Q3 2020 ACI Worldwide Inc Earnings Call

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Hello, This is <unk> zero.

I would now like to hand, a conference will retreat speaker today.

Mister John craft.

<unk> President of Investor Relations Sir Please go ahead.

Thank you and good morning, everyone today's call like all of our events. This subject to both safe Harbor and forward looking statements you can find the full text of both statements on the first and final pages of our presentation deck today, a copy of which is available on our website as well as with the SEC.

On this morning's call is O Juliana Almeida, our president and CEO and Scott Baron's are CFO.

Before I turn it over I'd like to share that ACI will be hosting a virtual analysts stay on November 10 to discuss the new Aci's strategy.

Further information and a registration link are available on the Investor page of our website.

With that I'd like to turn the call over to O July.

Thank you John and good morning, everyone.

Thank you for joining us for our third quarter to 20 earnings conference call.

The Covid the pandemic has had an impact on nearly all aspects of our daily lives in but a lot of uncertainty is two roommates.

However, I couldn't be prouder of more than 4000 employees and delivery very solid ear to get the results. Despite all the challenges.

During this crisis, we have remained focus on delivery resolves wires sheree continuity of our services to our customers.

This is very important as we begin to vacation of the new <unk> strategy.

Since I have started we continue to make progress and executing our three pillars striped that you would set the foundation for the newest shy to deliver continuous profitable organic growth at a step change value creation to emanate, our shareholders have high expectations for outperformance in forest strategic improvement efforts.

I Wonder if we're sorry that we shared those expectations.

We hope rainy with a sense of urgency and with a clear lineup site to what we want to achieve.

Let me start my comments by sharing some further detail on our financial results you to date to Q3.

To date revenue of $907 million was up 6% and I'd just at the beauty that was up 25%, yes, we have been very focused on cost management and profitability.

This girl to represent that nothing be to the margin of 31%, which is up from 26% versus previous here.

We are pleased it to report 500 base point, So you to date March improvement and just challenging.

No bookings are up 15% you to date from the same period last year did.

Despite in a book as being up 6% to 7% now older men business, new bookings were down 12% in our very profitable on premise license software business <unk> related temporary delays in purchasing decisions by your bank customers.

<unk> not impacting renewals, but they're impacting new business in on premise and the related license fee Robyn.

We expect this trend to continue in queue for.

Our customer retention remains high a testament to the Aci's team commitment and our industry leading products set.

We had some exciting new wins into quite a particularly in our real time solution. We lunch at the new important partnership with Mastercard that expense or go to market capabilities and provides the most robust and complete set of real time capabilities available in the market today.

We also built on a strong global customer base and having fourth is renewal and expansionary bookings from companies all over the world and all on premise segment, including bar closing the okay read the link in Argentina old keeping Hungary, B C. Neither nisha and incorrect in Canada, all four hour retail payments offering.

In our own demand segment, we saw significant book is this trend signing deals with two top credit card Bill is in the west a top technology provider in the mortgage industry and one of the largest electric and gas utilities.

In our motion business, we sign E commerce contracts with to you Kate basic telcos and expanded a relationship with a top Atlantic upper out comping, adding a market leading fraud prevention capability into the R E commerce, offering and helping them expand their reach into the Russian market.

As far as to all of our few and convenience store growth program, we secured a new private label open loop card usually solution with existing customer pint of travel centers.

We are as committed as ever to providing best in class service and deliberate superior solutions to customers at a time when <unk> payment, starting quisling essential to our ways of life.

Tony now two hours three pillars strategic plan, we recently finalize our strategy and have been implemented this prayer, which is into a business with a sense of urgency.

We're building on a J O N named organization with a best in class Global sales sclerosis, focusing on investment on realtime payments sophisticate, the larger global merchants and fast growing larger markets will continue to pursue them and the opportunities on top of a consistent organic growth that to drive step change your value creation.

We look forward to sharing more details on the new H I a strategy at our analyst stay on November 10th two twin.

There was much work to be done to ensure with acute our newest ti strategy that'd be prepared the company to come out of this global moment in better shape than before we.

We have the right team solutions put your for your diversify customers and his strategy to relaunch ACI to capitalize on the margin tramps and digital payments.

I will now hand to call to Scott to discuss the companies queue three results in greater detail Scott.

Thanks, Social one and good morning, everyone I first planning to go through our results for the third quarter and year to date, and then provide some high level commentary regarding our outlook for the rest of the year.

We will then open the line for questions.

I'll be starting my comments on slide seven with key takeaways from the quarter.

It must be anywhere not losing customers, but it is impacting license revenue from new sales in particular from a bank customers and we're expecting that trend to continue for the balance of the year.

Our on demand revenue was down 1% in Q3 with higher E commerce volumes, and Omnichannel merchant payments, helping offset kobe related slowing in certain vehicles on our biller solution in our digital banking solution.

Your date or on demand revenue was up 19% due to the contribution from speed pay.

From a margin perspective, we continue to focus on cost management and maximizing our profitability while are on premise adjusted EBITDA margin decreased from 61% to 55% in Q3 due to the decline in high margin license revenue are on demand margin continues to increase from 20% in Q3 last year.

32% this year.

We are very pleased with our profitability improvements in our on demand business.

Turning next to slide eight starting with that liquidity.

Q3 saw strong cash flow with cash flow from operating activities of $67 million in the quarter up more than 100% from Q3 last year.

And we have significant liquidity as we ended the quarter with $134 million in cash and 340 million available on our Rybolt.

And I know Sean side some of that is his commentary.

The strength in on demand is coming from bill or.

And ecommerce Bill.

Pillar is our biller businesses entirely us domestic.

But remember that's where we're getting good traction on our combination of AC I with the speed pay acquisition.

And then the ecommerce is international if I, if I look broader outside the us.

And I will conclude here through the on premise.

Sales as well.

And understand any update kind of quarter to date on how the conversations are going with some of the larger light.

License buyers I know that it seems like some of them are just on hold but under trying to understand the the mood or the tenor of those folks and when kind of when they if they have any visibility on maybe ramping some of those purchases.

Thank you for thanks for the question Brad.

The it's very clear for us down there are some headwinds and they will continue in Q4, we don't see them getting better.

We're not talking about the renewals account renewals are coming pretty strong guidance. Our prices are mission critical. So we have no problem true to renew the contract.

And that's going quite well the part that is really be delays are the new products and new services.

Just the new logos and existing loans. So we are seeing RFP is being postponed or fees being canceled in some cases and it's very hard to predict when this is going to stop but it's clear for us that we will continue and it is continuing fuel for.

Okay. That's helpful. And then a question on the thanks for some of the insight or sort of the teaser on the analyst day for the places you guys are going to invest in our emerging markets.

Global clients et cetera can.

I'm very proud.

Of the team of here I think that's called operational disciplined and.

And we came a very strong costs doing this year. There was also some help from from speed pay a physician, but the majority of Covid. These organic and I and I think you're going to the point where.

You know our most profitable by far segment is under delivery and even with that we have 500 basis points of margin improvement.

Very proud of the team very proud of the operational disciplinary give it to Scott.

Yeah, No I would just add to that it's obviously if you as you recall.

We implemented early in the year $20 million a structural cost reduction.

In the business.

And then in reaction to Covid back called late March very early April we quickly implemented another 30 million a cost savings.

That that is continuing to benefit us versus.

Investment on things that they can delay so I think thats whats happening around the globe. There are some exceptions of some geographies around the globe, but most of it is really delaying decisions.

Yes.

You could say that we are doing the same thing with expenses rise in some way I think thats, what they are doing the banks around the globe, there really delayed decisions and the live where they can.

So you have like modernization of infrastructures.

They will happen sooner or later because the days due to FX at once you go to the cloud effects that have this long term vision of modernization, adding products to the mix, so that will happen, but but those decisions are being delayed.

Yep, we're still seeing some volume less than less than our our target volume the bill or side. It but then on the on the E. Commerce side, we continue to see high volumes. There so a bit of a balance some volumes have gone up and some and when I say bill or it's been particularly certain.

<unk>.

Alright, great. That's a good color thanks, guys.

Your next question comes from the line of George seven.

I'm Craig Holland Your line is open.

Importantly, we saw mill so it may working on country better than other country and so forth. So it's going to be experiencing experimenting but I don't want to under sales and staying on me and also over so I think it is a great initiatives and do embedded behind it big time.

Great and then on some of the on Prem deals that were delayed I know you said they were from new customers. I mean is it possible that they switch to weigh on demand deal or is that something you're actively pursuing.

Oh, no we track that was a lot of discipline. So for example, we have a.

I'm Grateful for me its rate so rates on Lucy Lu lost.

Losses.

Like this when you're really focused on profitability in cash speed pay has been a very good contributor to the business yeah, they're very happy with the acquisition.

And I am do we look look at it and say there was a is too much more room to grow scale.

<unk>.

And I said that's helpful. Thank you and then brought more broadly on on demand do you have when you're looking out I don't know next year. A couple of years do you have a sense of went on demand will be able to reach a sustainable growth range instead of the mid single digit.

Yeah, we we are not giving like a longterm guy does now, but what I can tell you is that November 10th we we'd be talking about that so uhm so to stay tuned how Texas and November Jan we will talk to you about it.

Okay. Thank you.

[noise] again, if you would like to ask a question.

[noise] excuse me chairs there are no more phone questions you may continue.

Well, thanks, everybody for listening, we look forward to getting in front of everybody again next Tuesday at our analysts day have a good day.

This concludes today's conference call you may now disconnect. The centers please stand by.

Yeah.

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Uhm.

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