The online world has certainly redefined the ways of doing business. With ecommerce (B2B and B2C) gaining global acceptance, it has led to a new opening for various payment gateway companies. The global payment gateway industry has grown at a CAGR of more than 20 percent during 2010 to 2012, and is expected to grow at a rapid pace in the coming years driven by the recovery in private consumption and the rising popularity of mobile shopping. Electronic Bill presentation & Payments has also witnessed phenomenal growth as many utility services and corporates are shifting from printed pieces to electronic bill presentment and payment (EBPP) options as they can save the company time and money.
Various companies that provide software and various solutions pertaining to online payment gates are now looking into the phenomenal market that arises from online payments. ACI Worldwide (NASDAQ:ACIW) is one such company with its core business model of providing payment gateway solutions which it also bundles with its software solutions.
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- ACIW 15-Year Financial Data
- The intrinsic value of ACIW
- Peter Lynch Chart of ACIW
The banking sector is one segment that has been embracing the online payment gateway as a value-added service to its customers. The company has over 5,000 customers from diversified backgrounds that include financial institutions, retailers, billers and processors around the world. The company processes transactions of $13 trillion spread globally through leading retailers and the world’s largest banks.
Considering the investors’ focal point, the company recently released its quarterly results, posting revenue of $225.51 million. This could not beat the consensus estimate, but it did record growth by almost 40% as compared to the year-ago quarter. EPS also increased by $0.04 to record $0.11, up by 57% as compared to the year-ago quarter.
Electronic Bill Presentation and Payments (EBPP) is another high growth market with more and more business transactions and utility services moving online. ACI, to further strengthen its electronic bill payment product portfolio, acquired “Official Payment” to have a stronger foothold in the electronic bill payment market. The biller market for EBPP services represents significant opportunity for ACI of $6 billion.
Over 26 billion recurring bills and statements are printed and delivered via the postal services and paid through traditional methods at a cost of over $16 billion per year in printing and postage alone. By adopting EBPP, this can be certainly saved which creates the market for companies like ACI.
The company anticipates its growth pattern to continue in fiscal 2014, and it anticipates non-GAAP revenue in the range of $1.06 to $1.08 billion for the full year, and forecasts non-GAAP revenue of $240 million to $250 million in the second quarter. It also expects a growth by around 9% for net new sales in fiscal 2014.
IDC analysis shows ACI is in about a $20 billion market, growing to about $26 billion in 2018, a projected CAGR of 7% to 8%.
ACI operates in various online and electronic payment gateway solutions and independent revenue stream from each of its segments.
Investors should consider the following:
- Category growing at about 7% to 8% overall.
- ACI growing in mid to high single digits overall.
- ACI is gaining share with fastest growth in AOD (hosted SaaS solutions).
- IDC projects growth rates to maintain trajectory through 2018.
The share repurchase programs of the company certainly safeguard the investors. In the last quarter, ACI repurchased 1.2 million shares under its stock repurchase program, which was worth approximately $70 million, and it has approximately $138 million remaining on its current authorization.
ACI has significant room to grow market share in all current segments, regardless of market growth rates, so it could be a good investment.