ACI Worldwide Non-GAAP operating income flat for Q3

Source: ACI Worldwide

ACI Worldwide (ACIW), a leading global provider of electronic payment and banking solutions, today announced financial results for the period ended September 30, 2014.

“Our new sales bookings growth rate is tracking to be double our guidance for the year and our continued cost discipline helped ACI generate EBITDA growth over last year,” commented Phil Heasley, President and CEO, ACI Worldwide. “Aside from foreign currency movements that are reducing our revenue forecast by $10 million, our anticipated model change is moving more quickly than expected with significant growth in our hosted business and UP-enabled solutions adding much more complexity to the renewal opportunities with our largest customers. Our strong sales bookings this year set us up for an improved 2015 and, overall, we remain optimistic regarding our long-term strategy, product suite and position in the rapidly changing payments space.”


Financial Results for Q3

New sales bookings, net of term extensions (SNET), increased 6% compared to the prior year quarter. Overall sales bookings including term extensions increased 18% compared to the prior year. Year-to-date, SNET and total sales bookings are up 22% and 30%, respectively.

We ended Q3 with a 12-month backlog of $898 million and a 60-month backlog of $4.1 billion, both new records. The acquisition of ReD contributed $42 and $205 million, respectively. Excluding this addition and adjusting for foreign currency fluctuation, our 12 month backlog decreased $22 million from last quarter and our 60 month backlog increased $25 million from Q2.

Non-GAAP revenue in Q3 was $250 million, an increase of $34 million, or 16%, above the prior year quarter. Excluding the $35 million contribution from Official Payments and ReD, organic revenue was flat compared to last year.

Non-GAAP operating income was $40 million for the quarter, flat from the prior year quarter. Adjusted EBITDA of $66 million was up 7% from last year’s $62 million. Net EBITDA margin in Q3 2014 was 29% versus 30% margin last year, after adjusting for $25 million and $7 million of pass through interchange fees in Q3 2014 and Q3 2013, respectively.

Q3 non-GAAP net income was $21 million, or $0.18 per diluted share, versus non-GAAP net income of $21 million, or $0.17 per diluted share, in Q3 2013.

ACI ended the third quarter with $60 million in cash on hand. Operating free cash flow (OFCF) for the quarter was $18 million, down from $27 million in Q3 of last year. The third quarter ended with a debt balance of $946 million, up from $753 million in Q2.

Updating Guidance

Foreign currency movements during the quarter have reduced our outlook for full year revenue by $10 million, but will have no impact on our margins as our foreign expenses are a natural hedge. We are focused on optimizing our sales for the long-term economic value of the business. Our new forecast assumes a higher contribution from hosted contracts and that several large strategic sales will now sign in 2015. The timing, structure and complexity of these deals will result in lower sales to revenue conversion in the current year. We now expect non-GAAP revenue for the full year 2014 to be in a range of $1.025 to $1.045 billion, down from a range of $1.078 to $1.098 billion. Adjusted EBITDA expectations are now in a range of $265 to $275 million, down from a range of $294 to $304 million. This guidance excludes approximately $18 to $20 million of significant integration-related expenses and includes $2 million for the deferred revenue adjustments. Lastly, our new sales bookings growth rate for the year is expected to be in the double digits.

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