Ladies and gentlemen, thank you for standing by and welcome to the ACI Worldwide, Inc. Fourth Quarter and Full Year ended 2022 Financial Results. I would now like to turn the call over to John Kraft, Senior Vice President of Strategy and Finance. Please go ahead.

Thank you, and good morning, everyone. On today's call, we will discuss the company's fourth quarter and full year 2022 results and our financial outlook for the rest of the year. 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 on the first and final pages of our presentation deck, a copy of which is available on our website and with the SEC. On this morning's call is Tom Warsop, our Interim President and CEO; and Scott Behrens, our CFO. With that, I'd like to turn the call over to Tom. Tom?

Good morning. Thank you all for joining us this morning. And as usual, we have pretty packed agenda today. I'm going to speak about several topics, including our fairly recent CEO transition. My initial perspectives from my time in this role and of course, our 2022 results, including sales performance and our outlook for 2023, including an update on the interchange challenges we talked about on the last call. At that point, I'll turn the call over to Scott, who is going to provide more details on our results and our outlook. In about 3 months since we announced a change in our CEO, and I stepped in as the Interim leader of ACI. And it's been a fantastic 3 months and very interesting for me. What I can tell you is that very clearly, we've entered a new phase for ACI, and we have some different needs from our leader. We are shifting our emphasis even further toward accelerating growth towards capitalizing on our market position as three discontinuities take hold across our industry. Number one, payments continue to mature as a key differentiator for our customers. Second, the real-time payment revolution around the world is real and it's accelerating. And finally, customers are becoming more open to new operating models for payments infrastructure and often manifests itself as cloud opportunity, but it's more than that, and I'll talk more about that in a few minutes. ACI solutions underpin successful strategies to take advantage of all those market dynamics for customers around the world, and that's a great place to be. When I think about our next CEO, the next CEO will have significant financial services and payments experience, proven transformational leadership, large-scale sales acumen and demonstrated service excellence expertise in highly complex regulated organization. A balanced set of…

Thanks, Tom, and good morning, everyone. First, I plan to review our financial results for 2022. I will then provide our forward outlook, including 2023 guidance. We will then open the line for questions. I will be starting my comments on Slide 4. Full year 2022 revenue was $1.422 billion, up 4% from 2021. And total adjusted EBITDA was $373 million compared to $384 million in 2021. Adjusting for foreign currency fluctuations and the divestiture of our corporate online banking product, full year 2022 revenue growth was 7%, and total adjusted EBITDA growth was 2%. As previously announced, we closed on the sale of our corporate online banking products on September 1, 2022, for approximately $100 million in cash. And total ARR bookings for2022 grew 35% over 2021. Moving to the segment results. Bank segment revenue increased 9% and Bank segment adjusted EBITDA increased 4% versus 2021 adjusted for foreign currency and the divestiture of our corporate online banking product. Merchant segment revenue increased 5% and Merchant segment adjusted EBITDA decreased 4% versus 2021 on a constant currency basis. During 2022, we increased our investment in selling and marketing and product initiatives, which we expect to improve growth in 2023 and beyond. Biller segment revenue increased 6%, while Biller segment adjusted EBITDA decreased 17% versus 2021. Throughout 2022, we operated in an inflationary environment in our utilities vertical, which resulted in higher interchange fees and contracts where the price we received per transaction is fixed, but the interchange cost to us fluctuates with the average ticket size. In the second half of 2022, we implemented several initiatives, including price adjustments to mitigate the impact and improve profitability in 2023. ACI ended 2022 with $125 million in cash on hand and total debt outstanding of approximately $1 billion. Our net debt…

[Operator Instructions] Our first question comes from the line of Pallav Saini from Canaccord. Please proceed.

Good morning. Thanks for taking my questions. I have a couple here on your real time payments business. Maybe you can remind us how big your RTP business is right now and how much it grew last year? And what type of growth are you expecting in 2023 and some of the drivers there? And I have a follow-up.

Yes. Well, let me clarify when I say real time payment is about 10% of our business, when we look at real time from a product line perspective. But our overall strategy is really to productize within all of our product solutions, real time payments capability. So whether you're a biller right consumer of a biller and you want to pay with real time or your merchant want to use real time, our strategy is really to implement real time capabilities across all of our product sets. So from a particular product set, it's 10% of the business, growing double digits. But again, we are productizing it throughout our product suite.

Got it. Thanks for that clarification, Scott. And I believe the Fed is now rolling out it's a FedNow program this year. So maybe you can broadly frame what this means for your RTP opportunity in the U.S. And I think you are also participating in the pilot program. So anything you can share from that experience would be helpful. Thank you.

Yes. Thanks. So the FedNow program is indeed launching this year. We've been participating all along with the Fed and making -- everyone is making progress, certainly, we are. Our clients are very interested in the program. I think if you step way back, the -- I talked earlier about the real time payments revolution. The United States is way behind the rest of the world. And I often tell the story of my daughter went to university in China and how I had to learn about real time payments like real time on the street because I didn't do anything about it. That was many years ago. And the U.S. is just starting to catch up and the FedNow launch will be a big part of that. So we have -- we are not in a position to make specific forecasts about how fast that -- the real time environment in the U.S. grows, once FedNow launches, but what I'm absolutely confident of is it's going to grow much faster than it has in the past. And I think Americans generally are going to get a lot more comfortable with the idea of real time payments, which is great for us because we've been making investments for some time, and we are prepared for that to start to take hold.

Great. Thank you.

Our next question comes from the line of Peter Heckmann from D.A. Davidson. Please proceed.

Good morning. I want to follow-up on that last piece. So when you think about real time payments in the U.S., what is ACI's primary opportunity, connecting the banks to the switch, powering portions of the switch, how do you think about that? And best guess, I put out a really interesting white paper last year on real time payments penetration as a percent of electronic payments. And wide, wide variety of -- a wide range of penetration from some countries have had real time payments for decades and are at 1%, some are at 50%. I guess, how do you see the U.S. adoption of real time payments unfolding?

Ultimately our primary customer there will be the banks and the connectivity to whatever that scheme is in the case of what's rolling out near-term FedNow, but it's really connecting the banks. I would say that would be the primary and then it's really how this real time manifests itself in the U.S. And so what are the use cases? And so how does it develop? What we look at our portfolio of products and customers is really having the end points, whether it's the banks, billers or merchants really having those end points of electronic payments. Those relationships, we are -- our software or our SaaS solutions are running those transactions. So the question is how does it manifest itself? And what we're positioning ourselves to be as no matter where those use cases develop and what payment types that we will have the capability to provide that to our U.S. customers.

Okay. And then how do you feel about just the general pricing philosophy for real time? You mentioned that you're working in 25 countries, powering government switches. And we are looking at a roughly $100 million revenue business. I guess when you think about the -- and I mean I think that the next largest provider of real time payment software to cover switches perhaps as one country. Do you feel like the pricing is appropriate there. It seems like you're actually playing a bigger role in many of these countries, but the economic benefit to ACI doesn't seem as significant as maybe it should be.

Yes. I mean the pricing is pretty consistent with -- I mean, our place in the market is really providing the software solution. And so what we are doing is very similar to say the issue we are requiring on debt of the credit transaction. So our pricing model is -- it's still volume based, the price very similar to our issuing requirement product. And obviously, it's still going to be volume based. Most of the customers are buying in the low volume today and waiting for that critical mass of volume to come. But what's important for us now and what has been for years is selling the solution, getting it installed to that central infrastructure. And then when the transaction volume does come, we will be able to charge the capacity component of our license fee and -- and that's pretty much all margin at that point. There's really no incremental fulfillment cost to deliver that. So price very similar to our other licensed products that drive high volume in the issuing and acquiring and so volume based prices.

Yes. Just -- I will just add one thing. It is -- right now, we are very focused on planting the flags. That's why I highlighted the 25 schemes and central infrastructures that we support today. That's really important to us is it will become a much more meaningful part of the business as volumes grow, as Scott just highlighted, and obviously, the margin characteristics that you just highlighted are very important as well. But we are trying to make sure that we get ourselves inserted into as many of these schemes around the world as we can. And I think we are off to a very good start.

Our next question comes from the line of George Sutton from Craig Hallum. Please proceed.

Thank you. Nice to see the continued buyback emphasis and Tom, welcome to the call. So, Tom, I'm curious, the way you described the business, I liked it. You said we've got a substantial opportunity, a large untapped opportunity, growing fast. The market, I think, has viewed this largely as a relatively mature business without necessarily the open-ended sounding growth that you're talking about. I wondered if you could just give us your perspective on that thought process.

Yes, sure. And I think it's related to the last topic in many ways. So the -- this -- and I know I keep using the same word, but the revolution in real time payments it's -- you can feel it. But as we've highlighted, today, it's 10%-ish of our business. It should become a significantly larger portion. And as real time payments subsume primarily cash transactions around the world, that's an entirely different part of the payment ecosystem for us to participate in, which we really have very little to do with the cash transactions around the world, which in many countries account for the bulk of payments. So that is really exciting. And I think when I look at some of the geographies where we’ve played a lesser role. I mean, I think about Africa, in particular, I spent a lot of time with our -- with the team that’s chasing after and supporting the business in Africa recently, and there is a huge set of opportunities there that we barely scratch the surface up. So there's some geographic opportunities that we really haven't pursued as strongly as we will. There's the real time payments revolution. And then the final point I would make is that I think we've talked about before that we now offer most of our products in a SaaS, a Software-as-a-Service model, which we have not done previously until quite recently, and we have a couple of those clients that are live today, a couple of others that are coming live soon. And that, again, opens up a whole new segment of the market. So smaller financial institutions around the world that don't have the infrastructure to manage our software themselves. So they don't have the data center that they need, they don't have the expertise. Now we have created offerings, which will allow us to support even a different set of financial institutions. So that's a bunch of stuff I just threw [ph] at you, but when you put it all together, it creates a lot of really interesting opportunities. And our biggest challenge, I think, is make sure we focus on the ones that are going to make the biggest difference and don't spread ourselves too thin.

One other question we have, I believe been anticipating the NextGen platform to be launched this quarter. There wasn't any sort of mention of that on the call. Could you just address where that stands?

Yes, that's really -- that's ultimately going to be the FedNow offering, at least as it relates to the U.S., the rest of the investment is really being made in overseas hub capabilities. So in the U.S., it will lead to the FedNow. Yes, which is a bit later this year, as we said.

Okay. Thanks, guys.

Sure.

Our next question comes from the line of Charles Nabhan from Stephens. Please proceed.

Good morning and thank you for taking my questions. Had a quick one on the Biller segment. If I heard you correctly, you said that you were 70% of the way grew your contract negotiations. So with that said, I was wondering if you expect to be complete by year-end '23? And then secondly, given some of the new wins in the segment over the past year or so, is there anything different about the normalized margin profile of the business given some of the new verticals that are growing and some of the new wins that have come on recently?

Let me -- I will touch on the 70% question, and I will let Scott respond to the second part of the question. So we are roughly 70% through, and as I think we've described before, this is a -- I wish it were a situation where you could send out a letter and say, your prices change, but that actually isn't how it works. We literally need to go contract by contract. So that is what we are doing. I would expect substantially all of that work to be completed this year. I don't know that it will be 100%. I hope it is, but it will be closed if it's not 100% and the reason I'm hedging [ph] that just a little -- just to give you a tiny bit of color on it is when you're talking about clients in the utility space, utilities, as we know, are highly regulated entities. And to the point where their rates and fees have to be approved in multiple places in the regulatory environment and particularly with -- they tend to be called the public utilities commission or something similar to that in their local jurisdiction, and they have absolute authority to approve or not approve rates and fees. And so we can come to an agreement with a utility provider, but it still has to go through an approval process, a comment period, all those things that you have to do in a highly regulated environment. So we are working through these things with our clients. Honestly, I haven't found -- we haven't found a single client that doesn't understand why we're having the discussion and what needs to happen. I'm not saying they're happy about it because at the end of the day, it's an increase that they're going to be paying, but they do understand. And we are just slogging through it one at a time, as I said. But the quick answer to your question is, yes, we expect essentially all of it to be complete this year.

Yes. And in relation to the margin profile in 2023, in particular, you're going to see two benefits of the margin profile of business. One is the go line of revenue growth that we are going to see in 2023 in the Biller segment from the deals we sold prior to 2022. That went live late in 2022, we have a full benefit of that revenue in 2023. That revenue layered on top of a relative fixed cost base. So that business has scale. So that's going to drive profitability in 2023. And second will be this year-over-year benefit of these interchange initiatives. So number one will be the revenue growth from the go-lives that you hear late in 2022, but benefit next year, and second will be the interchange initiatives. So if you look at every quarter this year, Q1 -- lease interchange as a percentage of the total biller revenue will be about at par with Q1 last year, but Q2, Q3 and Q4, you'll see a significant year-over-year improvement.

Got it. Okay. And as a follow-up, I want to touch on the Merchant segment. I know it doesn't get a lot of airtime, but revenue was up 8%, slightly below your double-digit target. So my question is, number one, is it -- when you think about getting back to a normalized -- hitting your target in '24, is it still -- should we still expect the Merchant segment to be up double digits? And then secondly, could you talk a little about some of the growth drivers of the business during the quarter?

Yes, I mean ultimately the short answer on 2024, yes, in terms of double digits. If you look at merchant exit rate of recurring revenue growth in Q4 2022 is 9% year-over-year on a constant currency basis. So that's really the --they have a little bit of a licensed software business, but most of that is going to be recurring revenue, that trajectory of growth continues here in 2023. So that light and software business is becoming a smaller portion of that business. Again, recurring revenue exited last year at 9%. This year will be our fastest-growing segment at double-digit growth and further growth in 2024. But what is driving the growth in that business is really a lot of secular trends in the particular e-commerce electronic transactions, because it's not -- although we have an omni-commerce in-store presence capability, the bulk of our merchant capabilities are very geared towards e-commerce, whether that's e-comm alternative payment gateways, card not present fraud detection, which is really e-commerce merchant transaction. So it's really the secular growth in e-commerce. And I think it came up on the last call where we're seeing in terms of transaction volume there in Merchant we did see high -- we thought we'd end the year strong in transaction volume. We actually came in a little bit higher in transaction volumes in the Merchant segment. So we're not seeing a lot of weakness there as it relates to global economic concerns. So we are pretty happy with where we are at going into '23.

Got it. Thanks for all the color.

Thank you.

I would now like to turn the call over to John Kraft for closing remarks.

Well, thank you everybody for your time this morning. We look forward to catching up in the coming weeks. Have a great day.

Thank you, ladies and gentlemen. This does conclude today’s call. Thank you for your participation. You may now disconnect.