What changed in this filing

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Item 9A. Controls and Procedures

2023-03-01 compared with 2022-02-24 · 124 added, 215 removed, 1202 unchanged (22% of the section changed)

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Changes in Internal Control over Financial Reporting

There were no additional changes in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) during the quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) during the quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of

ACI Worldwide, Inc.

To the Stockholders and the Board of Directors of ACI Worldwide, Inc.

Opinion on Internal Control over Financial Reporting

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, 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, 2021, of the Company and our report dated February 24, 2022, expressed an unqualified opinion on those financial statements.

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, 2022, of the Company and our report dated March 1, 2023, expressed an unqualified opinion on those financial statements.

Basis for Opinion

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Omaha, Nebraska

February 24, 2022

March 1, 2023

OTHER INFORMATION

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The information under the heading “Executive Officers of the Registrant” in Part 1, Item 1 of this Form 10-K is incorporated herein by reference.

The other information required by this Item 10 is incorporated by reference from our Proxy Statement for the Annual Meeting of Stockholders to be held on June 1, 2022 (the “2022 Proxy Statement“), under the sections entitled “Proposal 1 – Election of Directors,” “Information Regarding Security Ownership – Section 16(a) Beneficial Ownership Reporting Compliance,” Corporate Governance – Code of Business Conduct and Ethics,” and “Corporate Governance – Board Committees.”

The other information required by this Item 10 is incorporated by reference from our Proxy Statement for the Annual Meeting of Stockholders to be held on or about June 1, 2023 (the “2023 Proxy Statement“), under the sections entitled “Proposal 1 – Election of Directors,” “Information Regarding Security Ownership – Section 16(a) Beneficial Ownership Reporting Compliance,” Corporate Governance – Code of Business Conduct and Ethics,” and “Corporate Governance – Board Committees.”

EXECUTIVE COMPENSATION

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of

ACI Worldwide, Inc.

To the Stockholders and the Board of Directors of ACI Worldwide, Inc.

Opinion on the Financial Statements

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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.

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, 2022, 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 March 1, 2023, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

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Omaha, Nebraska

February 24, 2022

March 1, 2023

We have served as the Company’s auditor since 2009.

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Net income $ 142,177 $ 127,791 $ 72,660

Other comprehensive income (loss):

Other comprehensive loss:

Foreign currency translation adjustments ( 18,113 ) ( 7,102 ) ( 862 )

Total other comprehensive income (loss) ( 7,102 ) ( 862 ) 1,034

Total other comprehensive loss ( 18,113 ) ( 7,102 ) ( 862 )

Comprehensive income $ 124,064 $ 120,689 $ 71,798

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Paid-in Capital Retained Earnings Treasury Stock Accumulated Other

Comprehensive Income (Loss) Total

Comprehensive Loss Total

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

Net income — — 72,660 — — 72,660

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

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

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

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29,753 27,242 29,602

Gain on divestiture ( 38,452 ) — —

3,028 855 6,017

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( 26,790 ) ( 24,786 ) ( 28,829 )

Acquisition of businesses, net of cash acquired

— — ( 757,268 )

— 15,934 ( 25,199 )

Proceeds from divestiture 100,139 — —

Net cash flows from investing activities

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( 75,000 ) ( 90,000 ) ( 214,000 )

Proceeds from term portion of credit agreement

Repayments of term portion of credit agreement

( 85,431 ) ( 38,950 ) ( 38,950 )

Payment for debt issuance costs

— — ( 12,830 )

Payments on or proceeds from other debt, net

( 12,123 ) ( 15,185 ) ( 13,854 )

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

Net increase (decrease) in settlement assets and liabilities 26,849 ( 37,834 ) 101,681

Net cash flows from financing activities

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( 2,037 ) 533 ( 57 )

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

Net increase (decrease) in cash and cash equivalents 30,530 ( 81,240 ) 124,250

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

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GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

These estimates and assumptions are affected by management’s application of accounting policies, as well as uncertainty in the current economic environment.

Actual results could differ from those estimates.

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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.

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

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

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

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

Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession.

Such economic disruption could have a material adverse effect on our business as our customers curtail and reduce capital and overall spending.

Policymakers around the globe have responded with fiscal policy actions to support the economy as a whole.

The magnitude and overall effectiveness of these actions remains uncertain.

The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers, all of which are uncertain and cannot be predicted.

The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, uncertain demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operational challenges faced by its customers.

As of the date of issuance of these consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.

Other Current Liabilities

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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, 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 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, Banks, Merchants, and Billers, as the reporting units.

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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Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period, assuming a constant WACC and low, long-term growth rates.

If the recoverability test indicates potential impairment, the Company calculates an implied fair value of goodwill for the reporting unit.

The implied fair value of goodwill is determined in a manner similar to how goodwill is calculated in a business combination.

If the implied fair value of goodwill exceeds the carrying value of goodwill assigned to the reporting unit, there is no impairment.

If the carrying value of goodwill assigned to the reporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded to write down the carrying value.

If, as per the quantitative test, the estimated fair value of the reporting unit is less than the carrying amount of the reporting unit, impairment is recognized for the difference, limited to the amount of goodwill recognized for the reporting unit.

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, 2022 were as follows (in thousands):

Banks Merchants Billers Total

Balance, December 31, 2021

$ 725,903 $ 137,289 $ 417,034 $ 1,280,226

Divestiture (1) ( 54,200 ) — — ( 54,200 )

Balance, December 31, 2022

$ 671,703 $ 137,289 $ 417,034 $ 1,226,026

(1) In connection with the divestiture, $ 54.2 million of goodwill from the Banks segment was allocated to the net assets sold.

See Note 3, Divestiture, for further information on the divestiture.

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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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, which is included in other noncurrent assets in the consolidated balance sheet as of December 31, 2021 and 2020.

Accordingly, the Company recorded an investment of $ 17.9 million and $ 19.3 million, which is included in other noncurrent assets in the consolidated balance sheet as of December 31, 2022 and 2021, respectively.

Impairment of Long-Lived Assets

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Such unrecognized tax benefits represent the estimated provision for income taxes expected to ultimately be paid.

New Accounting Standards Recently Adopted

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

Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards.

The amendments in this update simplify the accounting for income taxes by removing certain exceptions within ASC 740, as well as clarify and simplify other aspects of the accounting for income taxes to promote consistency among reporting entities.

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

The Company 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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Total receivables, net $ 701,599 $ 596,569

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.

One customer accounted for 10.1 % and 13.8 % of the Company's consolidated receivables balance as of December 31, 2022 and 2021, respectively.

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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Foreign currency translation adjustments and other

8 ( 78 ) ( 44 )

Balance, end of period

$ ( 3,779 ) $ ( 2,861 ) $ ( 3,912 )

Provision (increases) decreases recorded in general and administrative expense during the years ended December 31, 2021, December 31, 2020, and 2019, reflect (increases) decreases in the allowance for doubtful accounts based upon collection experience, net of collection of customer-specific receivables that were previously reserved for as doubtful of collection.

Provision increases recorded in general and administrative expense during the years ended December 31, 2022, and provision decreases recorded in general and administrative expense during the years ended December 31, 2021, and 2020, reflect adjustments in the allowance for doubtful accounts based upon collection experience, net of collection of customer-specific receivables that were previously reserved for as doubtful of collection.

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

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Recognition of deferred revenue ( 128,700 )

Divestiture ( 21,581 )

Foreign currency translation ( 4,398 )

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

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.

As of December 31, 2022 and 2021, less than $ 0.1 million and $ 0.2 million of these costs are included in other current assets, and $ 9.7 million and $ 10.1 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.

During the years ended December 31, 2022 and 2021, the Company recognized $ 3.1 million and $ 4.5 million of expense, respectively, related to the amortization of these costs, which is included in cost of revenue on the consolidated statements of operations.

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

The Company has included the financial results of Speedpay in the consolidated financial statements from the date of acquisition.

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

See Note 4, Debt , for terms of the Credit Agreement.

The remaining acquisition consideration was funded with cash on hand.

The Company expensed approximately $ 22.2 million of costs related to the acquisition of Speedpay for the year ended December 31, 2019.

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 $ 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 the finalized purchase price allocation as follows (in thousands, except weighted average useful lives):

Amount Weighted Average Useful Lives

Current assets:

Cash and cash equivalents $ 135

Receivables, net of allowances 17,658

Settlement assets 239,604

Prepaid expenses 317

Other current assets 19,585

Total current assets acquired 277,299

Noncurrent assets:

Goodwill 366,508

Software 113,600 7 years

Customer relationships 208,500 15 years

Trade names 10,900 5 years

Other noncurrent assets 3,745

Total assets acquired 980,552

Current liabilities:

Accounts payable 6,623

Settlement liabilities 212,892

Employee compensation 1,959

Other current liabilities 3,802

Total current liabilities acquired 225,276

Noncurrent liabilities:

Other noncurrent liabilities 1,219

Total liabilities acquired 226,495

Net assets acquired $ 754,057

Unaudited Pro Forma Financial Information

The pro forma financial information in the table below presents the combined results of operations for ACI and Speedpay as if the acquisition had occurred January 1, 2019.

The pro forma information is shown for illustrative purposes only and is not necessarily indicative of future results of operations of the Company or results of operations of the Company that would have actually occurred had the transaction been in effect for the periods presented.

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

Certain pro forma adjustments have been made to net income 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 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

Pro forma net income $ 82,003

Pro forma income per share:

Diluted $ 0.69

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.

Corporate Online Banking Solutions

On June 7, 2022, the Company announced a definitive agreement to divest its corporate online banking solutions related assets and liabilities to One Equity Partners ("OEP") for $ 100.1 million, including a preliminary net working capital adjustment.

The sale included employees and customer contracts as well as technology assets and intellectual property and closed on September 1, 2022.

For the year ended December 31, 2022, the Company recognized a gain of $ 38.5 million on the sale, which is recorded in other, net on the consolidated statements of operations.

This gain is preliminary subject to finalization of post-closing adjustments pursuant to the definitive transaction agreement.

The Company and OEP have also entered into a Transition Services Agreement ("TSA"), whereby the Company will continue to perform certain functions on OEP's behalf during a migration period not expected to exceed 18 months.

The TSA is meant to reimburse the Company for direct costs in order to provide such functions, which are no longer generating revenue for the Company.

As of December 31, 2022, the Company had $ 105.0 million, $ 592.7 million and $ 400.0 million outstanding under its Revolving Credit Facility, Term Loans, and Senior Notes, respectively, with up to $ 393.5 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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among other things.

In connection with amending the Credit Agreement, the Company incurred and paid debt issuance costs of $ 12.8 million during the year ended December 31, 2019.

On May 5, 2022, the Company and Bank of America entered into the LIBOR Transition Amendment (the "Amendment") that replaced the LIBOR reference rate with the Secured Overnight Financing Rate ("SOFR") reference rate.

No other terms or conditions of the Credit Agreement were changed as a result of the Amendment.

The Credit Agreement consists of (a) a five-year $ 500.0 million senior secured revolving credit facility (the “Revolving Credit Facility”), which includes sublimits for (1) the issuance of standby letters of credit and (2) swingline loans, (b) a five-year $ 279.0 million senior secured term loan facility (the “Initial Term Loan”) and (c) a five-year $ 500.0 million Delayed Draw Term Loan (together with the Initial Term Loan, the "Term Loans", and together with the Initial Term Loan and the Revolving Credit Facility, the “Credit Facility”).

The Credit Agreement also allows the Company to request optional incremental term loans and increases in the revolving commitment.

At the Company’s option, borrowings under the Credit Facility bear interest at an annual rate equal to either (a) a base rate determined by reference to the highest of (1) the annual interest rate publicly announced by the administrative agent as its Prime Rate, (2) the federal funds effective rate plus 1/2 of 1% or (3) a LIBOR rate determined by reference to the costs of funds for U.S.

dollar deposits for a one-month interest period, adjusted for certain additional costs plus 1 % or (b) a LIBOR rate determined by reference to the costs of funds for U.S.

At the Company’s option, borrowings under the Credit Facility bear interest at an annual rate equal to either (a) a base rate determined by reference to the highest of (1) the annual interest rate publicly announced by the administrative agent as its Prime Rate, (2) the federal funds effective rate plus 1/2 of 1% or (3) SOFR rate determined by reference to the costs of funds for U.S.

dollar deposits for a one-month interest period, adjusted for certain additional costs plus 1 % or (b) SOFR rate determined by reference to the costs of funds for U.S.

dollar deposits for the interest period relevant to such borrowings, adjusted for certain additional costs plus an applicable margin.

Based on the calculation of the applicable consolidated total leverage ratio, the applicable margin for borrowings under the Credit Facility is between 0.25 % to 1.25 % with respect to base rate borrowings and between 1.25 % and 2.25 % with respect to LIBOR rate borrowings.

Interest is due and payable monthly.

The interest rate in effect for the Credit Facility as of December 31, 2022, was 6.20 %.

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

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

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.

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

Expected Discontinuation of LIBOR

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 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.

The Company will continue to actively assess the related opportunities and risks involved in this transition.

On August 21, 2018, the Company completed a $ 400.0 million offering of the 2026 Notes at an issue price of 100 % of the principal amount in a private placement for resale to qualified institutional buyers.

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

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.

During the year ended December 31, 2022, the Company financed certain multi-year license agreements for internal-use software for $ 10.7 million, with annual payments through April 2024.

As of December 31, 2022, $ 9.3 million was outstanding under these and other license agreements previously entered into, of which $ 5.8 million and $ 3.5 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, all of which is included in other current liabilities in the consolidated balance sheet.

Software and Other Intangible Assets

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1,337 103,098

$ 129,109 $ 228,698

Stock-Based Compensation Plans

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( 406,230 ) 16.65

Expired ( 12,870 ) 20.07

Outstanding, December 31, 2022 1,221,219 $ 19.00 2.69 $ 4,887,760

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During the year ended December 31, 2017, pursuant to the Company’s 2016 Incentive Plan, the Company granted long-term incentive program performance share awards (“LTIP performance shares”).

These LTIP performance shares were earned based upon the achievement, over a specified period that must not be less than one year and is typically a three-year performance period, of performance goals related to (i) the compound annual growth over the performance period in the sales for the Company as determined by the Company, and (ii) the cumulative operating income or EBITDA over the performance period as determined by the Company.

These LTIP performance shares were earned based upon the achievement, over a specified period that must not be less than one year and was typically a three-year performance period, of performance goals related to (i) the compound annual growth over the performance period in the sales for the Company as determined by the Company, and (ii) the cumulative operating income or EBITDA over the performance period as determined by the Company.

Up to 200 % of the LTIP performance shares could be earned upon achievement of performance goals equal to or exceeding the maximum target levels for the performance goals over the performance period.

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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.

There are no LTIP performance shares outstanding as of December 31, 2022.

Total Shareholder Return Awards

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During the years ended December 31, 2022, 2021, and 2020, pursuant to the 2020 Plan and the 2016 Incentive Plan, the Company granted restricted share unit awards (“RSUs”).

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

RSUs generally have requisite service periods of three years and may vest 100 % upon the three-year anniversary or in equal increments quarterly or annually.

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

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The Company withheld 164,853 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

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.

As of December 31, 2022, there was unrecognized compensation expense of $ 24.9 million related to RSUs and $ 13.9 million related to TSRs, which the Company expects to recognize over a weighted average period of 2.0 years and 1.9 years, respectively.

The Company recorded stock-based compensation expense recognized under ASC 718 during the years ended December 31, 2022, 2021, and 2020, of $ 29.8 million, $ 27.2 million, and $ 29.6 million, respectively, with corresponding tax benefits of $ 4.5 million, $ 3.9 million, and $ 5.4 million, respectively.

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As of December 31, 2022, the maximum remaining amount authorized for purchase under the stock repurchase program was $ 9.8 million.

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

On February 24, 2023, the Board of Directors approved $ 200.0 million for the stock repurchase program in place of the remaining purchase amounts previously authorized.

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.

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Common stock outstanding as of December 31, 2022 and 2021, was 108,068,828 and 115,730,046 , respectively.

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

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.

Other, net is primarily comprised of foreign currency transaction gains and losses and, for the year ended December 31, 2022, the $ 38.5 million gain on the divestiture.

Other, net was $ 43.4 million of income for the year ended December 31, 2022 .

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

Segment Information

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 reports financial performance based on its operating segments, Banks, Merchants, and Billers, and analyzes Segment Adjusted EBITDA as a measure of segment profitability.

The Company’s Chief Executive Officer is also CODM.

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

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

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

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United States $ 1,286,505 $ 1,425,391

$ 1,425,391 $ 1,423,862

745,138 750,651

$ 2,170,529 $ 2,174,513

Other 754,847 745,138

Total $ 2,041,352 $ 2,170,529

No single customer accounted for more than 10% of the Company’s consolidated revenues during the years ended December 31, 2022, 2021, and 2020.

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Performance-based compensation 2,266 ( 1,887 ) ( 2,624 )

Tax effect of divestiture 14,522 — —

Other 794 ( 1,157 ) 2,113

Income tax provision $ 64,458 $ 47,274 $ 25,966

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.

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 countries having the greatest impact on the tax rate adjustment line shown in the above table as “Foreign tax rate differential” for the three years reported are Ireland, Singapore, and the United Kingdom.

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.

6 unchanged sentences

Operating lease 10,202 10,236

Capitalized research and development 23,891 —

Other 9,533 9,988

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Operating lease right-of-use asset ( 8,885 ) ( 8,791 )

Deferred revenue ( 15,596 ) ( 33,947 )

Unbilled revenue ( 9,566 ) ( 15,596 )

Withholding tax liability ( 27,432 ) ( 18,356 )

Total deferred income tax liabilities ( 79,575 ) ( 84,208 )

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Net deferred income taxes $ 13,367 $ 14,656

The deferred tax asset and liabilities disclosure above reflects a $ 18.4 million withholding tax liability reclass for the year ended December 31, 2021.

Prior year reported $ 18.4 million related to withholding tax liability as Tax credits within the deferred tax asset section.

This amount is now reported separately within the deferred tax liability section.

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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The Company does not have any valuation allowance against the federal tax NOLs but has provided a $ 0.6 million valuation allowance against the deferred tax asset associated with the state NOLs.

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 had foreign tax NOLs of $ 17.3 million, of which $ 17.0 million may be utilized over an indefinite life, with the remainder expiring over the next seven years .

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

5 unchanged sentences

The Company also has domestic federal and state general business tax credit carryforwards at December 31, 2022, of $ 20.5 million and $ 0.7 million, respectively, which will begin to expire in 2023.

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 Company has not provided deferred taxes on $ 37.8 million of unremitted earnings of its Indian subsidiaries that are considered permanently reinvested.

The company has not estimated the deferred tax liability on these earnings as such estimation is not practicable to determine or is immaterial to the financial statements.

As of December 31, 2022, deferred taxes for non-United States withholding and other taxes were provided on $ 26.1 million of unremitted earnings of non-United States subsidiaries that may be remitted to the United States.

As of December 31, 2022 and 2021, we have recorded a deferred tax liability of $ 1.3 million and $ 1.5 million, respectively, related to these non-United States earnings that may be remitted.

The unrecognized tax benefit at December 31, 2022 and 2021, was $ 26.4 million and $ 24.5 million, respectively, of which $ 19.9 million and $ 16.9 million, respectively, are included in other noncurrent liabilities in the consolidated balance sheets.

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

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

The United States, Ireland, 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.

In the United States, the Company’s tax returns for years following 2017 are open for audit.

In the United States, the Company’s federal tax return for years following 2018 are open for audit.

In the foreign jurisdictions, the tax returns open for audit generally vary by jurisdiction between 2005 and 2021.

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.

The Company’s Indian income tax returns covering fiscal years ended March 31, 2005, 2014, 2016 through 2018, and 2020 are under audit by the Indian tax authority.

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

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As of December 31, 2022 and 2021, $ 0.6 million and $ 1.1 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 aggregate amount of interest and penalties expense (benefit) recorded in the statements of operations for the years ended December 31, 2022, 2021, and 2020, was $( 0.5 ) million, $( 0.1 ) million, and $ 0.1 million, respectively.

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

12 unchanged sentences

Sublease income

— ( 134 ) ( 528 )

Total lease cost

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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 .

As of December 31, 2022, the Company has additional operating leases for office facilities that have not yet commenced with minimum lease payments of $ 0.6 million.

These operating leases will commence in fiscal year 2023 with lease terms of one year to three years .

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.

Pending and Threatened Legal Proceedings

In April 2021, ACH files associated with one of the Company's mortgage servicing customers were inadvertently transmitted into the ACH network during a test of the Company's payment processing system.

The Company took immediate correction action and issued reversing ACH files, restoring affected accounts.

The Company was named as a defendant in seven class action lawsuits filed in various federal courts purportedly on behalf of consumers whose mortgage accounts were affected by the inadvertent ACH file transmission.

The Company entered into an agreement, which is subject to final court approval and other conditions, to settle these lawsuits for the Company's establishment of a $ 5.0 million fund out of which payments would be made to class members and the Company's payment of attorneys’ fees and administrative costs, plus additional funds totaling $ 1.5 million that could be required to be established under certain circumstances.

There can be no assurance that the conditions to settlement will be satisfied, in which event the class action litigation could proceed.

The inadvertent ACH file transmission also gave rise to investigations by the U.S.

Consumer Financial Protection Bureau (the "CFPB") and state attorneys general in 49 states, the District of Columbia, and certain U.S.

territories as well as money transmission regulators in 46 states, the District of Columbia, and certain U.S.

A lead group of attorneys general and regulatory representatives of nine states have led the state investigations of the matter.

The Company has cooperated with the CFPB and state authorities, including furnishing documents and information to them.

There can be no assurance that the matters will be resolved without litigation, and the matters could result in the impositions of material penalties and damages as well as burdensome and costly remedies.

The Company has asserted claims for insurance coverage with respect to potential losses associated with the inadvertent ACH file transmission.

There is no assurance as to the amount of insurance that may be available or its effect on the availability or cost of insurance in the future.

The Company is from time to time subject to other claims, litigation and investigations.

While we believe that none of the currently pending matters is reasonably likely to have material adverse effect on us, there can be no assurance with respect thereto or future matters.

Employee Benefit Plans

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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.

ACI-EMEA contributions charged to expense were $ 1.6 million, $ 1.6 million, and $ 1.5 million, during the years ended December 31, 2022, 2021, and 2020, respectively.

EXHIBIT INDEX

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

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

10.09 (13)* Form of 2016 Performance Share Award Agreement (rTSR Performance Share Awards)

10.10 (14) Amendment Agreement to the Amended and Restated Credit Agreement, dated April 5, 2019

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

and Odilon Almeida

10.11 (15)* Form of Change in Control Employment Agreement between ACI Worldwide, Inc.

7 unchanged sentences

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

10.18 (22)* Severance Agreement between the Company and Odilon Almeida *

10.19 Transition Services Agreement between the Company and Odilon Almeida *

10.20 Interim CEO Letter Agreement *

10.21 Special Advisor Assignment Letter between the Company and Jeremy Wilmot *

21.01 Subsidiaries of the Registrant (filed herewith)

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(1) Incorporated herein by reference to Exhibit 3.1 to the registrant’s current report on Form 8-K filed August 17, 2017.

(2) Incorporated herein by reference to Exhibit 3.1 to the registrant’s current report on Form 8-K filed February 27, 2017.

(2) Incorporated herein by reference to Exhibit 3.1 to the registrant’s current report on Form 8-K/A filed April 1, 2022.

(3) Incorporated herein by reference to Exhibit 4.01 to the registrant’s Registration Statement No.

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

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

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

(15) Incorporated herein by reference to Exhibit 10.2 to the registrant’s current report on Form 8-K filed February 20, 2020.

(17) Incorporated herein by reference to Exhibit 10.2 to the registrant’s current report on Form 8-K filed February 20, 2020.

(16) 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.

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

(22) Incorporated herein by reference to Exhibit 10.01 to the registrant's current report on Form 8-K filed April 19, 2022.

__________________

4 unchanged sentences

ACI WORLDWIDE, INC.

February 24, 2022 By:

/s/ ODILON ALMEIDA

Odilon Almeida

President, Chief Executive Officer, and Director (Principal Executive Officer)

March 1, 2023 By:

/s/ THOMAS W.

Interim President, Interim Chief Executive Officer, and Director (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name Title Date

/ S / ODILON ALMEIDA

President, Chief Executive Officer, and Director (Principal Executive Officer)

February 24, 2022

Odilon Almeida

/ S / THOMAS W.

Interim President, Interim Chief Executive Officer, and Director (Principal Executive Officer)

March 1, 2023

/ S / SCOTT W.

Executive Vice President, Chief Financial Officer, and Chief Accounting Officer (Principal Financial Officer)

February 24, 2022

/ S / CHARLES K.

Chairman of the Board and Director February 24, 2022

March 1, 2023

/ S / ADALIO T.

Chairman of the Board and Director March 1, 2023

/ S / JANET O.

Director February 24, 2022

Director March 1, 2023

/ S / JAMES C.

Director February 24, 2022

Director March 1, 2023

/ S / MARY HARMAN

Director February 24, 2022

Director March 1, 2023

/ S / DIDIER R.

Director February 24, 2022

Director March 1, 2023

/ S / CHARLES E.

Director February 24, 2022

/ S / ADALIO T.

Director February 24, 2022

/ S / THOMAS W.

Director February 24, 2022

Director March 1, 2023

/ S / SAMIR ZABANEH

Director February 24, 2022

Director March 1, 2023

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