ACI WORLDWIDE, INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS ACI WORLDWIDE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited and in thousands, except share and per share amounts) June 30, 2020 December 31, 2019 ASSETS Current assets Cash and cash equivalents $ 129,223 $ 121,398 Receivables, net of allowances of $ 3,661 and $ 5,149 , respectively 324,659 359,197 Settlement assets 338,372 391,039 Prepaid expenses 29,620 24,542 Other current assets 30,533 24,200 Total current assets 852,407 920,376 Noncurrent assets Accrued receivables, net 199,964 213,041 Property and equipment, net 69,011 70,380 Operating lease right-of-use assets 54,816 57,382 Software, net 216,287 234,517 Goodwill 1,280,226 1,280,525 Intangible assets, net 335,697 356,969 Deferred income taxes, net 59,301 51,611 Other noncurrent assets 69,868 72,733 TOTAL ASSETS $ 3,137,577 $ 3,257,534 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 42,795 $ 37,010 Settlement liabilities 314,017 368,719 Employee compensation 36,717 29,318 Current portion of long-term debt 34,206 34,148 Deferred revenue 73,729 65,784 Other current liabilities 78,995 76,971 Total current liabilities 580,459 611,950 Noncurrent liabilities Deferred revenue 63,692 53,155 Long-term debt 1,282,889 1,339,007 Deferred income taxes, net 31,140 32,053 Operating lease liabilities 45,999 46,766 Other noncurrent liabilities 42,661 44,635 Total liabilities 2,046,840 2,127,566 Commitments and contingencies Stockholders’ equity Preferred stock; $ 0.01 par value; 5,000,000 shares authorized; no shares issued at June 30, 2020, and December 31, 2019 — — Common stock; $ 0.005 par value; 280,000,000 shares authorized; 140,525,055 shares issued at June 30, 2020, and December 31, 2019 702 702 Additional paid-in capital 667,554 667,658 Retained earnings 920,478 930,830 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 ) Accumulated other comprehensive loss ( 98,334 ) ( 91,583 ) Total stockholders’ equity 1,090,737 1,129,968 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 3,137,577 $ 3,257,534 The accompanying notes are an integral part of the condensed consolidated financial statements. 3 Table of contents ACI WORLDWIDE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in thousands, except per share amounts) Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Revenues Software as a service and platform as a service $ 180,573 $ 172,499 $ 373,523 $ 281,056 License 50,136 52,541 78,265 73,619 Maintenance 52,749 51,922 106,029 107,033 Services 16,452 20,656 33,578 41,765 Total revenues 299,910 297,618 591,395 503,473 Operating expenses Cost of revenue (1) 147,346 155,240 313,183 270,181 Research and development 35,578 39,235 74,602 75,429 Selling and marketing 24,455 32,962 54,538 62,392 General and administrative 29,758 49,319 65,684 80,836 Depreciation and amortization 33,635 26,744 65,533 48,610 Total operating expenses 270,772 303,500 573,540 537,448 Operating income (loss) 29,138 ( 5,882 ) 17,855 ( 33,975 ) Other income (expense) Interest expense ( 14,142 ) ( 15,323 ) ( 31,313 ) ( 26,937 ) Interest income 2,954 2,997 5,854 6,030 Other, net 2,041 1,402 ( 7,717 ) ( 510 ) Total other income (expense) ( 9,147 ) ( 10,924 ) ( 33,176 ) ( 21,417 ) Income (loss) before income taxes 19,991 ( 16,806 ) ( 15,321 ) ( 55,392 ) Income tax expense (benefit) 5,916 ( 22,531 ) ( 4,969 ) ( 35,154 ) Net income (loss) $ 14,075 $ 5,725 $ ( 10,352 ) $ ( 20,238 ) Income (loss) per common share Basic $ 0.12 $ 0.05 $ ( 0.09 ) $ ( 0.17 ) Diluted $ 0.12 $ 0.05 $ ( 0.09 ) $ ( 0.17 ) Weighted average common shares outstanding Basic 116,033 116,586 116,019 116,287 Diluted 117,264 118,786 116,019 116,287 (1) The cost of revenue excludes charges for depreciation but includes amortization of purchased and developed software for resale. The accompanying notes are an integral part of the condensed consolidated financial statements. 4 Table of contents ACI WORLDWIDE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited and in thousands) 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 loss ( 582 ) ( 1,730 ) ( 6,751 ) ( 409 ) Comprehensive income (loss) $ 13,493 $ 3,995 $ ( 17,103 ) $ ( 20,647 ) The accompanying notes are an integral part of the condensed consolidated financial statements. 5 Table of contents 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. 6 Table of contents ACI WORLDWIDE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited and in thousands, except share amounts) Six Months Ended June 30, 2020 Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total Balance as of December 31, 2019 $ 702 $ 667,658 $ 930,830 $ ( 377,639 ) $ ( 91,583 ) $ 1,129,968 Net loss — — ( 10,352 ) — — ( 10,352 ) Other comprehensive loss — — — — ( 6,751 ) ( 6,751 ) Stock-based compensation — 14,882 — — — 14,882 Shares issued and forfeited, net, under stock plans — ( 14,986 ) — 17,981 — 2,995 Repurchase of 1,000,000 shares of common stock — — — ( 28,881 ) — ( 28,881 ) Repurchase of stock-based compensation awards for tax withholdings — — — ( 11,124 ) — ( 11,124 ) Balance as of June 30, 2020 $ 702 $ 667,554 $ 920,478 $ ( 399,663 ) $ ( 98,334 ) $ 1,090,737 Six Months Ended June 30, 2019 Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total Balance as of December 31, 2018 $ 702 $ 632,235 $ 863,768 $ ( 355,857 ) $ ( 92,617 ) $ 1,048,231 Net loss — — ( 20,238 ) — — ( 20,238 ) Other comprehensive loss — — — — ( 409 ) ( 409 ) Stock-based compensation — 20,957 — — — 20,957 Shares issued and forfeited, net, under stock plans — ( 2,395 ) — 9,871 — 7,476 Repurchase of 23,802 shares of common stock — — — ( 631 ) — ( 631 ) Repurchase of stock-based compensation awards for tax withholdings — — — ( 2,809 ) — ( 2,809 ) 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. 7 Table of contents ACI WORLDWIDE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited and in thousands) Six Months Ended June 30, 2020 2019 Cash flows from operating activities: Net loss $ ( 10,352 ) $ ( 20,238 ) Adjustments to reconcile net loss to net cash flows from operating activities: Depreciation 11,752 11,831 Amortization 57,762 42,799 Amortization of operating lease right-of-use assets 8,801 7,029 Amortization of deferred debt issuance costs 2,416 1,683 Deferred income taxes ( 4,742 ) ( 41,331 ) Stock-based compensation expense 14,882 20,957 Other 1,772 1,533 Changes in operating assets and liabilities, net of impact of acquisitions: Receivables 29,053 88,596 Accounts payable 6,287 1,294 Accrued employee compensation 8,177 ( 1,163 ) Current income taxes ( 9,367 ) ( 5,634 ) Deferred revenue 22,236 ( 17,981 ) Other current and noncurrent assets and liabilities ( 13,148 ) ( 32,510 ) Net cash flows from operating activities 125,529 56,865 Cash flows from investing activities: Purchases of property and equipment ( 10,615 ) ( 9,915 ) Purchases of software and distribution rights ( 15,057 ) ( 11,300 ) Acquisition of businesses, net of cash acquired — ( 758,546 ) Net cash flows from investing activities ( 25,672 ) ( 779,761 ) Cash flows from financing activities: Proceeds from issuance of common stock 1,894 1,753 Proceeds from exercises of stock options 1,122 5,816 Repurchase of stock-based compensation awards for tax withholdings ( 11,124 ) ( 2,809 ) Repurchases of common stock ( 28,881 ) ( 631 ) Proceeds from revolving credit facility 30,000 250,000 Repayment of revolving credit facility ( 69,000 ) ( 15,000 ) Proceeds from term portion of credit agreement — 500,000 Repayment of term portion of credit agreement ( 19,475 ) ( 9,424 ) Payments for debt issuance costs — ( 12,830 ) Payments on or proceeds from other debt, net ( 4,686 ) ( 2,220 ) Net cash flows from financing activities ( 100,150 ) 714,655 Effect of exchange rate fluctuations on cash 8,118 ( 865 ) Net increase (decrease) in cash and cash equivalents 7,825 ( 9,106 ) Cash and cash equivalents, beginning of period 121,398 148,502 Cash and cash equivalents, end of period $ 129,223 $ 139,396 Supplemental cash flow information Income taxes paid $ 12,121 $ 15,476 Interest paid $ 29,026 $ 23,937 The accompanying notes are an integral part of the condensed consolidated financial statements. 8 Table of contents ACI WORLDWIDE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Condensed Consolidated Financial Statements The unaudited condensed consolidated financial statements include the accounts of ACI Worldwide, Inc. and its wholly-owned subsidiaries (collectively, the “Company”). All intercompany balances and transactions have been eliminated. The condensed consolidated financial statements as of June 30, 2020, and for the three and six months ended June 30, 2020 and 2019, are unaudited and reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair presentation, in all material respects, of the financial position and operating results for the interim periods. The condensed consolidated balance sheet as of December 31, 2019, is derived from the audited financial statements. The condensed consolidated financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2019, filed on February 27, 2020. Results for the three and six months ended June 30, 2020, are not necessarily indicative of results that may be attained in the future. The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Risks and Uncertainties The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company's business is highly uncertain and difficult to predict, as the response to the pandemic and available information continues to be evolving. The Company has experienced changes in volumes for certain Merchant and Biller customers and has received limited requests for extended payment terms under existing contracts. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Such economic disruption could have a material adverse effect on our business as our customers curtail and reduce capital and overall spending. Policymakers around the globe have responded with fiscal policy actions to support the economy as a whole. The magnitude and overall effectiveness of these actions remains uncertain. The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, uncertain demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operations challenges faced by its customers. As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain. Other Current Liabilities The components of other current liabilities are included in the following table (in thousands): June 30, 2020 December 31, 2019 Operating lease liabilities $ 13,976 $ 15,049 Vendor financed licenses 17,873 9,667 Royalties payable 5,097 6,107 Accrued interest 8,868 9,212 Other 33,181 36,936 Total other current liabilities $ 78,995 $ 76,971 9 Table of contents Settlement Assets and Liabilities Individuals and businesses settle their obligations to the Company’s various Biller clients using credit or debit cards or via automated clearing house (“ACH”) payments. The Company creates a receivable for the amount due from the credit or debit card processor and an offsetting payable to the client. Upon confirmation that the funds have been received, the Company settles the obligation to the client. Due to timing, in some instances, the Company may (1) receive the funds into bank accounts controlled by and in the Company’s name that are not disbursed to its clients by the end of the day, resulting in a settlement deposit on the Company’s books and (2) disburse funds to its clients in advance of receiving funds from the credit or debit card processor, resulting in a net settlement receivable position. Off Balance Sheet Settlement Accounts The Company also enters into agreements with certain Biller clients to process payment funds on their behalf. When an ACH or automated teller machine network payment transaction is processed, a transaction is initiated to withdraw funds from the designated source account and deposit them into a settlement account, which is a trust account maintained for the benefit of the Company’s clients. A simultaneous transaction is initiated to transfer funds from the settlement account to the intended destination account. These “back to back” transactions are designed to settle at the same time, usually overnight, such that the Company receives the funds from the source at the same time as it sends the funds to their destination. However, due to the transactions being with various financial institutions there may be timing differences that result in float balances. These funds are maintained in accounts for the benefit of the client, which is separate from the Company’s corporate assets. As the Company does not take ownership of the funds, these settlement accounts are not included in the Company’s balance sheet. The Company is entitled to interest earned on the fund balances. The collection of interest on these settlement accounts is considered in the Company’s determination of its fee structure for clients and represents a portion of the payment for services performed by the Company. The amount of settlement funds as of June 30, 2020, and December 31, 2019, was $ 165.9 million and $ 274.0 million, respectively. Fair Value The fair value of the Company’s Credit Agreement approximates the carrying value due to the floating interest rate (Level 2 of the fair value hierarchy). The Company measures the fair value of its Senior Notes based on Level 2 inputs, which include quoted market prices and interest rate spreads of similar securities. The fair value of the Company’s 5.750 % Senior Notes due 2026 (“2026 Notes”) was $ 416.7 million and $ 432.0 million as of June 30, 2020, and December 31, 2019, respectively. The fair values of cash and cash equivalents approximate the carrying values due to the short period of time to maturity (Level 2 of the fair value hierarchy). Goodwill In accordance with the Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other, the Company assesses goodwill for impairment annually during the fourth quarter of its fiscal year using October 1 balances or when there is evidence that events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Company evaluates goodwill at the reporting unit level and has identified its reportable segments, ACI On Demand and ACI On Premise, as the reporting units. Changes in the carrying amount of goodwill attributable to each reporting unit during the six months ended June 30, 2020, were as follows (in thousands): ACI On Demand ACI On Premise Total Gross Balance, prior to December 31, 2019 $ 554,617 $ 773,340 $ 1,327,957 Total impairment prior to December 31, 2019 — ( 47,432 ) ( 47,432 ) Balance, December 31, 2019 554,617 725,908 1,280,525 Goodwill from acquisitions (1) ( 299 ) — ( 299 ) Balance, June 30, 2020 $ 554,318 $ 725,908 $ 1,280,226 (1) Goodwill from acquisitions relates to adjustments in the goodwill recorded for the acquisition of E Commerce Group Products, Inc. ("ECG"), along with ECG's subsidiary, Speedpay, Inc. (collectively referred to as "Speedpay") and Walletron, Inc. ("Walletron"), as discussed in Note 3, Acquisition . 10 Table of contents Recoverability of goodwill is measured using a discounted cash flow valuation model incorporating discount rates commensurate with the risks involved. Use of a discounted cash flow model is common practice in impairment testing in the absence of available transactional market evidence to determine the fair value. The calculated fair value was substantially in excess of the current carrying value for all reporting units based upon the October 1, 2019, annual impairment test. Given the adverse economic and market conditions caused by the COVID-19 pandemic, the Company considered a variety of qualitative factors to determine if an additional quantitative impairment test was required subsequent to our annual impairment test. Based on a variety of factors, including the excess of the fair value over the carrying amount in the most recent impairment test, we determined that an additional quantitative impairment test was not required. Equity Method Investment On July 23, 2019, the Company invested $ 18.3 million for a 30 % non-controlling financial interest in a payment technology and services company in India. The Company accounted for this investment using the equity method in accordance with ASC 323, Investments - Equity Method and Joint Ventures . The Company records its share of earnings and losses in the investment on a one-quarter lag basis. Accordingly, the Company recorded an investment of $ 18.1 million and $ 18.5 million, which is included in other noncurrent assets in the condensed consolidated balance sheet as of June 30, 2020 and December 31, 2019, respectively. Name Change Effective January 1, 2020, Official Payments Corporation, a wholly owned subsidiary, changed its name to ACI Payments, Inc. An amended and restated certificate of incorporation was filed with the state of Delaware to reflect the change. The Official Payments Corporation name and corresponding trade name may continue to be used until all stationary and marketing materials are transitioned to ACI Payments, Inc. equivalents. New Accounting Standards Recently Adopted In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, codified as ASC 326 . Subsequent amendments to the guidance were issued as follows: ASU 2018-19 in November 2018; ASU 2019-04 in April 2019; ASU 2019-05 in May 2019; ASU's 2019-10 and 2019-11 in November 2019; and ASU 2020-02 in February 2020. This ASU provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in ASU 2016-13 replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company is required to use a forward-looking expected credit loss model for billed and accrued receivables. The Company adopted ASU 2016-13 as of January 1, 2020. The adoption of ASU 2016-13 did not have a material impact on the condensed consolidated financial statements. In February 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments , which clarifies or improves various financial instruments topics in the accounting standards codification to increase stakeholder awareness. ASU 2020-03 was effective upon issuance and did not have a material impact on the condensed consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The update provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”). This guidance includes optional expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 is effective for all entities as of March 12, 2020, through December 31, 2022, when the reference rate replacement activity is expected to be completed. The adoption of ASU 2020-04 did not have an impact on the Company's condensed consolidated financial statements. Recently Issued Accounting Standards Not Yet Effective In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes , as part of its initiative to reduce complexity in accounting standards. The amendments in this update simplify the accounting for income taxes by removing certain exceptions within ASC 740, as well as clarify and simplify other aspects of the accounting for income taxes to promote consistency among reporting entities. ASU 2019-12 is effective for annual and interim periods beginning after December 15, 2020. The Company is currently assessing the impact the adoption of ASU 2019-12 will have on its condensed consolidated financial statements. 11 Table of contents 2. Revenue In accordance with ASC 606, Revenue From Contracts With Customers , revenue is recognized upon transfer of control of promised products and/or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products and services. Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities. See Note 10, Segment Information, for additional information, including disaggregation of revenue based on primary solution category and geographic location. Total receivables represent amounts billed and amounts earned that are to be billed in the future (i.e., accrued receivables). Included in accrued receivables are services, software as a service ("SaaS"), and platform as a service ("PaaS") revenues earned in the current period but billed in the following period, and amounts due under multi-year software license arrangements with extended payment terms for which the Company has an unconditional right to invoice and receive payment subsequent to invoicing. Total receivables, net is comprised of the following (in thousands): June 30, 2020 December 31, 2019 Billed receivables $ 183,408 $ 213,654 Allowance for doubtful accounts ( 3,661 ) ( 5,149 ) Billed receivables, net 179,747 208,505 Accrued receivables 374,845 399,302 Significant financing component ( 29,969 ) ( 35,569 ) Total accrued receivables, net 344,876 363,733 Less: current accrued receivables 155,320 161,714 Less: current significant financing component ( 10,408 ) ( 11,022 ) Total long-term accrued receivables, net 199,964 213,041 Total receivables, net $ 524,623 $ 572,238 No customer accounted for more than 10% of the Company’s consolidated receivables balance as of June 30, 2020, or December 31, 2019. Deferred revenue includes amounts due or received from customers for software licenses, maintenance, services, and/or SaaS and PaaS services in advance of recording the related revenue. Changes in deferred revenue were as follows (in thousands): Balance, December 31, 2019 $ 118,939 Deferral of revenue 80,744 Recognition of deferred revenue ( 60,410 ) Foreign currency translation ( 1,852 ) Balance, June 30, 2020 $ 137,421 Revenue allocated to remaining performance obligations represents contracted revenue that will be recognized in future periods, which is comprised of deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. This does not include: • Revenue that will be recognized in future periods from capacity overages that are accounted for as a usage-based royalty. • SaaS and PaaS revenue from variable consideration that will be recognized in accordance with the ‘right to invoice’ practical expedient. • SaaS and PaaS revenue from variable consideration that will be recognized in accordance with the direct allocation method. 12 Table of contents 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. 3. Acquisition Speedpay On May 9, 2019, the Company acquired Speedpay, a subsidiary of The Western Union Company (“Western Union”), for $ 754.1 million in cash, including working capital adjustments, pursuant to a Stock Purchase Agreement, among the Company, Western Union, and ACI Worldwide Corp., a wholly owned subsidiary of the Company. The Company has included the financial results of Speedpay in the condensed consolidated financial statements from the date of acquisition. The combination of the Company and Speedpay bill pay solutions serves more than 4,000 customers across the U.S., bringing expanded reach in existing and complementary market segments such as consumer finance, insurance, healthcare, higher education, utilities, government, and mortgage. The acquisition of Speedpay increased the scale of the Company’s On Demand platform business and allows the acceleration of platform innovation through increased research and development and investment in ACI's On Demand platform infrastructure. To fund the acquisition, the Company amended its existing Credit Agreement, dated February 24, 2017, for an additional $ 500.0 million senior secured term loan (“Delayed Draw Term Loan”), in addition to drawing $ 250.0 million on the available Revolving Credit Facility. See Note 4, Debt , for terms of the Credit Agreement. The remaining acquisition consideration was funded with cash on hand. The Company expensed approximately $ 16.6 million and $ 21.3 million of costs related to the acquisition of Speedpay for the three and six months ended June 30, 2019, respectively. These costs, which consist primarily of investment bank, consulting, and legal fees, are included in general and administrative expenses in the accompanying condensed consolidated statements of operations. Speedpay contributed approximately $ 80.2 million in total revenue and $ 15.0 million in total operating income for the three months ended June 30, 2020. Speedpay contributed approximately $ 168.9 million in total revenue and $ 27.3 million in total operating income for the six months ended June 30, 2020. Speedpay contributed approximately $ 49.3 million in total revenue and $ 7.6 million in total operating income for the three and six months ended June 30, 2019. 13 Table of contents In connection with the acquisition, the Company recorded the following amounts based upon its purchase price allocation as of June 30, 2020 (in thousands, except weighted average useful lives): Amount Weighted Average Useful Lives Current assets: Cash and cash equivalents $ 135 Receivables, net of allowances 17,658 Settlement assets 239,604 Prepaid expenses 317 Other current assets 19,585 Total current assets acquired 277,299 Noncurrent assets: Goodwill 366,508 Software 113,600 7 years Customer relationships 208,500 15 years Trademarks 10,900 5 years Other noncurrent assets 3,745 Total assets acquired 980,552 Current liabilities: Accounts payable 6,623 Settlement liabilities 212,892 Employee compensation 1,959 Other current liabilities 3,802 Total current liabilities acquired 225,276 Noncurrent liabilities: Other noncurrent liabilities 1,219 Total liabilities acquired 226,495 Net assets acquired $ 754,057 During the six months ended June 30, 2020, the Company made adjustments to the preliminary purchase price allocation as additional information became available for accounts payable. These adjustments and any resulting adjustments to the statements of operations were not material to the Company’s previously reported operating results or financial position. The Company's review of the purchase price allocation has been completed. Factors contributing to the purchase price that resulted in the goodwill (which is tax deductible) include the acquisition of management, sales, and technology personnel with the skills to market new and existing products of the Company, enhanced product capabilities, complementary products, and customers. Unaudited Pro Forma Financial Information The pro forma financial information in the table below presents the combined results of operations for ACI and Speedpay as if the acquisition had occurred January 1, 2018. The pro forma information is shown for illustrative purposes only and is not necessarily indicative of future results of operations of the Company or results of operations of the Company that would have actually occurred had the transaction been in effect for the periods presented. This pro forma information is not intended to represent or be indicative of actual results had the acquisition occurred as of the beginning of each period, and does not reflect potential synergies, integration costs, or other such costs or savings. Certain pro forma adjustments have been made to net income (loss) for the three and six months ended June 30, 2019, to give effect to estimated adjustments that remove the amortization expense on eliminated Speedpay historical identifiable intangible assets, add amortization expense for the value of acquired identified intangible assets (primarily acquired software, customer relationships, and trademarks), and add estimated interest expense on the Company’s additional Delayed Draw Term Loan and Revolving Credit Facility borrowings. Additionally, certain transaction expenses that are a direct result of the acquisition have 14 Table of contents been excluded. The three and six months ended June 30, 2020, are not presented as Speedpay is included in the Company's consolidated results for the entire periods. The following is the unaudited summarized pro forma financial information (in thousands, except per share data): Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Pro forma revenue $ 334,077 $ 628,136 Pro forma net income (loss) $ 15,249 $ ( 5,996 ) Pro forma income (loss) per share: Basic $ 0.13 $ ( 0.05 ) Diluted $ 0.13 $ ( 0.05 ) Walletron On May 9, 2019, the Company also completed the acquisition of Walletron, which delivers patented mobile wallet technology. The Company has included the financial results of Walletron in the condensed consolidated financial statements from the date of acquisition, which were not material. 4. Debt As of June 30, 2020, the Company had $ 200.0 million, $ 736.6 million, and $ 400.0 million outstanding under its Revolving Credit Facility, Term Loan, and Senior Notes, respectively, with up to $ 300.0 million of unused borrowings under the Revolving Credit Facility portion of the Credit Agreement, as amended. Credit Agreement On April 5, 2019, the Company (and its wholly-owned subsidiaries, ACI Worldwide Corp. and ACI Payments, Inc. entered into the Second Amended and Restated Credit Agreement (the “Credit Agreement”) with the lenders, and Bank of America, N.A., as administrative agent for the lenders, to amend and restate the Company's existing agreement, as amended, dated February 24, 2017. The Credit Agreement consists of (a) a five -year $ 500.0 million senior secured revolving credit facility (the “Revolving Credit Facility”), which includes sublimits for (1) the issuance of standby letters of credit and (2) swingline loans, (b) a five -year $ 279.0 million senior secured term loan facility (the "Initial Term Loan") and (c) a five -year $ 500.0 million Delayed Draw Term Loan (together with the Initial Term Loan, the "Term Loans", and together with the Initial Term Loan and the Revolving Credit Facility, the “Credit Facility”). The Credit Agreement also allows the Company to request optional incremental term loans and increases in the revolving commitment. The Credit Facility will mature on April 5, 2024. At the Company’s option, borrowings under the Credit Facility bear interest at an annual rate equal to, either (a) a base rate determined by reference to the highest of (1) the annual interest rate publicly announced by the administrative agent as its Prime Rate, (2) the federal funds effective rate plus 1/2 of 1%, or (3) a London Interbank Offered Rate (“LIBOR”) rate determined by reference to the costs of funds for U.S. dollar deposits for a one-month interest period, adjusted for certain additional costs, plus 1 % or (b) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowings, adjusted for certain additional costs, plus an applicable margin. Based on the calculation of the applicable consolidated total leverage ratio, the applicable margin for borrowings under the Credit Facility is between 0.25 % to 1.25 % with respect to base rate borrowings and between 1.25 % and 2.25 % with respect to LIBOR rate borrowings. Interest is due and payable monthly. The interest rate in effect for the Credit Facility as of June 30, 2020, was 2.43 %. The Company is also required to pay (a) a commitment fee related to the unutilized commitments under the Revolving Credit Facility, payable quarterly in arrears, (b) letter of credit fees on the maximum amount available to be drawn under all outstanding letters of credit in an amount equal to the applicable margin on LIBOR rate borrowings under the Revolving Credit Facility on an annual basis, payable quarterly in arrears, and (c) customary fronting fees for the issuance of letters of credit fees and agency fees. The Company’s obligations under the Credit Facility and cash management arrangements entered into with lenders under the Credit Facility (or affiliates thereof) and the obligations of the subsidiary guarantors are secured by first-priority security interests in substantially all assets of the Company and any guarantor, including 100 % of the capital stock of ACI Worldwide Corp. and each domestic subsidiary of the Company, each domestic subsidiary of any guarantor, and 65 % of the voting capital stock of each foreign subsidiary of the Company that is directly owned by the Company or a guarantor, in each case subject to 15 Table of contents certain exclusions set forth in the credit documentation governing the Credit Facility. The collateral agreement of the Credit Agreement, as amended, released the lien on certain assets of ACI Payments, Inc., our electronic bill presentment and payment affiliate, to allow ACI Payments, Inc. to comply with certain eligible securities and unencumbered asset requirements related to money transmitter or transfer license rules and regulations. The Credit Agreement contains a number of covenants that, among other things and subject to certain exceptions, restrict the Company’s and its subsidiaries' ability to: create, incur, assume or suffer to exist any additional indebtedness; create, incur, assume or suffer to exist any liens; enter into agreements and other arrangements that include negative pledge clauses; pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated indebtedness; create restrictions on the payment of dividends or other distributions by subsidiaries; make investments, loans, advances and acquisitions; merge, consolidate or enter into any similar combination or sell assets, including equity interests of the subsidiaries; enter into sale and leaseback transactions; directly or indirectly engage in transactions with affiliates; alter in any material respect the character or conduct of the business; enter into amendments of or waivers under subordinated indebtedness, organizational documents, and certain other material agreements; and hold certain assets and incur certain liabilities. Expected Discontinuation of LIBOR In July 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced it will no longer compel banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee has proposed the Secured Overnight Financing Rate ("SOFR") as its recommended alternative to LIBOR, and the first publication of SOFR rates was released in April 2018. The Company is evaluating the potential impact of the transition from LIBOR as an interest rate benchmark to other potential alternative reference rates, including SOFR. The Company's Credit Agreement is currently indexed to LIBOR and the maturity date of the Credit Agreement extends beyond 2021. The Credit Agreement contemplates the discontinuation of LIBOR and provides options for the Company in such an event. The Company will continue to actively assess the related opportunities and risks involved in this transition. Senior Notes On August 21, 2018, the Company completed a $ 400.0 million offering of the 2026 Notes at an issue price of 100 % of the principal amount in a private placement for resale to qualified institutional buyers. The 2026 Notes bear interest at an annual rate of 5.750 %, payable semi-annually in arrears on February 15 and August 15 of each year. The 2026 Notes will mature on August 15, 2026. Maturities on debt outstanding as of June 30, 2020, are as follows (in thousands): Fiscal Year Ending December 31, Remainder of 2020 $ 19,475 2021 38,950 2022 50,431 2023 69,906 2024 757,823 Thereafter 400,000 Total $ 1,336,585 The Credit Agreement and 2026 Notes contain certain customary affirmative covenants and negative covenants that limit or restrict, subject to certain exceptions, the incurrence of liens, indebtedness of subsidiaries, mergers, advances, investments, acquisitions, transactions with affiliates, change in nature of business, and the sale of the assets. In addition, the Credit Agreement and 2026 Notes contain certain customary mandatory prepayment provisions. The Company is also required to maintain a consolidated leverage ratio at or below a specified amount and an interest coverage ratio at or above a specified amount. As specified in the Credit Agreement and 2026 Notes agreement, if certain events occur and continue, the Company may be required to repay all amounts outstanding under the Credit Facility and 2026 Notes. As of June 30, 2020, and at all times during the period, the Company was in compliance with its financial debt covenants. 16 Table of contents Total debt is comprised of the following (in thousands): June 30, 2020 December 31, 2019 Term loans $ 736,585 $ 756,060 Revolving credit facility 200,000 239,000 5.750 % Senior notes, due August 2026 400,000 400,000 Debt issuance costs ( 19,490 ) ( 21,905 ) Total debt 1,317,095 1,373,155 Less: current portion of term loans 38,950 38,950 Less: current portion of debt issuance costs ( 4,744 ) ( 4,802 ) Total long-term debt $ 1,282,889 $ 1,339,007 Overdraft Facility In 2019, the Company and ACI Payments, Inc. entered in to a $ 140.0 million uncommitted overdraft facility with Bank of America, N.A. The overdraft facility bears interest at LIBOR plus 0.875 % based on the Company’s average outstanding balance and the frequency in which overdrafts occur. The overdraft facility acts as a secured loan under the terms of the Credit Agreement to provide an additional funding mechanism for timing differences that can occur in the bill payment settlement process. Amounts outstanding on the overdraft facility are included in other current liabilities in the condensed consolidated balance sheet. As of June 30, 2020, there was no amount outstanding on the overdraft facility. As of December 31, 2019, there was $ 1.5 million outstanding on the overdraft facility. Other The Company finances certain multi-year license agreements for internal-use software. Upon execution, these arrangements have been treated as a non-cash investing and financing activity for purposes of the condensed consolidated statements of cash flows. As of June 30, 2020, $ 13.8 million was outstanding, of which $ 9.4 million and $ 4.4 million is included in other current liabilities and other noncurrent liabilities, respectively, in the consolidated balance sheet. As of December 31, 2019, $ 13.8 million was outstanding, of which $ 6.0 million and $ 7.8 million was included in other current liabilities and other noncurrent liabilities, respectively, in the consolidated balance sheet. 5. Stock-Based Compensation Plans Employee Stock Purchase Plan Shares issued under the 2017 Employee Stock Purchase Plan during the six months ended June 30, 2020 and 2019, totaled 72,228 and 60,362 , respectively. 2020 Equity and Incentive Compensation Plan On June 9, 2020, upon recommendation of the Company’s board of directors (the “board”), stockholders approved the ACI Worldwide, Inc. 2020 Equity and Incentive Compensation Plan (the “2020 Plan”). The 2020 Plan authorizes the board to provide for equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, dividend equivalents, and certain other awards, including those denominated or payable in, or otherwise based on, the Company’s common stock ("awards"). The purpose of the 2020 Plan is to provide incentives and rewards for service and/or performance by providing awards to non-employee directors, officers, other employees, and certain consultants and other service providers of the Company and its subsidiaries. Following the approval of the 2020 Plan, the 2016 Equity and Performance Incentive Plan (the “2016 Incentive Plan”) was terminated. Termination of the 2016 Incentive Plan did not affect any equity awards outstanding under the 2016 Incentive Plan. Subject to adjustment and share counting rules as described in the 2020 Plan, a total of 6,658,754 shares of common stock are available for awards granted under the 2020 Plan. Shares underlying certain awards under the 2020 Plan, the Company’s 2005 Equity and Performance Incentive Plan (the "2005 Incentive Plan"), and the 2016 Incentive Plan (each including as amended or amended and restated) that are cancelled or forfeited, expire, are settled for cash, or are unearned after June 9, 2020, will again be available under the 2020 Plan. The board generally will be able to amend the 2020 Plan, subject to stockholder approval in certain circumstances, as described in the 2020 Plan. 17 Table of contents Stock Options A summary of stock option activity is as follows: Number of Shares Weighted Average Exercise Price ($) Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value of In-the-Money Options ($) Outstanding as of December 31, 2019 4,006,816 $ 18.18 Exercised ( 1,110,583 ) 19.58 Forfeited ( 57,744 ) 19.08 Expired ( 6,090 ) 18.44 Outstanding as of June 30, 2020 2,832,399 $ 17.61 3.98 $ 26,562,039 Exercisable as of June 30, 2020 2,685,163 $ 17.48 4.11 $ 25,532,991 The total intrinsic value of stock options exercised during the six months ended June 30, 2020 and 2019, was $ 10.5 million and $ 6.0 million, respectively. There were no stock options granted during the six months ended June 30, 2020 or 2019. Long-term Incentive Program Performance Share Awards A summary of nonvested long-term incentive program performance share awards (“LTIP performance shares”) is as follows: Number of Shares at Expected Attainment Weighted Average Grant Date Fair Value Nonvested as of December 31, 2019 669,469 $ 20.12 Vested ( 668,240 ) 20.12 Forfeited ( 5,368 ) 20.12 Change in attainment 4,139 20.12 Nonvested as of June 30, 2020 — $ — During the six months ended June 30, 2020, a total of 668,240 LTIPs vested. The Company withheld 165,237 of those shares to pay the employees’ portion of the minimum payroll withholding taxes. Restricted Share Awards A summary of nonvested restricted share awards (“RSAs”) is as follows: Number of Shares Weighted Average Grant Date Fair Value Nonvested as of December 31, 2019 92,842 $ 20.13 Vested ( 88,913 ) 20.12 Forfeited ( 3,929 ) 20.35 Nonvested as of June 30, 2020 — $ — During the six months ended June 30, 2020, a total of 88,913 RSAs vested. The Company withheld 28,233 of those shares to pay the employees’ portion of the minimum payroll withholding taxes. 18 Table of contents Total Shareholder Return Awards During the six months ended June 30, 2020 and 2019, pursuant to the 2016 Incentive Plan, the Company granted total shareholder return awards (“TSRs”). TSRs are performance shares that are earned, if at all, based upon the Company’s total shareholder return as compared to a group of peer companies over a three -year performance period. The award payout can range from 0 % to 200 %. To determine the grant date fair value of the TSRs, a Monte Carlo simulation model is used. The Company recognizes compensation expense for the TSRs over a three-year performance period based on the grant date fair value. A summary of nonvested TSRs is as follows: Number of Shares Weighted Average Grant Date Fair Value Nonvested as of December 31, 2019 1,062,291 $ 35.77 Granted 677,195 30.01 Vested ( 199,413 ) 24.37 Forfeited ( 79,246 ) 39.41 Change in payout rate ( 14,259 ) 24.37 Nonvested as of June 30, 2020 1,446,568 $ 34.56 During the six months ended June 30, 2020, a total of 199,413 TSRs awards granted in fiscal 2017 vested and achieved a payout rate of 93 % based on the Company's total shareholder return as compared to a group of peer companies over a three -year performance period. The Company withheld 53,033 of those shares to pay the employees’ portion of the minimum payroll withholding taxes. The fair value of TSRs granted during the six months ended June 30, 2020 and 2019, were estimated on the date of grant using the Monte Carlo simulation model, acceptable under ASC 718, using the following weighted average assumptions: Six Months Ended June 30, 2020 2019 Expected life (years) 2.8 2.8 Risk-free interest rate 0.5 % 2.5 % Expected volatility 31.4 % 29.3 % Expected dividend yield — — Restricted Share Units During the six months ended June 30, 2020 and 2019, pursuant to the 2020 Plan and the 2016 Incentive Plan, respectively, the Company granted restricted share unit awards (“RSUs”). RSUs generally have requisite service periods of three years and vest in increments of 33 % on the anniversary of the grant dates. RSUs granted to our board vest one year from grant or as of the next annual shareholders meeting, whichever is earlier. Under each arrangement, RSUs are issued without direct cost to the employee on the vesting date. The Company estimates the fair value of the RSUs based upon the market price of the Company’s stock at the date of grant. The Company recognizes compensation expense for RSUs on a straight-line basis over the requisite service period. A summary of nonvested RSUs is as follows: Number of Shares Weighted Average Grant Date Fair Value Nonvested as of December 31, 2019 1,009,404 $ 29.96 Granted 787,871 25.65 Vested ( 399,605 ) 29.14 Forfeited ( 114,303 ) 29.68 Nonvested as of June 30, 2020 1,283,367 $ 27.59 19 Table of contents During the six months ended June 30, 2020, a total of 399,605 RSUs vested. The Company withheld 109,652 of those shares to pay the employees’ portion of the minimum payroll withholding taxes. As of June 30, 2020, there were unrecognized compensation costs of $ 30.1 million related to nonvested RSUs, $ 27.1 million related to nonvested TSRs, and less than $ 0.1 million related to nonvested stock options, which the Company expects to recognize over weighted average periods of 2.1 years, 1.9 years, and 0.7 years, respectively. The Company recorded stock-based compensation expense recognized under ASC 718 for the three months ended June 30, 2020 and 2019, of $ 7.9 million and $ 14.4 million, respectively, with corresponding tax benefits of $ 1.4 million and $ 2.8 million, respectively. The Company recorded stock-based compensation expense recognized under ASC 718 for the six months ended June 30, 2020 and 2019, of $ 14.9 million and $ 21.0 million, respectively, with the corresponding tax benefits of $ 2.8 million and $ 4.0 million, respectively. 6. Software and Other Intangible Assets The carrying amount and accumulated amortization of the Company's software assets subject to amortization at each balance sheet date are as follows (in thousands): June 30, 2020 December 31, 2019 Gross Carrying Amount Accumulated Amortization Net Balance Gross Carrying Amount Accumulated Amortization Net Balance Software for resale $ 136,618 $ ( 124,271 ) $ 12,347 $ 138,823 $ ( 122,061 ) $ 16,762 Software for internal use 415,690 ( 211,750 ) 203,940 400,065 ( 182,310 ) 217,755 Total software $ 552,308 $ ( 336,021 ) $ 216,287 $ 538,888 $ ( 304,371 ) $ 234,517 Amortization of software for resale is computed using the greater of (a) the ratio of current gross revenues to the total of current and future gross revenues expected to be derived from the software or (b) the straight-line method over the remaining estimated useful life of generally five to ten years . Software for resale amortization expense recorded during the three months ended June 30, 2020 and 2019, totaled $ 2.1 million and $ 3.0 million, respectively. Software for resale amortization expense recorded during the six months ended June 30, 2020 and 2019, totaled $ 4.0 million and $ 6.0 million, respectively. These software amortization expense amounts are reflected in cost of revenue in the condensed consolidated statements of operations. Amortization of software for internal use is computed using the straight-line method over an estimated useful life of generally one to ten years . Software for internal use amortization expense recorded during the three months ended June 30, 2020 and 2019, totaled $ 18.5 million and $ 13.3 million, respectively. Software for internal use amortization expense recorded during the six months ended June 30, 2020 and 2019, totaled $ 35.2 million and $ 23.7 million, respectively. These software amortization expense amounts are reflected in depreciation and amortization in the condensed consolidated statements of operations. The carrying amount and accumulated amortization of the Company’s other intangible assets subject to amortization at each balance sheet date are as follows (in thousands): June 30, 2020 December 31, 2019 Gross Carrying Amount Accumulated Amortization Net Balance Gross Carrying Amount Accumulated Amortization Net Balance Customer relationships $ 502,748 $ ( 175,681 ) $ 327,067 $ 507,785 $ ( 160,775 ) $ 347,010 Trademarks and trade names 27,142 ( 18,512 ) 8,630 27,312 ( 17,353 ) 9,959 Total other intangible assets $ 529,890 $ ( 194,193 ) $ 335,697 $ 535,097 $ ( 178,128 ) $ 356,969 Other intangible assets amortization expense recorded during the three months ended June 30, 2020 and 2019, totaled $ 9.2 million and $ 7.6 million, respectively. Other intangible assets amortization expense recorded during the six months ended June 30, 2020 and 2019, totaled $ 18.5 million and $ 13.1 million, respectively. 20 Table of contents Based on capitalized intangible assets as of June 30, 2020, estimated amortization expense amounts in future fiscal years are as follows (in thousands): Fiscal Year Ending December 31, Software Amortization Other Intangible Assets Amortization Remainder of 2020 $ 37,072 $ 18,346 2021 61,612 36,379 2022 43,302 36,234 2023 27,501 35,932 2024 20,551 31,520 Thereafter 26,249 177,286 Total $ 216,287 $ 335,697 7. Common Stock and Treasury Stock In 2005, the board approved a stock repurchase program authorizing the Company, as market and business conditions warrant, to acquire its common stock and periodically authorize additional funds for the program. In February 2018, the board approved the repurchase of the Company's common stock of up to $ 200.0 million, in place of the remaining purchase amounts previously authorized. The Company repurchased 1,000,000 shares for $ 28.9 million under the program during the six months ended June 30, 2020. Under the program to date, the Company has repurchased 46,357,495 shares for approximately $ 612.3 million. As of June 30, 2020, the maximum remaining amount authorized for purchase under the stock repurchase program was $ 112.1 million. 8. Earnings (Loss) Per Share Basic earnings (loss) per share is computed in accordance with ASC 260, Earnings Per Share , based on weighted average outstanding common shares. Diluted earnings (loss) per share is computed based on basic weighted average outstanding common shares adjusted for the dilutive effect of stock options, RSUs, and certain contingently issuable shares for which performance targets have been achieved. The following table reconciles the weighted average share amounts used to compute both basic and diluted earnings (loss) per share (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Weighted average shares outstanding: Basic weighted average shares outstanding 116,033 116,586 116,019 116,287 Add: Dilutive effect of stock options and RSUs 1,231 2,200 — — Diluted weighted average shares outstanding 117,264 118,786 116,019 116,287 The diluted earnings (loss) per share computation excludes 1.8 million and 2.1 million options to purchase shares, RSUs, and contingently issuable shares during the three months ended June 30, 2020 and 2019, respectively, as their effect would be anti-dilutive. The diluted loss per share computation excludes 6.1 million and 7.5 million options to purchase shares, RSUs, and contingently issuable shares during the six months ended June 30, 2020 and 2019, respectively, as their effect would be anti-dilutive. Common stock outstanding as of June 30, 2020, and December 31, 2019, was 116,366,996 and 115,986,352 , respectively. 9. Other, Net 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. 21 Table of contents 10. Segment Information The Company reports financial performance based on its segments, ACI On Demand and ACI On Premise, and analyzes Segment Adjusted EBITDA as a measure of segment profitability. The Company’s Chief Executive Officer is also the chief operating decision maker (“CODM”). The CODM, together with other senior management personnel, focus their review on consolidated financial information and the allocation of resources based on operating results, including revenues and Segment Adjusted EBITDA, for each segment, separate from Corporate operations. ACI On Demand serves the needs of banks, merchants, and billers who use payments to facilitate their core business. These on-demand solutions are maintained and delivered through the cloud via our global data centers and are available in either a single-tenant environment for SaaS offerings, or in a multi-tenant environment for PaaS offerings. ACI On Premise serves customers who manage their software on site or through a third-party public cloud environment. These on-premise customers use the Company’s software to develop sophisticated solutions, which are often part of a larger system located and managed at the customer specified site. These customers require a level of control and flexibility that ACI On Premise solutions can offer, and they have the resources and expertise to take a lead role in managing these solutions. Revenue is attributed to the reportable segments based upon the product sold and mechanism for delivery to the customer. Expenses are attributed to the reportable segments in one of three methods: (1) direct costs of the segment, (2) labor costs that can be attributed based upon time tracking for individual products, or (3) costs that are allocated. Allocated costs are generally marketing and sales related activities as well as information technology and facilities related expense for which multiple segments benefit. The Company also allocates certain depreciation costs to the segments. Segment Adjusted EBITDA is the measure reported to the CODM for purposes of making decisions on allocating resources and assessing the performance of the Company’s segments, and, therefore, Segment Adjusted EBITDA is presented in conformity with ASC 280, Segment Reporting. Segment Adjusted EBITDA is defined as earnings (loss) from operations before interest, income tax expense (benefit), depreciation and amortization (“EBITDA”) adjusted to exclude stock-based compensation, and net other income (expense). Corporate and unallocated expenses consist of the corporate overhead costs that are not allocated to reportable segments. These overhead costs relate to human resources, finance, legal, accounting, merger and acquisition activity, and other costs that are not considered when management evaluates segment performance. 22 Table of contents The following is selected financial data for the Company’s reportable segments for the periods indicated (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Revenue ACI On Demand $ 180,573 $ 172,499 $ 373,523 $ 282,347 ACI On Premise 119,337 125,119 217,872 221,126 Total revenue $ 299,910 $ 297,618 $ 591,395 $ 503,473 Segment Adjusted EBITDA ACI On Demand $ 33,071 $ 17,340 $ 56,192 $ 17,078 ACI On Premise 59,093 57,069 90,002 85,337 Depreciation and amortization ( 35,692 ) ( 29,778 ) ( 69,514 ) ( 54,630 ) Stock-based compensation expense ( 7,932 ) ( 14,372 ) ( 14,882 ) ( 20,957 ) Corporate and unallocated expenses ( 19,402 ) ( 36,141 ) ( 43,943 ) ( 60,803 ) Interest, net ( 11,188 ) ( 12,326 ) ( 25,459 ) ( 20,907 ) Other, net 2,041 1,402 ( 7,717 ) ( 510 ) Income (loss) before income taxes $ 19,991 $ ( 16,806 ) $ ( 15,321 ) $ ( 55,392 ) Depreciation and amortization ACI On Demand $ 10,852 $ 8,489 $ 20,184 $ 16,051 ACI On Premise 3,431 3,019 6,537 6,049 Corporate 21,409 18,270 42,793 32,530 Total depreciation and amortization $ 35,692 $ 29,778 $ 69,514 $ 54,630 Stock-based compensation expense ACI On Demand $ 2,273 $ 2,214 $ 4,299 $ 4,165 ACI On Premise 2,279 2,051 4,309 4,007 Corporate 3,380 10,107 6,274 12,785 Total stock-based compensation expense $ 7,932 $ 14,372 $ 14,882 $ 20,957 Assets are not allocated to segments, and the Company’s CODM does not evaluate operating segments using discrete asset information. 23 Table of contents The following is revenue by primary geographic market and primary solution category for the Company’s reportable segments for the periods indicated (in thousands): Three Months Ended June 30, 2020 Three Months Ended June 30, 2019 ACI On Demand ACI On Premise Total ACI On Demand ACI On Premise Total Primary Geographic Markets Americas - United States $ 158,720 $ 48,661 $ 207,381 $ 155,825 $ 35,696 $ 191,521 Americas - Other 2,419 1,250 3,669 2,107 12,413 14,520 EMEA 16,524 54,426 70,950 12,492 52,155 64,647 Asia Pacific 2,910 15,000 17,910 2,075 24,855 26,930 Total $ 180,573 $ 119,337 $ 299,910 $ 172,499 $ 125,119 $ 297,618 Primary Solution Categories Bill Payments $ 137,122 $ — $ 137,122 $ 125,339 $ — $ 125,339 Digital Channels 7,328 7,771 15,099 18,011 9,444 27,455 Merchant Payments 21,413 5,596 27,009 17,942 7,637 25,579 Payments Intelligence 11,852 3,942 15,794 8,874 6,504 15,378 Real-Time Payments 1,004 24,952 25,956 907 21,809 22,716 Retail Payments 1,854 77,076 78,930 1,426 79,725 81,151 Total $ 180,573 $ 119,337 $ 299,910 $ 172,499 $ 125,119 $ 297,618 Six Months Ended June 30, 2020 Six Months Ended June 30, 2019 ACI On Demand ACI On Premise Total ACI On Demand ACI On Premise Total Primary Geographic Markets Americas - United States $ 334,374 $ 77,800 $ 412,174 $ 248,861 $ 62,118 $ 310,979 Americas - Other 5,652 19,191 24,843 4,850 23,358 28,208 EMEA 27,442 83,381 110,823 24,560 94,606 119,166 Asia Pacific 6,055 37,500 43,555 4,076 41,044 45,120 Total $ 373,523 $ 217,872 $ 591,395 $ 282,347 $ 221,126 $ 503,473 Primary Solution Categories Bill Payments $ 290,808 $ — $ 290,808 $ 194,306 $ — $ 194,306 Digital Channels 15,721 15,334 31,055 27,799 18,169 45,968 Merchant Payments 40,427 9,702 50,129 37,281 12,659 49,940 Payments Intelligence 20,865 8,055 28,920 17,855 13,541 31,396 Real-Time Payments 2,001 42,251 44,252 1,525 36,524 38,049 Retail Payments 3,701 142,530 146,231 3,581 140,233 143,814 Total $ 373,523 $ 217,872 $ 591,395 $ 282,347 $ 221,126 $ 503,473 The following is the Company’s long-lived assets by geographic location for the periods indicated (in thousands): June 30, 2020 December 31, 2019 Long-lived Assets United States $ 1,494,545 $ 1,526,046 Other 731,324 759,501 Total $ 2,225,869 $ 2,285,547 No single customer accounted for more than 10% of the Company’s consolidated revenues during the three and six months ended June 30, 2020 and 2019. No other country outside the United States accounted for more than 10% of the Company's consolidated revenues during the three and six months ended June 30, 2020 and 2019. 24 Table of contents 11. Income Taxes The effective tax rate for the three and six months ended June 30, 2020, was 30 % and 32 %, respectively. The Company reported tax expense on pretax income for the three months ended June 30, 2020 and a tax benefit on a pretax loss for the six months ended June 30, 2020. The Company’s foreign entities recognized earnings of $ 10.7 million and a loss of $ 3.7 million for the three and six months ended June 30, 2020, respectively. The effective tax rate for the three months ended June 30, 2020, was negatively impacted by state income tax charges on a domestic profit. The effective tax rate for the six months ended June 30, 2020, was positively impacted by equity compensation excess tax benefits and state income tax benefits on a domestic loss. The effective tax rate for the three and six months ended June 30, 2019, was 134 % and 63 %, respectively. The Company reported an overall tax benefit on a pretax loss for the three and six months ended June 30, 2019. The earnings of the Company’s foreign entities for the three and six months ended June 30, 2019, were $ 11.0 million and $ 4.8 million, respectively. The effective tax rates for the three and six months ended June 30, 2019, was positively impacted by state income tax benefits on a domestic loss. In addition, the Company released a majority of its valuation allowance established against its U.S. foreign tax credit deferred tax asset, resulting in a non-cash benefit to income tax expense of approximately $ 18.5 million. The Company released the valuation allowance following the acquisition of Speedpay and determined it would more likely than not be able to utilize the foreign tax credits in future years due to additional income provided by Speedpay. The Company’s effective tax rate could fluctuate on a quarterly basis due to the occurrence of significant and unusual or infrequent items, such as vesting of stock-based compensation or foreign currency gains and losses. The Company’s effective tax rate could also fluctuate due to changes in the valuation of its deferred tax assets or liabilities, or by changes in tax laws, regulations, accounting principles, or interpretations thereof. In addition, the Company is occasionally subject to examination of its income tax returns by tax authorities in the jurisdictions it operates. The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. As of June 30, 2020, and December 31, 2019, the amount of unrecognized tax benefits for uncertain tax positions was $ 30.0 million and $ 29.0 million, respectively, excluding related liabilities for interest and penalties of $ 1.2 million as of June 30, 2020 and December 31, 2019. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits will decrease within the next 12 months by approximately $ 11.7 million, due to the settlement of various audits and the expiration of statutes of limitation.