What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-02-24 compared with 2021-02-25 · 51 added, 67 removed, 260 unchanged (31% of the section changed)

2 unchanged sentences

The following discussion highlights some of these risks.

Risks Related to COVID-19

The effects of the COVID-19 pandemic have materially affected how we, our clients and business partners are operating, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.

We remain subject to risk and uncertainties as result of the COVID-19 pandemic though the extent of the impact on our business and operations remains highly uncertain and difficult to predict.

The COVID-19 pandemic continues to have a global, evolving, and unpredictable impact on the economy, financial markets and business practices, and the overall impact of the COVID-19 pandemic on our business and financial performance remains to be seen.

Our future operational results, financial performance and liquidity could be negatively impacted by delays in payments of outstanding receivable amounts beyond normal payment terms and uncertain demand for our products and services.

As a result of the COVID-19 pandemic, we have temporarily closed our offices globally and a majority of our employees continue to work from home or remotely, which has caused strain for, and may adversely impact the productivity of, some of our employees.

Remote working conditions may persist, which could harm our business, including our future financial performance, our potential exposure to cybersecurity risks and potential improper dissemination of personal or confidential information.

Additionally, the COVID-19 pandemic may have long-lasting effects on the viability of the office environment and remote working, and this may result in challenging how we operate our business.

Due to the ongoing uncertainty surrounding the continued severity and duration of the COVID-19 pandemic, we cannot yet determine if our efforts thus far and efforts to come will be effective in mitigating the effects of the COVID-19 pandemic on our business, results of operations or financial performance.

Accordingly, we are unable at this time to predict how the COVID-19 pandemic will continue to affect our operations, liquidity, and financial results.

Further, without more clarity on the ultimate magnitude and duration of the COVID-19 pandemic, we are unable to determine whether the impact of COVID-19 will be material.

Risks Related to Our Business and Operations

10 unchanged sentences

Our ability to provide reliable service in a number of our businesses depends on the efficient and uninterrupted operation of our data centers, information technology and communication systems, and those of our external service providers.

As we continue to grow our ACI On Demand business, our dependency on the continuing operation and availability of these systems increases.

Our systems and data centers, and those of our external service providers, could be exposed to damage or interruption from fire, natural disasters, constraints within our workforce due to pandemics such as COVID-19, power loss, telecommunications failure, unauthorized entry and computer viruses.

As we continue to grow our private and public cloud offerings, our dependency on the continuing operation and availability of these systems increases.

Our systems and data centers, and those of our external service providers, could be exposed to damage or interruption from fire, natural disasters, constraints within our workforce due to pandemics such as outbreaks of COVID-19, power loss, telecommunications failure, unauthorized entry and computer viruses.

Although we have taken steps to prevent system failures and we have installed back-up systems and procedures to prevent or reduce disruption, such steps may not be sufficient to prevent an interruption of services and our disaster recovery planning may not account for all eventualities.

2 unchanged sentences

Any one or more of the foregoing occurrences could have a material adverse effect on our reputation, business, financial condition, cash flows and results of operations.

If our security measures are breached or become infected with a computer virus, or if our services are subject to attacks that degrade or deny the ability of users to access our products or services, our business will be harmed by disrupting delivery of services and damaging our reputation.

If our security measures are breached or become infected with a computer virus, or if our services are subject to attacks that degrade or deny the ability of users to access our products or services, our business may be harmed by disrupting delivery of services and damaging our reputation.

As part of our business, we electronically receive, process, store, and transmit sensitive business information of our customers.

5 unchanged sentences

Computer viruses could infiltrate our systems, disrupting our delivery of services and making our applications unavailable.

Any inability

to prevent security breaches or computer viruses could also cause existing customers to lose confidence in our systems and terminate their agreements with us, and could inhibit our ability to attract new customers.

Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in our systems and terminate their agreements with us, and could inhibit our ability to attract new customers.

Failure to attract and retain senior management personnel and skilled technical employees could harm our ability to grow .

12 unchanged sentences

Failure to attract, hire, develop, motivate and retain highly qualified and diverse employee talent, or to maintain a corporate culture that fosters innovation, creativity, and teamwork could harm our overall business and results of operations.

We have a number of new members on our senior management team, which coupled with the announced plan to relocate our corporate headquarters, may pose challenges to our operations and business growth.

Odilon Almeida was appointed our President and Chief Executive Officer on February 18, 2020, and assumed the roles effective March 9, 2020.

Anthony Dinkins also joined our executive leadership team in 2020, as our Chief Human Resources Officer.

As remote working and the COVID-19 pandemic continues, there may be challenges with fully integrating these new officers and their direct reports to the executive leadership team and the Company more broadly.

In addition, we may face further personnel and executive leadership changes and challenges in connection with the planned relocation of our corporate headquarters from Naples, Florida to Miami, Florida.

For example, we may face difficulties in retaining, attracting and training employees during and after the relocation of our headquarters.

These difficulties may be exacerbated by the remaining impact of the COVID-19 pandemic and especially many employees’ continued remote working situation.

Failure to meet these challenges successfully may adversely impact our operations, business results or long-term growth prospects.

If we engage in acquisitions, strategic partnerships or significant investments in new business, we will be exposed to risks which could materially adversely affect our business.

3 unchanged sentences

Further, even if we successfully complete acquisitions, we may encounter issues not discovered during our due diligence process, including product or service quality issues, intellectual property issues and legal contingencies, the internal control environment of the acquired entity may not be consistent with our standards and may require significant time and resources to improve and we may impair relationships with employees and customers as a result of migrating a business or product line to a new owner.

We will also face challenges in integrating any acquired business.

These challenges include eliminating redundant operations, facilities and systems, coordinating management and personnel, retaining key employees, customers and business partners, managing different corporate cultures, and achieving cost reductions and cross-selling opportunities.

We may also face challenges in integrating any acquired business.

These challenges may include eliminating redundant operations, facilities and systems, coordinating management and personnel, retaining key employees, customers and business partners, managing different corporate cultures, and achieving cost reductions and cross-selling opportunities.

There can be no assurance that we will be able to fully integrate all aspects of acquired businesses successfully, realize synergies expected to result from the acquisition, advance our business strategy or fully realize the potential benefits of bringing the businesses together, and the process of integrating these acquisitions may further disrupt our business and divert our resources.

2 unchanged sentences

Correspondingly, our expectations related to the benefits related to our recent acquisitions, prior acquisitions or any other future acquisition or investment could be inaccurate.

We may experience difficulties integrating Speedpay, which could cause us to fail to realize the anticipated benefits of the acquisition.

Achieving the anticipated benefits of our acquisition of Speedpay will depend in part upon whether we are able to integrate the business in an effective and efficient manner.

There can be no assurance that we will be able to fully integrate all aspects of Speedpay successfully, advance our business strategy, or fully realize the potential benefits of bringing the businesses together, and the process of integrating Speedpay may disrupt our business and divert our resources.

Any delay or inability of management to successfully integrate the operations of Speedpay could compromise our potential to achieve the anticipated long-term strategic benefits of the acquisitions and could have a material adverse effect on the business, financial condition, cash flows, and results of operations.

We may experience difficulties implementing our new Three Pillar strategy, and the Three Pillar strategy could prove

We may experience difficulties implementing our Three Pillar strategy, and the Three Pillar strategy could prove

unsuccessful in growing our business.

3 unchanged sentences

As we adjust, we also may need to bring on additional talent, which could prove difficult in a competitive job market, especially as the COVID-19 pandemic and remote working continues.

The increased focus on mergers and acquisitions opportunities and research and development could result in financial difficulties and may not always be fruitful.

The increased focus on opportunities for strategic mergers and acquisitions and research and development could result in financial difficulties and may not always be fruitful.

We may also face an increased amount of competition as we attempt to expand and grow our business, which may negatively impact our financial results.

40 unchanged sentences

By the terms of certain open source licenses, we could be required to release the source code of our proprietary software if we combine our proprietary software with open source software in a certain manner.

Additionally, the

terms of many open source licenses have not been interpreted by United States or other courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our solutions.

Additionally, the terms of many open source licenses have not been interpreted by United States or other courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our solutions.

In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on origin of the software.

11 unchanged sentences

Where indemnification claims are made by customers, resistance even to unmeritorious claims could damage the customer relationship.

A successful claim by a third-party of intellectual property infringement by us or one of our customers could compel us to enter into costly royalty or license agreements, pay significant damages, or stop selling certain products and incur additional costs to develop alternative non-infringing technology.

A successful claim by a third-party of intellectual property infringement by us or one

of our customers could compel us to enter into costly royalty or license agreements, pay significant damages, or stop selling certain products and incur additional costs to develop alternative non-infringing technology.

Royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could adversely affect our business.

22 unchanged sentences

There can be no assurance that we will be able to successfully address these challenges.

In addition, the implementation of the United Kingdom’s withdrawal from the European Union (referred to as Brexit) could, among other outcomes, disrupt the free movement of goods, services, and people between the United Kingdom and the European Union, undermine bilateral cooperation in key policy areas, and significantly disrupt trade between the United Kingdom and the European Union.

The uncertainties related to Brexit have cross-border operational, financial and tax implications, among others, and any economic volatility that may arise in the United Kingdom, the European Union, or elsewhere may adversely affect our business.

Political, military, and other international developments can undermine bilateral cooperation in key policy areas, significantly disrupt trade, and otherwise adversely affect economic conditions.

Risks Related to Our Products and Services

2 unchanged sentences

The global electronic payments industry and the banking and financial services industries depend heavily upon the overall levels of consumer, business and government spending.

Adverse economic conditions such as those caused by the COVID-19 pandemic and the potential for disruptions in these industries as well as the general software sector could result in a decrease in consumers’ use of banking services and financial service providers resulting in significant decreases in the demand for our products and services which could adversely affect our business and operating results.

decreases in the demand for our products and services which could adversely affect our business and operating results.

A lessening demand in either the overall economy, the banking and financial services industry or the software sector could also result in the implementation by banks and related financial service providers of cost reduction measures or reduced capital spending resulting in longer sales cycles, deferral or delay of purchase commitments for our products and increased price competition which could lead to a material decrease in our future revenues and earnings.

5 unchanged sentences

As a provider of electronic data processing to financial institutions, we must comply with FFIEC regulations and are subject to FFIEC examinations.

In addition, action by government and regulatory authorities such as the Dodd-Frank Wall Street Reform and the Consumer Protection Act relating to financial regulatory reform, the European Union-wide General Data Protection Regulation (“GDPR”) (which imposes strict data privacy requirements and regulatory fines of up to 4% of “worldwide turnover”) and the California Consumer Privacy Act ("CCPA"), as well as legislation and regulation related to credit availability, data usage, privacy, or other related regulatory developments could have an adverse effect on our customers and therefore could have a material

adverse effect on our business, financial condition, cash flows and results of operations.

The regulatory focus on privacy issues also continues to increase and worldwide laws and regulations concerning the handling of personal information are expanding and becoming more complex.

Our failure, or perceived failure, to comply with laws and regulations concerning the handling of personal information could result in lost or restricted business, proceedings, actions or fines brought against us or levied by governmental entities or others, or could adversely affect our business and harm our reputation.

Legislation and regulation related to credit availability, data usage, privacy, or other related regulatory developments could have an adverse effect on our customers or us.

Laws and regulations concerning the handling of personal information are expanding and becoming more complex.

Our failure, or perceived failure, to comply with these and other laws and regulations could adversely affect our business and harm our reputation.

Our software products may contain undetected errors or other defects, which could damage our reputation with customers, decrease profitability, and expose us to liability.

Our software products are complex.

Software may contain bugs or errors that can unexpectedly interfere with the operation of the software products.

Our software products may contain undetected errors or flaws when first introduced or as new versions are released.

These undetected errors may result in loss of, or delay in, market acceptance of our products and a corresponding loss of sales or revenues.

Customers depend upon our products for mission-critical applications, and these errors may hurt our reputation with customers.

In addition, software product errors or failures could subject us to product liability, as well as performance and warranty claims, which could materially adversely affect our business, financial condition, cash flows and/or results of operations.

Software may contain bugs or defects that could unexpectedly interfere with the operation of the software products when first introduced or as new versions are released.

Additionally, errors could occur during our provision of services, including processing services such as our bill payment services and other services delivered through public or private cloud.

Software defects or service errors may result in the loss of, or delay in, market acceptance of our products and services and a corresponding loss of sales or revenues.

Customers depend upon our products and services for mission-critical applications, and product defects or service errors may hurt our reputation with customers.

In addition, software product defects or errors could subject us to liability for damages, performance and warranty claims, and fines or penalties from governmental authorities, which could be material.

Risks Related to Legal, Regulatory, and Tax Matters

12 unchanged sentences

As a provider of services to financial institutions, we may be bound by the same limitations on disclosure of the information we receive from our customers as apply to the financial institutions themselves.

If we are subject to these limitations and we fail to comply with applicable regulations, including the EU GDPR and CCPA, we could be exposed to suits for breach of contract or to governmental proceedings, our customer relationships and reputation could be harmed, and we could be inhibited in our ability to obtain new customers.

If we fail to comply with applicable regulations, including the EU GDPR and CCPA, we could be exposed to suits for breach of contract or to governmental proceedings, our customer relationships and reputation could be harmed, and we could be inhibited in our ability to obtain new customers.

In addition, if more restrictive privacy laws or rules are adopted in the future on the federal or state level, or, with respect to our international operations, by authorities in foreign jurisdictions on the national, provincial, state, or other level, that could have an adverse impact on our business.

Our risk management and information security programs are the subject of oversight and periodic reviews by the federal agencies that regulate our business.

In the event an examination of our information security and risk management functions results in adverse findings, such findings could be made public or communicated to our regulated financial institution customers, which could have a material adverse effect on our business.

We may become involved in litigation that could materially adversely affect our business financial condition, cash flows and/or results of operations.

From time to time, we are involved in litigation relating to claims arising out of our operations.

Any claims, with or without merit, could be time-consuming and result in costly litigation.

Failure to successfully defend against these claims could result in a material adverse effect on our business, financial condition, results of operations and/or cash flows.

Our risk management and information security programs are the subject of oversight and periodic reviews by governmental agencies that regulate our business.

From time to time, we are involved in investigations, lawsuits and other proceedings that are expensive, time-consuming and could seriously harm to our business.

From time to time, we are involved in lawsuits, including class-action lawsuits, and government investigations relating to the conduct of our business.

For example, in April 2021, ACH files associated with one of our mortgage servicing customers were inadvertently transmitted to a processing bank during a test of its ACH file production system.

This incident is under investigation by regulatory authorities and has given rise to class action litigation.

See Legal Proceedings in Note 13, Commitments and Contingencies, to our Notes to Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K.

Damage claims in lawsuits, and fines and penalties imposed by governmental agencies, can be substantial, and injunctive remedies imposed by governmental agencies can be costly to implement.

Any litigation may result in an onerous or unfavorable judgment that might not be reversed on appeal, or we may decide to settle lawsuits or resolve government investigations on adverse terms.

Any such negative outcome could result in the payment of substantial monetary damages or fines or require changes to our products or business practices that materially affect us.

Even where the ultimate outcome of any such litigation or regulatory proceeding may be favorable, defending against claims and responding to regulatory proceedings is costly and can impose a significant burden on us.

The existence of lawsuits and investigations, and any adverse outcome, may create negative publicity for the Company and undermine the Company’s goodwill with customers.

Competitors may use these lawsuits and investigations against us in the marketplace, making it difficult for us to attract new customers and retain our existing customers.

We may face exposure to unknown tax liabilities, which could adversely affect our financial condition, cash flows and/or results of operations.

1 unchanged sentence

Significant judgment is required in determining our worldwide income tax liabilities and other tax liabilities.

In addition, we expect to continue to benefit from implemented tax-saving strategies.

We believe that these tax-saving strategies comply with applicable tax law.

10 unchanged sentences

Our business is concentrated in the financial services industry, making us susceptible to consolidation in, or contraction of, the number of participating institutions within that industry.

Consolidation activity among financial institutions and intermediaries has increased in recent years.

Changes in financial conditions have also historically resulted in consolidation and contraction as financial institutions have failed or have been acquired by or merged with other financial institutions.

There are several potential negative effects of increased consolidation activity.

Continuing consolidation could cause us to lose existing and potential customers for our products and services.

For instance, consolidation of two of our customers could result in reduced revenues if the combined entity were to negotiate greater volume discounts or discontinue use of certain of our products.

Additionally, if a non-customer and a customer combine and the combined entity in turn decided to forego future use of our products, our revenues would decline.

Due to the industry we operate in, our stock price may be volatile.

Our stock price may be volatile.

No assurance can be given that operating results will not vary from quarter to quarter, and past performance may not accurately predict future performance.

29 unchanged sentences

Our customers or third-party partners may attempt to renegotiate or terminate their contracts for a number of reasons, including mergers, changes in their financial condition, or general changes in economic conditions within their industries or geographic locations, or we may experience delays in the development or delivery of products or services specified in customer contracts.

Actual renewal rates and amounts may differ from historical experience used to estimate backlog amounts.

Actual renewal rates and amounts may differ

from historical experience used to estimate backlog amounts.

Changes in foreign currency exchange rates may also impact the amount of revenue actually recognized in future periods.

16 unchanged sentences

If an event of default occurs, the lenders, trustee, or holders of the 2026 Notes will be entitled to take various actions, including, but not limited to, demanding payment for all amounts outstanding.

If adverse global economic conditions persist or worsen, we

could experience decreased revenues from our operations attributable to reduced demand for our products and services and as a result, we could fail to satisfy the financial and other restrictive covenants to which we are subject under our existing debt, resulting in an event of default.

If adverse global economic conditions persist or worsen, we could experience decreased revenues from our operations attributable to reduced demand for our products and services and as a result, we could fail to satisfy the financial and other restrictive covenants to which we are subject under our existing debt, resulting in an event of default.

If we are unable to cure the default or obtain a waiver, we will not be able to access our credit facility and there can be no assurance that we would be able to obtain alternative financing.

10 unchanged sentences

Replacement of the LIBOR benchmark interest rate could adversely affect our business, financial condition, and results of operations.

In July 2017, the United Kingdom’s Financial Conduct Authority, which regulates the London Interbank Offered Rate ("LIBOR"), announced it will no longer compel banks to submit rates for the calculation of LIBOR after 2021.

U.S-dollar LIBOR must be replaced before June 30, 2023.

The Alternative Reference Rates Committee has proposed the Secured Overnight Financing Rate ("SOFR") as its recommended alternative to LIBOR.

Our Credit Agreement is currently indexed to LIBOR, and the maturity date of the Credit Agreement extends beyond 2021.

Our Credit Agreement is currently indexed to U.S.-dollar-LIBOR, and the maturity date of the Credit Agreement extends beyond June 30, 2023.

The Credit Agreement contemplates the discontinuation of LIBOR and provides options for us in such an event.

It is uncertain at this time, however, what the potential impact of the transition from LIBOR as an interest rate benchmark to other potential alternative reference rates, including SOFR, may be on our business, financial condition, and/or results of operations.

Risks Related to COVID-19

As a result of the COVID-19 pandemic, we have had temporary office closures globally and at any given time a majority of our employees may be working from home or remotely, which has caused strain for, and may adversely impact the productivity of, some of our employees.

Additionally, the COVID-19 pandemic may have long-lasting effects on the viability of the office environment and remote working, and this may result in changes in how we operate our business.

Accordingly, we are unable at this time to predict how the COVID-19 pandemic will continue to affect our operations, liquidity, and financial results.

Further, without more clarity on the ultimate magnitude and duration of the COVID-19 pandemic, we are unable to determine whether the impact of COVID-19 will be material.

General Risk Factors

19 unchanged sentences

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-K

Item 1A. Risk Factors