ACI Worldwide Inc

NASDAQ:ACIW

Earnings Call Transcript 2018-Q4

[Operator]

Good morning. My name is Tiffany and I will be your conference operator today. At this time, I would like to welcome everyone to the ACI Worldwide Reports Q4 Earnings and Acquisition of Speedpay Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]

Thank you. I would now like to turn the conference over to Mr. John Kraft. Please go ahead, sir.

[John Kraft, VP, IR and Strategic Analysis]

Thanks, Tiffany, and good morning, everybody. Today's call, like all of our events, is subject to both Safe Harbor and forward-looking statements. You can find the full text of both statements on the first and final pages of our deck today, a copy of which is available on our website as well as with the SEC.

On this morning's call is Phil Heasley, our CEO; and Scott Behrens, our CFO.

With that, I'd like to turn the call over to Phil.

[Philip Heasley, President and CEO]

Thank you, John and thank you everyone for joining today's call. I'll focus on two topics today. I'll start with a perspective of our 2018 financial results and then I'll discuss ACI's acquisition of Speedpay from Western Union that we just announced this morning. I will then turn the call over to Scott for detailed financials on both topics.

Let me start by saying as I look back I would characterize 2018 as a year of strains for ACI on a number of levels. It also a year that came to an unexpected revenue and EBITDA finish. I'll start with the 2018 strengths. ACI delivered strong bookings throughout the year, new bookings were up 22% and we added more than 100 new customers. It is exciting for ACI to be taking part in and benefiting from a number of exciting new and innovative industry growth areas, particularly real time payments, merchant e-commerce payments and payments intelligence.

As I've mentioned on my previous call ACI is well regarded by leading research analyst firms including Forrester, just as we received two more awards for our real time payment solutions. Frost & Sullivan's 2019 Global Product Leadership Award and MEFTECH's Best Use Of Emerging or Innovative Technology in the Middle East.

Another bright spot in 2018 was our ACI On Demand platform P&L, with our investment phase largely behind us ACI On Demand turned the corner to profitability delivering its first full year of positive EBITDA, more volume and scale will further accelerate the growth and profitability of ACI On Demand. And this is a key part of the rationale behind the acquisition of Speedpay, which I'll discuss in more detail in a few minutes.

Cash continues to be a core strength for us. In 2018 cash flow from operating activities was $184 million, up 26% from 2017 and adjusted operating cash flow was $148 million, up 14% from 2017. I'll transition now and share a sampling of notable quarter four wins and renewals.

In our banks and financial intermediary segment, Bank Safra, one of the largest bank in Brazil selected Up Retail Payments to support aggressive growth in new business requirements for its Safra pay offering merchant acquirers. Capitec one of the largest banks in South Africa and a long time ACI customer signed Up Retail Payments renewal to future proof its payments environment. Kiwi Bank Limited in New Zealand and a long time ACI customer increased focused on digital banking singed a renewal for Up Retail Payments.

Arrow Financial Services, the leading provider of electronic payments outsourced in the Middle East and North Africa also selected Up Retail Payments. The company requires state-of-the-art open platform to help its clients differentiate themselves in the marketplace. NETS which operates Singapore's national switching network and is responsible for providing critical infrastructure will leverage Up Retail Payments to address new market requirements, add new payment types and deliver payment innovation.

Transbank, the largest acquirer in Chile and longtime ACI customer selected Up Retail Payments as part of its drive to become a more agile, innovative and secure payment services provider. Transbank also licensed our proactive risk manager and API manager.

Now moving on to our Merchant and Corporate segments, Coca Cola bottlers, sales and service which is owned by more than 65 independent Coca Cola bottlers signed a renewal for Up Merchant Services. ACI powers their cash list enabled vending devices today and they plan to grow the number of cash less enabled devices in the coming years. They also wish to expand the offering outside of North America. Albertsons one of the largest food and drug retailers in the United States and a long time ACI customers selected Up Merchant Services as their next generation payment platform.

ACI was selected for its flexible architecture and industry leading security standards, the IRS and long-term customer signed renewal for our official payments, bill payment offering enabling consumers pay taxes using a credit or debit card or cash. These customers are just a stapling of the renewals and wins we secured in quarter four.

Despite these important bright spots 2018 did not end as expected for revenue and EBITDA. Late in December we encountered unforeseen events that impacted our Q4 results and ultimately caused us to miss our guidance. These events included a major capital transaction in the financial service industry, which froze a significantly Up Retail Payments Solution contract that we expected to sign with one of the parties in December.

This transaction took up and the industry by surprise and impacted the timing of our deal. However we expect these deals - these delayed contracts will come to provision in 2019 and we've increased our 2019 guidance as a result. Situation unfortunately dampened what was otherwise the year of progress and strength our business is strong and healthy, our RPS program continues its near 100% renewal rate with 25% to 30% value uplift. This positions us for steady organic growth and profitability for ACI in 2019 and beyond.

I'll now turn to the acquisition we just announced this morning. With ACI On Demand ready to scale I'm pleased to share that we signed an agreement to acquire Speedpay Western Union's U.S. bill pay business. ACI is already positioned as a leader in bill pay a market that is still largely unconsolidated. With Speedpay ACI will deliver unified bill payment platform that will support billions of transactions. Together, the ACI and Speedpay bill pay solutions will serve more than 4,000 customers across the United States.

We have combined vertical strength in the consumer finance, insurance, healthcare, higher education, utilities, government and mortgage industries. This will enable the combine business to more effectively serve a rapidly evolving category, as well as pursue additional segments such as digital subscriptions. The scale of ACI and Speedpay combined will transform both our bill pay business and the entire ACI On Demand P&L raising margins materially for both.

This move to critical mass rates for phrase ACI's AOD will enable us to fuel more growth investments and innovation across the entire AOD portfolio, including the merchant real-time payments and payment intelligent solutions area that I mentioned earlier.

We already invest more in R&D than most of the industry. The addition of Speedpay increases the money we can commit to advancing our next generation capabilities. I look forward to a healthy year ahead. I'm confident that ACI is well positioned to deliver our any payment every possibility strategy, the Speedpay acquisition accelerates our ability to capitalize on the growing global payment transaction opportunities over the next five years.

As the market show some customers needing to execute millions of transactions to needing to execute billions of transactions per month, per week and even per day. ACI is uniquely positioned to scale to meet that demand.

With that, I'll turn it over to Scott for his financial commentary.

[Scott Behrens, Senior EVP and CFO]

Thanks, Phil, and good morning, everyone. I first plan to go through our results for 2018 then provide guidance for 2019, as well as financial details of the acquisition of Speedpay that we announced this morning. We'll then open the line for questions.

I'll be starting my comments on slide seven, with key takeaways from the year, just as a reminder effective January 1, 2018 we adopted the new revenue recognition standard ASC 606, which replaced ASC 605. For all of my prepared comments I'll be discussing our results on a constant GAAP basis.

As Phil discussed, we saw strong bookings growth on the year with new bookings up 22% and total bookings up 15%. We ended the year with 60-months backlog of $4.2 billion and the 12-months backlog of $811 million. 2018 revenue was $1.012 billion, down slightly from 2017 and adjusted EBITDA was $261 million or essentially flat with 2017.

As Phil mentioned, our final 2018 revenue and EBITDA was impacted by unforeseen events, which included recent capital markets transaction in the financial services sector that delayed certain revenue producing contracts in the fourth quarter. These deals are now expected to close in 2019 and are reflected in our higher outlook for EBITDA this year, compared to our prior guidance.

Turning next to our two P&L, our ACI On Premise segment, which was impacted by the timing of the deals that were delayed around year-end, so our revenues declined 3% in 2018. This segment continues to generate strong EBITDA margins delivering 56% in 2018, down slightly from last year's 58%. Our ACI On Demand segment are grew 2% in 2018 and now represents 43% of our total revenue.

We've been saying for some time now that margin expansion will come with scale as we grow into the infrastructure that we've built out over the last several years. In 2018, we started to see that margin expansion with our On Demand segment delivering a 600 basis point improvement on net EBITDA margins. And now to jump ahead, but the acquisition of Speedpay will allow us to accelerate that scale by layering on revenue and EBITDA on top of that scalable infrastructure.

We saw strong cash flow growth in 2018 with operating free cash flow of $148 million, up 14% over the last year. We ended the year with $149 million in cash and a debt balance of $685 million. We close out the year with a net debt to EBITDA leverage ratio of roughly 2 times, which is below our targeted leverage 2.5 times.

In 2018, we continued our trend of deploying about a third of our cash flow for share repurchases, for the year we repurchased 2.3 million shares for roughly $54 million, which equates to an average price of just over $23 a share. And we currently have $176 million remaining on our share repurchase authorization.

Turning next to slide eight, with our guidance. Just a note here the follow guidance does not reflect any contribution from the Speedpay transaction. We plan to update our 2019 guidance for the financial impact of the transaction upon closing. So for 2019, we expect revenue to be in a range of $1.1 billion to $1.125 billion, which represents 9% to 11% growth over 2018. Adjusted EBITDA is expected to be in a range of $310 million to $325 million, which is up from our prior range of $300 million to $315 million. As we now expect certain revenue and EBITDA producing contracts that were delayed around year-end to come in, in 2019.

We expect the 2019 quarterly phasing of revenue and EBITDA to generally be consistent with 2018, new bookings are expected to be in the high single to low double-digits and operating free cash flow in 2019 is expected to be in a range of $165 million to $180 million. For the first quarter, we expect to generate between $205 million and $215 million of revenue. And note that this range does not include the impact of carry over deals from 2018. We expect the most likely timing of these deals to be in Q2 or Q3 of this year. And finally, our 2020 EBITDA target is unchanged at $335 million to $350 million.

And to help with your modeling, you'll find additional guidance assumptions on slide nine. Interest expense to be $39 million and cash interest to be $36 million, capital expenditures are expected to approximate $50 million, G&A is expected to approximate $100 million, non-cash compensation expense should approximate $35 million. Pass through interchange revenues are expected to be in a range of $180 million to $185 million.

Cash taxes are expected to approximate $40 million and our effective tax rate should be consistent with 2018, which was right around 25%. And lastly, our diluted share count should be around $117 million, which excludes future share buyback activities.

Moving - finally slide 10, we're very excited to announce the acquisition of Speedpay, in 2018 Speedpay generated more than $350 million in revenue and over $90 million in EBITDA. Our purchase price of $750 million represents a multiple of approximately 2 times revenue and 8 times EBITDA and that is excluding the value of the tax benefits in any potential synergy.

The acquisition will be structured as an asset purchase for U.S. tax purposes pursuant to 338 H10 election. As a result of this election we'll be able to amortize any goodwill and intangible associated with the acquisition. We estimate the net present value of this tax benefit to approximate $100 million. And overall, we expect the transaction to be double-digit accretive in the first full year on an adjusted EPS basis.

Speedpay is a 100% recurring revenue model will improve our overall recurring revenue from 65% of total revenue today to 74% on a pro forma basis. And as I mentioned previously, Speedpay will also allow us to accelerate the scale in our On Demand segment by layering on revenue and EBITDA on to our scalable infrastructure. We have 100% committed financing through an incremental term loan and a revolver draw. We expect pro forma net debt to EBITDA ratio to be under 4 times at closing and a significant free cash flow generation from the combined business should allow us to delever quickly.

We expect within 24 months of closing that our debt-to-EBITDA ratio to generally be in line with our targeted leverage ratio of 2.5 times. We expect the transaction to close by the end of Q2 against subject to customary closing conditions and regulatory approvals. And finally, as I mentioned already, we plan to provide updated 2019 guidance and 2020 outlook upon closing the transaction.

So that concludes my prepared remarks. Operator, we're ready to open the line for questions at this time.

[Operator]

[Operator Instructions] Your first question comes from the line of David Eller with Wells Fargo.

[David Eller, Wells Fargo]

Good morning, thank you for taking the questions. I wondered on the Speedpay acquisition, if you could just talk a little bit about the deal process. So, when did you start looking at this, was it a competitive process? And then, also if you could talk about the fundamentals of the business? So I think you mentioned it's a carve out transaction, so has revenue and EBITDA are those kind of both growing, flat, down just any kind of color there?

[Philip Heasley, President and CEO]

I'll start and Scott you should - we've been working on this acquisition - well, it's been in our sights for a long time, right. We've been talking for eight, eight and a half months in terms of doing it. To the best of our knowledge, it was a - there was a competitive process, right. We spent a lot of time really understanding this business as it relates to our business. In terms of the - we view the combinations of the verticals with our verticals, as very synergistic.

We have been doing a lot of work on building the backend, of building a world class backend, they've put a lot of energy into building a world class frontend. So the combination of the two R&D efforts is very synergistic. We're going to actually invest more on top of that. We expect this to be a growth business and not be negative to AOD's growth plans, and whatnot.

Very importantly, is that, we're very heavily into the e-commerce. We're very heavily into the merchants business. There is a tremendous crossover taking place from the e-commerce side of the business needing the ability to have biller capabilities. They won't necessarily call it biller capabilities and whatnot, but they need an efficient non-card rail in order to get all these new non-card payments added on to the traditional ways of doing their payments.

And this very synergistically add to what we've been working on for a decade on to the biller businesses that we had already purchased with this exact strategy in mind. And this gives us the critical mass to do it in an effective manner. Scott did you…

[Scott Behrens, Senior EVP and CFO]

No, I think the only thing I'd add to that is, I - we obviously have a large biller portfolio, I'd say the trends in that business are pretty consistent financial trends from what we're seeing. Really the compelling rationale here is the ability to combine the R&D spend from both businesses and really accelerate new feature functions in marketplace.

[David Eller, Wells Fargo]

Got it. And then, I guess, if you could also talk a little bit about the capital markets transaction in the financial services industry that you mentioned, what was that exactly? Was that domestic and why would that push into Q2, Q3 versus maybe Q1?

[Philip Heasley, President and CEO]

Well, we - of course we're not going to tell you, which one of our customers it is, it wouldn't be fair to our customers, or which customers it was. When there's mergers and it's unannounced merger we can - we may think we have a piece of business that's 99%, it's virtually signed and then it lands up getting unsigned because of - or not signed delayed, because it has to be worked into the combination of the two businesses.

In our history on our 44-year history as a company as the financial services industry is consolidated, we've unfortunately had to deal with this lumpiness. The good news is that it tends to create incremental opportunity, incremental value it doesn't tend to limit value, but it certainly doesn't fit well into 90-day reporting schemes.

[David Eller, Wells Fargo]

Got it. And then kind of last question for me going back to the acquisition. As I understand it On Demand segment as you've kind of built that out there has been a little bit of a - if you build it, they will come kind of mentality. And so it just seems like it's always - their goal has been to get more volume over that platform, whether through organic growth or through M&A. So, is that the right way to think about this deal. As you're getting the volume, you need to scale that or are there other kind of more strategic factors as well?

[Philip Heasley, President and CEO]

Well, let me put it this way. We spent - we've told you that we spent well over 100 - we spent a very large amount of money building out a forward looking AOD infrastructure, and we consolidated 28 data centers from different kinds of acquisitions. And it was quite honestly a painful, grueling task and we said that one of the things we were coming out of it with was that we could grow our business 10x easily and our infrastructure would be able to hold it. It would be incremental - the cost would be incremental.

So this is the first proof point, because we're buying a business, we're not taking data centers, we're not taking locations and all that kind of stuff. We're taking business and we're putting into our built out infrastructure and we're levering the technological and infrastructural investments that we made to - why it's such an accretive. It's a very, very accretive deal because yes, we spent a bunch of this money coming into it, or investment coming into it.

[David Eller, Wells Fargo]

Great. And then, do you have any high level estimate of what your market share might be post the deal?

[Philip Heasley, President and CEO]

I think the top four guys probably still don't have a quarter of this market. There's everybody and their brother is in this market in a miscellaneous way and the top four players, maybe have a quarter of the market.

[David Eller, Wells Fargo]

Great, thank you so much for the answers.

[Operator]

Your next question comes from the line of Pete Heckmann with D.A. Davidson and Company.

[Unidentified Analyst]

Just on for Pete. Thanks for taking our questions. So I was hoping you could help us put a few ranges on the Speedpay deal. Firstly, the EPS accretion that we're expecting in the first year. And then, any cost synergies that we're expecting. And then, following up on one of the earlier questions, the growth rates that the asset has been seeing?

[Scott Behrens, Senior EVP and CFO]

Yes, on the - we said in the materials that we expect in the first year double-digit EPS percent of accretion. So I'd stick it out what we think we're going to see in the first year. Sorry, what was the other question.

[Unidentified Analyst]

Cost synergies and then that growth rate?

[Scott Behrens, Senior EVP and CFO]

The cost synergy, we don't - because this is a carve out we're not expecting, I would say significant cost synergies. In fact, we're actually likely to invest in the R&D in a bit in the kind of go to market areas. But what this does have is a pretty sizable tax benefit, the way we're treating it under the tax clause, we're treating it as an asset purchase versus a share purchase. So that's going to deliver pretty substantial tax deduction and thus cash tax savings overtime. So, we've estimated that net present value to be around $100 million.

And from a growth perspective, again, as I mentioned earlier I think if you look at their growth profile, very, I would say similar to our biller business growth profile. Over the last several years we've seen transaction growth, but some pricing pressure on renewals. And so you'll see that the top line growth is a little muted by that. But we think we've worked through that as a marketplace that we've worked through a lot of that repricing.

[Unidentified Analyst]

Okay, thanks. That's really helpful. And then, so how are you expecting the Speedpay deal to position the company in terms of share in bill pay. So are we to look at ACI being a top three player in the niche or something around that?

[Scott Behrens, Senior EVP and CFO]

No, I think I would just reiterate what Phil said, I think between the handful of top it's a very fragmented space. The handful, the largest ones are probably still only make up a quarter of the market. So, plenty of room here for growth both organically as well as is consolidation in the space.

[Unidentified Analyst]

Okay, thanks. And then, just lastly a little bit of a more information on 2019. What type of growth and margin improvement should we be expecting for On Demand in 2019?

[Scott Behrens, Senior EVP and CFO]

Well, we saw a pretty substantial margin improvement in 2018, 600 basis point improvement. I would think that the On Demand business will see the top line growth kind of the higher end of our range. And it's going to continue to drive pretty healthy margin expansion. Again with the investment that we've put in, in this infrastructure, what we're able to do is - and the scalability of that infrastructure is the incremental dollar of revenue is able to pull through at a pretty high rate of EBITDA.

So, we expect to see pretty continued healthy margin expansion in that space. And I would say that even on a - call it on organic basis excluding the impact of Speedpay. Speedpay is just going to allow us to accelerate the margin expansion in this business as we're able to layer on their revenue, their customers on top of the scalable infrastructure.

[Unidentified Analyst]

Got it. That's helpful, thank you.

[Operator]

The next question comes from the line of Brian Riley with Mercator Advisory.

[Brian Riley, Mercator Advisory]

Hi. I have two questions that I'd like to hear about. And the first is, is it correct to assume that the Speedpay clients are moving over to the bill pay platform or is there going to be some kind of parallel run on the systems.

[Philip Heasley, President and CEO]

No, we've done extensive looking at the new front end of Speedpay and we intend to invest - continue to invest heavily in it. But we're very comfortable with the front end of Speedpay. Overtime, we will be converting their backend to our more sophisticated backend, as its finished. But with the front end being moved, the customers' real impact is already behind, as they move over to the next gen front end capabilities of Speedpay. They have an excellent new front end.

[Brian Riley, Mercator Advisory]

That make sense. Now, so if my accounts are right, since 2005 this makes - this is probably acquisition number 13. And of course it's been one sale off with Pfizer along the way. How is the whole play on the one ACI movement going? You're integrating a lot there, is everything going as well as it looks on the outside?

[Philip Heasley, President and CEO]

Yes, well our greatest asset it's not all these acquisitions, but it's the 4,000 people that we have all around the world that are very focused and very capable. And one ACI is about coming, we could spend hours talking about what means, but it's a culture that's focused on payments whether you're part of the pre-13 acquisitions or part of the 13 acquisitions and our management, as well as our people are - and that mixture of them.

It's actually going extremely - the courage that these guys have gone through to take a bunch of companies that really had long in the tooth technologies, but great underlying services and to think that we're coming into 2019 in a fully Linux-enabled, fully cloud-enabled kind of basis with innovations around database and infrastructure.

It's really a tribute to the - I'd love to take credit for it myself, but it's really is the one ACI family that has delivered this. And I think the Speedpay will fit, we were really, really impressed we did a lot of work in contacting the customers and understanding how the customers felt about how they were being managed and what their interactions were and whatnot. And we think that the 145, 150 people that are going to be joining us are going to add very strongly to that one ACI culture.

[Brian Riley, Mercator Advisory]

Great. Thank you, Phil.

[Operator]

Your next question comes from the line of Brett Huff with Stephens.

[Brett Huff, Stephens]

Good morning, guys. Congrats on the deal.

[Philip Heasley, President and CEO]

Thanks, Brett.

[Brett Huff, Stephens]

A couple quick questions, one follow-up to a question was asked before on the On Demand revenue growth, it was down a little bit this quarter. And I think Scott you're - you said it was maybe going to be at the high-end of the 9% to 11% type growth this year. Are there particular products that, that you expect to drive that on an organic basis that seem to be working well at this point?

[Philip Heasley, President and CEO]

Well, when you think about AOD, you got to think about it in terms of its three core pieces, right? So we'll take you through it in three pieces. Because we have the biller I am going to keep biller separately, I might talk to two. But we have our platform business. We have our single instance SaaS business and we have the biller business. And I think we have PAY.ON and ReD and the merchants platform and whatnot. And we've had - when you look at 2018, we had growth - we had very, very strong growth in our new products. I mean, we had some growth that was - that in fourth quarter in certain product groups exceeded 50% year-to-year.

On the other side, being a transformational business, we're in the process of getting out of the single instance SaaS business. So when you look at it from an AOD revenue stream, and you transfer from single instance SaaS platform, you have what looks like a lack of revenue growth, but you see EBITDA growth and it's kind of going from the more expensive, SaaS environment to the more efficient platform environment. So it's kind of hard to see under the covers that way.

In terms of biller, we didn't see - we did not see deterioration in that category and we expect to see growth in 2019 and beyond. And yes, we were saying it was the higher - that AOD itself would be at the higher end of that range. So we've gone from being a drag to an accelerator.

[Brett Huff, Stephens]

Great, that's helpful. Thank you. Second question is on the capital markets contract delay, I know you can't say too much, but was that going to be a renewal, or was that going to be a new contract? Could you give us that inside?

[Philip Heasley, President and CEO]

Well, it's contracts and it's combination of both.

[Brett Huff, Stephens]

Okay.

[Philip Heasley, President and CEO]

And like I said, we've been running up - we've been running just about 100% on the renewal side.

[Brett Huff, Stephens]

And then last question for me, did you - you gave us some stats around what your pro forma bill pay business will look like. Did you - I don't think you mentioned this, are you willing to share it. What will your pro forma revenue or percentage of revenue the - once you get this new bill pay business integrated on an annual basis if you're willing to give us that inside?

[Scott Behrens, Senior EVP and CFO]

Well, our bill pay business - I mean, I can just give you the numbers. Our bill pay business in 2018 was around $275 million of revenue where they're going to layer around $350 million and that's at a gross revenue level.

[Brett Huff, Stephens]

And then, last question this is all biller direct right they didn't have any consolidator business?

[Scott Behrens, Senior EVP and CFO]

Correct.

[Philip Heasley, President and CEO]

100%, correct.

[Brett Huff, Stephens]

Great. Thank you guys.

[Operator]

Your next question comes from the line of George Sutton with Craig Hallum.

[George Sutton, Craig Hallum]

Thank you. I am curious about the messaging or the logic behind the - you're going to market

with a new debt deal or an increased debt deal as a result of this acquisition. But you also meaningfully increased your share repurchase authorization, and you have been active there. So I'm just curious if you can give us the board driven logic there. Obviously, it suggests comfort with the business model.

[Scott Behrens, Senior EVP and CFO]

Yeah, I would just say - I mean, 2018, we use about, what equates to about a third of our cash flow for share repurchases. So, that's pretty consistent with our historical pattern. Yes, in the year we had an increase in the share authorization. So yes, I would just say that we continued that trend of deploying about a third of our free cash flow for share buyback.

[Philip Heasley, President and CEO]

A very - and everyone has their own models, but no one really follows us that much from a cash standpoint. Businesses there's SEC rules and everyone's got to report their businesses the way the government says to report it. We look at cash as the as earned way that you actually run the business and we are not happy that we had the deferred contract, but we still ended up about $30 million higher than the street thought we were going to have in cash.

And the cash is just an important component we guide to - we give you ranges every year and whatnot and it is something that we're extremely comfortable and it's extremely predictable we're as much more predictable than how you book revenue under 605 or 606 it's how your customers pay you for what you're doing. So, yes George, we're very comfortable with the model.

[George Sutton, Craig Hallum]

Great, no that was my sense. So I also was curious on real time payments you haven't addressed a lot on the call, but a lot of continued growth in Malaysia, Hungary, U.S., Canada broadly, can you just talk about how your opportunities sit in the real time payments landscape?

[Philip Heasley, President and CEO]

We're working on projects all over the world, I think our Canadian project is coming live, our Malaysian project I think in March is going to be the big ceremony for that coming live, Australia is in phases. There's work going on, we have work in France, it was significant work being done in France right now, in terms of it. Immediate payments is the new payment type, but also a lot of people are trying to get to the not finish line, which is what I call the starting line, everyone's trying to get ready to actually do immediate payments.

Once Zell opened up, I think it became really clear that the demand for immediate payments and that's a different flavor of it is a lot more real. India is probably the place in the world to watch because the entire country, its central banking infrastructure and whatnot is pretty much forcing an immediate payment model that I think will land up taking over a lot of the world.

Difference being is that it's going to have to be a $0.03, $0.04, $0.05 transaction not a $0.10 for the card guys, $0.30 for the acquirers and interchange on the other side they're talking about Nicole rate kinds of payments and they're talking about $100 billion of them that's going to change the world in terms of how payments take place.

And I actually think it's how e-commerce takes place originates in one part of the world and gets satisfied the amount of FX costs in e-commerce right now is perhaps growth is more important than margin perhaps right now. But the day that margin becomes important that cost the cost of payments is going to be the first thing that's attract.

[George Sutton, Craig Hallum]

Perfect. Scott as I'm thinking about a one other thing, relativity to your 2019 guidance raise. Is that 100% related to this specific deal that we're talking about or were there other pushes and pulls that are reflected?

[Scott Behrens, Senior EVP and CFO]

Well I'd say it's generally related to the delayed deal. So that's why as we said we didn't necessarily update our 2020 outlook for EBITDA partly because this is just dynamic between 2018 to 2019.

[George Sutton, Craig Hallum]

Understood. Thank you.

[Operator]

There are no further questions in queue at this time.

[Philip Heasley, President and CEO]

Thanks everybody. We look forward to catching up in the coming weeks.

[Operator]

Thank you for participating. This concludes today's conference call. You may now disconnect.