ACI Worldwide Inc.
08/07/2025 | Press release | Distributed by Public on 08/07/2025 09:43
Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This report contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. Generally, forward-looking statements do not relate strictly to historical or current facts and may include words or phrases such as "believes," "will," "expects," "anticipates," "intends," and words and phrases of similar impact. The forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended.
Forward-looking statements in this report include, but are not limited to, statements regarding future operations, business strategy, business environment, key trends, and, in each case, statements related to expected financial and other benefits. Many of these factors will be important in determining our actual future results. Any or all of the forward-looking statements in this report may turn out to be incorrect. They may be based on inaccurate assumptions or may not account for known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially from those expressed or implied in any forward-looking statements, and our business, financial condition and results of operations could be materially and adversely affected. In addition, we disclaim any obligation to update any forward-looking statements after the date of this report, except as required by law.
All forward-looking statements in this report are expressly qualified by the risk factors discussed in our filings with the Securities and Exchange Commission ("SEC"). The cautionary statements in this report expressly qualify all of our forward-looking statements. Factors that could cause actual results to differ from those expressed or implied in the forward-looking statements include, but are not limited to, those discussed in our Risk Factors in Part 1, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and in Part 2, Item 1A of this Form 10-Q.
The following discussion should be read together with our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and with our financial statements and related notes contained in this Form 10-Q. Results for the three and six months ended June 30, 2025, are not necessarily indicative of results that may be attained in the future.
Overview
ACI Worldwide, an innovator in global payments technology, delivers software solutions that power intelligent payments orchestration in real time so banks, merchants, and billers can drive growth, while continuously modernizing their payment infrastructures, simply and securely. With nearly 50 years of trusted payments expertise, we combine our global footprint with a local presence to offer enhanced payment experiences to stay ahead of constantly changing payment challenges and opportunities.
Our products are sold and supported directly and through distribution networks covering three geographic regions - the Americas; Europe, Middle East, and Africa ("EMEA"); and Asia Pacific. Each region has its own globally coordinated sales force, supplemented with local independent reseller and/or distributor networks. Our products and solutions are marketed under the ACI Worldwide brand and used globally by banks of all sizes, central banks, intermediaries, merchants, and billers, such as third-party digital payment processors, payment associations, switch interchanges, and a wide range of transaction-generating endpoints, including ATMs, merchant point-of-sale ("POS") terminals, bank branches, mobile phones, tablets, corporations, and internet commerce sites.
We derive a majority of our revenues from domestic operations and believe we have large opportunities for growth in international markets, as well as continued expansion domestically in the United States. We also continue to maintain centers of expertise in Timisoara, Romania, and Pune and Bangalore in India, as well as key operational centers such as in Cape Town, South Africa and in multiple locations in the United States.
Our business and operating results are influenced by trends such as information technology spending levels, the growth rate of digital payments, mandated regulatory changes, and changes in the number and type of customers in the financial services industry, as well as economic growth, and purchasing habits.
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Key trends that currently impact our strategies and operations include:
Increasing digital payment transaction volumes. The adoption of digital payments continues to accelerate, propelled by the digitization of cash, financial inclusion efforts of countries throughout the world, rapid growth of eCommerce, and the adoption of real-time payments enabling more people, governments, and businesses to embrace digital payments. We leverage the growth in transaction volumes through the licensing of new systems to customers whose older systems cannot handle increased volume, through the sale of capacity upgrades to existing customers, and through the scalability of our platform-based solutions.
Adoption of real-time payments. Expectations from both consumers and businesses are continuing to drive the payments world to more real-time delivery. This is bolstered by the new data-rich ISO 20022 messaging format prevalent in account-to-account payments, which is delivering greater value to banks and their customers and has now been rolled out across the world and continues to see adoption with local schemes, such as FedWire. We are seeing global players with existing schemes working to expand capacity in anticipation of volume growth and new payment types. Domestic schemes such as Unified Payments Interface ("UPI") in India and others are being made available to their citizens for cross-border transactions when abroad. Mature markets, including India, the United Kingdom, Australia, Brazil, Malaysia, Singapore, and Thailand, continue to accelerate innovation, especially in terms of overlay services, driving new transactions. The United States is driving real-time payments adoption through TCH Real-Time Payments and the FedNow Service. Asia is one of the most innovative markets for adoption of real-time payment systems. According to ACI's Prime Time for Real-Time report, Asia Pacific is the largest regional market, with four of the global top five real-time payment markets by volume. ACI provides solutions for commercial and central banks across Asia. Latin American countries are pushing ahead with real-time payments modernization initiatives, looking to replicate Brazil's success with PIX. ACI is also providing solutions centrally in Colombia and Peru. We are seeing success with real-time payments in the Middle East as well, as they have started to renovate their payment systems from legacy payment types to the modern digital and real-time world. ACI's broad software portfolio, experience, and strategic partnerships with Mastercard, Microsoft, and Red Hat, and Mindgate Solutions continue to position us as a leader in real-time payments, helping to drive seamless connectivity, increased security, and end-to-end modernization for organizations throughout the world.
Adoption of cloud technology. ACI has recognized the industry's technical inflection point in the transition from traditional on-premises infrastructure to the private and public cloud, and we are supporting our customers' cloud strategies. Cloud technology innovations allow the financial services ecosystem to remove technical risk from their operations, accelerate innovation and time to market for new revenue-generating solutions for their customers, and accelerate innovation and ensure scalability and resiliency while improving operating economics over time. As banks and intermediaries, merchants, and billers seek to transition their systems to make use of cloud technology, our investments and partnerships, as demonstrated by our product enablement and initial optimization onto Microsoft Azure, enable us to leverage those cloud technology benefits today and for the future while preserving ACI's fundamental base of performance, resiliency, and scalability. Cloud-native solutions running in a multi-tenant SaaS environment also allow ACI to expand our market coverage to smaller institutions, offering scalable solutions which are easy to integrate with but at price points that fit their budgets.
Payments intelligence, fraud, and compliance. The accelerated adoption of real-time payments, fraudsters leveraging artificial intelligence, and the ramping up of mandates increase the urgency for industry-wide collaboration to mitigate fraud with precision and achieve operational excellence. As the threat of sophisticated fraud becomes a greater concern for remitting and receiving institutions, consumers are challenged with increased friction to prevent illegitimate access of genuine accounts or funds to protect the consumer trust and confidence, while achieving their strategic objectives. Regulators are beginning to litigate between consumers and financial institutions on the losses, and between remitting and receiving banks on the accountability. Banks and intermediaries, merchants, and billers are pursuing solutions to mitigate their risks while improving their customer experience, protecting their margins, and securing their revenue streams, especially with their new products and offerings. We continue to evolve our advanced machine learning and network intelligence capabilities to stop criminals and enable frictionless, legitimate business. Meanwhile, with payments intelligence, organizations can integrate intelligent services to enhance consumer relationships while achieving precise, real-time fraud and risk mitigation capabilities.
Omni-commerce. Shoppers are increasingly browsing, buying, and returning items across channels, including in-store, online, and mobile. This trend has led to an increase in contactless payments, click and collect, and curbside collection. Merchants from all industries, including grocers, fuel and convenience stores, are being tasked with delivering seamless experiences that include pay-in-aisle, kiosks, mobile app payments, QR code payments, eCommerce, traditional and mobile POS, buy online pickup in-store (BOPIS), and buy online return in-store (BORIS). We believe there is significant opportunity to provide merchants with the tools to deliver a seamless, secure, personalized experience that creates loyalty and satisfaction, and drives conversion rates while protecting consumer data and preventing fraud.
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Open banking. Open banking is gaining momentum globally, and while it has been accelerated in Europe by regulations like PSD3, the United States is also seeing significant shifts driven by market demand and technology innovation rather than regulatory mandates. In the United States, the growing adoption of Request to Pay (RTP) offers an alternative to traditional bill payment methods, allowing payers to respond directly to payment requests with flexibility on timing, method, and amount. This aligns with the broader movement toward real-time payments, supported by platforms like the FedNow®Service and The Clearing House's RTP network. While the United States doesn't have a regulatory equivalent to PSD3, there's a strong push for open banking solutions that provide greater control and transparency for consumers, and RTP is a key trend within that space. By embracing both RTP and open banking trends in the United States, payment processors and financial institutions can offer more dynamic, flexible payment options, driving innovation and improving customer experience, while staying competitive in a rapidly evolving payments landscape. ACI is in a unique position to deliver service that takes advantage of our real-time payments software, our relationships with banks, merchants, and billers, and global connectivity.
Several other factors related to our business may have a significant impact on our operating results from year to year. For example, the accounting rules governing the timing of revenue recognition are complex, and it can be difficult to estimate when we will recognize revenue generated by a given transaction. Factors such as creditworthiness of the customer and timing of transfer of control or acceptance of our products may cause revenues related to sales generated in one period to be deferred and recognized in later periods. For arrangements in which services revenue is deferred, related direct and incremental costs may also be deferred. Additionally, while the majority of our contracts are denominated in the U.S. dollar, a substantial portion of our sales are made, and some of our expenses are incurred, in the local currency of countries other than the United States. Fluctuations in currency exchange rates in a given period may result in the recognition of gains or losses for that period.
We continue to seek ways to grow through organic sources, partnerships, alliances, and acquisitions. We continually look for potential acquisitions designed to improve our solutions' breadth or provide access to new markets. As part of our acquisition strategy, we seek acquisition candidates that are strategic, capable of being integrated into our operating environment, and accretive to our financial performance.
Backlog
Backlog is comprised of:
•Committed Backlog, which includes (1) contracted revenue that will be recognized in future periods (contracted but not recognized) from software license fees, maintenance fees, service fees, and SaaS and PaaS fees specified in executed contracts (including estimates of variable consideration if required under ASC 606, Revenue From Contracts with Customers) and included in the transaction price for those contracts, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods and (2) estimated future revenues from software license fees, maintenance fees, services fees, and SaaS and PaaS fees specified in executed contracts.
•Renewal Backlog, which includes estimated future revenues from assumed contract renewals to the extent we believe recognition of the related revenue will occur within the corresponding backlog period.
We have historically included assumed renewals in backlog estimates based upon automatic renewal provisions in the executed contract and our historic experience with customer renewal rates.
Our 60-month backlog estimates are derived using the following key assumptions:
•License arrangements are assumed to renew at the end of their committed term or under the renewal option stated in the contract at a rate consistent with historical experience. If the license arrangement includes extended payment terms, the renewal estimate is adjusted for the effects of a significant financing component.
•Maintenance fees are assumed to exist for the duration of the license term for those contracts in which the committed maintenance term is less than the committed license term.
•SaaS and PaaS arrangements are assumed to renew at the end of their committed term at a rate consistent with our historical experiences.
•Foreign currency exchange rates are assumed to remain constant over the 60-month backlog period for those contracts stated in currencies other than the U.S. dollar.
•Our pricing policies and practices are assumed to remain constant over the 60-month backlog period.
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In computing our 60-month backlog estimate, the following items are specifically not taken into account:
•Anticipated increases in transaction, account, or processing volumes by our customers.
•Optional annual uplifts or inflationary increases in recurring fees.
•Services engagements, other than SaaS and PaaS arrangements, are not assumed to renew over the 60-month backlog period.
•The potential impact of consolidation activity within our markets and/or customers.
We review our customer renewal experience on an annual basis. The impact of this review and subsequent updates may result in a revision to the renewal assumptions used in computing the 60-month backlog estimates. In the event a significant revision to renewal assumptions is determined to be necessary, prior periods will be adjusted for comparability purposes.
The following table sets forth our 60-month backlog estimate, by reportable segment, as of June 30, 2025, March 31, 2025, and December 31, 2024 (in millions). Dollar amounts reflect foreign currency exchange rates as of each period end. This is a non-GAAP financial measure being presented to provide comparability across accounting periods. We believe this measure provides useful information to investors and others in understanding and evaluating our financial performance.
| June 30, 2025 | March 31, 2025 | December 31, 2024 | ||||||||||||||||||
| Payment Software | $ | 3,333 | $ | 3,142 | $ | 3,102 | ||||||||||||||
| Biller | 3,712 | 3,597 | 3,604 | |||||||||||||||||
| Total | $ | 7,045 | $ | 6,739 | $ | 6,706 | ||||||||||||||
| June 30, 2025 | March 31, 2025 | December 31, 2024 | ||||||||||||||||||
| Committed | $ | 2,321 | $ | 2,257 | $ | 2,413 | ||||||||||||||
| Renewal | 4,724 | 4,482 | 4,293 | |||||||||||||||||
| Total | $ | 7,045 | $ | 6,739 | $ | 6,706 | ||||||||||||||
Estimates of future financial results require substantial judgment and are based on several assumptions, as described above. These assumptions may turn out to be inaccurate or wrong for reasons outside of management's control. For example, our customers may attempt to renegotiate or terminate their contracts for many reasons, including mergers, changes in their financial condition, or general changes in economic conditions in the customer's industry or geographic location. We may also experience delays in the development or delivery of products or services specified in customer contracts, which may cause the actual renewal rates and amounts to differ from historical experiences. Changes in foreign currency exchange rates may also impact the amount of revenue recognized in future periods. Accordingly, there can be no assurance that amounts included in backlog estimates will generate the specified revenues or that the actual revenues will be generated within the corresponding 60-month period. Additionally, because certain components of Committed Backlog and all of Renewal Backlog estimates are operating metrics, the estimates are not required to be subject to the same level of internal review or controls as contracted but not recognized Committed Backlog.
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RESULTS OF OPERATIONS
The following table presents the condensed consolidated statements of operations, as well as the percentage relationship to total revenues for items included in our condensed consolidated statements of operations (in thousands):
Three Month Period Ended June 30, 2025 Compared to the Three Month Period Ended June 30, 2024
| Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Amount |
% of Total Revenue |
$ Change vs 2024 | % Change vs 2024 | Amount |
% of Total Revenue |
||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||||
| Software as a service and platform as a service | $ | 271,258 | 67 | % | $ | 35,859 | 15 | % | $ | 235,399 | 63 | % | |||||||||||||||||||||||
| License | 56,711 | 14 | % | (8,871) | (14) | % | 65,582 | 18 | % | ||||||||||||||||||||||||||
| Maintenance | 50,421 | 13 | % | 1,688 | 3 | % | 48,733 | 13 | % | ||||||||||||||||||||||||||
| Services | 22,868 | 6 | % | (897) | (4) | % | 23,765 | 6 | % | ||||||||||||||||||||||||||
| Total revenues | 401,258 | 100 | % | 27,779 | 7 | % | 373,479 | 100 | % | ||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||
| Cost of revenue | 234,800 | 59 | % | 31,562 | 16 | % | 203,238 | 54 | % | ||||||||||||||||||||||||||
| Research and development | 41,107 | 10 | % | 5,697 | 16 | % | 35,410 | 9 | % | ||||||||||||||||||||||||||
| Selling and marketing | 28,741 | 7 | % | 190 | 1 | % | 28,551 | 8 | % | ||||||||||||||||||||||||||
| General and administrative | 37,651 | 9 | % | 12,658 | 51 | % | 24,993 | 7 | % | ||||||||||||||||||||||||||
| Depreciation and amortization | 24,101 | 6 | % | (3,485) | (13) | % | 27,586 | 7 | % | ||||||||||||||||||||||||||
| Total operating expenses | 366,400 | 91 | % | 46,622 | 15 | % | 319,778 | 85 | % | ||||||||||||||||||||||||||
|
Operating income
|
34,858 | 9 | % | (18,843) | (35) | % | 53,701 | 15 | % | ||||||||||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||||||||||||||
| Interest expense | (14,527) | (4) | % | 3,944 | (21) | % | (18,471) | (5) | % | ||||||||||||||||||||||||||
| Interest income | 3,934 | 1 | % | (19) | - | % | 3,953 | 1 | % | ||||||||||||||||||||||||||
| Other, net | (6,393) | (2) | % | (7,549) | (653) | % | 1,156 | - | % | ||||||||||||||||||||||||||
|
Total other income (expense)
|
(16,986) | (5) | % | (3,624) | 27 | % | (13,362) | (4) | % | ||||||||||||||||||||||||||
|
Income before income taxes
|
17,872 | 4 | % | (22,467) | (56) | % | 40,339 | 11 | % | ||||||||||||||||||||||||||
|
Income tax expense
|
5,670 | 1 | % | (3,782) | (40) | % | 9,452 | 3 | % | ||||||||||||||||||||||||||
|
Net income
|
$ | 12,202 | 3 | % | $ | (18,685) | (60) | % | $ | 30,887 | 8 | % | |||||||||||||||||||||||
Revenues
Total revenue for the three months ended June 30, 2025, increased $27.8 million, or 7%, as compared to the same period in 2024.
•The impact of certain foreign currencies strengthening against the U.S. dollar resulted in a $1.4 million increase in total revenue during the three months ended June 30, 2025, as compared to the same period in 2024.
•Adjusted for the impact of foreign currency, total revenue for the three months ended June 30, 2025, increased $26.4 million, or 7%, as compared to the same period in 2024.
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Software as a Service ("SaaS") and Platform as a Service ("PaaS") Revenue
The Company's SaaS arrangements allow customers to use certain software solutions (without taking possession of the software) in a single-tenant cloud environment on a subscription basis. The Company's PaaS arrangements allow customers to use certain software solutions (without taking possession of the software) in a multi-tenant cloud environment on a subscription or consumption basis. Included in SaaS and PaaS revenue are fees paid by our customers for use of our Biller solutions. Biller-related fees may be paid by our clients or directly by their customers and may be a percentage of the underlying transaction amount, a fixed fee per executed transaction, or a monthly fee for each customer enrolled. SaaS and PaaS costs include payment card interchange fees, the amounts payable to banks and payment card processing fees, which are included in cost of revenue in the condensed consolidated statements of operations. All fees from SaaS and PaaS arrangements that do not qualify for treatment as a distinct performance obligation, which includes set-up fees, implementation or customization services, and product support services, are included in SaaS and PaaS revenue.
SaaS and PaaS revenue increased $35.9 million, or 15%, during the three months ended June 30, 2025, as compared to the same period in 2024.
•The impact of foreign currencies strengthening against the U.S. dollar resulted in a $0.9 million increase in SaaS and PaaS revenue during the three months ended June 30, 2025, as compared to the same period in 2024.
•Adjusted for the impact of foreign currency, SaaS and PaaS revenue for the three months ended June 30, 2025, increased $35.0 million, or 15%, as compared to the same period in 2024.
•The increase was primarily driven by new customer go-lives since June 30, 2024, and higher transaction volumes during the three months ended June 30, 2025, as compared to the same period in 2024.
License Revenue
Customers purchase the right to license ACI software under multi-year, time-based software license arrangements that vary in length but are generally five years. Under these arrangements the software is installed at the customer's location (i.e. on-premise). Within these agreements are specified capacity limits typically based on customer transaction volume. ACI employs measurement tools that monitor the number of transactions processed by customers and if contractually specified limits are exceeded, additional fees are charged for the overage. Capacity overages may occur at varying times throughout the term of the agreement depending on the product, the size of the customer, and the significance of customer transaction volume growth. Depending on specific circumstances, multiple overages or no overages may occur during the term of the agreement.
Included in license revenue are license and capacity fees that are payable at the inception of the agreement. License revenue also includes license and capacity fees payable annually, quarterly, or monthly due to negotiated customer payment terms. The Company recognizes revenue in advance of billings for software license arrangements with extended payment terms and adjusts for the effects of the financing component, if significant.
License revenue decreased $8.9 million, or 14%, during the three months ended June 30, 2025, as compared to the same period in 2024.
•The decrease was driven by license renewal timing as well as the relative size of new license and capacity events during the three months ended June 30, 2025, as compared to the same period in 2024.
Maintenance Revenue
Maintenance revenue includes standard, enhanced, and premium customer support and any post contract support fees received from customers for the provision of product support services.
Maintenance revenue increased $1.7 million, or 3%, during the three months ended June 30, 2025, as compared to the same period in 2024.
•The impact of foreign currencies strengthening against the U.S. dollar resulted in a $0.4 million increase in maintenance revenue during the three months ended June 30, 2025, as compared to the same period in 2024.
•Adjusted for the impact of foreign currency, maintenance revenue for the three months ended June 30, 2025, increased $1.3 million, or 3%, as compared to the same period in 2024.
•The increase was primarily driven by consumer price index uplifts on contracted maintenance.
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Services Revenue
Services revenue includes fees earned through implementation services and other professional services. Implementation services include product installations, product configurations, and custom software modifications ("CSMs"). Other professional services include business consultancy, technical consultancy, on-site support services, product education, and testing services. These services include new customer implementations as well as existing customer migrations to new products or new releases of existing products.
Services revenue decreased $0.9 million, or 4%, during the three months ended June 30, 2025, as compared to the same period in 2024.
•The impact of foreign currencies strengthening against the U.S. dollar resulted in a $0.3 million increase in services revenue during the three months ended June 30, 2025, as compared to the same period in 2024.
•Adjusted for the impact of foreign currency, services revenue for the three months ended June 30, 2025, decreased $1.2 million, or 5%, as compared to the same period in 2024.
•The decrease was primarily driven by the timing and magnitude of project-related work during the three months ended June 30, 2025, as compared to the same period in 2024.
Operating Expenses
Total operating expenses for the three months ended June 30, 2025, increased $46.6 million, or 15%, as compared to the same period in 2024.
•Total operating expenses for the three months ended June 30, 2025, included $5.1 million for cost reduction strategies and $0.4 million of other significant transaction-related expenses during the period, compared to $0.4 million for cost reduction strategies and $0.4 million of other significant transaction-related expenses for the same period in 2024.
•The impact of foreign currencies strengthening against the U.S. dollar resulted in a $0.9 million increase in total operating expenses during the three months ended June 30, 2025, compared to the same period in 2024.
•Adjusted for the impact of cost reduction strategies, significant transaction-related expenses, and foreign currency, total operating expenses for the three months ended June 30, 2025, increased $41.0 million, or 13%, as compared to the same period in 2024.
Cost of Revenue
Cost of revenue includes costs to provide SaaS and PaaS, third-party royalties, amortization of purchased and developed software for resale, the costs of maintaining our software products, as well as the costs required to deliver, install, and support software at customer sites. SaaS and PaaS service costs include payment card interchange fees, amounts payable to banks, and payment card processing fees. Maintenance costs include the efforts associated with providing the customer with upgrades, 24-hour help desk, post go-live (remote) support, and production-type support for software that was previously installed at a customer location. Service costs include human resource costs and other incidental costs such as travel and training required for both pre go-live and post go-live support. Such efforts include project management, delivery, product customization and implementation, installation support, consulting, configuration, and on-site support.
Cost of revenue increased $31.6 million, or 16%, during the three months ended June 30, 2025, as compared to the same period in 2024.
•The impact of foreign currencies strengthening against the U.S. dollar resulted in a $0.4 million increase in cost of revenue during the three months ended June 30, 2025, compared to the same period in 2024.
•Adjusted for the impact of foreign currency, cost of revenue for the three months ended June 30, 2025, increased $31.2 million, or 15%, compared to the same period in 2024.
•The increase was primarily due to higher payment card interchange and personnel and related expenses of $26.9 million and $4.3 million, respectively.
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Research and Development
Research and development ("R&D") expenses are primarily human resource costs related to the creation of new products, improvements made to existing products as well as compatibility with new operating system releases and generations of hardware.
R&D expense increased $5.7 million, or 16%, during the three months ended June 30, 2025, as compared to the same period in 2024.
•The impact of foreign currencies strengthening against the U.S. dollar resulted in a $0.3 million increase in R&D expenses during the three months ended June 30, 2025, compared to the same period in 2024.
•Adjusted for the impact of foreign currency, R&D expenses for the three months ended June 30, 2025, increased $5.4 million, or 15%, compared to the same period in 2024.
•The increase was primarily due to higher personnel and related expenses.
Selling and Marketing
Selling and marketing includes both the costs related to selling our products to current and prospective customers as well as the costs related to promoting the Company, its products and the research efforts required to measure customers' future needs and satisfaction levels. Selling costs are primarily the human resource and travel costs related to the effort expended to license our products and services to current and potential clients within defined territories and/or industries as well as the management of the overall relationship with customer accounts. Selling costs also include the costs associated with assisting distributors in their efforts to sell our products and services in their respective local markets. Marketing costs include costs incurred to promote the Company and its products, perform or acquire market research to help the Company better understand impending changes in customer demand for and of our products, and the costs associated with measuring customers' opinions toward the Company, our products and personnel.
Selling and marketing expense increased $0.2 million, or 1%, during the three months ended June 30, 2025, as compared to the same period in 2024.
General and Administrative
General and administrative expenses are primarily human resource costs including executive salaries and benefits, personnel administration costs, and the costs of corporate support functions such as legal, administrative, human resources, and finance and accounting.
General and administrative expense increased $12.7 million, or 51%, during the three months ended June 30, 2025, as compared to the same period in 2024.
•General and administrative expenses for the three months ended June 30, 2025, included $5.1 million for cost reduction strategies and $0.4 million of other significant transaction-related expenses, compared to $0.4 million for cost reduction strategies and $0.4 million of other significant transaction-related expenses in the same period in 2024.
•Adjusted for the impact of significant transaction-related expenses, general and administrative expense increased $8.0 million, or 33%, for the three months ended June 30, 2025, as compared to the same period in 2024.
•The increase was primarily due to higher personnel and related expenses and higher professional fees of $5.2 million, including $3.2 million of stock-based compensation expenses, and other legal fees of $2.8 million.
Depreciation and Amortization
Depreciation and amortization decreased $3.5 million, or 13%, during the three months ended June 30, 2025, as compared to the same period in 2024.
•The decrease was primarily due to a decrease in amortization for fully amortized intangibles acquired through acquisitions.
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Other Income and Expense
Interest expense for the three months ended June 30, 2025, decreased $3.9 million, or 21%, as compared to the same period in 2024, primarily due to lower comparative debt balances during 2025 as well as a decrease in interest rates.
Interest income includes the portion of software license fees paid by customers under extended payment terms that is attributed to the significant financing component. Interest income for the three months ended June 30, 2025, remained flat as compared to the same period in 2024.
Other, net is primarily comprised of foreign currency transaction gains and losses. During the three months ended June 30, 2025, other, net also included the $1.1 million loss on extinguishment of debt as a result of the redemption of the 2026 Notes. Other, net was $6.4 million of expense and $1.2 million of income for the three months ended June 30, 2025 and 2024, respectively.
Income Taxes
See Note 10, Income Taxes,to our unaudited condensed consolidated financial statements in Part I of this Form 10-Q for additional information.
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RESULTS OF OPERATIONS
The following table presents the condensed consolidated statements of operations, as well as the percentage relationship to total revenues for items included in our condensed consolidated statements of operations (in thousands):
Six Month Period Ended June 30, 2025 Compared to the Six Month Period Ended June 30, 2024
| Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Amount |
% of Total Revenue |
$ Change vs 2024 | % Change vs 2024 | Amount |
% of Total Revenue |
||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||||
| Software as a service and platform as a service | $ | 508,341 | 64 | % | $ | 57,210 | 13 | % | $ | 451,131 | 65 | % | |||||||||||||||||||||||
| License | 141,204 | 18 | % | 45,649 | 48 | % | 95,555 | 14 | % | ||||||||||||||||||||||||||
| Maintenance | 99,063 | 12 | % | 2,576 | 3 | % | 96,487 | 14 | % | ||||||||||||||||||||||||||
| Services | 47,215 | 6 | % | 890 | 2 | % | 46,325 | 7 | % | ||||||||||||||||||||||||||
| Total revenues | 795,823 | 100 | % | 106,325 | 15 | % | 689,498 | 100 | % | ||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||
| Cost of revenue | 448,178 | 56 | % | 53,833 | 14 | % | 394,345 | 57 | % | ||||||||||||||||||||||||||
| Research and development | 80,015 | 10 | % | 9,612 | 14 | % | 70,403 | 10 | % | ||||||||||||||||||||||||||
| Selling and marketing | 60,927 | 8 | % | 5,626 | 10 | % | 55,301 | 8 | % | ||||||||||||||||||||||||||
| General and administrative | 65,243 | 8 | % | 14,250 | 28 | % | 50,993 | 7 | % | ||||||||||||||||||||||||||
| Depreciation and amortization | 48,086 | 6 | % | (7,109) | (13) | % | 55,195 | 8 | % | ||||||||||||||||||||||||||
| Total operating expenses | 702,449 | 88 | % | 76,212 | 12 | % | 626,237 | 90 | % | ||||||||||||||||||||||||||
|
Operating income
|
93,374 | 12 | % | 30,113 | 48 | % | 63,261 | 10 | % | ||||||||||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||||||||||||||
| Interest expense | (29,210) | (4) | % | 8,271 | (22) | % | (37,481) | (5) | % | ||||||||||||||||||||||||||
| Interest income | 7,998 | 1 | % | 36 | - | % | 7,962 | 1 | % | ||||||||||||||||||||||||||
| Other, net | 17,347 | 2 | % | 18,216 | 2,096 | % | (869) | - | % | ||||||||||||||||||||||||||
| Total other income (expense) | (3,865) | (1) | % | 26,523 | 87 | % | (30,388) | (4) | % | ||||||||||||||||||||||||||
|
Income before income taxes
|
89,509 | 11 | % | 56,636 | 172 | % | 32,873 | 6 | % | ||||||||||||||||||||||||||
|
Income tax expense
|
18,437 | 2 | % | 8,700 | 89 | % | 9,737 | 1 | % | ||||||||||||||||||||||||||
|
Net income
|
$ | 71,072 | 9 | % | $ | 47,936 | 207 | % | $ | 23,136 | 5 | % | |||||||||||||||||||||||
Revenues
Total revenue for the six months ended June 30, 2025, increased $106.3 million, or 15%, as compared to the same period in 2024. The impact of foreign currencies was not meaningful to total revenue for the six months ended June 30, 2025.
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Software as a Service ("SaaS") and Platform as a Service ("PaaS") Revenue
SaaS and PaaS revenue increased $57.2 million, or 13%, during the six months ended June 30, 2025, as compared to the same period in 2024.
•The impact of certain foreign currencies strengthening against the U.S. dollar resulted in $0.5 million increase in SaaS and PaaS revenue during the six months ended June 30, 2025, as compared to the same period in 2024.
•Adjusted for the impact of foreign currency, SaaS and PaaS revenue for the six months ended June 30, 2025, increased $56.7 million, or 13%, as compared to the same period in 2024.
•The increase was primarily driven by new customer go-lives since June 30, 2024, and higher transaction volumes during the six months ended June 30, 2025, as compared to the same period in 2024.
License Revenue
License revenue increased $45.6 million, or 48%, during the six months ended June 30, 2025, as compared to the same period in 2024.
•The impact of certain foreign currencies weakening against the U.S. dollar resulted in a $0.4 million decrease in license revenue during the six months ended June 30, 2025, as compared to the same period in 2024.
•Adjusted for the impact of foreign currency, license revenue for the six months ended June 30, 2025, increased $46.0 million, or 48%, as compared to the same period in 2024.
•The increase was driven by the relative size of new license and capacity events during the six months ended June 30, 2025, as compared to the same period in 2024.
Maintenance Revenue
Maintenance revenue increased $2.6 million, or 3%, during the six months ended June 30, 2025, as compared to the same period in 2024.
•The impact of foreign currencies weakening against the U.S. dollar resulted in a $0.2 million decrease in maintenance revenue during the six months ended June 30, 2025, as compared to the same period in 2024.
•Adjusted for the impact of foreign currency, maintenance revenue for the three months ended June 30, 2025, increased $2.8 million, or 3%, as compared to the same period in 2024.
•The increase was primarily driven by consumer price index uplifts on contracted maintenance.
Services Revenue
Services revenue increased $0.9 million, or 2%, during the six months ended June 30, 2025, as compared to the same period in 2024.
Operating Expenses
Total operating expenses for the six months ended June 30, 2025 increased $76.2 million, or 12%, as compared to the same period in 2024.
•Total operating expenses for the six months ended June 30, 2025, included $5.1 million for cost reduction strategies and $0.4 million of other significant transaction-related expenses, compared to $3.0 million for cost reduction strategies and $0.7 million of other significant transaction-related expenses for the same period in 2024.
•The impact of certain foreign currencies weakening against the U.S. dollar resulted in a $1.1 million decrease in total operating expenses for the six months ended June 30, 2025, as compared to the same period in 2024.
•Adjusted for the impact of cost reduction strategies, significant transaction-related expenses, and foreign currency, total operating expenses for the six months ended June 30, 2025, increased $75.5 million, or 12%, as compared to the same period in 2024.
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Cost of Revenue
Cost of revenue increased $53.8 million, or 14%, during the six months ended June 30, 2025, as compared to the same period in 2024.
•The impact of certain foreign currencies weakening against the U.S. dollar resulted in a $0.4 million decrease in cost of revenue during the six months ended June 30, 2025, as compared to the same period in 2024.
•Adjusted for the impact of foreign currency, cost of revenue increased $54.2 million, or 14%, for the six months ended June 30, 2025, as compared to the same period in 2024.
•The increase was primarily due to higher payment card interchange and personnel and related expenses of $45.3 million and $8.9 million, respectively.
Research and Development
R&D expense increased $9.6 million, or 14%, during the six months ended June 30, 2025, as compared to the same period in 2024.
•The increase was primarily due to higher personnel and related expenses.
Selling and Marketing
Selling and marketing expense increased $5.6 million, or 10%, during the six months ended June 30, 2025, as compared to the same period in 2024.
•The impact of foreign currencies weakening against the U.S. dollar resulted in a $0.4 million decrease in selling and marketing expense during the six months ended June 30, 2025, as compared to the same period in 2024.
•Adjusted for the impact of foreign currency, selling and marketing expense increased $6.0 million, or 11%, for the three months ended June 30, 2025, as compared to the same period in 2024.
•The increase was primarily due to higher personnel and related expenses of $6.6 million, partially offset by a decrease in advertising and professional fees of $0.6 million.
General and Administrative
General and administrative expense increased $14.3 million, or 28%, during the six months ended June 30, 2025, as compared to the same period in 2024.
•General and administrative expenses for the six months ended June 30, 2025, included $5.1 million for cost reduction strategies and $0.4 million of other significant transaction-related expenses, compared to $3.0 million for cost reduction strategies and $0.7 million of other significant transaction-related expenses during the same period in 2024.
•The impact of foreign currencies weakening against the U.S. dollar resulted in a $0.3 million decrease in general and administrative expense during the six months ended June 30, 2025, as compared to the same period in 2024.
•Adjusted for the impact of significant transaction-related expenses and foreign currency, general and administrative expense increased $12.8 million, or 27%, for the six months ended June 30, 2025, as compared to the same period in 2024.
•The increase was primarily due to higher personnel and related expenses of $10.1 million, including a $6.1 million increase in stock-based compensation expense, as well as an increase in professional and other legal fees of $2.7 million.
Depreciation and Amortization
Depreciation and amortization decreased $7.1 million, or 13%, during the six months ended June 30, 2025, as compared to the same period in 2024.
•The decrease was primarily due to a decrease in amortization for fully amortized intangibles acquired through acquisitions.
Other Income and Expense
Interest expense for the six months ended June 30, 2025, decreased $8.3 million, or 22%, as compared to the same period in 2024, primarily due to lower comparative debt balances during 2025 as well as a decrease in interest rates.
Interest income for the six months ended June 30, 2025, remained flat as compared to the same period in 2024.
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Other, net is primarily comprised of foreign currency transaction gains and losses. During the six months ended June 30, 2025, other, net also included the $25.9 million gain on the sale of the Company's equity method investment and the $1.1 million loss on extinguishment of debt. Other, net was $17.3 million income and $0.9 million of expense for the six months ended June 30, 2025 and 2024, respectively.
Income Taxes
See Note 10, Income Taxes,to our unaudited condensed consolidated financial statements in Part I of this Form 10-Q for additional information.
Segment Results
See Note 9, Segment Information, to our unaudited condensed consolidated financial statements in Part I of this Form 10-Q for additional information regarding segments.
The following is selected financial data for our reportable segments for the periods indicated (in thousands):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Payment Software | $ | 179,343 | $ | 181,666 | $ | 380,068 | $ | 322,823 | |||||||||||||||
| Biller | 221,915 | 191,813 | 415,755 | 366,675 | |||||||||||||||||||
| Total revenue | $ | 401,258 | $ | 373,479 | $ | 795,823 | $ | 689,498 | |||||||||||||||
| Segment Adjusted EBITDA | |||||||||||||||||||||||
| Payment Software | $ | 83,278 | $ | 94,587 | $ | 189,839 | $ | 146,876 | |||||||||||||||
| Biller | 39,785 | 37,435 | 70,680 | 68,172 | |||||||||||||||||||
| Depreciation and amortization | (24,101) | (27,586) | (48,086) | (55,195) | |||||||||||||||||||
| Stock-based compensation expense | (16,411) | (10,720) | (28,038) | (18,819) | |||||||||||||||||||
| Corporate and unallocated expenses | (47,693) | (40,015) | (91,021) | (77,773) | |||||||||||||||||||
| Interest, net | (10,593) | (14,518) | (21,212) | (29,519) | |||||||||||||||||||
| Other, net | (6,393) | 1,156 | 17,347 | (869) | |||||||||||||||||||
|
Income before income taxes
|
$ | 17,872 | $ | 40,339 | $ | 89,509 | $ | 32,873 | |||||||||||||||
Payment Software Segment Adjusted EBITDA decreased $11.3 million for the three months ended June 30, 2025, compared to the same period in 2024, due to a $2.3 million decrease in revenue primarily related to a decrease in license revenues and a $9.0 million increase in cash operating expense.
Biller Segment Adjusted EBITDA increased $2.4 million for the three months ended June 30, 2025, compared to the same period in 2024, due to a $30.1 million increase in revenue, partially offset by a $27.7 million increase in cash operating expense primarily for payment card interchange and other processing fees.
Payment Software Segment Adjusted EBITDA increased $43.0 million for the six months ended June 30, 2025, compared to the same period in 2024, due to a $57.2 million increase in revenue primarily related to an increase in license and capacity revenue, partially offset by a $14.2 million increase in cash operating expense.
Biller Segment Adjusted EBITDA increased $2.5 million for the six months ended June 30, 2025, compared to the same period in 2024, due to a $49.1 million increase in revenue, partially offset by a $46.6 million increase in cash operating expense primarily for payment card interchange and other processing fees.
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Liquidity and Capital Resources
General
Our primary liquidity needs are: (i) to fund normal operating expenses; (ii) to meet the interest and principal requirements of our outstanding indebtedness; and (iii) to fund acquisitions, capital expenditures, and lease payments. We believe these needs will be satisfied using cash flow generated by our operations, our cash and cash equivalents, and available borrowings under our revolving credit facility over the next 12 months and beyond.
Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less. As of June 30, 2025, we had $189.7 million of cash and cash equivalents, of which $90.7 million was held by our foreign subsidiaries. If these funds were needed for our operations in the United States, we may potentially be required to accrue and pay foreign and U.S. state income taxes to repatriate these funds. As of June 30, 2025, only the earnings from our Indian foreign subsidiaries are indefinitely reinvested. We are also permanently reinvested in the outside book/tax basis differences related to foreign subsidiaries. These outside basis differences could reverse through the sale of foreign subsidiaries, as well as various other events, none of which are considered probable as of June 30, 2025.
Available Liquidity
The following table sets forth our available liquidity for the dates indicated (in thousands):
| June 30, 2025 | December 31, 2024 | ||||||||||
| Cash and cash equivalents | $ | 189,697 | $ | 216,394 | |||||||
| Availability under revolving credit facility | 338,100 | 528,100 | |||||||||
| Total liquidity | $ | 527,797 | $ | 744,494 | |||||||
The decrease in total liquidity is primarily due to increased borrowings on the revolving credit facility used to redeem the Company's outstanding 2026 Notes.
The Company and ACI Payments, Inc., a wholly owned subsidiary, maintain a $75.0 million uncommitted overdraft facility with Bank of America, N.A. The overdraft facility acts as a secured loan under the terms of the Credit Agreement to provide an additional funding mechanism for timing differences that can occur in the bill payment settlement process. As of June 30, 2025, the full $75.0 million was available.
Stock Repurchase Program
The board approved a stock repurchase program authorizing the Company, as market and business conditions warrant, to acquire its common stock and periodically authorizes additional funds for the program. In June 2024, the board approved the repurchase of the Company's common stock of up to $400.0 million in place of the remaining purchase amounts previously authorized.
We repurchased 2,713,799 shares for $134.7 million under the program during the six months ended June 30, 2025. Under the program to date, we have repurchased 65,581,636 shares for approximately $1.2 billion. As of June 30, 2025, the maximum remaining amount authorized for purchase under the stock repurchase program was approximately $223.5 million. See Note 6, Common Stock and Treasury Stock,to our unaudited condensed consolidated financial statements in Part I of this Form 10-Q for additional information.
Cash Flows
The following table sets forth summarized cash flow data for the periods indicated (in thousands):
|
Six Months Ended June 30, |
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| 2025 | 2024 | ||||||||||
| Net cash provided by (used by): | |||||||||||
| Operating activities | $ | 128,018 | $ | 178,258 | |||||||
| Investing activities | 29,553 | (23,978) | |||||||||
| Financing activities | (129,543) | (170,273) | |||||||||
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Cash Flows from Operating Activities
The primary source of operating cash flows is cash collections from our customers for purchase and renewal of licensed software products and various services including software and platform as a service, maintenance, and other professional services. Our primary uses of operating cash flows include employee expenditures, taxes, interest payments, and leased facilities.
Cash flows provided by operating activities were $50.2 million lower for the six months ended June 30, 2025, compared to the same period in 2024. Operating cash flows for the current year decreased primarily due to lower customer receipt collections as a result of lower invoiced amounts at the prior year-end and higher income taxes paid, partially offset by improved profitability.
Our cash flow from operating activities can fluctuate from period to period due to several factors, including: the timing of billings, which are typically higher in the third and fourth quarters in conjunction with sales timing and are variable based upon license renewal timing; collections, which will lag the quarters with higher billings; the timing and amounts of interest due to interest rate fluctuations; income tax and other payments; and our operating results.
Cash Flows from Investing Activities
The changes in cash flows from investing activities primarily relate to the timing of our purchases and investments in capital and other assets, including strategic acquisitions, that support our growth.
During the first six months of 2025, we received net proceeds of $46.0 million from the sale of our equity method investment. In addition, we used cash of $16.5 million to purchase software, property, and equipment, as compared to $24.0 million during the same period in 2024.
Cash Flows from Financing Activities
The changes in cash flows from financing activities primarily relate to borrowings and repayments related to our debt instruments and other debt, stock repurchases, and net proceeds related to employee stock programs.
During the first six months of 2025, we repaid $400.0 million for the redemption of the 2026 Notes and $10.7 million of other debt payments. In addition, we used $133.8 million to repurchase common stock and $20.2 million for the repurchase of stock-based compensation awards for tax withholdings. We received net proceeds of $190.0 million on the Revolving Credit Facility and $181.3 million on the Incremental Term Loan, used for the redemption of the 2026 Notes. In addition, we received proceeds of $2.4 million from the exercise of stock options and the issuance of common stock under our 2017 Employee Stock Purchase Plan, as amended, and $61.6 million for settlement assets and liabilities due to processing timing. During the first six months of 2024, we repaid a net $38.4 million on the Term Loan under the Amendment, $8.7 million of other debt payments, and $5.1 million of debt issuance costs. In addition, we used $119.7 million to repurchase common stock, $6.3 million for the repurchase of stock-based compensation awards for tax withholdings, and $6.2 million for settlement assets and liabilities due to processing timing. We received net proceeds of $12.0 million on the Revolving Credit Facility, and proceeds of $2.1 million from the exercise of stock options and the issuance of common stock under our 2017 Employee Stock Purchase Plan, as amended.
Contractual Obligations and Commercial Commitments
For the six months ended June 30, 2025, there have been no material changes to the contractual obligations and commercial commitments disclosed in Item 7 of our Form 10-K for the fiscal year ended December 31, 2024, other than as disclosed in Note 3, Debt.
Critical Accounting Estimates
The preparation of the condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and other assumptions we believe to be proper and reasonable under the circumstances. We continually evaluate the appropriateness of estimates and assumptions used in the preparation of our condensed consolidated financial statements. Actual results could differ from those estimates.
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The accounting policies that reflect our more significant estimates, judgments, and assumptions, and that we believe are the most critical to aid in fully understanding and evaluating our reported financial results, include the following:
•Revenue Recognition
•Intangible Assets and Goodwill
•Stock-Based Compensation
•Accounting for Income Taxes
During the six months ended June 30, 2025, there were no significant changes to our critical accounting policies and estimates. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for our fiscal year ended December 31, 2024, for a more complete discussion of our critical accounting policies and estimates.
ACI Worldwide Inc. published this content on August 07, 2025, and is solely responsible for the information contained herein. Distributed via SEC EDGAR on August 07, 2025 at 15:43 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]