Yahoo Finance ACI Worldwide, Inc. (NASDAQ:ACIW) Q1 2024 Earnings Call Transcript
ACI Worldwide, Inc. (NASDAQ:ACIW) Q1 2024 Earnings Call Transcript April 30, 2024
ACI Worldwide, Inc. beats earnings expectations. Reported EPS is $1.12, expectations were $0.692. ACI Worldwide, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the ACI Worldwide Inc First Quarter 2024 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be question and answer session. [Operator Instructions] Thank you. I would now like to turn the call over to John Kraft. Please go ahead.
John Kraft: Thank you, and good morning, everyone. On today's call, we will discuss the company's first quarter 2024 results and financial outlook for the rest of the year. We will then take your questions at the end. The slides accompanying this call and webcast can be found at aciworldwide.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 in our presentation deck and earnings release, both of which are available on our website and with the SEC. On this morning's call is Tom Warsop our President and CEO; and Scott Behrens, our CFO. With that, I'll turn the call over to Tom.
Tom Warsop: Thanks, John, and good morning, everyone. I appreciate you joining our first quarter 2024 earnings conference call. As usual, I'll start this morning with some brief comments on the quarter, then I'll hand it over to Scott to discuss the detailed financials and the outlook for the remainder of 2024, and then we'll open the line for questions. Q1 results were ahead of our expectations. Total revenue was $316 million that was up 9% year-over-year. We were able to sign some expected contracts a little earlier than we forecast and some ramp-ups in our biller business tracked slightly better than we expected. I'd characterize these contracts as expansionary project specific deals with existing customers and then we also had opportunities that were in the pipeline and expected to sign a little bit later this year.
We've also signed over $20 million in high-margin license contracts that will show up on our income statement later in the year. As we've discussed, U.S. GAAP requires we recognize revenue for contract renewals on the first day of the renewal term, regardless of when we sign them. All of these items that I mentioned help derisk our full year forecast and it's allowing us to raise the upper end of our guidance range for both revenue and adjusted EBITDA. Moving on to our segments. We signed some notable deals in the bank segment, including a renewal for a large U.S. regional bank and new and expansion deals with customers around the world. As we discussed at our recent Analyst Day, the bank segment is a key area of focus for ACI going forward.
Segment revenue for banking grew 20% in the quarter. And as I indicated, the strength was broad. As you may recall, we have 3 main solution sets we sell into the segment. Issuing an inquiry and that includes our retail payments and Base 24 solutions. That part of the business grew 17% in the quarter. Fraud Management, which grew 23% and real-time payment products, which grew 28%. Bank segment adjusted EBITDA grew 69% versus Q1 2023, and that reflects the very high fall-through from revenue to EBITDA for our software businesses. As we discussed in depth at our recent Analyst Day, we've continued to invest in modernizing our solutions and making public cloud delivery options available. We're seeing accelerating SaaS demand, not only with some of our traditional and long-term customers, but also with new banking customers.
And some of these may be somewhat smaller than our historic focused areas, which has historically been mega banks or Tier 1 banks. These institutions, the slightly smaller ones, are seeking the highest levels of scalability and reliability that API is so well known for, and they're often more interested in taking advantage of SaaS delivery models. This is an incremental market for us, and it's an exciting opportunity we continue to allocate resources to. Merchant segment revenue grew 3% and EBITDA grew 63%. We continue to expect growth to improve throughout the year and the confidence we have is coming from in progress and scheduled implementation and, of course, our new sales pipeline. Moving on to Biller. Revenue grew 5% and segment EBITDA grew 4% in Q1 2024.
We continue to see the ramp-ups of prior sales and the positive impact of our interchange improvement plans. We're particularly pleased with the onboarding of our largest customers as volumes are coming in above expectations. Furthermore, we've been able to successfully remove interchange risk from most of those large contracts while they can have a little bit lower margin in some cases, those contracts avoid downside risk. Our biller retention rates are improving and our qualified new bookings pipeline is growing. The work on our payments hub, which we discussed at length at Analyst Day, is progressing well. We continue to see substantial productivity improvements driven by the application of AI-powered tools and methodologies. We're also starting to apply these enhancements across the company.
I want to make one more point on AI, which we also touched on at Analyst Day, our fraud detection and prevention businesses continue to gain traction. As I've mentioned previously, these solutions are all AI-powered and we believe, best-in-class. We've pulled all our fraud businesses together on a very capable leader, and we're receiving positive feedback from all our stakeholder groups. I will talk more about this as we get further into the year. Overall, we're executing well. We're delivering on our promises to the investment community and I remain confident in the team and our ability to achieve our goals. Now I'm going to turn it over to Scott to discuss financials and our guidance. Scott?
Scott Behrens: Thanks, Tom, and good morning, everyone. I first plan to review our financial results for Q1 and then provide our outlook for the rest of 2024. We'll then open the line for questions. Revenue in the quarter was $316 million, up 9% compared to Q1 2023 and adjusted EBITDA was $48 million, nearly double Q1 2023. As Tom mentioned, we saw particular strength in the bank segment with revenue of $105 million, up 20% compared to Q1 last year and adjusted EBITDA of $42 million, up nearly 70% compared to Q1 last year. Our issuing and acquiring solutions grew 17%. Our anti-fraud solutions grew 23%, and our real-time payment solution grew 28%. We saw a pretty solid quarter in the banking segment across the board. Our merchant segment revenue was $36 million, up 3% compared to Q1 last year and adjusted EBITDA was $11 million, up 63% compared to Q1 last year.
And our Biller segment revenue was $175 million, up 5% compared to Q1 last year and adjusted EBITDA was $31 million, up 4% compared to Q1 last year. Cash flow from operations was $123 million, an increase of roughly 3x compared to Q1 last year. We ended the quarter with $183 million in cash on hand, which is up $19 million in the quarter. Our debt balance of $1 billion is down $34 million in the quarter and our net debt leverage ratio of 2 times is down from 2.3 times when we started the year and represents our lowest leverage in more than 10 years. And finally, we repurchased approximately 2 million shares in Q1 for $63 million in capital and ended the quarter with $110 million remaining on our share repurchase authorization. And so far here in April, we have repurchased an additional 1 million shares to date in Q2.
Turning next to our outlook for the rest of 2024. With our strong start to the year, we are raising the high end of our guidance range for revenue and adjusted EBITDA. We now expect revenue to be in a range of $1.547 billion to $1.581 billion, up from a range of $1.547 billion to $1.576 billion. We now expect adjusted EBITDA to be in the range of $418 million to $433 million, up from a range of $418 million to $428 million. And as we look here into Q2 2024, we expect revenue to be in a range of $345 million to $355 million and adjusted EBITDA of $60 million to $70 million. So overall, a strong start to the year and we see that strength continuing here in Q2. So with that, I'll pass it back to Tom for some closing remarks. Tom?
Tom Warsop: Thanks, Scott. In summary, we are pleased to continue delivering results in line or above expectations. Looking forward, our pipeline is strong, and we're focused and optimistic regarding both our growth and our ability to deliver significant shareholder value. One last comment. You may have seen the announcement of our recently released prime time for real-time report, and that gives some great insight into the global real-time payments ecosystem trend and expectations for the future. I recommend giving a read. There's some really interesting stuff there. I look forward to following up with you in the very near future about the quarter, about our expectations for the future. I'm very excited about what's going on here at ACI. Operator, we can now take questions.
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