What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-02-24 compared with 2021-02-25 · 215 added, 404 removed, 1202 unchanged (34% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

To the Stockholders and the Board of Directors of

ACI Worldwide, Inc.

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020, of the Company and our report dated February 25, 2021, expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of FASB Accounting Standards Update 2016-02, Leases , effective January 1, 2019.

Basis for Opinion

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Information included in the sections entitled “Information Regarding Security Ownership” in our 2022 Proxy Statement is incorporated herein by reference.

Information included in the section entitled “Information Regarding Equity Compensation Plans” in our 2021 Proxy Statement is incorporated herein by reference.

Information included in the section entitled “Equity Compensation Plan Information” in our 2022 Proxy Statement is incorporated herein by reference.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

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The following index lists consolidated financial statements and notes thereto filed as part of this annual report on Form 10-K:

Report of Independent Registered Public Accounting Firm – Deloitte & Touche LLP

Report of Independent Registered Public Accounting Firm – Deloitte & Touche LLP (PCAOB ID No.

Consolidated Balance Sheets as of December 31, 2021 and 2020

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

To the Stockholders and the Board of Directors of

ACI Worldwide, Inc.

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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, effective January 1, 2019, the Company adopted FASB Accounting Standards Update 2016-02, Leases , using the optional transition method.

Basis for Opinion

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Revenue Recognition - Refer to Note 2 to the financial statements

Critical Audit Matter Description

The Company recognizes revenue upon transfer of control of promised products and/or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services.

The Company’s software license arrangements provide the customer with the right to use functional intellectual property for the duration of the contract term and are typically bundled with implementation, support, and other services.

The Company’s software license arrangements provide the customer with the right to use functional intellectual property (as it exists at the point in time at which the license is granted) for the duration of the contract term.

Implementation, support, and other services are typically considered distinct performance obligations when sold with a software license.

Significant judgment is exercised by the Company in determining revenue recognition for these customer arrangements, and includes the following:

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• Assessment of whether the extension of payment terms in a software licensing arrangement results in variable consideration and, if so, the amount to be included in the transaction price.

• Determination of the standalone selling price for each performance obligation and whether it depicts the amount that the Company expects to be entitled to in exchange for the related product and/or service.

As the selling prices of the Company’s software licenses are highly variable, the Company estimates standalone selling price of its software licenses using the residual approach when the software license is sold with other services and observable standalone selling prices exist for the other services.

• Determination of the standalone selling price for each performance obligation, the amount allocated to each performance obligation and whether it depicts the amount that the Company expects to be entitled to in exchange for the related product and/or service.

As the selling prices of the Company’s software licenses are highly variable, the Company estimates standalone selling prices of its software licenses using the residual approach when the software license is sold with other services and observable standalone selling prices exist for the other services.

Given these factors, the related audit effort in evaluating management’s judgments in determining revenue recognition for software license arrangements was extensive and required a high degree of auditor judgment.

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(in thousands, except share amounts)

Paid-in Capital

Retained Earnings

Treasury Stock

Accumulated Other

Common Stock Additional

Paid-in Capital Retained Earnings Treasury Stock Accumulated Other

Comprehensive Income (Loss) Total

Balance as of December 31, 2018 $ 702 $ 632,235 $ 863,768 $ ( 355,857 ) $ ( 92,617 ) $ 1,048,231

— — 68,921 — — 68,921

Other comprehensive loss — — — — ( 15,261 ) ( 15,261 )

Net income — — 67,062 — — 67,062

Other comprehensive income — — — — 1,034 1,034

Stock-based compensation — 36,763 — — — 36,763

— 20,360 — — — 20,360

Shares issued and forfeited, net, under stock plans — ( 1,340 ) — 17,821 — 16,481

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Repurchase of stock-based compensation awards for tax withholdings — — — ( 3,986 ) — ( 3,986 )

— — — ( 2,588 ) — ( 2,588 )

Cumulative effect of accounting change, ASC 606

— — 243,981 — — 243,981

Balance as of December 31, 2019 702 667,658 930,830 ( 377,639 ) ( 91,583 ) 1,129,968

— — 67,062 — — 67,062

Other comprehensive income — — — — 1,034 1,034

Net income — — 72,660 — — 72,660

Other comprehensive loss — — — — ( 862 ) ( 862 )

Stock-based compensation — 29,602 — — — 29,602

— 36,763 — — — 36,763

Shares issued and forfeited, net, under stock plans — ( 14,829 ) — 30,507 — 15,678

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Repurchase of stock-based compensation awards for tax withholdings — — — ( 11,568 ) — ( 11,568 )

— — — ( 3,986 ) — ( 3,986 )

Balance as of December 31, 2020 702 682,431 1,003,490 ( 387,581 ) ( 92,445 ) 1,206,597

— — 72,660 — — 72,660

Net income — — 127,791 — — 127,791

Other comprehensive loss — — — — ( 7,102 ) ( 7,102 )

— — — — ( 862 ) ( 862 )

Stock-based compensation — 27,242 — — — 27,242

— 29,602 — — — 29,602

Shares issued and forfeited, net, under stock plans — ( 21,360 ) — 33,820 — 12,460

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Repurchase of stock-based compensation awards for tax withholdings — — — ( 14,833 ) — ( 14,833 )

— — — ( 11,568 ) — ( 11,568 )

Balance as of December 31, 2021 $ 702 $ 688,313 $ 1,131,281 $ ( 475,972 ) $ ( 99,547 ) $ 1,244,777

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( 107,378 ) ( 28,881 ) ( 35,617 )

Proceeds from senior notes

Redemption of senior notes

— — ( 300,000 )

Proceeds from revolving credit facility

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( 15,185 ) ( 13,854 ) ( 7,020 )

Net (decrease) increase in settlement assets and liabilities ( 37,834 ) 101,681 1,127

Net cash flows from financing activities

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533 ( 57 ) ( 1,495 )

Net increase (decrease) in cash and cash equivalents 43,976 ( 27,104 ) 78,792

Cash and cash equivalents, beginning of period

121,398 148,502 69,710

Cash and cash equivalents, end of period

$ 165,374 $ 121,398 $ 148,502

Net (decrease) increase in cash and cash equivalents ( 81,240 ) 124,250 ( 31,021 )

Cash and cash equivalents, including settlement deposits, beginning of period 265,382 141,132 172,153

Cash and cash equivalents, including settlement deposits, end of period $ 184,142 $ 265,382 $ 141,132

Reconciliation of cash and cash equivalents to the Consolidated Balance Sheets

Cash and cash equivalents $ 122,059 $ 165,374 $ 121,398

Settlement deposits 62,083 100,008 19,734

Total cash and cash equivalents, including settlement deposits $ 184,142 $ 265,382 $ 141,132

Supplemental cash flow information

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In addition to its own products, the Company distributes or acts as a sales agent for software developed by third parties.

These products and services are used principally by banks, intermediaries, merchants, and billers, both in domestic and international markets.

These products and services are used principally by banks and intermediaries, merchants, and billers, both in domestic and international markets.

Consolidated Financial Statements

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The Company’s cash and cash equivalents includes holdings in checking, savings, money market, and overnight sweep accounts, all of which have daily maturities, as well as time deposits with maturities of three months or less at the date of purchase.

The carrying amounts of cash and cash equivalents on the consolidated balance sheets approximate fair value.

Revision of Prior Period Financial Statements

As of December 31, 2021, the Company has revised the previously reported consolidated statements of cash flows to include settlement deposits in total cash and cash equivalents and settlement receivables and settlement liabilities net activity in cash flows from financing activities, both of which were previously included in cash flows from operating activities.

This immaterial revision did not have an effect on its previously reported consolidated balance sheets, statements of operations, statements of comprehensive income, or statements of stockholders' equity.

A summary of the revisions to the previously reported balances are presented in the table below for comparative purposes (in thousands):

Year Ended December 31, 2020

As reported Revision adjustment As revised

Cash flows from operating activities:

Other current and noncurrent assets and liabilities $ 16,919 $ ( 21,407 ) $ ( 4,488 )

Net cash flows from operating activities 336,302 ( 21,407 ) 314,895

Cash flows from financing activities:

Net increase in settlement assets and liabilities $ — $ 101,681 $ 101,681

Net cash flows from financing activities ( 261,570 ) 101,681 ( 159,889 )

Net increase in cash and cash equivalents $ 43,976 $ 80,274 $ 124,250

Cash and cash equivalents, including settlement deposits, beginning of period 121,398 19,734 141,132

Cash and cash equivalents, including settlement deposits, end of period 165,374 100,008 265,382

Year Ended December 31, 2019

As reported Revision adjustment As revised

Cash flows from operating activities:

Other current and noncurrent assets and liabilities $ ( 16,695 ) $ ( 5,044 ) $ ( 21,739 )

Net cash flows from operating activities 137,649 ( 5,044 ) 132,605

Cash flows from financing activities:

Net increase in settlement assets and liabilities $ — $ 1,127 $ 1,127

Net cash flows from financing activities 667,223 1,127 668,350

Net decrease in cash and cash equivalents $ ( 27,104 ) $ ( 3,917 ) $ ( 31,021 )

Cash and cash equivalents, including settlement deposits, beginning of period 148,502 23,651 172,153

Cash and cash equivalents, including settlement deposits, end of period 121,398 19,734 141,132

Risks and Uncertainties

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Other Current Liabilities

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

Operating lease liabilities $ 13,438 $ 15,049

Other current liabilities include the following (in thousands):

Vendor financed licenses $ 12,521 $ 12,901

Operating lease liabilities 11,518 13,438

Accrued interest 8,776 8,745

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In accordance with 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 using the discounted cash flow valuation model and allocates goodwill to these reporting units using a relative fair value approach.

During this assessment, management relies on a number of factors, including operating results, business plans, and anticipated future cash flows.

The Company has identified its reportable segments, ACI On Demand and ACI On Premise, as the reporting units.

The Company evaluates goodwill at the reporting unit level, and as discussed in Note 10, Segment Information , in January 2021, it announced a change in organizational structure to better align with the Company’s strategic direction.

This change also resulted in a change in reporting units to coincide with the new operating segments—Banks, Merchants, and Billers.

The Company allocated goodwill to the new reporting units using a relative fair value approach with total goodwill of $ 1.3 billion allocated $ 725.9 million to Banks, $ 137.3 million to Merchants, and $ 417.0 million to Billers.

In addition, the Company performed an assessment of potential goodwill impairment for all reporting units immediately prior to the reallocation and determined that no impairment was indicated.

The key assumptions used in the discounted cash flow valuation model include discount rates, growth rates, cash flow projections and terminal value rates.

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The calculated fair value substantially exceeded the current carrying value for all reporting units for all periods.

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

ACI On Demand ACI On Premise Total

Gross Balance, prior to December 31, 2018

$ 183,783 $ 773,340 $ 957,123

Total impairment prior to December 31, 2018

— ( 47,432 ) ( 47,432 )

Balance, December 31, 2018

183,783 725,908 909,691

Goodwill from acquisitions (1) 370,834 — 370,834

Balance, December 31, 2019

554,617 725,908 1,280,525

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

Balance, December 31, 2020

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

(1) Goodwill from acquisitions relates to the goodwill recorded, as well as adjustments, for the acquisitions 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 .

Other intangible assets, which include customer relationships and trademarks and trade names, are amortized using the straight-line method over periods ranging from four to 20 years.

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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.

In July 2019, the Company invested $ 18.3 million for a 30 % non-controlling financial interest in a payment technology and services company in India.

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

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

Accordingly, the Company recorded an investment of $ 19.3 million and $ 18.5 million, which is included in other noncurrent assets in the consolidated balance sheet as of December 31, 2020 and 2019, respectively.

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.

Accordingly, the Company recorded an investment of $ 19.3 million, which is included in other noncurrent assets in the consolidated balance sheet as of December 31, 2021 and 2020.

Impairment of Long-Lived Assets

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Such shares are recorded at cost and reflected separately on the consolidated balance sheets as a reduction of stockholders’ equity.

The Company issues shares of treasury stock upon exercise of stock options, issuance of restricted share awards and restricted share units, payment of earned performance shares, and for issuances of common stock pursuant to the Company’s employee stock purchase plan.

The Company issues shares of treasury stock upon exercise of stock options, issuance of restricted share units, payment of earned performance shares, and for issuances of common stock pursuant to the Company’s employee stock purchase plan.

For purposes of determining the cost of the treasury shares re-issued, the Company uses the average cost method.

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Stock-based compensation expense is recorded in operating expenses depending on where the respective individual’s compensation is recorded.

The Company generally utilizes the Black-Scholes option-pricing model to determine the fair value of stock options on the date of grant.

To determine the grant date fair value of the supplemental stock options and total shareholder return awards (“TSRs”), a Monte Carlo simulation model was used.

The assumptions utilized in the Black-Scholes option-pricing and Monte Carlo simulation models, as well as the description of the plans the stock-based awards are granted under, are described in further detail in Note 6, Stock-Based Compensation Plans .

To determine the grant date fair value of total shareholder return awards (“TSRs”), a Monte Carlo simulation model was used.

The assumptions utilized in the Monte Carlo simulation models, as well as the description of the plans the stock-based awards are granted under, are described in further detail in Note 6, Stock-Based Compensation Plans .

Translation of Foreign Currencies

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New Accounting Standards Recently Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (codified as “ASC 842”).

ASC 842 requires lessees to recognize right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all leases unless, as a policy election, a lessee elects not to apply ASC 842 to short-term leases.

In addition, this standard requires both lessees and lessors to disclose certain key information about lease transactions.

The Company adopted ASC 842 on January 1, 2019 (the effective date) using the optional transition method to not apply the new lease standard in the comparative periods presented and elected the "practical expedient package", which permits the Company to not reassess prior conclusions about lease identification, lease classification, and initial direct costs.

ASC 842 also provides practical expedients for the Company’s ongoing accounting, including the combination of lease and non-lease components into a single lease component, which the Company has elected to apply to its leases.

As of January 1, 2019, the Company recognized ROU assets and operating lease liabilities of $ 63.3 million and $ 68.6 million, respectively.

Refer to Note 12, Leases , for further details.

In June 2016, the FASB issued 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 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 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.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform - Scope , which clarified the scope and application of the original guidance.

The adoption of ASU 2020-04 did not have an impact on the Company's consolidated financial statements.

Recently Issued Accounting Standards Not Yet Effective

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

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ASU 2019-12 is effective for annual and interim periods beginning after December 15, 2020.

The adoption of ASU 2019-12 will not have a material impact on the Company's consolidated financial statements.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements , which improves the consistency of the codification by including all disclosure related guidance in the appropriate disclosure sections and clarifies application of various provisions in the codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology.

ASU 2020-10 is effective for annual periods after December 15, 2020, and early application is permitted for any annual or interim period for which financial statements have not been issued.

The adoption of ASU 2020-10 will not have a material impact on the Company's consolidated financial statements.

The Company adopted ASU 2019-12 as of January 1, 2021.

The adoption of ASU 2019-12 did not have a material impact on the Company's consolidated financial statements.

Revenue Recognition

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These include arrangements in which the Company takes control of the products and is responsible for providing the product or service.

For software license

arrangements in which the Company acts as a sales agent for another company’s product, revenues are recorded on a net basis.

For software license arrangements in which the Company acts as a sales agent for another company’s product, revenues are recorded on a net basis.

These include arrangements in which the Company does not take control of products and is not responsible for providing the product or service.

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Total receivables, net $ 596,569 $ 558,651

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

One customer accounted for 13.8 % of the Company's consolidated receivables balance as of December 31, 2021.

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

The Company maintains an allowance for doubtful accounts for expected future credit losses that is calculated based on historical experience, current economic trends, and expectations of near term economic trends.

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Contract fulfillment costs are expensed as the Company transfers the related services to the customer.

As of December 31, 2020 and December 31, 2019, less than $ 0.1 million and $ 0.2 million of these costs are included in other current assets, and $ 9.5 million and $ 10.2 million of these costs are included in other noncurrent assets, respectively, on the consolidated balance sheets.

As of December 31, 2021 and 2020, $ 0.2 million and less than $ 0.1 million of these costs are included in other current assets, and $ 10.1 million and $ 9.5 million of these costs are included in other noncurrent assets, respectively, on the consolidated balance sheets.

The amounts capitalized primarily relate to direct costs that enhance resources under the Company’s SaaS and PaaS arrangements.

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The combination of the Company and Speedpay bill pay solutions serves more than 4,000 customers across the United States, 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.

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

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

Speedpay contributed approximately $ 329.2 million in total revenue the year ended December 31, 2020.

Due to integration activities, the Company is no longer able to separately identify the contribution to operating income generated from the acquisition of Speedpay for the year ended December 31, 2020 .

Speedpay contributed approximately $ 227.7 million in total revenue and $ 24.9 million in total operating income for the year ended December 31, 2019.

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

In connection with the acquisition, the Company recorded the following amounts based upon the finalized purchase price allocation as follows (in thousands, except weighted average useful lives):

Amount Weighted Average Useful Lives

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Net assets acquired $ 754,057

During the year ended December 31, 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

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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 for the years ended December 31, 2019 and 2018, to give effect to estimated adjustments that remove the amortization expense on eliminated Speedpay historical identifiable intangible assets, add amortization expense for the value of acquired identified intangible assets (primarily acquired software, customer relationships, and trademarks), and add estimated interest expense on the Company’s additional Delayed Draw Term Loan and Revolving Credit Facility borrowings.

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

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

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

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

Years Ended December 31,

The years ended December 31, 2021 and 2020, are not presented, as Speedpay is included in the Company's consolidated results for both periods.

The following is the unaudited summarized pro forma financial information for the year ended December 31, 2019 (in thousands, except per share data):

Year Ended December 31, 2019

Pro forma revenue $ 1,382,957

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Pro forma income per share:

Basic $ 0.71 $ 0.76

Diluted $ 0.69

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 consolidated financial statements from the date of acquisition, which were not material.

RevChip and TranSend

On October 1, 2019, the Company acquired certain technology assets of RevChip, LLC ("RevChip") and TranSend Integrated Technologies Inc.

("TranSend") for a combined $ 7.0 million.

As substantially all of the value was in the developed technology, the purchase was recognized as an asset acquisition.

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

As of December 31, 2020, the Company had $ 55.0 million, $ 717.1 million, and $ 400.0 million outstanding under its Revolving Credit Facility, Term Loan, and Senior Notes, respectively, with up to $ 443.5 million of unused borrowings under the Revolving Credit Facility portion of the Credit Agreement, as amended, and up to $ 1.5 million of unused borrowings under the Letter of Credit agreement.

As of December 31, 2021, the Company had $ 678.2 million and $ 400.0 million outstanding under its Term Loans and Senior Notes, respectively, with up to $ 498.5 million of unused borrowings under the Revolving Credit Facility portion of the Credit Agreement, as amended, and up to $ 1.5 million of unused borrowings under the Letter of Credit agreement.

The amount of unused borrowings actually available varies in accordance with the terms of the agreement.

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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 certain exclusions set forth in the credit documentation governing the Credit Facility.

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.

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entered into a standby letter of credit (the “Letter of Credit”), under the terms of the Credit Agreement, for $ 1.5 million.

The Letter of Credit expires on July 31, 2021, with automatic renewals for twelve month periods thereafter.

The Letter of Credit, currently effective through July 31, 2022, will automatically renew for successive one-year renewal terms unless Bank of America, N.A.

provides written notice of its intent to terminate the agreement at least 90 days prior to the end of the remaining renewal term.

The Letter of Credit reduces the maximum available borrowings under the Revolving Credit Facility to $ 498.5 million.

Upon expiration of the Letter of Credit, maximum borrowings will return to $ 500.0 million.

Upon expiration of the Letter of Credit, maximum borrowings would return to $ 500.0 million.

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 administrator of LIBOR has announced it will cease publication of the one-week and two-month LIBOR settings immediately following the LIBOR publication on December 31, 2021, and the remaining U.S.

dollar LIBOR settings immediately following the LIBOR publication on June 30, 2023.

The Alternative Reference Rates Committee has proposed the Secured Overnight Financing Rate ("SOFR") as its recommended alternative to LIBOR, and the first publication of SOFR rates was released in April 2018.

The Company is evaluating the potential impact of the transition from LIBOR as an interest rate benchmark to other potential alternative reference rates, including SOFR.

The Company's Credit Agreement is currently indexed to LIBOR and the maturity date of the Credit Agreement extends beyond 2021.

The Company's Credit Agreement is currently indexed to U.S dollar LIBOR and the maturity date of the Credit Agreement extends beyond June 30, 2023.

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

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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, which commenced on February 15, 2019.

Interest accrued from August 21, 2018.

The 2026 Notes will mature on August 15, 2026.

In connection with the issuance of the 2026 Notes, the Company incurred and paid debt issuance costs of $ 7.3 million for the year ended December 31, 2018.

The Company used the net proceeds of the offering described above to redeem, in full, the Company’s outstanding 6.375 % Senior Notes due 2020, including accrued interest, and repaid a portion of the outstanding amount under the Term Credit Facility.

Maturities on debt outstanding at December 31, 2021, are as follows (in thousands):

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Revolving credit facility

55,000 239,000

5.750 % Senior Notes, due August 2026

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entered in to an uncommitted overdraft facility with Bank of America, N.A.

The overdraft facility bears interest at LIBOR plus 2.25 % based on the Company’s average outstanding balance and the frequency in which overdrafts occur.

The overdraft facility bears interest at the federal funds effective rate plus 2.25 % based on the Company’s average outstanding balance and the frequency in which overdrafts occur.

The overdraft facility acts as a secured loan under the terms of the Credit Agreement to provide an additional funding mechanism for timing differences that can occur in the bill payment settlement process.

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As of December 31, 2021, there was $ 75.0 million available and no amount outstanding on the overdraft facility.

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

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

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

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

During the year ended December 31, 2019, the Company financed agreements for $ 10.4 million with annual payments through April 2022.

As of December 31, 2020, $ 7.8 million was outstanding under these and other license agreements previously entered into, of which $ 5.6 million and $ 2.2 million is included in other current liabilities and other noncurrent liabilities, respectively, in the consolidated balance sheet.

As of December 31, 2021, $ 2.9 million was outstanding under license agreements previously entered into, all of which is included in other current liabilities in the consolidated balance sheet.

As of December 31, 2020, $ 7.8 million was outstanding, of which $ 5.6 million and $ 2.2 million was included in other current liabilities and other noncurrent liabilities, respectively, in the consolidated balance sheet.

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Amount Accumulated

Software for resale

$ 130,261 $ ( 123,418 ) $ 6,843 $ 138,823 $ ( 122,061 ) $ 16,762

Software for internal use $ 440,242 $ ( 283,109 ) $ 157,133 $ 430,330 $ ( 240,717 ) $ 189,613

430,330 ( 240,717 ) 189,613 400,065 ( 182,310 ) 217,755

Software for resale 127,904 ( 127,255 ) 649 130,261 ( 123,418 ) 6,843

Total software

$ 568,146 $ ( 410,364 ) $ 157,782 $ 560,591 $ ( 364,135 ) $ 196,456

Software for resale amortization expense recorded during the years ended December 31, 2020, 2019, and 2018, totaled $ 8.5 million, $ 11.0 million, and $ 12.8 million, respectively.

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

Software for internal use amortization expense recorded during the years ended December 31, 2021, 2020, and 2019, totaled $ 69.3 million, $ 70.0 million, and $ 55.6 million, respectively.

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

Software for resale amortization expense recorded during the years ended December 31, 2021, 2020, and 2019, totaled $ 6.2 million, $ 8.5 million, and $ 11.0 million, respectively.

These software amortization expense amounts are reflected in cost of revenue in the 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):

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$ 157,782 $ 283,004

$ 196,456 $ 321,983

Stock-Based Compensation Plans

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2016 Equity and Performance Incentive Plan

On March 23, 2016, the board approved the 2016 Incentive Plan.

The 2016 Incentive Plan is intended to meet the Company’s objective of balancing stockholder concerns about dilution with the need to provide appropriate incentives to achieve Company performance objectives.

The Company's 2016 Incentive Plan provided for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, performance awards, and other awards.

The 2016 Incentive Plan was adopted by the stockholders on June 14, 2016.

Following the adoption of the 2016 Incentive Plan, the 2005 Incentive Plan was terminated.

Termination of the 2005 Incentive Plan did not affect any equity awards outstanding under the 2005 Incentive Plan.

The 2016 Incentive Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted share and restricted share units, performance shares and performance units, and other awards (“awards”).

Subject to adjustment in certain circumstances, the maximum number of shares of common stock that may be issued or transferred in connection with awards granted under the 2016 Incentive Plan will be the sum of (i) 8,000,000 shares of common stock and (ii) any shares of common stock that are represented by options previously granted under the 2005 Incentive Plan which are forfeited, expire, or are cancelled without delivery of common stock or which result in the forfeiture or relinquishment of common stock back to the Company.

To the extent awards granted under the 2016 Incentive Plan terminate, expire, are cancelled without being exercised, are forfeited or lapse for any reason, the shares of common stock subject to such award will again become available for grants under the 2016 Incentive Plan.

The 2016 Incentive Plan expressly prohibits re-pricing stock options and appreciation rights.

The 2016 Incentive Plan also, subject to certain limited exceptions, expressly requires a one-year vesting period for all stock options and appreciation rights.

No eligible person selected by the board to receive awards (“participant”) will receive stock options, stock appreciation rights, restricted share awards, restricted share units, and other awards under the 2016 Incentive Plan, during any calendar year, for more than 3,000,000 shares of common stock.

In addition, no participant may receive performance shares or performance units having an aggregate value on the date of grant in excess of $ 9,000,000 during any calendar year.

Each of the limits described above may be adjusted equitably to accommodate a change in the capital structure of the Company.

Subject to adjustment in certain circumstances, the maximum number of shares of common stock that was issued or transferred in connection with awards granted under the 2016 Incentive Plan was the sum of (i) 8,000,000 shares of common stock and (ii) any shares of common stock that were represented by options previously granted under the 2005 Incentive Plan which were subsequently forfeited, expired, or cancelled without delivery of common stock or which resulted in the forfeiture or relinquishment of common stock back to the Company.

2005 Equity and Performance Incentive Plan

The Company had a 2005 Incentive Plan, as amended, under which shares of the Company’s common stock were reserved for issuance to eligible employees or non-employee directors of the Company.

The Company's 2005 Incentive Plan, as amended, under which shares of the Company’s common stock were reserved for issuance to eligible employees or non-employee directors of the Company.

The 2005 Incentive Plan provided for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, performance awards, and other awards.

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( 546,192 ) 16.22

( 57,744 ) 19.08

Expired ( 6,090 ) 18.44

Outstanding, December 31, 2021 1,640,319 $ 18.42 3.26 $ 26,697,917

Exercisable, December 31, 2021 1,640,319 $ 18.42 3.26 $ 26,697,917

The weighted average grant date fair value of stock options granted during the year ended December 31, 2018, was $ 7.03 .

The Company did not grant stock options during the years ended December 31, 2021, 2020, and 2019.

The total intrinsic value of stock options exercised during the years ended December 31, 2021, 2020, and 2019, was $ 11.4 million, $ 19.5 million, and $ 16.0 million, respectively.

The fair value of options granted during the year ended December 31, 2018, were estimated on the date of grant using the Black-Scholes option-pricing model, acceptable under ASC 718, with the following weighted average assumptions:

Year Ended December 31, 2018

Expected life (years)

Risk-free interest rate

Expected volatility

Expected dividend yield

Expected volatilities are based on the Company’s historical common stock volatility, derived from historical stock price data for periods commensurate with the options’ expected life.

The expected life of options granted represents the period of time options are expected to be outstanding, based primarily on historical employee option exercise behavior.

The risk-free interest rate is based on the implied yield currently available on U.S.

Treasury zero coupon bonds issued with a term equal to the expected life at the date of grant of the options.

The expected dividend yield is zero, as the Company has historically paid no dividends and does not anticipate dividends to be paid in the future.

Long-term Incentive Program Performance Share Awards

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On a quarterly basis, management evaluated the probability that the threshold performance goals would be achieved, if at all, and the anticipated level of attainment to determine the amount of compensation expense to record in the consolidated financial statements.

A summary of the nonvested LTIP performance shares is as follows:

Number of Shares at

Expected Attainment Weighted Average

Grant Date Fair Value

Nonvested at December 31, 2019 669,469 $ 20.12

Vested ( 668,240 ) 20.12

Forfeited ( 5,368 ) 20.12

Change in expected attainment 4,139 20.12

Nonvested at December 31, 2020 — $ —

During the year ended December 31, 2021, the Company modified the performance target for the remaining outstanding long-term incentive program performance shares in consideration of the impact of the COVID-19 pandemic, resulting in additional stock-based compensation expense of approximately $ 0.4 million.

During the year ended December 31, 2021, a total of 10,457 LTIPs vested.

The Company withheld 4,527 of those shares to pay the employees' portion of the minimum payroll withholding taxes.

Restricted Share Awards

During the year ended December 31, 2017, pursuant to the Company’s 2016 Incentive Plan, the Company granted RSAs.

The awards had requisite service periods of three years and vested in increments of 33 % on the anniversary of the grant dates.

Under each arrangement, shares were issued without direct cost to the employee.

The Company estimated the fair value of the RSAs based upon the market price of the Company’s stock on the date of grant.

The RSA grants provided for the payment of dividends on the Company’s common stock, if any, to the participant during the requisite service period, and the participant had

voting rights for each share of common stock.

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

A summary of nonvested RSAs is as follows:

Shares Weighted Average

Grant Date Fair Value

Nonvested at December 31, 2019 92,842 $ 20.13

Vested ( 88,913 ) 20.12

Forfeited ( 3,929 ) 20.35

Nonvested at December 31, 2020 — $ —

During the year ended December 31, 2020, a total of 88,913 RSAs vested.

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

Total Shareholder Return Awards

During the years ended December 31, 2020, 2019, and 2018, pursuant to the 2016 Incentive Plan, the Company granted total shareholder return awards (“TSRs”).

During the years ended December 31, 2021, 2020, and 2019, pursuant to the 2020 Plan and 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.

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The Company withheld 155,031 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

As of December 31, 2020, there was unrecognized compensation expense of $ 18.9 million related to RSUs, $ 17.6 million related to TSRs, and less than $ 0.1 million related to nonvested stock options, which the Company expects to recognize over weighted average periods of 1.8 years, 1.9 years, and 0.2 years, respectively.

As of December 31, 2021, there was unrecognized compensation expense of $ 20.1 million related to RSUs and $ 17.3 million related to TSRs, which the Company expects to recognize over a weighted average period of 1.8 years.

The Company recorded stock-based compensation expense recognized under ASC 718 during the years ended December 31, 2021, 2020, and 2019, of $ 27.2 million, $ 29.6 million, and $ 36.8 million, respectively, with corresponding tax benefits of $ 3.9 million, $ 5.4 million, and $ 5.9 million, respectively.

The Company recognizes compensation expense for stock option awards that vest with only service conditions on a straight-line basis over the requisite service period.

The Company recognizes compensation expense for stock option awards that vest with service and market-based conditions on a straight-line basis over the longer of the requisite service period or the estimated period to meet the defined market-based condition.

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.

In December 2021, the board approved the repurchase of the Company's common stock of up to $ 250.0 million, in place of the remaining purchase amounts previously authorized.

The Company repurchased 3,000,000 shares for $ 107.4 million under the program for the year ended December 31, 2021.

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As of December 31, 2021, the maximum remaining amount authorized for purchase under the stock repurchase program was $ 216.3 million.

During the year ended September 30, 2006, the Company began to issue shares of treasury stock upon exercise of stock options, payment of earned performance shares (LTIP performance shares and TSRs), vesting of RSUs, and for issuances of common stock pursuant to the Company’s ESPP.

Subsequent to December 31, 2021, the Company has repurchased additional shares under the repurchase program.

In 2006, the Company began to issue shares of treasury stock upon exercise of stock options, payment of earned performance shares (LTIP performance shares and TSRs), vesting of RSUs, and for issuances of common stock pursuant to the Company’s ESPP.

Treasury shares issued by award type are as follows:

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Other, net is primarily comprised of foreign currency transaction gains and losses.

Other, net was $ 1.1 million of expense, $ 0.5 million of income, and $ 3.7 million of expense for the years ended December 31, 2020, 2019, and 2018, respectively.

Other, net was $ 1.3 million and $ 1.1 million of expense, for the years ended December 31, 2021 and 2020, respectively, and $ 0.5 million of income for the year ended December 31, 2019.

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").

In January 2021, the Company made a change in organizational structure to align with its strategic direction.

As a result of this change, the Company reassessed its segment reporting structure due to changes in how the Company's chief operating decision maker ("CODM") assesses the Company's performance and allocates resources.

Beginning in the first quarter of 2021, the Company reports financial performance based on its new operating segments, Banks, Merchants, and Billers, and analyzes Segment Adjusted EBITDA as a measure of segment profitability.

The Company’s Chief Executive Officer is also 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.

No operating segments have been aggregated to form the reportable segments.

ACI provides payment solutions to large and mid-size banks globally for retail banking, real time, digital, and other payment services.

These solutions transform banks’ complex payment environments to speed time to market, reduce costs, and deliver a consistent experience to customers across channels while enabling them to prevent and rapidly react to fraudulent activity.

In addition, they enable banks to meet the requirements of different real-time payments schemes and to quickly create differentiated products to meet consumer, business, and merchant demands.

ACI’s support of merchants globally includes Tier 1 and Tier 2 merchants, online-only merchants and the payment service providers, independent selling organizations, value-added resellers, and acquirers who service them.

These customers operate in a variety of verticals, including general merchandise, grocery, hospitality, dining, transportation, and others.

The Company's solutions provide merchants with a secure, omni-channel payments platform that gives them independence from third-party payment providers.

They also offer secure solutions to online-only merchants that provide consumers with a convenient and seamless way to shop.

Within the billers segment, ACI provides electronic bill presentment and payment (“EBPP”) services to companies operating in the consumer finance, insurance, healthcare, higher education, utility, government, and mortgage categories.

The solutions enable these customers to support a wide range of payment options and provide a convenient consumer payments experience that drives consumer loyalty and increases revenue.

Revenue is attributed to the reportable segments based upon customer.

Allocated costs are generally marketing and sales related activities.

Segment Adjusted EBITDA is the measure reported to the CODM for purposes of making decisions on allocating resources and assessing the performance of the Company’s segments, and therefore, Segment Adjusted EBITDA is presented in conformity with ASC 280, Segment Reporting .

Segment Adjusted EBITDA is defined as earnings (loss) from operations before interest, income tax expense (benefit), depreciation and amortization (“EBITDA”) adjusted to exclude 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.

Corporate and unallocated expenses includes global facilities and information technology costs and long-term product roadmap expenses in addition to corporate overhead costs that are not allocated to reportable segments.

The overhead costs relate to human resources, finance, legal, accounting, and merger and acquisition activity.

These costs along with depreciation and amortization and stock-based compensation are not considered when management evaluates segment performance.

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

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2021 2020 2019

ACI On Demand

$ 769,180 $ 678,960 $ 433,025

ACI On Premise

525,142 579,334 576,755

Banks $ 625,125 $ 558,498 $ 590,961

Merchants 152,988 149,342 156,452

Billers 592,485 586,482 510,881

Total revenue

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Segment Adjusted EBITDA

ACI On Demand

$ 149,610 $ 66,501 $ 12,015

ACI On Premise

290,310 321,305 323,902

Banks $ 372,949 $ 331,445 $ 343,844

Merchants 54,266 53,383 60,820

Billers 129,048 135,144 77,295

Depreciation and amortization

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Income before income taxes $ 175,065 $ 98,626 $ 72,210

Depreciation and amortization

ACI On Demand

$ 40,594 $ 34,395 $ 31,541

ACI On Premise

13,207 11,992 11,634

86,515 76,182 54,175

Total depreciation and amortization

$ 140,316 $ 122,569 $ 97,350

Stock-based compensation expense

ACI On Demand

$ 8,852 $ 7,995 $ 4,338

ACI On Premise

8,872 7,651 4,348

11,878 21,117 11,674

Total stock-based compensation expense

$ 29,602 $ 36,763 $ 20,360

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

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

Year Ended December 31, 2020 Year Ended December 31, 2019

Primary Geographic Markets

Americas - United States

$ 687,923 $ 142,588 $ 830,511 $ 609,160 $ 172,660 $ 781,820

Americas - Other

11,561 61,533 73,094 9,350 68,020 77,370

58,857 234,369 293,226 50,629 251,035 301,664

10,839 86,652 97,491 9,821 87,619 97,440

$ 769,180 $ 525,142 $ 1,294,322 $ 678,960 $ 579,334 $ 1,258,294

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

Year Ended December 31, 2021

Banks Merchants Billers Total

Primary Solution Categories

Bill Payments $ — $ — $ 592,485 $ 592,485

$ 586,047 $ — $ 586,047 $ 510,300 $ — $ 510,300

Digital Channels

46,269 29,438 75,707 44,731 32,980 77,711

Digital Business Banking 60,398 — — 60,398

Merchant Payments — 152,988 — 152,988

84,997 23,730 108,727 77,204 25,693 102,897

Payments Intelligence

40,495 21,570 62,065 36,019 33,790 69,809

Fraud Management 43,704 — — 43,704

Real-Time Payments 77,922 — — 77,922

3,902 77,158 81,060 3,456 97,153 100,609

Issuing and Acquiring 443,101 — — 443,101

$ 769,180 $ 525,142 $ 1,294,322 $ 678,960 $ 579,334 $ 1,258,294

Total $ 625,125 $ 152,988 $ 592,485 $ 1,370,598

Year Ended December 31, 2020

Primary Geographic Markets

Americas - United States

$ 369,097 $ 131,382 $ 500,479

Americas - Other

9,577 61,969 71,546

48,889 296,157 345,046

5,462 87,247 92,709

$ 433,025 $ 576,755 $ 1,009,780

Banks Merchants Billers Total

Primary Solution Categories

Bill Payments $ — $ — $ 586,482 $ 586,482

$ 275,526 $ — $ 275,526

Digital Channels

40,342 35,231 75,573

Digital Business Banking 75,475 — — 75,475

Merchant Payments — 149,342 — 149,342

64,956 30,447 95,403

Payments Intelligence

41,330 42,353 83,683

Fraud Management 32,942 — — 32,942

Real-Time Payments 80,654 — — 80,654

2,193 92,068 94,261

Issuing and Acquiring 369,427 — — 369,427

Total $ 558,498 $ 149,342 $ 586,482 $ 1,294,322

Year Ended December 31, 2019

Banks Merchants Billers Total

Primary Solution Categories

Bill Payments $ — $ — $ 510,881 $ 510,881

Digital Business Banking 77,319 — — 77,319

Merchant Payments — 156,452 — 156,452

Fraud Management 42,010 — — 42,010

Real-Time Payments 100,599 — — 100,599

Issuing and Acquiring 371,033 — — 371,033

Total $ 590,961 $ 156,452 $ 510,881 $ 1,258,294

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

Year Ended December 31,

2021 2020 2019

Software as a service and platform as a service $ 57,339 $ 69,254 $ 65,703

License 310,758 232,143 256,097

Maintenance 193,332 194,400 194,128

Services 63,696 62,701 75,033

Total $ 625,125 $ 558,498 $ 590,961

Software as a service and platform as a service $ 124,933 $ 113,854 $ 101,666

License 9,015 14,659 31,936

Maintenance 16,846 16,981 18,968

Services 2,194 3,848 3,882

Total $ 152,988 $ 149,342 $ 156,452

Software as a service and platform as a service $ 592,070 $ 586,072 $ 510,300

License 94 94 228

Maintenance 321 316 313

Services — — 40

Total $ 592,485 $ 586,482 $ 510,881

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

Year Ended December 31,

2021 2020 2019

United States $ 869,081 $ 830,511 $ 781,820

Other 501,517 463,811 476,474

Total $ 1,370,598 $ 1,294,322 $ 1,258,294

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

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No other country outside the United States accounted for more than 10% of the Company’s consolidated revenues during the years ended December 31, 2021, 2020, and 2019.

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into U.S.

As of December 31, 2018, the Company had completed its accounting for the tax effects related to the enactment of the Tax Act.

The Tax Act reduced the U.S.

federal corporate income tax rate from 35 % to 21 %, effective January 1, 2018.

During the year ended December 31, 2017, the Company remeasured certain deferred tax assets and liabilities and recorded a $ 15.0 million provisional tax charge.

During the year ended December 31, 2018, the Company reduced the initial provisional tax charge by recording a $ 4.9 million benefit related to accelerated tax deductions claimed on the 2018 U.S.

Federal Income Tax Return.

The Tax Act required U.S.

companies to pay a one-time transition tax on certain unremitted foreign earnings.

During the year ended December 31, 2017, the Company recorded a $ 20.9 million provisional tax charge based on post-1986 earnings and profits of foreign subsidiaries that were previously deferred from U.S.

income taxes.

Upon further analysis, the Company reduced the initial provisional tax charge by recording an $ 8.1 million benefit during the year ended December 31, 2018.

During the year ended December 31, 2018, the Company recorded a $ 15.5 million valuation allowance on its deferred tax asset related to U.S.

foreign tax credits based upon business conditions and tax laws in effect at that time.

During the year ended December 31, 2019, following the acquisition of Speedpay, the Company determined it will more likely than not be able to utilize foreign tax credits in future years due to additional income generated by Speedpay;

therefore, the Company released the $ 15.5 million valuation allowance that had been established on this deferred tax asset.

The Tax Act subjects a U.S.

shareholder to tax on global intangible low-taxed income ("GILTI") earned by certain foreign subsidiaries.

The Company has elected to account for GILTI in the year the tax is incurred.

Prior to 2018, the Company considered all earnings in foreign subsidiaries to be indefinitely reinvested, and accordingly, recorded no deferred income taxes related to unremitted earnings.

As of December 31, 2020, 2019, and 2018 the Company considered only the earnings in its Indian subsidiaries to be indefinitely reinvested.

The earnings of all other foreign subsidiaries are no longer considered indefinitely reinvested.

The Company is also permanently reinvested for outside book/tax basis differences related to foreign subsidiaries.

For financial reporting purposes, income before income taxes includes the following components (in thousands):

For financial reporting purposes, income (loss) before income taxes includes the following components (in thousands):

Years Ended December 31,

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Tax benefit of research & development ( 4,123 ) ( 2,173 ) ( 2,506 )

Transition tax — — ( 8,112 )

Revaluation of deferred tax balances — — ( 4,937 )

Performance-based compensation ( 1,887 ) ( 2,624 ) ( 560 )

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Income tax provision $ 47,274 $ 25,966 $ 5,148

The countries having the greatest impact on the tax rate adjustment line shown in the above table as “Foreign tax rate differential” are Ireland, Mexico, Singapore, and the United Kingdom for the year ended December 31, 2020;

Ireland, Luxembourg, and the United Kingdom for the year ended December 31, 2019;

and Ireland and Luxembourg for the year ended December 31, 2018.

The countries having the greatest impact on the tax rate adjustment line shown in the above table as “Foreign tax rate differential” are Colombia, Ireland, and Singapore for the year ended December 31, 2021;

Ireland, Mexico, Singapore, and the United Kingdom for the year ended December 31, 2020;

and Ireland, Luxembourg, and the United Kingdom for the year ended December 31, 2019.

therefore, the Company released the $ 15.5 million valuation allowance that had been established on this deferred tax asset.

The deferred tax assets and liabilities result from differences in the timing of the recognition of certain income and expense items for tax and financial accounting purposes.

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Net deferred income taxes $ 14,656 $ 16,972

The Company has reclassified certain prior period amounts between deferred income tax line items to conform to the current year presentation of deferred income tax disclosures.

The Company reclassified $ 13.0 million from other deferred tax assets to operating lease deferred tax assets and $ 11.9 million from other deferred tax assets to operating lease right-of-use asset deferred tax liabilities as of December 31, 2019.

The Company also reclassified $ 5.5 million from tax credit deferred tax assets to other deferred tax assets as of December 31, 2019.

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, the Company believes it is more likely than not that it will realize the benefits of these deductible differences, net of the valuation allowances recorded.

During the year ended December 31, 2019, the Company decreased its valuation allowance by $ 12.8 million which relates to a reduction in the valuation allowance on U.S.

foreign tax credits offset by an increase in valuation allowance on foreign net operating losses.

At December 31, 2020, the Company had domestic federal tax net operating losses (“NOLs”) of $ 59.9 million, which will begin to expire in 2021.

At December 31, 2021, the Company had domestic federal tax net operating losses (“NOLs”) of $ 58.3 million, of which $ 2.9 million may be utilized over an indefinite life, with the remainder beginning to expire in 2022.

The Company had deferred tax assets equal to $ 1.1 million related to domestic state tax NOLs which will begin to expire in 2022.

The Company does not have any valuation allowance against the federal tax NOLs but has provided a $ 1.0 million valuation allowance against the deferred tax asset associated with the state NOLs.

The Company had foreign tax NOLs of $ 25.0 million, of which $ 22.8 million may be utilized over an indefinite life, with the remainder expiring over the next 10 years.

The Company had foreign tax NOLs of $ 19.4 million, of which $ 19.1 million may be utilized over an indefinite life, with the remainder expiring over the next nine years .

The Company has provided a $ 0.1 million valuation allowance against the deferred tax asset associated with the foreign NOLs.

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The Company has provided a $ 1.2 million valuation allowance against the tax benefit associated with these foreign credits.

The Company also has domestic federal and state general business tax credit carryforwards at December 31, 2020, of $ 17.1 million and $ 0.8 million, respectively, which will begin to expire in 2021 and 2022, respectively.

The Company also has domestic federal and state general business tax credit carryforwards at December 31, 2021, of $ 20.6 million and $ 0.8 million, respectively, which will begin to expire in 2022.

Prior to 2018, the Company considered all earnings in foreign subsidiaries to be indefinitely reinvested, and accordingly, recorded no deferred income taxes related to unremitted earnings.

As of December 31, 2021, 2020, and 2019, the Company considered only the earnings in its Indian subsidiaries to be indefinitely reinvested.

The earnings of all other foreign subsidiaries are no longer considered indefinitely reinvested.

The Company is also permanently reinvested for outside book/tax basis differences related to foreign subsidiaries.

The unrecognized tax benefit at December 31, 2021 and 2020, was $ 24.5 million and $ 24.3 million, respectively, of which $ 16.9 million and $ 17.7 million, respectively, are included in other noncurrent liabilities in the consolidated balance sheets.

12 unchanged sentences

federal jurisdiction, various state and local jurisdictions, and many foreign jurisdictions.

The United States, India, Ireland, Mexico, Singapore, and the United Kingdom are the main taxing jurisdictions in which the Company operates.

The United States, India, Ireland, Singapore, and the United Kingdom are the main taxing jurisdictions in which the Company operates.

The years open for audit vary depending on the tax jurisdiction.

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In the foreign jurisdictions, the tax returns open for audit generally vary by jurisdiction between 2004 and 2020.

The Company’s Indian income tax returns covering fiscal years 2005, 2010 through 2014, 2016, and 2017 are under audit by the Indian tax authority.

The Company’s Indian income tax returns covering fiscal years 2005, 2011 through 2014, and 2016 through 2020 are under audit by the Indian tax authority.

Other foreign subsidiaries could face challenges from various foreign tax authorities.

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The Company accrues interest related to uncertain tax positions in interest expense or interest income and recognizes penalties related to uncertain tax positions in other income or other expense.

As of December 31, 2020 and 2019, $ 1.2 million is accrued for the payment of interest and penalties related to income tax liabilities.

The aggregate amount of interest and penalties expense (benefit) recorded in the statements of operations for the years ended December 31, 2020, 2019, and 2018, was less than $ 0.1 million, $ 0.2 million, and less than $( 0.1 ) million, respectively.

The Company has operating leases for corporate offices and data centers.

As of December 31, 2021 and 2020, $ 1.1 million and $ 1.2 million, respectively, is accrued for the payment of interest and penalties related to income tax liabilities.

The aggregate amount of interest and penalties expense (benefit) recorded in the statements of operations for the years ended December 31, 2021, 2020, and 2019, was $( 0.1 ) million, less than $ 0.1 million, and $ 0.2 million, respectively.

The Company has operating leases primarily for corporate offices and data centers.

Excluding office leases, leases with an initial term of 12-months or less that do not include an option to purchase the underlying asset are not recorded on the consolidated balance sheet and are expensed on a straight-line basis over the lease term.

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Years Ended December 31,

2021 2020 2019

Operating lease cost

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Variable lease cost

3,140 3,588 3,756

Sublease income

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Years Ended December 31,

2021 2020 2019

Cash paid for amounts included in the measurement of lease liabilities:

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Total lease liability

As of December 31, 2021, the Company has additional operating leases for office facilities that have not yet commenced with minimum lease payments of $ 0.2 million, These operating leases will commence in fiscal year 2022 with lease terms of one year .

Commitments and Contingencies

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The Company’s contractual indemnification obligations under these agreements are in addition to the respective directors’ and officers’ rights under the certificate of incorporation or under Delaware law.

Legal Proceedings

In April 2021, ACH files associated with one of the Company's mortgage servicing customers were inadvertently transmitted to a processing bank during a test of its ACH file production system.

Reversal ACH files were promptly issued, restoring affected accounts.

The Company has been contacted by the U.S.

Consumer Finance Protection Bureau and various state consumer protection and regulatory agencies about this incident and is cooperating in their investigations, which could result in fines or penalties that could be material and injunctive remedies that could be burdensome and costly to implement.

In addition, the Company has been named as a defendant in seven class action lawsuits filed in various federal courts purportedly on behalf of consumers whose mortgage accounts were affected.

The complaints vary, but generally allege violations of federal and state consumer protection and other laws and claim that the Company is obligated to pay statutory and other damages.

The Company intends to vigorously defend these cases.

Defending such cases could be time-consuming and costly, and failure to successfully defend the Company in any or all of these cases could have a material effect.

Employee Benefit Plans

The Company offers various defined contribution plans for our U.S.

Total defined contribution plan expense was $ 13.0 million, $ 13.5 million, and $ 13.7 million during the years ended December 31, 2021, 2020, and 2019, respectively.

ACI 401(k) Plan

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After one year of service, the Company matches 100 % of the first 4 % of eligible participant contributions and 50 % of the next 4 % of eligible participant contributions, not to exceed $ 5,000 per employee annually.

Company contributions charged to expense were $ 6.3 million during the year ended December 31, 2020, and $ 6.4 million during both the years ended December 31, 2019 and 2018.

Company contributions charged to expense were $ 6.0 million, $ 6.3 million, and $ 6.4 million during the years ended December 31, 2021, 2020, and 2019, respectively.

ACI Worldwide EMEA Group Personal Pension Scheme

The ACI Worldwide EMEA Group Personal Pension Scheme is a defined contribution plan covering substantially all ACI Worldwide (EMEA) Limited (“ACI-EMEA”) employees.

For those ACI-EMEA employees who elect to participate in the plan, the Company contributes a minimum of 8.5 % of eligible compensation to the plan for employees employed at December 1, 2000 (up to a maximum of 15.5 % for employees aged over 55 years on December 1, 2000) or from 6 % to 10 % of eligible compensation for employees employed subsequent to December 1, 2000.

ACI-EMEA contributions charged to expense were $ 1.5 million during both the years ended December 31, 2020 and 2019, and $ 1.6 million during the year ended December 31, 2018 .

Quarterly Financial Data (Unaudited)

The following consists of quarterly financial data (in thousands, except per share amounts):

Quarter Ended Year Ended

2020 June 30,

2020 September 30,

2020 December 31,

Software as a service and platform as a service $ 192,950 $ 180,573 $ 190,369 $ 205,288 $ 769,180

License 28,129 50,136 56,773 111,858 246,896

Maintenance 53,280 52,749 53,049 52,619 211,697

Services 17,126 16,452 15,692 17,279 66,549

Total revenues 291,485 299,910 315,883 387,044 1,294,322

Operating expenses:

Cost of revenue (1) 165,837 147,346 158,579 150,697 622,459

Research and development 39,024 35,578 33,573 31,118 139,293

Selling and marketing 30,083 24,455 22,154 26,875 103,567

General and administrative 35,926 29,758 37,000 49,784 152,468

Depreciation and amortization 31,898 33,635 33,395 32,863 131,791

Total operating expenses 302,768 270,772 284,701 291,337 1,149,578

Operating income (loss) ( 11,283 ) 29,138 31,182 95,707 144,744

Other income (expense):

Interest expense ( 17,171 ) ( 14,142 ) ( 12,925 ) ( 12,392 ) ( 56,630 )

Interest income 2,900 2,954 2,927 2,847 11,628

Other, net ( 9,758 ) 2,041 1,356 5,245 ( 1,116 )

Total other income (expense) ( 24,029 ) ( 9,147 ) ( 8,642 ) ( 4,300 ) ( 46,118 )

Income (loss) before income taxes ( 35,312 ) 19,991 22,540 91,407 98,626

Income tax expense (benefit) ( 10,885 ) 5,916 6,674 24,261 25,966

Net income (loss) $ ( 24,427 ) $ 14,075 $ 15,866 $ 67,146 $ 72,660

Earnings (loss) per share

Basic $ ( 0.21 ) $ 0.12 $ 0.14 $ 0.57 $ 0.62

Diluted $ ( 0.21 ) $ 0.12 $ 0.13 $ 0.56 $ 0.62

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

Quarter Ended Year Ended

2019 June 30,

2019 September 30,

2019 December 31,

Software as a service and platform as a service $ 108,557 $ 172,499 $ 192,952 $ 203,661 $ 677,669

License 21,078 52,541 92,058 122,584 288,261

Maintenance 55,111 51,922 52,638 53,738 213,409

Services 21,109 20,656 17,253 19,937 78,955

Total revenues 205,855 297,618 354,901 399,920 1,258,294

Operating expenses:

Cost of revenue (1) 114,941 155,240 174,168 173,104 617,453

Research and development 36,194 39,235 36,543 34,601 146,573

Selling and marketing 29,430 32,962 30,417 30,875 123,684

General and administrative 31,517 49,319 27,286 27,174 135,296

Depreciation and amortization 21,866 26,744 31,169 31,753 111,532

Total operating expenses 233,948 303,500 299,583 297,507 1,134,538

Operating income (loss) ( 28,093 ) ( 5,882 ) 55,318 102,413 123,756

Other income (expense):

Interest expense ( 11,614 ) ( 15,323 ) ( 18,987 ) ( 18,109 ) ( 64,033 )

Interest income 3,033 2,997 2,988 2,949 11,967

Other, net ( 1,912 ) 1,402 ( 2,369 ) 3,399 520

Total other income (expense) ( 10,493 ) ( 10,924 ) ( 18,368 ) ( 11,761 ) ( 51,546 )

Income (loss) before income taxes ( 38,586 ) ( 16,806 ) 36,950 90,652 72,210

Income tax expense (benefit) ( 12,623 ) ( 22,531 ) 5,136 35,166 5,148

Net income (loss) $ ( 25,963 ) $ 5,725 $ 31,814 $ 55,486 $ 67,062

Earnings (loss) per share

Basic $ ( 0.22 ) $ 0.05 $ 0.27 $ 0.48 $ 0.58

Diluted $ ( 0.22 ) $ 0.05 $ 0.27 $ 0.47 $ 0.57

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

For those ACI-EMEA employees who elect to participate in the plan, the Company contributes a minimum of 8.5 % of eligible compensation to the plan for employees employed at December 1, 2000 or from 6 % to 10 % of eligible compensation for employees employed subsequent to December 1, 2000.

ACI-EMEA contributions charged to expense were $ 1.6 million during the year ended December 31, 2021, and $ 1.5 million during both the years ended December 31, 2020 and 2019.

EXHIBIT INDEX

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and the lenders that are party thereto

10.07 (11)* Form of 2015 Supplemental LTIP Performance Shares Agreement for the Company’s 2005 Equity and Performance Incentive Plan, as amended

10.07 (11)* ACI Worldwide, Inc.

1 unchanged sentence

10.08 (12)* Form of 2016 Restricted Share Unit Award Agreement for the Company’s 2016 Equity and Performance Incentive Plan

10.10 (14)* Form of Performance Share Award Agreement CEO (rTSR Performance Share Awards)

10.09 (13)* Form of Restricted Share Unit Award Agreement (RSUs)

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10.11 (15) Amendment Agreement to the Amended and Restated Credit Agreement, dated April 5, 2019

10.14 (18) November 5, 2019 Retirement and General Release Agreement between the Company and Philip G.

10.12 (16)* Form of Severance Agreement between ACI Worldwide, Inc.

3 unchanged sentences

10.14 (18)* Form of 2015 Nonqualified Stock Option Agreement - Employee for the Company's 2005 Equity and Performance Incentive Plan, as amended

10.18 (22)* Form of 2015 Supplemental Nonqualified Stock Option Agreement - Employee for the Company’s 2005 Equity and Performance Incentive Plan, as amended

10.19 (23)* Form of 2015 Nonqualified Stock Option Agreement - Employee for the Company's 2005 Equity and Performance Incentive Plan, as amended

10.15 (19)* Form of 2016 Nonqualified Stock Option Agreement for the Company’s 2016 Equity and Performance Incentive Plan, as amended

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10.18 (22)* Form of Performance Share Award Agreement for the Company's 2020 Equity and Incentive Compensation Plan

10.19 (23)* Form of Director Restricted Share Unit Award Agreement for the Company's 2020 Equity and Incentive Compensation Plan

21.01 Subsidiaries of the Registrant (filed herewith)

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(10) Incorporated herein by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed February 27, 2017.

(11) Incorporated herein by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed January 30, 2015.

(11) Incorporated herein by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed June 20, 2016.

2 unchanged sentences

(14) Incorporated herein by reference to Exhibit 10.4 to the registrant’s current report on Form 8-K filed March 8, 2019.

(16) Incorporated herein by reference to Exhibit 10.4 to the registrant’s current report on Form 8-K filed March 8, 2019.

(15) Incorporated herein by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed April 11, 2019.

(18) Incorporated herein by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed November 7, 2019.

(16) Incorporated herein by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed February 20, 2020.

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(19) Incorporated herein by reference to Exhibit 10.04 to the registrant's quarterly report on Form 10-Q for the period ended March 31, 2020.

(23) Incorporated herein by reference to Exhibit 10.03 to the registrant's quarterly report on Form 10-Q for the period ended March 31, 2020.

(24) Incorporated herein by reference to Exhibit 10.04 to the registrant's quarterly report on Form 10-Q for the period ended March 31, 2020.

(20) Incorporated herein by reference to Appendix A to the registrant's definitive proxy statement on Schedule 14A (Commission File No.

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(22) Incorporated herein by reference to Exhibit 10.07 to the registrant's quarterly report on Form 10-Q for the period ended June 30, 2020.

(23) Incorporated herein by reference to Exhibit 10.01 to the registrant’s current report on Form 8-K filed June 8, 2021.

__________________

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February 24, 2022

/ S / DAVID A.

Chairman of the Board and Director February 25, 2021

/ S / CHARLES K.

Director February 25, 2021

Chairman of the Board and Director February 24, 2022

/ S / JANET O.

2 unchanged sentences

Director February 24, 2022

/ S / DIDIER R.

/ S / MARY HARMAN

Director February 24, 2022

/ S / PAMELA H.

/ S / DIDIER R.

Director February 24, 2022

5 unchanged sentences

Director February 24, 2022

/ S / SAMIR ZABANEH

Director February 24, 2022

Samir Zabaneh

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 9A. Controls and Procedures