Welcome to the September 30, 2008 earnings conference call. (Operator Instructions) Ms. Gerber, you may begin your conference.

Good morning and welcome to our call. I’d like to let you know that today we will have three management speakers; Ron Totaro, Scott Behrens and Phil Heasley on the line. All of our customary Safe Harbor and forward-looking language does apply for this call. A full reference of the Safe Harbor statement, please refer to page two of our PowerPoint presentation which is available via our website or via our SEC filing this morning. I am now going to turn the call over to Ron. Ron you may begin.

Good morning and thanks for joining us. As you can see from the financials that we reported today we had a good quarter as presented by all of our reported metrics which came in as expected or better than anticipated across categories. I’d like to open up my remarks with a general discussion on the market which is on most of your minds nowadays, especially what has happened in the financial market since we last spoke in August. ACI expects our 2008 sales to be in line with the expectations we shared with you in August. A possible exception that could occur as a result of the market unrest is that the timing of some of our renewals might move out into Q1 as management teams are distracted by the integrations and mergers occurring at the large U.S. and European banks. I know a lot of you are concerned the banking consolidation could cost us deals. What we are seeing to date in the marketplace is actually contrary to that concern. Customer M&A activity is not a hindrance in signing new deals. For instance, one large acquired banking customer is still signing their Q4 transaction with ACI as all procurement processes are moving along on a business-as-usual track until the two companies are merged. We are writing contracts with the pending change and control in mind but the controlling company has assured its new subsidiary that it is empowered to keep moving forward on its software procurement. A bigger item for ACI than M&A has been the sensitivity regarding term renewals and the sensitivity for large customers who have been given lower dis-economic pricing with pay up front or puff deals in the past, as we had explained. We are certainly aware the pricing increases of a magnitude that are…

Thanks Ron. Good morning everyone. Turning now to slide nineteen, I will spend a few minutes going through the key financial highlights from the quarter. Starting with revenue we had strong revenue growth on a comparable basis, approximately 28% over Q3 of last year and consistently strong on a sequential basis with our strong revenue performance in the June quarter 2008. On a comparable basis, revenue growth included approximately $12 million increase in software license fee revenue. This growth driven pretty evenly among customer projects moving out of backlog, term renewals being signed and capacity increases from existing customers. As Ron said, we haven’t seen a lot of capacity deals here to date so this demand was obviously building up in our customer base. We also saw more than $7 million increase in recurring revenue, again that being our monthly license fees, maintenance fees and ASP processing portion of our services revenue. Not specifically mentioned here but we also saw $4 million of additional revenue from go-live events and additional services provided by the faster pay mandate in the U.K. Again, most of those banks went live in the June quarter but we did have one carry over and go live in the September quarter. So overall another strong revenue quarter. Sales grew very nicely on a comparative basis with Q3 2007 and on a sequential basis with Q2 2008. Since Ron has already discussed sales with you quite a bit I’m not going to spend too much time with you on it here. Our OFCF while still negative was significantly improved over the second quarter, an improvement of almost $11 million and came in above our budgeted expectations. The September quarter saw the go-live of a number of customer implementations for which cash had already been received. Thus really…

Good morning everybody. I have very few things I have to say before we move into questions. One is that in terms of everything you have heard from Ron and Scott we are still very committed to our strategic plan and we think our strategic plan is on course. Our belief that ACI’s software is largely a nondiscretionary purchase for banks and actually very strategic to cost efficiencies and feature functions seems to be bearing itself out. I’ll reiterate our pleasure in our working relationship with IBM at this point and with the combination of working with IBM and the M&A activity motivated by financial markets and governments will tell us that as we go into next year we have to be agile and sensitive to the integration needs of our very large customers as part of our selling plans. We still see growth in pipeline and we are beginning to see our deferred revenues start moving back towards a more reasonable range so that we will have a combination of both working our backlog and working the marketplace and the new addition of working with our customers that have new and somewhat unexpected integration needs. Our attrition rate we told you was at historic lows coming into this. There has been no increase to our attrition rates which are very good. We still see second half 2009 the point we get through all the negatives of this tough misbehavior or whatever you want to call it. We have actually been very gratified with the dialogues and interchange we have had with our key and strategic customers in this regard. They understand us as a strategic partner and they understand the win-win need of our relationship. So I feel very good about that. The sales opportunities around the globe remain very good. If there is any change it is that mega banks are now thinking more like individual institutions than companies with 15 or 12 parts so the size of projects and complexity of projects is actually increasing, not decreasing. We have already told you the sales cycle has elongated so we are not saying that as an excuse because last quarter we told you it elongated. It did and now we are beginning to see the sunshine side of that elongated process. We just believe we are on schedule and on pace for the recovery that we have laid out in our strategic plan. With that I’ll go to questions.

(Operator Instructions) The first question comes from George Sutton - Craig-Hallum Capital.

As you have realigned your cost structure fairly aggressively over the last couple of quarters and frankly couple of years, you now have a lot more delivery capabilities outside the U.S. relative to before. Can you just lay out for us what the cost to deliver a new system to a new customer would be today relative to where it might have been two years ago and how that might impact your overall income statement long-term?

I can’t. On an apples-to-apples basis I have to make a couple of statements. One is the size deals we are doing because of the change in the nature of the banking industry the deals are getting bigger and bigger instead of smaller and smaller. So therefore it is not totally apples-to-apples. Previous 2006 and earlier we were basically dependent on the United States and Great Britain as our major resourcing locations. We had some support in Australia and the Netherlands on a product basis but those were our two main support centers. We now have close to 150 engineers in Timisoara, Romania and they are almost 100% dedicated to EPS. We have about 1.5 times that amount in Bangalore, India and they are pretty much 100% devoted to the wholesale side of our business. So that can explain it a little bit that way. Then over 2/3 of our revenues are actually overseas. So part of what we did was we grew our business extensively overseas without kind of right-balancing our cost infrastructure behind it. You win your deals market by market based on the competitive nature of those marketplaces and the reason we had to adjust was southern Europe’s engineering costs are about 40% to Great Britain’s. Great Britain’s are about 110% to the United States whereas Romania is probably 65-70% to the cost of southern Europe. So the combination of using our American staff and our staff from Great Britain along with Timisoara, we have a very competitive deal. So without giving you numbers, instead of the typical installation costing us 20% we now are setting goals where we are looking for margin of about 20% on an installation. Is that too vague?

That’s what I’m trying to understand long-term as these deals come through your pipeline you are going to consistently see higher margins and that is what I wanted to understand. As a follow-up for Ron, you had mentioned you are in the midst of a number of pricing discussions with customers and I just wondered if you could give us a better sense of what kinds of price changes you are suggesting to the market and again what kinds of discussions you are having on those lines.

Sure. As you can imagine the variance is quite varied. Depending on when the original puff deal was done with some of these larger renewals, which is what I think you are referring to, I am actually hesitant to quote quotes because a lot of this is pending right now. It is substantial and what we have to do is go back and show benchmarks as to sort of what our global pricing looks like specific to some of the regional pricing when some of these renewals are way out of whack frankly. So we have been going through this process very methodically. It involves typically many iterations at very high levels of these organizations to get their head around the fact there is in many cases a substantial price increase. So we literally are in the middle of the throes of some of these negotiations right now so I’m a little hesitant to throw out percentages. We are seeing the right tenor of the discussions to get over this hump and to find the right sort of balancing act for a win-win.

The next question comes from Nikolai Fisken - Stephens, Inc.

If I look at your revenue and listen to your commentary you had a lot of capacity upgrades. You’ve got rev rec on a bunch of contracts and on the sales period is lengthened. If I look at the Q3 GAAP revenue did the stars align in the [108] number? It just won’t happen again the next couple of quarters? Kind of give us some detail on that.

It was really a broad based revenue growth in the quarter. If you compare the 108 from Q3 to the 109 from Q2 the 109 from Q2 had a pretty big pop from faster pay but the revenue and in particular the growth over last year was broad based on increases in recurring revenue, pretty evenly split amongst the license fees amongst a number of projects. We did have some faster pay in the quarter but there isn’t anything in particular in the revenue for Q3 that is similar to that faster pay in Q2 in terms of some one-time pop. Obviously our ILF revenue is lumpy in that it is where you get generally a different one-time item in there next quarter than there were this quarter than there were last year. But the overall commentary is that it was a pretty broad based growth in revenue over last year.

Another way I feel comfortable answering it, we never did and never will give quarterly guidance. Yearly guidance is tough enough. We did reiterate our full-year guidance. So that would give you a pretty good clue whether we believe that…we have basically said some pretty clear things about Q4. You can put it that way. So that answers your question a little bit there. The other one is my famous pig in the python. I’m not supposed to talk about that. It is really clear we are digesting the pig. We should, if we get our service capabilities where they need to be, we get our sales flow which I am telling you that while the process is elongated clearly things are coming through on the sales side. We want to work ourselves down to an $85-100 million deferred revenue as a guide post versus up at the areas we are at. If you also look at the movement in the 12 versus 60 month backlogs it is very clear that we are beginning to see good movement from front to back standpoint. I’ll still go back to where we are before. I think we are on schedule for a second half 2009 having a normalized business model.

On the $8.2 million of pretax charges was that all in G&A?

Primarily in G&A yes.

Can you give us a split?

I don’t have the split in front of me but I can get it. Most of it was the IBM $4.9 that was all in G&A. The $3+ in severance was split out amongst the different line items but I can get that split for you.

As it relates to that, if I just took it out of G&A you guys are doing a great job at getting R&D down, sales down and maintaining a pretty low G&A level. So if I look at Q3 on an absolute dollar basis of $52 million if I just add up those three items is that a good run rate for a go forward basis?

When you say the three line items in terms of cost?

Equal to the G&A less that $8 million and sales and marketing at $18.5 and R&D of $11.4?

Obviously on the selling market for example that is going to fluctuate based on the size of sales. We are looking at a strong Q4 in terms of sales. One of the variable components within that is driven strictly not only by sales volume but the mix of sales. So the higher value deals we do we are going to have a higher commission related expense. So any given quarter isn’t necessarily going to be reflective of what we are going to see going forward. From a G&A perspective I don’t see a whole lot of necessarily variability in that line. Obviously G&A is pretty consistent quarter-over-quarter. We are obviously going through a number of initiatives with respect to restructuring here and the latter part of this year and the early part of 2009 and that is really going to benefit us across the board amongst all expense line items. We will start seeing that benefit right away here in the fourth quarter. But continuing through our actions we do in the first half of 2009. So we are going to see benefit across all expense categories starting in Q4 and going into until we are completed with these efforts in the middle of 2009.

What happened on R&D?

R&D will be impacted as well in terms of the overall cost structure.

The next question comes from Gil Luria – Wedbush Morgan Securities. Gil Luria – Wedbush Morgan Securities: When you are talking about these renewals that are coming up and obviously you have passed off the costs and you are getting closer to the point of renewal and you are obviously asking for the appropriate full list price. How does it work if and when you get to the point of renewal and you haven’t negotiated an extension? What happens then in terms of the cash flow, revenue recognition? Have you already had some of these negotiations where you have gotten to that point? How does that impact the financials?

I can honestly tell you that in terms of these big deals we have not gotten past contract renewal on a single deal yet.

In terms of a general statement, unlike a new client implementation renewals don’t have a large deferral period. We’re not talking about the deferral through the implementation period before we get to rev rec. Renewals we start essentially recognizing right away. Obviously it is in our current run rate. It is in our backlog. As we renew at higher rates obviously that will increase our revenue run rate and it will also increase our backlog because the backlog assumes renewing at its existing rates. So there is a benefit really an immediate benefit to revenue run rate as well as backlog because there is no waiting period essentially for starting to recognize the new revenue stream in the new contract period. Gil Luria – Wedbush Morgan Securities: In terms of your operating free cash flow guidance it is still $45-50 for the year. Where are we year-to-date?

Year-to-date we are I believe we are at 30. Gil Luria – Wedbush Morgan Securities: You put a little bit of a caveat when you put out that guidance which is there is a certain chance some of the deals will slip into Q1. What is the chance of you reaching the $45-50 guidance for the year? What is the chance of it slipping into Q1?

You mean in terms of the OFCF guidance? Gil Luria – Wedbush Morgan Securities: Yes.

I wouldn’t necessarily say if any of the deals slip into Q1 that it would necessarily have an impact on OFCF. It really depends on the timing of how much cash we would receive up front. So at this point I wouldn’t venture to say we are considering any of these big renewal deals to have a significant impact on OFCF if they slip.

The next question comes from John Kraft – D.A. Davidson. John Kraft – D.A. Davidson: Scott, you had mentioned that there was some faster payment revenues recognized in the quarter. My question is what is the backlog for faster payment? I was under the impression that was sort of winding down.

In terms of the number of banks that went live I think there were four that went live in the June quarter and another one that went live in the September quarter. I don’t think we have another one in the pipeline in terms of go-live. We have continuing services that we are performing for all the banks even those that went live in the June quarter. There is a second phase albeit I’m not really sure how extensive it is. There is a second phase to faster pay. Now that we have gone live we do have an ongoing cash and revenue stream on those existing customers. What we saw in the June quarter and have a little bit more in the third quarter was that initial pop from the fact that during the faster pay implementation we had to defer revenue. John Kraft – D.A. Davidson: Ron, you mentioned an IBM system Z wholesale deal for an international bank. Is that a subscription deal or a license deal and when do you expect that to be implemented?

It is a license deal and should be around mid 2009. John Kraft – D.A. Davidson: Just to follow-up and be clear here, the $5 million or so in transition and severance related to IBM that is all completed in Q3? There shouldn’t be any expense related to that in Q4?

We said that the overall transition expense would be about $8 million when we are fully transitioned to IBM outsourcing. So far this year we have incurred $6 million in the transition expense. The remaining $2 million is primarily related to third party data centers and those moves have not been completed. We would expect those to carry into 2009. But there is still a couple million out there that we will have in terms of transition expense and the timing is really contingent on when we get those data centers moved and in terms of severance we have pretty much incurred the severance related to that because we did go live with the outsourcing arrangement on September 1. John Kraft – D.A. Davidson: And that $2 million will sort of be dribbled throughout the next couple of quarters?

Yes. It is really driven on timing on when we get the data center moves. To the extent we get them done sooner rather than later we will incur that expense sooner. Again, on the transition expense from a cash perspective we are paying out those transition expense over five years so it does have a P&L effect expense today but from a cash standpoint we are paying out that amount over 5 years.

The next question comes from Tom McCrohan - Janney Montgomery Scott.

I’m looking at slide 21 of backlog and revenue. I just want to make sure I understand the near term renewal deals, where those revenues are captured. So for this quarter this was a helpful slide, 20% or 19% of your revenues were from sales. So are term renewal deals captured in that bucket? I wouldn’t think they would be in the other.

Generally the sales and revenue conversion rate is pretty quick. So depending on the nature of it it will most likely be a sales to revenue conversion in the quarter that the deal is signed.

If you renew a deal with someone how does that add incrementally to revenue for the quarter? That just assumes you have higher prices? Maybe you can just talk about that.

Yes that is going to be part of it. It is also going to be the portion of any license fee that is paid upon signing, renewing the deal. So it depends really on how it is structured on how much license fee we get at the front end versus what is ratable over the renewal period. But yes in terms of a renewal we would have no delay in recognizing that increased pricing and then that would be effective in the first month of the new contract period.

A lot of these term renewals were related to discontinuing past practice of puffing? Is that a way to think about it? You are heavily discounted now and you have to take much more healthy approach…so puffing and term renewals are kind of interchangeable? Is that the right way to think about it?

Almost all puffs are renewals, not all renewals are puffs.

So that number should be, since we are kind of ending the period of puffing and you have kind of retrained your clients to not expect that from you, should we expect this 20% revenue from sales to trend higher that we have seen in the past?

It depends if we sell an awful lot of new product, EPS or whatever, that could impact it down because we would be waiting for acceptance for it. But if we landed up having a lot of renewals or we landed up selling additional functionality to installed customers then we would have that up front. I’ll let Scott answer it but some of it is the sales mix. The sales mix drives that also.

I have nothing to add to that. It is really sales mix driven.

A follow-up on the IBM alliance. Just looking at slide eleven, the 268 accounts in the pipeline, can you give us any color on geographically where they exist and you talked about that opportunity in terms of the higher hit rate was going to be clients that were already running an IBM shop so it wasn’t a hardware sale. You have to get over that obstacle and we are also running kind of in-house payment platforms. Can you give us a breakdown of that 268?

I’ll let Ron give you an answer, but I will also say there is no geographic concentration in terms of the IBM pipeline. I would say we pretty much have the entire globe engaged team to team on that. I do think that certainly our installed base not on IBM is a big target for IBM. The IBM installed non-ACI base is a big target for ACI and I would actually think the greatest success we have had to date because again these are long sale cycles the biggest success we have had to date are neither one of those two. It has been where they have neither been IBM nor ACI but people that very much needed things and we prevailed together in terms of the opportunity. Ron you may want to add some color to that.

I would just add that this six-quarter view as far as the distribution goes without having all the information in front of me it looks pretty similar to how the distribution of large institutional banks and their location would look like. So there is not a high concentration or low concentration in one country or region at this point.

In the past you have talked about top 500 global banks defining the market. How many of the 268 are in the top 500 global banks?

I could give you a specific answer but I would have to get back to you. I would say again on a percentage basis it is healthy and I wouldn’t say again we are concentrated at tier one, two or three base. It is a healthy distribution across the board.

The next question comes from Michael Christodolou – Inwood Capital. Michael Christodolou – Inwood Capital: Just to understand this possible slippage between the fourth quarter 2008 to the first quarter 2009 is that due to the complexity of these renewals where you are not giving puffs or is this due at all to the elongation of the sales cycle which you have been talking about for the last few quarters?

The possible slippage we are looking at are on smaller deals. I said maybe somewhere in the range of $10-20 million and if they slip obviously we want to get the right price so we are not going to rush those deals into Q4 if we can’t get the right price. We’ll wait and let them slip into Q1 2009. At this point we are not expecting it but they are smaller deals. They are not large deals. Michael Christodolou – Inwood Capital: It is slippage though, it is not attrition right? There is no way…

Yes, this is on the sales side. This is not attrition. Michael Christodolou – Inwood Capital: A customer is not going to defect because he is surprised and offended he didn’t get a puff this time. You don’t just switch these things on a dime, correct?

No. We have also been articulating to them essentially what price they did receive in the past so I think generally those conversations have been going pretty well under the circumstances. But we just have to close the gap between what we believe is a fair price and what they are expecting based on their prior renewal. Michael Christodolou – Inwood Capital: This may have been in the slides and I didn’t see it, but could you recap for us the installed base of Base24 out there and how many Base24-eps accounts are out there and between those how many are new and how many are Base24’s transitioning over? Just kind of a scorecard there?

I don’t think we put it in there. But we have 70 EPS customers and there is probably half dozen or less, we have never given that exact number, but only about half dozen that are actually in transition at this point. As we said our attrition is close to zero on our installed base. We are not really announcing any change in our Base24 Classic installed base. Michael Christodolou – Inwood Capital: That number was around 300 so if half a dozen are in transition in theory in the coming years there are still another 294?

It is actually a significantly higher number than 300. Michael Christodolou – Inwood Capital: Just a couple of questions on stock buyback. I noticed there was no activity in the quarter. Was that just because you have your plate full with other things?

We have our plate full with other things and I think everyone saw the credit markets completely freeze up from a borrowing standpoint. We have quite a bit of cash and we just are being prudent. I don’t know any other way of saying it. Michael Christodolou – Inwood Capital: I commend your prudence. I guess I would observe though that you have $94 in cash and $74 in debt and so the enterprise value of the company at $12 is $400 million and that is 90% of sales and eight times OFCF and those are stunningly cheap numbers in a history of investing in software companies. Clearly the company has bought back stock between $18-30 and Phil you and the management team have bought stock between $20-30 and IBM has committed effectively $150 million to buy 8% of the company and the other 92% could be have for pick a number, $370 million. It seems like it is an extraordinary opportunity if the world doesn’t come to an end and yet you are implying the world is not going to come to an end, it is a nondiscretionary product with high consumer retention and you are seeing sunshine and prospects of 20% margins are on the horizon. Am I missing something there?

In terms of our cash availability we do have $94 million cash. What you don’t see and we don’t necessarily break out in our disclosures is the geographical spread of that cash throughout the world. A lot of that cash is overseas and to repatriate that cash would have pretty significant tax consequences. In terms of the amount of cash, we have that cash overseas to run day to day operations and again some of it has repatriation impacts. So it is not necessarily readily available here in the U.S. in order to utilize for cash buy back. We also have the restructuring actions we are taking now and will continue in Q4 where we have an estimated $10-15 million in severance, a lot of that which has not been paid yet. We action those in the September quarter late in the September period. That cash outflow will come here in Q4 so we need to make sure we have the cash in the respective jurisdictions in order to pay out that severance as well. So the total cash availability is not necessarily all available here in the U.S. for making stock buy backs. Michael Christodolou – Inwood Capital: After four years at the company and all the great transformation you have helped implement, you still think the ultimate value of the business is what you have been thinking?

I believe the company is more valuable. I think we now have a management team that can actually extract the value out of the assets that we have here. That is different than being prudent in a financial meltdown.

There are no further questions at this time. Do you have any closing remarks?

I just want to thank everyone for joining us. If you have any follow-up questions I can be reached via our New York office. (646) 348-6706. Thank you everybody.

That does conclude today’s conference call. You may now disconnect.