0000935036-23-000019 | 10-Q | XBRL Viewer

General and administrative

$ 289,676

$ 323,080

Operating expenses

Cost of revenue

^[1]

178,554

166,286

Research and development

37,118

37,807

Selling and marketing

35,435

34,608

31,382

25,875

Depreciation and amortization

31,539

30,838

Total operating expenses

314,028

295,414

Operating income (loss)

(24,352)

27,666

Other income (expense)

Interest expense

(18,892)

(10,894)

Interest income

3,505

3,159

Other, net

(3,395)

2,250

Total other income (expense)

(18,782)

(5,485)

Income (loss) before income taxes

(43,134)

22,181

Income tax expense (benefit)

(10,826)

6,691

Net income (loss)

$ (32,308)

$ 15,490

Income (loss) per common share

Basic (in dollars per share)

$ (0.30)

$ 0.13

Diluted (in dollars per share)

$ (0.30)

$ 0.13

Weighted average common shares outstanding

Basic (in shares)

108,156

115,287

Diluted (in shares)

108,156

116,098

Software as a service and platform as a service

Revenues

$ 204,930

$ 194,562

License

Revenues

18,331

60,285

Maintenance

Revenues

50,103

51,418

Services

Revenues

$ 16,312

$ 16,815

[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
	Mar. 31, 2023	Mar. 31, 2022
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ (32,308)	$ 15,490
Other comprehensive income (loss):
Foreign currency translation adjustments	3,618	(2,100)
Total other comprehensive income (loss)	3,618	(2,100)
Comprehensive income (loss)	$ (28,690)	$ 13,390

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, 2021	$ 1,244,777	$ 702	$ 688,313	$ 1,131,281	$ (475,972)	$ (99,547)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	15,490			15,490
Other comprehensive income (loss)	(2,100)					(2,100)
Stock-based compensation	7,958		7,958
Shares issued and forfeited, net, under stock plans	1,939		(10,917)		12,856
Repurchase of shares of common stock	(37,860)				(37,860)
Repurchase of stock-based compensation awards for tax withholdings	(5,537)				(5,537)
Ending balance at Mar. 31, 2022	1,224,667	702	685,354	1,146,771	(506,513)	(101,647)
Beginning balance at Dec. 31, 2022	1,193,187	702	702,458	1,273,458	(665,771)	(117,660)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(32,308)			(32,308)
Other comprehensive income (loss)	3,618					3,618
Stock-based compensation	5,301		5,301
Shares issued and forfeited, net, under stock plans	830		(6,719)		7,549
Repurchase of stock-based compensation awards for tax withholdings	(3,001)				(3,001)
Ending balance at Mar. 31, 2023	$ 1,167,627	$ 702	$ 701,040	$ 1,241,150	$ (661,223)	$ (114,042)

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

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.

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Organization, Consolidation and Presentation of Financial Statements [Abstract]

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Statement of Stockholders' Equity [Abstract]
Repurchase of common stock (in shares)	0	1,131,248

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash flows from operating activities:
Net income (loss)	$ (32,308)	$ 15,490
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation	6,131	4,981
Amortization	25,408	26,508
Amortization of operating lease right-of-use assets	2,767	2,716
Amortization of deferred debt issuance costs	1,115	1,153
Deferred income taxes	(10,382)	(3,367)
Stock-based compensation expense	5,301	7,958
Other	(290)	601
Changes in operating assets and liabilities:
Receivables	88,960	9,660
Accounts payable	(1,308)	(2,748)
Accrued employee compensation	(15,593)	(19,138)
Deferred revenue	10,202	9,949
Other current and noncurrent assets and liabilities	(39,935)	(24,889)
Net cash flows from operating activities	40,068	28,874
Cash flows from investing activities:
Purchases of property and equipment	(2,258)	(2,280)
Purchases of software and distribution rights	(6,481)	(6,207)
Net cash flows from investing activities	(8,739)	(8,487)
Cash flows from financing activities:
Proceeds from issuance of common stock	707	906
Proceeds from exercises of stock options	78	1,022
Repurchase of stock-based compensation awards for tax withholdings	(3,001)	(5,537)
Repurchases of common stock	0	(37,860)
Proceeds from revolving credit facility	50,000	40,000
Repayment of revolving credit facility	(45,000)	(10,000)
Repayment of term portion of credit agreement	(14,606)	(9,738)
Payments on or proceeds from other debt, net	(5,670)	(4,186)
Net decrease in settlement assets and liabilities	(2,834)	(605)
Net cash flows from financing activities	(20,326)	(25,998)
Effect of exchange rate fluctuations on cash	2,557	(2,464)
Net increase (decrease) in cash and cash equivalents	13,560	(8,075)
Cash and cash equivalents, including settlement deposits, beginning of period	214,672	184,142
Cash and cash equivalents, including settlement deposits, end of period	228,232	176,067
Cash and cash equivalents	142,412	114,754
Settlement deposits	85,820	61,313
Total cash and cash equivalents, including settlement deposits	228,232	176,067
Supplemental cash flow information
Income taxes paid	17,268	8,418
Interest paid	$ 23,403	$ 15,492

Condensed Consolidated Financial Statements

3 Months Ended

Mar. 31, 2023

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, 2023, and for the three months ended March 31, 2023 and 2022, 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, 2022, 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, 2022, filed on March 1, 2023. Results for the three months ended March 31, 2023, 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. Actual results could differ from those estimates.

Other Current Liabilities

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


	March 31, 2023		December 31, 2022
Operating lease liabilities	$	11,049	$	11,218
Vendor financed licenses	9,418		13,525
Accrued interest	3,370		9,067
Royalties payable	2,696		3,726
Other	44,131		65,109
Total other current liabilities	$	70,664	$	102,645

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, 2023, and December 31, 2022, was $300.6 million and $328.7 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 $399.0 million and $390.0 million as of March 31, 2023, and December 31, 2022, 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 operating segments, Banks, Merchants, and Billers, as the reporting units. As of March 31, 2023, the Company's goodwill balance of $1.2 billion was allocated $671.7 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, 2022, 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 $18.0 million and $17.9 million, which is included in other noncurrent assets in the condensed consolidated balance sheet as of March 31, 2023, and December 31, 2022, respectively.

Revenue

3 Months Ended

Mar. 31, 2023

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.

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, 2023		December 31, 2022
Billed receivables	$	153,420	$	218,611
Allowance for doubtful accounts	(3,179)		(3,779)
Billed receivables, net	150,241		214,832
Current accrued receivables, net	192,524		188,949
Long-term accrued receivables, net	270,332		297,818
Total accrued receivables, net	462,856		486,767
Total receivables, net	$	613,097	$	701,599

One customer accounted for 10.5% and 10.1% of the Company's consolidated receivables balance as of March 31, 2023 and December 31, 2022, respectively.

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, 2022	$	81,536
Deferral of revenue	31,518
Recognition of deferred revenue	(21,465)
Foreign currency translation	49
Balance, March 31, 2023	$	91,638

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 $651.4 million as of March 31, 2023, of which the Company expects to recognize approximately 50% over the next 12 months and the remainder thereafter.

During the three months ended March 31, 2023 and 2022, 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
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-Name Accounting Standards Codification
-Topic 606
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Divestiture	3 Months Ended
Divestiture	Mar. 31, 2023
Discontinued Operations and Disposal Groups [Abstract]
Divestiture	Divestiture Corporate Online Banking Solutions On June 7, 2022, the Company announced a definitive agreement to divest its corporate online banking solutions related assets and liabilities to One Equity Partners ("OEP") for $100.1 million, including preliminary net working capital adjustment. The sale included employees and customer contracts as well as technology assets and intellectual property and closed on September 1, 2022. The Company recognized a gain of $38.5 million on the sale during the year ended December 31, 2022, which is preliminary subject to finalization of post-closing adjustments pursuant to the definitive transaction agreement. The Company and OEP have also entered into a Transition Services Agreement ("TSA"), whereby the Company will continue to perform certain functions on OEP's behalf during a migration period not expected to exceed 18 months. The TSA is meant to reimburse the Company for direct costs in order to provide such functions, which are no longer generating revenue for the Company.

Debt

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Debt

As of March 31, 2023, the Company had $110.0 million, $578.1 million, and $400.0 million outstanding under its Revolving Credit Facility, Term Loans, and Senior Notes, respectively, with up to $388.4 million of unused borrowings under the Revolving Credit Facility portion of the Credit Agreement, as amended, and up to $1.6 million of unused borrowings under Letter of Credit agreements. 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.

On May 5, 2022, the Company and Bank of America entered into the LIBOR Transition Amendment (the "Amendment") that replaced the LIBOR reference rate with the Secured Overnight Financing Rate ("SOFR") reference rate. No other terms or conditions of the Credit Agreement were changed as a result of the Amendment.

On April 28, 2023, the Company and Bank of America entered into the 2023 Extension Amendment to extend the term of the Credit Facility one year to April 5, 2025. All other terms remained the same.

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.

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) SOFR 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 SOFR 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 SOFR rate borrowings. Interest is due and payable monthly. The interest rate in effect for the Credit Facility as of March 31, 2023, was 6.90%.

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 SOFR 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.

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, 2023, are as follows (in thousands):


Fiscal Year Ending December 31,
Remainder of 2023	$	55,300
2024	632,823
2025	—
2026	400,000
2027	—
Thereafter	—
Total	$	1,088,123

As of March 31, 2023, 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, 2023		December 31, 2022
Term loans	$	578,123	$	592,729
Revolving credit facility	110,000		105,000
5.750% Senior notes, due August 2026	400,000		400,000
Debt issuance costs	(6,742)		(7,857)
Total debt	1,081,381		1,089,872
Less: current portion of term loans	74,775		69,906
Less: current portion of debt issuance costs	(4,332)		(4,385)
Total long-term debt	$	1,010,938	$	1,024,351

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 2.25% 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, 2023, there was $75.0 million available and no amount outstanding on the overdraft facility. As of December 31, 2022, 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, 2023, $7.1 million was outstanding on these agreements, of which $3.6 million and $3.5 million is included in other current liabilities and other noncurrent liabilities, respectively, in the condensed consolidated balance sheet. As of December 31, 2022, $9.3 million was outstanding on these agreements, of which $5.8 million and $3.5 million is included in other current liabilities and other noncurrent liabilities, respectively

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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Goodwill and Intangible Assets Disclosure [Abstract]

Software and Other Intangible Assets

3 Months Ended

Mar. 31, 2023

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, 2023						December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Balance		Gross Carrying Amount		Accumulated Amortization		Net Balance
Software for internal use	$	456,647	$	(336,846)	$	119,801	$	454,171	$	(325,062)	$	129,109

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, 2023 and 2022, totaled $17.0 million and $16.7 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 was 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 totaled $0.7 million. Software for resale was fully amortized during the year ended December 31, 2022 and, therefore, there was no amortization expense recorded during the three months ended March 31, 2023. The software amortization expense amount was 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, 2023						December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Balance		Gross Carrying Amount		Accumulated Amortization		Net Balance
Customer relationships	$	445,631	$	(227,551)	$	218,080	$	444,749	$	(219,057)	$	225,692
Trademarks and trade names	21,782		(19,322)		2,460		21,678		(18,672)		3,006
Total other intangible assets	$	467,413	$	(246,873)	$	220,540	$	466,427	$	(237,729)	$	228,698

Other intangible assets amortization expense recorded during the three months ended March 31, 2023 and 2022, totaled $8.4 million and $9.2 million, respectively.

Based on capitalized intangible assets as of March 31, 2023, 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 2023	$	42,140	$	25,345
2024	37,988		29,381
2025	26,088		20,962
2026	10,522		20,962
2027	1,696		20,721
Thereafter	1,367		103,169
Total	$	119,801	$	220,540

Stock-Based Compensation Plans

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation Plans

Employee Stock Purchase Plan

Shares issued under the 2017 Employee Stock Purchase Plan during the three months ended March 31, 2023 and 2022, totaled 31,639 and 31,406, 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, 2022	1,221,219	$	19.00
Exercised	(4,992)	15.88

Expired	(4,614)	19.63
Outstanding as of March 31, 2023	1,211,613	$	19.01	2.46	$	9,658,883
Exercisable as of March 31, 2023	1,211,613	$	19.01	2.46	$	9,658,883

The total intrinsic value of stock options exercised during the three months ended March 31, 2023 and 2022, was less than $0.1 million and $0.9 million, respectively. There were no stock options granted during the three months ended March 31, 2023 or 2022.

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, 2022	1,011,881	$	39.21


Forfeited	(38,728)	43.99
Change in payout rate	(427,685)	30.01
Nonvested as of March 31, 2023	545,468	$	46.09

At March 31, 2023, the TSRs granted in 2020 were earned by the employees. However, the performance goals were not met and no shares were issued.

The fair value of TSRs granted during the three months ended March 31, 2022, 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, 2022
Expected life (years)	3.1
Risk-free interest rate	1.5	%
Expected volatility	40.0	%
Expected dividend yield	—

There were no TSRs granted during the three months ended March 31, 2023.

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, 2022	1,184,024	$	30.73

Vested	(333,812)	31.10
Forfeited	(103,379)	31.75
Nonvested as of March 31, 2023	746,833	$	30.43

During the three months ended March 31, 2023, a total of 333,812 RSUs vested. The Company withheld 114,492 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

As of March 31, 2023, there were unrecognized compensation costs of $18.5 million and $10.2 million related to nonvested RSUs and TSRs, respectively, which the Company expects to recognize over weighted average periods of 1.8 years and 1.7 years, respectively.

The Company recorded stock-based compensation expense recognized under ASC 718 for the three months ended March 31, 2023 and 2022, of $5.3 million and $8.0 million, respectively, with corresponding tax benefits of $0.9 million and $1.1 million, respectively.

Common Stock and Treasury Stock	3 Months Ended
Common Stock and Treasury Stock	Mar. 31, 2023
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. On February 24, 2023, 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 did not repurchase any shares under the program during the three months ended March 31, 2023. Under the program to date, the Company has repurchased 57,981,733 shares for approximately $926.2 million. As of March 31, 2023, the maximum remaining amount authorized for purchase under the stock repurchase program was $200.0 million.

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
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Earnings (Loss) Per Share

Earnings (Loss) Per Share

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

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,
		2023	2022
Weighted average shares outstanding:
Basic weighted average shares outstanding		108,156	115,287
Add: Dilutive effect of stock options and RSUs		—	811
Diluted weighted average shares outstanding		108,156	116,098

The diluted earnings (loss) per share computation excludes 2.5 million and 1.8 million options to purchase shares, RSUs, and contingently issuable shares during the three months ended March 31, 2023 and 2022, respectively, as their effect would be anti-dilutive.

Common stock outstanding as of March 31, 2023, and December 31, 2022, was 108,322,311 and 108,068,828, respectively.

Other, Net	3 Months Ended
Other, Net	Mar. 31, 2023
Other Income and Expenses [Abstract]
Other, Net	Other, NetOther, net is primarily comprised of foreign currency transaction gains and losses. Other, net was $3.4 million of expense and $2.3 million of income for the three months ended March 31, 2023 and 2022, respectively

Segment Information

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

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.

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,
		2023		2022
Revenue
Banks		$	88,040	$	132,198
Merchants		34,781		41,002
Billers		166,855		149,880
Total revenue		$	289,676	$	323,080
Segment Adjusted EBITDA
Banks		$	24,681	$	64,714
Merchants		6,544		14,713
Billers		29,641		26,357
Depreciation and amortization		(31,539)		(31,489)
Stock-based compensation expense		(5,301)		(7,958)
Corporate and unallocated expenses		(48,378)		(38,671)
Interest, net		(15,387)		(7,735)
Other, net		(3,395)		2,250
Income (loss) before income taxes		$	(43,134)	$	22,181

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 solution category for the Company’s reportable segments for the periods indicated (in thousands):


	Three Months Ended March 31, 2023
	Banks		Merchants		Billers		Total
Primary Solution Categories
Bill Payments	$	—	$	—	$	166,855	$	166,855
Digital Business Banking	849		—		—		849
Merchant Payments	—		34,781		—		34,781
Fraud Management	9,355		—		—		9,355
Real-Time Payments	19,398		—		—		19,398
Issuing and Acquiring	58,438		—		—		58,438
Total	$	88,040	$	34,781	$	166,855	$	289,676

	Three Months Ended March 31, 2022
	Banks		Merchants		Billers		Total
Primary Solution Categories
Bill Payments	$	—	$	—	$	149,880	$	149,880
Digital Business Banking	13,488		—		—		13,488
Merchant Payments	—		41,002		—		41,002
Fraud Management	7,777		—		—		7,777
Real-Time Payments	21,927		—		—		21,927
Issuing and Acquiring	89,006		—		—		89,006
Total	$	132,198	$	41,002	$	149,880	$	323,080

As discussed in Note 3, Divestiture, the Company divested its corporate online banking solution assets, which were included in the Digital Business Banking solution category.


	Three Months Ended March 31,
		2023		2022
Banks
Software as a service and platform as a service		$	9,249	$	13,952
License		16,316		54,439
Maintenance		46,342		47,343
Services		16,133		16,464
Total		$	88,040	$	132,198
Merchants
Software as a service and platform as a service		$	28,850	$	30,767
License		2,015		5,846
Maintenance		3,737		4,038
Services		179		351
Total		$	34,781	$	41,002
Billers
Software as a service and platform as a service		$	166,831	$	149,843
License		—		—
Maintenance		24		37
Services		—		—
Total		$	166,855	$	149,880

The following is the Company's revenue by geographic location for the periods indicated (in thousands):


	Three Months Ended March 31,
	2023		2022
Revenue
United States	$	201,269	$	199,315
Other	88,407		123,765
Total	$	289,676	$	323,080

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


	March 31, 2023		December 31, 2022
Long-lived Assets
United States	$	1,258,485	$	1,286,505
Other	730,935		754,847
Total	$	1,989,420	$	2,041,352

No single customer accounted for more than 10% of the Company’s consolidated revenues during the three months ended March 31, 2023 and 2022. No other country outside the United States accounted for more than 10% of the Company's consolidated revenues during the three months ended March 31, 2023 and 2022.

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.

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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Income Taxes	3 Months Ended
Income Taxes	Mar. 31, 2023
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes For the three months ended March 31, 2023, the Company's effective tax rate was 25%. The Company’s foreign entities reported losses of $7.2 million for the three months ended March 31, 2023. For the three months ended March 31, 2022, the Company's effective tax rate was 30%. The Company's foreign entities reported profits of $30.9 million for the three months ended March 31, 2022. 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 March 31, 2023, and December 31, 2022, the amount of unrecognized tax benefits for uncertain tax positions was $26.3 million and $26.4 million, respectively, excluding related liabilities for interest and penalties of $0.6 million as of March 31, 2023, and December 31, 2022. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits will decrease within the next 12 months by approximately $4.6 million, due to the settlement of various audits and the expiration of statutes of limitation.

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.

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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Organization, Consolidation and Presentation of Financial Statements [Abstract]

Commitments and Contingencies	3 Months Ended
Commitments and Contingencies	Mar. 31, 2023
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies Legal Proceedings In April 2021, ACH files associated with one of the Company's mortgage servicing customers were inadvertently transmitted into the ACH network during a test of the Company's payment processing system. The Company took immediate corrective action and issued reversing ACH files, restoring affected accounts. The Company was named as a defendant in seven class action lawsuits filed in various federal courts purportedly on behalf of consumers whose mortgage accounts were affected by the inadvertent ACH file transmission. The Company entered into an agreement, which is subject to final court approval and other conditions, to settle these lawsuits for the Company's establishment of a $5.0 million fund out of which payments would be made to class members and the Company's payment of attorneys’ fees and administrative costs, plus additional funds totaling $1.5 million that could be required to be established under certain circumstances. There can be no assurance that the conditions to settlement will be satisfied, in which event the class action litigation could proceed. The inadvertent ACH file transmission also gave rise to investigations by the U.S. Consumer Financial Protection Bureau (the "CFPB") and state attorneys general in 49 states, the District of Columbia, and certain U.S. territories as well as money transmission regulators in 46 states, the District of Columbia, and certain U.S. territories. A lead group of attorneys general and regulatory representatives of nine states have led the state investigations of the matter. The Company has cooperated with the CFPB and state authorities, including furnishing documents and information to them. There can be no assurance that the matters will be resolved without litigation, and the matters could result in the impositions of material penalties and damages as well as burdensome and costly remedies. The Company has asserted claims for insurance coverage with respect to potential losses associated with the inadvertent ACH file transmission. There is no assurance as to the amount of insurance that may be available or its effect on the availability or cost of insurance in the future. The Company is from time to time subject to other claims, litigation and investigations. While we believe that none of the currently pending matters is reasonably likely to have material adverse effect on us, there can be no assurance with respect thereto or future matters.

Condensed Consolidated Financial Statements (Policies)	3 Months Ended
Condensed Consolidated Financial Statements (Policies)	Mar. 31, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Consolidation	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, 2023, and for the three months ended March 31, 2023 and 2022, 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, 2022, 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, 2022, filed on March 1, 2023. Results for the three months ended March 31, 2023, are not necessarily indicative of results that may be attained in the future.
Use of Estimates	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. Actual results could differ from those estimates.
Settlement Assets and Liabilities	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	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.
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	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, 2023, the Company's goodwill balance of $1.2 billion was allocated $671.7 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, 2022, annual impairment test and there have been no indications of impairment in the subsequent periods.
Equity Method Investment	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 $18.0 million and $17.9 million, which is included in other noncurrent assets in the condensed consolidated balance sheet as of March 31, 2023, and December 31, 2022, respectively.

Condensed Consolidated Financial Statements (Tables)

3 Months Ended

Mar. 31, 2023

Summary of Other Current Liabilities

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


	March 31, 2023		December 31, 2022
Operating lease liabilities	$	11,049	$	11,218
Vendor financed licenses	9,418		13,525
Accrued interest	3,370		9,067
Royalties payable	2,696		3,726
Other	44,131		65,109
Total other current liabilities	$	70,664	$	102,645

Revenue (Tables)

3 Months Ended

Mar. 31, 2023

Revenue from Contract with Customer [Abstract]

Summary of Total Receivables, Net

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


	March 31, 2023		December 31, 2022
Billed receivables	$	153,420	$	218,611
Allowance for doubtful accounts	(3,179)		(3,779)
Billed receivables, net	150,241		214,832
Current accrued receivables, net	192,524		188,949
Long-term accrued receivables, net	270,332		297,818
Total accrued receivables, net	462,856		486,767
Total receivables, net	$	613,097	$	701,599

Summary of Changes in Deferred Revenue

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


Balance, December 31, 2022	$	81,536
Deferral of revenue	31,518
Recognition of deferred revenue	(21,465)
Foreign currency translation	49
Balance, March 31, 2023	$	91,638

Debt (Tables)

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Summary of Maturities on Debt Outstanding

Maturities on debt outstanding as of March 31, 2023, are as follows (in thousands):


Fiscal Year Ending December 31,
Remainder of 2023	$	55,300
2024	632,823
2025	—
2026	400,000
2027	—
Thereafter	—
Total	$	1,088,123

Summary of Total Debt

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


	March 31, 2023		December 31, 2022
Term loans	$	578,123	$	592,729
Revolving credit facility	110,000		105,000
5.750% Senior notes, due August 2026	400,000		400,000
Debt issuance costs	(6,742)		(7,857)
Total debt	1,081,381		1,089,872
Less: current portion of term loans	74,775		69,906
Less: current portion of debt issuance costs	(4,332)		(4,385)
Total long-term debt	$	1,010,938	$	1,024,351

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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