ACI WORLDWIDE, INC. Q4 2025 earnings call

Thank you. Good morning, everyone. On today's call, we will discuss ACI Worldwide's Q4 and full year 2025 results, as well as our financial outlook for 2026. We will open the line for your questions. 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 earnings press release and in our filings with the SEC. These documents describe important risk factors that could cause actual results to differ materially from those indicated in any forward-looking statements. Joining me this morning are Thomas Warsop, our President and CEO, and Robert Leibrock, our Chief Financial Officer.

Tom will begin with an overview of our Q4 and full year performance, strategic highlights, and the progress we're making against our long-term plan. Bobby will then review our financial results in more detail, including segment performance, cash flow, and our outlook for 2026. We will open the line for questions. With that, I'll turn it over to Tom.

Thanks, John, and good morning, everyone. I appreciate you joining our Q4 and full year 2025 earnings call. Let me start with the headline. 2025 was a very strong year for ACI. We delivered another year of double-digit revenue growth, improving margins, and solid free cash flow, all of which are consistent with or better than the long-term financial framework we outlined at our Investor Day two years ago. For the full year 2025, we delivered $1.76 billion in total revenue. That's up 10% from 2024, and that was our second consecutive year of double-digit revenue growth. Adjusted EBITDA increased 9% to $507 million, and our adjusted net EBITDA margin expanded to 42%. We also continued to execute against our capital deployment strategy.

Our balance sheet remains exceptionally strong, and we ended 2025 with $196 million of cash on hand at debt leverage ratio of 1.2x. This gives us significant flexibility to continue executing on our growth agenda while also returning capital to shareholders. In 2025, we repurchased 4.2 million shares, about 4% of the outstanding shares at the beginning of the year, for $203 million. This strong performance is a direct reflection of our committed focus to our multi-year value creation strategy. As a reminder, our strategy emphasizes growth within our core vertical markets, disciplined operational execution, and a return-driven approach to capital allocation. I also want to take a moment to discuss some of the important strategic successes we had at a segment level during 2025. First, in our Payment Software segment.

In 2025, we took a major step forward in scaling our bank and merchant businesses by unifying them into a new segment we call Payment Software. This increases efficiency, it accelerates innovation, and it simplifies our operating structure. This part of our business delivered 9% revenue growth and 10% adjusted EBITDA growth. Demand was broad-based, with issuing and acquiring solutions growing 11%, building on strong double-digit growth in 2024. The year also saw meaningful growth in real-time payments, with new contracts for both central infrastructure and bank solutions. In the Q4, we signed a large European bank to Connetic, our cloud-native payments hub. This was the second Connetic signing in 2025, that's further validation of its differentiated architecture and our long-term modernization vision. Customer interest continues to accelerate. Connetic is central to our long-term strategy.

It offers customers both the immediate stability of proven technology and a path to modernization through a modern cloud-native architecture. Connetic's combination of capability, ACI's proven reliability, and future readiness are major differentiators. Earlier in the year, we also signed one of our largest competitive takeaways in the Asia Pacific region in our issuing and acquiring segment. We're making progress on getting this customer live, and we fully expect to use them as a reference as we actively pursue other potential customers with outdated systems. In real time account-to-account payments, we continue to sign new logos and extend our reach with existing customers. In Q4, we signed an important expansion with PayNet, Malaysia's real-time account-to-account national infrastructure. In the Q4, we also went live with Banco de la República, the Central Bank of Colombia, which was a very strategic regional win for ACI.

We also renewed and expanded our relationship with Canada's leading digital payments network. In the US, FedNow and RTP adoption is slowly increasing, and we're optimistic that volumes will continue to grow and be material. In 2025, ACI's biller segment delivered another year of strong, consistent performance, with full-year revenues growing 13% and segment-adjusted EBITDA expanding year-over-year, reflecting continued transaction growth and investment in advancing our market-leading SpeedPay platform. The segment benefited from sustained momentum across core electronic bill payment transaction growth and ongoing customer adoption of ACI's go-forward platform, SpeedPay One. We added many new biller logos and expanded relationships with many other customers, including one of the country's largest insurance billers and a top credit union, to add new payment types and an upgraded modern payment experience.

ACI is gaining share in the biller market as more billers consolidate onto modern, outsourced digital bill pay platforms. ACI is increasingly the partner of choice. I'll let Bobby cover the financials in a moment. First, I want to address a topic that's top of mind for many investors: the impact of generative AI on the software industry and the volatility that has come with this. At ACI, we view generative AI as a significant opportunity, not a threat. We are already deploying it across the enterprise to improve engineering productivity, to enhance customer outcomes, and to reduce structural costs, all while supporting our strong margins and cash flow profile. There's been a lot of speculation about whether AI could fundamentally disrupt software.

While modern AI tools are very effective at generating code, and we use them extensively for this, ACI's platforms are not simply collections of software modules or computer programs. They're large-scale, mission-critical transaction processing systems operating at global scale, built on decades of payments expertise, deeply embedded regulatory and network rules, and proprietary data derived from billions of transactions. Generative AI is a powerful tool, but it is only one component of what's required to design, operate, and continuously evolve industrial-grade payments platforms. From a technical perspective, our advantage rests on three foundations: transaction-level data at massive scale, deep domain expertise in payment message flows and exception handling, and highly resilient infrastructure engineered for always-on, high-throughput environments. AI augments these foundations. It does not replace them.

When combined, those thre foundations are difficult to replace, and they provide ACI with durable, long-term competitive advantage, and they lead to strong, sticky relationships. We at ACI are applying AI in three primary ways. First, engineering productivity. Our development teams are using a combination of industry-standard and proprietary AI tools to accelerate design, coding, testing, and maintenance across extremely complex code bases. These platforms involve thousands of interdependent components, integrations, and country-specific variations, AI helps our engineers move faster while maintaining the reliability and security our customers require. As adoption deepens and training completes, we expect these productivity gains to compound over time. Second, operational efficiency. We're using AI to automate and scale knowledge-intensive workflows across our business. One example is our ability to index, query, and analyze our entire corpus of customer contracts in real time.

This allows us to instantly assess regulatory impacts, contractual obligations, and pricing terms across the installed base, and that dramatically increases productivity in legal and compliance functions while lowering costs as we scale our business. Third, and I think most importantly, enhanced customer value. I want to give you an example within ACI Connetic. We're applying AI models trained on data from billions of historical transactions to address one of the most complex and costly problems in payments: exception handling and payment repair. Today, many large institutions employ hundreds of people to manually resolve errors in high-volume payments. By embedding AI-driven intelligence directly into the transaction flow, we are able to automatically identify likely corrections when there is an error and dramatically reduce manual intervention. The result is lower operating costs, faster settlement, and a materially better customer experience.

This capability cannot be created by an LLM, large language model, alone. It requires deep domain expertise, purpose-built software, and of course, unmatched data at scale. In short, while we understand the broader concerns around AI and software, at ACI, we're leaning in. We have an AI-first approach across the company that's coordinated through what we call our Velocity program. We are already seeing tangible benefits across productivity, efficiency, and customer outcomes. Quite simply, the combination of our resilient infrastructure, our extensive proprietary data, and our unique domain expertise will allow ACI to continue delivering mission-critical payment and billing software that is deeply embedded in our customers' operations and very difficult to replace. We believe this positions ACI to remain a leader as payments technology continues to evolve. One last important item before I turn it over to Bobby.

I'm pleased to share that as part of our ongoing board refreshment process, we announced today the appointment of Kim Schwendeman, whose unique skill set and deep professional and advisory experience will further strengthen the board of directors' governance approach and risk culture, complementing the backgrounds of our other directors. This appointment follows the previously announced additions of Didier Lamouche and Todd Ford back in October of 2025. As part of a planned succession, Jan Estep and Charlie Peters have transitioned off the board. I would personally like to welcome Kim, and of course, thank Jan and Charlie for their many years of helpful service. I've enjoyed our time together, and I look forward to hearing about your future endeavors. In summary, 2025 was another year of significant progress for ACI Worldwide.

We had strong, balanced growth, expanding profitability, and broadening global demand for all of our solutions, including our cloud-native Connetic platform. We continued to invest in our AI-first roadmap, including Connetic capabilities such as real-time payments and digital currency connectivity, including stablecoins, reflecting the themes we've talked about throughout 2025. I'm proud of our team, I'm excited for the opportunities ahead to continue our shareholder value creation journey. I'll hand it over to Bobby to talk more about our financial results and the outlook for 2026. Bobby?

Thank you, Tom, and good morning, everyone. I'll begin with a brief review of our Q4 results, then focus primarily on our full year 2025 performance, reflecting our long-term, full-year approach to managing the business. I'll close with our outlook and capital allocation priorities for 2026. The Q4 was a solid close to a year of strong execution. Total revenue in the quarter was $482 million, up 6% year-over-year, and recurring revenue was $304 million, up 13%, reflecting continued strength across both segments and growing demand for our recurring software-led offerings. For the full year, total revenue was $1.76 billion, representing 10% growth versus 2024. Recurring revenue was $1.21 billion, up 11%, underscoring the durability and quality of our revenue base.

We delivered adjusted EBITDA of $506 million, an increase of 9% year-over-year, and expanded net adjusted EBITDA margin to 42%, reflecting disciplined execution and the operating leverage inherent in our software model, which provides flexibility to continue investing in the business while returning capital to shareholders. Net new ARR bookings increased 7% to $70 million, while new license and services bookings were $255 million, down 12%. This year-over-year comparison primarily reflects the timing of contract signings between periods, with 2025 representing a more normalized Q4 to Q1 booking cadence and no change in underlying demand or deal quality. As Thomas Warsop outlined, our results reflect broad-based demand across both segments and continued customer adoption of our modern payment and bill pay platforms.

In Payment Software, revenue increased 9% to $942 million. Adjusted EBITDA grew 10% to $544 million. We continue to see increasing demand for our cloud-based offerings, with SaaS revenue growing 15% in Q4 and 11% for the full year, alongside continued strength across our broader Payment Software portfolio. Growth was broad-based across issuing and acquiring, real-time payments, fraud management, and merchant solutions. We also continued to make progress advancing ACI Connetic, including the key customer wins Tom referenced as part of our long-term platform and modernization strategy. As payment complexity increases globally, our large bank and processor customers continue to expand their relationships with ACI over time. Turning to biller, revenue increased 13% to $818 million. Adjusted EBITDA grew 7% to $141 million.

Growth was driven by continued transaction volume with existing customers and strong new business momentum across utilities, government, and consumer finance as more billers consolidate onto modern digital bill pay platforms. The segment continues to perform consistently with a revenue profile and margin structure that are well understood and predictable. We also continued to make progress advancing SpeedPay One, our next-generation biller platform, which supports our long-term modernization strategy for the segment. Both segments provide a balanced growth profile with recurring revenue and exposure to multiple end markets. Each continues to invest in modern platforms and capabilities to meet evolving customer needs. Turning to cash flow and the balance sheet. Cash flow from operating activities in 2025 was $323 million, compared to $359 million in 2024, reflecting normal timing differences in working capital, including receivables and deferred revenue.

Underlying cash generation remains strong. We ended the year with $196 million of cash on hand and total debt of $823 million, resulting in a net debt leverage ratio of 1.2x adjusted EBITDA, below our targeted leverage range of 2x. Our balance sheet remains a significant strategic asset and provides flexibility to invest in growth while returning capital to shareholders. Capital allocation continues to be a core component of our value creation framework. In 2025, we returned $203 million to shareholders through the repurchase of approximately 4.2 million shares, or about 4% of shares outstanding. We ended the year with $456 million remaining on our current share repurchase authorization. Turning to our outlook for 2026.

Building on the momentum Tom described, our guidance reflects the durability of our recurring revenue base and continued growth, driven by new customer wins, share of wallet expansion, and increasing adoption of our cloud-native and real-time payment capabilities. For the full year, we expect revenue growth of 7-9% on a constant currency basis, or $1.88 billion-1.91 billion. For theQ1, we expect revenue in the range of $405 million-415 million. In terms of revenue phasing, we continue to expect a more H2-weighted revenue profile, with approximately 44% of full year revenue in the H1 of 2026 and 56% in the H2, consistent with historical seasonality.

We expect adjusted EBITDA of $530 million-550 million for the full year and $88 million-93 million in theQ1. This outlook reflects continued cost discipline while reinvesting in high return initiatives and maintaining flexibility to support our long-term roadmap. As we look at capital deployment for 2026, our approach reflects the strength and flexibility of our current financial position. We expect to allocate approximately 50-60% of our cash flow from operating activities to share repurchases in 2026, subject to market conditions and business needs, while continuing to invest organically and preserving capacity for disciplined strategic M&A within our targeted leverage range.

To provide additional transparency and support investor understanding, below adjusted EBITDA, our current expectations include net interest expense of approximately $30 million for the full year, depreciation and amortization of approximately $90 million, non-cash compensation expense of approximately $65 million-75 million, and an effective tax rate of approximately 25%. We also expect capital expenditures of approximately $45 million in 2026 and cash taxes in the range of $80 million-90 million. On share count, we expect diluted shares outstanding of approximately 105 million, excluding any impact from future share repurchase activity. Stepping back from detailed guidance, I want to put both our 2025 performance and our 2026 outlook into broader context. Since joining ACI last year, the consistency of execution and financial discipline across the organization has been clear.

In 2025, we delivered double-digit revenue growth, expanded margins, strong cash flow generation, and meaningful capital returns. Looking ahead to 2026, we enter with solid momentum, strong customer demand, and a position of financial strength that allows us to both return capital to shareholders and invest in a compelling innovation agenda to support continued execution. With that, Tom and I would be happy to take your questions.