Q1 2020 Earnings Call

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Over last year.

From a profitability perspective, I'm adjusted EBITDA inquisitive $238 million with margin expansion to 19% from 5% last year.

We have fought Tonight to have a resilient business model, which involves mo t. ear customer commitments with a large contractual backlog got 5.7 being m. dollars.

In addition, nearly 75 per cent of our annual revenues are recovering in nature, which provide us with a reliable cash flows.

In the quarter, we generated $58 million in cash flow from operations and that's it Q1 with a strong liquidity position consisting of $119 million in cash on the abolishing and $270 million, although available <unk> capacity.

Now I would like to turn their attention to the current go V. night T. situation.

I hope first and foremost that you and their families are things safe and well.

Last few months at both impress them challenges for countries and communities around it won't.

We are committed to doing everything we can to ensure their health safety and they'll be all of our employees, all while enabling them, including implementation tends to seamlessly supports our customers without interruption.

Oh team has remained highly focused on providing our customers with the software lab. They meant solutions they need at a time when digital payments are more critical that have.

We have thought to me to have a strong customer base, which includes large global banks financial intermediaries bidders I know many channels retailers, including ecommerce most of whom I also well positioned to whether they call V. 19 disruption.

<unk>, we will focus on maximizing profitability.

Why are the fancy our pipeline of deals to position A.C.I. for future continuous profitable growth.

Now moving into the future I would like to give you my perspective about they see I.

Growth potential as well as my thugs when our fast forward through.

Through my 30, plus year career I have had the track record the real lining companies that operations for value creation through revenue growth.

They bar to say play Sony Tag would tear Comfortability 10 diversity as helping me guy different cultures and markets around the globe over the past two months I had the chance to speak with many customers employees and leaders of our call.

It is clear to me.

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As a strong portfolio of customers and software lad payments solutions and most importantly, they <unk>.

Going for I'd be assessing operating structure.

Business processes brother portfolio and investment.

Sure we are organized sports sustainable predictable profitable girl.

Our growth there'll be a naval by three pillars.

Number one.

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<unk> fits for growth destructor, we've maximized the revenue opportunity.

Focus cutbacks in Opex behind growth terrorists as operational discipline will be our intent of language as strong and global sales culture will need the company into the future and we were sure that our customers I in the center of our actions never too.

Focus on the on differentiating innovation.

Such as investing in our fast growing real time payments and number three emanate, we will continue to provide our shareholders with the step change value creation.

Over the coming quarters I provide you updates on where we are indigenous formation, but you can't expect.

A sense of urgency.

And a bright future ahead of us.

<unk> they call over to Scott to provide additional financial highlight Scott.

[noise] things, so we want and good morning, everyone.

I first plan to go through our results for the quarter and then provide an update on our outlook for the rest of the year.

Well then over the line for question.

I'll be starting my comments on flight eight with key take away from the quarter.

New bookings were 120 million up 72% for Q1 last year.

You know the quarter with the 12 month backlog of 1.1 billion in a 60 months backlog of 5.7 billion.

Q1 revenue came in at 291 million up 42% compared to Q1 last year with our on demand business growing 76% driven primarily by the speed pay acquisition.

While our own premise business grew 3% with particular strength coming from our real time payments solution, which grew 20% or Q1 last year.

This revenue growth contributed a strong growth and adjusted either with Q. any bit dark coming in at 38 million up from 8 million and Q1 last year.

We continue to see he bit on March and expansion in our on demand business with nettie, but dot margins, increasing to 22% and Q1 from essentially zero in Q1 last year.

And this really shows again the scale of our on demand business, where we're able to layer on.

Incremental recurring revenue one <unk> onto a relatively fixed cost structure.

We all saw even on March and expansion at her on premise segment with even at the margins improving to 31% from 29% last year.

[noise] turning next to slide nine starting with destined liquidity casual from operations was 58 million and a quarter of 36% from Q1 last year. We ended the quarter with significant liquidity with 119 million in cash in 270 million available on a revolver.

We use cash in the quarter to pay on 19 million of debt and also repurchased 1 million shares of our stock.

Our current that balance at 1.4 billion, which represents a net debt leverage ratio of 3.6 times compared to the maximum leverage in our credit facility of 4.75 times.

[noise] and also note here is that we have relatively low required term debt repayments for the rest of 2020 and 2021 of approximately 29 million in 39 million respectively.

[noise] during the next door outlook the rest of 2020 as previously announced given the uncertainty read the uncertainties around a covert 19, we have temporarily suspended our financial guidance for the rest of the year. So I won't give you a full financial ranges, but I will provide you with some incremental color on our customers segments, and where we may see something financial impact.

So without turning dislike can we ought to be helps to highlight really are resilient business model that our customer mix, which include some of the world's largest banks financial intermediaries merchants and fillers.

You'll see here a cup or customer mix broken out a door to p. and L. statements starting with on premise, which was just under half of our consolidated revenues last year.

Nearly two thirds or on premise business is represented by large goal banks, most with more than 50 billion in assets.

30% of the segment is what we call financial intermediaries or or the large technology providers.

Cater to the smaller in mid size financial institutions.

And the smallest group a year is merchant, which represents less than 10% of the segment.

Although the emergence we target are generally large omni channel merchants with a significant e. commerce presence.

We really have no smaller mid sized customers in her on premise business.

It's also important note here. These customers are on a five year fixed term software subscription contracts for licensing in product support <unk>. So a large stable customer base with fix contractual committed revenue streams. The uncertainty with a segment is really the nonrecurring license going service revenue for.

From sales in here and how quickly the customer base will be back making purchasing decision once once a covert 19th sites.

Moving next door on demand business. This business is substantially all recurring revenue and doesn't have as much the lumpiness and timing issues as we have any on premise business, but it is more susceptible to near term changes and payment transaction volumes. This business is roughly three quarters electronic bill payment, you'll see here, our main customer segments and bill.

Pay our third consumer finance and insurance, a third utilities and a third higher education in government.

This business transaction base in any changes in consumer Bill payment volume's went back to remedy where your seat.

Important timing node here, we do expect some seasonality shift in this segment as federal and state, especially in the federal and state tax payments, which typically with spike in Q2 are now expected to come in Q3 as many of the tax filing deadline has been pushed out 90 days.

[noise]. The next largest segment here are merchant retailers, which represents roughly 10% of the on demand segment again, we have a particular strong presence in E. commerce merchants, obviously, some retailers are seen transactions that <unk> transaction declines while there's they're seeing notable increases.

This business is less impacted by rest of your sales meaning of it's not already sold installed it's not likely to deliver a significant amount of in your revenue. The uncertainty with this business is really around the volatility in a transaction volumes [noise].

But overall, it's you know it's important to remember regardless of whether it's in our on demand or on premise business. This is not discretionary spending. These are mission critical payments systems for our customers.

About 75% of our annual revenues are occurring and we also have committed contractual backlog of non recurring service revenue, which were able to continue to operate insert remotely.

As well as license fees from renewals.

But that's still leaves us with a significant amount of revenue to be derived from from in your sales.

And while we're optimistic about our pipeline it deals the duration severity of coping 19 outbreak has caused uncertainty about the timing of those findings and that's why we're spending the financial guidance for 2020.

<unk>, we are prioritizing profitability during this period and I've already taken and continue evaluate further steps this year to reduce our costs based.

[noise]. So that concludes my prepared remarks, operator, we are ready to open the line to questions at this time.

At this time, if you would like to ask the question <unk>.

A little believing in questions do one question per participant and one follow up question [laughter], we'll boss for just a moment to comply they do in a roster.

Yeah. French question comes from the line up <unk> from Canada card, you're 90, so bentleys ask a question.

[noise] Hi, good morning, Thanks for taking my colon and a welcome.

Relations on on on the on a new position.

As long, if we could talk a little bit more about strength in real time payments on the corner.

And then perhaps the follow up what you see the strategy and in real time moving forward thinking.

Yeah, well I think Joe Scott I mean, as the the growth in the quarter of 20 per cent growth is is pretty consistent with the types double digit growth we've been seeing in a in real time for a number of years.

<unk> you know I will say that we did have a net one of our net new logo sales in the quarter was actually a a fast growing U.S. Ah commercial bank that purchase both are universal online banker in a in combination with real type payments. We also had.

One of our Asian existing Asian, Ah customers that renewed retail payments, but also purchased a real time payments as well. So we're seeing it up again consistent with what we've seen is double digit growth now for a number of years, obviously, we see that as a fast growing segment.

Significant amount of opportunity.

And we're we're selling it both net new to new logos as well as combining it with our with our renewal.

So I've enjoyed or just.

So Joe Nice nice nice meeting you and just to reinforce I mean, there's there's we continue to be <unk>. There's a lot of girl you know real time around that will that and you know that the meal time is different in every country that he'd go and I think that is a place that you can really build the strength from a local point of view and we have the.

I need to do that so I I foresee a great future for us in a real time payments.

Thank you.

Again, I think question <unk> number one thing I telephone keypad.

Question comes from the line up <unk> <unk> your lines open. Please ask a question.

Thank you first got thanks for the customer mix break down I think that's helpful. <unk> walk up to you to your first call. So.

Have a bigger picture question given that you've just joined a question I think a lot of investors have been asking you know there aren't a lot of remaining payment businesses. In this size range. Most of them have been acquired and scale is really important. So I'm curious where are you see any C.I. sitting into the long term payments market went.

That kind of as a backdrop and and and maybe from the perspective of the on demand on the on premise.

Sure a nice meeting you I.

I I see I see I see may see I, we the very relevant space going for a and this scale business. There is always the space for differentiation.

And I think <unk> as well positioned to differentiate yourself or to continue to differentiate itself.

Very specific areas for example, real time payments, it's a it's up north I'm strand for us and and as you know I mean, it's not about having global scale real time, it's about having local state scale.

Tree that you are and we are very well additional death and <unk>. It is erased driving just race with a a very cautiously or so and they are also other spaces that you can create differentiation. So I think that there is a very strong value proposition for H.C.I. going for him.

Could you discuss organic growth potential you know take a longer term view outside of the coded era I'm curious what would you envision that opportunity to be.

Yeah, I'm I'm, not I'm, not giving numbers at this point, but what I. What I can tell you is that I think that we are very well position.

And and the opportunity there significant opportunities I think if you look at the company. The company has been very successfully inorganic and we will continue to do that I also has been very successful and differentiating it's often offerings like the r. and D. investment and so forth. There was one part that's the weekend improvement that's.

No surprise because that was sad I think by the end of last year. The investments meeting, which is really about the scaling parts of the business. It is about to go to markets apart, but they'd be Zen. That's my D.N.A. My D.N.A. is on girls dancing growth revenue girl and it's about you know the structure.

<unk> up all the role since you have and ended up all the coach or you have this I I use 11111 kind of phrase all the time, which is blood on the teeth on sales right and I think you're going to see much more of that in our business going forward.

Thank you.

Again to ask a question <unk> telephone keypad.

Oh.

There you know if I get question at this time please continue.

Well, thanks, everybody for joining we look forward to catching up in the coming weeks of a good afternoon.

Decent since the days conference call. Thank you for participating you may not just going to.

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