0000935036-20-000031 | 10-Q | XBRL Viewer

General and administrative

$ 299,910

$ 297,618

$ 591,395

$ 503,473

Operating expenses

Cost of revenue

^[1]

147,346

155,240

313,183

270,181

Research and development

35,578

39,235

74,602

75,429

Selling and marketing

24,455

32,962

54,538

62,392

29,758

49,319

65,684

80,836

Depreciation and amortization

33,635

26,744

65,533

48,610

Total operating expenses

270,772

303,500

573,540

537,448

Operating income (loss)

29,138

(5,882)

17,855

(33,975)

Other income (expense)

Interest expense

(14,142)

(15,323)

(31,313)

(26,937)

Interest income

2,954

2,997

5,854

6,030

Other, net

2,041

1,402

(7,717)

(510)

Total other income (expense)

(9,147)

(10,924)

(33,176)

(21,417)

Income (loss) before income taxes

19,991

(16,806)

(15,321)

(55,392)

Income tax expense (benefit)

5,916

(22,531)

(4,969)

(35,154)

Net income (loss)

$ 14,075

$ 5,725

$ (10,352)

$ (20,238)

Income (loss) per common share

Basic (in dollars per share)

$ 0.12

$ 0.05

$ (0.09)

$ (0.17)

Diluted (in dollars per share)

$ 0.12

$ 0.05

$ (0.09)

$ (0.17)

Weighted average common shares outstanding

Basic (in shares)

116,033

116,586

116,019

116,287

Diluted (in shares)

117,264

118,786

116,019

116,287

Software as a service and platform as a service

Revenues

$ 180,573

$ 172,499

$ 373,523

$ 281,056

License

Revenues

50,136

52,541

78,265

73,619

Maintenance

Revenues

52,749

51,922

106,029

107,033

Services

Revenues

$ 16,452

$ 20,656

$ 33,578

$ 41,765

[1]	The cost of revenue excludes charges for depreciation but includes amortization of purchased and developed software for resale.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 14,075	$ 5,725	$ (10,352)	$ (20,238)
Other comprehensive loss:
Foreign currency translation adjustments	(582)	(1,730)	(6,751)	(409)
Total other comprehensive loss	(582)	(1,730)	(6,751)	(409)
Comprehensive income (loss)	$ 13,493	$ 3,995	$ (17,103)	$ (20,647)

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Loss
Beginning balance at Dec. 31, 2018	$ 1,048,231	$ 702	$ 632,235	$ 863,768	$ (355,857)	$ (92,617)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(20,238)			(20,238)
Other comprehensive income (loss)	(409)					(409)
Stock-based compensation	20,957		20,957
Shares issued and forfeited, net, under stock plans	7,476		(2,395)		9,871
Repurchase of common stock	(631)				(631)
Repurchase of stock-based compensation awards for tax withholdings	(2,809)				(2,809)
Ending balance at Jun. 30, 2019	1,052,577	702	650,797	843,530	(349,426)	(93,026)
Beginning balance at Mar. 31, 2019	1,032,584	702	636,960	837,805	(351,587)	(91,296)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	5,725			5,725
Other comprehensive income (loss)	(1,730)					(1,730)
Stock-based compensation	14,372		14,372
Shares issued and forfeited, net, under stock plans	1,811		(535)		2,346
Repurchase of stock-based compensation awards for tax withholdings	(185)				(185)
Ending balance at Jun. 30, 2019	1,052,577	702	650,797	843,530	(349,426)	(93,026)
Beginning balance at Dec. 31, 2019	1,129,968	702	667,658	930,830	(377,639)	(91,583)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(10,352)			(10,352)
Other comprehensive income (loss)	(6,751)					(6,751)
Stock-based compensation	14,882		14,882
Shares issued and forfeited, net, under stock plans	2,995		(14,986)		17,981
Repurchase of common stock	(28,881)				(28,881)
Repurchase of stock-based compensation awards for tax withholdings	(11,124)				(11,124)
Ending balance at Jun. 30, 2020	1,090,737	702	667,554	920,478	(399,663)	(98,334)
Beginning balance at Mar. 31, 2020	1,067,798	702	656,723	906,403	(398,278)	(97,752)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	14,075			14,075
Other comprehensive income (loss)	(582)					(582)
Stock-based compensation	7,932		7,932
Shares issued and forfeited, net, under stock plans	1,665		2,899		(1,234)
Repurchase of stock-based compensation awards for tax withholdings	(151)				(151)
Ending balance at Jun. 30, 2020	$ 1,090,737	$ 702	$ 667,554	$ 920,478	$ (399,663)	$ (98,334)

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.

+ References + Details

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - shares	6 Months Ended		187 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020
Statement of Stockholders' Equity [Abstract]
Repurchase of common stock (in shares)	1,000,000	23,802	46,357,495

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash flows from operating activities:
Net loss	$ (10,352)	$ (20,238)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation	11,752	11,831
Amortization	57,762	42,799
Amortization of operating lease right-of-use assets	8,801	7,029
Amortization of deferred debt issuance costs	2,416	1,683
Deferred income taxes	(4,742)	(41,331)
Stock-based compensation expense	14,882	20,957
Other	1,772	1,533
Changes in operating assets and liabilities, net of impact of acquisitions:
Receivables	29,053	88,596
Accounts payable	6,287	1,294
Accrued employee compensation	8,177	(1,163)
Current income taxes	(9,367)	(5,634)
Deferred revenue	22,236	(17,981)
Other current and noncurrent assets and liabilities	(13,148)	(32,510)
Net cash flows from operating activities	125,529	56,865
Cash flows from investing activities:
Purchases of property and equipment	(10,615)	(9,915)
Purchases of software and distribution rights	(15,057)	(11,300)
Acquisition of businesses, net of cash acquired	0	(758,546)
Net cash flows from investing activities	(25,672)	(779,761)
Cash flows from financing activities:
Proceeds from issuance of common stock	1,894	1,753
Proceeds from exercises of stock options	1,122	5,816
Repurchase of stock-based compensation awards for tax withholdings	(11,124)	(2,809)
Repurchases of common stock	(28,881)	(631)
Proceeds from revolving credit facility	30,000	250,000
Repayment of revolving credit facility	(69,000)	(15,000)
Proceeds from term portion of credit agreement	0	500,000
Repayment of term portion of credit agreement	(19,475)	(9,424)
Payments of Debt Issuance Costs	0	(12,830)
Payments on or proceeds from other debt, net	(4,686)	(2,220)
Net cash flows from financing activities	(100,150)	714,655
Effect of exchange rate fluctuations on cash	8,118	(865)
Net increase (decrease) in cash and cash equivalents	7,825	(9,106)
Cash and cash equivalents, beginning of period	121,398	148,502
Cash and cash equivalents, end of period	129,223	139,396
Supplemental cash flow information
Income taxes paid	12,121	15,476
Interest paid	$ 29,026	$ 23,937

Condensed Consolidated Financial Statements

6 Months Ended

Jun. 30, 2020

Condensed Consolidated Financial Statements

The unaudited condensed consolidated financial statements include the accounts of ACI Worldwide, Inc. and its wholly-owned subsidiaries (collectively, the “Company”). All intercompany balances and transactions have been eliminated. The condensed consolidated financial statements as of June 30, 2020, and for the three and six months ended June 30, 2020 and 2019, are unaudited and reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair presentation, in all material respects, of the financial position and operating results for the interim periods. The condensed consolidated balance sheet as of December 31, 2019, is derived from the audited financial statements.

The condensed consolidated financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2019, filed on February 27, 2020. Results for the three and six months ended June 30, 2020, are not necessarily indicative of results that may be attained in the future.

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Risks and Uncertainties

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company's business is highly uncertain and difficult to predict, as the response to the pandemic and available information continues to be evolving. The Company has experienced changes in volumes for certain Merchant and Biller customers and has received limited requests for extended payment terms under existing contracts. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Such economic disruption could have a material adverse effect on our business as our customers curtail and reduce capital and overall spending. Policymakers around the globe have responded with fiscal policy actions to support the economy as a whole. The magnitude and overall effectiveness of these actions remains uncertain.

The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, uncertain demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operations challenges faced by its customers. As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.

Other Current Liabilities

The components of other current liabilities are included in the following table (in thousands):


	June 30, 2020		December 31, 2019
Operating lease liabilities	$	13,976	$	15,049
Vendor financed licenses	17,873		9,667
Royalties payable	5,097		6,107
Accrued interest	8,868		9,212
Other	33,181		36,936
Total other current liabilities	$	78,995	$	76,971

Settlement Assets and Liabilities

Individuals and businesses settle their obligations to the Company’s various Biller clients using credit or debit cards or via automated clearing house (“ACH”) payments. The Company creates a receivable for the amount due from the credit or debit card processor and an offsetting payable to the client. Upon confirmation that the funds have been received, the Company settles the obligation to the client. Due to timing, in some instances, the Company may (1) receive the funds into bank accounts controlled by and in the Company’s name that are not disbursed to its clients by the end of the day, resulting in a settlement deposit on the Company’s books and (2) disburse funds to its clients in advance of receiving funds from the credit or debit card processor, resulting in a net settlement receivable position.

Off Balance Sheet Settlement Accounts

The Company also enters into agreements with certain Biller clients to process payment funds on their behalf. When an ACH or automated teller machine network payment transaction is processed, a transaction is initiated to withdraw funds from the designated source account and deposit them into a settlement account, which is a trust account maintained for the benefit of the Company’s clients. A simultaneous transaction is initiated to transfer funds from the settlement account to the intended destination account. These “back to back” transactions are designed to settle at the same time, usually overnight, such that the Company receives the funds from the source at the same time as it sends the funds to their destination. However, due to the transactions being with various financial institutions there may be timing differences that result in float balances. These funds are maintained in accounts for the benefit of the client, which is separate from the Company’s corporate assets. As the Company does not take ownership of the funds, these settlement accounts are not included in the Company’s balance sheet. The Company is entitled to interest earned on the fund balances. The collection of interest on these settlement accounts is considered in the Company’s determination of its fee structure for clients and represents a portion of the payment for services performed by the Company. The amount of settlement funds as of June 30, 2020, and December 31, 2019, was $165.9 million and $274.0 million, respectively.

Fair Value

The fair value of the Company’s Credit Agreement approximates the carrying value due to the floating interest rate (Level 2 of the fair value hierarchy). The Company measures the fair value of its Senior Notes based on Level 2 inputs, which include quoted market prices and interest rate spreads of similar securities. The fair value of the Company’s 5.750% Senior Notes due 2026 (“2026 Notes”) was $416.7 million and $432.0 million as of June 30, 2020, and December 31, 2019, respectively.

The fair values of cash and cash equivalents approximate the carrying values due to the short period of time to maturity (Level 2 of the fair value hierarchy).

Goodwill

In accordance with the Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other, the Company assesses goodwill for impairment annually during the fourth quarter of its fiscal year using October 1 balances or when there is evidence that events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Company evaluates goodwill at the reporting unit level and has identified its reportable segments, ACI On Demand and ACI On Premise, as the reporting units.

Changes in the carrying amount of goodwill attributable to each reporting unit during the six months ended June 30, 2020, were as follows (in thousands):


	ACI On Demand		ACI On Premise		Total
Gross Balance, prior to December 31, 2019	$	554,617	$	773,340	$	1,327,957
Total impairment prior to December 31, 2019	—		(47,432)		(47,432)
Balance, December 31, 2019	554,617		725,908		1,280,525
Goodwill from acquisitions (1)	(299)		—		(299)
Balance, June 30, 2020	$	554,318	$	725,908	$	1,280,226

(1)Goodwill from acquisitions relates to adjustments in the goodwill recorded for the acquisition of E Commerce Group Products, Inc. ("ECG"), along with ECG's subsidiary, Speedpay, Inc. (collectively referred to as "Speedpay") and Walletron, Inc. ("Walletron"), as discussed in Note 3, Acquisition.

Recoverability of goodwill is measured using a discounted cash flow valuation model incorporating discount rates commensurate with the risks involved. Use of a discounted cash flow model is common practice in impairment testing in the absence of available transactional market evidence to determine the fair value. The calculated fair value was substantially in excess of the current carrying value for all reporting units based upon the October 1, 2019, annual impairment test. Given the adverse economic and market conditions caused by the COVID-19 pandemic, the Company considered a variety of qualitative factors to determine if an additional quantitative impairment test was required subsequent to our annual impairment test. Based on a variety of factors, including the excess of the fair value over the carrying amount in the most recent impairment test, we determined that an additional quantitative impairment test was not required.

Equity Method Investment

On July 23, 2019, the Company invested $18.3 million for a 30% non-controlling financial interest in a payment technology and services company in India. The Company accounted for this investment using the equity method in accordance with ASC 323, Investments - Equity Method and Joint Ventures. The Company records its share of earnings and losses in the investment on a one-quarter lag basis. Accordingly, the Company recorded an investment of $18.1 million and $18.5 million, which is included in other noncurrent assets in the condensed consolidated balance sheet as of June 30, 2020 and December 31, 2019, respectively.

Name Change

Effective January 1, 2020, Official Payments Corporation, a wholly owned subsidiary, changed its name to ACI Payments, Inc. An amended and restated certificate of incorporation was filed with the state of Delaware to reflect the change. The Official Payments Corporation name and corresponding trade name may continue to be used until all stationary and marketing materials are transitioned to ACI Payments, Inc. equivalents.

New Accounting Standards Recently Adopted

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, codified as ASC 326. Subsequent amendments to the guidance were issued as follows: ASU 2018-19 in November 2018; ASU 2019-04 in April 2019; ASU 2019-05 in May 2019; ASU's 2019-10 and 2019-11 in November 2019; and ASU 2020-02 in February 2020. This ASU provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in ASU 2016-13 replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company is required to use a forward-looking expected credit loss model for billed and accrued receivables. The Company adopted ASU 2016-13 as of January 1, 2020. The adoption of ASU 2016-13 did not have a material impact on the condensed consolidated financial statements.

In February 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments, which clarifies or improves various financial instruments topics in the accounting standards codification to increase stakeholder awareness. ASU 2020-03 was effective upon issuance and did not have a material impact on the condensed consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The update provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”). This guidance includes optional expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 is effective for all entities as of March 12, 2020, through December 31, 2022, when the reference rate replacement activity is expected to be completed. The adoption of ASU 2020-04 did not have an impact on the Company's condensed consolidated financial statements.

Recently Issued Accounting Standards Not Yet Effective

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in this update simplify the accounting for income taxes by removing certain exceptions within ASC 740, as well as clarify and simplify other aspects of the accounting for income taxes to promote consistency among reporting entities. ASU 2019-12 is effective for annual and interim periods beginning after December 15, 2020. The Company is currently assessing the impact the adoption of ASU 2019-12 will have on its condensed consolidated financial statements.

Revenue

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Revenue

In accordance with ASC 606, Revenue From Contracts With Customers, revenue is recognized upon transfer of control of promised products and/or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products and services. Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities. See Note 10, Segment Information, for additional information, including disaggregation of revenue based on primary solution category and geographic location.

Total receivables represent amounts billed and amounts earned that are to be billed in the future (i.e., accrued receivables). Included in accrued receivables are services, software as a service ("SaaS"), and platform as a service ("PaaS") revenues earned in the current period but billed in the following period, and amounts due under multi-year software license arrangements with extended payment terms for which the Company has an unconditional right to invoice and receive payment subsequent to invoicing.

Total receivables, net is comprised of the following (in thousands):


	June 30, 2020		December 31, 2019
Billed receivables	$	183,408	$	213,654
Allowance for doubtful accounts	(3,661)		(5,149)
Billed receivables, net	179,747		208,505
Accrued receivables	374,845		399,302
Significant financing component	(29,969)		(35,569)
Total accrued receivables, net	344,876		363,733
Less: current accrued receivables	155,320		161,714
Less: current significant financing component	(10,408)		(11,022)
Total long-term accrued receivables, net	199,964		213,041
Total receivables, net	$	524,623	$	572,238

No customer accounted for more than 10% of the Company’s consolidated receivables balance as of June 30, 2020, or December 31, 2019.

Deferred revenue includes amounts due or received from customers for software licenses, maintenance, services, and/or SaaS and PaaS services in advance of recording the related revenue.

Changes in deferred revenue were as follows (in thousands):


Balance, December 31, 2019	$	118,939
Deferral of revenue	80,744
Recognition of deferred revenue	(60,410)
Foreign currency translation	(1,852)
Balance, June 30, 2020	$	137,421

Revenue allocated to remaining performance obligations represents contracted revenue that will be recognized in future periods, which is comprised of deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. This does not include:

•Revenue that will be recognized in future periods from capacity overages that are accounted for as a usage-based royalty.

•SaaS and PaaS revenue from variable consideration that will be recognized in accordance with the ‘right to invoice’ practical expedient.

•SaaS and PaaS revenue from variable consideration that will be recognized in accordance with the direct allocation method.

Revenue allocated to remaining performance obligations was $672.2 million as of June 30, 2020, of which the Company expects to recognize approximately 44% over the next 12 months and the remainder thereafter.

During the three and six months ended June 30, 2020 and 2019, revenue recognized by the Company from performance obligations satisfied in previous periods was not significant.

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI http://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Share-based Payment Arrangement [Abstract]

Acquisition

6 Months Ended

Jun. 30, 2020

Business Combinations [Abstract]

Acquisition

Speedpay

On May 9, 2019, the Company acquired Speedpay, a subsidiary of The Western Union Company (“Western Union”), for $754.1 million in cash, including working capital adjustments, pursuant to a Stock Purchase Agreement, among the Company, Western Union, and ACI Worldwide Corp., a wholly owned subsidiary of the Company. The Company has included the financial results of Speedpay in the condensed consolidated financial statements from the date of acquisition. The combination of the Company and Speedpay bill pay solutions serves more than 4,000 customers across the U.S., bringing expanded reach in existing and complementary market segments such as consumer finance, insurance, healthcare, higher education, utilities, government, and mortgage. The acquisition of Speedpay increased the scale of the Company’s On Demand platform business and allows the acceleration of platform innovation through increased research and development and investment in ACI's On Demand platform infrastructure.

To fund the acquisition, the Company amended its existing Credit Agreement, dated February 24, 2017, for an additional $500.0 million senior secured term loan (“Delayed Draw Term Loan”), in addition to drawing $250.0 million on the available Revolving Credit Facility. See Note 4, Debt, for terms of the Credit Agreement. The remaining acquisition consideration was funded with cash on hand.

The Company expensed approximately $16.6 million and $21.3 million of costs related to the acquisition of Speedpay for the three and six months ended June 30, 2019, respectively. These costs, which consist primarily of investment bank, consulting, and legal fees, are included in general and administrative expenses in the accompanying condensed consolidated statements of operations.

Speedpay contributed approximately $80.2 million in total revenue and $15.0 million in total operating income for the three months ended June 30, 2020. Speedpay contributed approximately $168.9 million in total revenue and $27.3 million in total operating income for the six months ended June 30, 2020. Speedpay contributed approximately $49.3 million in total revenue and $7.6 million in total operating income for the three and six months ended June 30, 2019.

In connection with the acquisition, the Company recorded the following amounts based upon its purchase price allocation as of June 30, 2020 (in thousands, except weighted average useful lives):


	Amount		Weighted Average Useful Lives
Current assets:
Cash and cash equivalents	$	135
Receivables, net of allowances	17,658
Settlement assets	239,604
Prepaid expenses	317
Other current assets	19,585
Total current assets acquired	277,299
Noncurrent assets:
Goodwill	366,508
Software	113,600		7 years
Customer relationships	208,500		15 years
Trademarks	10,900		5 years
Other noncurrent assets	3,745
Total assets acquired	980,552
Current liabilities:
Accounts payable	6,623
Settlement liabilities	212,892
Employee compensation	1,959
Other current liabilities	3,802
Total current liabilities acquired	225,276
Noncurrent liabilities:
Other noncurrent liabilities	1,219
Total liabilities acquired	226,495
Net assets acquired	$	754,057

During the six months ended June 30, 2020, the Company made adjustments to the preliminary purchase price allocation as additional information became available for accounts payable. These adjustments and any resulting adjustments to the statements of operations were not material to the Company’s previously reported operating results or financial position. The Company's review of the purchase price allocation has been completed.

Factors contributing to the purchase price that resulted in the goodwill (which is tax deductible) include the acquisition of management, sales, and technology personnel with the skills to market new and existing products of the Company, enhanced product capabilities, complementary products, and customers.

Unaudited Pro Forma Financial Information

The pro forma financial information in the table below presents the combined results of operations for ACI and Speedpay as if the acquisition had occurred January 1, 2018. The pro forma information is shown for illustrative purposes only and is not necessarily indicative of future results of operations of the Company or results of operations of the Company that would have actually occurred had the transaction been in effect for the periods presented. This pro forma information is not intended to represent or be indicative of actual results had the acquisition occurred as of the beginning of each period, and does not reflect potential synergies, integration costs, or other such costs or savings.

Certain pro forma adjustments have been made to net income (loss) for the three and six months ended June 30, 2019, to give effect to estimated adjustments that remove the amortization expense on eliminated Speedpay historical identifiable intangible assets, add amortization expense for the value of acquired identified intangible assets (primarily acquired software, customer relationships, and trademarks), and add estimated interest expense on the Company’s additional Delayed Draw Term Loan and Revolving Credit Facility borrowings. Additionally, certain transaction expenses that are a direct result of the acquisition have

been excluded. The three and six months ended June 30, 2020, are not presented as Speedpay is included in the Company's consolidated results for the entire periods.

The following is the unaudited summarized pro forma financial information (in thousands, except per share data):


	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Pro forma revenue	$	334,077	$	628,136
Pro forma net income (loss)	$	15,249	$	(5,996)
Pro forma income (loss) per share:
Basic	$	0.13	$	(0.05)
Diluted	$	0.13	$	(0.05)

Walletron

On May 9, 2019, the Company also completed the acquisition of Walletron, which delivers patented mobile wallet technology. The Company has included the financial results of Walletron in the condensed consolidated financial statements from the date of acquisition, which were not material.

Debt

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Debt

As of June 30, 2020, the Company had $200.0 million, $736.6 million, and $400.0 million outstanding under its Revolving Credit Facility, Term Loan, and Senior Notes, respectively, with up to $300.0 million of unused borrowings under the Revolving Credit Facility portion of the Credit Agreement, as amended.

Credit Agreement

On April 5, 2019, the Company (and its wholly-owned subsidiaries, ACI Worldwide Corp. and ACI Payments, Inc. entered into the Second Amended and Restated Credit Agreement (the “Credit Agreement”) with the lenders, and Bank of America, N.A., as administrative agent for the lenders, to amend and restate the Company's existing agreement, as amended, dated February 24, 2017.

The Credit Agreement consists of (a) a five-year $500.0 million senior secured revolving credit facility (the “Revolving Credit Facility”), which includes sublimits for (1) the issuance of standby letters of credit and (2) swingline loans, (b) a five-year $279.0 million senior secured term loan facility (the "Initial Term Loan") and (c) a five-year $500.0 million Delayed Draw Term Loan (together with the Initial Term Loan, the "Term Loans", and together with the Initial Term Loan and the Revolving Credit Facility, the “Credit Facility”). The Credit Agreement also allows the Company to request optional incremental term loans and increases in the revolving commitment. The Credit Facility will mature on April 5, 2024.

At the Company’s option, borrowings under the Credit Facility bear interest at an annual rate equal to, either (a) a base rate determined by reference to the highest of (1) the annual interest rate publicly announced by the administrative agent as its Prime Rate, (2) the federal funds effective rate plus 1/2 of 1%, or (3) a London Interbank Offered Rate (“LIBOR”) rate determined by reference to the costs of funds for U.S. dollar deposits for a one-month interest period, adjusted for certain additional costs, plus 1% or (b) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowings, adjusted for certain additional costs, plus an applicable margin. Based on the calculation of the applicable consolidated total leverage ratio, the applicable margin for borrowings under the Credit Facility is between 0.25% to 1.25% with respect to base rate borrowings and between 1.25% and 2.25% with respect to LIBOR rate borrowings. Interest is due and payable monthly. The interest rate in effect for the Credit Facility as of June 30, 2020, was 2.43%.

The Company is also required to pay (a) a commitment fee related to the unutilized commitments under the Revolving Credit Facility, payable quarterly in arrears, (b) letter of credit fees on the maximum amount available to be drawn under all outstanding letters of credit in an amount equal to the applicable margin on LIBOR rate borrowings under the Revolving Credit Facility on an annual basis, payable quarterly in arrears, and (c) customary fronting fees for the issuance of letters of credit fees and agency fees.

The Company’s obligations under the Credit Facility and cash management arrangements entered into with lenders under the Credit Facility (or affiliates thereof) and the obligations of the subsidiary guarantors are secured by first-priority security interests in substantially all assets of the Company and any guarantor, including 100% of the capital stock of ACI Worldwide Corp. and each domestic subsidiary of the Company, each domestic subsidiary of any guarantor, and 65% of the voting capital stock of each foreign subsidiary of the Company that is directly owned by the Company or a guarantor, in each case subject to

certain exclusions set forth in the credit documentation governing the Credit Facility. The collateral agreement of the Credit Agreement, as amended, released the lien on certain assets of ACI Payments, Inc., our electronic bill presentment and payment affiliate, to allow ACI Payments, Inc. to comply with certain eligible securities and unencumbered asset requirements related to money transmitter or transfer license rules and regulations.

The Credit Agreement contains a number of covenants that, among other things and subject to certain exceptions, restrict the Company’s and its subsidiaries' ability to: create, incur, assume or suffer to exist any additional indebtedness; create, incur, assume or suffer to exist any liens; enter into agreements and other arrangements that include negative pledge clauses; pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated indebtedness; create restrictions on the payment of dividends or other distributions by subsidiaries; make investments, loans, advances and acquisitions; merge, consolidate or enter into any similar combination or sell assets, including equity interests of the subsidiaries; enter into sale and leaseback transactions; directly or indirectly engage in transactions with affiliates; alter in any material respect the character or conduct of the business; enter into amendments of or waivers under subordinated indebtedness, organizational documents, and certain other material agreements; and hold certain assets and incur certain liabilities.

Expected Discontinuation of LIBOR

In July 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced it will no longer compel banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee has proposed the Secured Overnight Financing Rate ("SOFR") as its recommended alternative to LIBOR, and the first publication of SOFR rates was released in April 2018.

The Company is evaluating the potential impact of the transition from LIBOR as an interest rate benchmark to other potential alternative reference rates, including SOFR. The Company's Credit Agreement is currently indexed to LIBOR and the maturity date of the Credit Agreement extends beyond 2021. The Credit Agreement contemplates the discontinuation of LIBOR and provides options for the Company in such an event. The Company will continue to actively assess the related opportunities and risks involved in this transition.

Senior Notes

On August 21, 2018, the Company completed a $400.0 million offering of the 2026 Notes at an issue price of 100% of the principal amount in a private placement for resale to qualified institutional buyers. The 2026 Notes bear interest at an annual rate of 5.750%, payable semi-annually in arrears on February 15 and August 15 of each year. The 2026 Notes will mature on August 15, 2026.

Maturities on debt outstanding as of June 30, 2020, are as follows (in thousands):


Fiscal Year Ending December 31,
Remainder of 2020	$	19,475
2021	38,950
2022	50,431
2023	69,906
2024	757,823
Thereafter	400,000
Total	$	1,336,585

The Credit Agreement and 2026 Notes contain certain customary affirmative covenants and negative covenants that limit or restrict, subject to certain exceptions, the incurrence of liens, indebtedness of subsidiaries, mergers, advances, investments, acquisitions, transactions with affiliates, change in nature of business, and the sale of the assets. In addition, the Credit Agreement and 2026 Notes contain certain customary mandatory prepayment provisions. The Company is also required to maintain a consolidated leverage ratio at or below a specified amount and an interest coverage ratio at or above a specified amount. As specified in the Credit Agreement and 2026 Notes agreement, if certain events occur and continue, the Company may be required to repay all amounts outstanding under the Credit Facility and 2026 Notes. As of June 30, 2020, and at all times during the period, the Company was in compliance with its financial debt covenants.

Total debt is comprised of the following (in thousands):


	June 30, 2020		December 31, 2019
Term loans	$	736,585	$	756,060
Revolving credit facility	200,000		239,000
5.750% Senior notes, due August 2026	400,000		400,000
Debt issuance costs	(19,490)		(21,905)
Total debt	1,317,095		1,373,155
Less: current portion of term loans	38,950		38,950
Less: current portion of debt issuance costs	(4,744)		(4,802)
Total long-term debt	$	1,282,889	$	1,339,007

Overdraft Facility

In 2019, the Company and ACI Payments, Inc. entered in to a $140.0 million uncommitted overdraft facility with Bank of America, N.A. The overdraft facility bears interest at LIBOR plus 0.875% based on the Company’s average outstanding balance and the frequency in which overdrafts occur. 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. Amounts outstanding on the overdraft facility are included in other current liabilities in the condensed consolidated balance sheet. As of June 30, 2020, there was no amount outstanding on the overdraft facility. As of December 31, 2019, there was $1.5 million outstanding on the overdraft facility.

Other

The Company finances certain multi-year license agreements for internal-use software. Upon execution, these arrangements have been treated as a non-cash investing and financing activity for purposes of the condensed consolidated statements of cash flows. As of June 30, 2020, $13.8 million was outstanding, of which $9.4 million and $4.4 million is included in other current liabilities and other noncurrent liabilities, respectively, in the consolidated balance sheet. As of December 31, 2019, $13.8 million was outstanding, of which $6.0 million and $7.8 million was included in other current liabilities and other noncurrent liabilities, respectively, in the consolidated balance sheet.

Stock-Based Compensation Plans

6 Months Ended

Jun. 30, 2020

Stock-Based Compensation Plans

Employee Stock Purchase Plan

Shares issued under the 2017 Employee Stock Purchase Plan during the six months ended June 30, 2020 and 2019, totaled 72,228 and 60,362, respectively.

2020 Equity and Incentive Compensation Plan

On June 9, 2020, upon recommendation of the Company’s board of directors (the “board”), stockholders approved the ACI Worldwide, Inc. 2020 Equity and Incentive Compensation Plan (the “2020 Plan”). The 2020 Plan authorizes the board to provide for equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, dividend equivalents, and certain other awards, including those denominated or payable in, or otherwise based on, the Company’s common stock ("awards"). The purpose of the 2020 Plan is to provide incentives and rewards for service and/or performance by providing awards to non-employee directors, officers, other employees, and certain consultants and other service providers of the Company and its subsidiaries. Following the approval of the 2020 Plan, the 2016 Equity and Performance Incentive Plan (the “2016 Incentive Plan”) was terminated. Termination of the 2016 Incentive Plan did not affect any equity awards outstanding under the 2016 Incentive Plan.

Subject to adjustment and share counting rules as described in the 2020 Plan, a total of 6,658,754 shares of common stock are available for awards granted under the 2020 Plan. Shares underlying certain awards under the 2020 Plan, the Company’s 2005 Equity and Performance Incentive Plan (the "2005 Incentive Plan"), and the 2016 Incentive Plan (each including as amended or amended and restated) that are cancelled or forfeited, expire, are settled for cash, or are unearned after June 9, 2020, will again be available under the 2020 Plan.

The board generally will be able to amend the 2020 Plan, subject to stockholder approval in certain circumstances, as described in the 2020 Plan.

Stock Options

A summary of stock option activity is as follows:


	Number of Shares	Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value of In-the-Money Options ($)
Outstanding as of December 31, 2019	4,006,816	$	18.18
Exercised	(1,110,583)	19.58
Forfeited	(57,744)	19.08
Expired	(6,090)	18.44
Outstanding as of June 30, 2020	2,832,399	$	17.61	3.98	$	26,562,039
Exercisable as of June 30, 2020	2,685,163	$	17.48	4.11	$	25,532,991

The total intrinsic value of stock options exercised during the six months ended June 30, 2020 and 2019, was $10.5 million and $6.0 million, respectively. There were no stock options granted during the six months ended June 30, 2020 or 2019.

Long-term Incentive Program Performance Share Awards

A summary of nonvested long-term incentive program performance share awards (“LTIP performance shares”) is as follows:


	Number of Shares at Expected Attainment	Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2019	669,469	$	20.12
Vested	(668,240)	20.12
Forfeited	(5,368)	20.12
Change in attainment	4,139	20.12
Nonvested as of June 30, 2020	—	$	—

During the six months ended June 30, 2020, a total of 668,240 LTIPs vested. The Company withheld 165,237 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

Restricted Share Awards

A summary of nonvested restricted share awards (“RSAs”) is as follows:


	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2019	92,842	$	20.13
Vested	(88,913)	20.12
Forfeited	(3,929)	20.35
Nonvested as of June 30, 2020	—	$	—

During the six months ended June 30, 2020, a total of 88,913 RSAs vested. The Company withheld 28,233 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

Total Shareholder Return Awards

During the six months ended June 30, 2020 and 2019, pursuant to the 2016 Incentive Plan, the Company granted total shareholder return awards (“TSRs”). TSRs are performance shares that are earned, if at all, based upon the Company’s total shareholder return as compared to a group of peer companies over a three-year performance period. The award payout can range from 0% to 200%. To determine the grant date fair value of the TSRs, a Monte Carlo simulation model is used. The Company recognizes compensation expense for the TSRs over a three-year performance period based on the grant date fair value.

A summary of nonvested TSRs is as follows:


	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2019	1,062,291	$	35.77
Granted	677,195	30.01
Vested	(199,413)	24.37
Forfeited	(79,246)	39.41
Change in payout rate	(14,259)	24.37
Nonvested as of June 30, 2020	1,446,568	$	34.56

During the six months ended June 30, 2020, a total of 199,413 TSRs awards granted in fiscal 2017 vested and achieved a payout rate of 93% based on the Company's total shareholder return as compared to a group of peer companies over a three-year performance period. The Company withheld 53,033 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

The fair value of TSRs granted during the six months ended June 30, 2020 and 2019, were estimated on the date of grant using the Monte Carlo simulation model, acceptable under ASC 718, using the following weighted average assumptions:


	Six Months Ended June 30,
	2020		2019
Expected life (years)	2.8		2.8
Risk-free interest rate	0.5	%	2.5	%
Expected volatility	31.4	%	29.3	%
Expected dividend yield	—		—

Restricted Share Units

During the six months ended June 30, 2020 and 2019, pursuant to the 2020 Plan and the 2016 Incentive Plan, respectively, the Company granted restricted share unit awards (“RSUs”). RSUs generally have requisite service periods of three years and vest in increments of 33% on the anniversary of the grant dates. RSUs granted to our board vest one year from grant or as of the next annual shareholders meeting, whichever is earlier. Under each arrangement, RSUs are issued without direct cost to the employee on the vesting date. The Company estimates the fair value of the RSUs based upon the market price of the Company’s stock at the date of grant. The Company recognizes compensation expense for RSUs on a straight-line basis over the requisite service period.

A summary of nonvested RSUs is as follows:


	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2019	1,009,404	$	29.96
Granted	787,871	25.65
Vested	(399,605)	29.14
Forfeited	(114,303)	29.68
Nonvested as of June 30, 2020	1,283,367	$	27.59

During the six months ended June 30, 2020, a total of 399,605 RSUs vested. The Company withheld 109,652 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

As of June 30, 2020, there were unrecognized compensation costs of $30.1 million related to nonvested RSUs, $27.1 million related to nonvested TSRs, and less than $0.1 million related to nonvested stock options, which the Company expects to recognize over weighted average periods of 2.1 years, 1.9 years, and 0.7 years, respectively.

The Company recorded stock-based compensation expense recognized under ASC 718 for the three months ended June 30, 2020 and 2019, of $7.9 million and $14.4 million, respectively, with corresponding tax benefits of $1.4 million and $2.8 million, respectively. The Company recorded stock-based compensation expense recognized under ASC 718 for the six months ended June 30, 2020 and 2019, of $14.9 million and $21.0 million, respectively, with the corresponding tax benefits of $2.8 million and $4.0 million, respectively.

Software and Other Intangible Assets

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Software and Other Intangible Assets

The carrying amount and accumulated amortization of the Company's software assets subject to amortization at each balance sheet date are as follows (in thousands):


	June 30, 2020										December 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Net Balance		Gross Carrying Amount		Accumulated Amortization		Net Balance
Software for resale	$	136,618	$	(124,271)	$	12,347	$	138,823	$	(122,061)	$	16,762
Software for internal use	415,690		(211,750)		203,940		400,065		(182,310)		217,755
Total software	$	552,308	$	(336,021)	$	216,287	$	538,888	$	(304,371)	$	234,517

Amortization of software for resale is computed using the greater of (a) the ratio of current gross revenues to the total of current and future gross revenues expected to be derived from the software or (b) the straight-line method over the remaining estimated useful life of generally five to ten years. Software for resale amortization expense recorded during the three months ended June 30, 2020 and 2019, totaled $2.1 million and $3.0 million, respectively. Software for resale amortization expense recorded during the six months ended June 30, 2020 and 2019, totaled $4.0 million and $6.0 million, respectively. These software amortization expense amounts are reflected in cost of revenue in the condensed consolidated statements of operations.

Amortization of software for internal use is computed using the straight-line method over an estimated useful life of generally one to ten years. Software for internal use amortization expense recorded during the three months ended June 30, 2020 and 2019, totaled $18.5 million and $13.3 million, respectively. Software for internal use amortization expense recorded during the six months ended June 30, 2020 and 2019, totaled $35.2 million and $23.7 million, respectively. These software amortization expense amounts are reflected in depreciation and amortization in the condensed consolidated statements of operations.

The carrying amount and accumulated amortization of the Company’s other intangible assets subject to amortization at each balance sheet date are as follows (in thousands):


	June 30, 2020															December 31, 2019
			Gross Carrying Amount			Accumulated Amortization			Net Balance			Gross Carrying Amount			Accumulated Amortization			Net Balance
Customer relationships	$	502,748		$	(175,681)		$	327,067		$	507,785		$	(160,775)		$	347,010
Trademarks and trade names	27,142			(18,512)			8,630			27,312			(17,353)			9,959
Total other intangible assets	$	529,890		$	(194,193)		$	335,697		$	535,097		$	(178,128)		$	356,969

Other intangible assets amortization expense recorded during the three months ended June 30, 2020 and 2019, totaled $9.2 million and $7.6 million, respectively. Other intangible assets amortization expense recorded during the six months ended June 30, 2020 and 2019, totaled $18.5 million and $13.1 million, respectively.

Based on capitalized intangible assets as of June 30, 2020, estimated amortization expense amounts in future fiscal years are as follows (in thousands):


Fiscal Year Ending December 31,	Software Amortization		Other Intangible Assets Amortization
Remainder of 2020	$	37,072	$	18,346
2021	61,612		36,379
2022	43,302		36,234
2023	27,501		35,932
2024	20,551		31,520
Thereafter	26,249		177,286
Total	$	216,287	$	335,697

Common Stock and Treasury Stock	6 Months Ended
Common Stock and Treasury Stock	Jun. 30, 2020
Equity [Abstract]
Common Stock and Treasury Stock	Common Stock and Treasury Stock In 2005, the board approved a stock repurchase program authorizing the Company, as market and business conditions warrant, to acquire its common stock and periodically authorize additional funds for the program. In February 2018, the board approved the repurchase of the Company's common stock of up to $200.0 million, in place of the remaining purchase amounts previously authorized. The Company repurchased 1,000,000 shares for $28.9 million under the program during the six months ended June 30, 2020. Under the program to date, the Company has repurchased 46,357,495 shares for approximately $612.3 million. As of June 30, 2020, the maximum remaining amount authorized for purchase under the stock repurchase program was $112.1 million.

Earnings (Loss) Per Share

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed in accordance with ASC 260, Earnings Per Share, based on weighted average outstanding common shares. Diluted earnings (loss) per share is computed based on basic weighted average outstanding common shares adjusted for the dilutive effect of stock options, RSUs, and certain contingently issuable shares for which performance targets have been achieved.

The following table reconciles the weighted average share amounts used to compute both basic and diluted earnings (loss) per share (in thousands):


	Three Months Ended June 30,			Six Months Ended June 30,
	2020	2019	2020	2019
Weighted average shares outstanding:
Basic weighted average shares outstanding	116,033	116,586	116,019	116,287
Add: Dilutive effect of stock options and RSUs	1,231	2,200	—	—
Diluted weighted average shares outstanding	117,264	118,786	116,019	116,287

The diluted earnings (loss) per share computation excludes 1.8 million and 2.1 million options to purchase shares, RSUs, and contingently issuable shares during the three months ended June 30, 2020 and 2019, respectively, as their effect would be anti-dilutive. The diluted loss per share computation excludes 6.1 million and 7.5 million options to purchase shares, RSUs, and contingently issuable shares during the six months ended June 30, 2020 and 2019, respectively, as their effect would be anti-dilutive.

Common stock outstanding as of June 30, 2020, and December 31, 2019, was 116,366,996 and 115,986,352, respectively.

Other, Net	6 Months Ended
Other, Net	Jun. 30, 2020
Other Income and Expenses [Abstract]
Other, Net	Other, NetOther, net is primarily comprised of foreign currency transaction gains of $1.9 million and $1.4 million for the three months ended June 30, 2020 and 2019, respectively. Other, net is primarily comprised of foreign currency transaction losses of $7.9 million and $0.5 million for the six months ended

Segment Information

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Segment Information

The Company reports financial performance based on its segments, ACI On Demand and ACI On Premise, and analyzes Segment Adjusted EBITDA as a measure of segment profitability.

The Company’s Chief Executive Officer is also the chief operating decision maker (“CODM”). The CODM, together with other senior management personnel, focus their review on consolidated financial information and the allocation of resources based on operating results, including revenues and Segment Adjusted EBITDA, for each segment, separate from Corporate operations.

ACI On Demand serves the needs of banks, merchants, and billers who use payments to facilitate their core business. These on-demand solutions are maintained and delivered through the cloud via our global data centers and are available in either a single-tenant environment for SaaS offerings, or in a multi-tenant environment for PaaS offerings.

ACI On Premise serves customers who manage their software on site or through a third-party public cloud environment. These on-premise customers use the Company’s software to develop sophisticated solutions, which are often part of a larger system located and managed at the customer specified site. These customers require a level of control and flexibility that ACI On Premise solutions can offer, and they have the resources and expertise to take a lead role in managing these solutions.

Revenue is attributed to the reportable segments based upon the product sold and mechanism for delivery to the customer. Expenses are attributed to the reportable segments in one of three methods: (1) direct costs of the segment, (2) labor costs that can be attributed based upon time tracking for individual products, or (3) costs that are allocated. Allocated costs are generally marketing and sales related activities as well as information technology and facilities related expense for which multiple segments benefit. The Company also allocates certain depreciation costs to the segments.

Segment Adjusted EBITDA is the measure reported to the CODM for purposes of making decisions on allocating resources and assessing the performance of the Company’s segments, and, therefore, Segment Adjusted EBITDA is presented in conformity with ASC 280, Segment Reporting. Segment Adjusted EBITDA is defined as earnings (loss) from operations before interest, income tax expense (benefit), depreciation and amortization (“EBITDA”) adjusted to exclude stock-based compensation, and net other income (expense).

Corporate and unallocated expenses consist of the corporate overhead costs that are not allocated to reportable segments. These overhead costs relate to human resources, finance, legal, accounting, merger and acquisition activity, and other costs that are not considered when management evaluates segment performance.

The following is selected financial data for the Company’s reportable segments for the periods indicated (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenue
ACI On Demand	$	180,573	$	172,499	$	373,523	$	282,347
ACI On Premise	119,337		125,119		217,872		221,126
Total revenue	$	299,910	$	297,618	$	591,395	$	503,473
Segment Adjusted EBITDA
ACI On Demand	$	33,071	$	17,340	$	56,192	$	17,078
ACI On Premise	59,093		57,069		90,002		85,337
Depreciation and amortization	(35,692)		(29,778)		(69,514)		(54,630)
Stock-based compensation expense	(7,932)		(14,372)		(14,882)		(20,957)
Corporate and unallocated expenses	(19,402)		(36,141)		(43,943)		(60,803)
Interest, net	(11,188)		(12,326)		(25,459)		(20,907)
Other, net	2,041		1,402		(7,717)		(510)
Income (loss) before income taxes	$	19,991	$	(16,806)	$	(15,321)	$	(55,392)
Depreciation and amortization
ACI On Demand	$	10,852	$	8,489	$	20,184	$	16,051
ACI On Premise	3,431		3,019		6,537		6,049
Corporate	21,409		18,270		42,793		32,530
Total depreciation and amortization	$	35,692	$	29,778	$	69,514	$	54,630
Stock-based compensation expense
ACI On Demand	$	2,273	$	2,214	$	4,299	$	4,165
ACI On Premise	2,279		2,051		4,309		4,007
Corporate	3,380		10,107		6,274		12,785
Total stock-based compensation expense	$	7,932	$	14,372	$	14,882	$	20,957

Assets are not allocated to segments, and the Company’s CODM does not evaluate operating segments using discrete asset information.

The following is revenue by primary geographic market and primary solution category for the Company’s reportable segments for the periods indicated (in thousands):


	Three Months Ended June 30, 2020										Three Months Ended June 30, 2019
	ACI On Demand		ACI On Premise		Total		ACI On Demand		ACI On Premise		Total
Primary Geographic Markets
Americas - United States	$	158,720	$	48,661	$	207,381	$	155,825	$	35,696	$	191,521
Americas - Other	2,419		1,250		3,669		2,107		12,413		14,520
EMEA	16,524		54,426		70,950		12,492		52,155		64,647
Asia Pacific	2,910		15,000		17,910		2,075		24,855		26,930
Total	$	180,573	$	119,337	$	299,910	$	172,499	$	125,119	$	297,618
Primary Solution Categories
Bill Payments	$	137,122	$	—	$	137,122	$	125,339	$	—	$	125,339
Digital Channels	7,328		7,771		15,099		18,011		9,444		27,455
Merchant Payments	21,413		5,596		27,009		17,942		7,637		25,579
Payments Intelligence	11,852		3,942		15,794		8,874		6,504		15,378
Real-Time Payments	1,004		24,952		25,956		907		21,809		22,716
Retail Payments	1,854		77,076		78,930		1,426		79,725		81,151
Total	$	180,573	$	119,337	$	299,910	$	172,499	$	125,119	$	297,618

	Six Months Ended June 30, 2020										Six Months Ended June 30, 2019
	ACI On Demand		ACI On Premise		Total		ACI On Demand		ACI On Premise		Total
Primary Geographic Markets
Americas - United States	$	334,374	$	77,800	$	412,174	$	248,861	$	62,118	$	310,979
Americas - Other	5,652		19,191		24,843		4,850		23,358		28,208
EMEA	27,442		83,381		110,823		24,560		94,606		119,166
Asia Pacific	6,055		37,500		43,555		4,076		41,044		45,120
Total	$	373,523	$	217,872	$	591,395	$	282,347	$	221,126	$	503,473
Primary Solution Categories
Bill Payments	$	290,808	$	—	$	290,808	$	194,306	$	—	$	194,306
Digital Channels	15,721		15,334		31,055		27,799		18,169		45,968
Merchant Payments	40,427		9,702		50,129		37,281		12,659		49,940
Payments Intelligence	20,865		8,055		28,920		17,855		13,541		31,396
Real-Time Payments	2,001		42,251		44,252		1,525		36,524		38,049
Retail Payments	3,701		142,530		146,231		3,581		140,233		143,814
Total	$	373,523	$	217,872	$	591,395	$	282,347	$	221,126	$	503,473

The following is the Company’s long-lived assets by geographic location for the periods indicated (in thousands):


	June 30, 2020		December 31, 2019
Long-lived Assets
United States	$	1,494,545	$	1,526,046
Other	731,324		759,501
Total	$	2,225,869	$	2,285,547

No single customer accounted for more than 10% of the Company’s consolidated revenues during the three and six months ended June 30, 2020 and 2019. No other country outside the United States accounted for more than 10% of the Company's consolidated revenues during the three and six months ended June 30, 2020 and 2019.

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

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Income Taxes	6 Months Ended
Income Taxes	Jun. 30, 2020
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes The effective tax rate for the three and six months ended June 30, 2020, was 30% and 32%, respectively. The Company reported tax expense on pretax income for the three months ended June 30, 2020 and a tax benefit on a pretax loss for the six months ended June 30, 2020. The Company’s foreign entities recognized earnings of $10.7 million and a loss of $3.7 million for the three and six months ended June 30, 2020, respectively. The effective tax rate for the three months ended June 30, 2020, was negatively impacted by state income tax charges on a domestic profit. The effective tax rate for the six months ended June 30, 2020, was positively impacted by equity compensation excess tax benefits and state income tax benefits on a domestic loss. The effective tax rate for the three and six months ended June 30, 2019, was 134% and 63%, respectively. The Company reported an overall tax benefit on a pretax loss for the three and six months ended June 30, 2019. The earnings of the Company’s foreign entities for the three and six months ended June 30, 2019, were $11.0 million and $4.8 million, respectively. The effective tax rates for the three and six months ended June 30, 2019, was positively impacted by state income tax benefits on a domestic loss. In addition, the Company released a majority of its valuation allowance established against its U.S. foreign tax credit deferred tax asset, resulting in a non-cash benefit to income tax expense of approximately $18.5 million. The Company released the valuation allowance following the acquisition of Speedpay and determined it would more likely than not be able to utilize the foreign tax credits in future years due to additional income provided by Speedpay. The Company’s effective tax rate could fluctuate on a quarterly basis due to the occurrence of significant and unusual or infrequent items, such as vesting of stock-based compensation or foreign currency gains and losses. The Company’s effective tax rate could also fluctuate due to changes in the valuation of its deferred tax assets or liabilities, or by changes in tax laws, regulations, accounting principles, or interpretations thereof. In addition, the Company is occasionally subject to examination of its income tax returns by tax authorities in the jurisdictions it operates. The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. As of June 30, 2020, and December 31, 2019, the amount of unrecognized tax benefits for uncertain tax positions was $30.0 million and $29.0 million, respectively, excluding related liabilities for interest and penalties of $1.2 million as of June 30, 2020 and December 31, 2019. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits will decrease within the next 12 months by approximately $11.7 million, due to the settlement of various audits and the expiration of statutes of limitation.

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

Condensed Consolidated Financial Statements (Policies)

6 Months Ended

Jun. 30, 2020

Settlement Assets and Liabilities

Off Balance Sheet Settlement Accounts

Off Balance Sheet Settlement AccountsThe Company also enters into agreements with certain Biller clients to process payment funds on their behalf. When an ACH or automated teller machine network payment transaction is processed, a transaction is initiated to withdraw funds from the designated source account and deposit them into a settlement account, which is a trust account maintained for the benefit of the Company’s clients. A simultaneous transaction is initiated to transfer funds from the settlement account to the intended destination account. These “back to back” transactions are designed to settle at the same time, usually overnight, such that the Company receives the funds from the source at the same time as it sends the funds to their destination. However, due to the transactions being with various financial institutions there may be timing differences that result in float balances. These funds are maintained in accounts for the benefit of the client, which is separate from the Company’s corporate assets. As the Company does not take ownership of the funds, these settlement accounts are not included in the Company’s balance sheet. The Company is entitled to interest earned on the fund balances. The collection of interest on these settlement accounts is considered in the Company’s determination of its fee structure for clients and represents a portion of the payment for services performed by the Company.

Fair Value

Fair ValueThe fair value of the Company’s Credit Agreement approximates the carrying value due to the floating interest rate (Level 2 of the fair value hierarchy). The Company measures the fair value of its Senior Notes based on Level 2 inputs, which include quoted market prices and interest rate spreads of similar securities.

Goodwill

Changes in the carrying amount of goodwill attributable to each reporting unit during the six months ended June 30, 2020, were as follows (in thousands):


	ACI On Demand		ACI On Premise		Total
Gross Balance, prior to December 31, 2019	$	554,617	$	773,340	$	1,327,957
Total impairment prior to December 31, 2019	—		(47,432)		(47,432)
Balance, December 31, 2019	554,617		725,908		1,280,525
Goodwill from acquisitions (1)	(299)		—		(299)
Balance, June 30, 2020	$	554,318	$	725,908	$	1,280,226

Recent Accounting Standards

New Accounting Standards Recently Adopted

Recently Issued Accounting Standards Not Yet Effective

Condensed Consolidated Financial Statements (Tables)

6 Months Ended

Jun. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Summary of Other Current Liabilities

The components of other current liabilities are included in the following table (in thousands):


	June 30, 2020		December 31, 2019
Operating lease liabilities	$	13,976	$	15,049
Vendor financed licenses	17,873		9,667
Royalties payable	5,097		6,107
Accrued interest	8,868		9,212
Other	33,181		36,936
Total other current liabilities	$	78,995	$	76,971

Summary of Changes in the Carrying Amount of Goodwill

Changes in the carrying amount of goodwill attributable to each reporting unit during the six months ended June 30, 2020, were as follows (in thousands):


	ACI On Demand		ACI On Premise		Total
Gross Balance, prior to December 31, 2019	$	554,617	$	773,340	$	1,327,957
Total impairment prior to December 31, 2019	—		(47,432)		(47,432)
Balance, December 31, 2019	554,617		725,908		1,280,525
Goodwill from acquisitions (1)	(299)		—		(299)
Balance, June 30, 2020	$	554,318	$	725,908	$	1,280,226

Revenue (Tables)

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Summary of Total Receivables, Net

Total receivables, net is comprised of the following (in thousands):


	June 30, 2020		December 31, 2019
Billed receivables	$	183,408	$	213,654
Allowance for doubtful accounts	(3,661)		(5,149)
Billed receivables, net	179,747		208,505
Accrued receivables	374,845		399,302
Significant financing component	(29,969)		(35,569)
Total accrued receivables, net	344,876		363,733
Less: current accrued receivables	155,320		161,714
Less: current significant financing component	(10,408)		(11,022)
Total long-term accrued receivables, net	199,964		213,041
Total receivables, net	$	524,623	$	572,238

Summary of Changes in Deferred Revenue

Changes in deferred revenue were as follows (in thousands):


Balance, December 31, 2019	$	118,939
Deferral of revenue	80,744
Recognition of deferred revenue	(60,410)
Foreign currency translation	(1,852)
Balance, June 30, 2020	$	137,421

Acquisition (Tables)

6 Months Ended

Jun. 30, 2020

Business Combinations [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

In connection with the acquisition, the Company recorded the following amounts based upon its purchase price allocation as of June 30, 2020 (in thousands, except weighted average useful lives):


	Amount		Weighted Average Useful Lives
Current assets:
Cash and cash equivalents	$	135
Receivables, net of allowances	17,658
Settlement assets	239,604
Prepaid expenses	317
Other current assets	19,585
Total current assets acquired	277,299
Noncurrent assets:
Goodwill	366,508
Software	113,600		7 years
Customer relationships	208,500		15 years
Trademarks	10,900		5 years
Other noncurrent assets	3,745
Total assets acquired	980,552
Current liabilities:
Accounts payable	6,623
Settlement liabilities	212,892
Employee compensation	1,959
Other current liabilities	3,802
Total current liabilities acquired	225,276
Noncurrent liabilities:
Other noncurrent liabilities	1,219
Total liabilities acquired	226,495
Net assets acquired	$	754,057

Summary of Unaudited Summarized Pro Forma Financial Information

The following is the unaudited summarized pro forma financial information (in thousands, except per share data):


	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Pro forma revenue	$	334,077	$	628,136
Pro forma net income (loss)	$	15,249	$	(5,996)
Pro forma income (loss) per share:
Basic	$	0.13	$	(0.05)
Diluted	$	0.13	$	(0.05)

Debt (Tables)

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Summary of Maturities on Debt Outstanding

Maturities on debt outstanding as of June 30, 2020, are as follows (in thousands):


Fiscal Year Ending December 31,
Remainder of 2020	$	19,475
2021	38,950
2022	50,431
2023	69,906
2024	757,823
Thereafter	400,000
Total	$	1,336,585

Summary of Total Debt

Total debt is comprised of the following (in thousands):


	June 30, 2020		December 31, 2019
Term loans	$	736,585	$	756,060
Revolving credit facility	200,000		239,000
5.750% Senior notes, due August 2026	400,000		400,000
Debt issuance costs	(19,490)		(21,905)
Total debt	1,317,095		1,373,155
Less: current portion of term loans	38,950		38,950
Less: current portion of debt issuance costs	(4,744)		(4,802)
Total long-term debt	$	1,282,889	$	1,339,007

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

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