What changed in this filing

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Item 1A. Risk Factors

2022-08-25 compared with 2021-08-25 · 29 added, 16 removed, 154 unchanged (23% of the section changed)

21 unchanged sentences

We cannot ensure that any limitation-of-liability provisions in our customer and user agreements, contracts with third-party vendors, or other contracts are sufficient to protect us from liabilities or damages with respect to claims relating to a security breach or similar matters.

The insurance coverage we maintain to address data security risks may be insufficient to cover all types of claims or losses that may arise, and there is not assurance that such insurance coverage will continue to be available to us on economically reasonable terms, or at all.

The insurance coverage we maintain to address data security risks may be insufficient to cover all types of claims or losses that may arise, and there is no assurance that such insurance coverage will continue to be available to us on economically reasonable terms, or at all.

In the event of a security breach, we may need to spend substantial additional capital and resources alleviating problems caused by such breach.

4 unchanged sentences

Damage or destruction that interrupts our outsourcing operations could cause delays and failures in customer processing which could hurt our relationship with customers, damage our reputation, expose us to damage claims, and cause us to incur substantial additional expense to relocate operations and repair or replace damaged equipment.

Our back-up systems and procedures may not prevent disruption, such as a prolonged interruption of our transaction processing services.

In the event that an interruption extends for more than several hours, we may experience data loss or a reduction in revenues by reason of such interruption.

Events that could cause operational failures include, but are not limited to, hardware and software defects, breakdowns or malfunctions, cybersecurity incidents, human error, power losses, disruptions in telecommunications services, computer viruses or other malware, or other events.

Our facilities are also subject to physical risks related to natural disasters or severe weather events, such as tornados, flooding, hurricanes, and heat waves.

Climate change may increase the likelihood and severity of such events.

Our back-up systems and procedures may prove insufficient or otherwise fail to prevent disruption, such as a prolonged interruption of our transaction processing services.

If an interruption extends for more than several hours, we may experience data loss or a reduction in revenues by reason of such interruption.

Any significant interruption of service could reduce revenue, have a negative impact on our reputation, result in damage claims, lead our present and potential customers to choose other service providers, and lead to increased regulatory scrutiny of the critical services we provide to financial institutions, with resulting increases in compliance burdens and costs.

12 unchanged sentences

We also rely on third party service providers to provide part or all of certain services we deliver to customers.

As we continue to move more computing, storage, and processing services out of our data centers and facilities and into third-party hosting environments, our reliance on these providers and their systems will increase.

While we have selected these third-party vendors carefully, we do not control their actions.

A failure of these services by a third party could have a material impact upon our delivery of services to customers.

A failure of these services by a third party could have a material impact upon our delivery of services to our customers.

Such a failure could lead to damage claims, loss of customers, and reputational harm, depending on the duration and severity of the failure.

Third parties perform significant operational services on our behalf.

These third-party vendors are subject to similar risks as us relating to cybersecurity, breakdowns or failures of their own systems or employees.

These third-party vendors are subject to similar risks as us including, but not limited to, compliance with applicable laws and regulations, hardware and software defects, breakdowns or malfunctions, cybersecurity incidents, human error, power losses, disruptions in telecommunications services, computer viruses or other malware, natural disasters or severe weather events, or other events.

One or more of our vendors may experience a cybersecurity event or operational disruption and, if any such event does occur, it may not be adequately addressed, either operationally or financially, by the third-party vendor.

11 unchanged sentences

Renewal time presents our customers with the opportunity to consider other providers or to renegotiate their contracts with us, including reducing the services we provide or negotiating the prices paid for our services.

If we are not successful in achieving high renewal rates upon favorable terms, or if inflation or costs outpace our contractual ability to adjust pricing during our contractual terms, our revenues and profit margins will suffer.

If we are not successful in achieving high renewal rates upon favorable terms, revenues and profit margins will suffer.

We may experience increased costs for services from our third-party vendors due to inflation or other cost expansion, but because our customer contracts typically have longer terms than our vendor contracts, our ability to pass on those higher costs to customers may be limited.

If inflation or costs outpace our contractual ability to adjust pricing during the contractual terms of our customer contracts, our revenues and profit margins could be negatively impacted.

If we fail to adapt our products and services to changes in technology and the markets we serve, we could lose existing customers and be unable to attract new business.

16 unchanged sentences

As a supplier of software and services to financial institutions, portions of our operations are examined by the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau, and the National Credit Union Association, among other regulatory agencies.

These agencies regulate services we provide and the manner in which we operate, and we are required to comply with a broad range of applicable federal and state laws and regulations.

These agencies regulate services we provide and the way we operate, and we are required to comply with a broad range of applicable federal and state laws and regulations.

If we, or third parties with whom we contract or partner, fail to comply with applicable regulations or guidelines, we could be subject to regulatory actions and suffer harm to our customer relationships and reputation.

Such failures could require significant expenditures to correct and could negatively affect our ability to retain customers and obtain new customers.

In addition, existing laws, regulations, and policies could be amended or interpreted differently by regulators in a manner that imposes additional costs and has a negative impact on our existing operations or that limits our future growth or expansion.

growth or expansion.

New regulations could require additional programming or other costly changes in our processes or personnel.

8 unchanged sentences

This includes rules enacted by the New York Department of Financial Services that require covered financial institutions to have a cybersecurity program along with other compliance requirements and the California Consumer Privacy Act.

The unique data protection regulations issued by multiple agencies have created a fragmented series of requirements that makes it increasingly complex to comply with all of the mandates in an efficient manner and may increase costs to deliver affected products and services as those requirements are established.

The unique data protection regulations issued by multiple agencies have created a fragmented series of requirements that makes it increasingly complex to comply with all the mandates in an efficient manner and may increase costs to deliver affected products and services as those requirements are established.

Failure to comply or readily address compliance and regulatory rule changes made by payment card networks could adversely affect our business.

4 unchanged sentences

A widespread public health crisis could adversely affect our results of operations.

The widespread outbreak of a communicable illness or disease, such as the ongoing COVID-19 outbreak, or other public health crises, including government mandates in response to such events, can result in significant economic disruptions and uncertainties and could adversely affect our business, results of operation and financial condition.

The widespread outbreak of a communicable illness or disease, such as the COVID-19 outbreak, or other public health crises, including government mandates in response to such events, can result in significant economic disruptions and uncertainties and could adversely affect our business, results of operation, and financial condition.

The conditions caused by such events may affect the rate of spending by our customers and their ability to pay for our products and services, delay prospective customers’ purchasing decisions, interfere with our employees’ ability to support our business function, disrupt the ability of third-party providers we rely upon to deliver services, adversely impact our ability to provide on-site services or installations to our customers, or reduce the number of transactions we process, all of which could adversely affect our results of operation and financial position.

1 unchanged sentence

If we are not able to respond to and manage the impact of such events effectively, our business will be harmed.

Our business may be adversely impacted by U.S.

and global market and economic conditions.

Our business may be adversely impacted by general U.S.

and global market and economic conditions or specific conditions in the financial services industry.

We derive most of our revenue from products and services we provide to the financial services industry.

If the economic environment worsens such that customers are less willing or able to pay the cost of our products and services, we could face a reduction in demand from current and potential clients for our products and services, which could have a material adverse effect on our business, results of operations and financial condition.

If the general economic environment worsens, or if conditions or regulatory requirements within the financial services industry change, such as if financial institutions are required to increase reserve amounts, customers may be less willing or able to pay the cost of our products and services, and we could face a reduction in demand from current and potential clients for our products and services, which could have a material adverse effect on our business, results of operations, and financial condition.

In addition, a growing portion of our revenue is derived from transaction processing fees, which depend heavily on levels of consumer and business spending.

11 unchanged sentences

Acquisitions subject us to risks and may be costly and difficult to integrate.

Acquisitions are difficult to evaluate, and our due diligence may not identify all potential liabilities or valuation issues.

On August 5, 2022, we entered into an Agreement and Plan of Merger to acquire 100% of the equity interests of Payrailz, LLC, which offers digital payment capabilities, including real-time person-to-person ("P2P") payments.

The acquisition is anticipated to close on August 31, 2022, subject to the satisfaction of customary closing conditions.

Acquisitions, including the Payrailz acquisition, are difficult to evaluate, and our due diligence may not identify all potential liabilities or valuation issues.

We may also be subject to risks related to cybersecurity incidents or vulnerabilities of the acquired company and the acquired systems.

We may not be able to successfully integrate acquired companies.

We may not be able to successfully integrate Payrailz or any other acquired companies.

We may encounter problems with the integration of new businesses, including:

7 unchanged sentences

and significant depreciation and amortization expenses related to acquired assets.

To finance future acquisitions, we may have to increase our borrowing or sell equity or debt securities to the public.

To finance the Payrailz acquisition or other future acquisitions, we may have to increase our borrowing or sell equity or debt securities to the public.

If we fail to integrate our acquisitions, our business, financial condition, and results of operations could be materially and adversely affected.

30 unchanged sentences

An impairment of a significant portion of our goodwill or intangible assets could have a material negative effect on our operating results.

An increase in interest rates could increase our borrowing costs.

Although our debt borrowing levels have historically been low, we may require additional or increased borrowings in the future under existing or new debt facilities to support operations, finance acquisitions, or fund stock repurchases.

Our current revolving credit facility bears interest at a variable rate.

Increases in interest rates on variable-rate debt would increase our interest expense, which could negatively impact our results of operations.

UNRESOLVED STAFF COMMENTS

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

What changed 10-K

Item 1A. Risk Factors