What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-02 compared with 2023-08-03 · 156 added, 148 removed, 313 unchanged (49% of the section changed)

15 unchanged sentences

The following discussion should be read together with our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and with our financial statements and related notes contained in this Form 10-Q.

Results for the three and six months ended June 30, 2023, are not necessarily indicative of results that may be attained in the future.

Results for the three and nine months ended September 30, 2023, are not necessarily indicative of results that may be attained in the future.

Global Economy and Inflation

33 unchanged sentences

As banks and intermediaries, merchants, and billers seek to transition their systems to make use of cloud technology, our investments and partnerships, as demonstrated by our product enablement and initial optimization onto Microsoft Azure, enable us to leverage those cloud technology benefits today and for the future while preserving ACI's fundamental base of performance, resiliency, and scalability.

Payments intelligence.

fraud, and compliance.

Payments intelligence, fraud, and compliance.

The accelerated adoption of real-time payments increases the urgency for industry-wide collaboration against fraud.

27 unchanged sentences

The sale included employees and customer contracts as well as technology assets and intellectual property.

The Company recognized a gain of $38.5 million on the sale during the year ended December 31, 2022.

During the three months ended June 30, 2023, the Company recognized a loss for the final post-closing adjustment pursuant to the definitive agreement of $0.5 million.

The Company recognized a gain of $38.5 million on the sale during the three and nine months ended September 30, 2022.

During the nine months ended September 30, 2023, the Company recognized a loss for the final post-closing adjustment pursuant to the definitive agreement of $0.5 million.

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.

19 unchanged sentences

In the event a significant revision to renewal assumptions is determined to be necessary, prior periods will be adjusted for comparability purposes.

The following table sets forth our 60-month backlog estimate, by reportable segment, as of June 30, 2023, March 31, 2023, and December 31, 2022 (in millions).

The following table sets forth our 60-month backlog estimate, by reportable segment, as of September 30, 2023, June 30, 2023, March 31, 2023, and December 31, 2022 (in millions).

Dollar amounts reflect foreign currency exchange rates as of each period end.

1 unchanged sentence

We believe this measure provides useful information to investors and others in understanding and evaluating our financial performance.

June 30, 2023 March 31, 2023 December 31, 2022

September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022

Banks $ 2,173 $ 2,207 $ 2,154 $ 2,095

2 unchanged sentences

Total $ 6,435 $ 6,413 $ 6,370 $ 6,295

June 30, 2023 March 31, 2023 December 31, 2022

September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022

Committed $ 2,147 $ 2,192 $ 2,266 $ 2,338

10 unchanged sentences

The following table presents the condensed consolidated statements of operations, as well as the percentage relationship to total revenues for items included in our condensed consolidated statements of operations (in thousands):

Three Month Period Ended June 30, 2023 Compared to the Three Month Period Ended June 30, 2022

Three Months Ended June 30,

Three Month Period Ended September 30, 2023 Compared to the Three Month Period Ended September 30, 2022

Three Months Ended September 30,

Amount % of Total

14 unchanged sentences

Total operating expenses 301,091 82 % (2,011) (1) % 303,102 99 %

Operating income (loss) 10,520 3 % (13,937) (57) % 24,457 8 %

Operating income

61,924 18 % 58,435 1,675 % 3,489 1 %

Other income (expense):

3 unchanged sentences

Total other income (expense) (15,261) (4) % (45,465) (151) % 30,204 10 %

Income (loss) before income taxes (10,023) (3) % (27,753) (157) % 17,730 7 %

Income tax expense (benefit) (3,313) (1) % (7,701) (176) % 4,388 1 %

Net income (loss) $ (6,710) (2) % $ (20,052) (150) % $ 13,342 6 %

Total revenue for the three months ended June 30, 2023, decreased $17.1 million, or 5%, as compared to the same period in 2022.

• The divestiture resulted in a $11.3 million decrease in total revenue for the three months ended June 30, 2023.

• The impact of foreign currencies weakening against the U.S.

dollar resulted in a $0.4 million decrease in total revenue during the three months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestitures and foreign currency, total revenue for the three months ended June 30, 2023, decreased $5.4 million, or 2%, as compared to the same period in 2022.

Income before income taxes

46,663 14 % 12,970 38 % 33,693 11 %

Income tax expense

8,752 2 % (1,824) (17) % 10,576 3 %

$ 37,911 12 % $ 14,794 64 % $ 23,117 8 %

Total revenue for the three months ended September 30, 2023, increased $56.4 million, or 18%, as compared to the same period in 2022.

• The divestiture resulted in a $8.5 million decrease in total revenue for the three months ended September 30, 2023.

• The impact of foreign currencies strengthening against the U.S.

dollar resulted in a $1.3 million increase in total revenue during the three months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, total revenue for the three months ended September 30, 2023, increased $63.6 million, or 21%, as compared to the same period in 2022.

Software as a Service (“SaaS”) and Platform as a Service (“PaaS”) Revenue

5 unchanged sentences

All fees from SaaS and PaaS arrangements that do not qualify for treatment as a distinct performance obligation, which includes set-up fees, implementation or customization services, and product support services, are included in SaaS and PaaS revenue.

SaaS and PaaS revenue increased $2.7 million, or 1%, during the three months ended June 30, 2023, as compared to the same period in 2022.

• The divestiture resulted in a $6.3 million decrease in SaaS and PaaS revenue for the three months ended June 30, 2023.

• Adjusted for the impact of the divestiture, SaaS and PaaS revenue for the three months ended June 30, 2023, increased $9.0 million, or 4%, as compared to the same period in 2022.

• The increase was primarily driven by higher transaction volumes during the three months ended June 30, 2023, as compared to the same period in 2022, as well as new customer go-lives since June 30, 2022.

SaaS and PaaS revenue increased $15.8 million, or 8%, during the three months ended September 30, 2023, as compared to the same period in 2022.

• The divestiture resulted in a $4.5 million decrease in SaaS and PaaS revenue for the three months ended September 30, 2023.

• The impact of certain foreign currencies strengthening against the U.S.

dollar resulted in a $0.9 million increase in SaaS and PaaS revenue during the three months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, SaaS and PaaS revenue for the three months ended September 30, 2023, increased $19.4 million, or 10%, as compared to the same period in 2022.

• The increase was primarily driven by higher transaction volumes during the three months ended September 30, 2023, as compared to the same period in 2022, as well as new customer go-lives since September 30, 2022.

License Revenue

8 unchanged sentences

The Company recognizes revenue in advance of billings for software license arrangements with extended payment terms and adjusts for the effects of the financing component, if significant.

License revenue decreased $19.6 million, or 31%, during the three months ended June 30, 2023, as compared to the same period in 2022.

License revenue increased $36.0 million, or 82%, during the three months ended September 30, 2023, as compared to the same period in 2022.

• The impact of certain foreign currencies strengthening against the U.S.

dollar resulted in a $0.7 million increase in license revenue during the three months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of foreign currency, license revenue for the three months ended June 30, 2023, decreased $20.3 million, or 31%, as compared to the same period in 2022.

• The decrease was driven by license renewal timing as well as the relative size of new license agreements during the three months ended June 30, 2023, as compared to the same period in 2022.

dollar resulted in a $0.3 million increase in license revenue during the three months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of foreign currency, license revenue for the three months ended September 30, 2023, increased $35.7 million, or 81%, as compared to the same period in 2022.

• The increase was driven by license renewal timing as well as the relative size of new license and capacity events during the three months ended September 30, 2023, as compared to the same period in 2022.

Maintenance Revenue

Maintenance revenue includes standard and premium maintenance and any post contract support fees received from customers for the provision of product support services.

Maintenance revenue increased $0.8 million, or 2%, during the three months ended June 30, 2023, as compared to the same period in 2022.

• The divestiture resulted in a $2.9 million decrease in maintenance revenue for the three months ended June 30, 2023.

• The impact of foreign currencies weakening against the U.S.

dollar resulted in a $0.8 million decrease in maintenance revenue during the three months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, maintenance revenue for the three months ended June 30, 2023, increased $4.5 million or 10%, as compared to the same period in 2022.

• The increase was primarily driven by annual inflationary increases in product support fees subsequent to June 30, 2022.

Maintenance revenue increased $2.8 million, or 6%, during the three months ended September 30, 2023, as compared to the same period in 2022.

• The divestiture resulted in a $1.6 million decrease in maintenance revenue for the three months ended September 30, 2023.

• The impact of foreign currencies strengthening against the U.S.

dollar resulted in a $0.2 million increase in maintenance revenue during the three months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, maintenance revenue for the three months ended September 30, 2023, increased $4.2 million or 9%, as compared to the same period in 2022.

• The increase was primarily driven by annual inflationary increases in product support fees subsequent to September 30, 2022.

Services Revenue

3 unchanged sentences

These services include new customer implementations as well as existing customer migrations to new products or new releases of existing products.

Services revenue decreased $1.0 million, or 5%, during the three months ended June 30, 2023, as compared to the same period in 2022.

• The divestiture resulted in a $2.1 million decrease in services revenue for the three months ended June 30, 2023.

• The impact of foreign currencies weakening against the U.S.

dollar resulted in a $0.3 million decrease in services revenue during the three months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, services revenue for the three months ended June 30, 2023, increased $1.4 million or 9%, as compared to the same period in 2022.

• The increase was primarily driven by the timing and magnitude of project-related work during the three months ended June 30, 2023, as compared to the same period in 2022.

Services revenue increased $1.8 million, or 10%, during the three months ended September 30, 2023, as compared to the same period in 2022.

• The divestiture resulted in a $2.4 million decrease in services revenue for the three months ended September 30, 2023.

• Adjusted for the impact of the divestiture, services revenue for the three months ended September 30, 2023, increased $4.2 million or 27%, as compared to the same period in 2022.

• The increase was primarily driven by the timing and magnitude of project-related work during the three months ended September 30, 2023, as compared to the same period in 2022.

Operating Expenses

Total operating expenses for the three months ended June 30, 2023, decreased $3.2 million, or 1%, as compared to the same period in 2022.

• During the three months ended June 30, 2023, there was a $6.5 million reduction in operating expenses related to the divestiture.

• Total operating expenses for the three months ended June 30, 2023, included $7.6 million for cost reduction strategies, $0.5 million of significant transaction-related expenses, $0.7 million for CEO transition, and $1.2 million of European data center migration expenses during the period, compared to $1.4 million of divestiture transaction-related expenses and $1.3 million of European data center migration expenses for the same period in 2022.

• The impact of foreign currencies weakening against the U.S.

dollar resulted in a $1.6 million decrease in total operating expenses during the three months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture, significant transaction-related expenses, and foreign currency, total operating expenses for the three months ended June 30, 2023, decreased $2.4 million, or 1%, as compared to the same period in 2022.

Total operating expenses for the three months ended September 30, 2023, decreased $2.0 million, or 1%, as compared to the same period in 2022.

• During the three months ended September 30, 2023, there was a $4.4 million reduction in operating expenses related to the divestiture.

• Total operating expenses for the three months ended September 30, 2023, included $3.8 million for cost reduction strategies and $0.4 million of European data center migration expenses during the period, compared to $1.2 million of divestiture transaction-related expenses and $1.7 million of European data center migration expenses for the same period in 2022.

• The impact of foreign currencies strengthening against the U.S.

dollar resulted in a $1.1 million increase in total operating expenses during the three months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture, significant transaction-related expenses, and foreign currency, total operating expenses for the three months ended September 30, 2023, decreased $0.1 million, as compared to the same period in 2022.

Cost of Revenue

4 unchanged sentences

Such efforts include project management, delivery, product customization and implementation, installation support, consulting, configuration, and on-site support.

Cost of revenue increased $2.0 million, or 1%, during the three months ended June 30, 2023, as compared to the same period in 2022.

• During the three months ended June 30, 2023, there was a $6.0 million reduction in cost of revenue related to the divestiture.

• The impact of foreign currencies weakening against the U.S.

dollar resulted in a $0.8 million decrease in cost of revenue during the three months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, cost of revenue increased $8.8 million, or 5%, for the three months ended June 30, 2023, as compared to the same period in 2022.

• The increase was primarily due to higher personnel and related expenses, payment card interchange and processing fees, and cloud computing fees of $4.5 million, $2.3 million, and $2.0 million, respectively.

Cost of revenue increased $5.9 million, or 3%, during the three months ended September 30, 2023, as compared to the same period in 2022.

• During the three months ended September 30, 2023, there was a $4.1 million reduction in cost of revenue related to the divestiture.

• The impact of foreign currencies strengthening against the U.S.

dollar resulted in a $0.2 million increase in cost of revenue during the three months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, cost of revenue increased $9.8 million, or 6%, for the three months ended September 30, 2023, as compared to the same period in 2022.

• The increase was primarily due to higher payment card interchange and processing fees, cloud computing fees, and personnel and related expenses of $4.3 million, $3.8 million, and $1.7 million, respectively.

Research and Development

Research and development (“R&D”) expenses are primarily human resource costs related to the creation of new products, improvements made to existing products as well as compatibility with new operating system releases and generations of hardware.

R&D expense decreased $5.4 million, or 13%, during the three months ended June 30, 2023, as compared to the same period in 2022.

• During the three months ended June 30, 2023, there was a $0.5 million reduction in R&D expense related to the divestiture.

• The impact of foreign currencies weakening against the U.S.

dollar resulted in a $0.3 million decrease in R&D expense during the three months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, R&D expense decreased $4.6 million, or 11%, for the three months ended June 30, 2023, as compared to the same period in 2022.

• The decrease was primarily due to lower personnel and related expenses and professional fees of $2.9 million and $1.7 million, respectively.

R&D expense decreased $2.2 million, or 6%, during the three months ended September 30, 2023, as compared to the same period in 2022.

• During the three months ended September 30, 2023, there was a $0.3 million reduction in R&D expense related to the divestiture.

• Adjusted for the impact of the divestiture, R&D expense decreased $1.9 million, or 5%, for the three months ended September 30, 2023, as compared to the same period in 2022.

• The decrease was primarily due to lower professional fees.

Selling and Marketing

3 unchanged sentences

Marketing costs include costs incurred to promote the Company and its products, perform or acquire market research to help the Company better understand impending changes in customer demand for and of our products, and the costs associated with measuring customers’ opinions toward the Company, our products and personnel.

Selling and marketing expense decreased $2.1 million, or 6%, during the three months ended June 30, 2023, as compared to the same period in 2022.

• The impact of foreign currencies weakening against the U.S.

dollar resulted in a $0.2 million decrease in selling and marketing expense during the three months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of foreign currency, selling and marketing expense decreased $1.9 million, or 5%, for the three months ended June 30, 2023, as compared to the same period in 2022.

• The decrease was primarily due to lower advertising and professional fees, travel and entertainment expenses, and personnel and related expenses.

Selling and marketing expense decreased $3.4 million, or 10%, during the three months ended September 30, 2023, as compared to the same period in 2022.

• The impact of foreign currencies strengthening against the U.S.

dollar resulted in a $0.4 million increase in selling and marketing expense during the three months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of foreign currency, selling and marketing expense decreased $3.8 million, or 11%, for the three months ended September 30, 2023, as compared to the same period in 2022.

• The decrease was primarily due to lower personnel and related expenses, advertising and professional fees, and travel and entertainment expenses of $2.4 million, $1.0 million, and $0.5 million, respectively.

General and Administrative

General and administrative expenses are primarily human resource costs including executive salaries and benefits, personnel administration costs, and the costs of corporate support functions such as legal, administrative, human resources, and finance and accounting.

General and administrative expense increased $3.1 million, or 11%, during the three months ended June 30, 2023, as compared to the same period in 2022.

• General and administrative expenses for the three months ended June 30, 2023, included $7.6 million for cost reduction strategies, $0.5 million of significant transaction-related expenses, $0.7 million for CEO transition, and $1.2 million of European data center migration expenses during the period, compared to $2.7 million of significant transaction-related expenses in the same period in 2022.

• The impact of foreign currencies weakening against the U.S.

dollar resulted in a $0.2 million decrease in general and administrative expense during the three months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of significant transaction-related expenses and foreign currency, general and administrative expense decreased $4.0 million, or 16%, for the three months ended June 30, 2023, as compared to the same period in 2022.

• The decrease was primarily due to lower personnel and related expenses.

General and administrative expense decreased $0.7 million, or 2%, during the three months ended September 30, 2023, as compared to the same period in 2022.

• General and administrative expenses for the three months ended September 30, 2023, included $3.8 million for cost reduction strategies and $0.4 million of European data center migration expenses during the period, compared to $1.2 million of divestiture transaction-related expenses and $1.7 million of European data center migration expenses in the same period in 2022.

• The impact of foreign currencies strengthening against the U.S.

dollar resulted in a $0.2 million increase in general and administrative expense during the three months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of significant transaction-related expenses and foreign currency, general and administrative expense decreased $2.3 million, or 8%, for the three months ended September 30, 2023, as compared to the same period in 2022.

• The decrease was primarily due to lower professional and other legal fees.

Depreciation and Amortization

Depreciation and amortization decreased $0.8 million, or 2%, during the three months ended June 30, 2023, as compared to the same period in 2022.

Depreciation and amortization decreased $1.7 million, or 5%, during the three months ended September 30, 2023, as compared to the same period in 2022.

Other Income and Expense

Interest expense for the three months ended June 30, 2023, increased $8.1 million, or 69%, as compared to the same period in 2022, primarily due to higher interest rates.

Interest expense for the three months ended September 30, 2023, increased $5.5 million, or 38%, as compared to the same period in 2022, primarily due to higher interest rates.

Interest income includes the portion of software license fees paid by customers under extended payment terms that is attributed to the significant financing component.

Interest income for the three months ended June 30, 2023, increased $0.4 million, or 13%, as compared to the same period in 2022.

Interest income for the three months ended September 30, 2023, increased $0.5 million, or 17%, as compared to the same period in 2022.

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

Other, net was $4.1 million of expense and $2.0 million of income for the three months ended June 30, 2023 and 2022, respectively.

During the three months ended September 30, 2022, other, net also included a $38.5 million gain from the divestiture.

Other, net was $1.1 million and $41.5 million of income for the three months ended September 30, 2023 and 2022, respectively.

See Note 11, Income Taxes, to our unaudited condensed consolidated financial statements in Part I of this Form 10-Q for additional information.

1 unchanged sentence

Six Month Period Ended June 30, 2023 Compared to the Six Month Period Ended June 30, 2022

Six Months Ended June 30,

Nine Month Period Ended September 30, 2023 Compared to the Nine Month Period Ended September 30, 2022

Nine Months Ended September 30,

Amount % of Total

14 unchanged sentences

Total operating expenses 927,924 95 % 13,440 1 % 914,484 95 %

Operating income (loss) (13,832) (2) % (65,955) (127) % 52,123 7 %

Operating income

48,092 5 % (7,520) (14) % 55,612 5 %

Other income (expense):

6 unchanged sentences

Net income (loss) $ (1,107) — % $ (53,056) (102) % $ 51,949 5 %

Total revenue for the six months ended June 30, 2023, decreased $50.5 million, or 8%, as compared to the same period in 2022.

• The divestiture resulted in a $23.5 million decrease in total revenue for the six months ended June 30, 2023.

Total revenue for the nine months ended September 30, 2023, increased $5.9 million, or 1%, as compared to the same period in 2022.

• The divestiture resulted in a $32.0 million decrease in total revenue for the nine months ended September 30, 2023.

• The impact of certain foreign currencies weakening against the U.S.

dollar resulted in a $5.5 million decrease in total revenue during the six months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, total revenue for the six months ended June 30, 2023, decreased $21.5 million, or 3%, as compared to the same period in 2022.

dollar resulted in a $4.1 million decrease in total revenue during the nine months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, total revenue for the nine months ended September 30, 2023, increased $42.0 million, or 4%, as compared to the same period in 2022.

Software as a Service (“SaaS”) and Platform as a Service (“PaaS”) Revenue

SaaS and PaaS revenue increased $13.1 million, or 3%, during the six months ended June 30, 2023, as compared to the same period in 2022.

• The divestiture resulted in a $13.6 million decrease in SaaS and PaaS revenue for the six months ended June 30, 2023.

SaaS and PaaS revenue increased $28.9 million, or 5%, during the nine months ended September 30, 2023, as compared to the same period in 2022.

• The divestiture resulted in a $18.1 million decrease in SaaS and PaaS revenue for the nine months ended September 30, 2023.

• The impact of certain foreign currencies weakening against the U.S.

dollar resulted in $1.1 million decrease in SaaS and PaaS revenue during the six months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, SaaS and PaaS revenue for the six months ended June 30, 2023, increased $27.8 million, or 7%, as compared to the same period in 2022.

• The increase was primarily driven by higher transaction volumes during the six months ended June 30, 2023, as compared to the same period in 2022, as well as new customer go-lives since June 30, 2022.

dollar resulted in $0.2 million decrease in SaaS and PaaS revenue during the nine months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, SaaS and PaaS revenue for the nine months ended September 30, 2023, increased $47.2 million, or 8%, as compared to the same period in 2022.

• The increase was primarily driven by higher transaction volumes during the nine months ended September 30, 2023, as compared to the same period in 2022, as well as new customer go-lives since September 30, 2022.

License Revenue

License revenue decreased $61.6 million, or 49%, during the six months ended June 30, 2023, as compared to the same period in 2022.

License revenue decreased $25.6 million, or 15%, during the nine months ended September 30, 2023, as compared to the same period in 2022.

• The impact of certain foreign currencies weakening against the U.S.

dollar resulted in a $1.5 million decrease in license revenue during the six months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of foreign currency, license revenue for the six months ended June 30, 2023, decreased $60.1 million, or 49%, as compared to the same period in 2022.

• The decrease was driven by license renewal timing as well as the relative size of new license agreements during the six months ended June 30, 2023, as compared to the same period in 2022.

dollar resulted in a $1.2 million decrease in license revenue during the nine months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of foreign currency, license revenue for the nine months ended September 30, 2023, decreased $24.4 million, or 15%, as compared to the same period in 2022.

• The decrease was driven by license renewal timing as well as the relative size of new license agreements during the nine months ended September 30, 2023, as compared to the same period in 2022.

Maintenance Revenue

Maintenance revenue decreased $0.5 million during the six months ended June 30, 2023, as compared to the same period in 2022.

• The divestiture resulted in a $5.8 million decrease in maintenance revenue for the six months ended June 30, 2023.

Maintenance revenue increased $2.3 million, or 2% during the nine months ended September 30, 2023, as compared to the same period in 2022.

• The divestiture resulted in a $7.4 million decrease in maintenance revenue for the nine months ended September 30, 2023.

• The impact of certain foreign currencies weakening against the U.S.

dollar resulted in a $2.2 million decrease in maintenance revenue during the six months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, maintenance revenue for the six months ended June 30, 2023, increased $7.5 million, or 8%, as compared to the same period in 2022.

• The increase was primarily driven by annual inflationary increases in product support fees subsequent to June 30, 2022.

dollar resulted in a $2.0 million decrease in maintenance revenue during the nine months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, maintenance revenue for the nine months ended September 30, 2023, increased $11.7 million, or 8%, as compared to the same period in 2022.

• The increase was primarily driven by annual inflationary increases in product support fees subsequent to September 30, 2022.

Services Revenue

Services revenue decreased $1.5 million, or 4%, during the six months ended June 30, 2023, as compared to the same period in 2022.

• The divestiture resulted in a $4.0 million decrease in services revenue for the six months ended June 30, 2023

Services revenue increased $0.3 million, or 1%, during the nine months ended September 30, 2023, as compared to the same period in 2022.

• The divestiture resulted in a $6.4 million decrease in services revenue for the nine months ended September 30, 2023

• The impact of certain foreign currencies weakening against the U.S.

dollar resulted in a $0.7 million decrease in services revenue during the six months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, services revenue for the six months ended June 30, 2023, increased $3.2 million, or 11%, as compared to the same period in 2022.

• The increase was primarily driven by the timing and magnitude of project-related work during the six months ended June 30, 2023, as compared to the same period in 2022.

dollar resulted in a $0.8 million decrease in services revenue during the nine months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, services revenue for the nine months ended September 30, 2023, increased $7.5 million, or 16%, as compared to the same period in 2022.

• The increase was primarily driven by the timing and magnitude of project-related work during the nine months ended September 30, 2023, as compared to the same period in 2022.

Operating Expenses

Total operating expenses for the six months ended June 30, 2023, increased $15.5 million, or 3%, as compared to the same period in 2022.

• During the six months ended June 30, 2023, there was a $13.7 million reduction in operating expenses related to the divestiture.

• Total operating expenses for the six months ended June 30, 2023, included $15.9 million for cost reduction strategies, $2.6 million of significant transaction-related expenses, $1.8 million for CEO transition, and $2.2 million of European data center migration expenses during the period, compared to $1.8 million of European datacenter migration expenses and $1.4 million of divestiture transaction-related expenses for the same period in 2022.

Total operating expenses for the nine months ended September 30, 2023, increased $13.4 million, or 1%, as compared to the same period in 2022.

• During the nine months ended September 30, 2023, there was a $18.2 million reduction in operating expenses related to the divestiture.

• Total operating expenses for the nine months ended September 30, 2023, included $19.7 million for cost reduction strategies, $2.6 million of significant transaction-related expenses, $1.8 million for CEO transition, and $2.6 million of European data center migration expenses during the period, compared to $3.4 million of European data center migration expenses and $2.6 million of divestiture transaction-related expenses for the same period in 2022.

• The impact of certain foreign currencies weakening against the U.S.

dollar resulted in a $5.4 million decrease in total operating expenses for the six months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture, significant transaction-related expenses, and foreign currency, total operating expenses for the six months ended June 30, 2023, increased $15.3 million, or 3%, as compared to the same period in 2022.

dollar resulted in a $4.3 million decrease in total operating expenses for the nine months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture, significant transaction-related expenses, and foreign currency, total operating expenses for the nine months ended September 30, 2023, increased $15.2 million, or 2%, as compared to the same period in 2022.

Cost of Revenue

Cost of revenue increased $14.3 million, or 4%, during the six months ended June 30, 2023, as compared to the same period in 2022.

• During the six months ended June 30, 2023, there was a $12.7 million reduction in cost of revenue related to the divestiture.

Cost of revenue increased $20.2 million, or 4%, during the nine months ended September 30, 2023, as compared to the same period in 2022.

• During the nine months ended September 30, 2023, there was a $16.8 million reduction in cost of revenue related to the divestiture.

• The impact of certain foreign currencies weakening against the U.S.

dollar resulted in a $2.4 million decrease in cost of revenue during the six months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, cost of revenue increased $29.4 million, or 9%, for the six months ended June 30, 2023, as compared to the same period in 2022.

dollar resulted in a $2.3 million decrease in cost of revenue during the nine months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, cost of revenue increased $39.3 million, or 8%, for the nine months ended September 30, 2023, as compared to the same period in 2022.

• The increase was primarily due to higher payment card interchange and processing fees, personnel and related expenses, and cloud computing fees of $19.6 million, $11.6 million, and $8.7 million, respectively.

Research and Development

R&D expense decreased $6.1 million, or 8%, during the six months ended June 30, 2023, as compared to the same period in 2022.

• During the six months ended June 30, 2023, there was a $1.0 million reduction in R&D expenses related to the divestiture.

R&D expense decreased $8.2 million, or 7%, during the nine months ended September 30, 2023, as compared to the same period in 2022.

• During the nine months ended September 30, 2023, there was a $1.3 million reduction in R&D expenses related to the divestiture.

• The impact of certain foreign currencies weakening against the U.S.

dollar resulted in a $1.0 million decrease in R&D expense during the six months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, R&D expense decreased $4.1 million, or 5%, for the six months ended June 30, 2023, as compared to the same period in 2022.

dollar resulted in a $1.0 million decrease in R&D expense during the nine months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of the divestiture and foreign currency, R&D expense decreased $5.9 million, or 5%, for the nine months ended September 30, 2023, as compared to the same period in 2022.

• The decrease was primarily due to lower professional fees and personnel and related expenses of $4.9 million and $1.0 million, respectively.

Selling and Marketing

Selling and marketing expense decreased $1.3 million, or 2%, during the six months ended June 30, 2023, as compared to the same period in 2022.

Selling and marketing expense decreased $4.6 million, or 5%, during the nine months ended September 30, 2023, as compared to the same period in 2022.

• The impact of certain foreign currencies weakening against the U.S.

dollar resulted in a $0.9 million decrease in selling and marketing expense for the six months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of foreign currency, selling and marketing expense decreased $0.4 million, for the six months ended June 30, 2023, as compared to the same period in 2022.

dollar resulted in a $0.4 million decrease in selling and marketing expense for the nine months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of foreign currency, selling and marketing expense decreased $4.2 million, or 4%, for the nine months ended September 30, 2023, as compared to the same period in 2022.

• The decrease was primarily due to lower personnel and related expenses.

General and Administrative

General and administrative expense increased $8.6 million, or 16%, during the six months ended June 30, 2023, as compared to the same period in 2022.

• General and administrative expenses for the six months ended June 30, 2023, included $15.9 million for cost reduction strategies, $2.6 million of significant transaction-related expenses, $1.8 million for CEO transition, and $2.2 million of European data center migration expenses during the period, compared to $3.2 million of significant transaction-related expenses associated with cost reduction strategies implemented during the same period in 2022.

General and administrative expense increased $7.9 million, or 9%, during the nine months ended September 30, 2023, as compared to the same period in 2022.

• General and administrative expenses for the nine months ended September 30, 2023, included $19.7 million for cost reduction strategies, $2.6 million of significant transaction-related expenses, $1.8 million for CEO transition, and $2.6 million of European data center migration expenses during the period, compared to $3.4 million of European data center migration expenses and $2.6 million of divestiture transaction-related expenses during the same period in 2022.

• The impact of certain foreign currencies weakening against the U.S.

dollar resulted in a $0.8 million decrease in general and administrative expenses during the six months ended June 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of significant transaction-related expenses and foreign currency, general and administrative expense decreased $9.9 million, or 20%, for the six months ended June 30, 2023, as compared to the same period in 2022.

dollar resulted in a $0.5 million decrease in general and administrative expenses during the nine months ended September 30, 2023, as compared to the same period in 2022.

• Adjusted for the impact of significant transaction-related expenses and foreign currency, general and administrative expense decreased $12.3 million, or 16%, for the nine months ended September 30, 2023, as compared to the same period in 2022.

• The decrease was primarily due to lower personnel and related expenses and professional and other legal fees of $9.2 million and $3.1 million, respectively.

Depreciation and Amortization

Depreciation and amortization decreased $0.1 million, during the six months ended June 30, 2023, as compared to the same period in 2022.

Depreciation and amortization decreased $1.8 million, or 2%, during the nine months ended September 30, 2023, as compared to the same period in 2022.

Other Income and Expense

Interest expense for the six months ended June 30, 2023, increased $16.1 million, or 71%, as compared to the same period in 2022, primarily due to higher interest rates.

Interest income for the six months ended June 30, 2023, increased $0.8 million, or 12%, as compared to the same period in 2022.

Interest expense for the nine months ended September 30, 2023, increased $21.6 million, or 58%, as compared to the same period in 2022, primarily due to higher interest rates.

Interest income for the nine months ended September 30, 2023, increased $1.3 million, or 14%, as compared to the same period in 2022.

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

Other, net was $7.5 million of expense and $4.3 million of income for the six months ended June 30, 2023 and 2022, respectively.

During the nine months ended September 30, 2022, other, net also included a $38.5 million gain from the divestiture.

Other, net was $6.4 million of expense and $45.8 million of income for the nine months ended September 30, 2023 and 2022, respectively.

See Note 11, Income Taxes, to our unaudited condensed consolidated financial statements in Part I of this Form 10-Q for additional information.

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Income (loss) before income taxes $ 46,663 $ 33,693 $ (6,494) $ 73,604

Banks Segment Adjusted EBITDA decreased $4.7 million for the three months ended June 30, 2023 due to the divestiture.

Excluding the divestiture, Banks Segment Adjusted EBITDA decreased $13.8 million for the three months ended June 30, 2023, compared to the same period in 2022, due to a $13.1 million decrease in revenue primarily related to a decrease in license revenues, and a $0.7 million increase in cash operating expense.

Merchants Segment Adjusted EBITDA increased $2.2 million for the three months ended June 30, 2023, compared to the same period in 2022, due to a $2.2 million decrease in cash operating expense.

Billers Segment Adjusted EBITDA increased $2.9 million for the three months ended June 30, 2023, compared to the same period in 2022, due to a $7.4 million increase in revenue, offset by a $4.5 million increase in cash operating expense primarily for payment card interchange and other processing fees.

Banks Segment Adjusted EBITDA decreased $9.8 million for the six months ended June 30, 2023 due to the divestiture.

Excluding the divestiture, Banks Segment Adjusted EBITDA decreased $48.8 million for the six months ended June 30, 2023, compared to the same period in 2022, due to a $45.0 million decrease in revenue primarily related to a decrease in license revenues, and a $3.8 million increase in cash operating expense.

Merchants Segment Adjusted EBITDA decreased $6.0 million for the six months ended June 30, 2023, compared to the same period in 2022, due to a $6.2 million decrease in revenue, offset by a $0.2 million decrease in cash operating expense.

Billers Segment Adjusted EBITDA increased $6.2 million for the six months ended June 30, 2023, compared to the same period in 2022, due to a $24.3 million increase in revenue, offset by a $18.1 million increase in cash operating expense, primarily for payment card interchange and other processing fees.

Banks Segment Adjusted EBITDA decreased $4.1 million for the three months ended September 30, 2023 due to the divestiture.

Excluding the divestiture, Banks Segment Adjusted EBITDA increased $45.3 million for the three months ended September 30, 2023, compared to the same period in 2022, due to a $46.7 million increase in revenue primarily related to a increase in license revenues, partially offset by a $1.4 million increase in cash operating expense.

Merchants Segment Adjusted EBITDA increased $0.5 million for the three months ended September 30, 2023, compared to the same period in 2022, due to a $0.7 million increase in revenue, partially offset by a $0.2 million increase in cash operating expense.

Billers Segment Adjusted EBITDA increased $12.8 million for the three months ended September 30, 2023, compared to the same period in 2022, due to a $17.5 million increase in revenue, partially offset by a $4.7 million increase in cash operating expense, primarily for payment card interchange and other processing fees.

Banks Segment Adjusted EBITDA decreased $14.0 million for the nine months ended September 30, 2023 due to the divestiture.

Excluding the divestiture, Banks Segment Adjusted EBITDA decreased $3.4 million for the nine months ended September 30, 2023, compared to the same period in 2022, due to a $5.1 million increase in cash operating expense, partially offset by a $1.7 million increase in revenue.

Merchants Segment Adjusted EBITDA decreased $5.5 million for the nine months ended September 30, 2023, compared to the same period in 2022, due to a $5.6 million decrease in revenue.

Billers Segment Adjusted EBITDA increased $19.0 million for the nine months ended September 30, 2023, compared to the same period in 2022, due to a $41.9 million increase in revenue, partially offset by a $22.9 million increase in cash operating expense, primarily for payment card interchange and other processing fees.

Liquidity and Capital Resources

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Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less.

As of June 30, 2023, we had $132.4 million of cash and cash equivalents, of which $37.8 million was held by our foreign subsidiaries.

As of September 30, 2023, we had $139.5 million of cash and cash equivalents, of which $40.1 million was held by our foreign subsidiaries.

If these funds were needed for our operations in the U.S., we may potentially be required to accrue and pay foreign and U.S.

state income taxes to repatriate these funds.

As of June 30, 2023, only the earnings in our Indian foreign subsidiaries are indefinitely reinvested.

As of September 30, 2023, only the earnings in our Indian foreign subsidiaries are indefinitely reinvested.

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

We are also permanently reinvested for outside book/tax basis difference related to foreign subsidiaries.

These outside basis differences could reverse through sales of the foreign subsidiaries, as well as various other events, none of which are considered probable as of June 30, 2023.

These outside basis differences could reverse through sales of the foreign subsidiaries, as well as various other events, none of which are considered probable as of September 30, 2023.

Available Liquidity

The following table sets forth our available liquidity for the dates indicated (in thousands):

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Cash and cash equivalents $ 139,520 $ 124,981

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

As of June 30, 2023, the full $75.0 million was available.

As of September 30, 2023, the full $75.0 million was available.

Stock Repurchase Program

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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.

We did not repurchase any shares under the program during the six months ended June 30, 2023.

We did not repurchase any shares under the program during the nine months ended September 30, 2023.

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

As of June 30, 2023, the maximum remaining amount authorized for purchase under the stock repurchase program was approximately $200.0 million.

As of September 30, 2023, the maximum remaining amount authorized for purchase under the stock repurchase program was approximately $200.0 million.

See Note 7, Common Stock and Treasury Stock, to our unaudited condensed consolidated financial statements in Part I of this Form 10-Q for additional information.

The following table sets forth summarized cash flow data for the periods indicated (in thousands):

Six Months Ended June 30,

Nine Months Ended

September 30,

Net cash provided by (used by):

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Our primary uses of operating cash flows includes employee expenditures, taxes, interest payments, and leased facilities.

Cash flows provided by operating activities were $10.3 million lower for the six months ended June 30, 2023, compared to the same period in 2022.

Our operating cash flows for the current year decreased primarily due to $15.4 million more in income tax payments, which are based upon higher pre-tax income in the previous year, $15.8 million more in interest payments due to increase in interest rates, and the net loss for the six months ended June 30, 2023, compared to net income for the same period in 2022, partially offset by $95.9 million more in customer receipt collections on higher prior year-end receivable balances.

Cash flows provided by operating activities were $19.2 million lower for the nine months ended September 30, 2023, compared to the same period in 2022.

Our operating cash flows for the current year decreased primarily due to $18.9 million more in income tax payments, which are based upon higher pre-tax income in the previous year, $21.4 million more in interest payments due to increase in interest rates, and the net loss for the nine months ended September 30, 2023, compared to net income for the same period in 2022, partially offset by $36.2 million more in customer receipt collections on higher prior year-end receivable balances.

Our cash flow from operating activities can fluctuate from period to period due to several factors, including:

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The changes in cash flows from investing activities primarily relate to the timing of our purchases and investments in capital and other assets, including strategic acquisitions, that support our growth.

During the first six months of 2023, we used cash of $19.6 million to purchase software, property, and equipment, as compared to $14.4 million during the same period in 2022.

During the first nine months of 2023, we used cash of $30.5 million to purchase software, property, and equipment, as compared to $26.5 million during the same period in 2022.

During the first nine months of 2022, we received net proceeds of $100.1 million from the divestiture.

Cash Flows from Financing Activities

The changes in cash flows from financing activities primarily relate to borrowings and repayments related to our debt instruments and other debt, stock repurchases, and net proceeds related to employee stock programs.

During the first six months of 2023, we repaid $34.1 million on the Term Loans, $11.8 million of other debt payments, and $2.2 million of debt issuance costs.

During the first nine months of 2023, we repaid $53.6 million on the Term Loans, $12.5 million of other debt payments, and $2.2 million of debt issuance costs.

In addition, we used $4.2 million for the repurchase of stock-based compensation awards for tax withholdings, and $4.6 million for settlement assets and liabilities due to processing timing.

We received net proceeds of $24.0 million on the Revolving Credit Facility, and proceeds of $5.3 million from the exercise of stock options and the issuance of common stock under our 2017 Employee Stock Purchase Plan, as amended.

During the first six months of 2022, we repaid $21.2 million on the Term Loans and $9.4 million of other debt payments.

In addition, we used $62.7 million to repurchase common stock, $5.8 million for the repurchase of stock-based compensation awards for tax withholdings and $4.6 million for settlement assets and liabilities due to processing timing.

We received net proceeds of $40.0 million on the Revolving Credit Facility and proceeds of $3.4 million from the exercise of stock options and the issuance of common stock under our 2017 Employee Stock Purchase Plan, as amended.

During the first nine months of 2022, we used the proceeds from the divestiture to partially fund repayments of $70.8 million on the Term Loans and $10.1 million of other debt payments.

In addition, we used $90.9 million to repurchase common stock and $5.8 million for the repurchase of stock-based compensation awards for tax withholdings.

We received net proceeds of $10.0 million on the Revolving Credit Facility, proceeds of $4.6 million from the exercise of stock options and the issuance of common stock under our 2017 Employee Stock Purchase Plan, as amended, and $20.1 million from settlement assets and liabilities due to processing timing.

Contractual Obligations and Commercial Commitments

For the six months ended June 30, 2023, there have been no material changes to the contractual obligations and commercial commitments disclosed in Item 7 of our Form 10-K for the fiscal year ended December 31, 2022.

For the nine months ended September 30, 2023, there have been no material changes to the contractual obligations and commercial commitments disclosed in Item 7 of our Form 10-K for the fiscal year ended December 31, 2022.

Critical Accounting Estimates

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• Accounting for Income Taxes

During the six months ended June 30, 2023, there were no significant changes to our critical accounting policies and estimates.

During the nine months ended September 30, 2023, there were no significant changes to our critical accounting policies and estimates.

Please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for our fiscal year ended December 31, 2022, for a more complete discussion of our critical accounting policies and estimates.

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 2. Management’s Discussion and Analysis