ACI Worldwide (ACIW) Q4 2007 earnings summary

Executive summary

• FY07 marked a strategic shift toward integrated, end-to-end payment solutions and new products; longer implementation and revenue-recognition cycles pressured near-term license revenue but added $76M to backlog.

• Revenue grew 5.3% to $366.2M, while net income swung to a $9.1M loss from $55.4M profit, reflecting lower operating income, higher expenses and tax expense.

• Added 40 new customers and sold new applications to 125+ existing clients; 60-month backlog reached $1.302B at Sept. 30, 2007.

Financial highlights

• FY07 revenue $366.2M, up 5.3% YoY; maintenance revenue rose $17.5M and services $26.9M, while software license revenue fell $26.1M.

• Operating income fell to $2.4M from $53.8M; net loss was $9.1M versus $55.4M net income, and diluted EPS was -$0.25 versus $1.45.

• Acquired-business revenue contributed ~$45.0M versus $2.9M in FY06; excluding acquisitions, revenue declined, primarily from lower software license fees.

• Operating expenses rose 23.7% to $363.8M; FY07 included $11.8M of costs tied to the stock-option review, restatement work, option settlements and SEC filing catch-up.

• FY07 included $2.6M of restructuring charges and $2.1M of interest-swap fair-value loss; $8.5M was recorded for the class-action settlement in FY06.

Outlook and guidance

• 60-month backlog was $1.302B at Sept. 30, 2007, up from $1.226B a year earlier; management expected no material adjustment from its ongoing backlog review.

• Strategy for 2008 centered on converged end-to-end payment solutions, IBM System z enablement, global expansion and growth beyond reliance on license renewals.

• Management cited aging payment systems, open-systems adoption, fraud and compliance needs, EMV deployments, SEPA and Faster Payments as market opportunities.