Q2 2022 ACI Worldwide Inc Earnings Call

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Yeah.

Good day, ladies and gentlemen, and welcome to the ACI worldwide second quarter 2022 conference call.

All lines have been placed on a listen only mode.

The floor will be open for your questions or comments following the presentation.

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Please press star zero on your telephone keypad to reach a live operator.

At this time.

It is my pleasure to turn the floor over to your host John Kraft head of strategy and finance.

Sir the floor is yours.

Thank you and good morning, everyone.

On today's call, we will discuss the company's second quarter 2022 results.

Yes, its financial outlook through the rest of the year.

We will take your questions at the end.

Slides accompanying this call and webcast can be found in ACI worldwide Dot com under the Investor Relations tab and will remain available after the call.

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 deck.

Copy of which is available on our website and with the SEC.

On this morning's call is <unk> Almeida, our president and CEO and Scott Behrens our CFO .

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

Thank you John .

Hello, everyone and thank you for joining our second quarter 222 earnings conference call.

We are pleased to deliver another quarter of results in line with guidance and consensus.

These results underscore the predictability resilience and momentum of our growth.

It proves that our three pillar strategy fit for growth focus on growth and step change value creation is working.

And that's our continued focus and disciplined execution of this strategy is gaining traction.

Our real time payment solutions continue to make headway across the globe just as our merchant omni commerce solution enters new markets and expense with innovative offerings.

Our boots on the ground approach continues to deliver significant wins across international markets.

Work is underway on our next generation real time payments cloud platform and we expect the release of the minimal viable product in the first quarter of 223.

We expect the Divesture of our carpet online banking solutions to close in the third quarter of 2022, and our continuous rigorous review of divestitures and acquisitions opportunities to maximize shareholder value remains unchanged.

We reported organic growth of 13% or 14% on a constant currency basis, and EBITDA growth of 10% or 11% on a constant currency basis.

We our bookings growth was 3% compared to the second quarter of 221, and they are year to date is up 43%.

We continue to cement our annual mid single digit organic revenue growth, while positioning the company to grow by 7% to 9% by 224 I.

I am pleased with the consistency of our performance and our significant financial flexibility.

Support short and long term profitable growth.

We bought 2 million shares through June 30, and have $154 million remaining on our share repurchase authorization.

Now, let me turn to some latest trends and wins.

Central government mandates continues to be the difference maker for faster adoption of real time payments around the globe.

Within this landscape ACI remains at the forefront of real time payments across the globe by leading national payment schemes for central banks and connecting national banks to National systems.

The middle East has taken strides towards real time payments as national governments prioritize infrastructure modernization.

On the Central Bank, we use ACI is real time same true infrastructure software to drive immediate payments as the country modernized towards a cashless society.

Japan card network, Japan's central domestic payments network has select ACI as its digital platform Barnett to modernize its payments infrastructure.

South Korea's Lotte card co leading credit card conglomerate with the largest distribution and service network nationwide has appointed ACI to build the core foundation of its credit card business.

The largest white label ATM service provider with more than 11000, Atms has signed Aci's enterprise payments platform solution to support its expansion.

In our merchant business, we continue to ramp up and <unk> solutions to allow merchants to offer more payment methods to put customers.

We see the results of these investments as we enter new markets and cross sell to existing customers.

We recently launched ACI smart engaged our mobile engagement platform.

It lets merchants offer goods and services directly to consumers smartphones using location voice and image recognition technology.

<unk> global way to service provider, we use the ACI secure e-commerce solution for Italian merchant business servicing multiple sectors from fashion and food to utilities.

Alright, Payment's secure e-commerce, an established provider of innovative e-commerce payment solutions, we use the ACI secure e-commerce solution Red.

Redman, Columbia's largest Pos network and the top processor has expanded to include ACI Brexit risk manager and our cross sell deals.

Blue Sky Technology service U S technology consulting firm offering payments worldwide, we use ACI security Congress.

Im pleased with the significant wins in the second quarter and now I will turn it over to Scott to discuss financials and forward guidance Scott.

Thanks, so much Lonnie and good morning, everyone.

I first plan to review our financial results for Q2 and provide our outlook for the rest of the year.

We will then open the line for questions.

Revenue for the quarter was $340 million up 13%, 14% on a constant currency basis from Q2 last year.

Adjusted EBITDA for the quarter was $66 million up 10% or 11% constant currency basis from Q2 last year.

And net new <unk> bookings in Q2 were $18 million up 3% from Q2 last year and up 43% year to date.

These results continue a string of quarters in line with our financial guidance.

Turning to our segment results. Thanks segment revenue grew 24% or 27% on constant currency basis and segment adjusted EBITDA increased 29% on both the reported and a constant currency basis versus Q2 last year.

Merchant segment revenue decreased 2% on a reported basis, but increased 2% on a constant currency basis, while merchant segment adjusted EBITDA was down 41% were.

We're down 32% on a constant currency basis versus Q2 last year.

And finally, our Biller segment revenue grew 8% on a reported and constant currency basis, while adjusted EBITDA decreased 18% or 19% constant currency basis versus Q2 last year.

We ended the quarter with $119 million in cash on hand.

Balance of $1 1 billion and a net.

Net debt leverage ratio of two four times, which is just below our two five times target.

We repurchased a little more than 900000 shares for $25 million during the quarter.

And have repurchased approximately 2 million shares for $63 million year to date.

And we have $154 million remaining on our current repurchase authorization at the end of June .

Okay.

And finally, turning to our outlook for the rest of 2022, we are reiterating our full year guidance, we expect revenue growth to be in the mid single digits on a constant currency basis or in the range of 1415 to $1 $43 5 billion.

And we expect full year adjusted EBITDA of 400 to 415.

For Q3, we expect revenue to be in a range of $310 million to $325 million.

And adjusted EBITDA to be in a range of 50 to 65.

In terms of capital allocation, we continue to expect to use approximately 50% of our cash flow for share repurchases.

<unk> of the year.

And again, we will update our outlook for the impact of the sale of our corporate online banking business. Once it closes which is expected to be before the end of the third quarter.

With that I will pass it back to <unk> for some closing comments.

Thanks, Sean.

Thank you Scott.

In summary.

We delivered another strong quarter in line with guidance and consensus.

Our year to date results demonstrated the predictability resilience and growth momentum of ACI worldwide.

The steady cadence of significant business wins validates our three pillar strategy. It also reinforces the mission critical role of our software and technology and leading the future of real time payments worldwide.

We continue to cement our mid single digit organic growth, while positioning the company to grow by 7% to 9% by 224, our strong balance sheet and cash flow gives us resilience and financial flexibility.

Thank our <unk> employees for their dedication.

And our partners and customers for their trust.

Thank you all for joining us today and now we will open for Q&A.

Do you have a question. Please press star one on your telephone keypad at this time.

Anytime Youre question has been answered.

Can remove yourself from the queue by pressing one okay, and ladies and gentlemen, if you have a.

Question I'll comment.

Please press star one on your telephone keypad at this time.

One moment, while we poll.

Sure.

[noise] questions at this time.

We do have a question coming in okay.

First question is from George Sutton of Craig Hallum. Please go ahead George.

Thank you guys nice results. So I wondered if we could go into a little bit more segment detail.

It looks like the bulk the bulk business has been superb.

I guess, we can think Jerome Powell for some of that but.

But the merchant piece of the business has been slowing in the recurring revenue slowing and.

I just wanted to make sure we understood sort of what is causing that to occur.

Yes, maybe I'll take that one you can add.

I mean, the bank strength and we kind of said this coming out of the fourth quarter last year, a strong exit to 2021.

<unk> to see that strength here in the first half of the year.

If you Peel that back even further on the bank side really Thats a lot of that is being powered by our real time payments.

Which through the first half of the year is up almost 50% over last year.

So a lot of strength there.

If you look at Bill pay up 8% over last year, and then on the merchant segment.

Constant currency, yes, it's 2% for the quarter, but it's up.

6% year to date and so.

Timing of some of the license fee can make a difference in that business, albeit a small portion of the business.

It can have a year over year impact up 6% constant currency year to date.

Yes.

Yes, just to call Brent George.

I think we look at the merchant business and we had a very strong quarter in recurring revenue.

Last year that was the recovery of the pandemic and the anniversary of that but I can tell you that we're still estimating a very strong year for <unk> <unk>.

No.

Yeah.

Understand okay.

The next Gen.

RTP that you're talking about can you just give us a sense of what will be enhanced.

It comes out.

Youre talking about the next generation RTP orchestration right the cloud correct.

Okay, Yeah, no definitely yes, yes basic.

Basically basically is like a rewrite of the all the coal. So you can think about the next generation of our base 24, our suites are issuing our acquiring our RTP. So.

It is like the last technology that we have available which will give our clients a much more speed to go to the market much easier to make changes to adapt the products and so forth. The idea is to have the minimal viable product by Q1 next year and then we're going to start to roll it out around the globe.

And in the coming two years.

Perfect Lastly, you mentioned some compelling wins in Japan Korea, India.

For my benefit and those on the call when do we start to get revenues in from those.

New opportunities.

Yes, there are some of them that we talked about which is license rights that we got the revenue right away.

All of them are.

Banks and intermediaries that takes around six to 12 months to launch most of the time.

On a subscription basis and Daniel have merchant, yes. It takes around also three to six months to launch. So I would say I will tell you that part of that revenue. We can expect that this year, but the bulk of the revenue will be next year.

Perfect. Thanks, guys.

Yes, Joe just to complement.

I think it's important to reinforce our very strong <unk> growth. So when we talk about they are we are talking about the first year expected revenue. After we launch that's flat and we havent growth I'd like more than 40%.

This year, we are projecting very strong growth for this year.

Bulk of it is all about next year so.

One is we are not only projecting this.

This year to be strong solid and predictable, but also we are coming with a very strong not only pipeline, but finally to guarantee that we have also a bright here next year.

Great. Thank you.

Our next question is from Charles Nathan Steven Please.

Please go ahead.

Good morning, and thank you for taking my question.

The drilling that they'll pay a little bit. This is clearly one of the stronger results post the pay acquisition and I wanted to get a little color in terms of what was driving that growth, perhaps from a vertical standpoint or from a geographical standpoint.

Yes, I'll take the latter first.

The geographical standpoint.

Our biller direct bill pay business is entirely U S. Based so there is no nothing outside of the U S and that business from a vertical standpoint, we saw really strong growth.

Government tax payments year over year.

And so I would say of all the segments, we had that had the strongest year over year growth.

Got it.

And as a follow up I wanted to get some color on a high level on what youre seeing in terms of bank spending and how much of a priority payment.

Payments payments is given the current given the current macro backdrop and what Youre, what youre hearing from your conversations with your bank got your bank clients.

I can tell you about that because I've been traveling around the globe and have heard that later about every geography.

I can tell you that the.

Payments infrastructure continue to be mission critical for the banks and there is a revolution economy real time payments and they understand it and they understand that they need to modernize that part and that part is again the center of the systems Opex. So I would say top top of mind for <unk>.

<unk> around the globe.

If you're asking me about a recession I mean, what's happening with the economy.

I think my line on that is.

Depends on how deep it is I'll lastly, jugal, if we look at Covid, we were impacted in some way because they delayed that drove the projects. We are not hearing that at this moment. So I have not heard anything from <unk> middle east or in Europe , or even in Europe or in Asia, or Latin America organized.

It's about delaying estimates at this point.

Got it I appreciate the color. Thank you.

Sure.

There are no other questions at this time.

Well, thanks, everybody for joining us we look forward to catching up in the coming weeks have a great day.

Thank you. This concludes today's conference. We thank you for your participation you may disconnect. Your lines at this time and have a great day.

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