ACI Worldwide reports Q4 and full year results

"In 2011, ACI continued to prove the high demand for our market leading products across all geographies. We saw solid growth in both revenue and operating income over the prior year and maintained record growth in sales as customers purchased global or multi-country product offerings. Our 60-month backlog of committed and renewable client bookings continues to rise strongly as average deal size expands. Furthermore, we anticipate another good year in 2012, with continued growth in profitability and EBITDA margin," said Chief Executive Officer Philip Heasley. "Finally, we are excited to have closed the transaction with S1 Corporation which we believe will provide greater growth prospects and expanded customer relationship opportunities."

FINANCIAL SUMMARY

Sales

Sales bookings in the quarter totaled $171.4 million which was a decrease of $3.4 million, or 2%, as compared to the December 2010 quarter. Noteworthy changes in the mix of sales compared to last year's quarter included a rise of $44.8 million in add-on sales.

For the full year 2011, sales bookings rose by $31.1 million to total $556.3 million as compared to $525.2 million for the full year 2010. The positive variance was driven by a rise of $15.5 million in new and add-on sales with the remaining $15.7 million of growth due to higher term extensions.

Revenues

Revenue was $135.0 million in the quarter ended December 31, 2011, a decrease of $6.2 million, or 4%, over the prior-year quarter. The change in revenue reflects lower non-recurring implementation services revenues as fewer projects moved out of backlog into current period revenue compared to the prior-year quarter.

Revenue for the full year 2011 was $465.1 million, an increase of $46.7 million, or 11%, over revenues of $418.4 million for the full year 2010. Revenue growth was strong across all revenue categories and geographies.

Backlog

As of December 31, 2011, our estimated 60-month backlog was $1.617 billion, an increase of $62 million as compared to $1.555 billion at December 31, 2010. The increase was primarily attributable to the sales bookings signed during calendar 2011. As of December 31, 2011, our 12-month backlog was $424 million, an increase of $43 million as compared to $381 million for the quarter ended December 31, 2010.

Operating Expenses

Operating expenses were $98.0 million in the December 2011 quarter compared to $98.4 million in the December 2010 quarter, a decrease of $0.4 million, or 0.4%. Excluding $3.2 million of professional fees related to the S1 acquisition, operating expenses decreased $3.6 million, or 4%.

Operating expenses for the year ended December 31, 2011 were $398.9 million, an increase of $34.1 million, or 9%, as compared to $364.8 million for the prior year ended December 31, 2010. Excluding $6.7 million of professional fees related to the S1 acquisition, operating expenses increased $27.4 million, or 8%. Operating expense growth was led primarily by higher sales and marketing expenses and higher research and development expenses.

Operating Income

Operating income was $37.0 million in the December 2011 quarter, a decrease of approximately $5.8 million, or 14%, compared to $42.8 million for the December 2010 quarter as fewer project 'go-lives' were recognized in the fourth quarter of 2011 as compared to prior-year fourth quarter. Excluding $3.2 million of professional fees related to the S1 acquisition, operating income decreased $2.6 million, or 6%.

Operating income for the full year 2011 was $66.2 million, an improvement of $12.6 million, or 24%, compared to operating income of $53.6 million for the full year 2010. Excluding $6.7 million of professional fees related to the S1 acquisition, operating income increased $19.3 million, or 36%.

Adjusted EBITDA

Adjusted EBITDA was $48.6 million in the December 2011 quarter as compared to $51.7 million in Adjusted EBITDA in the December 2010 quarter. Excluding $3.2 million of professional fees related to the S1 acquisition, Adjusted EBITDA was essentially flat with the prior year quarter.

Full year 2011 Adjusted EBITDA was $105.9 million, an increase of $18.1 million, or 21%, as compared to $87.8 million for full year 2010. Excluding $6.7 million of professional fees related to the S1 acquisition, Adjusted EBITDA increased $24.8 million, or 28%.

Liquidity

We had $197.1 million in cash on hand at December 31, 2011. Cash on hand increased $17.4 million as compared to September 30, 2011 primarily as a result of strong operating income as well as strong cash collections. As of December 31, 2011, we also had $175.0 million in unused borrowings under the revolving credit facility portion of our credit agreement.

In February 2012, our board of directors approved an increase of $52.1 million to its current stock repurchase authorization, bringing the total authorization to $262.1 million, of which $75 million remains available.

Operating Free Cash Flow

Operating free cash flow ("OFCF") for the quarter was $30.0 million as compared to $28.0 million for the December 2010 quarter.

OFCF for the full year 2011 was $67.2 million, an increase of $4.4 million over the full year 2010.

Other Expense

Other expense for the quarter was $1.0 million, compared to other expense of $0.4 million in the December 2010 quarter. The increase in other expense versus the prior-year quarter resulted primarily from a $0.6 million negative variance in foreign exchange losses.

Other expense for the full year 2011 was $1.9 million as compared to other expense of $4.9 million for the full year 2010. The improvement was led primarily by a $2.5 million positive variance in foreign exchange losses.

Taxes

Income tax expense in the December 2011 quarter was $12.1 million, or a 34% effective tax rate, compared to $15.3 million, or a 36% effective tax rate, in the prior-year quarter.

Income tax expense for the year ended December 2011 was $18.5 million, or a 29% effective tax rate, as compared to $21.5 million, or a 44% effective tax rate, for the prior year ended December 2010.

The year-over-year decrease in the effective tax rate was largely due to a $3.1 million liability release related to our IP transfer and a $2.2 million release of tax reserves in 2011 that did not occur in 2010.

Net Income and Diluted Earnings Per Share

Net income for the quarter ended December 31, 2011 was $23.9 million, compared to net income of $27.1 million during the fourth quarter 2010.

Net income for the year ended December 31, 2011 was $45.9 million, compared to net income of $27.2 million during the same period last year, an increase of $18.7 million, or 69%.

Earnings per share for the quarter and year ended December 2011 was $0.70 and $1.34 per diluted share, respectively, compared to $0.80 earnings per diluted share for the quarter and year ended December 2010. Annual EPS represented a rise of 68% compared to the same period last year. The improvement was largely due to stronger operating income and lower income tax expense.

Weighted Average Shares Outstanding

Total diluted weighted average shares outstanding were 34.2 million for the quarter and year ended December 31, 2011 as compared to 33.7 million shares outstanding for the quarter and 33.9 million shares outstanding for the year ended December 31, 2010.

S1 Transaction

On February 10, 2012, we closed the exchange offer for S1 Corporation for approximately $360 million in cash and 5.9 million shares of our stock resulting in a total purchase price of $569 million, or $10.36 per share.

2012 Guidance

ACI is guiding on three metrics for calendar year 2012. On an organic basis, we currently expect to achieve revenue in a range of $490-$500 million, operating income of $84-$89 million and Adjusted EBITDA of $124-$129 million. Including the incremental impact of the acquisition of S1 Corporation, we expect to achieve revenue in a range of $696-$706 million, operating income of $99-$104 million and Adjusted EBITDA of $165-$170 million. The above guidance excludes approximately $16 million of one-time charges resulting from the transaction.