Earnings call transcript: ACI Worldwide Q4 2024 beats earnings forecast, stock rises

ACI Worldwide Inc. (NASDAQ:ACIW) reported its fourth-quarter 2024 earnings, surpassing analyst expectations with an earnings per share (EPS) of $0.93 against the forecasted $0.91. The company’s revenue also exceeded predictions, reaching $453 million compared to the anticipated $451.7 million. Following the earnings announcement, ACIW’s stock rose 2.81% in premarket trading, reflecting investor optimism. According to InvestingPro analysis, ACIW currently appears undervalued, with a perfect Piotroski Score of 9, indicating exceptional financial strength. Discover more insights about ACIW and 1,400+ other stocks with InvestingPro’s comprehensive research reports.

Key Takeaways

• ACI Worldwide exceeded both EPS and revenue forecasts for Q4 2024.
• The company’s stock increased by 2.81% in premarket trading.
• ACIW launched a new cloud-native platform, Kinetic Payments Hub.
• The company reduced its total debt by over $100 million.
• 2025 revenue guidance projects 7-9% growth.

Company Performance

ACI Worldwide demonstrated strong performance in 2024, with full-year revenue increasing by 10% to $1.6 billion. The company’s adjusted EBITDA grew by 18% to $466 million, and its EBITDA margin expanded by 300 basis points to 41%. This growth is attributed to the successful launch of the Kinetic Payments Hub and strategic organizational restructuring. InvestingPro data shows the company maintains a strong financial health score of 2.87 (rated as "GOOD"), with particularly high marks in profitability and growth metrics.

Financial Highlights

• Revenue: $1.6 billion (10% increase from 2023)
• Adjusted EBITDA: $466 million (18% increase)
• Adjusted EBITDA Margin: 41% (300 basis points expansion)
• Cash Flow from Operating Activities: $359 million (more than double previous year)
• Total (EPA:TTEF) Debt Outstanding: Reduced by over $100 million to $932 million

Earnings vs. Forecast

ACI Worldwide reported an EPS of $0.93, surpassing the forecast of $0.91, marking a positive surprise of approximately 2.2%. Revenue also exceeded expectations by $1.3 million, highlighting the company’s strong performance relative to forecasts.

Market Reaction

Following the earnings release, ACI Worldwide’s stock price increased by 2.81% in premarket trading, reaching $52. This movement reflects investor confidence, as the stock approaches its 52-week high of $59.71, indicating robust market sentiment. The stock has delivered an impressive 62% return over the past year, with analyst price targets ranging up to $68. Get deeper insights into ACIW’s valuation and growth potential with InvestingPro’s exclusive analysis and 8 additional ProTips.

Outlook & Guidance

For 2025, ACI Worldwide projects revenue between $1.685 billion and $1.715 billion, representing a 7-9% growth. The company also anticipates adjusted EBITDA to range from $480 million to $495 million. The first quarter of 2025 is expected to contribute $360 million to $370 million in revenue, reflecting a 17-21% increase. The company’s P/E ratio of 23.8x appears attractive relative to its growth prospects, according to InvestingPro analysis, suggesting potential for further value creation.

Executive Commentary

CEO Tom Warsop highlighted the company’s technological advancements, stating, "We have a functioning demo... running on the same servers that production systems will run on." He also emphasized the Kinetic platform’s capabilities, noting, "We’re able to demonstrate extraordinarily high throughput, in fact much higher than any bank has ever needed in the world."

Risks and Challenges

• Market competition: The payments industry remains highly competitive, posing challenges for ACI Worldwide’s market share.
• Economic fluctuations: Global economic instability could impact client spending and demand for financial technology solutions.
• Technological advancements: Rapid changes in technology require continuous innovation and adaptation.

Q&A

During the earnings call, analysts inquired about the competitive landscape in the Asia Pacific region and the strategic rationale behind the company’s organizational restructuring. Executives addressed these concerns, emphasizing the unique positioning of the Kinetic platform and the anticipated growth from the new segment structure.

Full transcript - ACI Worldwide Inc (ACIW) Q4 2024:

John, Conference Operator: Good morning. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the ACI Worldwide Incorporated Reports Financial Results for the Quarter and Full Year Ended 12/31/2024.

All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. Thank you. I would now like to turn the call over to John Kraft. You may begin your conference.

John Kraft, Investor Relations, ACI Worldwide: Thank you, and good morning, everyone. On today’s call, we will discuss the company’s fourth quarter and full year 2024 results as well as our financial outlook for 2025. We will 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 press 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’d like to turn the call over to Tom.

Tom Warsop, President and CEO, ACI Worldwide: Thanks, John, and good morning, everyone. I appreciate you joining our full year twenty twenty four earnings conference call. I’ll start this morning with some comments about the full year, and then I’ll hand it over to Scott to discuss detailed financial results for the year as well as our expectations for 2025. And then as always, we’ll open the line for some questions. Let me start with this.

I am immensely proud of the results my team delivered last year. Performance was strong across every one of our metrics. In fact, 2024 results were ahead of our own expectations and the guidance we provided throughout the year. Total revenue was up 10 over 2023, which was above our upper single digit longer term forecast we provided at our Analyst Day last March. Our adjusted EBITDA for the year grew 18%, also notably above our guidance.

Our adjusted net EBITDA margin of 41% expanded more than 300 basis points over last year, which highlights the inherent leverage in our software model. And cash flow generation remains strong with cash flow from operating activities of $359,000,000 in 2024, more than double the previous year. As we’ve discussed throughout the year, we made a conscious effort to complete the signing of contracts, renewal and new, earlier in the year. While the revenue from a renewal contract cannot be recognized earlier than the renewal date, getting these time consuming renewals out of the way allowed us to focus on new customer wins, which often can be recognized when signed. As I reflect on 2024, this effort was clearly successful in delivering results ahead of our quarterly forecasts throughout the year.

It’s something we’re continuing to do in 2025. Further, it helps reduce the heavy seasonality we’ve traditionally seen. It also allowed us to start working on deals in our 2025 pipeline. This momentum and our large current pipeline provide me with high confidence in our full year 2025 outlook. Before I give you a little more color on segment, I want to discuss an organizational improvement we made starting on January one of this year.

We’ve combined the bank segment and the merchant segment into one new business called payment software. This makes sense for a number of reasons. First and quite simply, the fundamental software, the code that we use to serve banks and large merchants, is very similar. While the software is configured differently for the bank and merchant customer targets, the coding expertise and much of the functionality and the R and D is shared. The combination is synergistic and it simplifies operations in many ways.

In addition, we’re moving to a general manager structure for the business unit. We did this with the biller segment last year and we found significant success. We’re highly confident this change will allow us to accelerate progress in the payment software segment as well. I’ve asked Eric Licht to lead this new business. As I mentioned on our last call, I’ve known Eric for many years, and I’m highly confident in his abilities.

His experience is perfect for this role, including the years he was involved selling and servicing mission critical enterprise software to the largest global banks, which, of course, it will continue to do at ACI. Look for us to report our financial results in this new structure starting in first quarter of this year. Turning to the three segments you’re familiar with. The bank segment, which will now be the majority of the payment software segment, grew 14% in terms of revenue and 20% in terms of EBITDA compared to 2023. We saw particular strength in our issuing and acquiring solutions with revenues up 23% from last year.

Our increased focus on next generation modernization and software, especially our payments hub product, really is driving the pipeline. The merchant segment, which going forward will also be included in the payment software segment, saw revenue grow 10% in 2024 and adjusted EBITDA grew 57%. Before moving on from payment software to biller, I want to provide an update on our next generation payments hub solutions. Investments are continuing. Development is on track.

We remain extremely focused on our launch in 2025. Our offering will be cloud native, which increases usability in terms of how customers utilize the tools and in terms of the breadth of customer segments we can target. And we’re not just targeting our current very large bank segment. One important addition to our Payments Hub efforts, I hope you saw the announcement that I hired Phil Bruno as our Chief Strategy and Growth Officer. I’ve known and worked with Phil for a very long time, and we’re excited for him to join the team.

Phil will be instrumental in helping ACI execute on the broader strategy we launched in 2024. In particular, Bill will be utilized in a customer facing capacity, helping our sales efforts by partnering with ACI customers and providing valuable assistance with their modernization efforts. We expect his efforts to be a very large part of our Hub go to market strategy. Now turning to Biller. Our 2024 revenue was up 6%.

We signed some significant contracts during the year, and our bookings momentum closing out the year is strong, with ARR bookings in Q4 up more than 20% over twenty twenty three Q4. Overall, we’re very happy with our full year financial results, and we’re confident in our 2025 outlook. We started the year very strong. We created a Smart Start program to encourage and reward early new business execution this year. As part of this program, early this month, we signed the largest new logo and competitive takeaway we have ever had in our Asia Pacific region.

While the contract is an excellent win by itself, the relationship is opening up additional opportunities for us in the region. Inclusive of this very large new logo win, the team has, as of today, signed net revenue contracts in our Banking segment yielding more than $50,000,000 in first quarter revenue. Scott will give more details about Q1 in the first half, but I’m sure you can appreciate the benefits of signing deals early in the year. Now I’ll turn it over to Scott to discuss financials and our guidance. Scott?

Scott Behrens, CFO, ACI Worldwide: Thanks, Tom, and good morning, everyone. I first plan to review our financial results for 2024 and then I’ll provide our outlook for 2025. We’ll then open the line for questions. In 2024, we capped off a year of strong revenue growth, significant margin expansion, improved cash flow and a strong liquidity position. Full year 2024 revenue was $1,600,000,000 up 10% from 2023 and total adjusted EBITDA was $466,000,000 up 18% from 2023 and adjusted EBITDA margin of 41% representing over 300 basis points of margin expansion.

Looking at the results by segment, bank segment revenue increased 14% versus 2023 with adjusted EBITDA margin of 61%. Merchants segment revenue increased 10% versus 2023 with adjusted EBITDA margin of 42% and biller segment revenue increased 6% versus 2023 with adjusted EBITDA margin of 51%. And as a reminder from our last earnings call, biller EBITDA dollars were down compared to last year due to certain one time non recurring margin benefits that did not recur here in 2024. We continue to see strong cash flow growth in 2024 with cash flow from operating activities of $359,000,000 more than double last year and we ended the year with a strong liquidity position including $216,000,000 in cash on hand. In 2024, total debt outstanding decreased by more than $100,000,000 to $932,000,000 and our net debt leverage ratio declined to 1.5x, which is below our recently lowered stated target of 2x that we discussed last quarter.

During the year, we repurchased nearly 4,000,000 shares of our stock, representing approximately 4% of our shares outstanding. And at year end, we had $373,000,000 remaining on our repurchase authorization. With the strong bookings growth we had in 2024 and the momentum we saw exiting the year, we are confident in what we are seeing here in 2025. As Tom mentioned, we are starting the year strong, in particular with new sales bookings in our Bank segment, including a large new logo and competitive takeaway in our Asia Pacific region, which we expect to show up in our results here in Q1 as we start the year. For the full year 2025, we expect revenue to be in a range of $1,685,000,000 to $1,715,000,000 representing 7% to 9% growth over 2024 on an FX adjusted basis, which is in line with the long term growth targets we discussed at our Analyst Day last year and is particularly encouraging on the back of our strong growth in 2024.

’20 ’20 ’5 adjusted EBITDA is expected to be in a range of $480,000,000 to $495,000,000 which again is coming on top of the strong year we had in 2024 where we achieved over 300 basis points of margin expansion. Notably, as we finished 2024, we were able to deliver a fully demonstratable MVP for our new payment sub at a cost less than we had expected, but will increase that investment in 2025 as we roll out the product to market and build incremental functionality on top of the new architecture. For Q1 twenty twenty five, we expect revenue to be in a range of $360,000,000 to $370,000,000 representing 17% to 21% growth over last year. We expect adjusted EBITDA to be in a range of $70,000,000 to $80,000,000 representing 43% to 63% growth over last year. And looking to the sequential phasing of revenue for the rest of the year, we expect the first half of the year to account for a little more of our full year revenue or approximately 45% of our total revenue for the year in 2025 versus the 43% weight of the first half we saw in 2024.

This is due to our continued efforts, as Tom mentioned, to sign our new contracts earlier in the year. And to help with the rest of your financial modeling, you’ll find a few additional guidance assumptions here on Slide six. So in summary, in 2024, we saw strong revenue growth contributing to strong EBITDA growth and margin expansion and cash flow growth more than doubled last year. We exited 2024 with a healthy pipeline and significant momentum. As Tom mentioned, we started the year strong, in particular with new sales wins, giving us high confidence for 2025.

With that, I’ll pass it back to Tom for some closing remarks. Tom?

Tom Warsop, President and CEO, ACI Worldwide: Thanks, Scott. So in summary, we remain focused on sales execution and the development and rollout of our next generation payments hub platform. We’re pleased with our progress and our extremely strong results in 2024. Looking to 2025, our pipeline is large. We have had a great start, as you can see from our first quarter guidance, and we’re confident in our full year financial outlook.

Overall, we are optimistic regarding both our long term profitable growth and our ability to deliver significant shareholder value. Thank you very much for joining our call. Operator, we can now take questions.

John, Conference Operator: Thank you. We will now begin the question and answer session. Your first question comes from the line of Peter Heckmann with D. A. Davidson.

Please go ahead.

Peter Heckmann, Analyst, D.A. Davidson: Hey, good morning, everyone. Could you comment a

Scott Behrens, CFO, ACI Worldwide: little bit about the net revenue dynamics within Biller? Seems like we saw a kind of a reversal from a number of quarters of relatively strong trends. And is that what’s contributing to the down year over year EBITDA within Biller? Or are there kind of two overlapping dynamics? Yes, Pete.

No, it’s primarily, certain contracts we talked about this after our Q3 call, certain contracts where we had a margin benefit, we call it one time margin benefit in 2023, it did not recur in 2024. So, you’ll see net revenue increase and EBITDA increase in 2025 once we get away from that kind of year over year uptick. But obviously, at the consolidated level, we were able to increase our margin expansion by 300 basis points even with that kind of year over year headwinds.

Tom Warsop, President and CEO, ACI Worldwide: Yes. So those benefits that Scott’s referring to those fall through straight to net from growth. So when those didn’t occur that had an impact on home.

Scott Behrens, CFO, ACI Worldwide: Okay. Okay. And then in terms of thinking about this win in the first quarter, can you talk about what solution or what solution, what area that was

Tom Warsop, President and CEO, ACI Worldwide: in? Yes. It’s our flagship issuing and acquiring solutions is one of the very few extremely large banks in the world that don’t that were not previously using our flagship solutions. So we’re super I mean, obviously, super excited about that. And as we’ve mentioned, I just want to reinforce this is a very competitive takeaway and it’s just really encouraging and it’s a program that we started last year targeting some very specific solutions from some of our competitors and to try to try to grab those few remaining banks and very successful.

Obviously, this one was successful and we have a whole pipeline that we’re going after that looks like this. This is one of the largest ones, which is obviously great to start with one of the largest ones. But there’s more to come on that program.

Scott Behrens, CFO, ACI Worldwide: Okay. That’s great to hear. And then just a quick follow on, nobody. Are they going to run that on an in house basis and

Tom Warsop, President and CEO, ACI Worldwide: in They’ll be running it in their own data center. That’s correct.

Scott Behrens, CFO, ACI Worldwide: Okay, great. Thank you very much.

John, Conference Operator: Your next question comes from the line of Trevor Williams with Jefferies. Please go ahead.

Trevor Williams, Analyst, Jefferies: Great. Thanks guys and congrats on the year. Tom, just to go back to the reorg with merchant and banks and the shift to the GM model, if you could just expand on what the impetus was for both of those? And then just as we think about this year, what kind of tangible benefits we might start to see from those as we work through? Thanks.

Tom Warsop, President and CEO, ACI Worldwide: Yes, sure. Sure. So, if I go back to when I first walked in the door November of twenty twenty two, we had an organizational structure that was functional. And so, and there’s nothing wrong with the functional organization. We got some efficiencies out of it.

My challenge was I prefer and I think it just works better to have leadership teams that are as fully accountable for results in an entire business as possible. And so I’ve always preferred to operate that way. I wanted to make sure that I got my arms around the ups and downs, the positives and the negatives of that with respect to ACI. And I’ve stayed very comfortable last year after seeing how successful we were on biller. We’ve now rolled it out across the company.

And so what it means is, Eric, the General Manager of our payment software business, he now has the sales resources, the account management resources, the implementation team, the product marketing teams, they all are working on the same team. And so we’ve already started to see benefits from consistency of direction from no matter how good everybody is at working across a matrix, if you’re if you have different bosses, it’s challenging. And so now every person in the company that’s supporting directly our bank and merchant customers, they all report to the same team, the same leader. And they are very quick on what their objectives are and they, they’re actually they’re thrilled that we’ve done this because it just helps everybody get on board with what we’re trying to do. So, that’s why we did this.

We’re I’m highly confident that it’s going to have very positive results. I think what we’ll see and we’ll keep you updated on this and how it’s really going, but I think the first impact we’re probably going to see is our customers are going to be happier because we’re going to have they don’t it’s easier now for them they don’t have to think twice about who is accountable for their business inside of ACI. In the past, we had times where a customer would say, well, if it’s implementation, I need to call James. If it’s, If it’s a new opportunity, a sales thing, I need to call Joe. None of that anymore.

There’s we’ve made that much easier for our customers. They’re going to really be happy about it. And then internally, we’re going to see efficiency because as I mentioned, the software is very, very similar. But because we had it in separate organizations, I’m absolutely certain that we had some wasted efforts, some duplicative efforts and we’re eliminating those. They don’t go away on day one, but we’re starting to already see benefits there.

Hopefully, that’s helpful, Trevor.

Trevor Williams, Analyst, Jefferies: Yes. No, that’s great. I appreciate all that. And for Scott, just anything more specific on and I guess now we’re down to two segments, but on what the growth expectations are at the segment level between the new payment software and biller? And then just as we think of the and I know banks have now wrapped with merchant, but just relative to 2024 contribution you guys are expecting from new sales?

And then also any impact we should think about from renewal volume if there’s any cadence in 2025 to be mindful of? Thank you.

Scott Behrens, CFO, ACI Worldwide: Yes. First, last year, we laid out kind of the long term targets by each of the three segments. They were all over the three year time horizon, call it high single digit revenue growth. That won’t change. Ultimately, I think there was opportunity upside opportunity in banks if we do get traction on the payments hub with the Tier two banks that could push banks up to double digit.

But because merchant’s relatively small, it’s a part of the payment software business. It’s really not going to change the trajectory of those numbers. They were pretty much all in line. So, I would stick with those growth numbers. I think externally what you guys will see starting with Q1 is really a combination of bank, what is this sort within bank and merchant.

So, if you’re modeling kind of the go forward, it’s really combining those two business segments into one. It’s really not going to be any more complicated than that. And as it relates to this year’s new business and renewal business, renewal book is again, I think that every year it’s call it 20% plus or minus of the total books. So nothing really significant there in terms of sizing. The new business, as I said on the call, we are making a conscious effort to kind of derisk full year, make it so that we don’t have to rely so much in the fourth quarter.

And that’s why I said in my prepared remarks that you’re going to see more of the full year revenue in the first half than we saw in 2024. And hopefully, that will be a trend going forward as we begin to balance out the year. So last year, 2024 had 43%, the first half issues can be 45%. It doesn’t seem like a big shift, but again, it’s going to take time to balance out the year and get rid of some of that variability that we see by quarter.

Tom Warsop, President and CEO, ACI Worldwide: Yes. And I think this is obvious, but the reason that it takes some time to really make an impact there is as we say all the time, these renewal deals, it doesn’t matter when we sign them. They’re recognized on the renewal date. And so we’re still doing a really good job team is doing a really good job of signing these renewals earlier. That doesn’t move the needle.

But where we have the leverage is on the new business and that’s why you’re seeing a very strong Q1 because this is a great thing for the company. It’s great for our shareholders. They don’t have to worry so much about Q4 and frankly, I don’t have to worry so much about Q4 getting it all done. So it’s good news all the way around, but it’s going to I think great progress already, but we’re going to continue to push that. So we get closer and closer to that magic fifty-fifty between the past.

Trevor Williams, Analyst, Jefferies: Okay. No, I appreciate all that. Thank you guys.

Tom Warsop, President and CEO, ACI Worldwide: Thanks, Trevor. Thanks, Trevor.

John, Conference Operator: Your next question comes from the line of Jeff Cantwell with Seaport Research Partners. Please go ahead.

Peter Heckmann, Analyst, D.A. Davidson: Hey, David. Thanks very much. On your adjusted EBITDA guidance, can you talk about what the factors are that would drive you towards the higher end of the range for the full year? And commercially, what would put you at the lower end of that $4.00 $8,000,000 and $4.00 $95,000,000 range for the full year? Thanks.

Scott Behrens, CFO, ACI Worldwide: Well, yes, the factors that we’ve pushed is the high end. Again, we have a very leverageable model. I mean, we have the whether it’s software model, SaaS model, both are highly scalable. And so, it really comes down to that mix of whether it’s call license fee services or SaaS and what that mix ends up being on a year. You know, we’re comfortable with this range, but delivering up high end would be very similar to this year.

You overachieve in areas like license and that really falls dollar per dollar down to EBITDA. So, we’re comfortable with that range. A lot of paths, I think, to that high end. So, I wouldn’t limit it to one particular path, but highly scalable model, you saw that in 2024. It’d be very similar mechanics or ability to reach that in 2025.

Tom Warsop, President and CEO, ACI Worldwide: Yes. And I mean, just Scott said this, I’m going to say it a little differently. I think the most likely path to the high end or over the high end of the EBITDA guidance would be, we’re even more successful than we expect to be on these new license deals such as the very margin we signed in Q1. If we signed another one of those during this year, there’s a very real chance we could be at the highest or above.

Peter Heckmann, Analyst, D.A. Davidson: Got it. Got it. Great. And then can maybe just talk a little more about that competitive takeaway in Asia Pacific? I’m curious to be able to share who that was and what you think the drivers were for them to make the change over the year.

Maybe talk a little more about the sales environment with Bags. It sounds like you’re starting the year. I mean, is that your expectation for the coming year and are there any big renewals that we should be aware of as well? Thanks.

Tom Warsop, President and CEO, ACI Worldwide: Yes, Jeff, we have a little over under on how long it would take for somebody to ask you a list. I can’t tell you who it is. But what I can say is just to repeat what I said before, which is a very large financial institution, Asia Pacific based global institution, but based in Asia Pacific region. It’s again, as I said, it’s one of the very few in that region that didn’t already use our flagship products. So we’re really excited about that.

The reason that, I think there are two main things that I would say about why we were able to win this. Number one was, I think our competitor made a mistake. They did not serve the customer well. They were not happy. Of course, we always look for those situations and try to take advantage of those.

So that was number one. But number two is really the reason is because we started the whole conversation talking about the future and where we’re headed with our Payments Hub strategy. And they the reason that they bought was they said this is fantastic because I can use proven absolutely proven technology. I mean, I think at one point they used the word bulletproof with me. I would never actually use that word, myself.

But that’s what they said because they got feedback from other customers. Is that we can use that immediately. You can help us implement that really fast and we’re totally comfortable with that. And you’re giving us a path to modernization that no one else has been able to demonstrate for us. So, that’s why we won.

And it’s a wonderful thing. We’ll do a celebration in a month or so. And I’ll be there for that. I’m excited about that. In terms of the overall sales environment, I think this that description I just gave you of this process is a pretty good proxy for how conversations are going around the world.

These are this is the whole reason that we embarked on our Payments Hub strategy. By the way, we call the Payments Hub Kinetic now. We did actually come up with a name for it. But it’s that path to modernization which is far lower risk and easier to understand for institutions. So they can either continue to use proven software until they’re ready or like in this case, they can move over to already proven platforms and then move at their pace to new cloud native technology.

So, I think this is a really good example of our sales strategy and it’s obviously it works, certainly works in this case.

Peter Heckmann, Analyst, D.A. Davidson: Great. Thanks very much.

Tom Warsop, President and CEO, ACI Worldwide: Thanks, Jeff.

John, Conference Operator: Your next question comes from the line of George Sutton with Craig Hallum. Please go ahead.

Jeff Cantwell, Analyst, Seaport Research Partners: Thank you. Tom, just more on the payment hub or now Kinetic. You mentioned the launch would be in 2025. I wondered if you could give us a little more specificity there. And there was also a mention of incremental functionality.

I just wanted to make sure I understood what the incremental functionality was and it sounds like it might address a modestly larger market than you had prior thought.

Tom Warsop, President and CEO, ACI Worldwide: Sure, Joe. So, we’ve actually already led our sales force loose to sell the product.

John, Conference Operator: I think I’ve said before

Tom Warsop, President and CEO, ACI Worldwide: on earnings calls and then in individual calls that I was personally particularly pedantic about not having our sales force sell from a PowerPoint. And many of our competitors do that, right? They will come in with a PowerPoint slide, they set a slide and say, hey, look at this. This is what we can do. Well, they can’t actually do that and I didn’t want to do it.

And so we waited. We did not allow our sales force to sell Kinetic until the first of this year. And the reason and what drove that was we have a functioning demo. And when I say demo, I mean, it actually works. It’s running on the same servers that production systems will run on.

It uses synthetic test data that looks very much like real transactions for very, very large financial institutions. We’re able to demonstrate extraordinarily high throughput, in fact much higher than any bank has ever needed in the world. We’ve been able to demonstrate that. So we got to that point where we could show the customer. They can touch it.

They can feel it. They can play with it. And that’s when we fixed the sales force on it. So as far as exactly when the first model go into production, I don’t know that yet. But what I do know is we’ve got a lot of interest, our sales force is thrilled to be let loose.

They’re out there right now. In fact, there’s a deal we’re proposing right this second of a kind of a mid sized financial institution that I hope we win it. And if we do that will probably be the first one, I don’t know. But we’ve got a lot of interest, we’re very focused on it. We’ll keep you updated in terms of our progress on actually selling the product with tons of interest.

And then you Scott, I think mentioned incremental functionality. So what we did was in this working demo, we chose one of the most common or several actually of the most common payment types. And we chose account to account. So that could be a real time payment, a small payment or a very large wire, for example, or a swift transaction. Anything that goes from one account to another, that’s what we’re able to demonstrate right now.

The next set of functionality is going to be like with the cards. So debit cards, credit transactions and then ACH will come a little bit later. So, we’ve phased in the functionality but it’s the same platform with the same database, the same middleware if you will, the same interfaces to the customer systems. So by demonstrating this and just we’ve had a bunch of analysts look at industry analysts. And I’ll just give you one quote that I love.

I won’t tell you the analyst was because this person hasn’t published the study yet or the paper yet. But we showed the demo. We let this person play with it and the her reaction it gave something away, didn’t it? Her reaction was, I have never seen anything like this. No one in the market has this.

It blew me away. Those were very exact words. So we’re very excited about that. Obviously, the proof is in the pudding. We need to sell, we need to implement and we need to continue to deliver that

Jeff Cantwell, Analyst, Seaport Research Partners: The new payment software group, one who has watched the merchant segment, which has struggled a bit and not necessarily achieve the size we would hope also manage. Is it fair to this merchant in this EEM facade or do you see getting more emphasized in the structure?

Tom Warsop, President and CEO, ACI Worldwide: No, I definitely don’t think the emphasized, George. It’s just to refresh everybody. When I originally hired Eric Mitch, I asked him to take on merchant and build a plan to re energize merchant. He had a bunch of experience with large merchants around the world. He was the CEO of a company that searched large merchants around the world.

But his real passion was banks. And Eric was one of the early employees of Carilion, which is an online banking software company. And I worked with him at Cipher after we bought Check Group which had bought Carilion. And so Eric’s passion is banks. He knows the executives at large banks around the world already.

And so that’s a very long way around to your question, which is Eric is the right person to reenergize or energize both banks and merchants and we get a lot of leverage that we really haven’t gotten enough of by putting merchant and banking together because as I mentioned probably a couple of times now, the software itself is very similar. It’s just a matter of exactly how it’s applied. And then really importantly, we talk about banks for the most part when we talk about Payments Hub, Kinetic. But actually when we talk to large merchants and explain what we’re doing with Kinetic, they go, when can I have that? Because that orchestration of payments, that super efficient routing, the traceability, all of those things, large merchants want just as much if not more than financial institutions.

We had to start somewhere and we started with banks, it’s our largest business, but that will equally apply at least equally apply to merchants and that’s another reason we brought it together. So I don’t want to miss that opportunity.

Jeff Cantwell, Analyst, Seaport Research Partners: Helpful stuff. Thank you very much.

Tom Warsop, President and CEO, ACI Worldwide: Thank you.

John, Conference Operator: Further questions at this time, I would like to turn the call back over to the management team for closing remarks.

Tom Warsop, President and CEO, ACI Worldwide: Great. Well, look, we thank you very much for participating. As you can tell, we’re very excited about the performance our team put in, in 2024, but much more importantly, where we’re headed and we’re very confident in 2025 and beyond. I think we feel internally, we’ve turned a corner and we feel great about the future and we’re talking about the future, we’re talking about growth, we’re talking about expansion, which is what we want to do. And so we’re very excited about it and appreciate your support and let’s get on with your day.

Thanks, everyone.

John, Conference Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.

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