Q4 2021 ACI Worldwide Inc Earnings Call
[music].
Good morning, everyone. Thank you for standing by and welcome to the ACI worldwide fourth quarter earnings Conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
I ask a question during the session you will need to press star one on your telephone.
And please be advised that today's conference is being recorded.
And if you require any further assistance you May press Star zero.
I would now like to hand, the conference over to your Speaker today, Mr. John Kraft.
Thank you and good morning, everyone.
Today's call, we will discuss the company's fourth quarter and full year 2021 results our financial outlook for 2022, and then we will take your questions.
Slides that accompany this call and webcast can be found at ACI worldwide Dot com under the Investor Relations tab and will remain available after the call.
Additional operational statistics have been provided in the supplemental tables of our materials today's call is subject to safe Harbor and forward looking statements like all of our events.
You can find the full text of both statements on the first and final pages of our presentation materials, a copy of which is available on our website as well as with the SEC on this morning's call is July Neil Mehta, our president and CEO and Scott Behrens our CFO .
With that I'd like to turn the call over to or July .
Thank you John .
Hello, everyone and thank you for joining our fourth quarter 221 earnings conference call.
Well, thank you over as CEO of 22 months ago, and facing the reality of lower organic growth, we committed to a disciplined approach to turning around our business.
The 220 together with our leadership team, we created our three pillar strategy, which has already shown results.
Until 'twenty, one we'd increase at organic growth from flat to mid single digit.
This growth is the highest we have seen in almost a decade.
We have increased margin the habit team the rule of 40 for the first year average.
We have deployed a rigorous disciplined and systematic approach to M&A focusing on creating value.
And we have increased the allocation of our strong cash flow towards share repurchases in a sign of confidence in the company's future.
In summary, 221 was a transformational year for ACI.
We delivered on our commitment.
Generated financial results above our guidance and consensus.
And achieved the rule of 40 company with a score of <unk> 43, all while building momentum for 222.
This year, we will cement our mid single digit growth in prime HCI to accelerate growth to 7% to 9% by 224.
<unk> to take you through our financial results in the table.
First let me step back for a moment and update you about our three pillar strategy.
As a reminder, in the Pea.
Our growth pillar, we focus on the streaming line our structure sharpening. Our go to market is try to <unk>, we have a simpler and more efficient operating model with fewer layers broader spans of control smart talent development and more robust Congress.
We are more agile and accountable respecters contribute to our momentum today.
Our weekly operating cadence gives us a clear line of sight to make the business more predictable wherever we operate across the world every revenue drive it and technology leader connect to facilitate critical decision, making real time each week.
<unk> sales compensation closely to company revenue has also been an important lever.
The benefit of local boots on the ground across international markets has increased our ability to seize commercial opportunities ahead of the competition meet the different local demands with agility and global scale and accelerate innovation cycles.
And it is worth repeating that with a simplified and more efficient organization, we captured $60 million in annual cost savings last year half of which was reinvested in our focus on growth priorities.
Moving to our second pillar focus on growth, we have four investment areas real time payments sophisticated global motions.
National markets and the next generation real time payments platform.
Starting with the real time, we continue to invest in both low and high value real time solutions real time transactions continued to grow in every region globally early sites of our annual global real time analysis indicate a 60% year on year rising real time transactions until 'twenty one.
By 226 more than 25% of electronic payments will be through real time payments.
In Asia, we won our real time payments infrastructure for Indonesia, a global top five economy, we are driving the new by FES scheme for Indonesia Central Bank. It will become an integral part of Indonesia's ongoing digital modernization initiative and central to its payment system.
Great.
Multiple banks across Indonesia have already signed for ACI real time solutions, which can skew to billions of transactions overall, we signed a total of 17, new real time wins.
Some examples of real time authorization successes for the last quarter include a major bank in South Africa. It to be the first of many expansions yourself esque.
Top commercial bank in Indonesia, and a part of a global banking network.
In German base, it fintech offering banking as a service a top U S 100 bank headquartered in Texas, and the largest financial institution in Kuwait.
Moving to sophisticated global merchants.
Priority, one expanding innovative omni and E. Commerce solutions has led us to increase our offerings and signed large sophisticated emotions and Murcia intermediaries worldwide.
Last week, we launched the innovative global buy now pay later solution, enabling access to 70 plus be NPL lenders through a single integration.
The innovative user interface ACI be after enhances acceptance rates and service a broader base of credit worthy customers boosting merchant sales worldwide.
NPL has become a must have for merchants.
Offers new avenues to serve a broader base of customers by enabling them to stagger their repayments over time, while driving revenue sophisticated global merchant spend in the range of our solutions and last year, we signed 22 new logos.
Examples worth highlighting from the previous quarter include.
And established Fintech in Europe , we used our secure e-commerce payment gateway for rapid geographic expansion.
Significant evolution of our relationship and independent U S supermarket with 240 stores, we will use our Albany grocery focus solutions.
In the U K top grocery and fewer store will migrate to the multi tenant platform in Missouri.
The largest travel center truck stop in North America, we use multiple solutions to rather card acceptance and integrates fraud management for Deere commercial few customers the largest acquirer in Latin America to resolve fraud solution to secure its 10000, plus gateway merchant base.
Now moving to our international markets, we continue to increase our presence across global growth markets with Abu Relenting focus on improving our sales pipeline.
Latin America, the Middle East Africa, Asia, and South Pacific are core to this expansion. Some examples of ACI wins from across the world for quarter. Four include our first <unk> deal in the Pacific region is with a leading bank in New Zealand.
Top bank in Egypt, as they reinforced their market leadership.
Our National Bank in Sri Lanka extended its remit to modernize its payments infrastructure.
Two major banks in Saudi Arabia embark on their payments modernization.
Multinational commercial banking, Qatar as they modernize to capture growth driven by the upcoming World Cup and new events like the fee Formula one graphics.
A leading bank in Brazil sought our expertise to upgrade their payment services.
One of Ireland's top four commercial banks has kicked off its transformational journey with us the world's largest building society headquartered in the U K is now partnering to drive the modernization strategies.
Our fourth focus on growth investments is about building the new generation of real time payments platform into cement our global leadership in real time payments. This end to end platform, we will deliver payments capabilities across all payment rails with real time as its center of gravity.
Bring a breadth of reach functionality unmatched by any other competitor in this space. It is designed to be simple secure and flexible and we will leverage the latest cloud native principles with a faster time to market.
Our efforts with our third strategic pillar step change value creation through M&A remains a high priority.
Continued to spend significant time, reviewing our business portfolio and M&A opportunities to ensure we maximize short and long term value creation for our shareholders. We look at many investments and divestitures options, where the big small global or local.
Turning to our cash flow and capital structure, our consistent cash flow generation and solid balance sheet gives us significant financial flexibility to make investments to support growth and return cash to shareholders. As a reminder, at our November analyst day, we announced that our expectations to generate 900 million.
And cash flow over the next three years in December we increased our share repurchase authorization to $250 million.
Before turning things over to Scott I'd like to summarize my comments by reiterating that ACI had a transformational year in 2021.
222 will be an inflection point for ACI.
This year, we expect to cement our mid single digit growth and prepared the company to accelerate organic revenue growth to 7% to 9% or 224. We also expect a gradual increase in that adjusted EBITDA margin over the same period.
Combining this outlook with our capital allocation framework and the Optionality associated with step change value creation through M&A. We believe we are well positioned to deliver sustainable shareholder value.
With that I will turn it over to Scott to discuss financials and forward guidance Scott.
Thanks, social a lot and good morning, everyone.
I first plan to go through our financial results for Q4 and full year 2021.
And provide some commentary regarding our outlook for 2022.
Then open the line for questions.
As <unk> mentioned 2021 was a transformational year in 2022 will be an inflection point for ACI.
Fourth quarter revenue was 467 million up 21% from Q4 last year.
Adjusted EBITDA for the quarter was $205 million up 31% from Q4 last year.
Full year 2021 revenue was 137 1 billion up 6% from 2020.
5% on a constant currency basis.
And the highest level in many years.
Total adjusted EBITDA in 2021 was $384 million up 7% compared to $359 million in 2020.
And net adjusted EBITDA margin was 38% in 2021 compared to 37% in 2020.
Turning next to full year segment results, our bank segment revenue increased 12% and adjusted EBITDA increased 13% versus 2020.
Our merchant segment revenue increased 2% in total while the underlying recurring revenue increased 8%.
And merchant segment, adjusted EBITDA increased 2% versus 2020.
Our biller segment revenue and recurring revenue increased 1% in the builder segment adjusted EBITDA decreased 5% versus 2020.
We ended the year with $122 million in cash on hand, and a debt balance of $1 billion.
We repaid $94 million in debt during the year, bringing us a net debt leverage ratio of just under two five times.
We repurchased 3 million shares of our stock during 2021 for $107 million and a further.
Purchased an additional 800000 shares for $27 million so far here in 2022.
And we have approximately $190 million remaining on our current repurchase authorization.
And finally, turning to our outlook for 2022, we expect to submit our constant currency mid single digit organic revenue growth in 2022.
With reported revenue in a range of 1415 to $143 5 billion.
<unk> us to accelerate growth into the upper single digits by 2024.
We expect 2022, adjusted EBITDA of $400 million to $415 million in there.
This excludes one time costs related to the move of our European data centers to the public cloud as communicated at our analyst day back in November .
With our debt balances now at our leverage targets, we are changing our capital allocation priorities in the near term.
Increasing the expected cash flow used for repurchases to approximately 50% of our cash flow.
We announced a $250 million share repurchase authorization in December with plans to use a significant portion of this in the near term.
And finally for Q1 2022, we expect revenue to be in a range of $310 million to $330 million and adjusted EBITDA to be in a range of $60 million to $80 million.
And just a modeling note here from a quarterly phasing perspective, we do not expect our revenue and EBITDA to be as back end loaded here in 2022 as we experienced in 2021.
So with that I will pass it back to <unk> for closing comments.
Thank you Scott.
21 was a transformational year with solid results.
I want to thank the ACI family for all the efforts and outcomes into 'twenty one.
Improved 22.
We will cement our mid single digit growth and position the company to deliver 7% to 9% growth by 224.
Thank you.
We will now open it up for questions and as a reminder to ask a question you will need to press star one on your telephone until we draw. Your question you May press the pound key.
Please limit your question to one.
First question comes from the line of <unk> Tandon, Fujian May Inc. Your line is now open.
Good morning, Congrats on the progress I wanted to start with the question on the seasonality Scott you mentioned that.
It would not be as back end weighted but the <unk> guide does look pretty good relative to expectations, but we're not seeing that flow through for the rest of the year. So just wanted to get some thoughts around like the <unk> guide versus your expectations for the full year and how should think about seasonality in general.
Yes, I think generally speaking if you look at 2021.
It was unusually back end loaded in Q4, both up from a revenue and an EBITDA perspective, I think if you look at.
Kind of pre 2021, if you look at even 2020.
I think thats, probably more indicative of the revenue base and we will see kind of if you look at that first half versus second half, but yes.
I indicated our Q1 guidance is strong.
You just won't have to wait till Q4, this year to see year over year.
Got it and then just a quick follow up in terms of the growth between the three components banks merchants and bidders how should we think about that progression over the course of the year and then maybe like what's embedded in your full year guide for the three components. Thank you.
Yes, I would say.
I wouldn't I wouldn't look at it and say on a quarterly basis I'd look across Europe year over year 'twenty, one to 'twenty two obviously the banks had a very strong.
2021.
That growth rate should pull back a little here in 2022.
Pillars.
<unk> should be call. It in that mid single digits year over year, and then merchants should be a little bit higher and again I'm talking year over year not necessarily quarterly phasing.
So I would look at it being our highest growth would be in merchants.
And then <unk> and then again just because of the overall relative strength of banks in 2021 that growth rate should pull back a little bit in 2022.
Great. Thank you so much.
Yes.
Next question comes from the line of George Sutton of Craig Hallum. George Your line is now open.
Hey, guys. This is James on for George Congrats on a great quarter and grateful year.
So first off I'd love to just hear some color around some of the traction youre seeing with the crypto.
<unk> partnership with rocket fuel, thus far and then what inspired the decision to tap into a buy now pay later the way you did buy sort of going agnostic in enabling access to the 70 plus buy now pay later providers.
Yes.
Okay.
I wouldn't necessarily talk specifically in terms of the kind of the economics of the rocket fuel deal.
That's another.
Caught endpoint or gateway that we offer to our merchants.
I think maybe a little bit more exciting would be the ACI pay after capabilities and what's really driving the opportunity. There is I think what we're seeing with the merchants with some pain points in terms of access to a variety of buy now pay later vendors and what our capability is going to do.
Or is it will provide our merchants with.
Essentially a gateway initially to about 70.
Different buy now pay later lenders and by the end of this year over 200.
And what it is doing is allowing our merchants to provide choice.
Increase the overall acceptance rate of those consumers.
And ultimately from our standpoint.
Not only do we get the economics of the per transaction, which we would get today in our ecommerce solution, but we get essentially revenue share on the the dollar value of the lending. So we are really excited about that opportunity again, I think we're addressing a pain point.
In the market as it relates to to merchants being able to provide.
Provide choice to their consumers.
Jim just to complement.
We are very well positioned for merchants, we have not acquired agnostic solution. So when you talk about crypto partnership the NPL. Those are all other methods of payment for us and now our job here is to get the sophisticated marches why do they call them, we call them Super sophisticated because they want to run the shelf day one.
To be responsible to direct the transaction through the different acquiring Pearl map that we offer. So it is critical that we offer everything that is there. So when you go go or you go be NPL. It is going the same direction, which is if you are with ACI you have multiple <unk>.
Are those of payment and it's all about maximizing revenues for our merchants right.
Got you so it sounds like you're sort of exist.
<unk> existing pain points, rich I guess sort of sounds like there could be some existing demand already at this point is that a fair right right. Yes, we're getting a lot of I would say a lot of inbounds on the ACI pay after capabilities.
Capabilities and again, if we even go back to crypto not to minimize the crypto all we're doing there is giving our merchants.
Other path to payment and expand their total addressable market.
Got you and then just one more follow up if I could.
So in Latin America, the impact of Covid drove a pretty material decline in cash increase in digital payments you identified Latin America as one of your growth markets. I mean could you talk about within Latin America is sort of what specifically, you're targeting which market and sort of what the growth strategy is within those markets.
We had three big markets in Latin America, we have.
Brazil, Colombia, and Mexico, where parallel development in both markets.
We are reaching like another 10 or 11 countries oriented with a good penetration we have put in the ground and.
Our bank solution, thanks, intermediary solution that could be the suites.
Issuing the acquiring the real time payments.
It's very very popular in most of the countries over there now the next frontier is merchant.
Since last year, we started to expand our merchant services internationally to Latin America, and we are already seeing a very strong pipeline.
<unk> prevention Omni commerce.
We have been working so I would say that we have Latin America in all cylinders now and you can expect greater results from North America.
By the way Jamie just for you to know I mean, Brazil today, I am calling to you <unk>.
I'm holding this call from Brazil.
So your boots are literally on the ground it sounds good congrats very much.
Yeah.
Okay.
Yes.
Next question comes from the line of Peter Heckmann of D. A Davidson Peter Your line is now open.
Hey, good morning, Thanks for taking my questions I wanted to talk about the pillar.
Yes.
Net revenue.
It was down and was below our forecast has been down a couple of quarters in a row.
The extent of the down in the fourth quarter, maybe you take the calendar fall in such a way that maybe the end of the mine or the end of the key week push.
<unk>.
Bill pay into January .
No Pete I would say just generally speaking if you look at bill pay.
It came in low single digit growth year over year.
Net revenue growth was.
Lower than that but.
But I would look at 2021, and we spent a lot of the time in 2021 are really focused on finishing up the TSA that we have the speed and so a lot of that effort was really alright, sorry, with western Union and moving that business over to our data center. So a lot of time is really on that migration, we have a significant backlog of on boarding of new projects that we've got.
And that we've turned our attention to here starting in the fourth quarter to get those deals live here in the early part of this year and so.
I don't think that were still going to probably see the phenomenon of net.
It is growing less than the gross revenue because of <unk>.
Interchange and mix, but I would say that really what's going to be the driver of growth here. In 2002 is getting those projects live that we've already sold and you should see those coming online here early in the year. So that will push gross revenue up book push net revenue up you always have a bit of a delta I think in terms of the.
Interchange mix, Okay. Okay, and then just thinking about the mix of revenue in your guidance.
The clearly.
Very strong software year in 2021.
And.
In order to get to your guidance.
I need.
I am having a difficult time.
Not.
Basically, stating that software is going to be at least flat to get to your numbers.
And that seems like a relatively high hurdle, but is that how youre thinking about it or is there. Another offsets like for example subscription revenues accelerating towards the high high single digits.
I think generally speaking you'll see.
Recurring revenue increase year over year, if you look at our midpoint of our 22 revenue guidance call at constant currency.
Midpoint is 5%.
Merchant should grow in excess of that really powered by.
The recurring revenue in that business transaction growth and recurring revenue.
On the biller side should come in probably about in line for in line with the total company and then the software side, a predominance offer cypress with the banks again, that's what I was saying in my prepared remarks, that's going to be we're coming off of a very strong year with banks and so I'd see that coming in.
Less than our midpoint growth rates, mostly because we were really were really coming off of a strong year, but maybe you can add to that and I think you see it even in our Q1 guidance.
Banks, we were really seeing banks will open up the wallet and.
In the second half of 2021, and we're continuing to see that strength here in the early part of 2022 so.
It was very encouraging to see the bank spending.
Good to hear thank you.
Next question comes from the line of Joseph <unk> of Canaccord. Joseph Your line is now open.
Hey, guys good morning, great.
Great execution.
Execution in 'twenty one.
Looking forward to a good 22, just going back to the guide real quick.
Could you breakdown, what you would see as the growth.
<unk> from U S domestic versus international and then I'll have a quick follow up on that.
Maybe let me maybe answer first bite.
Kind of providing some color on 2021 2021 had if you exclude what I call more of our mature markets.
U S and Europe are the rest of our international markets drove about 15%, 16% year over year growth.
We would expect that to continue.
Emerging markets growth markets are driving higher growth and I'd say in our.
Kind of more mature markets. So I would expect that to continue in 2022.
And then if you look at safety part of our business builders predominate is entirely U S domestic.
Merchant banks has more of an international footprint.
Then biller.
Sure.
Helpful. And then if you wanted a breakdown between banks and merchants internationally.
And.
The growth outlook in each of those segments, which one would be ahead of the other or are they about equal.
We would generally speaking merchants is going to grow whether it's international or domestic is going to grow faster than the banks.
That's just a.
Following the trends in overall transaction growth in E Commerce.
If you look at the underlying recurring revenue merchant.
In 2021 that that grew 8% that's really.
A subset of what the transaction growth is and so we'd expect that to continue.
I don't I'll be honest don't have necessarily a mix on banks and merchants split between international and domestic or we can get that.
They are pretty balanced.
Merchants merchants more international than banks.
Sure. That's helpful. Scott and then just circling back to U S. Domestic banks, we've seen in a lot of the other names we follow.
A resurgence in demand from banks here and clearly you saw some of that here exiting the year.
Do you think if you look into the into the pipeline and the business. There are we kind of fully caught up at this point on delayed deals at this point or would you say that.
More and more kind of now at a normal cadence.
<unk>.
It does feel like the banks won't do as much delaying as perhaps they did over the last couple of years and maybe that's also a positive for your business or any comments on that would be helpful. Thanks a lot.
There's no doubt the banks like I was saying the banks really opened up the wallet here in the second half of 2021, we're continuing to see that.
I don't know if were quite at the end of the catch up period again, we're seeing particular strength in banks and I wouldn't I.
I wouldn't isolate it to just our U S Bank market, we had as we had a strong year.
In both.
And the international markets with banks.
Yes, I think I think I can add more color to that Scott.
In Dubai last week, right, namely, Brazil today, and I've been traveling around the globe and talking to the Ceos of banks auto immune.
And you asked Europe , but all around the globe.
What I'm listening is.
I think that we're going after COVID-19 now.
Coming from pandemic to endemic so everything that you have already thats happening and.
The banks are starting to really talk about modernization, even more than before so when I talked to them. For example, both our next generation payments hub payments platform.
I would tell them that they're going to have a road map on all of that like in the middle of the year and explain to them that is going to be joining is going to be 123 years. They get very excited <unk> got real excited and they are calling us to see it on the table.
The modernization with them and tell them what is does not move back knowledge about I can tell you that that competition was not happening until 'twenty.
One of the first half of 'twenty, one so it's a very different environment.
That's great color Thanks, Alex alone.
Sure.
As there are no further questions at this time.
I'll turn it back to the speakers for any closing remarks.
Thanks, everybody for joining us today, we look forward to catching up in the coming weeks have a good day.
Thank you so much for our presenters and to everyone who participated this concludes today's conference call you may now disconnect.
Speakers. Please stay on the line for the post conference.
[music].
[music].
Good morning, everyone. Thank you for standing by and welcome to the ACI worldwide fourth quarter earnings Conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
And to ask a question during the session you will need to press star one on your telephone.
And please be advised that today's conference is being recorded.
And if you require any further assistance you May press Star zero.
I would now like to hand, the conference over to your Speaker today, Mr. John Kraft.
Thank you and good morning, everyone.
On today's call, we will discuss the company's fourth quarter and full year 2021 results our financial outlook for 2022, and then we will take your questions.
The slides that accompany this call and webcast can be found at ACI worldwide Dot com under the Investor Relations tab and will remain available after the call.
Additional operational statistics have been provided in the supplemental tables of our materials today's call is subject to safe Harbor and forward looking statements like all of our events you can find the full text of both statements on the first and final pages of our presentation materials, a copy of which is available on our website as well as with the SEC.
<unk>.
On this morning's call is <unk>, our president and CEO and Scott Behrens our CFO .
With that I'd like to turn the call over to Audra one.
Thank you John Hello, everyone and thank you for joining our fourth quarter 221 earnings conference call.
Well, thank you over as CEO of 22 months ago and facing the reality of no organic growth, we committed to a disciplined approach to turning around our business.
<unk> hundred 20, <unk> together with our leadership team, we created our three pillar strategy, which has already shown results.
In 2021, we increase it organic growth from flat to mid single digit.
This growth is the highest we have seen in almost a decade.
We have increased margin and have achieved the rule of 40 for the first year ever.
We have deployed a rigorous disciplined and systematic approach to M&A focusing on creating value.
And we have increased the allocation of our strong cash flow towards share repurchases in a sign of confidence in the company's future.
In summary, $2 21 was a transformational year for ACI.
We delivered on our commitments.
Generated financial results above our guidance and consensus.
And achieved the rule of 40 coming in with a score of 43, all while building momentum for 2022.
This year, we will cement our mid single digit growth in prime ACI to accelerate growth to 7% to 9% by 2024.
To take you through our financial results in detail, but first let me step back for a moment and update you about our three pillar strategy.
As a reminder, in the fit for growth pillar, we focused on streamline our structure sharpening. Our go to market is strategy and execution, we have a simpler and more efficient operating model with fewer layers broader spans of control smart talent development and more robust Congress, we are more of <unk>.
<unk> and accountable these factors contribute to our momentum today.
Our weekly operating cadence give us a clear line of sight to make the business more predictable wherever we operate across the world every revenue product and technology leader connect to facilitate critical decision, making real time each week.
Lincoln sales compensation closely to company revenue has also been an important lever.
The benefit of local boots on the ground across international markets has increased our ability to seize commercial opportunities ahead of the competition meet the different local demands with agility and global scale and accelerate innovation cycles.
And it is worth repeating that with a simplified and more efficient organization, we captured $60 million in annual cost savings last year half of which was reinvested and our focus on growth priorities.
Moving to our second pillar focused on growth.
We have four investment areas real time payments sophisticated global motions international markets and the next generation real time payments platform.
Starting with the real time, we continue to invest in both low and high value real time solutions real time transactions continued to grow in every region globally early insights of our annual global real time analysis indicate a 60% year on year rising real time transactions into 'twenty one.
By 226 more than 25% of electronic payments will be through real time payments.
Lastly in Asia, we want our real time payments infrastructure for Indonesia, a global top five economy, we are driving the new by FES scheme for Indonesia Central Bank. It will become an integral part of Indonesia's ongoing digital modernization initiative and central to its payment system.
Right.
Multiple banks across Indonesia have already signed for ACI real time solutions, which can scale 2 billion of transactions overall, we signed a total of 70, new real time wins.
Some examples of real time authorization successes for the last quarter include a major bank in South Africa. It would be the first of many expansions in South Africa.
Top commercial bank in Indonesia, and a part of a global banking network.
Leading German basic syntech offering banking as a service a top U S 100 bank headquarter in taxes, and the largest financial institution in Kuwait.
Moving to sophisticated global merchants.
Priority on expanding innovative omni and E. Commerce solutions has led us to increase our offerings and signed large sophisticated emotions and merchant intermediaries worldwide.
Last week, we launched an innovative global buy now pay later solution, enabling access to 70, plus the NPL lenders through a single integration.
The innovative user interface ACI pay after enhances acceptance rates and service a broader base of credit worthy customers boosting merchant sales worldwide.
The NPL has become a must have for merchants.
Offers new avenues to serve a broader base of customers by enabling them to stagger their repayments over time, while driving revenue sophisticated global merchants value the range of our solutions and last year, we signed 22 new logos.
Examples worth highlighting from the previous quarter includes.
And established Fintech in Europe , we use our secure e-commerce payments gateway for rapid geographic expansion and a significant evolution of our relationship and independent U S supermarket with 240 stores, we will use our omani grocery focus solutions.
In the U K.
Top grocery and fewer store will migrate to the multi tenant platform in azure.
The largest travel center truck stop in North America, we use multiple solutions to a broader and card acceptance and integrates fraud management for their commercial few customers the largest acquirer in Latin America to the fraud solution to secure its 10000 plus gateway merchant base.
Now moving to our international markets, we continue to increase our presence across global growth markets with an unrelenting focus on improving our sales pipeline.
In America, the Middle East Africa, Asia, and South Pacific are core to this expansion. Some examples of ACI wins from across the world for quarter. Four include our first <unk> deal in the Pacific region is with a leading bank in New Zealand.
Top bank in India as they reinforced their market leadership in.
Our National Bank in Sri Lanka extended its remit to modernize its payments infrastructure.
Two major banks in Saudi Arabia embark on their payment modernization.
A multinational commercial banking, Qatar as they modernize to capture growth driven by the upcoming World Cup and new events like the fear Formula one Grand picks.
A leading bank in Brazil sought our expertise to upgrade their payments services one of Ireland's top four commercial banks has kicked off its transformational journey with us the world's largest building society headquartered in the UK is now partnering to drive the modernization projects.
Our fourth focus on growth investments is about building the new generation real time payments platform to cement our global leadership in real time payments. This end to end platform, we will deliver payments capabilities across all payment rails with real time as its center of gravity.
Bring a breadth of rich functionality unmatched by any other competitor in this space, it's designed to be simple secure and flexible and we will leverage the latest cloud native principles with a faster time to market.
Our efforts with our third strategic pillar step change value creation through M&A remains a high priority.
Continued to spend significant time, reviewing our business portfolio and M&A opportunities to ensure we maximize short and long term value creation for our shareholders. We look at many investments and divestitures options, where the big small global or local.
Turning to our cash flow and capital structure are consistent cash flow generation and solid balance sheet gives us significant financial flexibility to make investments to support growth and return cash to shareholders. As a reminder, at our November analyst day, we announced that our expectations to generate 900 million.
And cash flow over the next three years in December we increased our share repurchase authorization to $250 million.
Before turning things over to Scott I'd like to summarize my comments by reiterating that ACI had a transformational year in 2021.
222 will be an inflection point for HCI.
This year, we expect to cement our mid single digit growth and prepare the company to accelerate organic revenue growth to 7% to 9% in 224. We also expect a gradual increase in net adjusted EBITDA margin over the same period.
Combining this outlook with our capital allocation framework and the Optionality associated with step change value creation through M&A. We believe we are well positioned to deliver sustainable shareholder value.
I'll turn it over to Scott to discuss financials and forward guidance Scott.
Thanks, a lot and good morning, everyone.
First plan to go through our financial results for Q4, and full year 2021, and then provide some commentary regarding our outlook for 2022.
We will then open the line for questions.
As <unk> mentioned 2021 was a transformational year in 2022 will be an inflection point for ACI.
Fourth quarter revenue was $467 million up 21% from Q4 last year.
And adjusted EBITDA for the quarter was $205 million up 31% from Q4 last year.
Full year 2021 revenue was $1 371 billion up 6% from 2020 or 5% on a constant currency basis, and the highest level in many years.
Total adjusted EBITDA in 2021 was $384 million up 7% compared to $359 million in 2020.
Net adjusted EBITDA margin was 38% in 2021 compared to 37% in 2020.
Turning next to full year segment results, our bank segment revenue increased 12% and adjusted EBITDA increased 13% versus 2020.
Our merchant segment revenue increased 2% in total while the underlying recurring revenue increased 8%.
And merchant segment, adjusted EBITDA increased 2% versus 2020.
Our biller segment revenue and recurring revenue increased 1% in the <unk> segment, adjusted EBITDA decreased 5% versus 2020.
We ended the year with $122 million in cash on hand, and a debt balance of $1 billion.
We repaid $94 million of debt during the year, bringing us a net debt leverage ratio of just under two five times.
We repurchased 3 million shares of our stock during 2021 for $107 million and a further repurchased an additional 800000 shares for $27 million. So far here in 2022.
And we have approximately $190 million remaining on our current repurchase authorization.
And finally, turning to our outlook for 2022, we expect to cement our constant currency mid single digit organic revenue growth in 2022 with reported revenue in a range of 1415 to $143 5 billion.
Positioning us to accelerate growth into the upper single digits by 2024.
We expect 2022, adjusted EBITDA of $400 million to $415 million.
And this excludes one time costs related to the move of our European data centers to the public cloud as communicated at our analyst day back in November .
With our debt balances now at our leverage targets, we are changing our capital allocation priorities in the near term.
Increasing the expected cash flow used for repurchases to approximately 50% of our cash flow.
We announced a $250 million share repurchase authorization in December with plans to use a significant portion of this in the near term.
And finally for Q1 2022, we expect revenue to be in a range of $310 million to $330 million and adjusted EBITDA to be in the range of $60 million to $80 million.
And just a modeling note here from a quarterly phasing perspective, we do not expect our revenue and EBITDA to be as back end loaded here in 2022 as we experienced in 2021.
So with that I will pass it back to <unk> for closing comments.
Thank you Scott.
221 was a transformational year with solid results.
I want to thank the ACI family for all the efforts and outcomes in 2021.
And 222.
We will cement our mid single digit growth and position the company to deliver 7% to 9% growth by 202004.
Thank you.
And we will now open it up for questions and as a reminder to ask a question you will need to press star one on your telephone and can we draw. Your question you May press the pound key.
And a question to one.
First question comes from the line of <unk> Tandon Needham Ma'am. Your line is now open.
Good morning, Congrats on the progress I wanted to start with the question on the seasonality Scott you mentioned it.
Would not be as backend weighted but.
The <unk> guide does look pretty good relative to expectations, but we're not seeing that flow through for the rest of the year. So just wanted to get some thoughts around like the <unk> guide versus your expectations for the full year and how should think about seasonality in general.
Yes, I think generally speaking if you look at 2021.
It was unusually back end loaded.
In Q4, both from a revenue and an EBITDA perspective, I think if you look at.
Kind of pre 2021, if you look at even 2020.
For a call I think thats, probably more indicative of the revenue base and we will see kind of if you look at that first half versus second half, but yes.
Indicated our Q1 guidance is strong.
You just won't have to wait till Q4, this year to see year over year shrink.
Okay.
Got it and then just a quick follow up in terms of the growth between the three components banks merchants and bidders how should we think about that progression over the course of the year and then maybe like what's embedded in your full year guide for the three components. Thank you.
Yes, I would say.
I wouldn't I wouldn't look at it and stay on a quarterly basis I would look at.
Europe year over year 'twenty, one to 'twenty two obviously the banks had a very strong.
2021.
That growth rate should pull back a little here in 2022.
<unk> growth should be call. It in that mid single digits year over year, and then merchants should be a little bit higher and again im talking year over year not necessarily quarterly phasing.
So I would look at it being our highest growth would be in merchant.
And then pillars and then again just because of the overall relative strength of banks in 2021 that growth rate should pull back a little bit in 2022.
Great. Thank you so much.
Next question comes from the line of George Sutton of Craig Hallum. George Your line is now open.
Hey, guys. This is James on for George Congrats on a great quarter and grateful year.
So first off I'd love to just hear some color around some of the traction youre seeing with the crypto.
Crypto partnership with rocket fuel, thus far and then what inspired the decision to tap into a buy now pay later the way you did buy sort of going agnostic in enabling access to 70, plus buy now pay later providers.
Okay.
I wouldn't necessarily talk specifically in terms of kind of the economics of the rocket fuel deal.
Obviously, that's another.
Caught endpoint or gateway that we offer to our merchants.
I think maybe a little bit more exciting would be the ACI pay after capabilities and what's really driving the opportunity. There is I think what we're seeing with our merchants with some pain points in terms of access to a variety of buy now pay later vendors and what our capability is going to do is it will.
Provide our merchants with.
Essentially a gateway initially to about 70.
Different buy now pay later lenders and by the end of this year over 200.
And what it is doing is allowing our merchants to provide choice.
Increase the overall acceptance rate of those consumers.
And ultimately from our standpoint.
Not only do we get the economics of the per transaction, which we would get today in our ecommerce solution, but we get essentially revenue share on the the dollar value of the lending. So we are really excited about that opportunity again, I think we're addressing a pain point in the market as it relates to <unk>.
<unk> being able to provide.
We provide choice to their consumers.
Tim just to complement.
We are very well positioned for merchants, we have an acquirer ignostic solution. So when you talk about crypto partnership the NPL pools or other methods of payment for us and now our job here is to get the sophisticated Marcia do they call them, we call them Super sophisticated because they want to run the show.
Wanted to be responsible to direct the transaction through the different acquiring pro map that we offer. So it is critical that we offer everything that is there. So when you go <unk>.
Or would you go be NPL. It is going the same direction, which is a few of our with ACI, you'll have multiple methods of payment and it's all about maximizing revenues for our merchants right.
Got you so it sounds like you sort of exist.
Identified existing pain points, rich I guess sort of sounds like there could be some existing demand already at this point is that a fair right right. Yes, we're getting a lot of I would say a lot of inbounds on the ACI pay after Cape.
Capabilities and again, if we even go back to crypto not to minimize the crypto all we're doing there is giving our merchants.
Other path to payment and expand their total addressable market.
Got you and then just one more follow up if I could.
So in Latin America, the impact of Covid drove a pretty material decline in cash increase in digital payments you identified Latin America as one of your growth markets. I mean could you talk about within Latin America sort of what specifically, you're targeting which market and sort of what the growth strategy is within those markets.
We have three big markets in North America, we have.
Brazil, Colombia, and Mexico, we are very well developed in both markets.
We are reaching like cut another 10 or 11 countries are oriented with a good penetration we have put in the ground and our bank solution. Thanks intermediary solutions, then could be the suites the issuing the acquiring the real time payments.
It's very very popular in most of the countries over there now with an excellent tier is merchant.
Since last year, we started to expand our merchant services internationally to Latin America, and we are already seeing a very strong pipeline.
And fraud prevention Omni commerce.
And you're working so I would say that we have Latin America in all cylinders now and you can expect greater results from North America.
By the way Jamie just for you to know I mean, Brazil today, so I am calling to you.
Im described I'm holding this call from Brazil. So.
Your boots are literally on the ground it sounds good congrats very much.
Next question comes from the line of Peter Heckmann of D. A Davidson Peter Your line is now open.
Good morning, Thanks for taking my questions.
I wanted to talk about the biller business.
Net revenue.
Was down and was below our forecast has been down a couple of quarters in a row.
We extended the down in the fourth quarter, maybe you take the calendar fall in such a way that maybe the end of the mine or the end of the key week push.
Push them.
Bill pay into January .
No Pete I would say just generally speaking if you look at bill pay.
It came in low single digit growth year over year.
Net revenue growth was.
Lower than that but.
But I would look at 2021, and we spent a lot of time in 2021 are really focused on finishing up the TSA that we have to pay and so a lot of that effort was really arent, sorry, with western Union and moving that business over to our data center. So a lot of time is really on that migration, we have a significant backlog of on boarding of new projects that we've got.
Now we've turned our attention to here starting in the fourth quarter to get those deals of live here in the early part of this year and so.
I don't think that were still going to probably see the phenomenon of net revenue growing less than our gross revenue because of <unk>.
Interchange and mix, but I would say that really what's going to be the driver of growth here in 2002 is getting those projects life that we've already sold and you should see those coming online here early in the year. So that will push gross revenue up book push net revenue up you always have a bit of a delta I think in terms of the <unk>.
Interchange mix, Okay. Okay, and then just thinking about the mix of revenue in your guidance.
B B clearly very.
Very strong software year in 2021.
And.
In order to get to your guidance.
I need.
I am having a difficult time.
Not <unk> based.
Basically, stating that software is going to be at least flat to get to your numbers.
And that seems like a relatively high hurdle, but is that how youre thinking about it or is there. Another offsets like for example subscription revenues accelerating towards the high high single digits.
Yes, I think generally speaking you'll see re.
Recurring revenue increase year over year, if you look at our midpoint of our 22 revenue guidance call at constant currency.
Midpoint is a 5%.
Merchants should grow in excess of that really powered by.
The recurring revenue in that business transaction growth and recurring revenue.
On the biller side should come in probably about in line for in line with the total company and then the software side, our predominant software servers at the banks again, that's what I was saying in my prepared remarks, that's going to be we're coming off of a very strong year with banks and so I'd see that coming in.
Less than our midpoint growth rates, mostly because we're really we're really coming off of a strong year, but I would even add to that and I think you see it even in our Q1 guidance that.
Banks, we're really seeing banks open up their wallet.
In the second half of 2021, and we're continuing to see that strength here in the early part of 2022 so.
It was very encouraging to see the bank spending.
Good to hear thank you.
Next question comes from the line of Joseph <unk> of Canaccord. Joseph Your line is now open.
Hey, guys good morning, great.
Great execution.
Execution in 'twenty one.
Looking forward to a good 22, just going back to the guide real quick.
Could you breakdown, what you would see as the growth.
Tributaries from U S domestic versus international and then I'll have a quick follow up on that.
Maybe let me maybe answer first by.
Kind of providing some color on 2021 2021 had if you exclude what I call more of our mature markets.
U S and Europe are the rest of our international markets drove about 15%, 16% year over year growth.
We would.
Spect that to continue.
Emerging markets growth markets are driving higher growth and I'd say in our kind of more mature markets. So I would expect that to continue in 2022.
And then if you look at safety part of our business Biller is predominant is entirely U S domestic.
Merchant banks has more of an international footprint.
Then biller.
Sure.
Helpful. And then if you wanted a breakdown between banks and merchants internationally.
And.
The growth outlook in each of those segments, which one would be ahead of the other or are they about equal.
Well generally speaking merchants is going to grow whether it's international or domestic is going to grow faster than the banks.
That's just a.
Following the trends in overall transaction growth in E Commerce.
If you look at the underlying recurring revenue merchant.
In 2021 that grew 8% that's really.
A subset of what the transaction growth is and so we'd expect that to continue.
I don't I'll be honest don't have necessarily our mix on banks and merchants split between international and domestic but we can get that.
They are pretty balanced.
Merchants merchants more international than banks.
Sure. That's helpful. Scott and then just circling back to U S. Domestic banks, we've seen in a lot of the other names we follow.
A resurgence in demand from banks here and I think clearly you saw some of that here exiting the year.
Do you think if you look into the into the pipeline and the business. There are we kind of slowly caught up at this point on delayed deals at this point or would you say that.
More and more kind of now at a normal cadence of business.
It does feel like the banks won't do as much delaying as perhaps it did over the last couple of years and maybe that's also a positive for your business or any comments on that would be helpful. Thanks, a lot yes.
Yes, there's no doubt the banks like I was saying the banks really opened up the wallet here in the second half of 2021, we're continuing to see that.
I don't know if were quite at the end of the catch up period again, we're seeing particular strength in banks and I wouldn't I.
I wouldn't isolate it to just our U S Bank market, we had we had a strong year.
In both.
And the international markets with banks.
Yes, I think I think I can add more color to that Scott.
I was in Dubai last week right now in Brazil today, and they've been traveling around the globe and talking to the <unk> Bank auto immune.
Last year, but they're all around the globe.
What I'm listening is I think that we're going after COVID-19 now it's.
It's coming from pandemic to endemic so everything that you have already it's happening and the banks are starting to really talk about modernization, even more than before so when I talk to them. For example, both our next generation payments hub payments platform.
I would tell them that they're going to have a road map of that like in the middle of the year and explain to them that is going to be a joining is going to be 123 years. They get very excited <unk> got real excited and they are calling us to sit on the table and mapped the modernization with them and tell them. What is does not move back knowledge about I can tell.
That that competition was not happening to planning when in the first half of 'twenty one.
Very different environment.
That's great color. Thanks, So exelon.
Sure.
Okay.
As there are no further questions at this time I will turn it back to the speakers for any closing remarks.
Thanks, everybody for joining us today, we look forward to catching up in the coming weeks have a good day.
Thank you so much for our presenters and to everyone who participated this concludes today's conference call. You may now disconnect and speakers. Please stay on the line for the post conference.