ACI Worldwide, Inc. (ACIW) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the ACI Worldwide Financial Update. [Operator Instructions] I would now like to hand the conference over to your speaker for today, Mr. John Kraft. Sir, please go ahead.

Thanks, Jay, and good morning, everyone. I'm joined this morning by Craig Saks, our Interim President and CEO; as well as Scott Behrens, our CFO. Before we begin, please take a note of the forward-looking statement disclaimer included in our press release issued yesterday and filed with the SEC. We will make forward-looking statements on today's call, including about 2020 guidance. Forward-looking statements inherently involve risks and uncertainties and reflect our view as of today, and we are under no obligation to update. In addition, the 2019 amounts discussed today are preliminary unaudited estimates based on currently available information and are subject to change as we complete our year-end accounting procedures and our audited financial statements for 2019. We expect to announce our audited 2019 results in the second half of February 2020. With that, I'll turn it over to Craig.

Thank you, John, and hello, everyone, and thank you very much for joining us today. Today's call is to address our preliminary financial results for the full year 2019 and provide guidance for 2020. Scott Behrens will talk through the specifics, after which I will make some remarks. Scott?

Thanks, Craig, and good morning, everyone. As outlined in our press release, we expect that our 2019 results will be below our prior guidance. Based on preliminary information available at this time, we currently expect 2019 revenue of between $1.255 billion and $1.265 billion, up over 20% over 2018, but below our prior guidance of $1.315 billion to $1.345 billion. And we expect 2019 adjusted EBITDA of between $300 million and $310 million, up over 20% over 2018, but below our prior guidance of $360 million to $380 million. Our 2019 revenue and adjusted EBITDA were negatively impacted principally by a large customer expansion contract that did not sign as expected in December. Primarily as a result of this contract not signing as expected as well as other deals that slipped into 2020, our new bookings did not meet our expectations. We are disappointed that we did not deliver the results we expected. However, it is important to note that the customer contract was not lost. The customer continues to use our technology, and we expect the relationship to grow in the coming years to serve its [ growing ] payment volume. I will now turn the call over to Craig to provide additional comments on 2019 and our 2020 outlook.

Thank you very much, Scott. So let me put all of this into context. First of all, I want to reiterate that ACI's business continues to grow. We believe we have a unique value proposition serving the real-time any-to-any payment needs of banks, intermediaries, billers and merchants. We continue to secure strategic wins that validate ACI's strengths and leaderships across the real-time payments, retail payments, merchant and e-commerce payments, bulk payments and payment intelligence areas. Let me share some key highlights from 2019. In our banks and intermediary segment, and during 2019, 3 banks selected ACI's retail payment solution running on Microsoft Azure to power their global payment platforms. 2 of the 3, both of them are global top 50 banks, signed during Q4. In addition, the partnership that we announced with Microsoft in November continues to mature. And several hundred of our technical staff completed Azure training during Q4. In Asia, 2 major banks renewed their retail payment contracts, added significant volumes and most importantly, made very significant commitments to our real-time payment solutions. In total, in the banks and financial intermediary segment, we added 35 new real-time payment customers in 2019 and had 8 net new logos signed for our retail payments business. In the biller segment, we saw continued traction in the U.S. Bill Pay market for our Speedpay solution, validating our customers' growing confidence in our Speedpay integration. We renewed several Speedpay clients, and in most cases, transitioned these customers to multiyear contracts. One of these multiyear renewals was with one of the largest utilities in the U.S. This deal represented one of the largest ACI contracts ever. During Q4, we saw continued traction with both cross-sell and new logo sales. And in total, during 2019, we signed 35 new logos in the Bill Pay space. Cross-sell of our award-winning moBills mobile billing technology, which is part of the ACI Speedpay solution, was strong and we expect this trend to accelerate in 2020. In the merchant segment, our e-commerce platforms had a stellar holiday season. We processed 50% more transactions across the globe in Q4 2019 than we did in 2018, a very good performance. In 2019, we secured more than 35 new merchant and e-commerce wins as well as several large renewals. By way of example, one of those renewals in Q4 was with British convenience food retailer Co-op. The company is using the full range of ACI's app merchant payments and e-commerce fraud solutions to offer customers a true secure omnichannel payments experience. Also, in Q4, we renewed or signed a renewal with one of the world's major fuel brands. On a related note, as we mentioned at the November Analyst Day, we continue to re-engineer our sales processes and to hire new sales management and staff. This transformation of our sales practices provides a solid foundation for future sales performance improvement. Looking forward to 2020, we currently expect revenue to be in the range of $1.48 billion and $1.51 billion, and we expect adjusted EBITDA to be in the range of $425 million to $445 million. It is very important to note that our 2020 guidance does not include the large customer expansion contract we had expected to book in December. Since this contract was a license deal, it would have primarily impacted our 2020 -- 2019, sorry. Let me reiterate, it would have primarily impacted our 2019 revenue and license deal and also our 2019 EBITDA results with no significant impact on our 2020 results had we signed it. Just to be clear, this is not a customer that we have lost. This is an expansion of that relationship that we thought would materialize in December. That deal did not get signed by year-end as expected. We are optimistic that this deal will materialize at some point, but we are not including it in our 2020 guidance due to uncertainty as to timing. In summary, our 2020 pipeline is strong, and we expect solid revenue growth and can reiterate our 2020 EBITDA guidance. Before I conclude, I wanted to also provide an update on our CEO search. Our Board search process is progressing well. The Board is committed to conducting a thorough and comprehensive search to identify the best candidate to lead ACI's next phase of growth. As previously announced, both internal and external candidates are being considered, and we are moving forward as expeditiously as possible. As you know, we are in our quiet period, and we will not be taking questions today. We will have more to say at our full earnings call in February. So we look forward to speaking again next month when we announce our final 2019 results. Thank you very much for your time.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day.