Financial technology (fintech) represents a transformative investment space in a hybrid sector merging finance and technology. The companies featured in the space encompass a variety of services, such as online banking, peer-to-peer payments, insurance, cryptocurrency and cybersecurity, among others. They are relevant because they streamline financial services and enhance efficiency and security through innovations like mobile banking, online investing and payment processing.The financial technology space i ...

ACI Worldwide (ACIW) announced a partnership with NationsBenefits, a healthcare fintech and supplemental benefits company, to enhance health and retail benefits for millions of consumers.The partnership will integrate ACI Worldwide's payment processing solutions with NationsBenefits' Benefits Mastercard Prepaid Card, enabling seamless transactions for eligible health plan members at participating retailers. This initiative is expected to increase retailer connectivity, broaden payment options, and ensure en ...

Core Insights - The Zacks Computer Software industry is positioned to benefit from the global digital transformation, particularly through cloud transition and advancements in AI and machine learning [1][3][4] Industry Overview - The Zacks Computer Software industry encompasses companies providing software applications in AI, cloud computing, digital media, customer relationship management, cybersecurity, and more [2] Trends Influencing the Industry - Increased enterprise spending on AI and cloud computing is expected to drive growth, with a projected 14.2% growth in software by 2025 due to generative AI hardware upgrades [3][4] - The demand for cybersecurity software is rising due to increased cyber threats, leading to a focus on cloud security and performance monitoring tools [5] Macroeconomic Factors - Global macroeconomic challenges and supply chain volatility are concerns, with potential impacts on software pricing and spending, particularly among small and medium-sized businesses [6] Industry Performance - The Zacks Computer Software industry ranks 135, placing it in the bottom 45% of over 246 Zacks industries, indicating dull near-term prospects [7][8] - The industry has underperformed compared to the broader Zacks Computer and Technology sector and the S&P 500, declining 2% over the past year while the S&P 500 and sector increased by 10.5% and 10.4%, respectively [9] Valuation Metrics - The industry is currently trading at a forward 12-month P/E ratio of 28.19X, higher than the S&P 500's 20.92X and the sector's 24.25X [11] Company Highlights - **ACI Worldwide (ACIW)**: Expected revenue growth of 10% in 2024, with adjusted EBITDA of $466 million up 18% and cash flow from operations up 113% [14][15] - **Open Text Corporation (OTEX)**: Focused on cloud, security, and AI, with fiscal 2025 earnings projected at $3.86 per share [18] - **Microsoft (MSFT)**: Dominates the PC software market with over 73% market share, fiscal 2025 earnings expected at $13.08 per share, indicating a year-over-year growth of 10.9% [20][22]

Core Viewpoint - ACI Worldwide (ACIW) is experiencing solid improvement in earnings estimates, which is likely to positively impact its stock price momentum [1][2]. Earnings Estimates - The current quarter's earnings estimate for ACI Worldwide is projected at $0.33 per share, reflecting a significant increase of +230% compared to the same quarter last year [5]. - Over the past 30 days, the Zacks Consensus Estimate for ACI Worldwide has risen by 283.33%, with no negative revisions reported [5]. - For the full year, the expected earnings per share is $2.73, indicating a year-over-year growth of +3.41% [6]. - The consensus estimate for the current year has increased by 5.77% due to two upward revisions and no negative changes [7]. Analyst Sentiment - There is strong agreement among analysts in raising earnings estimates for ACI Worldwide, contributing to a more favorable outlook [3]. - The Zacks Rank system currently rates ACI Worldwide as 1 (Strong Buy), indicating a positive sentiment among analysts [8]. Stock Performance - ACI Worldwide shares have appreciated by 8% over the past four weeks, suggesting investor confidence in the company's earnings growth prospects [9].

Market Overview - The S&P 500 and Nasdaq are in correction territory, down over 10% from recent peaks, as investors react to tariff uncertainties and their potential impact on the global economy [1] - Wall Street is awaiting the Federal Reserve's interest-rate decision and comments from Jay Powell [1] Investment Opportunities - There are numerous value stocks available for purchase, particularly given the strong earnings outlook for the S&P 500 [2] - ACI Worldwide is highlighted as a must-buy tech stock due to its strong value and growth potential [7][8] Stock Screening Methodology - The screening process focuses on stocks with Zacks Rank 1 (Strong Buy) or 2 (Buy), P/E ratios under the industry median, and P/S ratios under the industry median [5][9] - The screen also considers quarterly earnings rates above the industry median and utilizes a blend of upgrades and estimate revisions to identify the top seven stocks [6] ACI Worldwide Performance - ACI Worldwide has a significant client base, including over 6,000 organizations and 1,000 large financial institutions, processing billions of transactions daily [10] - The company achieved 10% sales growth in 2024 and 42% adjusted earnings growth, with projections of 7% revenue growth and 9% higher sales in 2025 [11] - ACI's consensus earnings estimate for FY26 increased by 10% since February 27, contributing to its Zacks Rank 1 [12] Stock Valuation - ACI Worldwide's stock has increased by 450% over the past 25 years, outperforming the Zacks Tech Sector's 415% growth [12] - Despite recent performance, ACIW trades 11% below its November records and 20% below its average Zacks price target, indicating potential for further appreciation [15]

Financial Data and Key Metrics Changes - Total revenue for 2024 was $1.6 billion, up 10% from 2023, exceeding previous guidance [7][24] - Adjusted EBITDA for the year grew 18% to $466 million, with an adjusted EBITDA margin of 41%, representing over 300 basis points of margin expansion [8][24] - Cash flow from operating activities was $359 million, more than double the previous year [8][25] - Total debt outstanding decreased by over $100 million to $932 million, with a net debt leverage ratio of 1.5x [25][26] Business Line Data and Key Metrics Changes - The Bank segment revenue increased by 14% with an adjusted EBITDA margin of 61% [24][25] - The Merchant segment revenue grew by 10% with an adjusted EBITDA margin of 42% [24][25] - The Biller segment revenue was up 6%, with adjusted EBITDA margin at 51% [24][25] Market Data and Key Metrics Changes - The company reported strong bookings momentum, with ARR bookings in Q4 up more than 20% over Q4 2023 [20] - A significant new contract was signed in the Asia Pacific region, yielding over $50 million in first quarter revenue [21][26] Company Strategy and Development Direction - The company combined the Bank and Merchant segments into a new business called Payment Software to streamline operations and enhance synergies [11][12] - The focus remains on the development and rollout of the next-generation payments hub, Kinetic, with a launch expected in 2025 [17][80] - The company aims to improve customer satisfaction and operational efficiency through a general manager structure [50][54] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the 2025 outlook, citing a strong start to the year and a healthy pipeline [10][30] - The company is optimistic about long-term profitable growth and delivering significant shareholder value [31][32] Other Important Information - The company repurchased nearly 4 million shares, representing approximately 4% of shares outstanding, with $373 million remaining on the repurchase authorization [26] - The company is focused on reducing seasonality by signing contracts earlier in the year [9][29] Q&A Session Summary Question: Comments on net revenue dynamics within Biller - Management indicated that the decline in EBITDA was primarily due to certain one-time margin benefits in 2023 that did not recur in 2024 [35][36] Question: Details on the competitive takeaway in the first quarter - The competitive takeaway involved a flagship issuing and acquiring solution for a large bank that was not previously using the company's products [38][39] Question: Impetus for the reorganization and expected benefits - The reorganization aimed to create accountability and streamline operations, with expectations of improved customer satisfaction and internal efficiency [48][54] Question: Factors influencing adjusted EBITDA guidance - The high end of the EBITDA range would be driven by successful new license deals, while the lower end could result from a less favorable mix of revenue sources [71][73] Question: Insights on the sales environment and renewals - Management noted a positive sales environment, with a focus on modernization and proven technology as key drivers for customer decisions [78][80]

Earnings Presentation Q4 2024 February 27, 2025 Private Securities Litigation Reform Act of 1995 Safe Harbor for Forward-Looking Statements This presentation contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. The forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. A discussion of these forward-looking statements and risk factors that may affect them is set forth at the ...

Core Insights - ACI Worldwide reported a revenue of $453.04 million for the quarter ended December 2024, reflecting a decrease of 4.9% year-over-year, while EPS was $1.08 compared to $1.27 in the same quarter last year [1] - The revenue exceeded the Zacks Consensus Estimate of $450.75 million by 0.51%, and the EPS surpassed the consensus estimate of $0.79 by 36.71% [1] Revenue Breakdown - Revenue from Banks was $230.80 million, exceeding the average estimate of $220.85 million [4] - Revenue from Billers was $180.20 million, slightly below the average estimate of $185.40 million [4] - Revenue from Merchants was $42 million, also falling short of the average estimate of $44.50 million [4] Stock Performance - ACI Worldwide's shares have declined by 5.8% over the past month, compared to a 2.2% decline in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Financial Performance - Total revenue for the year ended December 31, 2024, increased by $141.7 million, or 10%, compared to 2023[211]. - Total revenue for the year ended December 31, 2024, was $1,594.3 million, an increase of 9.8% compared to $1,452.6 million in 2023[238]. - The Banks segment revenue increased by $85.8 million, reaching $701.9 million in 2024, while the Merchants segment revenue rose by $15.3 million to $165.9 million[238][239]. - Adjusted EBITDA for the Banks segment increased by $70.0 million to $425.5 million, while the Merchants segment saw an increase of $25.2 million to $69.5 million[238][239]. - Net income for the year ended December 31, 2024, was $203.1 million, an increase of $81.6 million, or 67%, compared to 2023[210]. Revenue Breakdown - SaaS and PaaS revenue increased by $48.8 million, or 6%, during the year ended December 31, 2024, compared to 2023[213]. - License revenue increased by $91.1 million, or 28%, during the year ended December 31, 2024, compared to 2023[216]. - Maintenance revenue decreased by $14.3 million, or 7%, during the year ended December 31, 2024, compared to 2023[219]. - Services revenue increased by $16.1 million, or 21%, during the year ended December 31, 2024, compared to 2023[221]. Backlog and Commitments - ACI Worldwide reported a total 60-month backlog of $6.706 billion as of December 31, 2024, reflecting an increase from $6.520 billion as of December 31, 2023[207]. - Committed backlog increased to $2.413 billion as of December 31, 2024, up from $2.178 billion as of December 31, 2023[207]. Operating Expenses - Total operating expenses increased by $54.0 million, or 4%, during the year ended December 31, 2024, compared to 2023[222]. - Cost of revenue increased by $72.6 million, or 10%, during the year ended December 31, 2024, compared to 2023[226]. - General and administrative expenses increased by $24.4 million, or 28%, for the year ended December 31, 2024, primarily due to higher personnel costs[236]. - R&D expense increased by $5.9 million, or 4%, during the year ended December 31, 2024, compared to 2023[228]. Cash Flow and Liquidity - Cash flow from operating activities was $358.7 million for the year ended December 31, 2024, a 113% increase from $168.5 million in 2023[252]. - Total liquidity as of December 31, 2024, was $744.5 million, up from $538.1 million in 2023, driven by increased cash and availability under the revolving credit facility[243]. Share Repurchase and Debt - The company repurchased 3,946,537 shares for $128.5 million during the year ended December 31, 2024, with a total repurchase amount to date of approximately $1.1 billion[247]. - The company had approximately $0.9 billion of debt outstanding as of December 31, 2024, including $532.5 million under its Credit Facility and $400.0 million in 2026 Notes[285]. - The Credit Facility had a floating interest rate of 6.21% as of December 31, 2024, while the 2026 Notes carried a fixed interest rate of 5.750%[285]. Tax and Investment Activities - The effective tax rate for the year ended December 31, 2024, was approximately 19%, compared to 18% in 2023, influenced by operations in foreign jurisdictions[235]. - Cash used in investing activities was $45.1 million in 2024, compared to $37.8 million in 2023, reflecting increased investments in software and equipment[254]. Strategic Focus and Partnerships - ACI Worldwide is actively pursuing growth through acquisitions, seeking candidates that can enhance solution breadth and provide access to new markets[200]. - ACI Worldwide's omni-commerce strategy aims to provide seamless payment experiences across various channels, capitalizing on the trend of contactless payments and integrated shopping experiences[198]. - ACI Worldwide's strategic partnerships with major players like Mastercard and Microsoft position it as a leader in real-time payments and cloud solutions[194][195]. Technology and Innovation - The company is focusing on cloud technology to enhance scalability and reduce technical risks, enabling faster innovation and improved operating economics[195][196]. - The adoption of open banking and Request to Pay (RTP) in the U.S. is expected to drive innovation and improve customer experience in the payments landscape[199]. - ACI Worldwide's revenue growth is driven by increasing digital payment transaction volumes and the adoption of real-time payments, with Asia Pacific being the largest regional market for real-time payments[193][194]. Financial Reporting and Revenue Recognition - The company recognizes revenue from SaaS and PaaS arrangements over the term of the arrangement, with fixed consideration recognized over time and variable consideration recognized as usage occurs[266]. - The company assesses the significance of financing components in software license arrangements based on the ratio of license fees paid over time to total license fees[265]. - The company applies judgment in determining customers' ability and intention to pay, considering factors such as creditworthiness and economic conditions[267]. Other Financial Metrics - Interest expense decreased by $6.0 million, or 8%, during the year ended December 31, 2024, compared to 2023[233]. - A hypothetical 10% increase or decrease in effective interest rates would impact interest income by $0.3 million annually based on cash investments[284]. - The company's intangible assets, excluding goodwill, were $165.4 million, down from $195.6 million in 2023[270]. - The company's goodwill remained stable at $1.2 billion as of December 31, 2024, with no reporting units deemed at risk of impairment[272]. - Performance share awards for 2024 and 2023 are based on adjusted EBITDA metrics and revenue growth rates, with a potential payout of up to 200%[275]. - The company has not entered into any foreign currency hedging transactions, relying instead on natural hedges through local currency revenue contracts[283].

Financial Performance - Total revenue for 2024 was $1.594 billion, representing a 10% increase from 2023[4] - Net income for 2024 was $203 million, up 67% compared to 2023[4] - Adjusted EBITDA for 2024 was $466 million, an 18% increase from 2023[4] - Cash flow from operating activities in 2024 was $359 million, up 113% from 2023[4] - Total revenues for 2024 reached $1,594.3 million, a 9.8% increase from $1,452.6 million in 2023[20] - Net income for 2024 was $203.1 million, compared to $121.5 million in 2023, representing a 67.2% increase[20] - Adjusted EBITDA for 2024 was $465.7 million, up from $395.4 million in 2023, reflecting a 17.7% growth[23] - Cash flows from operating activities for 2024 were $358.7 million, significantly higher than $168.5 million in 2023, marking an increase of 112.5%[22] - GAAP net income for the year 2024 was $203.1 million, resulting in an EPS of $1.91, a significant increase from $121.5 million and an EPS of $1.12 in 2023[25] - Total adjustments for the year 2024 were $77.1 million, leading to an adjusted EPS of $2.64, compared to $81.0 million in adjustments and an adjusted EPS of $1.86 in 2023[25] Segment Performance - The bank segment revenue increased by 14% and adjusted EBITDA grew by 20% compared to 2023[6] - The merchant segment revenue grew by 10% and adjusted EBITDA increased by 57% compared to 2023[6] - Revenue from the Banks segment for 2024 was $701.9 million, up from $616.1 million in 2023, a growth of 13.9%[23] - The company reported a total of $898.0 million in SaaS and PaaS fees for the year 2024, an increase from $849.1 million in 2023[25] Future Outlook - For 2025, the company expects revenue growth in the range of 7% to 9%, translating to $1.685 billion to $1.715 billion[8] - The company anticipates adjusted EBITDA for 2025 to be in the range of $480 million to $495 million[8] Cash and Debt Management - The company ended 2024 with $216 million in cash and a debt balance of $933 million, resulting in a net debt leverage ratio of 1.5x adjusted EBITDA[7] - Total cash and cash equivalents at the end of 2024 were $265.0 million, an increase from $238.8 million at the end of 2023[22] Shareholder Actions - ACI repurchased approximately 3.9 million shares for $128 million in capital during 2024[7] Operating Metrics - Operating income decreased to $308.1 million in 2024 from $220.4 million in 2023, a decline of 39.7%[20] - The company reported a net adjusted EBITDA margin of 41% for 2024, compared to 38% in 2023[23] Revenue Streams - The company experienced a decrease in license revenue to $412.3 million in 2024 from $321.2 million in 2023, a decline of 28.4%[20] - Recurring revenue for Q4 2024 was $270.2 million, slightly down from $274.8 million in Q4 2023, while total recurring revenue for the year increased to $1,088.7 million from $1,054.2 million[25] - Annual recurring revenue (ARR) bookings for Q4 2024 were $35.2 million, up from $28.8 million in Q4 2023, indicating a growth of approximately 22.2%[25] - License and services bookings for Q4 2024 reached $115.1 million, compared to $106.5 million in Q4 2023, reflecting a growth of about 4.9%[25] Non-Cash Expenses - Non-cash stock-based compensation for Q4 2024 was $8.8 million, up from $5.3 million in Q4 2023, indicating a rise of approximately 66.0%[24] - Amortization of acquisition-related intangibles for the year 2024 was $23.3 million, slightly down from $25.7 million in 2023[25]