ACI Worldwide Q4 profit soars

"We closed out a transitional 2012 with record revenues, sales bookings and earnings," said Chief Executive Officer Philip Heasley. "With the S1 integration substantially complete, we are excited to enter 2013 well positioned to accelerate our growth objectives. Further, the proposed acquisition of Online Resources will add a highly strategic electronic bill payment platform to the ACI suite of products, enabling us to be the Universal Payments Platform company", continued Mr. Heasley.

FINANCIAL SUMMARY

Sales
Sales bookings in the quarter totaled $309 million, an increase of $138 million, or 81%, over prior year quarter. Sales net of term extensions in the quarter totaled $198 million, an increase of $81 million, or 69%, over the prior-year quarter. S1 contributed $81 million to sales in the quarter. Historical ACI sales increased $57 million, or 33%, over prior year quarter sales bookings of $171 million.

For the year 2012, sales totaled $766 million, an increase of $210 million, or 38%, as compared with $556 million last year. S1 contributed $189 million to sales for the year.

Backlog
60-month backlog increased $49 million in the quarter to $2.416 billion as compared to $2.367 billion as of September 30, 2012. 12-month backlog increased $12 million to $596 million as compared to $584 million at September 30, 2012.

Revenue
GAAP revenue increased to $224.1 million, an increase of $89.1 million, or 66%, over prior-year quarter. Historical ACI revenue increased $40.7 million, or 30%, and S1 contributed $48.4 million of revenue in the fourth quarter. Non-GAAP revenue was $227.7 million, an increase of $92.7 million, or 69%, over prior year quarter. Non-GAAP revenue excludes the impact of $3.6 million of deferred revenue that would have been recognized in the normal course of business by S1 but was not recognized due to GAAP purchase accounting requirements.

Revenue for the full year 2012 was $666.6 million, an increase of $201.5 million, or 43%. Historical ACI revenue increased $39.6 million, or 8.5%, and S1 contributed $161.9 million of revenue to the full year. Non-GAAP revenue was $689.0 million, an increase of $223.9 million, or 48%, over prior year.

Operating Expenses
Excluding $4.4 million and $3.2 million of S1 acquisition related one-time expenses incurred in the quarters ended December 31, 2012 and 2011, respectively, operating expenses increased $49.3 million compared to the prior year quarter primarily due to the addition of $42.7 million of S1 operating expenses, inclusive of $4.0 million of intangibles amortization. Total GAAP operating expenses for the quarter were $148.6 million.

Excluding $31.5 million and $6.7 million of S1 acquisition related one-time expenses incurred in the years ended December 31, 2012 and 2011, respectively, operating expenses increased of $168.6 million, or 43%, primarily from the addition of $159 million of S1 operating expenses, inclusive of $13.9 million of intangible amortization. Total GAAP operating expenses were $592.2 for the full year 2012. Historical ACI operating expense growth was led primarily by higher deferred cost recognition upon project go-lives.

Operating Income
Consolidated GAAP operating income was $75.5 million for the quarter. Non-GAAP operating income totaled $83.6 million, an increase of $43.4 million, or 108%, above the prior-year quarter. Non-GAAP operating income excludes the $3.6 million deferred revenue adjustment due to purchase accounting as well as the impact of $4.4 million of acquisition-related one-time expenses.

Operating income for the full year 2012 was $74.4 million, versus $66.2 million for the full year 2011. Excluding the $22.5 million deferred revenue adjustment due to purchase accounting as well as the impact of $31.5 million of acquisition-related one-time expenses, operating income increased $55.4 million, or 76%, to $128.3 million.

Adjusted EBITDA
Adjusted EBITDA increased to $101.1 million, an improvement of $49.2 million, or 95%, compared to the prior year quarter. Adjusted EBITDA excludes the impact of $3.6 million of deferred revenue that would have been recognized in the normal course of business by S1 but was not recognized due to GAAP purchase accounting requirements and $4.4 million of acquisition related one-time expenses.

Full year 2012 Adjusted EBITDA was $191.4 million, an increase of $78.9 million, or 70%, as compared to $112.6 million for full year 2011.

Liquidity
We ended the year with $76.3 million in cash on hand as of December 31, 2012. During the quarter, we repaid $20.7 million in refundable liability to IBM upon termination of our Alliance and $10.4 million in debt. We ended the quarter with a debt balance of $374.3 million. As of December 31, 2012, we had up to $62 million of unused borrowings under our Revolving Credit Facility.

Operating Free Cash Flow
Operating free cash flow ("OFCF") for the quarter and full year 2012 was $23.6 million, and $23.5 million, respectively, both impacted by back-end timing of sales bookings and revenue during the year. OFCF for the quarter and full year 2011 was $30.0 million, and $67.2 million, respectively

Other Expense
Other expense for the quarter was $1.5 million, an increase of $0.5 million as compared to other expense of $1.0 million in the prior-year quarter.

Other expense for the full year 2012 was $9.1 million as compared to other expense of $1.9 million for the full year 2011. The increase was primarily the result of $8.0 million of increased interest expense due to increased borrowings partially offset by a gain of $1.6 million on the shares of S1 stock previously held as available-for-sale.

Taxes
Income tax expense in the quarter was $24.3 million, or a 33% effective tax rate, compared to income tax expense of $12.1 million, or a 34% effective tax rate in the prior year quarter. Income tax expense for the year ended December 2012 was $16.4 million, or a 25% effective tax rate, as compared to $18.5 million, or a 29% effective tax rate, for the prior year ended December 2011. The year-over-year decrease in the effective tax rate was largely due to the mix of lower domestic earnings at the U.S. tax rate offset by higher foreign income at lower tax rates.

Net Income and Diluted Earnings Per Share
Net income for the quarter ended December 31, 2012 was $49.7 million, compared to net income of $23.9 million during the same period last year.

GAAP earnings per share for the quarter was $1.24 per diluted share compared to $0.70 per diluted share during the same period last year. Excluding the tax-adjusted impact of $4.4 million of S1 acquisition related one-time expenses and the impact of $3.6 of million deferred revenue that would have been recognized in the normal course of business by S1 but was not recognized due to GAAP purchase accounting requirements, earnings per share was $1.37 per diluted share, versus $0.76 per share last year, up 81%.

GAAP earnings per share for the year ended December 2012 was $1.22 compared to $1.34 per diluted share for the year ended December 2011. Excluding the tax-adjusted impact of $31.5 million of S1 acquisition related one-time expenses and the impact of $22.5 of million deferred revenue that would have been recognized in the normal course of business by S1 but was not recognized due to GAAP purchase accounting requirements, earnings per share was $2.10 per diluted share, versus $1.47 per share last year, up 43%.

Weighted Average Shares Outstanding
Total diluted weighted average shares outstanding were 39.9 million for the year ended December 31, 2012 as compared to 34.2 million shares outstanding for the year ended December 31, 2011. The number of weighted average shares outstanding was increased by 5.9 million due to the issuance of shares related to the acquisition of S1 Corporation.

2013 Guidance
ACI is guiding on three metrics for calendar year 2013. On an organic basis, we currently expect to achieve revenue in a range of $765-$785 million, operating income of $150-$160 million and Adjusted EBITDA of $230-$240 million.