1 WELCOME Exhibit 99.1 |
Private Securities Litigation Reform Act of 1995 SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. The forward- looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. A discussion of these forward-looking statements and risk factors that may affect them is set forth at the end of this presentation. The Company assumes no obligation to update any forward-looking statement in this presentation, except as required by law. 2 |
Corporate Vision and Strategy Phil Heasley President & CEO November 14, 2013 3 |
Corporate Marketing Carl Gustin SVP, Chief Marketing Officer November 14, 2013 4 |
ACI Business Plan Models Differentiation, value, gold standard – leading solutions PRODUCT INNOVATION Highest efficiency, lowest cost, high value and flexible solutions OPERATIONAL EXCELLENCE Low attrition, high satisfaction, maximize margins CUSTOMER INTIMACY 5 Corporate Marketing |
ACI Business Plan Models Global Markets PRODUCT INNOVATION OPERATIONAL EXCELLENCE CUSTOMER INTIMACY ACI On Demand Customer Management 6 Corporate Marketing |
7 Market Profile: Sizing IDC analysis shows ACI is in about a $20B market, growing to about $26B in 2018, a projected CAGR of 7-8%* Biller market for EBPP services represents a new significant opportunity for ACI of ~$6B (bottom-up analysis) Per IDC data, ACI share does not exceed 10% in any segment ACI has significant room to grow market share in all current segments, regardless of market growth rates *Variability of data due to segment definitions and classifications, combinations of data. |
8 Market Profile: Competition CORE – Traditional competitors operating closely to ACI in certain regions e.g. OpenWay, Clear2Pay, Alaric TANGENTIAL – Significant industry players, occasional customer, might be a threat SECONDARY – Larger competitors, occasionally customers Corporate Marketing |
9 Market Profile: Competition FUNDTECH ACTIMIZE ALARIC LUSIS OPENWAY IBM VISA MASTERCARD SAP CSC JACK HENRY LOGICA BPC DOVETAIL C2P BOTTOMLINE FIS FISERV Corporate Marketing |
Market Profile Summary • Category growing at about 7-8% overall.* • ACI growing at a mid to high single digit rate overall. • ACI is gaining share with fastest growth in AOD (hosted SaaS solutions). • IDC projects growth rates to maintain trajectory through 2018. *Variability of data due to segment definitions and classifications, combinations of data. Corporate Marketing 10 |
Market Trends MACRO THE BUSINESS OF PAYMENTS Corporate Marketing 11 • Return to normal growth for global economy not yet realized. • Emerging economies no longer simply “emerging”. • FI’s under pressure to overhaul their business models. • Online, real-time and ubiquitous access will transform Retail and Wholesale banking. |
Market Trends MARKET PRESSURES TECHNOLOGY Corporate Marketing 12 • Consumer expectations changing dramatically. • Global regulation continues to pressure ACI customers’ margins. • FI’s SOA and ISO2022 are the architectural preference of the technology buyer. • Expensive legacy systems in maintenance mode stalling migration to new technologies. |
Strategic Imperatives Online, real-time transcends all other trends. 1 Hosting, SaaS, and various Cloud alternatives will continue to develop. 2 Value Proposition to replace legacy systems must be clear and compelling. 3 FI’s must become price-makers, not price-takers. 4 Processors are in a race to the bottom in fees they can charge. 6 Online and brick- and-mortar experience is blurring and retailers must respond. Rapid growth in emerging markets will change the Global Payments landscape. 7 8 Regulation is a pervasive, strategic driver of payments and an opportunity for ACI to lead the market. Corporate Marketing 13 5 |
Strategic Imperatives Online, real-time transcends all other trends. 1 Hosting, SaaS, and various Cloud alternatives will continue to develop. 2 Value Proposition to replace legacy systems must be clear and compelling. 3 FI’s must become price-makers, not price-takers. 4 Processors are in a race to the bottom in fees they can charge. 5 6 Online and brick- and-mortar experience is blurring and retailers must respond. Rapid growth in emerging markets will change the Global Payments landscape. 7 Regulation is a pervasive, strategic driver of payments and an opportunity for ACI to lead the market. 8 Corporate Marketing 14 5 |
The UP Advantage – BEFORE FI CORE SYSTEMS & REFERENCE ARCHITECTURE Wholesale Retail … Networks Channels • Massive customization needs • High cost of maintenance • Slow time-to-market • Difficulty achieving differentiation Today’s financial institutions are burdened with integration tasks: Corporate Marketing 15 |
The UP Advantage – BEFORE FI CORE SYSTEMS & REFERENCE ARCHITECTURE Wholesale Retail … Networks Channels • Complex systems • Little control • Little choice • Inflexible Integration: 16 |
The UP Advantage – AFTER UNIVERSAL PAYMENTS FI CORE SYSTEMS & REFERENCE ARCHITECTURE Wholesale Retail … Networks Channels • Lower unit costs • Speed time-to-market • Increase global readiness • Enable data mining and cross-sell opportunities • Controlled migration Universal Payments aligns with existing and target infrastructure to: 17 |
The UP Advantage – AFTER FI CORE SYSTEMS & REFERENCE ARCHITECTURE Wholesale Retail … Networks Channels WHY • Control • Choice • Flexibility • Peace of mind HOW WHAT 18 UNIVERSAL PAYMENTS |
The UP Advantage – REACTIONS ACI positioned to lead the enterprise payments space… Best in class payments engine… We see the future with UP… We develop and integrate services quickly (with UP) while saving costs… Peter Elliot, Head of Solutions Design, Vocalink Vincent Querrette, BNPP CEB TowerGroup Adrian Hauser, PayX International 19 Corporate Marketing |
The UP Brand: Go to Market Plan WHY Control, Choice, Flexibility & Peace-of-mind HOW Universal Payments WHAT Strategic Products (BASE24-eps, PRM, MTS, Mobility, Universal Online Banking, etc.) 20 Corporate Marketing |
The UP Brand: Go to Market Plan 21 |
The UP Brand: Go to Market Plan 22 |
No one unleashes the promise and power of payment systems like ACI. NO ONE. Corporate Marketing 24 |
Application Development Tony Scotto EVP, Application Development November 14, 2013 25 |
• Responsible for timely delivery of product and customer development projects • Average of 346 projects per month (132 product, 214 customer) • 1,650 application development professionals • Team members in 19 countries • 11 primary development locations • More than 18% of revenue applied to R&D OVERVIEW INVESTMENT SCALE ACI Application Development Overview 26 Application Development |
FI CORE SYSTEMS & REFERENCE ARCHITECTURE Wholesale Retail … Networks Channels UP Overview • Lower unit costs • Speed time-to-market • Increase global readiness • Enable data mining and cross-sell opportunities • Reduce maintenance costs ACI Universal Payments aligns with existing and target infrastructure to: 27 UNIVERSAL PAYMENTS Application Development |
UP Technical Differentiators Support for all payment types Service-oriented architecture Flexible service orchestration Common payment object (Payment Information Model) 28 |
Customer Benefits of Control, Choice and Flexibility • Utilize and leverage existing investments: renovation does not equal replacement • Get to market more quickly: up to 50% faster • Reduce operations and maintenance costs: up to 40% savings • Future-proof investment: embrace continued industry disruption 29 |
UP Use Case PERSON-TO-PERSON (P2P) AND MOBILE PAYMENTS CHALLENGE RESULTS “[ACI] has increased our agility as a company and improved our ability to respond effectively to changing market conditions and increasing customer demands like mobile payments.” – Rafick Cassim, business manager, self service at Absa • Extend existing payment systems to generate: – New revenue opportunities for developed markets – New ways to deliver payments to underserved and unbanked markets • UP-enabled cardless authorization using a user ID, mobile phone number, customer ID or email address • ABSA Bank mobile P2P solution – 120,000 transactions per month, growing at 10-15% monthly |
UP Use Case WHOLESALE BANKING EXAMPLES CHALLENGES “After a rigorous evaluation process, we found that ACI uniquely provides a robust, scalable and flexible payments infrastructure to manage all of our payments needs.” -leading Middle Eastern Bank RESULTS • Capitalize on new revenue opportunities • Renovation vs. replacement of legacy systems • 35% faster user interface development • 42% faster development of new connection types • Middle Eastern Bank capitalizes on new revenue opportunity for unbanked workers |
UP Use Case UK FASTER PAYMENTS RESULTS • Reduces settlement to 30 minutes • UP orchestration enables any-to-any payments • Clear and immediate financial visibility CHALLENGE Real-time Payments Solution • Replace traditional 3-day settlement process with real- time settlement |
• UP deployed within ACI products • Customers achieving significant benefits • Talent, scale and investment to drive continued innovation Summary UP VISION REALIZED TODAY 33 |
34 BREAK |
Global Markets Dan Frate EVP, Global Markets and Products November 14, 2013 35 |
Developing Long-Term Value Winning business develops growing backlog Managing maintenance for profitability Recurring revenue through hosting operations 36 |
Opportunity for ACI North America Europe Asia Pacific Latin America Middle East & Africa TRENDS IN NONCASH TRANSACTION VOLUMES NONCASH TRANSACTION VOLUMES (IN MILLIONS) BY REGION, 2005-2016 (E) Source: CEB TowerGroup Payment Database (TGPD), 2011 37 |
Opportunity for ACI SOLUTIONS PER ACI CUSTOMER # of Existing Customers in the Top Banks and Retailers Average ACI Customer 2.5 Products 5+ Products Goal: 38 |
ACI Worldwide: A Global Payments Company Canada 1 locations USA 14 locations Latin America 2 locations Brazil 1 location Africa 2 locations Continental Europe 3 locations Northern Europe 3 locations Australia & New Zealand 2 locations North Asia 2 locations ASEAN 2 locations South Asia 2 locations Middle East 3 locations 4,500 employees in 35 countries R+D ~18% 39 |
CONSUMER/BUSINESS ACI Universal Payments SOLUTIONS ACROSS THE PAYMENTS VALUE CHAIN DEBIT CREDIT WIRE SWIFT FRAUD AML BILL PAYMENT POS ACQUIRING PAYMENT TYPES PAPER BILLS/ CHECKS MOBILE ONLINE BRANCH POS ATM CHANNELS 40 |
Global Payment Trends Driving Customer Needs 41 |
An omni-channel platform for handling all the engagement points with consumers – from branch to online to mobile. Payment Channel Solutions A complete business and wholesale banking solution Mobile, Online, Trade, and Payments Win new clients in fast-paced Asian business market Kaisikornbank Driving profit through customer centricity Significant cost savings to compete with major US banks 42 |
Enabling consumer payments securely from cards to mobile Payment Engine Solutions A complete business and wholesale banking solution Mobile, Online, Trade, and Payments Driving fraud rates below 5 basis points Turning tough regulations into competitive advantage Enabling innovation to win new customers in India |
Security and control over multi-channel retail payments Bringing the POS to the consumer to maximize satisfaction Managing payments across 12 retail store brands Retailer Solutions LEADING CONSUMER ELECTRONICS PROVIDER 44 |
Complete biller solutions from mobile to online to physical to drive up electronic payments Biller Solutions 45 |
ACI Universal Payments UP AHEAD OF THE INDUSTRY 46 • Significant growth opportunity • Unparalleled global distribution • Leading integrated payments solutions |
ACI On Demand David Morem EVP, ACI On Demand November 14, 2013 47 |
AOD provides Software-as-a-Service (SaaS) hosted payment systems featuring the ACI UP product portfolio • 4119 financial institutions, retailers and billers • 7 of the top 50 banks globally • 3 of the top 10 brands globally • 1 of the top 3 quick service restaurants in the world • 5 of the top 10 banks in the U.S. • Large financial institutions and retailers • Community banks and credit unions • Billers ACI On Demand (AOD) Overview OVERVIEW INVESTMENT SCALE 48 |
• Lower up-front investment, more consistent costs • Faster time to market • Reduced operational and regulatory burden AOD Advantages Over On-Premise Operations • Operational excellence • Protection from code issues • Faster time to service restoration • Security and risk management |
Retail Payment Solution for one of the world’s largest fast food retailers (14,200 stores, 60,000 tills) RESULTS • 2 billion transactions in last year • Transaction processing up 31% over last 2 years • Mobile handheld processing for in-store queue busting Retail Payments Use Case LARGE FAST FOOD RETAILER CHALLENGE • Build electronic payments infrastructure for a historically cash-based business • Scale to address growing transaction volume, and increase in number of stores 50 ACI On Demand |
Growth Growth from 10% to 40% of ACI revenues 2011 2013 POST OPAY 2013 2012 APPLICATIONS SUPPORTED 5 10 18 19 2011 2013 POST OPAY 2013 2012 STAFF 120 260 500 575 2011 2013 POST OPAY 2013 2012 REVENUE $45M $110M $260M $400M 2011 2013 POST OPAY 2013 2012 CUSTOMERS 40 450 1100 4400 51 |
EBPP: Grow market share and vertical reach in Electronic Bill Presentment and Payment market SOLUTIONS: Grow revenue and reach with targeted, high-value solutions Major Growth Opportunities 52 |
• Displacing in-house solutions is largest source of ACI growth in biller-direct • 80% of transactions are processed by billers in-house today • 3.7 billion payments per year are processed in-house • Compliance, efficiency and speed to market are driving growth in outsourcing ACI Biller Market Opportunity BILLER DIRECT IS FASTEST-GROWING SEGMENT OF BILL PAY MARKET Mail Walk-in Auto-debit Consolidator Biller-direct Website 53 8% 6% 4% -2% -4% 2% Source: Aite Group 0% |
Acquisition of Online Resources EBPP Growth Highlights 25% 20% 15% 10% 5% 0% 2009 2010 2011 2012 ONLINE RESOURCES GREW TRANSACTIONS AT MORE THAN DOUBLE INDUSTRY RATE Biller Direct Industry Online Resources Biller Direct 54 Source: Aite Group, 2013 • Industry’s fastest growing biller direct provider • 600+ customers • $60 billion in payments annually |
OFFICAL PAYMENTS LEADS INDUSTRY IN NUMBER OF CUSTOMERS Acquisition of Official Payments – US Internal Revenue Service – 23 state governments, Puerto Rico and the District of Columbia – Municipal utilities – Higher education institutions Source: Aite Group, 2013 EBPP Growth Highlights 55 • $9+ billion in payments annually • Money transmitter licenses in all states where required • 3,000 customers |
Online Resources Official Payments Future Opportunities Vertical Market Opportunities Federal, State & Local Municipal Utilities Higher Education Real Property Taxes Consumer Finance (Mortgage, card, auto, other loans) Insurance Utilities ARM (Collection agencies, debt buyers) Healthcare Charities International Telecom (TV, phone, Internet) 56 |
Integrated Bill Payments One-time and recurring payments, and consolidated remittances across Web, IVR and call center EBPP Use Case LARGE U.S. MORTGAGE LENDER RESULTS CHALLENGE 57 • Reduce high costs associated with paper-based payments • Integration of remittance channels • 73% of payments received electronically vs. industry average of 44% • Turned off 21% of paper statements vs. industry average of 16% |
ACI Universal Payments SOLUTIONS ACROSS THE VALUE CHAIN DEBIT CREDIT WIRE SWIFT FRAUD AML BILL PAYMENT POS ACQUIRING PAYMENT TYPES PAPER BILLS/ CHECKS MOBILE ONLINE BRANCH POS ATM CHANNELS 58 |
Community Bank Competes with Big Banks Integrated mobile, online and voice banking solution Solutions Use Case THE PALMETTO BANK RESULTS CHALLENGE 59 • Ability to compete with big bank offerings for online and mobile solutions • Difficulty keeping up with security, redundancy and compliance concerns • 24x7x365 customer self-service capabilities • Consumer online banking increased by 15% • Business online banking increased by 10% • Fully secure, compliant |
• High-growth, high margin part of ACI business • Source of recurring revenue • Operational excellence • EBPP represents key opportunity for growth and vertical expansion • Solutions focus to develop deeper, bigger relationships Summary 60 |
Customer Management and Maintenance Carolyn Homberger SVP, Customer Management November 14, 2013 61 |
Our focus What is Customer Management and Maintenance? Brand Relationship Products & Solutions 62 • Profitability management • Customer satisfaction • Customer loyalty and retention |
• Post-implementation support • 100% recurring revenue comprised of standard and premium customer support • Expenses are driven by: - Production support - Software mandates - Customer management shared services (billing, invoicing, etc.) Maintenance and Premium Customer Support (PCS) • Sunset products • Revenue model driven by: - License fees and maintenance - Services • Expenses are driven by product extension (CSMs) Extended Support Services (ESS) Customer Management and Maintenance PROFITABILITY MANAGEMENT P&L Model focused on recurring revenue and margin management 63 |
Customer Management and Maintenance CUSTOMER SATISFACTION Customer satisfaction driven by world-class SLA performance 64 |
Customer Management and Maintenance CUSTOMER LOYALTY & RETENTION Customer loyalty drivers… • “Cares about customers” and “Ease of doing business” • Solutions and innovation • Operational excellence $3,112 2009 2010 2011 2012 9-30-13 LOW SINGLE DIGIT ATTRITION AND IMPROVING (millions) 60-month backlog 65 Customer Management and Maintenance $1,517 $1,566 $1,617 $2,416 21% CAGR |
66 Customer Management and Maintenance GROWTH Organic License Fee & Maintenance Growth • High electronic transaction growth rates • Add-on sales Cross-Sell • UP & solutions focus • 2X products / customer Migration to Strategic Products • Best-in-class migration tools Premium Customer Support • Customized support – annual system reviews, etc. • Learning services Customer Management and Maintenance |
• Focus on profitability… high margin, high predictability • 100% satisfaction with every customer interaction • An experience that “delights” driving customer loyalty and retention Summary 67 Customer Management and Maintenance |
Financials Scott Behrens Executive Vice President Chief Financial Officer November 14, 2013 68 |
2009 2010 2011 2012 LTM 9-30-13 ACI Sales, Net of Term Extensions (SNET) ACI Term Extensions $425 $525 $556 $766 $813 SNET 19% CAGR $132 $210 $226 $265 $261 $293 $315 $330 $501 $552 • Renewal rates across ACI products >96% • >95% of our contracts are transaction-based SALES BOOKINGS Bookings Growth Leads to Large Backlog PROVIDES REVENUE AND EARNINGS VISIBILITY (millions) $3,112 2009 2010 2011 2012 9-30-13 HISTORICAL 60-MONTH BACKLOG (millions) $1,517 $1,566 $1,617 $2,416 21% CAGR 69 Financials |
ACI’s Financial Summary 2009 – LTM 9/30/2013 $814 $73 $88 $113 $191 $223 2009 2010 2011 2012 LTM 9-30-13 NON-GAAP REVENUE 2009 2010 2011 2012 LTM 9-30-13 ADJUSTED EBITDA 18% 21% 24% 28% 27% Adjusted EBITDA % Margin 20% CAGR 35% CAGR +900 bps (millions) (millions) 70 • No customer accounts for >3% of revenue • LTM 9/30/13 revenue geographic mix: 70% Americas, 20% EMEA and 10% Asia Pacific $406 $418 $465 $689 Financials |
Ongoing Services, Implementations, Increased Capacity Sales & Other Recurring Revenue: Hosting, Maintenance & License Fees (Paid Monthly, Quarterly or Annually) >70% Recurring Revenue and Growing STRONG RECURRING REVENUE GROWTH • Recurring revenue has increased in dollar amount and as a percent of revenue • Virtually all components of revenue are seasonally stronger in the latter half of the year 71 2009 2010 2011 2012 2013 Financials |
Transaction growth (both in SaaS revenue and incremental capacity licenses) Price increases Annual CPI increases 60-month backlog (recurring only) Financials Economic Value of Existing Customer Base is Growing 72 |
Low Cap Ex and Strong Cash Flow $30 $63 $67 $24 $106 2009 2010 2011 2012 LTM 9-30-13 OPERATING FREE CASH FLOW 2009 2010 2011 2012 LTM 9-30-13 $10 $13 $19 $17 $22 CAPITAL EXPENDITURES 3% 3% 4% 2% 3% Low capital expenditures needed to maintain existing client base ACI consistently generates strong free cash flow • NOLs starting to contribute and cash taxes much lower than GAAP (millions) (millions) % of Non-GAAP Revenue Financials |
HISTORICAL USE OF CASH/BORROWINGS SINCE 2005 CUMULATIVE SHARE REPURCHASES Average price $29.96/share • $108 million remains authorized • Current leverage ratio 2.8x *2012 Includes $30m in IBM warrant purchases Cumulative Amount Purchased ($millions) Cumulative Shares (millions) Efficient Use of Cash AGGRESSIVE SHARE REPURCHASES Share Repurchases Acquisitions (excludes shares issued) $355m $1090m 74 Financials |
2013 Pro Forma Non-GAAP Revenue Bridge 2013 Pro Forma 2013 *(millions) Represents low end of guidance Stub additions normalize for full year contribution 75 • Normalized 2013 revenue mix: • 40% Hosting (SaaS), 24% Maintenance and 36% License & Services • 75% recurring revenue $883 $30 $122 $1035 ORCC Stub OPAY Stub Financials |
2013 Pro Forma Adjusted EBITDA Bridge $12 $5 $291 ORCC Stub and incremental synergies S1 Synergies Pro Forma 2013 $257 2013 OPAY Stub and synergies $17 *(millions) Represents low end of guidance Stub additions normalize for full year contribution 76 Financials |
Summary FINANCIAL SUMMARY – FIVE YEAR TARGETS • Organic revenue growth – Mid to upper single digits • Adjusted EBITDA margin – 100 bps expansion per year • Operating free cash flow – Track adjusted EBITDA growth • Sales net of term extension growth – High single digits 77 Financials |
High Quality Software Model Drives Superior Performance • Leading market position • High retention and renewal rates • Pricing power and large barriers to entry • Significant recurring revenue • Scalable model with improving margin • Low cash investment required • Strong cash flow and balance sheet • Value enhancing capital allocation 78 Financials |
QUESTIONS AND ANSWERS |
Non-GAAP Financial Measures To supplement our financial results presented on a GAAP basis, we use the non-GAAP measure indicated in the tables, which exclude certain business combination accounting entries related to the acquisitions of ORCC and S1 and significant transaction related expenses, as well as other significant non-cash expenses such as depreciation, amortization and share-based compensation, that we believe are helpful in understanding our past financial performance and our future results. The presentation of these non-GAAP financial measures should be considered in addition to our GAAP results and are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management generally compensates for limitations in the use of non-GAAP financial measures by relying on comparable GAAP financial measures and providing investors with a reconciliation of non-GAAP financial measures only in addition to and in conjunction with results presented in accordance with GAAP. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. Certain non-GAAP measures include: • Non-GAAP revenue: revenue plus deferred revenue that would have been recognized in the normal course of business by S1, Online Resources and Official Payments if not for GAAP purchase accounting requirements. Non-GAAP revenue should be considered in addition to, rather than as a substitute for, revenue. • Non-GAAP operating income: operating income (loss) plus deferred revenue that would have been recognized in the normal course of business by S1, Online Resources and Official Payments if not for GAAP purchase accounting requirements and significant transaction related expenses. Non-GAAP operating income should be considered in addition to, rather than as a substitute for, operating income. • Adjusted EBITDA: net income (loss) plus income tax expense, net interest income (expense), net other income (expense), depreciation, amortization and non-cash compensation, as well as deferred revenue that would have been recognized in the normal course of business by S1, Online Resources and Official Payments if not for GAAP purchase accounting requirements and significant transaction related expenses. Adjusted EBITDA should be considered in addition to, rather than as a substitute for, operating income. Non-GAAP Financial Measures 80 |
Non-GAAP Financial Measures Non-GAAP Revenue (millions) 2009 2010 2011 2012 Q4 2012 9 months 9-30-13 LTM 9-30-13 Revenue 406 $ 418 $ 465 $ 667 $ 224 $ 582 $ 806 $ Deferred revenue fair value adjustment - - - 22 4 4 8 Non-GAAP revenue 406 $ 418 $ 465 $ 689 $ 228 $ 586 $ 814 $ Adjusted EBITDA (millions) 2009 2010 2011 2012 Q4 2012 9 months 9-30-13 LTM 9-30-13 Net income (loss) 20 $ 27 $ 46 $ 49 $ 50 $ 13 $ 63 $ Plus: Income tax expense (benefit) 13 22 18 16 24 5 29 Net interest expense 2 1 1 10 3 17 20 Net other expense 7 4 1 - (1) 2 1 Depreciation expense 6 6 8 13 4 14 18 Amortization expense 17 20 21 38 10 36 46 Non-cash compensation expense 8 8 11 15 3 11 14 Adjusted EBIDTA 73 88 106 141 93 98 191 Deferred revenue fair value adjustment - - - 22 4 5 9 Employee related actions - - - 11 - 9 9 Facility closure costs - - - 5 1 1 2 IT exit costs - - - 3 - - - Other significant transaction related expenses - - 7 9 3 9 12 Adjusted EBIDTA excluding significant transaction related expenses 73 $ 88 $ 113 $ 191 $ 101 $ 122 $ 223 $ Non-GAAP Financial Measures 81 |
Reconciliation of Operating Free Cash Flow (millions) 2009 2010 2011 2012 Q4 2012 9 months 9-30-13 LTM 9-30-13 Net cash provided (used) by operating activities 44 $ 81 $ 83 $ (9) $ 4 $ 87 $ 91 $ Net after-tax payments associated with employee-related actions 3 - - 6 - 5 5 Net after-tax payments associated with facility closures - - - 3 2 1 3 Net after-tax payments associated with significant transaction related expenses - - 4 9 - 7 7 Net after-tax payments associated with cash settlement of S1 options - - - 10 - - - Net after-tax payments associated with IBM IT Outsourcing Transition 1 1 1 - - - Plus IBM Alliance liability repayment - - - 21 21 - 21 Less capital expenditures (10) (13) (19) (17) (3) (18) (21) Less IBM Alliance technical enablement expenditures (7) (6) (2) - - - - Operating Free Cash Flow 30 $ 63 $ 67 $ 24 $ 24 $ 82 $ 106 $ Non-GAAP Financial Measures Non-GAAP Financial Measures 82 |
Non-GAAP Financial Measures ACI is also presenting operating free cash flow, which is defined as net cash provided by operating activities, plus net after-tax payments associated with employee-related actions and facility closures, net after-tax payments associated with significant transaction related expenses, net after-tax payments associated with IBM IT outsourcing transition and termination, and less capital expenditures. Operating free cash flow is considered a non-GAAP financial measure as defined by SEC Regulation G. We utilize this non-GAAP financial measure, and believe it is useful to investors, as an indicator of cash flow available for debt repayment and other investing activities, such as capital investments and acquisitions. We utilize operating free cash flow as a further indicator of operating performance and for planning investing activities. Operating free cash flow should be considered in addition to, rather than as a substitute for, net cash provided by operating activities. A limitation of operating free cash flow is that it does not represent the total increase or decrease in the cash balance for the period. This measure also does not exclude mandatory debt service obligations and, therefore, does not represent the residual cash flow available for discretionary expenditures. We believe that operating free cash flow is useful to investors to provide disclosures of our operating results on the same basis as that used by our management. Reconciliation of Operating Free Cash Flow (millions) 2009 2010 2011 2012 Q4 2012 9 months 9-30-13 LTM 9-30-13 Net cash provided (used) by operating activities 44 $ 81 $ 83 $ (9) $ 4 $ 87 $ 91 $ Net after-tax payments associated with employee-related actions 3 - - 6 - 5 5 Net after-tax payments associated with facility closures - - - 3 2 1 3 Net after-tax payments associated with significant transaction related expenses - - 4 9 - 7 7 Net after-tax payments associated with cash settlement of S1 options - - - 10 - - - Net after-tax payments associated with IBM IT Outsourcing Transition 1 1 1 - - - Plus IBM Alliance liability repayment - - - 21 21 - 21 Less capital expenditures (10) (13) (19) (17) (3) (18) (21) Less IBM Alliance technical enablement expenditures (7) (6) (2) - - - - Operating Free Cash Flow 30 $ 63 $ 67 $ 24 $ 24 $ 82 $ 106 $ Non-GAAP Financial Measures 83 |
ACI also includes backlog estimates, which include all software license fees, maintenance fees and services specified in executed contracts, as well as revenues from assumed contract renewals to the extent that we believe recognition of the related revenue will occur within the corresponding backlog period. We have historically included assumed renewals in backlog estimates based upon automatic renewal provisions in the executed contract and our historic experience with customer renewal rates. Backlog is considered a non-GAAP financial measure as defined by SEC Regulation G. Our 60-month backlog estimate represents expected revenues from existing customers using the following key assumptions: • Maintenance fees are assumed to exist for the duration of the license term for those contracts in which the committed maintenance term is less than the committed license term. • License, facilities management, and software hosting arrangements are assumed to renew at the end of their committed term at a rate consistent with our historical experiences. • Non-recurring license arrangements are assumed to renew as recurring revenue streams. • Foreign currency exchange rates are assumed to remain constant over the 60-month backlog period for those contracts stated in currencies other than the U.S. dollar. • Our pricing policies and practices are assumed to remain constant over the 60-month backlog period. Estimates of future financial results are inherently unreliable. Our backlog estimates require substantial judgment and are based on a number of assumptions as described above. These assumptions may turn out to be inaccurate or wrong, including for reasons outside of management’s control. For example, our customers may attempt to renegotiate or terminate their contracts for a number of reasons, including mergers, changes in their financial condition, or general changes in economic conditions in the customer’s industry or geographic location, or we may experience delays in the development or delivery of products or services specified in customer contracts which may cause the actual renewal rates and amounts to differ from historical experiences. Changes in foreign currency exchange rates may also impact the amount of revenue actually recognized in future periods. Accordingly, there can be no assurance that contracts included in backlog estimates will actually generate the specified revenues or that the actual revenues will be generated within the corresponding 60-month period. Backlog should be considered in addition to, rather than as a substitute for, reported revenue and deferred revenue. Non-GAAP Financial Measures Non-GAAP Financial Measures 84 |
This presentation contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. Generally, forward-looking statements do not relate strictly to historical or current facts and may include words or phrases such as “believes,” “ will,” “expects,” “anticipates,” “intends,” and words and phrases of similar impact. The forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this presentation include, but are not limited to, statements regarding: • expectations regarding the financial impact of the Official Payments acquisition; • expectations regarding future increases in organic revenue, adjusted EBITDA, operating free cash flow and sales net of term extension; • expectations that we will generate annual cost synergies with respect to recent prior acquisitions; and • expectations regarding 2013 financial guidance related to revenue, operating income and adjusted EBITDA. Forward-Looking Statements Forward-Looking Statements 85 |
All of the foregoing forward-looking statements are expressly qualified by the risk factors discussed in our filings with the Securities and Exchange Commission. Such factors include but are not limited to, increased competition, the performance of our strategic product, BASE24- eps, demand for our products, restrictions and other financial covenants in our credit facility, consolidations and failures in the financial services industry, customer reluctance to switch to a new vendor, the accuracy of management’s backlog estimates, the maturity of certain products, our strategy to migrate customers to our next generation products, ratable or deferred recognition of certain revenue associated with customer migrations and the maturity of certain of our products, failure to obtain renewals of customer contracts or to obtain such renewals on favorable terms, delay or cancellation of customer projects or inaccurate project completion estimates, volatility and disruption of the capital and credit markets and adverse changes in the global economy, our existing levels of debt, impairment of our goodwill or intangible assets, litigation, future acquisitions, strategic partnerships and investments, risks related to the expected benefits to be achieved in the transaction with Online Resources, the complexity of our products and services and the risk that they may contain hidden defects or be subjected to security breaches or viruses, compliance of our products with applicable legislation, governmental regulations and industry standards, our compliance with privacy regulations, the protection of our intellectual property in intellectual property litigation, the cyclical nature of our revenue and earnings and the accuracy of forecasts due to the concentration of revenue generating activity during the final weeks of each quarter, business interruptions or failure of our information technology and communication systems, our offshore software development activities, risks from operating internationally, including fluctuations in currency exchange rates, exposure to unknown tax liabilities, and volatility in our stock price. For a detailed discussion of these risk factors, parties that are relying on the forward-looking statements should review our filings with the Securities and Exchange Commission, including our most recently filed Annual Report on Form 10-K, Registration Statement on Form S-4, and subsequent reports on Forms 10-Q and 8-K. Forward-Looking Statements Forward-Looking Statements 86 |