Q3 2025 ACI Worldwide Inc Earnings Call

Thank you for standing by. My name is Janice and I'll be your conference operator. Today at this time I would like to welcome everyone to the ACI worldwide Inc, third quarter, 2025 Financial results. All lines have been placed on you to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at this time, simply press star followed by the number 1 on your telephone keypad.

If you would like to withdraw your question, press star 1 again, thank you. And I would now like to turn the conference over to John Kraft you may begin.

Good morning everyone. And thank you for joining our call.

On today's call, we will discuss aci's third quarter, 2025 results and our financial outlook for the remainder of the year.

We will take your questions at the end of the call.

The slides accompanying, this webcast can be found at ACI worldwide.com under the investor relations Tab and will remain available after the call.

As always, today's call is subject to Safe Harbor and forward-looking statements, you can find the full text of these statements. In our presentation deck and earnings release both available on our website and filed with the SEC.

Joining me today are Tom War, stop our president, and CEO and Bobby LeBrock. Our CFO

before I turn it over, I did want to share that, we will be attending some investor conferences including

Cities 14th annual fintech conference in New York City on November 18th.

Stevens, annual investment conference in Nashville, on November 20th,

And the UBS global technology and AI conference in Scottsdale December 3rd.

With that, I'll turn the call over to Tom.

Thanks John. Good morning everyone and thank you for joining our Q3 earnings call.

I'm going to share some key takeaways and then Bobby will review our financials and guidance before we take your questions,

We've spent the last couple of years investing in our leading software and working hard to structurally reshape ACI for accelerating growth in financial predictability.

Q3 was another strong quarter for ACI. And another proof point that our efforts are working.

We delivered 7% year-over-year. Total revenue growth with double digit, recurring Revenue growth in the quarter.

Execution, and operational efficiency across the business.

Given this momentum, we're again, raising our full year guidance, and Bobby will share more about that shortly.

as I've mentioned on prior calls, our team is working hard to reduce some of the variability introduced by our historic term, licensed software, business model

While we can't completely eliminate it, our focus on getting deals closed earlier in the year.

Movement toward more radical pricing structures in our payment software segment and consistent growth in our biller business is helping lessen. The quarter to quarter variability

We're continuing this effort and I expect to continue to see benefits.

Looking at our segments, the bill or business continues to perform well with Q3 Revenue up, 10% compared to a year ago.

We're seeing particularly strong growth in the utility and government verticals.

Our payment software segment delivered 4% growth compared to last year. And it's up 12% year to date. With the strong start. We had to 2025

We continue to see strong demand from both traditional Banks and established payment processors as well as from up-and-coming fintechs.

Bottom line is the winners in the marketplace are investing and they're often choosing ACI for their software needs.

I've been talking about our ACI kinetic platform for several quarters now and I'm happy to report. We signed our first new ACI kinetic customer in Q3 Solaris.

A German fintech and Bank.

We were very selective in choosing our first customer as I've indicated, we would be and we're committed to working closely with the Solaris team to successfully implement the technology across their system.

They are an ideal partner focus on the future and on dramatically improving their business supported by our industry-leading technology and services.

So Laura's CEO Karsten Hulme was a featured speaker at our recent payments and least event in New York. And he talked about the many challenges and opportunities in the financial services industry and specifically about how we are working together.

Take advantage.

Looking ahead.

Kinetics architecture and capabilities are resonating with customers who are looking to modernize and simplify their payments infrastructure.

We have expanded our pipeline, we've deepened relationships with existing customers and we're excited about what's ahead. As we roll out this compelling new platform

In addition, we made a small but important acquisition of a European based fintech.

Payment components.

That provide software for financial messaging translation, orchestration and integration.

Although the direct impact to our Revenue will not be material the software they provide and the great team of technologists that have now joined us

Will augment our AI first initiatives and help accelerate the development roadmap of our ACI kinetic offering.

We will continue to be opportunistic in our approach to m&a grounded in disciplined Capital allocation.

I also want to point out our ongoing commitment to returning Capital to shareholders.

And point you to our other announcement today.

Year to date. We've repurchased. 3.1 million shares for 150 million. And just today, we announced the increase of our repurchase authorization to 500 million.

Stablecoin has obviously been another Hot Topic in our industry and on our recent earnings calls.

Just a few weeks ago.

We announced a partnership with bitpay which supports our ability to unlock even more potential, as cryptocurrencies and stable coins, continue to grow in importance.

This partnership. Strengthens our existing commitment to digital currency innovation.

By expanding our payments orchestration platforms established capabilities for our customers.

I mentioned payments, Unleashed briefly and let me take a moment to give you a bit more insight on this great event.

Payments Unleashed was aci's, Premier payment Summit.

And a celebration of our 50th anniversary.

We brought together some of the brightest Minds thought leaders innovators and Visionaries to discuss the future of payments. Topics included, stable coins real Time payments AI

The feedback was overwhelmingly positive and we're proud to be at the center of these important conversations.

On the topic of thought leadership.

ACI has also been active in the media.

Most recently I joined Bloomberg TVs crypto show to share our prospective on stable coins and its role in crossborder real-time payments.

A couple weeks earlier I discussed similar topics, including the role of Europe in the growth of stable coins on cnbc's, Squawk Box, Europe.

This is all part of a focused campaign to make aci's points of view clearer and more widely shared.

Expect to see me and the entire ACI leadership team much more often.

Before I turn it over to Bobby, I'd also like to touch on the ongoing board refreshment that has continued to be a priority for us.

We recently appointed Todd Ford and welcome back DDA lamoos as independent directors.

Todd. Many years, as CFO of high growth software technology companies in combination, with DDA successful, track record of leadership in global technology companies.

Will add value to our board and additional support for our management team as we focus on accelerating sustainable growth.

Delivering industry-leading, software Solutions and generating shareholder value overall. We're pleased with our progress and optimistic about the remainder of 2025 and none of what we're doing would be possible without the hard work of our team members.

I want to thank our talented team for their steadfast commitment to our customers, and to all of our stakeholders.

As I mentioned earlier, our strategy to sign contracts earlier in the year continues to pay off.

And our pipeline remains robust.

We will continue to focus on increasing shareholder value through operational excellence and Technology leadership. Solidifying, the durability of our improving growth

With that, I'll turn it over to Bobby to walk through financials and guidance.

Thank you, Tom, and good morning, everyone.

I'll start with our third quarter Financial results and then cover our year-to-date performance and Outlook.

23 was another solid quarter and we exceeded our expectations.

Total revenue was 482 million up 7% year-over-year and up 6% adjusted for foreign exchange.

Recurring Revenue was 298 million up 10% and represents 62% of our total revenue.

Adjusted ibida came in at 171 million and was up 2% year-over-year.

To this growth, the biller business continues to perform well with revenue of 198 million up 10% year-over-year.

For biller was 32 million, a 4% increase.

In payment, software, Revenue, grew 4% to 284 million and adjusted. Ibida was 182 million up 1%.

We are pleased with our recurring revenue momentum, which was $100 million in Q3 and accelerated to 9% growth year-over-year.

Now, at the first 9 months of the year we generated 1.3 billion in total revenue and 346 million in adjusted ibida, both up 12% compared to the first 9 months of last year.

That growth is the same as reported and adjusted for foreign exchange. So, no impact from currency fluctuation.

This strong performance reflects consistent execution, across the business and the strong start. We had in first quarter licensed sales,

Payment software Revenue year to date, crew, 12% and adjusted IBA grew. 13% this includes growth, across issuing acquiring Merchant, fraud management, and real-time payments.

Bill of Revenue is also growing 12% year to date and adjusted ibida through 4%.

Our Revenue momentum is driven by our continued booking strength. Net new ARR bookings year to date. Grew 50% to 46 million, and new license and services. Bookings grew 8% to 189 million. And as Tom mentioned, we were pleased to welcome Solaris as our first kinetic customer

These results, reflect the execution focus of our team and the growing customer demand across both segments turning to the balance sheet. We ended the quarter with 199 million in cash and a net debt leverage ratio of 1.3 times.

We continue to generate strong, underlying cash flow, with 2011 million cash flow from operations year to date.

And tax payments between periods. We also purchased approximately 400,000 shares in the third quarter, bringing our year-to-date total to 3.1 million, or about 3% of our shares outstanding.

As Tom mentioned, we have increased our share of our purchase authorization to a total of $500 million, underscoring our commitment to returning capital to shareholders based on this strong year-to-date performance and a healthy fourth quarter pipeline. We are again raising our 2025 guidance.

We now expect total revenue to be in the range of 1.73 to 1.754 billion.

Up from our prior range of 1.71 to 1.74 billion. We expect adjusted ibida to be in the range of 495 to 510 million up, from our previous guidance of 490 to 505 million. As I complete. My first full quarter is acfo, I want to thank the team for their seamless collaboration and disciplined execution. Over the past few months, I've had the opportunity to engage with employees across ACI and more deeply with our board.

I've heard directly from our customers and partners and had a chance to meet many of you both current and prospective investors. And after these first few months, I'm even more energized by the opportunity ahead for ACI. I've been impressed by the strength of our team, the quality of our technology and the clarity of our strategy, this is a strong well-run company and I'm excited to be part of it. I'm also very pleased with the operational discipline, and financial controls across ACI, there is a strong cone from the top, both our board, and Tom, and we have the processes and assurances to back it up.

We are prudent in how we manage Financial Risk for example. As you know our payment software business operates across approximately 90 countries with nearly 75% of revenue generated outside the US.

While this demonstrates our global scale and Leadership, we've always managed this exposure carefully and transparently in hyperinflationary markets. We transact almost entirely in US dollars to mitigate risk.

And we consistently disclose the impact of Foreign Exchange on our results. Providing visibility into our underlying operational performance looking forward, we remain focused on maintaining a proactive dialogue with the investment Community. Transparency remains a top priority and we're actively exploring ways to provide even greater Clarity into our business and the progress we're making.

I look forward to spending more time on the road again, in Q4 continuing the conversation and deepening, our engagement with investors, Tom back to you.

Thanks Bobby.

We're proud of our performance in Q3 and we're energized by the momentum that we have heading into Q4.

Our strategy execution and Innovation, especially with ACI kinetic.

Position us, well to enter 2026 on track to achieve our longer term targets.

Thank you for your continued support and for your continued interest in ACI.

We're ready to take some questions.

At this time, I would like to remind everyone in order to ask a question. Press star, then the number 1 on your telephone keypad, we will pause just for a moment to compile the Q&A roster.

Your first question is coming from the line of Trevor Williams from Jeffrey's. Please go ahead.

Great, thanks. Hey, guys, good morning. I wanted to start on pricing. Tom, maybe bigger picture, I'm curious how you would frame the runway for pricing is a lever within the longer term growth. I'll go. I know, it's something you've talked about increasing monetization. It's been a focus over the last year plus. So I'm curious kind of where you still see the most opportunity and then any way to put into perspective, how impactful pricing has been this year.

Your relative to 24 or maybe the historical growth algo, any context around? That would be helpful. Thank you.

Yeah, sure, thanks, Trevor. So, um, it's it's a, it's a lever that we always we always pull as appropriate against the value that we provide to our customers. Um,

Because if they need to come back and buy more, they're more expensive. So, there's a, there's a lot of levers that we pull their. Uh, I don't see, I don't see that fading at all. Uh, in fact as we add more value with new versions of software, as we start to move customers onto kinetic. Um, the value we add is higher and we expect to uh we expect to get our fair share of that. So um I this is this is an important lever. It's been an important lever in 24 and 25 you specifically asked about those. It's always been an important lever but 202 425 it's been an important lever will continue to be and uh, I think, you know, we're just excited about continuing to add new, more valuable features functions and capabilities for our customers, and then getting our share.

Okay. Understood, thank you. Uh, and then on payment software, just as we're getting closer to 26, anything, we should be mindful of, in terms of the Cadence of renewals just thinking, whether renewal Cadence has been a, a Tailwind to 25 if that potentially abates in 26, any contacts, you could give us around. That would be uh helpful. Thanks and Trevor, I'll jump in, this is Bobby. Um, so 1, I'll let me put it in the context of our backlog and I'll give you the total number, you know, we were healthy uh growth again, double digits and our 7.1 billion dollar 60-month backlog. Uh and that's across both payment software.

As you asked about and our our biller business, as I, as I look into 2026, as I mentioned, we feel, uh, we feel good about continuing to be on track for our longer term, high single-digit, growth model. Um, and even a tracking along that Revenue growth as you think about, you know, the Cadence of the renewals that, you put it. Uh, we got off to a great start here in the beginning of this year. You know, overall growing 25% and almost 50% in payment software. Um, that that level is something we're continuing to be focused on to have deals spread out throughout the year. But I do expect things to be, you know, more balanced throughout the quarters next year, you know, especially against that compared against the first quarter. Um, so in terms of cadence of renewals next year, we feel good about achieving our longer term growth model. Uh, but I do expect it to be, you know, the levels. We have this year, more balanced from a skewed standpoint. Yeah. Trevor. Just 1, 1 more comment on that. Um, I I sometimes get the question, you know, is it, is it highly variable year to year the volume of renewals and

You know, if you just do the average math obviously, it's if you have 5 year terms, you think kind of 20% per year. It's not exactly 20% per year, but it isn't that far off? So we don't we, the good news, I think, is that we don't have huge variability year to year little bit. Yeah. But um, but we we feel very comfortable, uh, managing that relatively small level of variability.

Okay, great. So it sounds like there's not going to be some major change in the percentage of the portfolio. That's renewing next year that we need to be mindful of if you're on track for the high cycle. So all that sounds good. Thanks guys. Thank you.

Your next question is coming from the line of Chess. Kendall from cport research, please go ahead.

Hey, thanks. Um, congrats on deciding a client. Um, would you mind just telling us high level about the progression from here? Maybe talk about the pipeline. You think you'll start seeing more contracts signed from here, and what is the timing on when that convergence in the revenue? Or any thoughts on sizing or the magnitude of that? Revenue would be great. Thanks.

Yeah, so so we're really we're really excited actually about the the pipeline. These are big decisions. Jeff is, first of all, thanks for the question. Um, good to talk to you. But uh We've uh these are complicated decisions for financial institutions and fintechs. And um, and as I've hopefully, I've been clear that we we want to make sure we get the right first few customers. So, we got to, we got a strong pipeline, it's getting stronger. Uh, literally every month we as we look at it. So I feel great about that. Um, obviously, we never know the exact timing of, of when sales are going to happen, but, uh, they're progressing really well. So we'll, we'll continue to keep everybody.

Uh, informed, as we as we add new new customers and you were asking specifically about the the, uh, when it when it converts to revenue. Um, the

Is finished.

And transactions start to flow. That's when we'll see the revenue. So, it's, it'll, it'll be a few months in the case of this, this first customer, uh, several months. Um, but but, uh, feel feel great about that. And I expect the first first few will probably be like that. Yeah, I think and Jeff, if I can add the Tom's comments, the other, the other comment I'd say is this is the first proper kinetic. Customer, um, that will start, uh, getting Revenue as we on board. Um,

but it's, it's not a large discrete amount, but it is across every 1 of our customer conversations. We talked about payments Unleashed and those conversations, we have 2 weeks ago, it was across every 1 of them. And right now, we're focusing on our European and US capabilities for kinetic. We'll, we'll have more of a global role out, you know, through the, you know, medium term, but every customer in Mexico, loves it. Every customer and Asia. We talked to is excited about it. So I I like the, you know, the effect that Connecticut has to raise those conversations and encourage customers and get them to commit to the continued long-term ACI relationship. They've had

absolutely.

Perfect. Okay great. Thanks for that. And then you made a lot of moves during the quarter. So I want to ask you about a couple of them. If you talk more about the payments components acquisition, why you want them to capitalize on that opportunity and what that does for you.

How should we be thinking about the revenue contribution for your results going forward? And also can you elaborate on the, the bid pay announcement? Uh, maybe just explain what that unlocks for ACI is that domestic International. I'm just trying to get a sense of how that becomes part of the story and what we should expect to see, uh, from here on that 1 as well. Thanks. Yeah, yeah, thank you. So, uh, I would say

Super high level. The, their similar, the reasons that we we did both the, the bid pay partnership and the, uh, payment components acquisition, they're similar in that they allow us to accelerate, uh, progress in terms of adding or enhancing capabilities in our Solutions. So we can go faster through the partnership and the acquisition different, different capabilities, obviously. But the bit pay, uh, partnership. Uh, we already have a lot of capabilities around, uh, around

crypto and stable coin. We talked a little bit about that on the last call. Uh, we, we have good capabilities did pay, uh, allows us to improve those, uh, the way that we serve our customers in those really important and increasingly important areas and they, frankly, they, they, that partnership allows us to add a few things that we didn't have. And so it's really an enhancement of the, the, the tools that we already have, we're excited about it. I think,

Good basic size about it. So uh, that's a that's a great 1.

Good. Good strategic uh reason to to do that. So we're excited about that on the payment components. Um we we were faced with a decision as we continue to build out and enhance ACI kinetic, we needed world-class.

Payment message, translation and orchestration. And uh, we either had to build some of the capabilities. The payment components has, or we needed to to buy them. And we did tons of research, lots of due diligence. Uh, we really think highly of the payment components team and the capabilities and software that they already have ready to go on. The Shelf was, uh, exactly what we thought we needed for ACI kinetic. So, um, it's not, it's a, it's a small acquisition, as I said, but really important strategically, we didn't buy it for immediate Revenue growth. We bought it because the the capabilities they have and the talent they have is a great add to ACI. So, uh, do we we we do not expect to say to you. Uh, next quarter. Oh, you know, payment components added a bunch of Revenue. That's not the reason we did it.

Um, but it it makes ACI kinetic more impactful and gets us where we want to go faster. That's why we did that.

Got it. Okay, great. Thanks a lot and congrats, guys.

Your next question is coming from the line of George Sutton from great. Craig Hayden. Please go ahead.

It seemed clear to me that, Tom, when you originally announced this, it was really meant for an SMB type of customer, potentially a mid-market customer. It would appear that this is now potentially an offering that could be delivered to virtually any size. Could you just talk about that?

Yeah, absolutely George. Uh, thanks for joining us. So you're 100% right. And uh, when when we were talking about the, you know, what new markets could we potentially tap or new segments, could we potentially tap with ACI kinetic, uh, if you're thinking about, you know, really knew then it really was focused on the it still is focused on the mid-market, uh, because they, they, those customers may not have made enough investment or have enough uh, experience and expertise to take advantage of the historical ACI offerings. Um, so that from a new market perspective, that was true. We always expected that large financial institution large, Merchants would eventually, uh,

Be ready to take advantage of ACI kinetic and what we're building. So we, we always believe that what I, you know, maybe maybe I should say it this way. Uh, we didn't want to get people too excited about that opportunity because that's going to take some time. These very big banks, for example, they've made so much investment in their infrastructure and they have so many processes and, and, uh, uh, ways of doing things that making a change to a new platform, no matter how good it is. Is a, is a big, big, big change. So, um, we we absolutely see what you said, which is this is super appealing to a large, uh, large large customer or a large potential customer. Absolutely, yes.

I think the early adopters are likely to be a little bit smaller, but we are inactive conversations with people, uh, customers along that whole pears. Uh, whole, um, uh, Continuum thanks. Couldn't think of the right word, uh, along that whole Continuum. So we have smaller, financial institutions smaller Merchants. We have mid-size and we have very, very large. They're all interested in the capabilities. And uh, we're just we're just trying to work with them to make uh, make them comfortable, and get them ready for the transition.

Gotcha, just, uh, 1 other question on biller, um, sounds like utilities were really a key component of the growth. This quarter. Can you just talk about your, your win rates? And what your broadly seeing in terms of opportunities for continued growth there? There's definitely a movement we see in the market from bespoke Solutions, uh you know to to kind of moving to a an outsourced model like yours. So just curious your thoughts and uh, that'd be helpful.

Yeah sure. So I think we uh we highlighted that utilities and government were were very uh

a big contributor to the growth in this this quarter that's been truth through the year. But we see very good Pipeline and uh and pipeline growth across all of the the verticals that that we serve. So we feel good about the business. I agree with what you just said that there continues to be a a a real interest and a move away from

The, I think you called them. Bespoke good. Good. The name is any, um, Solutions per biller to to Outsource and that that's been happening for quite a long time. It continues to happen. Uh, obviously, that's the reason that, that, we're so excited about this business. We, we have a great, we have a great offering, great client base. And what we're, uh, our new customers are all going on.

To our speed pay 1 platform which is our new. I don't know if you saw that 1 uh George at the at at payments Unleashed but uh we also had a a demo uh of speed pay 1 which is our, you know, our our new

The same level, um, going forward. The other part, I'd say I met with a lot of those same customers who asked about payments Unleashed and the utility space.

The reason they're coming to us and some of the top players is the complexity is increasing, and that's what a player like speed pay can actually bring to them is to address that complexity to some of those bespoke ones can't. So that's I, in terms of win rates, that's 1 of our bigger competitive advantages. I see in that segment. Um and and 1 of the reasons we're winning more.

Perfect. Thanks guys.

Thanks George. It's George.

Your next question is coming from the line of Alex Newman from sep Inc, please go ahead.

Hi, thanks for taking the question. Just to double click there. There's another great quarter for the double digit growth. I was wondering if you could just provide some additional detail on the drivers of growth there, whether it's new customers, volume price, and maybe the relative contribution there and then just the same for the payment software segment which had some nice nice growth over which was a pretty tough comparison. This quarter thanks. Yeah. I I could jump in Alex uh 1. It's pretty broad but uh based across both, I'll start with the second part of payment software. Um you know, as I mentioned in my opening comments, all key cylinders, all key solution areas are growing in that area and across that business, kind of year to date basis. Uh, in the third quarter, we saw a great contributing uh

Contribution from the issuing inquiring space. We saw real time and fraud, uh, in Q2 they had, they had really a blowout quarters there on a year. Basically, um, you go into the, the biller side of it. Um, it's I would emphasize its new customers and retention. Um, the price lever, I view, you know, there's an earlier, uh, question that Tom was answering around pricing. I view that as untapped potential in our billing uh business actually, I view it more as success rates on, getting new customers on boarding them and expanding those into, you know, more use cases across there.

Great. Thanks guys. Next quarter.

Thanks.

Q&A session. I will now turn the conference back over to the company. For closing remarks, please go ahead.

Well, thanks everybody for joining us. We do look forward to catching up with individually, uh, with you guys at individually in the coming weeks at the various events is that we mentioned earlier.

Have a great day. Thanks everybody.

Ladies and gentlemen, that concludes our today's call. Thank you for joining you may now disconnect