What changed in this filing

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Item 1. Financial Statements

2020-08-06 compared with 2020-05-07 · 202 added, 106 removed, 605 unchanged (34% of the section changed)

4 unchanged sentences

(unaudited and in thousands, except share and per share amounts)

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Current assets

53 unchanged sentences

5,000,000 shares authorized;

no shares issued at March 31, 2020, and December 31, 2019

no shares issued at June 30, 2020, and December 31, 2019

Common stock;

1 unchanged sentence

280,000,000 shares authorized;

140,525,055 shares issued at March 31, 2020, and December 31, 2019

140,525,055 shares issued at June 30, 2020, and December 31, 2019

Additional paid-in capital 667,554 667,658

Retained earnings 920,478 930,830

Treasury stock, at cost, 24,642,813 and 24,538,703 shares at March 31, 2020, and December 31, 2019, respectively

Treasury stock, at cost, 24,158,059 and 24,538,703 shares at June 30, 2020, and December 31, 2019, respectively

( 399,663 ) ( 377,639 )

7 unchanged sentences

(unaudited and in thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Software as a service and platform as a service

18 unchanged sentences

270,772 303,500 573,540 537,448

Operating loss ( 11,283 ) ( 28,093 )

Operating income (loss) 29,138 ( 5,882 ) 17,855 ( 33,975 )

Other income (expense)

3 unchanged sentences

2,954 2,997 5,854 6,030

2,041 1,402 ( 7,717 ) ( 510 )

Total other income (expense) ( 9,147 ) ( 10,924 ) ( 33,176 ) ( 21,417 )

Loss before income taxes ( 35,312 ) ( 38,586 )

Income tax benefit ( 10,885 ) ( 12,623 )

Net loss $ ( 24,427 ) $ ( 25,963 )

Loss per common share

Income (loss) before income taxes 19,991 ( 16,806 ) ( 15,321 ) ( 55,392 )

Income tax expense (benefit) 5,916 ( 22,531 ) ( 4,969 ) ( 35,154 )

Net income (loss) $ 14,075 $ 5,725 $ ( 10,352 ) $ ( 20,238 )

Income (loss) per common share

$ 0.12 $ 0.05 $ ( 0.09 ) $ ( 0.17 )

9 unchanged sentences

(unaudited and in thousands)

Three Months Ended March 31,

Net loss $ ( 24,427 ) $ ( 25,963 )

Other comprehensive income (loss):

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Net income (loss) $ 14,075 $ 5,725 $ ( 10,352 ) $ ( 20,238 )

Other comprehensive loss:

Foreign currency translation adjustments

( 582 ) ( 1,730 ) ( 6,751 ) ( 409 )

Total other comprehensive income (loss)

Total other comprehensive loss ( 582 ) ( 1,730 ) ( 6,751 ) ( 409 )

Comprehensive income (loss)

$ 13,493 $ 3,995 $ ( 17,103 ) $ ( 20,647 )

Comprehensive loss

The accompanying notes are an integral part of the condensed consolidated financial statements.

ACI WORLDWIDE, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited and in thousands, except share amounts)

Three Months Ended June 30, 2020

Common Stock Additional

Paid-in Capital Retained Earnings Treasury Stock Accumulated Other

Comprehensive Loss Total

Balance as of March 31, 2020 $ 702 $ 656,723 $ 906,403 $ ( 398,278 ) $ ( 97,752 ) $ 1,067,798

Net income — — 14,075 — — 14,075

Other comprehensive loss — — — — ( 582 ) ( 582 )

Stock-based compensation

— 7,932 — — — 7,932

Shares issued and forfeited, net, under stock plans

— 2,899 — ( 1,234 ) — 1,665

Repurchase of stock-based compensation awards for tax withholdings

— — — ( 151 ) — ( 151 )

Balance as of June 30, 2020 $ 702 $ 667,554 $ 920,478 $ ( 399,663 ) $ ( 98,334 ) $ 1,090,737

Three Months Ended June 30, 2019

Common Stock Additional

Paid-in Capital Retained Earnings Treasury Stock Accumulated Other

Comprehensive Loss Total

Balance as of March 31, 2019 $ 702 $ 636,960 $ 837,805 $ ( 351,587 ) $ ( 91,296 ) $ 1,032,584

Net income — — 5,725 — — 5,725

Other comprehensive loss

— — — — ( 1,730 ) ( 1,730 )

Stock-based compensation

— 14,372 — — — 14,372

Shares issued and forfeited, net, under stock plans

— ( 535 ) — 2,346 — 1,811

Repurchase of stock-based compensation awards for tax withholdings

— — — ( 185 ) — ( 185 )

Balance as of June 30, 2019 $ 702 $ 650,797 $ 843,530 $ ( 349,426 ) $ ( 93,026 ) $ 1,052,577

The accompanying notes are an integral part of the condensed consolidated financial statements.

3 unchanged sentences

(unaudited and in thousands, except share amounts)

Three Months Ended March 31, 2020

Six Months Ended June 30, 2020

Paid-in Capital

14 unchanged sentences

— — — ( 11,124 ) — ( 11,124 )

Balance as of March 31, 2020 $ 702 $ 656,723 $ 906,403 $ ( 398,278 ) $ ( 97,752 ) $ 1,067,798

Three Months Ended March 31, 2019

Balance as of June 30, 2020 $ 702 $ 667,554 $ 920,478 $ ( 399,663 ) $ ( 98,334 ) $ 1,090,737

Six Months Ended June 30, 2019

Paid-in Capital

5 unchanged sentences

— — ( 20,238 ) — — ( 20,238 )

Other comprehensive income

Other comprehensive loss

— — — — ( 409 ) ( 409 )

7 unchanged sentences

— — — ( 2,809 ) — ( 2,809 )

Balance as of March 31, 2019 $ 702 $ 636,960 $ 837,805 $ ( 351,587 ) $ ( 91,296 ) $ 1,032,584

Balance as of June 30, 2019 $ 702 $ 650,797 $ 843,530 $ ( 349,426 ) $ ( 93,026 ) $ 1,052,577

The accompanying notes are an integral part of the condensed consolidated financial statements.

3 unchanged sentences

(unaudited and in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

2 unchanged sentences

11,752 11,831

57,762 42,799

Amortization of operating lease right-of-use assets

3 unchanged sentences

Stock-based compensation expense

14,882 20,957

Changes in operating assets and liabilities, net of impact of acquisitions:

1 unchanged sentence

Accounts payable

( 6,087 ) ( 10,297 )

Accrued employee compensation

13 unchanged sentences

( 15,057 ) ( 11,300 )

Acquisition of businesses, net of cash acquired

— ( 758,546 )

Net cash flows from investing activities

7 unchanged sentences

Proceeds from revolving credit facility

30,000 250,000

Repayment of revolving credit facility

( 69,000 ) ( 15,000 )

Proceeds from term portion of credit agreement

Repayment of term portion of credit agreement

( 19,475 ) ( 9,424 )

Payments for debt issuance costs

Payments on or proceeds from other debt, net ( 4,686 ) ( 2,220 )

2 unchanged sentences

Effect of exchange rate fluctuations on cash

Net increase (decrease) in cash and cash equivalents

8,118 ( 865 )

Net increase (decrease) in cash and cash equivalents 7,825 ( 9,106 )

Cash and cash equivalents, beginning of period

15 unchanged sentences

All intercompany balances and transactions have been eliminated.

The condensed consolidated financial statements as of March 31, 2020, and for the three months ended March 31, 2020 and 2019, are unaudited and reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair presentation, in all material respects, of the financial position and operating results for the interim periods.

The condensed consolidated financial statements as of June 30, 2020, and for the three and six months ended June 30, 2020 and 2019, are unaudited and reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair presentation, in all material respects, of the financial position and operating results for the interim periods.

The condensed consolidated balance sheet as of December 31, 2019, is derived from the audited financial statements.

The condensed consolidated financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2019, filed on February 27, 2020.

Results for the three months ended March 31, 2020, are not necessarily indicative of results that may be attained in the future.

Results for the three and six months ended June 30, 2020, are not necessarily indicative of results that may be attained in the future.

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S.

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The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic.

The extent of the impact of the COVID-19 pandemic on the Company's business is highly uncertain and difficult to predict, as the response to the pandemic is in early stages and information is rapidly evolving.

The extent of the impact of the COVID-19 pandemic on the Company's business is highly uncertain and difficult to predict, as the response to the pandemic and available information continues to be evolving.

The Company has experienced changes in volumes for certain Merchant and Biller customers and has received limited requests for extended payment terms under existing contracts.

8 unchanged sentences

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

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Operating lease liabilities $ 13,976 $ 15,049

19 unchanged sentences

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, 2020, and December 31, 2019, was $ 215.5 million and $ 274.0 million, respectively.

The amount of settlement funds as of June 30, 2020, and December 31, 2019, was $ 165.9 million and $ 274.0 million, respectively.

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 $ 402.0 million and $ 432.0 million as of March 31, 2020, and December 31, 2019, respectively.

The fair value of the Company’s 5.750 % Senior Notes due 2026 (“2026 Notes”) was $ 416.7 million and $ 432.0 million as of June 30, 2020, and December 31, 2019, respectively.

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

1 unchanged sentence

The Company evaluates goodwill at the reporting unit level and has identified its reportable segments, ACI On Demand and ACI On Premise, as the reporting units.

Changes in the carrying amount of goodwill attributable to each reporting unit during the three months ended March 31, 2020, were as follows (in thousands):

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

ACI On Demand ACI On Premise Total

6 unchanged sentences

Goodwill from acquisitions (1) ( 299 ) — ( 299 )

Balance, March 31, 2020

Balance, June 30, 2020

$ 554,318 $ 725,908 $ 1,280,226

11 unchanged sentences

The Company accounted for this investment using the equity method in accordance with ASC 323, Investments - Equity Method and Joint Ventures .

Accordingly, the Company recorded an initial investment of $ 18.5 million, which is included in other noncurrent assets in the condensed consolidated balance sheet as of March 31, 2020 and December 31, 2019.

The Company records its share of earnings and losses in the investment on a one-quarter lag basis.

Accordingly, the Company recorded an investment of $ 18.1 million and $ 18.5 million, which is included in other noncurrent assets in the condensed consolidated balance sheet as of June 30, 2020 and December 31, 2019, respectively.

Effective January 1, 2020, Official Payments Corporation, a wholly owned subsidiary, changed its name to ACI Payments, Inc.

37 unchanged sentences

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

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Billed receivables $ 183,408 $ 213,654

8 unchanged sentences

Total receivables, net $ 524,623 $ 572,238

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

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

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

4 unchanged sentences

Foreign currency translation ( 1,852 )

Balance, March 31, 2020

Balance, June 30, 2020

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.

3 unchanged sentences

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

Revenue allocated to remaining performance obligations was $ 682.2 million as of March 31, 2020, of which the Company expects to recognize approximately 44 % over the next 12 months and the remainder ther eafter.

During the three months ended March 31, 2020 and 2019, revenue recognized by the Company from performance obligations satisfied in previous periods was not significant.

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

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

On May 9, 2019, the Company acquired Speedpay, a subsidiary of The Western Union Company (“Western Union”), for $ 754.1 million in cash, including working capital adjustments, pursuant to a Stock Purchase Agreement, among the Company, Western Union, and ACI Worldwide Corp., a wholly owned subsidiary of the Company.

1 unchanged sentence

The combination of the Company and Speedpay bill pay solutions serves more than 4,000 customers across the U.S., bringing expanded reach in existing and complementary market segments such as consumer finance, insurance, healthcare, higher education, utilities, government, and mortgage.

The acquisition of Speedpay increases the scale of the Company’s On Demand platform business and allows the acceleration of platform innovation through increased research and development and investment in ACI's On Demand platform infrastructure.

The acquisition of Speedpay increased the scale of the Company’s On Demand platform business and allows the acceleration of platform innovation through increased research and development and investment in ACI's On Demand platform infrastructure.

To fund the acquisition, the Company amended its existing Credit Agreement, dated February 24, 2017, for an additional $ 500.0 million senior secured term loan (“Delayed Draw Term Loan”), in addition to drawing $ 250.0 million on the available Revolving Credit Facility.

1 unchanged sentence

The remaining acquisition consideration was funded with cash on hand.

The Company expensed approximately $ 4.7 million of costs related to the acquisition of Speedpay for the three months ended March 31, 2019.

The Company expensed approximately $ 16.6 million and $ 21.3 million of costs related to the acquisition of Speedpay for the three and six months ended June 30, 2019, respectively.

These costs, which consist primarily of investment bank, consulting, and legal fees, are included in general and administrative expenses in the accompanying condensed consolidated statements of operations.

Speedpay contributed approximately $ 88.7 million in revenue and $ 12.3 million in operating income for the three months ended March 31, 2020.

In connection with the acquisition, the Company recorded the following amounts based upon its purchase price allocation as of March 31, 2020 (in thousands, except weighted average useful lives):

Speedpay contributed approximately $ 80.2 million in total revenue and $ 15.0 million in total operating income for the three months ended June 30, 2020.

Speedpay contributed approximately $ 168.9 million in total revenue and $ 27.3 million in total operating income for the six months ended June 30, 2020.

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

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

Amount Weighted Average Useful Lives

23 unchanged sentences

Net assets acquired $ 754,057

During the three months ended March 31, 2020, the Company made adjustments to the preliminary purchase price allocation as additional information became available for accounts payable.

During the six months ended June 30, 2020, the Company made adjustments to the preliminary purchase price allocation as additional information became available for accounts payable.

These adjustments and any resulting adjustments to the statements of operations were not material to the Company’s previously reported operating results or financial position.

The Company's review of the purchase price allocation has been completed.

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

3 unchanged sentences

This pro forma information is not intended to represent or be indicative of actual results had the acquisition occurred as of the beginning of each period, and does not reflect potential synergies, integration costs, or other such costs or savings.

Certain pro forma adjustments have been made to net loss for the three months ended March 31, 2019, to give effect to estimated adjustments that remove the amortization expense on eliminated Speedpay historical identifiable intangible assets, add amortization expense for the value of acquired identified intangible assets (primarily acquired software, customer relationships, and trademarks), and add estimated interest expense on the Company’s additional Delayed Draw Term Loan and Revolving Credit Facility borrowings.

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

Additionally, certain transaction expenses that are a direct result of the acquisition have

been excluded.

The three months ended March 31, 2020, is not presented as Speedpay is included in the Company's consolidated results for the entire period.

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

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

Three Months Ended March 31, 2019

Three Months Ended June 30, 2019 Six Months Ended June 30, 2019

Pro forma revenue $ 334,077 $ 628,136

Pro forma net loss $ ( 21,245 )

Pro forma loss per share:

Pro forma net income (loss) $ 15,249 $ ( 5,996 )

Pro forma income (loss) per share:

Basic $ 0.13 $ ( 0.05 )

2 unchanged sentences

The Company has included the financial results of Walletron in the condensed consolidated financial statements from the date of acquisition, which were not material.

As of March 31, 2020, the Company had $ 230.0 million, $ 746.3 million, and $ 400.0 million outstanding under its Revolving Credit Facility, Term Loan, and Senior Notes, respectively, with up to $ 270.0 million of unused borrowings under the Revolving Credit Facility portion of the Credit Agreement, as amended.

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

Credit Agreement

10 unchanged sentences

Interest is due and payable monthly.

The interest rate in effect for the Credit Facility as of March 31, 2020, was 3.17 %.

The interest rate in effect for the Credit Facility as of June 30, 2020, was 2.43 %.

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

27 unchanged sentences

The 2026 Notes will mature on August 15, 2026.

Maturities on debt outstanding as of March 31, 2020, are as follows (in thousands):

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

Fiscal Year Ending December 31,

6 unchanged sentences

As specified in the Credit Agreement and 2026 Notes agreement, if certain events occur and continue, the Company may be required to repay all amounts outstanding under the Credit Facility and 2026 Notes.

As of March 31, 2020, and at all times during the period, the Company was in compliance with its financial debt covenants.

As of June 30, 2020, and at all times during the period, the Company was in compliance with its financial debt covenants.

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

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Term loans $ 736,585 $ 756,060

13 unchanged sentences

Amounts outstanding on the overdraft facility are included in other current liabilities in the condensed consolidated balance sheet.

As of March 31, 2020, there was no amount outstanding on the overdraft facility.

As of June 30, 2020, there was no amount outstanding on the overdraft facility.

As of December 31, 2019, there was $ 1.5 million outstanding on the overdraft facility.

As of March 31, 2020, and December 31, 2019, $ 13.8 million was outstanding related to certain multi-year license agreements for internal-use software, of which $ 6.0 million and $ 7.8 million was included in other current liabilities and other noncurrent liabilities, respectively, in the condensed consolidated balance sheets.

The Company finances certain multi-year license agreements for internal-use software.

Upon execution, these arrangements have been treated as a non-cash investing and financing activity for purposes of the condensed consolidated statements of cash flows.

As of June 30, 2020, $ 13.8 million was outstanding, of which $ 9.4 million and $ 4.4 million is included in other current liabilities and other noncurrent liabilities, respectively, in the consolidated balance sheet.

As of December 31, 2019, $ 13.8 million was outstanding, of which $ 6.0 million and $ 7.8 million was included in other current liabilities and other noncurrent liabilities, respectively, in the consolidated balance sheet.

Stock-Based Compensation Plans

Employee Stock Purchase Plan

Shares issued under the 2017 Employee Stock Purchase Plan during the three months ended March 31, 2020 and 2019, totaled 31,794 and 32,174 , respectively.

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

2020 Equity and Incentive Compensation Plan

On June 9, 2020, upon recommendation of the Company’s board of directors (the “board”), stockholders approved the ACI Worldwide, Inc.

2020 Equity and Incentive Compensation Plan (the “2020 Plan”).

The 2020 Plan authorizes the board to provide for equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, dividend equivalents, and certain other awards, including those denominated or payable in, or otherwise based on, the Company’s common stock ("awards").

The purpose of the 2020 Plan is to provide incentives and rewards for service and/or performance by providing awards to non-employee directors, officers, other employees, and certain consultants and other service providers of the Company and its subsidiaries.

Following the approval of the 2020 Plan, the 2016 Equity and Performance Incentive Plan (the “2016 Incentive Plan”) was terminated.

Termination of the 2016 Incentive Plan did not affect any equity awards outstanding under the 2016 Incentive Plan.

Subject to adjustment and share counting rules as described in the 2020 Plan, a total of 6,658,754 shares of common stock are available for awards granted under the 2020 Plan.

Shares underlying certain awards under the 2020 Plan, the Company’s 2005 Equity and Performance Incentive Plan (the "2005 Incentive Plan"), and the 2016 Incentive Plan (each including as amended or amended and restated) that are cancelled or forfeited, expire, are settled for cash, or are unearned after June 9, 2020, will again be available under the 2020 Plan.

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

Stock Options

9 unchanged sentences

Expired ( 6,090 ) 18.44

Outstanding as of March 31, 2020 3,919,759 $ 18.17 3.13 $ 23,427,581

Exercisable as of March 31, 2020 3,772,523 $ 18.10 3.18 $ 22,816,683

The total intrinsic value of stock options exercised during the three months ended March 31, 2020 and 2019, was $ 0.3 million and $ 5.3 million, respectively.

There were no stock options granted during the three months ended March 31, 2020 or 2019.

Outstanding as of June 30, 2020 2,832,399 $ 17.61 3.98 $ 26,562,039

Exercisable as of June 30, 2020 2,685,163 $ 17.48 4.11 $ 25,532,991

The total intrinsic value of stock options exercised during the six months ended June 30, 2020 and 2019, was $ 10.5 million and $ 6.0 million, respectively.

There were no stock options granted during the six months ended June 30, 2020 or 2019.

Long-term Incentive Program Performance Share Awards

7 unchanged sentences

Change in attainment 4,139 20.12

Nonvested as of March 31, 2020 — $ —

During the three months ended March 31, 2020, a total of 668,240 LTIPs vested.

Nonvested as of June 30, 2020 — $ —

During the six months ended June 30, 2020, a total of 668,240 LTIPs vested.

The Company withheld 165,237 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

6 unchanged sentences

Forfeited ( 3,929 ) 20.35

Nonvested as of March 31, 2020 — $ —

During the three months ended March 31, 2020, a total of 88,913 RSAs vested.

Nonvested as of June 30, 2020 — $ —

During the six months ended June 30, 2020, a total of 88,913 RSAs vested.

The Company withheld 28,233 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

Total Shareholder Return Awards

A summary of nonvested total shareholder return awards (“TSRs”) is as follows:

During the six months ended June 30, 2020 and 2019, pursuant to the 2016 Incentive Plan, the Company granted total shareholder return awards (“TSRs”).

TSRs are performance shares that are earned, if at all, based upon the Company’s total shareholder return as compared to a group of peer companies over a three -year performance period.

The award payout can range from 0 % to 200 %.

To determine the grant date fair value of the TSRs, a Monte Carlo simulation model is used.

The Company recognizes compensation expense for the TSRs over a three-year performance period based on the grant date fair value.

A summary of nonvested TSRs is as follows:

Shares Weighted Average

5 unchanged sentences

Change in payout rate ( 14,259 ) 24.37

Nonvested as of March 31, 2020 1,466,081 $ 34.64

During the three months ended March 31, 2020, a total of 199,413 TSRs awards granted in fiscal 2017 vested and achieved a payout rate of 93 % based on the Company's total shareholder return as compared to a group of peer companies over a three -year performance period.

Nonvested as of June 30, 2020 1,446,568 $ 34.56

During the six months ended June 30, 2020, a total of 199,413 TSRs awards granted in fiscal 2017 vested and achieved a payout rate of 93 % based on the Company's total shareholder return as compared to a group of peer companies over a three -year performance period.

The Company withheld 53,033 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

The fair value of TSRs granted during the three months ended March 31, 2020 and 2019, were estimated on the date of grant using the Monte Carlo simulation model, acceptable under ASC 718, using the following weighted average assumptions:

Three Months Ended March 31,

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

Six Months Ended June 30,

Expected life (years) 2.8 2.8

3 unchanged sentences

Restricted Share Units

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

During the six months ended June 30, 2020 and 2019, pursuant to the 2020 Plan and the 2016 Incentive Plan, respectively, the Company granted restricted share unit awards (“RSUs”).

RSUs generally have requisite service periods of three years and vest in increments of 33 % on the anniversary of the grant dates.

RSUs granted to our board vest one year from grant or as of the next annual shareholders meeting, whichever is earlier.

Under each arrangement, RSUs are issued without direct cost to the employee on the vesting date.

The Company estimates the fair value of the RSUs based upon the market price of the Company’s stock at the date of grant.

The Company recognizes compensation expense for RSUs on a straight-line basis over the requisite service period.

A summary of nonvested RSUs is as follows:

Shares Weighted Average

4 unchanged sentences

Forfeited ( 114,303 ) 29.68

Nonvested as of March 31, 2020 1,333,154 $ 27.87

During the three months ended March 31, 2020, a total of 327,491 RSUs vested.

Nonvested as of June 30, 2020 1,283,367 $ 27.59

During the six months ended June 30, 2020, a total of 399,605 RSUs vested.

The Company withheld 109,652 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

As of March 31, 2020, there were unrecognized compensation costs of $ 33.7 million related to nonvested RSUs, $ 31.5 million related to nonvested TSRs, and less than $ 0.1 million related to nonvested stock options, which the Company expects to recognize over weighted average periods of 2.4 years, 2.5 years, and 0.9 years, respectively.

The Company recorded stock-based compensation expense recognized under ASC 718 for the three months ended March 31, 2020 and 2019, of $ 7.0 million and $ 6.6 million, respectively, with the corresponding tax benefits of $ 1.4 million and $ 1.2 million, respectively.

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

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

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

Software and Other Intangible Assets

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, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Gross Carrying Amount Accumulated Amortization Net Balance Gross Carrying Amount Accumulated Amortization Net Balance

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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 in the three months ended March 31, 2020 and 2019, totaled $ 1.9 million and $ 3.0 million, respectively.

Software for resale amortization expense recorded during the three months ended June 30, 2020 and 2019, totaled $ 2.1 million and $ 3.0 million, respectively.

Software for resale amortization expense recorded during the six months ended June 30, 2020 and 2019, totaled $ 4.0 million and $ 6.0 million, respectively.

These software amortization expense amounts are reflected in cost of revenue in the condensed consolidated statements of operations.

Amortization of software for internal use is computed using the straight-line method over an estimated useful life of generally one to ten years .

Software for internal use amortization expense recorded during the three months ended March 31, 2020 and

2019, totaled $ 16.7 million and $ 10.4 million, respectively.

Software for internal use amortization expense recorded during the three months ended June 30, 2020 and 2019, totaled $ 18.5 million and $ 13.3 million, respectively.

Software for internal use amortization expense recorded during the six months ended June 30, 2020 and 2019, totaled $ 35.2 million and $ 23.7 million, respectively.

These software amortization expense amounts are reflected in depreciation and amortization in the condensed consolidated statements of operations.

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

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Gross Carrying Amount Accumulated Amortization Net Balance Gross Carrying Amount Accumulated Amortization Net Balance

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Total other intangible assets $ 529,890 $ ( 194,193 ) $ 335,697 $ 535,097 $ ( 178,128 ) $ 356,969

Other intangible assets amortization expense for the three months ended March 31, 2020 and 2019, totaled $ 9.3 million and $ 5.5 million, respectively.

Based on capitalized intangible assets as of March 31, 2020, estimated amortization expense amounts in future fiscal years are as follows (in thousands):

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

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

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

Fiscal Year Ending December 31, Software Amortization Other Intangible Assets Amortization

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In February 2018, the board approved the repurchase of the Company's common stock of up to $ 200.0 million, in place of the remaining purchase amounts previously authorized.

The Company repurchased 1,000,000 shares for $ 28.9 million under the program during the three months ended March 31, 2020.

The Company repurchased 1,000,000 shares for $ 28.9 million under the program during the six months ended June 30, 2020.

Under the program to date, the Company has repurchased 46,357,495 shares for approximately $ 612.3 million.

As of March 31, 2020, the maximum remaining amount authorized for purchase under the stock repurchase program was $ 112.1 million.

Loss Per Share

Basic loss per share is computed in accordance with ASC 260, Earnings Per Share , based on weighted average outstanding common shares.

Diluted 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 loss per share (in thousands):

Three Months Ended March 31,

As of June 30, 2020, the maximum remaining amount authorized for purchase under the stock repurchase program was $ 112.1 million.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed in accordance with ASC 260, Earnings Per Share , based on weighted average outstanding common shares.

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

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

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Weighted average shares outstanding:

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Diluted weighted average shares outstanding 117,264 118,786 116,019 116,287

The diluted loss per share computation excludes 6.7 million and 7.4 million options to purchase shares and RSUs during the three months ended March 31, 2020 and 2019, respectively, as their effect would be anti-dilutive.

Common stock outstanding as of March 31, 2020, and December 31, 2019, was 115,882,242 and 115,986,352 , respectively.

Other, net is comprised of foreign currency transaction losses of $ 9.8 million and $ 1.9 million for the three months ended March 31, 2020 and 2019, respectively.

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

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

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

Other, net is primarily comprised of foreign currency transaction gains of $ 1.9 million and $ 1.4 million for the three months ended June 30, 2020 and 2019, respectively.

Other, net is primarily comprised of foreign currency transaction losses of $ 7.9 million and $ 0.5 million for the six months ended June 30, 2020 and 2019, respectively.

Segment Information

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These on-demand solutions are maintained and delivered through the cloud via our global data centers and are available in either a single-tenant environment for SaaS offerings, or in a multi-tenant environment for PaaS offerings.

ACI On Premise serves customers who manage their software on site or through a third-party cloud service provider.

ACI On Premise serves customers who manage their software on site or through a third-party public cloud environment.

These on-premise customers use the Company’s software to develop sophisticated solutions, which are often part of a larger system located and managed at the customer specified site.

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

ACI On Demand $ 180,573 $ 172,499 $ 373,523 $ 282,347

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Other, net 2,041 1,402 ( 7,717 ) ( 510 )

Loss before income taxes $ ( 35,312 ) $ ( 38,586 )

Income (loss) before income taxes $ 19,991 $ ( 16,806 ) $ ( 15,321 ) $ ( 55,392 )

Depreciation and amortization

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

Three Months Ended March 31, 2020 Three Months Ended March 31, 2019

Three Months Ended June 30, 2020 Three Months Ended June 30, 2019

ACI On Demand ACI On Premise Total ACI On Demand ACI On Premise Total

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Total $ 180,573 $ 119,337 $ 299,910 $ 172,499 $ 125,119 $ 297,618

Six Months Ended June 30, 2020 Six Months Ended June 30, 2019

ACI On Demand ACI On Premise Total ACI On Demand ACI On Premise Total

Primary Geographic Markets

Americas - United States $ 334,374 $ 77,800 $ 412,174 $ 248,861 $ 62,118 $ 310,979

Americas - Other 5,652 19,191 24,843 4,850 23,358 28,208

EMEA 27,442 83,381 110,823 24,560 94,606 119,166

Asia Pacific 6,055 37,500 43,555 4,076 41,044 45,120

Total $ 373,523 $ 217,872 $ 591,395 $ 282,347 $ 221,126 $ 503,473

Primary Solution Categories

Bill Payments $ 290,808 $ — $ 290,808 $ 194,306 $ — $ 194,306

Digital Channels 15,721 15,334 31,055 27,799 18,169 45,968

Merchant Payments 40,427 9,702 50,129 37,281 12,659 49,940

Payments Intelligence 20,865 8,055 28,920 17,855 13,541 31,396

Real-Time Payments 2,001 42,251 44,252 1,525 36,524 38,049

Retail Payments 3,701 142,530 146,231 3,581 140,233 143,814

Total $ 373,523 $ 217,872 $ 591,395 $ 282,347 $ 221,126 $ 503,473

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

March 31, 2020 December 31, 2019

June 30, 2020 December 31, 2019

Long-lived Assets

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Total $ 2,225,869 $ 2,285,547

No single customer accounted for more than 10% of the Company’s consolidated revenues during the three months ended March 31, 2020 and 2019.

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, 2020 and 2019.

The effective tax rate for the three months ended March 31, 2020, was 31 %.

The Company reported an overall tax benefit on a pretax loss for the three months ended March 31, 2020.

The losses of the Company’s foreign entities for the three months ended March 31, 2020, were $ 14.4 million.

The effective tax rate for the three months ended March 31, 2020, was positively impacted by equity compensation excess tax benefits and state income tax benefits on domestic loss.

The effective tax rate for the three months ended March 31, 2019, was 33 %.

The Company reported an overall tax benefit on a pretax loss for the three months ended March 31, 2019.

The losses of the Company’s foreign entities for the three months ended March 31, 2019, were $ 6.1 million.

The effective tax rates for the three months ended March 31, 2019, was positively impacted by equity compensation excess tax benefits and state income tax benefits on domestic loss.

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

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

The effective tax rate for the three and six months ended June 30, 2020, was 30 % and 32 %, respectively.

The Company reported tax expense on pretax income for the three months ended June 30, 2020 and a tax benefit on a pretax loss for the six months ended June 30, 2020.

The Company’s foreign entities recognized earnings of $ 10.7 million and a loss of $ 3.7 million for the three and six months ended June 30, 2020, respectively.

The effective tax rate for the three months ended June 30, 2020, was negatively impacted by state income tax charges on a domestic profit.

The effective tax rate for the six months ended June 30, 2020, was positively impacted by equity compensation excess tax benefits and state income tax benefits on a domestic loss.

The effective tax rate for the three and six months ended June 30, 2019, was 134 % and 63 %, respectively.

The Company reported an overall tax benefit on a pretax loss for the three and six months ended June 30, 2019.

The earnings of the Company’s foreign entities for the three and six months ended June 30, 2019, were $ 11.0 million and $ 4.8 million, respectively.

The effective tax rates for the three and six months ended June 30, 2019, was positively impacted by state income tax benefits on a domestic loss.

In addition, the Company released a majority of its valuation allowance established against its U.S.

foreign tax credit deferred tax asset, resulting in a non-cash benefit to income tax expense of approximately $ 18.5 million.

The Company released the valuation allowance following the acquisition of Speedpay and determined it would more likely than not be able to utilize the foreign tax credits in future years due to additional income provided by Speedpay.

The Company’s effective tax rate could fluctuate on a quarterly basis due to the occurrence of significant and unusual or infrequent items, such as vesting of stock-based compensation or foreign currency gains and losses.

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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, 2020, and December 31, 2019, the amount of unrecognized tax benefits for uncertain tax positions was $ 30.0 million and $ 29.0 million, respectively, excluding related liabilities for interest and penalties of $ 1.2 million as of March 31, 2020 and December 31, 2019.

As of June 30, 2020, and December 31, 2019, the amount of unrecognized tax benefits for uncertain tax positions was $ 30.0 million and $ 29.0 million, respectively, excluding related liabilities for interest and penalties of $ 1.2 million as of June 30, 2020 and December 31, 2019.

The Company believes it is reasonably possible that the total amount of unrecognized tax benefits will decrease within the next 12 months by approximately $ 11.7 million, due to the settlement of various audits and the expiration of statutes of limitation.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements