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Table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 10-Q
____________________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-25346
___________________________
ACI WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
___________________________
Delaware47-0772104
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
2811 Ponce de Leon BlvdPH 1Coral Gables,Florida33134
(Address of principal executive offices)(Zip code)
(305) 894-2200
(Registrant’s telephone number, including area code)
______________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of the Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒
As of May 2, 2022, there were 114,786,563 shares of the registrant’s common stock outstanding.
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.005 par valueACIWNasdaq Global Select Market



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TABLE OF CONTENTS
Page
Item 1

2

Table of contents
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands, except share and per share amounts)
March 31, 2022December 31, 2021
ASSETS
Current assets
Cash and cash equivalents
$114,754 $122,059 
Receivables, net of allowances of $2,980 and $2,861, respectively
310,778 320,405 
Settlement assets
531,804 452,396 
Prepaid expenses
33,465 24,698 
Other current assets
18,926 17,876 
Total current assets1,009,727 937,434 
Noncurrent assets
Accrued receivables, net
276,731 276,164 
Property and equipment, net
60,770 63,050 
Operating lease right-of-use assets
47,161 47,825 
Software, net
146,952 157,782 
Goodwill
1,280,226 1,280,226 
Intangible assets, net
273,527 283,004 
Deferred income taxes, net
51,243 50,778 
Other noncurrent assets
64,108 62,478 
TOTAL ASSETS$3,210,445 $3,158,741 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable
$38,929 $41,312 
Settlement liabilities
531,148 451,575 
Employee compensation
32,316 51,379 
Current portion of long-term debt50,778 45,870 
Deferred revenue
92,518 84,425 
Other current liabilities
67,923 79,594 
Total current liabilities813,612 754,155 
Noncurrent liabilities
Deferred revenue27,790 25,925 
Long-term debt1,036,380 1,019,872 
Deferred income taxes, net32,519 36,122 
Operating lease liabilities41,718 43,346 
Other noncurrent liabilities33,759 34,544 
Total liabilities1,985,778 1,913,964 
Commitments and contingencies
Stockholders’ equity
Preferred stock; $0.01 par value; 5,000,000 shares authorized; no shares issued at March 31, 2022, and December 31, 2021
  
Common stock; $0.005 par value; 280,000,000 shares authorized; 140,525,055 shares issued at March 31, 2022, and December 31, 2021
702 702 
Additional paid-in capital685,354 688,313 
Retained earnings1,146,771 1,131,281 
Treasury stock, at cost, 25,439,428 and 24,795,009 shares at March 31, 2022, and December 31, 2021, respectively
(506,513)(475,972)
Accumulated other comprehensive loss(101,647)(99,547)
Total stockholders’ equity1,224,667 1,244,777 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$3,210,445 $3,158,741 
The accompanying notes are an integral part of the condensed consolidated financial statements.
3

Table of contents
ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)
Three Months Ended March 31,
20222021
Revenues
Software as a service and platform as a service
$194,562 $195,746 
License
60,285 21,202 
Maintenance
51,418 52,363 
Services
16,815 15,875 
Total revenues
323,080 285,186 
Operating expenses
Cost of revenue (1)
166,286 159,485 
Research and development
37,807 34,514 
Selling and marketing
34,608 28,138 
General and administrative
25,875 27,775 
Depreciation and amortization
30,838 31,584 
Total operating expenses
295,414 281,496 
Operating income27,666 3,690 
Other income (expense)
Interest expense
(10,894)(11,475)
Interest income
3,159 2,854 
Other, net
2,250 (1,382)
Total other income (expense)(5,485)(10,003)
Income (loss) before income taxes22,181 (6,313)
Income tax expense (benefit)6,691 (4,368)
Net income (loss)$15,490 $(1,945)
Income (loss) per common share
Basic
$0.13 $(0.02)
Diluted
$0.13 $(0.02)
Weighted average common shares outstanding
Basic115,287 117,491 
Diluted116,098 117,491 

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

The accompanying notes are an integral part of the condensed consolidated financial statements.
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ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited and in thousands)
 
Three Months Ended March 31,
20222021
Net income (loss)$15,490 $(1,945)
Other comprehensive loss:
Foreign currency translation adjustments
(2,100)(3,116)
Total other comprehensive loss(2,100)(3,116)
Comprehensive income (loss)$13,390 $(5,061)

The accompanying notes are an integral part of the condensed consolidated financial statements.
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ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited and in thousands, except share amounts)
Three Months Ended March 31, 2022
Common Stock
Additional
Paid-in Capital
Retained EarningsTreasury Stock
Accumulated Other
Comprehensive Loss
Total
Balance as of December 31, 2021$702 $688,313 $1,131,281 $(475,972)$(99,547)$1,244,777 
Net income— — 15,490 — — 15,490 
Other comprehensive loss— — — — (2,100)(2,100)
Stock-based compensation
— 7,958 — — — 7,958 
Shares issued and forfeited, net, under stock plans
— (10,917)— 12,856 — 1,939 
Repurchase of 1,131,248 shares of common stock
— — — (37,860)— (37,860)
Repurchase of stock-based compensation awards for tax withholdings
— — — (5,537)— (5,537)
Balance as of March 31, 2022$702 $685,354 $1,146,771 $(506,513)$(101,647)$1,224,667 
Three Months Ended March 31, 2021
Common Stock
Additional
Paid-in Capital
Retained Earnings
Treasury Stock
Accumulated Other
Comprehensive Loss
Total
Balance as of December 31, 2020$702 $682,431 $1,003,490 $(387,581)$(92,445)$1,206,597 
Net loss— — (1,945)— — (1,945)
Other comprehensive loss
— — — — (3,116)(3,116)
Stock-based compensation
— 6,703 — — — 6,703 
Shares issued and forfeited, net, under stock plans
— (19,116)— 22,800 — 3,684 
Repurchase of stock-based compensation awards for tax withholdings
— — — (14,206)— (14,206)
Balance as of March 31, 2021$702 $670,018 $1,001,545 $(378,987)$(95,561)$1,197,717 
The accompanying notes are an integral part of the condensed consolidated financial statements.
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ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
Three Months Ended March 31,
20222021
Cash flows from operating activities:
Net income (loss)$15,490 $(1,945)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation
4,981 5,416 
Amortization
26,508 28,167 
Amortization of operating lease right-of-use assets
2,716 2,345 
Amortization of deferred debt issuance costs
1,153 1,182 
Deferred income taxes
(3,367)(6,078)
Stock-based compensation expense
7,958 6,703 
Other
601 (106)
Changes in operating assets and liabilities:
Receivables
9,660 76,135 
Accounts payable
(2,748)(2,808)
Accrued employee compensation
(19,138)(12,725)
Deferred revenue
9,949 8,152 
Other current and noncurrent assets and liabilities
(24,889)(34,681)
Net cash flows from operating activities
28,874 69,757 
Cash flows from investing activities:
Purchases of property and equipment
(2,280)(4,346)
Purchases of software and distribution rights
(6,207)(8,053)
Net cash flows from investing activities
(8,487)(12,399)
Cash flows from financing activities:
Proceeds from issuance of common stock
906 1,052 
Proceeds from exercises of stock options
1,022 2,799 
Repurchase of stock-based compensation awards for tax withholdings(5,537)(14,206)
Repurchases of common stock
(37,860) 
Proceeds from revolving credit facility
40,000  
Repayment of revolving credit facility
(10,000)(15,000)
Repayment of term portion of credit agreement
(9,738)(9,738)
Payments on or proceeds from other debt, net(4,186)(3,600)
Net decrease in settlement assets and liabilities(605)(71,264)
Net cash flows from financing activities
(25,998)(109,957)
Effect of exchange rate fluctuations on cash(2,464)(41)
Net decrease in cash and cash equivalents(8,075)(52,640)
Cash and cash equivalents, including settlement deposits, beginning of period184,142 265,382 
Cash and cash equivalents, including settlement deposits, end of period$176,067 $212,742 
Reconciliation of cash and cash equivalents to the Consolidated Balance Sheets
Cash and cash equivalents$114,754 $184,364 
Settlement deposits61,313 28,378 
Total cash and cash equivalents, including settlement deposits$176,067 $212,742 
Supplemental cash flow information
Income taxes paid
$8,418 $10,713 
Interest paid
$15,492 $15,954 
The accompanying notes are an integral part of the condensed consolidated financial statements.
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ACI WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. 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 March 31, 2022, and for the three months ended March 31, 2022 and 2021, 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, 2021, 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, 2021, filed on February 24, 2022. Results for the three months ended March 31, 2022, 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. These estimates and assumptions are affected by management’s application of accounting policies, as well as uncertainty in the current economic environment due to COVID-19. Actual results could differ from those estimates.

Revision of Prior Period Financial Statements
As of December 31, 2021, the Company revised the previously reported consolidated statements of cash flows to include settlement deposits in total cash and cash equivalents and settlement receivables and settlement liabilities net activity in cash flows from financing activities, both of which were previously included in cash flows from operating activities. This immaterial revision did not have an effect on its previously reported consolidated balance sheets, statements of operations, statements of comprehensive income, or statements of stockholders' equity.
A summary of the revisions to the previously reported balances are presented in the table below for comparative purposes (in thousands):
Three Months Ended March 31, 2021
As reportedRevision adjustmentAs revised
Cash flows from operating activities:
Other current and noncurrent assets and liabilities$(34,315)$(366)$(34,681)
Net cash flows from operating activities70,123 (366)69,757 
Cash flows from financing activities:
Net decrease in settlement assets and liabilities$ $(71,264)$(71,264)
Net cash flows from financing activities(38,693)(71,264)(109,957)
Net increase (decrease) in cash and cash equivalents$18,990 $(71,630)$(52,640)
Cash and cash equivalents, including settlement deposits, beginning of period165,374 100,008 265,382 
Cash and cash equivalents, including settlement deposits, end of period184,364 28,378 212,742 






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Other Current Liabilities
The components of other current liabilities are included in the following table (in thousands):
March 31, 2022December 31, 2021
Operating lease liabilities$12,226 $11,518 
Vendor financed licenses9,729 12,521 
Accrued interest3,020 8,776 
Royalties payable2,331 4,102 
Other40,617 42,677 
Total other current liabilities$67,923 $79,594 

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 March 31, 2022, and December 31, 2021, was $198.1 million and $272.8 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 $411.5 million and $419.0 million as of March 31, 2022, and December 31, 2021, 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).











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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 operating segments, Banks, Merchants, and Billers, as the reporting units. As of March 31, 2022, the Company's goodwill balance of $1.3 billion was allocated $725.9 million to Banks, $137.3 million to Merchants, and $417.0 million to Billers.

Recoverability of goodwill is measured using a discounted cash flow 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, 2021, annual impairment test and there have been no indications of impairment in the subsequent periods.

Equity Method Investment
In July 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 $18.9 million and $19.3 million, which is included in other noncurrent assets in the condensed consolidated balance sheet as of March 31, 2022, and December 31, 2021, respectively.

2. 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 9, Segment Information, for additional information, including disaggregation of revenue based on primary solution category.

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):
March 31, 2022December 31, 2021
Billed receivables$152,027 $162,479 
Allowance for doubtful accounts(2,980)(2,861)
Billed receivables, net149,047 159,618 
Current accrued receivables, net161,731 160,787 
Long-term accrued receivables, net276,731 276,164 
Total accrued receivables, net438,462 436,951 
Total receivables, net$587,509 $596,569 

One customer accounted for 13.8% of the Company's consolidated receivables balance as of March 31, 2022 and December 31, 2021.
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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, 2021
$110,350 
Deferral of revenue38,201 
Recognition of deferred revenue(28,109)
Foreign currency translation(133)
Balance, March 31, 2022
$120,308 

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 or meets the allocation objective.

Revenue allocated to remaining performance obligations was $788.8 million as of March 31, 2022, of which the Company expects to recognize approximately 45% over the next 12 months and the remainder thereafter.

During the three months ended March 31, 2022 and 2021, revenue recognized by the Company from performance obligations satisfied in previous periods was not significant.
3. Debt
As of March 31, 2022, the Company had $30.0 million, $668.4 million, and $400.0 million outstanding under its Revolving Credit Facility, Term Loans, and Senior Notes, respectively, with up to $468.5 million of unused borrowings under the Revolving Credit Facility portion of the Credit Agreement, as amended, and up to $1.5 million of unused borrowings under the Letter of Credit agreement. The amount of unused borrowings actually available varies in accordance with the terms of the agreement.

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 March 31, 2022, was 2.20%.

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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.

Expected Discontinuation of LIBOR
The administrator of LIBOR announced it would cease publication of the U.S. dollar LIBOR settings immediately following the LIBOR publication on June 30, 2023. 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 U.S dollar LIBOR and the maturity date of the Credit Agreement extends beyond June 30, 2023. 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 March 31, 2022, are as follows (in thousands):
Fiscal Year Ending December 31,
Remainder of 2022$40,694 
202369,906 
2024587,823 
2025 
2026400,000 
Thereafter 
Total$1,098,423 

As of March 31, 2022, 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):
March 31, 2022December 31, 2021
Term loans$668,423 $678,160 
Revolving credit facility30,000  
5.750% Senior notes, due August 2026
400,000 400,000 
Debt issuance costs(11,265)(12,418)
Total debt1,087,158 1,065,742 
Less: current portion of term loans55,300 50,431 
Less: current portion of debt issuance costs(4,522)(4,561)
Total long-term debt$1,036,380 $1,019,872 






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Overdraft Facility
In 2019, the Company and ACI Payments, Inc. entered in to an uncommitted overdraft facility with Bank of America, N.A. The overdraft facility bears interest at the federal funds effective rate plus 2.250% 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 March 31, 2022, there was $75.0 million available and no amount outstanding on the overdraft facility. As of December 31, 2021, there was no amount 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 March 31, 2022, $2.3 million was outstanding on these agreements, all of which is included in other current liabilities in the condensed consolidated balance sheet. As of December 31, 2021, $2.9 million was outstanding on these agreements, all of which is included in other current liabilities in the condensed consolidated balance sheet.
4. 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):
March 31, 2022December 31, 2021
Gross Carrying AmountAccumulated AmortizationNet BalanceGross Carrying AmountAccumulated AmortizationNet Balance
Software for internal use$443,487 $(296,535)$146,952 $440,242 $(283,109)$157,133 
Software for resale126,934 (126,934) 127,904 (127,255)649 
Total software$570,421 $(423,469)$146,952 $568,146 $(410,364)$157,782 
Amortization of software for internal use is computed using the straight-line method over an estimated useful life of generally three to eight years. Software for internal use amortization expense recorded during the three months ended March 31, 2022 and 2021, totaled $16.7 million and $16.9 million, respectively. These software amortization expense amounts are reflected in depreciation and amortization in the condensed consolidated statements of operations.

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 March 31, 2022 and 2021, totaled $0.7 million and $2.0 million, respectively. These software amortization expense amounts are reflected in cost of revenue 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):
March 31, 2022December 31, 2021
Gross Carrying AmountAccumulated AmortizationNet BalanceGross Carrying AmountAccumulated AmortizationNet Balance
Customer relationships$507,264 $(238,384)$268,880 $507,962 $(230,152)$277,810 
Trademarks and trade names23,701 (19,054)4,647 23,839 (18,645)5,194 
Total other intangible assets$530,965 $(257,438)$273,527 $531,801 $(248,797)$283,004 

Other intangible assets amortization expense recorded during both the three months ended March 31, 2022 and 2021, totaled $9.2 million and $9.3 million, respectively.

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Based on capitalized intangible assets as of March 31, 2022, estimated amortization expense amounts in future fiscal years are as follows (in thousands):
Fiscal Year Ending December 31,Software AmortizationOther Intangible Assets Amortization
Remainder of 2022$46,543 $27,385 
202344,509 36,231 
202427,692 31,754 
202520,353 23,232 
20267,801 23,232 
Thereafter54 131,693 
Total$146,952 $273,527 

5. Stock-Based Compensation Plans
Employee Stock Purchase Plan
Shares issued under the 2017 Employee Stock Purchase Plan during the three months ended March 31, 2022 and 2021, totaled 31,406 and 27,117, respectively.

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, 20211,640,319 $18.42 
Exercised(57,083)17.91 
Outstanding as of March 31, 20221,583,236 $18.44 3.12$20,657,176 
Exercisable as of March 31, 20221,583,236 $18.44 3.12$20,657,176 


The total intrinsic value of stock options exercised during the three months ended March 31, 2022 and 2021, was $0.9 million and $3.1 million, respectively. There were no stock options granted during the three months ended March 31, 2022 or 2021.

Total Shareholder Return Awards
A summary of nonvested total shareholder return awards ("TSRs") is as follows:
Number of
Shares
Weighted Average
Grant Date Fair Value
Nonvested as of December 31, 20211,154,721 $40.10 
Granted520,020 42.99 
Vested(212,210)45.86 
Forfeited(7,114)43.22 
Change in payout rate(114,355)45.92 
Nonvested as of March 31, 20221,341,062 $39.79 

During the three months ended March 31, 2022, a total of 212,210 TSRs awards granted in fiscal 2019 vested and achieved a payout rate of 65% based on the Company's total shareholder return as compared to a group of peer companies over a three-
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year performance period. The Company withheld 47,612 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

The fair value of TSRs granted during the three months ended March 31, 2022 and 2021, were estimated on the date of grant using the Monte Carlo simulation model, acceptable under ASC 718, Compensation - Stock Compensation, using the following weighted average assumptions:
Three Months Ended March 31,
20222021
Expected life (years)3.12.8
Risk-free interest rate1.5 %0.3 %
Expected volatility40.0 %41.2 %
Expected dividend yield  

Restricted Share Units
A summary of nonvested restricted share unit awards ("RSUs") is as follows:
Number of
Shares
Weighted Average
Grant Date Fair Value
Nonvested as of December 31, 2021946,151 $33.57 
Granted756,517 31.69 
Vested(356,079)31.72 
Forfeited(9,364)33.38 
Nonvested as of March 31, 20221,337,225 $33.00 

During the three months ended March 31, 2022, a total of 356,079 RSUs vested. The Company withheld 122,337 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

As of March 31, 2022, there were unrecognized compensation costs of $39.6 million and $36.1 million related to nonvested RSUs and TSRs, respectively, which the Company expects to recognize over weighted average periods of 2.4 years.

The Company recorded stock-based compensation expense recognized under ASC 718 for the three months ended March 31, 2022 and 2021, of $8.0 million and $6.7 million, respectively, with corresponding tax benefits of $1.1 million and $1.0 million, respectively.
6. 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 December 2021, the board approved the repurchase of the Company's common stock of up to $250.0 million, in place of the remaining purchase amounts previously authorized.

The Company repurchased 1,131,248 shares for $37.9 million during the three months ended March 31, 2022. Under the program to date, the Company has repurchased 50,488,743 shares for approximately $757.6 million. As of March 31, 2022, the maximum remaining amount authorized for purchase under the stock repurchase program was $178.4 million.

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7. 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 March 31,
20222021
Weighted average shares outstanding:
Basic weighted average shares outstanding115,287 117,491 
Add: Dilutive effect of stock options and RSUs811  
Diluted weighted average shares outstanding116,098 117,491 

The diluted earnings (loss) per share computation excludes 1.8 million and 4.5 million options to purchase shares, RSUs, and contingently issuable shares during the three months ended March 31, 2022 and 2021, respectively, as their effect would be anti-dilutive.

Common stock outstanding as of March 31, 2022, and December 31, 2021, was 115,085,627 and 115,730,046, respectively.
8. Other, Net
Other, net is primarily comprised of foreign currency transaction gains and losses. Other, net was $2.3 million of income and $1.4 million of expense for the three months ended March 31, 2022 and 2021, respectively.
9. Segment Information
The Company reports financial performance based on its operating segments, Banks, Merchants, and Billers, 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. No operating segments have been aggregated to form the reportable segments.

Banks. ACI provides payment solutions to large and mid-size banks globally for retail banking, real time, digital, and other payment services. These solutions transform banks’ complex payment environments to speed time to market, reduce costs, and deliver a consistent experience to customers across channels while enabling them to prevent and rapidly react to fraudulent activity. In addition, they enable banks to meet the requirements of different real-time payments schemes and to quickly create differentiated products to meet consumer, business, and merchant demands.

Merchants. ACI’s support of merchants globally includes Tier 1 and Tier 2 merchants, online-only merchants and the payment service providers, independent selling organizations, value-added resellers, and acquirers who service them. These customers operate in a variety of verticals, including general merchandise, grocery, hospitality, dining, transportation, and others. The Company's solutions provide merchants with a secure, omni-channel payments platform that gives them independence from third-party payment providers. They also offer secure solutions to online-only merchants that provide consumers with a convenient and seamless way to shop.

Billers. Within the billers segment, ACI provides electronic bill presentment and payment (“EBPP”) services to companies operating in the consumer finance, insurance, healthcare, higher education, utility, government, and mortgage categories. The solutions enable these customers to support a wide range of payment options and provide a convenient consumer payments experience that drives consumer loyalty and increases revenue.

Revenue is attributed to the reportable segments based upon 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 projects, or (3) costs that are allocated. Allocated costs are generally marketing and sales related activities.

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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 net other income (expense).

Corporate and unallocated expenses includes global facilities and information technology costs and long-term product roadmap expenses in addition to corporate overhead costs that are not allocated to reportable segments. The overhead costs relate to human resources, finance, legal, accounting, and merger and acquisition activity. These costs along with depreciation and amortization and stock-based compensation 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 March 31,
20222021
Revenue
Banks$132,198 $95,917 
Merchants41,002 38,670 
Billers149,880 150,599 
Total revenue$323,080 $285,186 
Segment Adjusted EBITDA
Banks$64,714 $37,195 
Merchants14,713 14,725 
Billers26,357 34,021 
Depreciation and amortization(31,489)(33,583)
Stock-based compensation expense(7,958)(6,703)
Corporate and unallocated expenses(38,671)(41,965)
Interest, net(7,735)(8,621)
Other, net2,250 (1,382)
Income (loss) before income taxes$22,181 $(6,313)

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

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The following is revenue by primary solution category for the Company’s reportable segments for the periods indicated (in thousands):
Three Months Ended March 31, 2022
BanksMerchantsBillersTotal
Primary Solution Categories
Bill Payments$ $ $149,880 $149,880 
Digital Business Banking13,488   13,488 
Merchant Payments 41,002  41,002 
Fraud Management7,777   7,777 
Real-Time Payments21,927   21,927 
Issuing and Acquiring89,006   89,006 
Total$132,198 $41,002 $149,880 $323,080 
Three Months Ended March 31, 2021
BanksMerchantsBillersTotal
Primary Solution Categories
Bill Payments$ $ $150,599 $150,599 
Digital Business Banking15,092   15,092 
Merchant Payments 38,670  38,670 
Fraud Management6,224   6,224 
Real-Time Payments13,185   13,185 
Issuing and Acquiring61,416   61,416 
Total$95,917 $38,670 $150,599 $285,186 

Three Months Ended March 31,
20222021
Banks
Software as a service and platform as a service$13,952 $14,278 
License54,439 18,018 
Maintenance47,343 48,031 
Services16,464 15,590 
Total$132,198 $95,917 
Merchants
Software as a service and platform as a service$30,767 $31,043 
License5,846 3,090 
Maintenance4,038 4,252 
Services351 285 
Total$41,002 $38,670 
Billers
Software as a service and platform as a service$149,843 $150,425 
License 94 
Maintenance37 80 
Services  
Total$149,880 $150,599 

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The following is the Company's revenue by geographic location for the periods indicated (in thousands):
Three Months Ended March 31,
20222021
Revenue