ACI WORLDWIDE, INC. Q3 2025 earnings call

Good morning, everyone, and thank you for joining our call. On today's call, we will discuss ACI's third quarter 2025 results and our financial outlook for the remainder of the year. We will take your questions at the end of the call. The slides accompanying this webcast can be found at aciworldwide.com under the Investor Relations tab and will remain available after the call.

As always, today's call is subject to safe harbor and forward-looking statements. You can find the full text of these statements in our presentation deck and earnings release, both available on our website and filed with the SEC. Joining me today are Tom Warsop, our President and CEO, and Bobby LeBrock, our CFO. Before I turn it over, I did want to share that we will be attending some investor conferences, including Citi's 14th Annual FinTech Conference in New York City on November 18. Stephens Annual Investment Conference in Nashville on November 20, and the UBS Global Technology and AI Conference in Scottsdale, December 3. With that, I'll turn the call over to Tom.

Thanks, John. Good morning, everyone, and thank you for joining our Q3 earnings call. I'm going to share some key takeaways, and then Bobby will review our financials and guidance before we take your questions. We've spent the last couple of years investing in our leading software and working hard to structurally reshape ACI Worldwide for accelerating growth and financial predictability.

Q3 was another strong quarter for ACI Worldwide and another proof point that our efforts are working. We delivered 7% year-over-year total revenue growth with double-digit recurring revenue growth in the quarter. For the year so far, both total revenue and Adjusted EBITDA are up 12%, reflecting consistent execution and operational efficiency across the business. Given this momentum, we're again raising our full-year guidance, and Bobby will share more about that shortly.

As I've mentioned on prior calls, our team is working hard to reduce some of the variability introduced by our historic term license software business model. While we can't completely eliminate it, our focus on getting deals closed earlier in the year, movement toward more ratable pricing structures in our payment software segment, and consistent growth in our biller business is helping lessen the quarter-to-quarter variability. We're continuing this effort, and I expect to continue to see benefits.

Looking at our segments, the biller business continues to perform well, with Q3 revenue up 10% compared to a year ago. We're seeing particularly strong growth in the utility and government verticals. Our payment software segment delivered 4% growth compared to last year, and it's up 12% year-to-date with the strong start we had to 2025.

We continue to see strong demand from both traditional banks and established payment processors, as well as from up-and-coming fintechs. Bottom line is the winners in the marketplace are investing, and they're often choosing ACI for their software needs. I've been talking about our ACI Kinetic platform for several quarters now, and I'm happy to report we signed our first new ACI Kinetic customer in Q3, Solaris, a German fintech and bank.

We were very selective in choosing our first customer, as I've indicated we would be, and we're committed to working closely with the Solaris team to successfully implement the technology across their system. They are an ideal partner, focused on the future and on dramatically improving their business, supported by our industry-leading technology and services.

Solaris CEO, Karsten Hultemeyer, was a featured speaker at our recent Payments Unleashed event in New York, and he talked about the many challenges and opportunities in the financial services industry, and specifically about how we are working together to take advantage. Looking ahead, Kinetic's architecture and capabilities are resonating with customers who are looking to modernize and simplify their payments infrastructure.

We have expanded our pipeline, we have deepened relationships with existing customers, and we are excited about what is ahead as we roll out this compelling new platform. In addition, we made a small but important acquisition of a European-based fintech payment component. That provides software for financial messaging, translation, orchestration, and integration.

Although the direct impact to our revenue will not be material, the software they provide and the great team of technologists that have now joined us will augment our AI-first initiatives and help accelerate the development roadmap of our ACI Kinetic offering. We will continue to be opportunistic in our approach to M&A grounded in disciplined capital allocation. I also want to point out our ongoing commitment to returning capital to shareholders and point you to our other announcement today.

Year-to-date, we've repurchased 3.1 million shares for $150 million, and just today, we announced the increase of our repurchase authorization to $500 million. Stablecoin has obviously been another hot topic in our industry and on our recent earnings calls. Just a few weeks ago, we announced a partnership with BitPay, which supports our ability to unlock even more potential as cryptocurrencies and stablecoins continue to grow in importance.

This partnership strengthens our existing commitment to digital currency innovation by expanding our payments orchestration platform's established capabilities for our customers. I mentioned Payments Unleashed briefly, and let me take a moment to give you a bit more insight on this great event. Payments Unleashed was ACI's premier payments summit and a celebration of our 50th anniversary. We brought together some of the brightest minds, thought leaders, innovators, and visionaries to discuss the future of payments.

Topics included stablecoins, real-time payments, AI, modernization strategies for banks, merchants, and billers. The feedback was overwhelmingly positive, and we're proud to be at the center of these important conversations. On the topic of thought leadership, ACI has also been active in the media. Most recently, I joined Bloomberg TV's Crypto Show to share our perspective on stablecoins and its role in cross-border real-time payments.

Thank you, Tom, and good morning, everyone. I'll start with our third quarter financial results and then cover our year-to-date performance and outlook. Q3 was another solid quarter, and we exceeded our expectations. Total revenue was $482 million, up 7% year-over-year, and up 6% adjusted for foreign exchange. Recurring revenue was $298 million, up 10%, and represents 62% of our total revenue.

Adjusted EBITDA came in at $171 million and was up 2% year-over-year. Both of our segments contributed to this growth. The biller business continues to perform well, with revenue of $198 million, up 10% year-over-year. Segment-Adjusted EBITDA for biller was $32 million, a 4% increase. In payment software, revenue grew 4% to $284 million, and Adjusted EBITDA was $182 million, up 1%. We're pleased with our recurring revenue momentum, which was $100 million in Q3 and accelerated to 9% growth year-over-year.

Looking now at the first nine months of the year, we generated $1.3 billion in total revenue and $346 million in Adjusted EBITDA, both up 12% compared to the first nine months of last year. That growth is the same as reported and adjusted for foreign exchange, so no impact from currency fluctuation. This strong performance reflects consistent execution across the business and the strong start we had in first-quarter license sales. Payment software revenue year-to-date grew 12%, and Adjusted EBITDA grew 13%.

This includes growth across issuing, acquiring, merchant, fraud management, and real-time payments. Biller revenue is also growing 12% year-to-date, and Adjusted EBITDA grew 4%. Our revenue momentum is driven by our continued booking strength. Net new ARR bookings year-to-date grew 50% to $46 million, and new license and services bookings grew 8% to $189 million.

As Tom mentioned, we were pleased to welcome Solaris as our first Kinetic customer. These results reflect the execution focus across our team and the growing customer demand across both segments. Turning to the balance sheet, we ended the quarter with $199 million in cash and a net debt leverage ratio of 1.3 times. We continue to generate strong underlying cash flow with $201 million cash flow from operations year-to-date.

That compares to $232 million last year and reflects the anticipated timing of receivables and tax payments between periods. We also repurchased approximately 400,000 shares in the third quarter, bringing our year-to-date total to 3.1 million, or about 3% of our shares outstanding. As Tom mentioned, we have increased our share repurchase authorization to a total of $500 million, underscoring our commitment to returning capital to shareholders.

Based on this strong year-to-date performance and a healthy fourth-quarter pipeline, we are again raising our 2025 guidance. We now expect total revenue to be in the range of $1.73 billion-$1.754 billion, up from our prior range of $1.71 billion-$1.74 billion. We expect Adjusted EBITDA to be in the range of $495 million-$510 million, up from our previous guidance of $490 million-$505 million.

As I complete my first full quarter as ACI CFO, I want to thank the team for their seamless collaboration and disciplined execution. Over the past few months, I've had the opportunity to engage with employees across ACI and more deeply with our board. I've heard directly from our customers and partners and had a chance to meet many of you, both current and prospective investors. After these first few months, I'm even more energized by the opportunity ahead for ACI.

I've been impressed by the strength of our team, the quality of our technology, and the clarity of our strategy. This is a strong, well-run company, and I'm excited to be part of it. I'm also very pleased with the operational discipline and financial controls across ACI. There is a strong tone from the top, both our board and Tom, and we have the processes and assurances to back it up.

We are prudent in how we manage financial risk. For example, as you know, our payment software business operates across approximately 90 countries, with nearly 75% of revenue generated outside the U.S. While this demonstrates our global scale and leadership, we've always managed this exposure carefully and transparently.

In hyperinflationary markets, we transact almost entirely in US dollars to mitigate risk, and we consistently disclose the impact of foreign exchange on our results, providing visibility into our underlying operational performance. Looking forward, we remain focused on maintaining a proactive dialogue with the investment community. Transparency remains a top priority, and we're actively exploring ways to provide even greater clarity into our business and the progress we're making. I look forward to spending more time on the road again in Q4, continuing the conversation and deepening our engagement with investors. Tom, back to you.

Thanks, Bobby. We're proud of our performance in Q3, and we're energized by the momentum that we have heading into Q4. Our strategy, execution, and innovation, especially with ACI Kinetic, position us well to enter 2026 on track to achieve our longer-term targets. Thank you for your continued support and for your continued interest in ACI. We're ready to take some questions.