What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2022-11-02 · 121 added, 236 removed, 456 unchanged (44% of the section changed)

4 unchanged sentences

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Current assets

53 unchanged sentences

5,000,000 shares authorized;

no shares issued at September 30, 2022, and December 31, 2021

no shares issued at March 31, 2023, and December 31, 2022

Common stock;

1 unchanged sentence

280,000,000 shares authorized;

140,525,055 shares issued at September 30, 2022, and December 31, 2021

140,525,055 shares issued at March 31, 2023, and December 31, 2022

Additional paid-in capital 701,040 702,458

Retained earnings 1,241,150 1,273,458

Treasury stock, at cost, 27,323,712 and 24,795,009 shares at September 30, 2022, and December 31, 2021, respectively

Treasury stock, at cost, 32,202,744 and 32,456,227 shares at March 31, 2023, and December 31, 2022, respectively

( 661,223 ) ( 665,771 )

7 unchanged sentences

(unaudited and in thousands, except per share amounts)

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Software as a service and platform as a service

18 unchanged sentences

314,028 295,414

Operating income 3,489 27,979 55,612 47,093

Operating income (loss) ( 24,352 ) 27,666

Other income (expense)

3 unchanged sentences

( 3,395 ) 2,250

41,545 ( 1,088 ) 45,801 ( 1,036 )

Total other income (expense) ( 18,782 ) ( 5,485 )

Income before income taxes 33,693 18,517 73,604 20,667

Income tax expense 10,576 4,753 21,655 2,347

Net income $ 23,117 $ 13,764 $ 51,949 $ 18,320

Income per common share

Income (loss) before income taxes ( 43,134 ) 22,181

Income tax expense (benefit) ( 10,826 ) 6,691

Net income (loss) $ ( 32,308 ) $ 15,490

Income (loss) per common share

$ ( 0.30 ) $ 0.13

Diluted $ 0.20 $ 0.12 $ 0.45 $ 0.15

$ ( 0.30 ) $ 0.13

Weighted average common shares outstanding

7 unchanged sentences

(unaudited and in thousands)

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net income $ 23,117 $ 13,764 $ 51,949 $ 18,320

Other comprehensive loss:

Three Months Ended March 31,

Net income (loss) $ ( 32,308 ) $ 15,490

Other comprehensive income (loss):

Foreign currency translation adjustments

Total other comprehensive loss ( 13,459 ) ( 4,223 ) ( 28,179 ) ( 5,873 )

Comprehensive income $ 9,658 $ 9,541 $ 23,770 $ 12,447

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

ACI WORLDWIDE, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited and in thousands, except share amounts)

Three Months Ended September 30, 2022

Common Stock Additional

Paid-in Capital Retained Earnings Treasury Stock Accumulated Other

Comprehensive Loss Total

Balance as of June 30, 2022 $ 702 $ 690,574 $ 1,160,113 $ ( 528,758 ) $ ( 114,267 ) $ 1,208,364

Net income — — 23,117 — — 23,117

Other comprehensive loss — — — — ( 13,459 ) ( 13,459 )

Stock-based compensation

3,618 ( 2,100 )

Shares issued and forfeited, net, under stock plans

— 63 — 1,250 — 1,313

Repurchase of 1,154,825 shares of common stock

— — — ( 28,227 ) — ( 28,227 )

Repurchase of stock-based compensation awards for tax withholdings

— — — ( 18 ) — ( 18 )

Balance as of September 30, 2022 $ 702 $ 697,763 $ 1,183,230 $ ( 555,753 ) $ ( 127,726 ) $ 1,198,216

Three Months Ended September 30, 2021

Common Stock Additional

Paid-in Capital Retained Earnings Treasury Stock Accumulated Other

Comprehensive Loss Total

Balance as of June 30, 2021 $ 702 $ 676,399 $ 1,008,046 $ ( 412,492 ) $ ( 94,095 ) $ 1,178,560

Net income — — 13,764 — — 13,764

Other comprehensive loss — — — — ( 4,223 ) ( 4,223 )

Stock-based compensation

— 6,367 — — — 6,367

Shares issued and forfeited, net, under stock plans

— 278 — 845 — 1,123

Repurchase of stock-based compensation awards for tax withholdings

— — — ( 37 ) — ( 37 )

Balance as of September 30, 2021 $ 702 $ 683,044 $ 1,021,810 $ ( 411,684 ) $ ( 98,318 ) $ 1,195,554

Total other comprehensive income (loss) 3,618 ( 2,100 )

Comprehensive income (loss) $ ( 28,690 ) $ 13,390

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

3 unchanged sentences

(unaudited and in thousands, except share amounts)

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Common Stock Additional

3 unchanged sentences

Balance as of December 31, 2022 $ 702 $ 702,458 $ 1,273,458 $ ( 665,771 ) $ ( 117,660 ) $ 1,193,187

Net income — — 51,949 — — 51,949

Other comprehensive loss — — — — ( 28,179 ) ( 28,179 )

Net loss — — ( 32,308 ) — — ( 32,308 )

Other comprehensive income — — — — 3,618 3,618

Stock-based compensation

2 unchanged sentences

— ( 6,719 ) — 7,549 — 830

Repurchase of 3,210,313 shares of common stock

— — — ( 90,934 ) — ( 90,934 )

Repurchase of stock-based compensation awards for tax withholdings

— — — ( 3,001 ) — ( 3,001 )

Balance as of September 30, 2022 $ 702 $ 697,763 $ 1,183,230 $ ( 555,753 ) $ ( 127,726 ) $ 1,198,216

Nine Months Ended September 30, 2021

Balance as of March 31, 2023 $ 702 $ 701,040 $ 1,241,150 $ ( 661,223 ) $ ( 114,042 ) $ 1,167,627

Three Months Ended March 31, 2022

Paid-in Capital

15 unchanged sentences

— — — ( 5,537 ) — ( 5,537 )

Balance as of September 30, 2021 $ 702 $ 683,044 $ 1,021,810 $ ( 411,684 ) $ ( 98,318 ) $ 1,195,554

Balance as of March 31, 2022 $ 702 $ 685,354 $ 1,146,771 $ ( 506,513 ) $ ( 101,647 ) $ 1,224,667

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

3 unchanged sentences

(unaudited and in thousands)

Nine Months Ended

September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net income $ 51,949 $ 18,320

Adjustments to reconcile net income to net cash flows from operating activities:

17,052 15,838

Net income (loss) $ ( 32,308 ) $ 15,490

Adjustments to reconcile net income (loss) to net cash flows from operating activities:

25,408 26,508

4 unchanged sentences

Stock-based compensation expense

21,884 20,790

Gain on divestiture ( 38,452 ) —

Changes in operating assets and liabilities:

4 unchanged sentences

Deferred revenue

( 6,367 ) 10,339

Other current and noncurrent assets and liabilities

7 unchanged sentences

( 6,481 ) ( 6,207 )

Proceeds from divestiture 100,139 —

Net cash flows from investing activities

5 unchanged sentences

Repurchases of common stock

( 90,934 ) ( 39,411 )

Proceeds from revolving credit facility

50,000 40,000

Repayment of revolving credit facility

3 unchanged sentences

Payments on or proceeds from other debt, net ( 5,670 ) ( 4,186 )

Net increase (decrease) in settlement assets and liabilities 20,084 ( 55,470 )

Net decrease in settlement assets and liabilities ( 2,834 ) ( 605 )

Net cash flows from financing activities

21 unchanged sentences

All intercompany balances and transactions have been eliminated.

The condensed consolidated financial statements as of September 30, 2022, and for the three and nine months ended September 30, 2022 and 2021, are unaudited and reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair presentation, in all material respects, of the financial position and operating results for the interim periods.

The condensed consolidated financial statements as of March 31, 2023, and for the three months ended March 31, 2023 and 2022, are unaudited and reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair presentation, in all material respects, of the financial position and operating results for the interim periods.

The condensed consolidated balance sheet as of December 31, 2022, is derived from the audited financial statements.

The condensed consolidated financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2021, filed on February 24, 2022.

Results for the three and nine months ended September 30, 2022, are not necessarily indicative of results that may be attained in the future.

Results for the three months ended March 31, 2023, are not necessarily indicative of results that may be attained in the future.

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

2 unchanged sentences

Actual results could differ from those estimates.

Revision of Prior Period Financial Statements

As of December 31, 2021, the Company 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):

Nine Months Ended September 30, 2021

As reported Revision adjustment As revised

Cash flows from operating activities:

Other current and noncurrent assets and liabilities $ ( 51,158 ) $ ( 3,415 ) $ ( 54,573 )

Net cash flows from operating activities 147,898 ( 3,415 ) 144,483

Cash flows from financing activities:

Net decrease in settlement assets and liabilities $ — $ ( 55,470 ) $ ( 55,470 )

Net cash flows from financing activities ( 138,865 ) ( 55,470 ) ( 194,335 )

Net decrease in cash and cash equivalents $ ( 23,892 ) $ ( 58,885 ) $ ( 82,777 )

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

Cash and cash equivalents, including settlement deposits, end of period 141,482 41,123 182,605

Other Current Liabilities

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

September 30, 2022 December 31, 2021

Vendor financed licenses $ 12,520 $ 12,521

March 31, 2023 December 31, 2022

Operating lease liabilities $ 11,049 $ 11,218

Vendor financed licenses 9,418 13,525

Accrued interest 3,370 9,067

16 unchanged sentences

The Company is entitled to interest earned on the fund balances.

The collection of interest on these settlement accounts is considered in the Company’s determination of its fee structure for clients and represents a portion of the payment for services performed by the Company.

The amount of settlement funds as of September 30, 2022, and December 31, 2021, was $ 308.7 million and $ 272.8 million, respectively.

The collection of interest on these settlement accounts is

considered in the Company’s determination of its fee structure for clients and represents a portion of the payment for services performed by the Company.

The amount of settlement funds as of March 31, 2023, and December 31, 2022, was $ 300.6 million and $ 328.7 million, respectively.

The fair value of the Company’s Credit Agreement approximates the carrying value due to the floating interest rate (Level 2 of the fair value hierarchy).

The Company measures the fair value of its Senior Notes based on Level 2 inputs, which include quoted market prices and interest rate spreads of similar securities.

The fair value of the Company’s 5.750 % Senior Notes due 2026 (“2026 Notes”) was $ 379.9 million and $ 419.0 million as of September 30, 2022, and December 31, 2021, respectively.

The fair value of the Company’s 5.750 % Senior Notes due 2026 (“2026 Notes”) was $ 399.0 million and $ 390.0 million as of March 31, 2023, and December 31, 2022, respectively.

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

1 unchanged sentence

The Company evaluates goodwill at the reporting unit level and has identified its operating segments, Banks, Merchants, and Billers, as the reporting units.

As of September 30, 2022, the Company's goodwill balance of $ 1.2 billion was allocated $ 671.7 million to Banks, $ 137.3 million to Merchants, and $ 417.0 million to Billers.

As of March 31, 2023, the Company's goodwill balance of $ 1.2 billion was allocated $ 671.7 million to Banks, $ 137.3 million to Merchants, and $ 417.0 million to Billers.

Recoverability of goodwill is measured using a discounted cash flow model incorporating discount rates commensurate with the risks involved.

1 unchanged sentence

The calculated fair value was substantially in excess of the current carrying value for all reporting units based upon the October 1, 2022, annual impairment test and there have been no indications of impairment in the subsequent periods.

Changes in the carrying amount of goodwill attributable to each reporting unit during the nine months ended September 30, 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, September 30, 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.

Equity Method Investment

2 unchanged sentences

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 $ 17.3 million and $ 19.3 million, which is included in other noncurrent assets in the condensed consolidated balance sheet as of September 30, 2022, and December 31, 2021, respectively.

Accordingly, the Company recorded an investment of $ 18.0 million and $ 17.9 million, which is included in other noncurrent assets in the condensed consolidated balance sheet as of March 31, 2023, and December 31, 2022, respectively.

In accordance with ASC 606, Revenue From Contracts With Customers , revenue is recognized upon transfer of control of promised products and/or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products and services.

4 unchanged sentences

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Billed receivables $ 153,420 $ 218,611

5 unchanged sentences

Total receivables, net $ 613,097 $ 701,599

One customer accounted for 12.7 % and 13.8 % of the Company's consolidated receivables balance as of September 30, 2022 and December 31, 2021.

One customer accounted for 10.5 % and 10.1 % of the Company's consolidated receivables balance as of March 31, 2023 and December 31, 2022, respectively.

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.

3 unchanged sentences

Recognition of deferred revenue ( 21,465 )

Divestiture ( 21,581 )

Foreign currency translation 49

Balance, September 30, 2022

Balance, March 31, 2023

Revenue allocated to remaining performance obligations represents contracted revenue that will be recognized in future periods, which is comprised of deferred revenue and amounts that will be invoiced and recognized as revenue in future periods.

2 unchanged sentences

• SaaS and PaaS revenue from variable consideration that will be recognized in accordance with the ‘right to invoice’ practical expedient or meets the allocation objective.

Revenue allocated to remaining performance obligations was $ 682.0 million as of September 30, 2022, of which the Company expects to recognize approximately 51 % over the next 12 months and the remainder thereafter.

During the three and nine months ended September 30, 2022 and 2021, revenue recognized by the Company from performance obligations satisfied in previous periods was not significant.

Revenue allocated to remaining performance obligations was $ 651.4 million as of March 31, 2023, of which the Company expects to recognize approximately 50 % over the next 12 months and the remainder thereafter.

During the three months ended March 31, 2023 and 2022, revenue recognized by the Company from performance obligations satisfied in previous periods was not significant.

Corporate Online Banking Solutions

1 unchanged sentence

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

For the three and nine months ended September 30, 2022, the Company recognized a gain of $ 38.5 million on the sale, which is recorded in other, net in the accompanying condensed consolidated statements of operations.

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

The Company recognized a gain of $ 38.5 million on the sale during the year ended December 31, 2022, which 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 September 30, 2022, the Company had $ 10.0 million, $ 607.3 million, and $ 400.0 million outstanding under its Revolving Credit Facility, Term Loans, and Senior Notes, respectively, with up to $ 488.5 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 March 31, 2023, the Company had $ 110.0 million, $ 578.1 million, and $ 400.0 million outstanding under its Revolving Credit Facility, Term Loans, and Senior Notes, respectively, with up to $ 388.4 million of unused borrowings under the Revolving Credit Facility portion of the Credit Agreement, as amended, and up to $ 1.6 million of unused borrowings under Letter of Credit agreements.

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

5 unchanged sentences

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

On April 28, 2023, the Company and Bank of America entered into the 2023 Extension Amendment to extend the term of the Credit Facility one year to April 5, 2025.

All other terms remained the same.

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

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

The Credit Facility will mature on April 5, 2024.

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

3 unchanged sentences

Interest is due and payable monthly.

The interest rate in effect for the Credit Facility as of September 30, 2022, was 4.88 %.

The interest rate in effect for the Credit Facility as of March 31, 2023, was 6.90 %.

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.

2 unchanged sentences

The 2026 Notes will mature on August 15, 2026.

Maturities on debt outstanding as of September 30, 2022, are as follows (in thousands):

Maturities on debt outstanding as of March 31, 2023, are as follows (in thousands):

Fiscal Year Ending December 31,

1 unchanged sentence

Total $ 1,088,123

As of September 30, 2022, and at all times during the period, the Company was in compliance with its financial debt covenants.

As of March 31, 2023, and at all times during the period, the Company was in compliance with its financial debt covenants.

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Term loans $ 578,123 $ 592,729

13 unchanged sentences

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

As of September 30, 2022, there was $ 75.0 million available and no amount outstanding on the overdraft facility.

As of March 31, 2023, there was $ 75.0 million available and no amount outstanding on the overdraft facility.

As of December 31, 2022, there was no amount outstanding on the overdraft facility.

1 unchanged sentence

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

During the nine months ended September 30, 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 September 30, 2022, $ 9.3 million was outstanding on 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 condensed consolidated balance sheet.

As of December 31, 2021, $ 2.9 million was outstanding on these agreements, all of which is included in other current liabilities in the condensed consolidated balance sheet.

As of March 31, 2023, $ 7.1 million was outstanding on these agreements, of which $ 3.6 million and $ 3.5 million is included in other current liabilities and other noncurrent liabilities, respectively, in the condensed consolidated balance sheet.

As of December 31, 2022, $ 9.3 million was outstanding on these agreements, of which $ 5.8 million and $ 3.5 million is included in other current liabilities and other noncurrent liabilities, respectively .

Software and Other Intangible Assets

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

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

Software for internal use $ 456,647 $ ( 336,846 ) $ 119,801 $ 454,171 $ ( 325,062 ) $ 129,109

Software for resale 121,801 ( 121,801 ) — 127,904 ( 127,255 ) 649

Total software $ 568,195 $ ( 433,253 ) $ 134,942 $ 568,146 $ ( 410,364 ) $ 157,782

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

Software for internal use amortization expense recorded during the three months ended September 30, 2022 and 2021, totaled $ 17.3 million and $ 17.5 million, respectively.

Software for internal use amortization expense recorded during the nine months ended September 30, 2022 and 2021, totaled $ 51.1 million and $ 51.8 million, respectively.

Software for internal use amortization expense recorded during the three months ended March 31, 2023 and 2022, totaled $ 17.0 million and $ 16.7 million, respectively.

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

Amortization of software for resale is computed using the greater of (a) the ratio of current gross revenues to the total of current and future gross revenues expected to be derived from the software or (b) the straight-line method over the remaining estimated useful life of generally five to ten years .

Software for resale amortization expense recorded during the three months ended September 30, 2021 totaled $ 1.5 million.

There was no software for resale amortization expense recorded during the three months ended September 30, 2022.

Software for resale amortization expense recorded during the nine months ended September 30, 2022 and 2021, totaled $ 0.7 million and $ 4.9 million, respectively.

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

Amortization of software for resale was computed using the greater of (a) the ratio of current gross revenues to the total of current and future gross revenues expected to be derived from the software or (b) the straight-line method over the remaining estimated useful life of generally five to ten years .

Software for resale amortization expense recorded during the three months ended March 31, 2022 totaled $ 0.7 million.

Software for resale was fully amortized during the year ended December 31, 2022 and, therefore, there was no amortization expense recorded during the three months ended March 31, 2023.

The software amortization expense amount was reflected in cost of revenue in the condensed consolidated statements of operations.

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

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

2 unchanged sentences

Total other intangible assets $ 467,413 $ ( 246,873 ) $ 220,540 $ 466,427 $ ( 237,729 ) $ 228,698

Other intangible assets amortization expense recorded during the three months ended September 30, 2022 and 2021, totaled $ 8.8 million and $ 9.3 million, respectively.

Other intangible assets amortization expense recorded during the nine months ended September 30, 2022 and 2021, totaled $ 27.1 million and $ 27.8 million, respectively.

Based on capitalized intangible assets as of September 30, 2022, estimated amortization expense amounts in future fiscal years are as follows (in thousands):

Other intangible assets amortization expense recorded during the three months ended March 31, 2023 and 2022, totaled $ 8.4 million and $ 9.2 million, respectively.

Based on capitalized intangible assets as of March 31, 2023, estimated amortization expense amounts in future fiscal years are as follows (in thousands):

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

8 unchanged sentences

Employee Stock Purchase Plan

Shares issued under the 2017 Employee Stock Purchase Plan during the nine months ended September 30, 2022 and 2021, totaled 108,149 and 86,877 , respectively.

Shares issued under the 2017 Employee Stock Purchase Plan during the three months ended March 31, 2023 and 2022, totaled 31,639 and 31,406 , respectively.

Stock Options

7 unchanged sentences

Exercised ( 4,992 ) 15.88

Outstanding as of September 30, 2022 1,541,596 $ 18.44 2.37 $ 3,796,359

Exercisable as of September 30, 2022 1,541,596 $ 18.44 2.37 $ 3,796,359

The total intrinsic value of stock options exercised during the nine months ended September 30, 2022 and 2021, was $ 1.1 million and $ 7.8 million, respectively.

There were no stock options granted during the nine months ended September 30, 2022 or 2021.

Expired ( 4,614 ) 19.63

Outstanding as of March 31, 2023 1,211,613 $ 19.01 2.46 $ 9,658,883

Exercisable as of March 31, 2023 1,211,613 $ 19.01 2.46 $ 9,658,883

The total intrinsic value of stock options exercised during the three months ended March 31, 2023 and 2022, was less than $ 0.1 million and $ 0.9 million, respectively.

There were no stock options granted during the three months ended March 31, 2023 or 2022.

Total Shareholder Return Awards

3 unchanged sentences

Nonvested as of December 31, 2022 1,011,881 $ 39.21

Granted 520,020 42.99

Vested ( 212,210 ) 45.86

Forfeited ( 38,728 ) 43.99

Change in payout rate ( 427,685 ) 30.01

Nonvested as of September 30, 2022 1,154,197 $ 39.79

During the nine months ended September 30, 2022, a total of 212,210 TSRs granted in fiscal 2019 vested and achieved a payout rate of 65 % based on the Company's total shareholder return as compared to a group of peer companies over a three-year performance period.

The Company withheld 47,612 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

The fair value of TSRs granted during the nine months ended September 30, 2022 and 2021, were estimated on the date of grant using the Monte Carlo simulation model, acceptable under ASC 718, Compensation - Stock Compensation , using the following weighted average assumptions:

Nine Months Ended

September 30,

Nonvested as of March 31, 2023 545,468 $ 46.09

At March 31, 2023, the TSRs granted in 2020 were earned by the employees.

However, the performance goals were not met and no shares were issued.

The fair value of TSRs granted during the three months ended March 31, 2022, were estimated on the date of grant using the Monte Carlo simulation model, acceptable under ASC 718, Compensation - Stock Compensation , using the following weighted average assumptions:

Three Months Ended March 31, 2022

Expected life (years) 3.1

2 unchanged sentences

Expected dividend yield —

There were no TSRs granted during the three months ended March 31, 2023.

Restricted Share Units

3 unchanged sentences

Nonvested as of December 31, 2022 1,184,024 $ 30.73

Granted 1,071,776 29.97

Vested ( 333,812 ) 31.10

Forfeited ( 103,379 ) 31.75

Nonvested as of September 30, 2022 1,381,113 $ 31.09

During the nine months ended September 30, 2022, a total of 442,882 RSUs vested.

Nonvested as of March 31, 2023 746,833 $ 30.43

During the three months ended March 31, 2023, a total of 333,812 RSUs vested.

The Company withheld 114,492 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

As of September 30, 2022, there were unrecognized compensation costs of $ 33.0 million and $ 23.4 million related to nonvested RSUs and TSRs, respectively, which the Company expects to recognize over weighted average periods of 2.1 years and 2.0 years, respectively.

The Company recorded stock-based compensation expense recognized under ASC 718 for the three months ended September 30, 2022 and 2021, of $ 7.1 million and $ 6.4 million, respectively, with corresponding tax bene fits of $ 1.0 million and $ 0.9 million, respectively.

The Company recorded stock-based compensation expense recognized under ASC 718 for the nine months ended September 30, 2022 and 2021, of $ 21.9 million and $ 20.8 million, respectively, with corresponding tax benefits of $ 3.0 million and $ 3.1 million, respectively.

As of March 31, 2023, there were unrecognized compensation costs of $ 18.5 million and $ 10.2 million related to nonvested RSUs and TSRs, respectively, which the Company expects to recognize over weighted average periods of 1.8 years and 1.7 years, respectively.

The Company recorded stock-based compensation expense recognized under ASC 718 for the three months ended March 31, 2023 and 2022, of $ 5.3 million and $ 8.0 million, respectively, with corresponding tax benefits of $ 0.9 million and $ 1.1 million, respectively.

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 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 3,210,313 shares for $ 90.9 million during the nine months ended September 30, 2022.

On February 24, 2023, the board approved the repurchase of the Company's common stock of up to $ 200.0 million, in place of the remaining purchase amounts previously authorized.

The Company did no t repurchase any shares under the program during the three months ended March 31, 2023.

Under the program to date, the Company has repurchased 57,981,733 shares for approximately $ 926.2 million.

As of September 30, 2022, the maximum remaining amount authorized for purchase under the stock repurchase program was $ 125.4 million.

Earnings Per Share

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

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

As of March 31, 2023, the maximum remaining amount authorized for purchase under the stock repurchase program was $ 200.0 million.

Earnings (Loss) Per Share

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

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

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

Three Months Ended March 31,

Weighted average shares outstanding:

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Diluted weighted average shares outstanding 108,156 116,098

The diluted earnings per share computation excludes 2.0 million and 1.6 million RSUs and contingently issuable shares during the three months ended September 30, 2022 and 2021, respectively, as their effect would be anti-dilutive.

The diluted earnings per share computation excludes 2.0 million and 1.5 million RSUs and contingently issuable shares during the nine months ended September 30, 2022 and 2021, respectively, as their effect would be anti-dilutive.

Common stock outstanding as of September 30, 2022, and December 31, 2021, was 113,201,343 and 115,730,046 , respectively.

Other, net is primarily comprised of foreign currency transaction gains and losses and, for the three and nine months ended September 30, 2022, the $ 38.5 million gain on divestiture.

Other, net was $ 41.5 million of income and $ 1.1 million of expense for the three months ended September 30, 2022 and 2021, respectively.

Other, net was $ 45.8 million of income and $ 1.0 million of expense for the nine months ended September 30, 2022 and 2021, respectively.

The diluted earnings (loss) per share computation excludes 2.5 million and 1.8 million options to purchase shares, RSUs, and contingently issuable shares during the three months ended March 31, 2023 and 2022, respectively, as their effect would be anti-dilutive.

Common stock outstanding as of March 31, 2023, and December 31, 2022, was 108,322,311 and 108,068,828 , respectively.

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

Other, net was $ 3.4 million of expense and $ 2.3 million of income for the three months ended March 31, 2023 and 2022, respectively .

Segment Information

22 unchanged sentences

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Banks $ 88,040 $ 132,198

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Other, net ( 3,395 ) 2,250

Income before income taxes $ 33,693 $ 18,517 $ 73,604 $ 20,667

Income (loss) before income taxes $ ( 43,134 ) $ 22,181

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 solution category for the Company’s reportable segments for the periods indicated (in thousands):

Three Months Ended September 30, 2022

Banks Merchants Billers Total

Primary Solution Categories

Bill Payments $ — $ — $ 153,543 $ 153,543

Digital Business Banking 9,001 — — 9,001

Merchant Payments — 35,609 — 35,609

Fraud Management 14,840 — — 14,840

Real-Time Payments 24,904 — — 24,904

Issuing and Acquiring 68,694 — — 68,694

Total $ 117,439 $ 35,609 $ 153,543 $ 306,591

Three Months Ended September 30, 2021

Banks Merchants Billers Total

Primary Solution Categories

Bill Payments $ — $ — $ 146,181 $ 146,181

Digital Business Banking 16,527 — — 16,527

Merchant Payments — 38,989 — 38,989

Fraud Management 6,882 — — 6,882

Real-Time Payments 27,638 — — 27,638

Issuing and Acquiring 80,697 — — 80,697

Total $ 131,744 $ 38,989 $ 146,181 $ 316,914

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Banks Merchants Billers Total

7 unchanged sentences

Total $ 88,040 $ 34,781 $ 166,855 $ 289,676

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Banks Merchants Billers Total

7 unchanged sentences

Total $ 132,198 $ 41,002 $ 149,880 $ 323,080

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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.

Three Months Ended March 31,

Software as a service and platform as a service $ 9,249 $ 13,952

9 unchanged sentences

Software as a service and platform as a service $ 166,831 $ 149,843

License — — — 94

Maintenance 24 37

Services — — — —

Total $ 166,855 $ 149,880

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Three Months Ended March 31,

United States $ 201,269 $ 199,315

2 unchanged sentences

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Long-lived Assets

2 unchanged sentences

Total $ 1,989,420 $ 2,041,352

No single customer accounted for more than 10% of the Company’s consolidated revenues during the three and nine months ended September 30, 2022 and 2021.

No other country outside the United States accounted for more than 10% of the Company's consolidated revenues during the three and nine months ended September 30, 2022 and 2021.

For the three and nine months ended September 30, 2022, the Company's effective tax rate was 31 % and 29 %, respectively.

The Company reported tax expense on pretax income for both the three and nine months ended September 30, 2022, with foreign entities recognizing earnings of $ 28.7 million and $ 87.0 million, respectively.

The effective tax rate for the three and nine months ended September 30, 2022, was negatively impacted by excess tax expense on equity-based compensation and state income tax expense on domestic earnings.

For the three and nine months ended September 30, 2021, the Company's effective tax rate was 26 % and 11 %, respectively.

The Company reported tax expense on pretax income for both the three and nine months ended September 30, 2021, with foreign entities recognizing earnings of $ 18.1 million and $ 27.7 million, respectively.

The effective tax rate for the three months ended September 30, 2021, was negatively impacted by excess tax expense on equity-based compensation.

The effective tax rate for the nine months ended September 30, 2021, was positively impacted by excess tax benefits on equity-based compensation.

No single customer accounted for more than 10% of the Company’s consolidated revenues during the three months ended March 31, 2023 and 2022.

No other country outside the United States accounted for more than 10% of the Company's consolidated revenues during the three months ended March 31, 2023 and 2022.

For the three months ended March 31, 2023, the Company's effective tax rate was 25 %.

The Company’s foreign entities reported losses of $ 7.2 million for the three months ended March 31, 2023.

For the three months ended March 31, 2022, the Company's effective tax rate was 30 %.

The Company's foreign entities reported profits of $ 30.9 million for the three months ended March 31, 2022.

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

2 unchanged sentences

The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes.

As of September 30, 2022, and December 31, 2021, the amount of unrecognized tax benefits for uncertain tax positions was $ 23.9 million and $ 24.5 million, respectively, excluding related liabilities for interest and penalties of $ 1.0 million and $ 1.1 million as of September 30, 2022, and December 31, 2021, respectively.

As of March 31, 2023, and December 31, 2022, the amount of unrecognized tax benefits for uncertain tax positions was $ 26.3 million and $ 26.4 million, respectively, excluding related liabilities for interest and penalties of $ 0.6 million as of March 31, 2023, and December 31, 2022.

The Company believes it is reasonably possible that the total amount of unrecognized tax benefits will decrease within the next 12 months by approximately $ 4.6 million, due to the settlement of various audits and the expiration of statutes of limitation.

1 unchanged sentence

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.

Consumer Financial Protection Bureau and various state regulatory agencies and attorneys general commenced investigations of this incident.

The Company is cooperating with these authorities, including voluntarily furnishing information to them, and seeking to resolve these matters.

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

Separately, 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 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 in certain circumstances.

There can be no assurance that the conditions to settlement will be satisfied.

The Company has asserted claims for insurance coverage with respect to potential losses associated with these matters.

There is no assurance as to the amount of insurance that may be available.

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 corrective 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.

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

What changed 10-Q

Item 1. Financial Statements