ACI Worldwide, Inc. (ACIW) Bundle
Understanding ACI Worldwide, Inc. (ACIW) Revenue Streams
Understanding ACI Worldwide, Inc.’s Revenue Streams
The financial performance of ACI Worldwide, Inc. is characterized by diverse revenue streams, primarily categorized into Software as a Service (SaaS) and Platform as a Service (PaaS), license revenue, maintenance revenue, and services revenue. The following sections provide a detailed breakdown of these revenue sources, historical growth trends, and their contributions to the overall revenue.
Breakdown of Primary Revenue Sources
| Revenue Source | Revenue (Nine Months Ended September 30, 2024) | Revenue (Nine Months Ended September 30, 2023) | % Change |
|---|---|---|---|
| SaaS and PaaS | $674,498,000 | $625,975,000 | 8% |
| License | $252,984,000 | $142,681,000 | 77% |
| Maintenance | $144,046,000 | $153,436,000 | -6% |
| Services | $69,722,000 | $53,924,000 | 29% |
| Total Revenue | $1,141,250,000 | $976,016,000 | 17% |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, total revenue increased by $165,234,000, or 17%, compared to the same period in 2023. Notably, the license revenue saw an impressive rise of $110,303,000, marking a 77% increase year-over-year. In contrast, maintenance revenue experienced a decline of $9,390,000, or 6%.
Contribution of Different Business Segments to Overall Revenue
The revenue distribution across the segments for the nine months ended September 30, 2024, is as follows:
- SaaS and PaaS: 59% of total revenue
- License: 22% of total revenue
- Maintenance: 13% of total revenue
- Services: 6% of total revenue
Analysis of Significant Changes in Revenue Streams
The notable changes in revenue streams include:
- SaaS and PaaS Revenue: Increased by $48,523,000, or 8%, driven by new customer go-lives and higher transaction volumes.
- License Revenue: Increased significantly by $110,303,000, or 77%, due to favorable license renewal timing and substantial new license events.
- Maintenance Revenue: Decreased by $9,390,000, or 6%, as customers reduced premium support on non-strategic products.
- Services Revenue: Increased by $15,798,000, or 29%, attributed to the timing and scale of project-related work.
Overall, the company has shown resilience and adaptability in its revenue generation, with significant growth in its SaaS, PaaS, and license segments, while facing challenges in maintenance revenue.
A Deep Dive into ACI Worldwide, Inc. (ACIW) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was 48.0%, compared to 45.0% for the same period in 2023. This represents an increase in operational efficiency and cost management practices.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was 16.3%, which is a significant increase from 5.2% in the prior year. This improvement reflects stronger revenue growth and better cost control measures.
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024, stood at 9.2%, up from a net loss margin of -0.1% in the same period of 2023, showcasing a substantial turnaround in profitability.
| Metric | 2024 | 2023 | % Change |
|---|---|---|---|
| Gross Profit Margin | 48.0% | 45.0% | +6.67% |
| Operating Profit Margin | 16.3% | 5.2% | +213.46% |
| Net Profit Margin | 9.2% | -0.1% | +9200% |
Trends in Profitability: Over the past few years, profitability has shown a positive trend. The gross profit margin has steadily increased from 44.0% in 2022 to 48.0% in 2024. Operating profit margins have also improved significantly, reflecting the company’s ability to manage costs effectively.
Comparison with Industry Averages: The company's gross profit margin of 48.0% is above the industry average of 42.5%. The operating profit margin of 16.3% also exceeds the industry average of 10.0%, indicating strong competitive positioning in the market.
Operational Efficiency Analysis: The increase in gross margin can be attributed to successful cost management strategies and operational efficiencies. The cost of revenue has increased by 10% year-over-year, but this has been outpaced by revenue growth of 17% during the same period.
In terms of operational efficiency, the company has effectively reduced general and administrative expenses by 8% year-over-year, contributing to improved margins.
| Operational Metric | 2024 | 2023 | % Change |
|---|---|---|---|
| Cost of Revenue | $591.7M | $537.5M | +10% |
| Total Revenue | $1,141.3M | $976.0M | +17% |
| General & Administrative Expenses | $84.9M | $92.7M | -8% |
Debt vs. Equity: How ACI Worldwide, Inc. (ACIW) Finances Its Growth
Debt vs. Equity: How ACI Worldwide, Inc. Finances Its Growth
The company's financial structure consists of both debt and equity financing, which plays a crucial role in its growth strategy. As of September 30, 2024, the total debt stood at $994.3 million, down from $1.038 billion at the end of 2023. This debt comprises:
- Term loans: $471.9 million
- Revolving credit facility: $131.0 million
- 5.750% Senior notes, due August 2026: $400.0 million
The company's long-term debt amounts to $959.4 million after accounting for current portions and debt issuance costs. Short-term debt includes $37.5 million due within the next year.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio is a critical measure of financial leverage. As of September 30, 2024, the debt-to-equity ratio for the company is calculated as follows:
| Total Debt | Total Equity | Debt-to-Equity Ratio |
|---|---|---|
| $994.3 million | $1.3296 billion | 0.75 |
This ratio of 0.75 is relatively lower than the industry average of approximately 1.0, indicating a more conservative financing approach.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
On February 26, 2024, the company entered into a Refinance Amendment to its Credit Agreement, enhancing its borrowing capacity. This amendment includes:
- A senior secured term loan facility totaling $500 million
- A senior secured revolving credit facility of up to $600 million
- Extended maturity dates to February 26, 2029
The company maintains a credit rating of B2 from Moody's and B+ from S&P, reflecting its stable financial outlook despite the significant debt.
Balancing Debt Financing and Equity Funding
The company strategically balances its debt and equity to finance operations and growth. In the first nine months of 2024, it utilized:
- $127.7 million for stock repurchases
- $47.8 million repayment on the Term Loan
- $9.3 million for other debt payments
With total equity at $1.3296 billion as of September 30, 2024, the company continues to leverage both debt and equity to maintain liquidity while pursuing growth opportunities.
Assessing ACI Worldwide, Inc. (ACIW) Liquidity
Assessing ACI Worldwide, Inc. Liquidity
Current Ratio: As of September 30, 2024, the current ratio was calculated at 1.56, with current assets of $1,085.6 million and current liabilities of $697.3 million.
Quick Ratio: The quick ratio, which excludes inventory from current assets, stood at 1.52 as of the same date.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, was $388.3 million as of September 30, 2024. This represents a decrease from $369.4 million at December 31, 2023, indicating a slight tightening in liquidity.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $1,085.6 | $697.3 | $388.3 |
| December 31, 2023 | $1,406.6 | $1,037.2 | $369.4 |
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, net cash provided by operating activities was $232.3 million, a significant increase from $82.8 million in the prior year.
Investing Cash Flow: Cash used in investing activities was $(31.6 million) during the same period, slightly higher than $(30.5 million) in 2023.
Financing Cash Flow: Cash used in financing activities amounted to $(170.4 million), compared to $(47.8 million) in the prior year.
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $232.3 | $82.8 |
| Investing Activities | $(31.6) | $(30.5) |
| Financing Activities | $(170.4) | $(47.8) |
Potential Liquidity Concerns or Strengths
Cash and Cash Equivalents: As of September 30, 2024, cash and cash equivalents totaled $177.9 million, up from $164.2 million at the end of 2023.
Available Liquidity: Total liquidity, which includes cash and cash equivalents and availability under the revolving credit facility, was $645.0 million as of September 30, 2024, compared to $538.1 million at the end of 2023.
Debt Obligations: Total debt as of September 30, 2024, was $994.3 million, with a current portion of $34.9 million. The company remains in compliance with its financial covenants.
| Liquidity Metric | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Cash and Cash Equivalents | $177.9 million | $164.2 million |
| Available under Revolving Credit Facility | $467.1 million | $373.9 million |
| Total Liquidity | $645.0 million | $538.1 million |
| Total Debt | $994.3 million | $1,038.0 million |
Is ACI Worldwide, Inc. (ACIW) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we can analyze its key financial ratios, stock performance, dividends, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio as of September 30, 2024, stands at 37.78. This is calculated based on a trailing twelve months (TTM) earnings per share (EPS) of $2.65.
Price-to-Book (P/B) Ratio
The P/B ratio is currently 6.21, with a book value per share of $9.07 as of the latest financial statements.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is reported at 25.1, derived from an enterprise value of approximately $2.6 billion and TTM EBITDA of $103.4 million.
Stock Price Trends
Over the last 12 months, the stock price has shown significant volatility, starting at approximately $70.00 and reaching a peak of $85.00 before settling around $73.50 as of September 30, 2024.
Dividend Yield and Payout Ratios
The current dividend yield is 2.5% with a payout ratio of 30%, indicating a balanced approach to returning value to shareholders while still retaining earnings for growth.
Analyst Consensus
According to recent analyst ratings, the consensus is a Hold, with a minority recommending Buy based on growth potential and ongoing operational improvements.
| Metric | Value |
|---|---|
| P/E Ratio | 37.78 |
| P/B Ratio | 6.21 |
| EV/EBITDA Ratio | 25.1 |
| Stock Price (as of Sep 30, 2024) | $73.50 |
| 12-Month High | $85.00 |
| 12-Month Low | $70.00 |
| Dividend Yield | 2.5% |
| Payout Ratio | 30% |
| Analyst Consensus | Hold |
Key Risks Facing ACI Worldwide, Inc. (ACIW)
Key Risks Facing ACI Worldwide, Inc.
ACI Worldwide, Inc. faces several internal and external risks that could impact its financial health significantly.
Industry Competition
The payment processing industry is highly competitive, with numerous players vying for market share. As of September 30, 2024, ACI Worldwide's total revenue reached $1,141.3 million, compared to $976.0 million in the same period of 2023, reflecting a growth of 17%. However, increasing competition could pressure pricing and margins, potentially impacting profitability.
Regulatory Changes
Compliance with regulatory requirements is critical. The Company is subject to various laws and regulations, including data protection laws and payment processing regulations. Any changes in these regulations could lead to increased compliance costs. For instance, the implementation of the OECD's Pillar Two Model Rules for a global minimum tax may affect operational costs.
Market Conditions
Market conditions, including economic downturns, can adversely affect transaction volumes. The Company reported a net income of $104.6 million for the nine months ended September 30, 2024, compared to a net loss of $1.1 million in the same period of 2023. A downturn could reverse this trend, impacting revenue and cash flows.
Operational Risks
Operational risks related to technology failures or cybersecurity threats can disrupt services. The Company's effective management of these risks is crucial, especially as it expands its digital payment solutions. The Company reported cash flows from operating activities of $232.3 million for the nine months ended September 30, 2024. Any operational disruption could hinder this performance.
Financial Risks
As of September 30, 2024, ACI Worldwide had total debt of $994.3 million, with maturities on debt outstanding totaling $1,002.9 million. Fluctuations in interest rates could increase interest expenses, affecting net income. The Company’s interest expense for the nine months ended September 30, 2024, was $55.8 million.
Strategic Risks
The Company's strategic decisions regarding acquisitions and investments carry inherent risks. During the first nine months of 2024, ACI Worldwide spent $31.6 million on capital expenditures. Poor investment decisions could lead to financial losses and impact shareholder value.
Mitigation Strategies
To mitigate these risks, ACI Worldwide has implemented various strategies. For example, the Company maintains a strong liquidity position, with total liquidity of $645.0 million as of September 30, 2024, including cash and cash equivalents of $177.9 million. This liquidity can help absorb shocks from unexpected operational disruptions or market conditions.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | High competition affecting pricing and market share | Potential decrease in revenue margins |
| Regulatory Changes | Compliance with evolving regulations | Increased operational costs |
| Market Conditions | Economic downturns affecting transaction volumes | Negative impact on revenue and cash flow |
| Operational Risks | Technology failures and cybersecurity threats | Possible service disruptions |
| Financial Risks | Debt levels and interest rate fluctuations | Increased interest expenses |
| Strategic Risks | Risks related to acquisitions and investments | Financial losses from poor decisions |
Future Growth Prospects for ACI Worldwide, Inc. (ACIW)
Growth Opportunities
Analysis of key growth drivers reveals several avenues for expansion:
Product Innovations
The company has been focusing on enhancing its Software as a Service (SaaS) and Platform as a Service (PaaS) offerings. During the three months ended September 30, 2024, SaaS and PaaS revenue increased by $12.0 million, or 6%, compared to the same period in 2023, driven by new customer go-lives and higher transaction volumes.
Market Expansions
In the nine months ended September 30, 2024, total revenue reached $1.141 billion, up from $976 million in the same period in 2023, representing a growth of 17%. The revenue breakdown is as follows:
| Segment | Revenue (2024) | Revenue (2023) | Growth (%) |
|---|---|---|---|
| Banks | $471,109,000 | $361,231,000 | 30.6% |
| Merchants | $123,865,000 | $107,556,000 | 15.1% |
| Billers | $546,276,000 | $507,229,000 | 7.7% |
| Total | $1,141,250,000 | $976,016,000 | 17.0% |
Acquisitions
Strategic acquisitions have been part of the company’s growth strategy, with cash flows from investing activities amounting to $(31.6 million) in the first nine months of 2024, primarily for software and related assets to support growth initiatives.
Future Revenue Growth Projections
Future revenue growth projections indicate continued momentum, with expectations of recognizing approximately 51% of the $659.2 million in remaining performance obligations over the next 12 months. This will significantly contribute to the company’s revenue stream.
Strategic Initiatives and Partnerships
The company has also been enhancing its partnerships within the financial services ecosystem, which is expected to drive further adoption of its solutions across various markets.
Competitive Advantages
Competitive advantages include a robust product portfolio tailored to the needs of banks, merchants, and billers, alongside a strong balance sheet with cash and cash equivalents of $177.9 million as of September 30, 2024. Additionally, the company maintained a liquidity position of $644.96 million, providing ample resources for future growth initiatives.
The strategic focus on innovation, market expansion, and strategic partnerships positions the company for sustainable growth in the financial technology sector.
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Resources:
- ACI Worldwide, Inc. (ACIW) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of ACI Worldwide, Inc. (ACIW)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View ACI Worldwide, Inc. (ACIW)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.