UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________

FORM10-Q

___________________________

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2018~~

2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number0-25346

___________________________

ACI WORLDWIDE, INC.

(Exact name of registrant as specified in its charter)

___________________________



Delaware				47-0772104
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)

3520 Kraft Rd,	Suite 300	Naples, ~~FL 34105~~	Florida	~~(239)403-4600~~34105
(Address of principal executive ~~offices,~~ ~~including zip code)~~ offices)				(~~Registrant’s telephone number,~~ ~~including area~~Zip code)

(239) 403-4660

(Registrant’s telephone number, including area code)

___________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of the Regulation S-T ~~(§232.405 of this chapter)~~ during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” inRule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November~~August 5, ~~2018,~~2019, there were ~~115,979,645~~116,714,472 shares of the registrant’s common stock outstanding.

~~TABLE OF CONTENTS~~

Securities registered or to be registered pursuant to Section 12(b) of the Act.



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.005 par value	ACIW	Nasdaq Global Select Market

Table of contents



	TABLE OF CONTENTS

~~Page~~		Page
PART I – FINANCIAL INFORMATION

Item 1. 1		Financial Statements (unaudited)
		Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2018~~2019, and December 31, ~~2017~~2018	3
		3
		Condensed Consolidated Statements of Operations for the ~~three~~Three and ~~nine months ended September~~Six Months Ended June 30, ~~2018~~2019 and ~~2017~~2018	4
		4
		Condensed Consolidated Statements of Comprehensive Income (Loss) for the ~~three~~Three and ~~nine months ended September~~Six Months Ended June 30, ~~2018~~2019 and ~~2017~~2018	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2019 and 2018	5	6
		Condensed Consolidated Statements of Cash Flows for the ~~nine months ended September~~Six Months Ended June 30, ~~2018~~2019 and ~~2017~~2018	8
		6
		Notes to Condensed Consolidated Financial Statements	9
			7
Item 2
~~Item 2.~~		Management’s Discussion and Analysis of Financial Condition and Results of Operations			26	25
Item 3. 3		Quantitative and Qualitative Disclosures About Market Risk	41
Item 4	Controls and Procedures	41 42

~~Item 4.~~				~~Controls and Procedures~~			41

PART II – OTHER INFORMATION
~~Item 1.~~		~~Legal Proceedings~~
42 Item 1	Legal Proceedings	42
Item ~~1A.~~ 1A		Risk Factors			42
Item 2. 2		Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3	Defaults Upon Senior Securities	42 43
Item 4	Mine Safety Disclosures	43
Item 5	Other Information	43
Item 6	Exhibits	44

~~Item 3.~~ Signature			~~Defaults Upon Senior Securities~~45			42
~~Item 4.~~		~~Mine Safety Disclosures~~			42
~~Item 5.~~		~~Other Information~~			43
~~Item 6.~~		~~Exhibits~~			44

~~Signature~~					45

Table of contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

   September 30, December 31,
   2018 2017
ASSETS

Current assets

Cash and cash equivalents
   $ 76,342 $ 69,710
Receivables, net of allowances of $3,598 and $4,799, respectively
   279,641 262,845
Recoverable income taxes
   8,233 7,921
Prepaid expenses
   25,875 23,219
Other current assets
   23,244 58,126


Total current assets
   413,335 421,821


Noncurrent assets

Accrued receivables, net
   181,832 —
Property and equipment, net
   75,437 80,228
Software, net
   147,316 155,386
Goodwill
   909,691 909,691
Intangible assets, net
   174,057 191,281
Deferred income taxes, net
   28,179 66,749
Other noncurrent assets
   54,477 36,483


TOTAL ASSETS
   $ 1,984,324 $ 1,861,639


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable
   $ 27,381 $ 34,718
Employee compensation
   48,142 48,933
Current portion of long-term debt
   18,765 17,786
Deferred revenue
   93,668 107,543
Income taxes payable
   1,600 9,898
Other current liabilities
   60,075 102,904


Total current liabilities
   249,631 321,782


Noncurrent liabilities

Deferred revenue
   48,789 51,967
Long-term debt
   656,159 667,943
Deferred income taxes, net
   26,372 16,910
Other noncurrent liabilities
   40,435 38,440


Total liabilities
   1,021,386 1,097,042


Commitments and contingencies

Stockholders’ equity

Preferred stock; $0.01 par value; 5,000,000 shares authorized; no shares issued at September 30, 2018 and December 31, 2017
   —   —
Common stock; $0.005 par value; 280,000,000 shares authorized; 140,525,055 shares issued at September 30, 2018 and December 31, 2017
   702 702
Additionalpaid-in capital
   632,547 610,345
Retained earnings
   776,078 550,866
Treasury stock, at cost, 24,543,359 and 23,428,324 shares at September 30, 2018 and December 31, 2017, respectively
   (357,923 ) (319,960 )
Accumulated other comprehensive loss
   (88,466 ) (77,356 )


Total stockholders’ equity
   962,938 764,597


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
   $ 1,984,324 $ 1,861,639



	June 30, 2019			December 31, 2018
ASSETS
Current assets
Cash and cash equivalents	$	139,396		$	148,502
Receivables, net of allowances of $3,781 and $3,912, respectively	286,393			348,182
Settlement assets	613,290			32,256
Prepaid expenses	30,645			23,277
Other current assets	52,259			14,260
Total current assets	1,121,983			566,477
Noncurrent assets
Accrued receivables, net	177,513			189,010
Property and equipment, net	70,805			72,729
Operating lease right-of-use assets	62,316			—
Software, net	246,314			137,228
Goodwill	1,279,472			909,691
Intangible assets, net	374,908			168,127
Deferred income taxes, net	63,569			27,048
Other noncurrent assets	53,440			52,145
TOTAL ASSETS	$	3,450,320		$	2,122,455
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	46,975		$	39,602
Settlement liabilities	589,742			31,605
Employee compensation	38,976			38,115
Current portion of long-term debt	34,089			20,767
Deferred revenue	79,311			104,843
Other current liabilities	81,156			61,688
Total current liabilities	870,249			296,620
Noncurrent liabilities
Deferred revenue	59,122			51,292
Long-term debt	1,352,096			650,989
Deferred income taxes, net	23,243			31,715
Operating lease liabilities	50,550			—
Other noncurrent liabilities	42,483			43,608
Total liabilities	2,397,743			1,074,224
Commitments and contingencies
Stockholders’ equity
Preferred stock; $0.01 par value; 5,000,000 shares authorized; no shares issued at June 30, 2019, and December 31, 2018	—			—
Common stock; $0.005 par value; 280,000,000 shares authorized; 140,525,055 shares issued at June 30, 2019, and December 31, 2018	702			702
Additional paid-in capital	650,797			632,235
Retained earnings	843,530			863,768
Treasury stock, at cost, 23,840,186 and 24,401,694 shares at June 30, 2019, and December 31, 2018, respectively	(349,426		)	(355,857		)
Accumulated other comprehensive loss	(93,026		)	(92,617		)
Total stockholders’ equity	1,052,577			1,048,231
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,450,320		$	2,122,455

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

Table of contents

ACI WORLDWIDE, INC.AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share amounts)

   For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
   2018 2017 2018 2017
Revenues

Software as a service and platform as a service
   $ 104,519 $ 99,761 $ 322,399 $ 312,677
License
   68,964 50,017 142,565 163,578
Maintenance
   54,373 56,349 166,080 166,829
Services
   17,669 19,608 58,786 54,712


Total revenues
   245,525 225,735 689,830 697,796


Operating expenses

Cost of revenue (1)
   102,473 107,393 326,070 336,293
Research and development
   36,008 33,935 110,661 106,189
Selling and marketing
   28,252 25,236 93,305 81,190
General and administrative
   29,537 25,302 87,023 130,332
Depreciation and amortization
   20,896 22,446 63,274 67,189


Total operating expenses
   217,166 214,312 680,333 721,193


Operating income (loss)
   28,359 11,423 9,497 (23,397 )


Other income (expense)

Interest expense
   (12,573 ) (9,374 ) (31,655 ) (30,198 )
Interest income
   2,763 165 8,249 421
Other, net
   (1,304 ) (1,059 ) (3,036 ) (2,176 )


Total other income (expense)
   (11,114 ) (10,268 ) (26,442 ) (31,953 )


Income (loss) before income taxes
   17,245 1,155 (16,945 ) (55,350 )
Income tax expense (benefit)
   2,012 (2,233 ) 1,824 (27,321 )


Net income (loss)
   $ 15,233 $ 3,388 $ (18,769 ) $ (28,029 )


Earnings (loss) per common share

Basic
   $ 0.13 $ 0.03 $ (0.16 ) $ (0.24 )
Diluted
   $ 0.13 $ 0.03 $ (0.16 ) $ (0.24 )
Weighted average common shares outstanding

Basic
   115,889 118,254 115,615 117,096
Diluted
   117,492 119,743 115,615 117,096

~~(1)~~

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



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenues
Software as a service and platform as a service	$	172,499		$	113,600		$	281,056		$	217,880
License	52,541			45,555			73,619			73,601
Maintenance	51,922			55,048			107,033			111,707
Services	20,656			20,792			41,765			41,117
Total revenues	297,618			234,995			503,473			444,305
Operating expenses
Cost of revenue (1)	155,240			116,261			270,181			223,597
Research and development	39,235			37,862			75,429			74,653
Selling and marketing	32,962			33,160			62,392			65,053
General and administrative	49,319			28,837			80,836			57,486
Depreciation and amortization	26,744			21,033			48,610			42,378
Total operating expenses	303,500			237,153			537,448			463,167
Operating loss	(5,882		)	(2,158		)	(33,975		)	(18,862		)
Other income (expense)
Interest expense	(15,323		)	(9,717		)	(26,937		)	(19,082		)
Interest income	2,997			2,742			6,030			5,486
Other, net	1,402			(1,677		)	(510		)	(1,732		)
Total other income (expense)	(10,924		)	(8,652		)	(21,417		)	(15,328		)
Loss before income taxes	(16,806		)	(10,810		)	(55,392		)	(34,190		)
Income tax expense (benefit)	(22,531		)	3,764			(35,154		)	(188		)
Net income (loss)	$	5,725		$	(14,574	)	$	(20,238	)	$	(34,002	)
Income (loss) per common share
Basic	$	0.05		$	(0.13	)	$	(0.17	)	$	(0.29	)
Diluted	$	0.05		$	(0.13	)	$	(0.17	)	$	(0.29	)
Weighted average common shares outstanding
Basic	116,586			115,548			116,287			115,595
Diluted	118,786			115,548			116,287			115,595

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

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

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ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited and in thousands)

   Three Months Ended
September 30, Nine Months Ended
September 30,
   2018 2017 2018 2017
Net income (loss)
   $ 15,233 $ 3,388 $ (18,769 ) $ (28,029 )
Other comprehensive income (loss):

Foreign currency translation adjustments
   (3,862 ) (594 ) (11,110 ) 14,526


Total other comprehensive income (loss)
   (3,862 ) (594 ) (11,110 ) 14,526


Comprehensive income (loss)
   $ 11,371 $ 2,794 $ (29,879 ) $ (13,503 )



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income (loss)	$	5,725		$	(14,574	)	$	(20,238	)	$	(34,002	)
Other comprehensive loss:
Foreign currency translation adjustments	(1,730		)	(12,907		)	(409		)	(7,248		)
Total other comprehensive loss	(1,730		)	(12,907		)	(409		)	(7,248		)
Comprehensive income (loss)	$	3,995		$	(27,481	)	$	(20,647	)	$	(41,250	)

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

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ACI WORLDWIDE, INC.ANDSUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~

STOCKHOLDERS’ EQUITY

(unaudited and in ~~thousands)~~

   For the Nine Months Ended
September 30,
   2018 2017
Cash flows from operating activities:

Net loss
   $ (18,769 ) $ (28,029 )
Adjustments to reconcile net loss to net cash flows from operating activities:

Depreciation
   17,896 18,658
Amortization
   54,993 58,114
Amortization of deferred debt issuance costs
   3,881 3,537
Deferred income taxes
   (7,139 ) (37,707 )
Stock-based compensation expense
   20,642 22,724
Other
   1,432 1,094
Changes in operating assets and liabilities

Receivables
   58,443 80,398
Accounts payable
   (4,217 ) (11,610 )
Accrued employee compensation
   92 (1,056 )
Current income taxes
   (10,429 ) (10,161 )
Deferred revenue
   (47 ) (1,248 )
Other current and noncurrent assets and liabilities
   (16,316 ) (9,642 )


Net cash flows from operating activities
   100,462 85,072


Cash flows from investing activities:

Purchases of property and equipment
   (16,434 ) (18,566 )
Purchases of software and distribution rights
   (21,876 ) (21,328 )
Other
   (1,467 ) —


Net cash flows from investing activities
   (39,777 ) (39,894 )


Cash flows from financing activities:

Proceeds from issuance of common stock
   2,326 2,185
Proceeds from exercises of stock options
   18,405 10,284
Repurchase of restricted stock for tax withholdings
   (2,588 ) (5,311 )
Repurchases of common stock
   (54,527 ) —
Proceeds from senior notes
   400,000 —
Redemption of senior notes
   (300,000 ) —
Proceeds from revolving credit facility
   109,000 42,000
Repayment of revolving credit facility
   (111,000 ) (126,000 )
Proceeds from term portion of credit agreement
   —   415,000
Repayment of term portion of credit agreement
   (105,332 ) (380,852 )
Payment of debt issuance costs
   (7,253 ) (5,340 )
Payments on other debt and capital leases
   (2,332 ) (9,286 )


Net cash flows from financing activities
   (53,301 ) (57,320 )


Effect of exchange rate fluctuations on cash
   (752 ) 4,319


Net increase (decrease) in cash and cash equivalents
   6,632 (7,823 )
Cash and cash equivalents, beginning of period
   69,710 75,753


Cash and cash equivalents, end of period
   $ 76,342 $ 67,930


Supplemental cash flow information

Income taxes paid
   $ 22,439 $ 24,693
Interest paid
   $ 31,914 $ 31,762

thousands, except share amounts)



	Three Months Ended June 30, 2019
	Common Stock		Additional Paid-in Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total
Balance as of March 31, 2019	$	702	$	636,960		$	837,805		$	(351,587	)	$	(91,296	)	$	1,032,584
Net income	—		—			5,725			—			—			5,725
Other comprehensive loss	—		—			—			—			(1,730		)	(1,730		)
Stock-based compensation	—		14,372			—			—			—			14,372
Shares issued and forfeited, net, under stock plans including income tax benefits	—		(535		)	—			2,346			—			1,811
Repurchase of restricted share awards and restricted share units for tax withholdings	—		—			—			(185		)	—			(185		)
Balance as of June 30, 2019	$	702	$	650,797		$	843,530		$	(349,426	)	$	(93,026	)	$	1,052,577


	Three Months Ended June 30, 2018
	Common Stock		Additional Paid-in Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total
Balance as of March 31, 2018	$	702	$	616,913		$	775,419		$	(342,316	)	$	(71,697	)	$	979,021
Net loss	—		—			(14,574		)	—			—			(14,574		)
Other comprehensive loss	—		—			—			—			(12,907		)	(12,907		)
Stock-based compensation	—		7,705			—			—			—			7,705
Shares issued and forfeited, net, under stock plans including income tax benefits	—		233			—			6,325			—			6,558
Repurchase of 1,000,000 shares of common stock	—		—			—			(23,414		)	—			(23,414		)
Repurchase of restricted share awards for tax withholdings	—		—			—			(1,674		)	—			(1,674		)
Balance as of June 30, 2018	$	702	$	624,851		$	760,845		$	(361,079	)	$	(84,604	)	$	940,715

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

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ACI WORLDWIDE, INC.ANDSUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited and in thousands, except share amounts)



	Six Months Ended June 30, 2019
	Common Stock		Additional Paid-in Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total
Balance as of December 31, 2018	$	702	$	632,235		$	863,768		$	(355,857	)	$	(92,617	)	$	1,048,231
Net loss	—		—			(20,238		)	—			—			(20,238		)
Other comprehensive loss	—		—			—			—			(409		)	(409		)
Stock-based compensation	—		20,957			—			—			—			20,957
Shares issued and forfeited, net, under stock plans including income tax benefits	—		(2,395		)	—			9,871			—			7,476
Repurchase of 23,802 shares of common stock	—		—			—			(631		)	—			(631		)
Repurchase of restricted share awards and restricted share units for tax withholdings	—		—			—			(2,809		)	—			(2,809		)
Balance as of June 30, 2019	$	702	$	650,797		$	843,530		$	(349,426	)	$	(93,026	)	$	1,052,577


	Six Months Ended June 30, 2018
	Common Stock		Additional Paid-in Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total
Balance as of December 31, 2017	$	702	$	610,345		$	550,866		$	(319,960	)	$	(77,356	)	$	764,597
Net loss	—		—			(34,002		)	—			—			(34,002		)
Other comprehensive loss	—		—			—			—			(7,248		)	(7,248		)
Stock-based compensation	—		14,067			—			—			—			14,067
Shares issued and forfeited, net, under stock plans including income tax benefits	—		439			—			15,996			—			16,435
Repurchase of 2,346,427 shares of common stock	—		—			—			(54,527		)	—			(54,527		)
Repurchase of restricted share awards for tax withholdings	—		—			—			(2,588		)	—			(2,588		)
Cumulative effect of accounting change, ASC 606	—		—			243,981			—			—			243,981
Balance as of June 30, 2018	$	702	$	624,851		$	760,845		$	(361,079	)	$	(84,604	)	$	940,715

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

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ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

Six Months Ended
June 30,
2019 2018
Cash flows from operating activities:
Net loss $ (20,238 ) $ (34,002 )
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation 11,831
11,875
Amortization 42,799
37,469
Amortization of operating lease right-of-use assets 7,029
—
Amortization of deferred debt issuance costs 1,683
1,445
Deferred income taxes (41,331 ) (3,044 )
Stock-based compensation expense 20,957
14,067
Other 1,533
(248 )
Changes in operating assets and liabilities, net of impact of acquisitions:
Receivables 88,596
67,689
Accounts payable 1,294
(3,658 )
Accrued employee compensation (1,163 ) (5,805 )
Current income taxes (5,634 ) (7,243 )
Deferred revenue (17,981 ) 10,142
Other current and noncurrent assets and liabilities (32,510 ) (17,576 )
Net cash flows from operating activities 56,865
71,111
Cash flows from investing activities:
Purchases of property and equipment (9,915 ) (11,108 )
Purchases of software and distribution rights (11,300 ) (16,776 )
Acquisition of businesses, net of cash acquired (758,546 ) —
Other —
(1,467 )
Net cash flows from investing activities (779,761 ) (29,351 )
Cash flows from financing activities:
Proceeds from issuance of common stock 1,753
1,564
Proceeds from exercises of stock options 5,816
14,906
Repurchase of restricted share awards and restricted share units for tax withholdings (2,809 ) (2,588 )
Repurchases of common stock (631 ) (54,527 )
Proceeds from revolving credit facility 250,000
85,000
Repayment of revolving credit facility (15,000 ) (84,000 )
Proceeds from term portion of credit agreement 500,000
—
Repayment of term portion of credit agreement (9,424 ) (10,375 )
Payments for debt issuance costs (12,830 ) —
Payments on other debt (2,220 ) (1,550 )
Net cash flows from financing activities 714,655
(51,570 )
Effect of exchange rate fluctuations on cash (865 ) (867 )
Net decrease in cash and cash equivalents (9,106 ) (10,677 )
Cash and cash equivalents, beginning of period 148,502
69,710
Cash and cash equivalents, end of period $ 139,396
$ 59,033
Supplemental cash flow information
Income taxes paid $ 15,476
$ 20,613
Interest paid $ 23,937
$ 17,297

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

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ACI WORLDWIDE, INC.ANDSUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Condensed Consolidated Financial Statements

The unaudited condensed consolidated financial statements include the accounts of ACI Worldwide, Inc. and itswholly-owned subsidiaries (collectively, the “Company”). All intercompany balances and transactions have been eliminated. The condensed consolidated financial statements as of ~~September~~June 30, ~~2018,~~2019, and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, 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, ~~2017~~2018, is derived from the audited financial statements.

Certain prior period amounts have been reclassified to conform to current year presentation. The Company reclassified $32.3 million from other current assets to settlement assets and $31.6 million from other current liabilities to settlement liabilities in the condensed consolidated balance sheet as of December 31, 2018.

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 Form10-K for the fiscal year ended December 31, ~~2017,~~2018, filed on ~~February 27, 2018.~~March 1, 2019. Results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019, 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. GAAP”) requires management to make judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Other Current Liabilities

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

June 30,
2019 December 31,
2018
Operating lease liabilities $ 15,193
$ —
Vendor financed licenses 13,574
3,551
Accrued interest 9,660
8,407
Royalties payable 5,693
11,318
Other 37,036
38,412
Total other current liabilities $ 81,156
$ 61,688

Settlement Assets and ~~Other Current~~ Liabilities

(in thousands)
   September 30,
2018    December 31,
2017
Settlement deposits
   $ 5,477    $ 22,282
Settlement receivables
   11,462    30,063
Other
   6,305    5,781




Total other current assets
   $ 23,244    $ 58,126

(in thousands)
   September 30,
2018    December 31,
2017
Settlement payables
   $ 16,221    $ 48,953
Accrued interest
   2,726    7,291
Vendor financed licenses
   5,973    1,862
Royalties payable
   7,148    9,264
Other
   28,007    35,534




Total other current liabilities
   $ 60,075    $ 102,904

Individuals and businesses settle their obligations to the Company’s various ~~clients, primarily utility and other public sector~~biller clients using credit or debit cards or via ~~ACH~~automated clearing house (“ACH”) payments. The Company creates a receivable for the amount due from the credit or debit card ~~company~~processor and an offsetting payable to the client. Upon confirmation that the funds have been received, the Company settles the obligation to the client. Due to timing, in some instances, the Company may receive the funds into bank accounts controlled by and in the Company’s name that are not disbursed to its clients by the end of the day, resulting in a settlement deposit on the Company’s books.

Off Balance Sheet Settlement Accounts

The Company also enters into agreements with certain biller clients to process payment funds on their behalf. When an ACH or automated teller machine network payment transaction is processed, a transaction is initiated to withdraw funds from the designated source account and deposit them into a settlement account, which is a trust account maintained for the benefit of the Company’s clients. A simultaneous transaction is initiated to transfer funds from the settlement account to the intended destination account. These “back to back” transactions are designed to settle at the same time, usually overnight, such that the Company receives the funds from the source at the same time as it sends the funds to their destination. However, due to the transactions being with various financial institutions there may be timing differences that result in float balances. These funds are maintained in accounts

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for the benefit of the client, which is separate from the Company’s corporate assets. As the Company does not take ownership of the funds, ~~the~~these settlement accounts are not included in the

Company’s balance sheet. 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~~June 30, ~~2018~~2019, and December 31, ~~2017 were $185.4~~2018, was $203.2 million and ~~$238.9~~$256.5 million, respectively.

Fair Value

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 ~~2026~~5.750% Senior Notes ~~was $407.1 million at September~~due 2026 (“2026 Notes”) as of June 30, ~~2018. The fair value of the Company’s 2020 Senior Notes was $305.7 million at~~2019, and December 31, ~~2017.~~

2018, was $418.0 million and $395.0 million, 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).

Goodwill

In accordance with ~~ASC~~the Accounting Standards Codification (“ASC”) 350,Intangibles – Goodwill and Other, the Company assesses goodwill for impairment annually during the fourth quarter of its fiscal year using October 1 balances or when there is evidence that events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Company evaluates goodwill at the reporting unit level and has identified its operating segments, ACI On Demand and ACI On Premise, as its reporting units. ~~The Company allocated~~

Changes in the carrying amount of goodwill attributable to each reporting unit during the ~~reporting units using a relative fair value approach with total goodwill of $909.7 million of which it allocated $725.9 million and $183.8 million to ACI On Premise and ACI On Demand, respectively.~~

six months ended June 30, 2019, were as follows (in thousands):



	ACI On Demand		ACI On Premise			Total
Gross Balance, prior to December 31, 2018	$	183,783	$	773,340		$	957,123
Total impairment prior to December 31, 2018	—		(47,432		)	(47,432		)
Balance, December 31, 2018	183,783		725,908			909,691
Goodwill from acquisitions (1)	369,781		—			369,781
Balance, June 30, 2019	$	553,564	$	725,908		$	1,279,472

(1)

Goodwill from acquisitions relates to the goodwill recorded for the acquisition of E Commerce Group Products, Inc. ("ECG"), along with ECG's subsidiary, Speedpay, Inc. (collectively referred to as "Speedpay") and Walletron, Inc. ("Walletron"), as discussed in Note 3, Acquisitions. The purchase price allocations for Speedpay and Walletron are preliminary as of June 30, 2019, and are subject to future changes during the maximum one-year measurement period.

Recoverability of goodwill is measured using a discounted cash flow model incorporating discount rates commensurate with the risks involved. Use of a discounted cash flow model is common practice in impairment testing in the absence of available transactional market evidence to determine the fair value. The calculated fair value was substantially in excess of the current carrying value for all reporting units based upon the October 1, ~~2017~~2018, annual impairment test and there have been no indications of impairment in the subsequent periods.

New Accounting Standards Recently Adopted

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)~~2014-09,~~~~Revenue from Contracts with Customers~~ ~~(codified as “ASC 606”) as well as other clarifications and technical guidance related to this new revenue standard, including ASC340-40,~~~~Other Assets and Deferred Costs – Contracts with Customers~~ ~~(“ASC340-40”).~~ ~~ASC 606 superseded the revenue recognition requirements in ASC 605,~~ ~~Revenue Recognition~~~~, and most industry-specific guidance. The Company adopted ASC 606 and ASC340-40~~ on January 1, 2018 (the effective date) using the modified retrospective transition method which required an adjustment to retained earnings for the cumulative effect of applying ASC 606 to active contracts as of the adoption date. For active contracts that were modified before the effective date, the Company reflected the aggregate effect of all modifications when identifying performance obligations and allocating the transaction price in accordance with the practical expedient permitted under ASC 606. The cumulative effect of applying ASC 606 to active contracts as of the adoption date was an increase to retained earnings of $244.0 million.

~~In August 2016, the FASB issued ASU2016-15,~~~~Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments~~, an update that addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows. Among the cash flow matters addressed in the update are payments for costs related to debt prepayments or extinguishments, payments related to settlement of certain types of debt instruments, payments of contingent consideration made after a business combination, proceeds from insurance claims and corporate-owned life insurance policies, and distributions received from equity method investees, among others. The amendments are applied using a retrospective transition method to each period presented, unless impracticable for specific cash flow matters, in which case the amendments would be applied prospectively as of the earliest date practicable. The Company adopted ASU~~2016-15~~ ~~as of January 1, 2018. The adoption of ASU2016-15~~ ~~was not material to the condensed consolidated statement of cash flows.~~

~~In October 2016, the FASB issued ASU2016-16,~~~~Intra-Entity Transfers of Assets Other than Inventory~~, to simplify the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Previously, U.S. GAAP prohibited the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This prohibition on recognition was an exception to the principle of comprehensive recognition of current and deferred income taxes in U.S. GAAP. The limited amount of authoritative guidance about the exception led to diversity in practice and is a source of complexity in financial reporting, particularly for an intra-entity transfer of intellectual property. Under the amendments of ASU~~2016-16,~~ an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Consequently, this amendment eliminates the exception for an intra-entity transfer of an asset other than inventory. The amendments to this ASU should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company adopted ASU~~2016-16~~ ~~as of January 1, 2018. The adoption of ASU2016-16~~ ~~had no impact on the condensed consolidated balance sheet, results of operations, or statement of cash flows.~~

~~In August 2018, the FASB issued ASU2018-05,~~~~Intangibles—Goodwill andOther–Internal-Use~~ ~~Software: Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement~~ ~~(“ASU2018-05”).~~ ~~The purpose of the update was to reduce potential diversity in practice and provide specific guidance on how to account for implementation costs incurred in a cloud computing arrangement. ASU2018-05~~ ~~applies the same guidance in ASC350-40,~~~~Intangibles – Goodwill and Other —Internal-Use~~ ~~Software~~ ~~(“ASC350-40”),~~ to determine implementation costs to capitalize versus costs that are to be expensed as incurred. This ASU will be effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company has elected to early adopt ASU~~2018-05~~ ~~during the period ended September 30, 2018. The adoption had no impact on the condensed consolidated balance sheet, results of operations, or statement of cash flows.~~

~~Recently Issued Accounting Standards Not Yet Effective~~

~~In February 2016, the FASB issuedASU 2016-02,~~ 2016-2, Leases (codified as “ASC 842”). ASC 842 requires ~~a lessee~~lessees to ~~record~~recognize right-of-use (“ROU”) assets and lease liabilities on the balance sheet ~~the assets and liabilities~~ for ~~the rights and obligations created by~~all leases ~~with lease terms of more than 12 months.~~unless, as a policy election, a lessee elects not to apply ASC 842 to short-term leases. In addition, this standard requires both lessees and lessors to disclose certain key information about lease transactions. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years; early adoption is permitted and modified retrospective application is currently required with optional practical expedients. The Company ~~will adopt~~adopted ASC 842 ~~as of the~~on January 1, 2019 (the effective ~~date and is evaluating the use of~~date), using the optional transition method to not apply the new lease standard in the comparative periods presented and elected the “practical expedient package”, which permits the Company to not reassess prior conclusions about lease identification, lease classification, and initial direct costs. ASC 842 also provides practical ~~expedients.~~

~~The~~expedients for the Company’s ongoing accounting including the combination of lease and non-lease components into a single lease component which the Company has ~~established a cross-functional project team~~elected to ~~assess implementing changes~~apply to its ~~systems, processes, and controls, in conjunction with a comprehensive review~~facilities leases. As of ~~existing lease agreements. The~~January 1, 2019, the Company ~~expects the adoption of ASC 842 will have a material impact on its condensed consolidated balance sheet as its rights and obligations from its existing operating leases will be~~ recognized ~~on the balance sheet as~~ROU assets and ~~liabilities. As~~operating lease liabilities of ~~September 30, 2018, the Company’s undiscounted minimum commitments under noncancelable operating leases was approximately $79.4 million. The Company does not expect the adoption~~$63.3 million and $68.6 million, respectively. Refer to Note 13, Leases, for further details.

Table of ~~ASC 842 to have a material impact on its results of operations or statement of cash flows.~~

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In February 2018, the FASB issued ASU~~2018-02,~~ 2018-2, Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU provides an option to reclassify stranded tax effects within accumulated other comprehensive income (“AOCI”) to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the 2017 U.S. Tax Cuts and Jobs Act (or portion thereof) is recorded. This ASU requires disclosure of a description of the accounting policy for releasing income tax effects from AOCI; whether election is made to reclassify the stranded income tax effects from the 2017 U.S. Tax Cuts and Jobs Act; and information about the income tax effects that are reclassified. The Company adopted ASU 2018-2 as of January 1, 2019. The adoption of ASU 2018-2 did not have an impact on the condensed consolidated balance sheet, results of operations, and statement of cash flows.

Recently Issued Accounting Standards Not Yet Effective

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, and subsequent amendments to the guidance, ASU 2018-19 in November 2018, ASU 2019-04 in April 2019, and ASU 2019-05 in May 2019.This ASU provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in ASU 2016-13 replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company will be required to use a forward-looking expected credit loss model for accounts receivables. ASU 2016-13 is effective for annual and interim periods beginning after December 15, ~~2018.~~2019. The Company is currently assessing the impact the adoptionof ASU ~~2018-02~~2016-13 will have on its condensed consolidated balance sheet, results of operations, and statement of cash flows.

2. Revenue

~~Revenue Recognition~~

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. Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.

~~Contract Combination.~~The Company may execute more than one contract or agreement with a single customer. The separate contracts or agreements may be viewed as one combined arrangement or separate agreements for revenue recognition purposes. In order to reach appropriate conclusions regarding whether such agreements should be combined, the Company evaluates whether the agreements were negotiated as a package with a single commercial objective, whether the amount of consideration to be paid in one agreement depends on the price and/or performance of another agreement, or whether the product(s) or services promised in the agreements represent a single performance obligation. The conclusions reached can impact the allocation of the transaction price to each performance obligation and the timing of revenue recognition related to those arrangements.

~~Software as a Service (“SaaS”) and Platform as a Service (“PaaS”) Arrangements~~. The Company’s SaaS-based and PaaS-based arrangements, including implementation, support and other services, represent a single promise to provide continuous access (i.e. a stand-ready performance obligation) to its software solutions and their processing capabilities in the form of a service through one of the Company’s data centers. As each day of providing access to the software solution(s) is substantially the same and the customer simultaneously receives and consumes the benefits as access is provided, the Company’s single promise under its SaaS-based and PaaS-based arrangements is comprised of a series of distinct service periods. The Company’s SaaS-based and PaaS-based arrangements may include fixed consideration, variable consideration, or a combination of the two. Fixed consideration is recognized over the term of the arrangement or longer if the fixed consideration relates to a material right. A material right would be a separate performance obligation. The Company estimates the standalone selling price for a material right by reference to the services expected to be provided and the corresponding expected consideration. Variable consideration in these arrangements is typically a function of transaction volume or

another usage-based measure. Depending upon the structure of a particular arrangement, the Company: (1) allocates the variable amount to each distinct service period within the series and recognizes revenue as each distinct service period is performed (i.e. direct allocation), (2) estimates total variable consideration at contract inception (giving consideration to any constraints that may apply and updating the estimates as new information becomes available) and recognizes the total transaction price over the period to which it relates, or (3) applies the ‘right to invoice’ practical expedient and recognizes revenue based on the amount invoiced to the customer during the period.

~~License Arrangements.~~ The Company’s software license arrangements provide the customer with the right to use functional intellectual property (as it exists at the point in time at which the license is granted) for the duration of the contract term. Implementation, support, and other services are typically considered distinct performance obligations when sold with a software license unless these services are determined to significantly modify the software.

Payment terms for the Company’s software license arrangements generally include fixed license and capacity fees that are payable up front or over time. These arrangements may also include incremental usage-based fees that are payable when the customer exceeds its contracted license capacity limits. The Company accounts for capacity overages as a usage-based royalty that is recognized when the usage occurs.

When a software license arrangement contains payment terms that are extended beyond one year, a significant financing component may exist. The significant financing component is calculated as the difference between the stated value and present value of the software license fees and is recognized as interest income over the extended payment period. The total fixed software license fee net of the significant financing component is recognized as revenue at the point in time when the software is transferred to the customer.

For those software license arrangements that include customer-specific acceptance provisions, such provisions are generally presumed to be substantive and the Company does not recognize revenue until the earlier of the receipt of a written customer acceptance, objective demonstration that the delivered product meets the customer-specific acceptance criteria, or the expiration of the acceptance period. The Company recognizes revenues on such arrangements upon the earlier of receipt of written acceptance or the first production use of the software by the customer.

For software license arrangements in which the Company acts as a distributor of another company’s product, and in certain circumstances, modifies or enhances the product, revenues are recorded on a gross basis. These include arrangements in which the Company takes control of the products and is responsible for providing the product or service. For software license arrangements in which the Company acts as a sales agent for another company’s product, revenues are recorded on a net basis. These include arrangements in which the Company does not take control of products and is not responsible for providing the product or service.

For software license arrangements in which the Company utilizes a third-party distributor or sales agent, the Company recognizes revenue upon transfer of control of the software license(s) to the third-party distributor or sales agent.

~~The Company’s software license arrangements typically provide the customer with a standard90-day~~ assurance-type warranty. These warranties do not represent an additional performance obligation as services beyond assuring that the software license complies with agreed-upon specifications are not provided.

Software license arrangements typically include an initial post contract customer support (maintenance or “PCS”) term of one year with subsequent renewals for additional years within the initial license period. The Company’s promise to those customers who elect to purchase PCS represents a stand-ready performance obligation that is distinct from the license performance obligation and recognized over the PCS term.

The Company also provides various professional services to customers with software licenses. These include project management, software implementation, and software modification services. Revenues from arrangements to provide professional services are generally distinct from the other promises in the contract(s) and are recognized as the related services are performed. Consideration payable under these arrangements is either fixed fee or on a~~time-and-materials~~ ~~basis, which represents variable consideration that must be estimated using the most likely amount based on the range of hours expected to be incurred in providing the services.~~

The Company estimates the standalone selling price (“SSP”) for maintenance and professional services based on observable standalone sales. The Company applies the residual approach to estimate the SSP for software licenses.

Refer to Note ~~10,~~11, Segment Information, for further details, including disaggregation of revenue based on primary solution category and geographic location.

~~Significant Judgments~~

The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information.

~~The Company also applies judgment in determining the term of an arrangement when early termination rights are provided to the customer.~~

The Company’s software license arrangements with its customers often include multiple promises to transfer licensed software products and services. Determining whether the products and/or services are distinct performance obligations that should be accounted for separately may require significant judgment.

The Company’s SaaS and PaaS arrangements may include variable consideration in the form of usage-based fees. If the arrangement that includes variable consideration in the form of usage-based fees does not meet the allocation exception for variable consideration, the Company estimates the amount of variable consideration at the outset of the arrangement using either the expected value or most likely amount method, depending on the specifics of each arrangement. These estimates are constrained to the extent that it is probable that a significant reversal of incremental revenue will not occur and are updated each reporting period as additional information becomes available.

Judgment is used in determining: (1) whether the financing component in a software license agreement is significant and, if so, (2) the discount rate used in calculating the significant financing component. The Company assesses the significance of the financing component based on the ratio of license fees paid over time to total license fees. If determined to be significant, the financing component is calculated using a rate that discounts the license fees to the cash selling price.

Judgment is also used in assessing whether the extension of payment terms in a software license arrangement results in variable consideration and, if so, the amount to be included in the transaction price. The Company applies the portfolio approach to estimating the amount of variable consideration in these arrangements using the most likely amount method that is based on the Company’s historical collection experience under similar arrangements.

Significant judgment is required to determine the SSP for each performance obligation, the amount allocated to each performance obligation and whether it depicts the amount that the Company expects to receive in exchange for the related product and/or service. As the selling prices of the Company’s software licenses are highly variable, the Company estimates SSP of its software licenses using the residual approach when the software license is sold with other services and observable SSPs exist for the other services. The Company uses a range of amounts to estimate SSP for maintenance and services. These ranges are based on standalone sales and vary based on the type of service and geographic region. If the SSP of a performance obligation is not directly observable, the Company will maximize observable inputs to determine its SSP.

~~Contract Balances~~

Timing of revenue recognition may differ from the timing of invoicing to customers. The Company records an accrued receivable when revenue is recognized prior to invoicing and the Company’s right to consideration only requires the passage of time, or deferred revenue when revenue is recognized subsequent to invoicing.

Total receivables represent amounts billed and amounts earned that are to be billed in the future (i.e., accrued receivables). Included in accrued receivables are services, software as a service ("SaaS"), and ~~SaaS and PaaS~~platform as a service ("PaaS") revenues earned in the current period but billed in the following period, and amounts due under multi-year software license arrangements with extended payment terms for which the Company has an unconditional right to invoice and receive payment insubsequent to invoicing.

Total receivables, net is comprised of the ~~future.~~

   September 30,    December 31,
(in thousands)
   2018    2017
Billed Receivables
   $ 172,395    $ 240,137
Allowance for doubtful accounts
   (3,598 )    (4,799 )




Billed Receivables, net
   $ 168,797    $ 235,338




Accrued receivables
   324,019    27,507
Significant financing component
   (31,343 )    —




Total accrued receivables, net
   292,676    27,507
Less current accrued receivables
   120,532    27,507
Less current significant financing component
   (9,688 )    —




Total long-term accrued receivables, net
   $ 181,832    $ —




Total receivables, net
   $ 461,473    $ 262,845




following (in thousands):



	June 30, 2019			December 31, 2018
Billed receivables	$	158,052		$	239,275
Allowance for doubtful accounts	(3,781		)	(3,912		)
Billed receivables, net	154,271			235,363
Accrued receivables	341,417			336,858
Significant financing component	(31,782		)	(35,029		)
Total accrued receivables, net	309,635			301,829
Less: current accrued receivables	142,248			123,053
Less: current significant financing component	(10,126		)	(10,234		)
Total long-term accrued receivables, net	177,513			189,010
Total receivables, net	$	463,906		$	537,192

No customer accounted for more than 10% of the Company’s consolidated receivables balance as of ~~September~~June 30, ~~2018~~2019, or December 31, ~~2017.~~

2018.

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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.

Changes in deferred revenue were as ~~follows:~~

   Deferred
(in thousands)
   Revenue
Balance, January 1, 2018
   $ 145,344
Deferral of revenue
   145,573
Recognition of deferred revenue
   (144,935 )
Foreign currency translation
   (3,525 )


Balance, September 30, 2018
   $ 142,457

follows (in thousands):



Balance, December 31, 2018	$	156,135
Deferral of revenue	79,147
Recognition of deferred revenue	(97,104		)
Foreign currency translation	255
Balance, June 30, 2019	$	138,433

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. This does not include:

~~(1)~~

~~Revenue that will be recognized in future periods from capacity overages that are accounted for as a usage-based royalty.~~

~~(2)~~

~~SaaS and PaaS revenue from variable consideration that will be recognized in accordance with the ‘right to invoice’ practical expedient.~~

~~(3)~~

~~SaaS and PaaS revenue from variable consideration that will be recognized in accordance with the direct allocation method.~~

Revenue that will be recognized in future periods from capacity overages that are accounted for as a usage-based royalty.

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

SaaS and PaaS revenue from variable consideration that will be recognized in accordance with the direct allocation method.

Revenue allocated to remaining performance obligations was ~~$599.9~~$647.8 million as of ~~September~~June 30, ~~2018,~~2019, of which the Company expects to recognize approximately ~~48%~~45% over the next 12 months and the remainder thereafter.

During the three and ~~nine-month periods~~six months ended ~~September~~June 30, 2019 and 2018, ~~the~~ revenue recognized by the Company from performance obligations satisfied in previous periods was not ~~material.~~

~~Costs~~significant.

3. Acquisition

Speedpay

On May 9, 2019, the Company acquired Speedpay, a subsidiary of The Western Union Company (“Western Union”), for $755.3 million in cash, including working capital adjustments, pursuant to ~~Obtain~~a Stock Purchase Agreement, among the Company, Western Union, and ~~Fulfill~~ACI Worldwide Corp., a ~~Contract~~

wholly owned subsidiary of the Company. The Company ~~accounts~~has included the financial results of Speedpay in the condensed consolidated financial statements from the date of acquisition. The combination of the Company and Speedpay bill pay solutions serves more than 4,000 customers across the U.S., bringing expanded reach in existing and complementary market segments such as consumer finance, insurance, healthcare, higher education, utilities, government, and mortgage. The acquisition of Speedpay increases the scale of the Company’s On Demand platform business and allows the acceleration of platform innovation through increased research and development and investment in ACI On Demand's platform infrastructure.

To fund the acquisition, the Company amended its existing Credit Agreement, dated February 24, 2017, for ~~costs~~an additional $500.0 million senior secured term loan (“Delayed Draw Term Loan”), in addition to ~~obtain and fulfill its contracts in accordance~~drawing $250.0 million on the available Revolving Credit Facility. See Note 4, Debt, for terms of the Credit Agreement. The remaining acquisition consideration was funded with ~~ASC 340,~~~~Other Assets and Deferred Costs~~.

cash on hand.

The Company ~~capitalizes certain~~expensed approximately $16.6 million and $21.3 million of ~~its sales commissions that meet the definition of incremental~~ costs of obtaining a contract and for which the amortization period is greater than one year. The costs associated with those sales commissions is capitalized during the period in which the Company becomes obligated to pay the commissions and is amortized over the period in which the related ~~products or services are transferred~~ to the ~~customer. As~~acquisition of ~~September~~Speedpay for the three and six months ended June 30, ~~2018, $0.6 million~~2019, respectively. These costs, which consist primarily of investment bank, consulting, and ~~$15.4 million of these costs~~legal fees, are included in ~~other current~~general and ~~othernon-current~~ ~~assets, respectively, on~~administrative expenses in the accompanying condensed consolidated ~~balance sheets. During~~statements of operations.

Speedpay contributed approximately $49.3 million in revenue and $7.6 million in operating income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018, the Company recognized $2.1 million and $6.4 million, respectively, of sales commission expense related to the amortization of these costs, which is included in selling and marketing expense.~~

2019.

The Company capitalizes costs incurred to fulfill its contracts that: (1) relate directly to the arrangement, (2) are expected to generate resources that will be used to satisfy the Company’s performance obligation under the arrangement, and (3) are expected to be recovered through revenue generated under the arrangement. Contract fulfillment costs are expensed as the Company transfers the related services to the customer. As of September 30, 2018, $0.1 million and $12.6 million of these costs are included in other current and other~~non-current~~ assets, respectively, on the condensed consolidated balance sheets. The amounts capitalized primarily relate to direct costs that enhance resources under the Company’s SaaS and PaaS arrangements. During the three and nine months ended September 30, 2018, the Company recognized $1.1 million and $3.5 million, respectively, of expense related to the amortization of these costs, which is included in cost of revenue.

~~Financial Statement Effect of Applying ASC 606~~

~~As the modified retrospective transition method does not result in recast of the prior year financial statements, ASC 606 requires~~consideration paid by the Company to ~~provide additional disclosures for~~complete the ~~amount by which each financial statement line item is affected by adoption of~~acquisition has been allocated preliminarily to the ~~standard~~assets acquired and ~~explanation of the reasons for significant changes.~~

~~The financial statement line items affected by adoption of ASC 606 are as follows:~~

   September 30, 2018
(in thousands)
   As Reported    Without
application of
ASC 606    Effect of Change
Higher / (Lower)
Assets

Receivables, net of allowances
   $ 279,641    $ 202,829    $ 76,812
Recoverable income taxes
   8,233    6,711    1,522
Prepaid expenses
   25,875    26,616    (741 )
Other current assets
   23,244    22,844    400
Accrued receivables, net
   181,832    —      181,832
Deferred income taxes, net
   28,179    67,261    (39,082 )
Other noncurrent assets
   54,477    40,275    14,202
Liabilities

Deferred revenue
   93,668    108,162    (14,494 )
Income taxes payable
   1,600    153    1,447
Other current liabilities
   60,075    60,310    (235 )
Deferred income taxes, net
   26,372    6,161    20,211
Stockholders’ equity

Total stockholders’ equity
   962,938    734,925    228,013

   For the Three Months Ended September 30, 2018
(in thousands)
   As Reported    Without
application of
ASC 606    Effect of Change
Higher / (Lower)
Revenues

Software as a service and platform as a service
   $ 104,519    $ 103,764    $ 755
License
   68,964    69,052    (88 )
Maintenance
   54,373    54,659    (286 )
Services
   17,669    18,184    (515 )
Operating expenses

Selling and marketing
   28,252    26,397    1,855
Other income (expense)

Interest income
   2,763    230    2,533
Other, net
   (1,304 )    (1,155 )    (149 )
Income tax provision

Income tax expense (benefit)
   2,012    2,804    (792 )

   For the Nine Months Ended September 30, 2018
(in thousands)
   As Reported    Without
application of
ASC 606    Effect of Change
Higher / (Lower)
Revenues

Software as a service and platform as a service
   $ 322,399    $ 321,897    $ 502
License
   142,565    163,788    (21,223 )
Maintenance
   166,080    166,673    (593 )
Services
   58,786    58,938    (152 )
Operating expenses

Selling and marketing
   93,305    88,667    4,638
Other income (expense)

Interest income
   8,249    601    7,648
Other, net
   (3,036 )    (2,495 )    (541 )
Income tax provision

Income tax expense (benefit)
   1,824    5,371    (3,547 )

~~The following summarizes the significant changes resulting from the adoption of ASC 606 compared to if the Company had continued to recognize revenues under ASC985-605,~~~~Revenue Recognition: Software~~~~(ASC 605).~~

~~Receivables, Deferred Revenue, License Revenue, and Interest Income~~

~~The change in receivables, deferred revenue, license revenue, and interest income is due to a change in the timing and the amount of recognition for software license revenues under ASC 606.~~

~~Under ASC 605, the Company recognized revenue~~liabilities assumed based upon delivery provided (i) there is persuasive evidence of an arrangement, (ii) collection of the fee is considered probable, and (iii) the fee is fixed or determinable. For software license arrangements in which a significant portion of the fee is due more than 12 months after delivery or when payment terms are significantly beyond the Company’s standard business practice, the license fee is deemed not fixed or determinable. For software license arrangements in which the fee is not considered fixed or determinable, the license is recognized as revenue as payments become due and payable, provided all other conditions for revenue recognition have been met.

License revenue under ASC 605 includes revenue from software license arrangements with extended payment terms for which the due and payable pattern of recognition was applied and revenue from renewals of software license arrangements in the period during which the renewal is signed. Under ASC 606, license revenue from these software license arrangements with extended payment terms is accelerated (i.e. upfront recognition) and adjusted for the effects of the financing component, if significant. The significant financing component in these software license arrangements is recognized as interest income over the extended payment period. As many of these software license arrangements were activeestimated fair values as of the date the Company adopted ASC 606, the license fees are included in the Company’s cumulative adjustment to retained earnings. Revenue for license renewals is recognized when the customer can begin to use and benefit from the license, which is generally at the commencement of the ~~license renewal period.~~

~~Other Current Assets, Other Noncurrent Assets,~~acquisition. The allocation of purchase price is based upon external valuation and ~~Selling and Marketing~~

Under ASC 606, certain of the Company’s sales commissions meet the definition of incremental costs of obtaining a contract. Accordingly, these costs are capitalized and the expense is recognized as the related goods or services are transferred to the customer. Prior to the adoption of ASC 606, the Company recognized sales commission expenses as they were incurred.

~~Deferred Income Taxes, Net~~

~~The change in deferred income taxes is primarily due to the deferred tax effects resulting from the adjustment to retained earnings for the cumulative effect of applying ASC 606 to active contracts~~other analyses that have not been completed as of the ~~adoption date.~~

date of this filing, including, but not limited to, certain tax matters, software, intangible assets, and accrued liabilities. Accordingly, the purchase price allocations are preliminary and are subject to future adjustments during the maximum one-year allocation period.

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In connection with the acquisition, the Company recorded the following amounts based upon its preliminary purchase price allocation as of June 30, 2019, which are subject to completion of the valuation and other analyses (in thousands, except weighted average useful lives):



	Amount		Weighted Average Useful Lives
Current assets:
Cash and cash equivalents	$	135
Receivables, net of allowances	18,422
Settlement assets	239,604
Prepaid expenses	317
Other current assets	19,585
Total current assets acquired	278,063
Noncurrent assets:
Goodwill	367,142
Software	113,600		7 years
Customer relationships	208,500		15 years
Trademarks	10,900		5 years
Other noncurrent assets	3,745
Total assets acquired	981,950
Current liabilities:
Accounts payable	6,743
Settlement liabilities	212,892
Employee compensation	1,959
Other current liabilities	3,802
Total current liabilities acquired	225,396
Noncurrent liabilities:
Other noncurrent liabilities	1,219
Total liabilities acquired	226,615
Net assets acquired	$	755,335

Factors contributing to the purchase price that resulted in the goodwill (which is tax deductible) include the acquisition of management, sales, and technology personnel with the skills to market new and existing products of the Company, enhanced product capabilities, complementary products and customers.

Unaudited Pro Forma Financial Information

The ~~adoption~~pro forma financial information in the table below presents the combined results of ~~ASC 606~~operations for ACI and Speedpay as if the acquisition had ~~no impact~~occurred January 1, 2018. The pro forma information is shown for illustrative purposes only and is not necessarily indicative of future results of operations of the Company or results of operations of the Company that would have actually occurred had the transaction been in ~~total~~effect for the periods presented. This pro forma information is not intended to represent or be indicative of actual results had the acquisition occurred as of the beginning of each period, and does not reflect potential synergies, integration costs, or other such costs or savings.

Certain pro forma adjustments have been made to net income (loss) for the three and six months ended June 30, 2019 and 2018, to give effect to estimated adjustments that remove the amortization expense on eliminated Speedpay historical identifiable intangible assets, add amortization expense for the value of acquired identified intangible assets (primarily acquired software, customer relationships, and trademarks), and add estimated interest expense on the Company’s ~~cash flows~~additional Delayed Draw Term Loan and Revolving Credit Facility borrowings. Additionally, certain transaction expenses that are a direct result of the acquisition have been excluded from ~~operations.~~

the three and six months ended June 30, 2019 and 2018.

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



	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019			2018
Pro forma revenue	$	334,077	$	322,407		$	628,136		$	626,691
Pro forma net income (loss)	15,249		(7,382		)	(5,996		)	(13,595		)
Pro forma income (loss) per share:
Basic	$	0.13	$	(0.06	)	$	(0.05	)	$	(0.12	)
Diluted	0.13		(0.06		)	(0.05		)	(0.12		)

Walletron

On May 9, 2019, the Company also completed the acquisition of Walletron, which delivers patented mobile wallet technology. The Company has included the financial results of Walletron in the condensed consolidated financial statements from the date of acquisition, which were not material.

4. Debt

As of ~~September~~June 30, ~~2018,~~2019, the Company had ~~$288.9~~$235.0 million, $775.5 million, and $400.0 million outstanding under its ~~Term~~Revolving Credit Facility, Term Loan, and Senior Notes, respectively, with up to ~~$500.0~~$265.0 million of unused borrowings under the Revolving Credit Facility portion of the Credit Agreement, as amended.

Credit Agreement

On ~~February 24, 2017,~~April 5, 2019, the Company entered into ~~an amended~~the Second Amended and ~~restated credit agreement~~Restated Credit Agreement (the “Credit Agreement”) with ACI Worldwide Corp., ~~replacing~~Official Payments Corporation ("OPAY"), the ~~existing agreement, with a syndicate of financial institutions, as~~ lenders, and Bank of America, N.A. ~~(“BofA”)~~, as ~~Administrative Agent, providing~~administrative agent for ~~revolving loans, swingline loans, letters~~the lenders, to amend and restate the Company's existing agreement, as amended, dated February 24, 2017. The amended Credit Agreement: permitted the Company to borrow up to $500.0 million in the form of ~~credit,~~an additional senior secured term loan; extended the revolver and the existing term loan maturity date from February 24, 2022, to April 5, 2024; increased the maximum consolidated senior secured net leverage ratio covenant from 3.50:1.00 to 3.75:1.00; and increased the maximum consolidated total net leverage ratio covenant from 4.25:1.00 to 5.00:1.00, with subsequent decreases occurring every three quarters thereafter for a ~~term loan.~~ specified period of time; among other things. In connection with amending the Credit Agreement, the Company incurred and paid debt issuance costs of $12.8 million as of June 30, 2019.

The Credit Agreement consists of (a) a five-year $500.0 million senior secured revolving credit facility (the “Revolving Credit Facility”), which includes ~~a sublimit~~sublimits for (1) the issuance of standby letters of credit and ~~a sublimit for~~(2) swingline loans, ~~and $415.0~~(b) a five-year $279.0 million ~~under the five-year~~ senior secured term loan facility (the ~~“Term Credit Facility”~~"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 loans under~~

At the ~~Credit Facility may be made to, and the letters of credit under the Revolving Credit Facility may be issued on behalf of the Company.~~

~~Borrowings~~Company’s option, borrowings under the Credit Facility bear interest at aan annual rate ~~per annum~~ equal to, ~~at the Company’s option,~~ either (a) a base rate determined by reference to the highest of (1) the ~~rate of~~annual interest ~~per annum~~rate publicly announced by the ~~Administrative Agent~~administrative agent as its Prime Rate, (2) the federal funds effective rate plus 1/2 of 1%, ~~and~~or (3) a ~~LIBOR~~London Interbank Offered Rate (“LIBOR”) rate determined by reference to the costs of funds for U.S. dollar deposits for aone-month interest period, adjusted for certain additional costs, plus 1% or (b) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such ~~borrowing~~borrowings, adjusted for certain additional costs, ~~in each case~~ plus an applicable margin. ~~The applicable margin for borrowings under the Credit Facility is, based~~Based on the calculation of the applicable consolidated total leverage ratio, the applicable margin for borrowings under the Credit Facility is between 0.25% to 1.25% with respect to base rate borrowings and between 1.25% and 2.25% with respect to LIBOR rate borrowings. Interest is due and payable monthly. The interest rate in effect ~~at September~~as of June 30, ~~2018,~~2019, for the Credit Facility was ~~3.99%~~4.65%.

~~In addition to paying interest on the outstanding principal under the Credit Facility, the~~

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

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The Company’s obligations under the Credit Facility and cash management arrangements entered into with lenders under the Credit Facility (or affiliates thereof) and the obligations of the subsidiary guarantors are secured by first-priority security interests in substantially all assets of the Company and any guarantor, including 100% of the capital stock of ACI Worldwide Corp. and each domestic subsidiary of the Company, each domestic subsidiary of any guarantor, and 65% of the voting capital stock of each foreign subsidiary of the Company that is directly owned by the Company or a guarantor, in each case subject to certain exclusions set forth in the credit documentation governing the Credit Facility.

The collateral agreement of the Credit Agreement, as amended, released the lien on certain assets of OPAY, our electronic bill presentment and payment affiliate, to allow OPAY to comply with certain eligible securities and unencumbered asset requirements related to money transmitter or transfer license rules and regulations.

The Credit Agreement contains a number of covenants that, among other things and subject to certain exceptions, restrict the Company’s ~~ability~~ and ~~as applicable, the~~its subsidiaries' ability ~~of its subsidiaries~~ to: create, incur, assume or suffer to exist any additional indebtedness; create, incur, assume or suffer to exist any liens; enter into agreements and other arrangements that include negative pledge clauses; pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated indebtedness; create restrictions on the payment of dividends or other distributions by subsidiaries; make investments, loans, advances and acquisitions; merge, consolidate or enter into any similar combination or sell assets, including equity interests of the subsidiaries; enter into sale and leaseback transactions; directly or indirectly engage in transactions with affiliates; alter in any material respect the character or conduct of the business; enter into amendments of or waivers under subordinated indebtedness, organizational documents and certain other material agreements; and hold certain assets and incur certain liabilities.

The Credit Agreement also contains certain customary affirmative covenants and events of default. If an event of default, as specified in the Credit Agreement, shall occur and be continuing, the Company may be required to repay all amounts outstanding under the Credit Facility.

Senior Notes

On August 21, 2018, the Company completed a $400.0 million offering of ~~5.750% Senior~~the 2026 Notes ~~due 2026 (the “2026 Notes”)~~ at an issue price of 100% of the principal amount, in a private placement for resale to qualified institutional buyers. The 2026 Notes bear interest at aan annual rate of 5.750% ~~per year,~~, payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2019.

Interest ~~will accrue~~accrued from August 21, 2018. The 2026 Notes will mature on August 15, 2026. ~~In connection with the issuance of the 2026 Notes, the Company incurred and paid~~

Maturities on debt ~~issuance costs of $7.3 million~~outstanding as of ~~September~~June 30, ~~2018.~~

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

~~Maturities on long-term debt outstanding at September 30, 2018~~2019, are as ~~follows:~~

Fiscal year ending December 31,

(in thousands)
2018
   $ 3,958
2019
   23,747
2020
   23,747
2021
   31,662
2022
   205,803
Thereafter
   400,000


Total
   $ 688,917

The Credit Agreement and 2026 Notes also contain certain customary mandatory prepayment provisions. If certain events, as specified in the Credit Agreement or 2026 Notes agreement, shall occur, the Company may be required to repay all or a portion of the amounts outstanding under the Credit Facility or 2026 Notes.

follows (in thousands):



Fiscal Year Ending December 31,
Remainder of 2019	$	19,475
2020	38,950
2021	38,950
2022	50,431
2023	69,906
Thereafter	1,192,823
Total	$	1,410,535

The Credit Facility will mature on ~~February 24, 2022~~April 5, 2024, and the 2026 Notes will mature on August 15, 2026. The Revolving Credit Facility and 2026 Notes do not ~~amortize and the~~amortize. The Term ~~Credit Facility does~~Loans do amortize, with principal payable in consecutive quarterly installments.

The Credit Agreement and 2026 Notes contain certain customary affirmative covenants and negative covenants that limit or restrict, subject to certain exceptions, the incurrence of liens, indebtedness of subsidiaries, mergers, advances, investments, acquisitions, transactions with affiliates, change in nature of business and the sale of the assets. In addition, the Credit Agreement and 2026 Notes contain certain customary mandatory prepayment provisions. The Company is also required to maintain a consolidated leverage ratio at or below a specified amount and an interest coverage ratio at or above a specified amount. ~~If an event of default, as~~As specified in the Credit Agreement and 2026 Notes agreement, ~~shall~~if certain events occur and ~~be continuing,~~continue, the Company may be required to repay all amounts outstanding under the Credit Facility and 2026 Notes. As of ~~September~~June 30, ~~2018,~~2019, and at all times during the period, the Company was in compliance with its financial debt covenants.

(in thousands)
   As of September 30,
2018    As of December 31,
2017
Term credit facility
   $ 288,917    $ 394,250
Revolving credit facility
   —      2,000
5.750% Senior Notes, due August 2026
   400,000    —
6.375% Senior Notes, due August 2020
   —      300,000
Debt issuance costs
   (13,993 )    (10,521 )




Total debt
   674,924    685,729
Less current portion of term credit facility
   21,768    20,750
Less current portion of debt issuance costs
   (3,003 )    (2,964 )




Total long-term debt
   $ 656,159    $ 667,943

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

June 30,
2019 December 31,
2018
Term loans $ 775,535
$ 284,959
Revolving credit facility 235,000
—
5.750% Senior notes, due August 2026 400,000
400,000
Debt issuance costs (24,350 ) (13,203 )
Total debt 1,386,185
671,756
Less: current portion of term loans 38,950
23,747
Less: current portion of debt issuance costs (4,861 ) (2,980 )
Total long-term debt $ 1,352,096
$ 650,989

Overdraft Facility

In 2019, the Company and OPAY entered in to a $140.0 million uncommitted overdraft facility with Bank of America, N.A. The overdraft facility bears interest at LIBOR plus 0.875% based on the Company’s average outstanding balance and the frequency in which overdrafts occur. The overdraft facility acts as a secured loan under the terms of the Credit Agreement to provide an additional funding mechanism for timing differences that can occur in the bill payment settlement process. Amounts outstanding on the overdraft facility are included in other current liabilities in the condensed consolidated balance sheet. As of June 30, 2019, there was no amount outstanding on the overdraft facility.

Other

During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, the Company financed certain multi-year license agreements for ~~internally-used~~internal-use software for ~~$11.9~~$10.4 million, with annual payments through ~~June 2023.~~April 2022. As of ~~September~~June 30, ~~2018, $11.6~~2019, $19.8 million is outstanding under these and other license agreements previously entered into, of which ~~$4.7~~$11.6 million and ~~$6.9~~$8.2 million is included in other current liabilities and other noncurrent liabilities, respectively, in the ~~accompanying~~ condensed consolidated balance sheet. ~~The $11.6 million has~~Upon execution, these arrangements have been treated as anon-cash ~~investing~~ investment and financing activity for purposes of the condensed consolidated ~~statement~~statements of cash flows.

5. Stock-Based Compensation Plans

Employee Stock Purchase Plan

~~On April 6, 2017, the Board of Directors approved~~

Shares issued under the 2017 Employee Stock Purchase Plan (“2017 ESPP”), which was approved by shareholders at the 2017 Annual Shareholder meeting. The 2017 ESPP provides employees with an opportunity to purchase shares of common stock in the Company. The 1999 Employee Stock Purchase Plan terminated upon the August 1, 2017 effective date of the 2017 ESPP. Under the Company’s 2017 ESPP a total of 3,000,000 shares of the Company’s common stock have been reserved for issuance to eligible employees. Participating employees are permitted to designate up to the lesser of $25,000 or 10% of their annual base compensation, for the purchase of common stock under the ESPP. Purchases under the ESPP are made one calendar month after the end of each fiscal quarter. The price for shares of common stock purchased under the ESPP is 85% of the stock’s fair market value on the last business day of the three-month participation period. Shares issued under the ESPP during the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018, totaled 60,362 and ~~2017, totaled 112,549 and 121,765,~~77,118, respectively.

~~Stock-Based Payments~~

Stock Options

A summary of stock ~~options issued pursuant to the Company’s stock incentive plans~~option activity is as follows:

   Number of
Shares    Weighted-
Average
Exercise
Price    Weighted-
Average
Remaining
Contractual
Term (Years)    Aggregate Intrinsic
Value of In-the-
Money Options
Outstanding as of December 31, 2017
   6,162,717    $ 16.83
Granted
   170,455    23.36
Exercised
   (1,262,994 )    14.57
Forfeited
   (81,881 )    18.62





Outstanding as of September 30, 2018
   4,988,297    $ 17.60    6.30    $ 52,585,398








Exercisable as of September 30, 2018
   3,533,425    $ 16.84    5.64    $ 39,930,860



	Number of Shares		Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value of In-the-Money Options ($)
Outstanding as of December 31, 2018	4,864,836		$	17.76
Exercised	(365,808	)	15.90
Forfeited	(3,496	)	17.89
Outstanding as of June 30, 2019	4,495,532		$	17.91	5.77	$	73,859,896
Exercisable as of June 30, 2019	3,951,380		$	17.59	5.54	$	66,188,229

The ~~weighted-average~~weighted average grant date fair value of stock options granted during the ~~nine~~six months ended ~~September~~June 30, 2018, ~~and 2017~~ was ~~$7.03 and $6.24, respectively. The Company issued treasury shares for the exercise of stock options during the nine months ended September 30, 2018 and 2017.~~$7.03. The total intrinsic value of stock options exercised during the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018, ~~and 2017~~ was ~~$13.6~~$6.0 million and ~~$6.6~~$11.3 million, respectively.

There were no stock options granted during the six months ended June 30, 2019.

Table of contents

The fair value of options ~~that do not vest based on the achievement of certain market conditions~~ granted during the ~~nine~~six months ended ~~September~~June 30, 2018, ~~and 2017~~ were estimated on the date of grant using the~~Black-Scholesoption-pricing~~ ~~model, a pricing~~ Black-Scholes option-pricing model, acceptable under ~~U.S. GAAP~~ASC 718, Compensation – Stock Compensation (“ASC 718”), with the following ~~weighted-average~~weighted average assumptions:

   Nine Months Ended Nine Months Ended
   September 30, 2018 September 30, 2017
Expected life (years)
   5.6 5.6
Interest rate
   2.7 % 1.9 %
Volatility
   26.4 % 29.4 %
Dividend yield
   —   —



	Six Months Ended June 30, 2018
Expected life (years)	5.6
Risk-free interest rate	2.7	%
Expected volatility	26.4	%
Expected dividend yield	—

Expected volatilities are based on the Company’s historical common stock volatility, derived from historical stock price data for ~~historical~~ periods commensurate with the options’ expected life. The expected life ~~is the average number~~ of ~~years that the Company estimated that~~ the options ~~will~~granted represents the period of time options are expected to be outstanding, based primarily on historical employee option exercise behavior. The risk-free interest rate is based on the implied yield currently available on ~~United States~~U.S. Treasury zero coupon ~~issues~~bonds issued with a term equal to the expected ~~term~~life at the date of grant of the options. The expected dividend yield is zero, as the Company has historically ~~not~~ paid no dividends and does not anticipate dividends to be paid in the future.

Long-term Incentive Program Performance Share Awards

A summary of nonvested long-term incentive program performance share awards (“LTIP performance shares”) ~~outstanding as of September 30, 2018, and changes during the period are~~is as follows:

Nonvested LTIP Performance Shares
   Number of
Shares at
Expected
Attainment    Weighted-
Average
Grant Date
Fair Value
Nonvested as of December 31, 2017
   1,125,035    $ 18.94
Forfeited
   (89,582 )    19.24




Nonvested as of September 30, 2018
   1,035,453    $ 18.92

Number of Shares
at Expected Attainment

Weighted Average
Grant Date Fair Value
Nonvested as of December 31, 2018 540,697
$ 19.83
Forfeited (16,319 ) 20.12
Change in attainment 377,557
20.22
Nonvested as of June 30, 2019 901,935
$ 19.99

During the six months ended June 30, 2019, the Company revised the expected attainment rates for all outstanding LTIP performance shares due to changes in forecasted sales and operating income, resulting in additional stock-based compensation expense of approximately $6.0 million for the three and six months ended June 30, 2019.

Restricted Share Awards

A summary of nonvested restricted share awards (“RSAs”) ~~as of September 30, 2018, and changes during the period are~~is as follows:

Nonvested Restricted Share Awards
   Number of
Restricted
Share Awards    Weighted-Average Grant
Date Fair Value
Nonvested as of December 31, 2017
   503,237    $ 20.63
Vested
   (231,473 )    21.20
Forfeited
   (47,411 )    19.88




Nonvested as of September 30, 2018
   224,353    $ 20.18



	Number of Shares		Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2018	213,337		$	20.21
Vested	(104,763	)	20.21
Forfeited	(9,068	)	20.12
Nonvested as of June 30, 2019	99,506		$	20.21

During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, a total of ~~231,473 RSA shares~~104,763 RSAs vested. The Company withheld ~~41,973~~32,371 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

~~Performance-Based Restricted Share~~

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Total Shareholder Return Awards

A summary of nonvested ~~Performance-Based~~ total shareholder return awards (“TSRs”) is as follows:



	Number of Shares		Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2018	718,931		$	29.25
Granted	436,674		47.90
Forfeited	(18,050	)	36.06
Nonvested as of June 30, 2019	1,137,555		$	36.30

The fair value of TSRs granted during the six months ended June 30, 2019 and 2018, were estimated on the date of grant using the Monte Carlo simulation model, acceptable under ASC 718, using the following weighted average assumptions:



	Six Months Ended June 30,
	2019		2018
Expected life (years)	2.8		2.9
Risk-free interest rate	2.5	%	2.4	%
Expected volatility	29.3	%	28.0	%
Expected dividend yield	—		—

Restricted Share ~~Awards~~Units

A summary of nonvested restricted share unit awards (“~~PBRSAs”~~RSUs”) ~~as of September 30, 2018, and changes during the period are~~is as follows:

Nonvested Performance-Based Restricted Share Awards
   Number of
Performance-Based
Restricted
Share Awards    Weighted-Average Grant
Date Fair Value
Nonvested as of December 31, 2017
   173,636    $ 24.41
Vested
   (173,636 )    24.41




Nonvested as of September 30, 2018
   —      $ —



	Number of Shares		Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2018	651,045		$	23.82
Granted	679,480		33.06
Vested	(257,982	)	24.13
Forfeited	(22,465	)	26.60
Nonvested as of June 30, 2019	1,050,078		$	29.66

During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, a total of ~~173,636 PBRSA shares~~257,982 RSUs vested. The Company withheld ~~64,699~~57,403 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

~~Total Shareholder Return Awards~~

During the nine months ended September 30, 2018 and 2017, the Company granted total shareholder return (“TSR”) awards, pursuant to the 2016 Equity and Performance Incentive Plan. TSRs are performance shares that are earned, if at all, based upon the Company’s total shareholder return as compared to a group of peer companies over a three-year performance period. The award payout can range from 0% to 200%. In order to determine the grant date fair value of the TSRs, a Monte Carlo simulation model is used. The Company recognizes compensation expense for TSRs over a three-year performance period based on the grant date fair value.

~~The grant date fair value of the TSRs was estimated using the following weighted-average assumptions:~~

   Nine Months Ended Nine Months Ended
   September 30, 2018 September 30, 2017
Expected life (years)
   2.9 2.9
Interest rate
   2.4 % 1.5 %
Volatility
   28.0 % 26.5 %
Dividend Yield
   —   —

~~A summary of nonvested TSRs outstanding as of September 30, 2018, and changes during the period are as follows:~~

Nonvested Total Shareholder Return Awards
   Number of
Shares at
Expected
Attainment    Weighted-
Average
Grant Date
Fair Value
Nonvested as of December 31, 2017
   143,649    $ 24.37
Granted
   541,214    31.31
Forfeited
   (33,970 )    29.90




Nonvested as of September 30, 2018
   650,893    $ 29.85

~~Restricted Share Units~~

During the nine months ended September 30, 2018, the Company granted restricted share units (“RSUs”) awards, pursuant to the 2016 Equity and Performance Incentive Plan. The awards generally have requisite service periods of three years and vest in increments of 33% on the anniversary of the grant dates. Under each arrangement, stock is issued without direct cost to the employee on the vesting date. The Company estimates the fair value of the RSUs based upon the market price of the Company’s stock at the date of grant. The Company recognizes compensation expense for RSUs on a straight-line basis over the requisite service period.

~~A summary of nonvested RSUs as of September 30, 2018, and changes during the period are as follows:~~

Nonvested Restricted Share Units
   Number of
Restricted
Share Units    Weighted-
Average Grant
Date Fair Value
Nonvested as of December 31, 2017
   —      $ —
Granted
   714,123    23.81
Vested
   (10,000 )    25.72
Forfeited
   (38,739 )    23.36




Nonvested as of September 30, 2018
   665,384    $ 23.81

~~During the nine months ended September 30, 2018, a total of 10,000 RSU shares vested.~~

As of ~~September~~June 30, ~~2018,~~2019, there were unrecognized compensation costs of ~~$14.3~~$27.4 million related to ~~the~~nonvested TSRs, ~~$12.6~~$27.4 million related to nonvested RSUs, ~~$5.8~~$3.8 million related to ~~the~~nonvested LTIP performance shares, ~~$3.7~~$1.3 million related to nonvested RSAs, and $0.8 million related to nonvested stock options, ~~and $3.2 million related to the nonvested RSAs,~~ which the Company expects to recognize over ~~weighted-average~~weighted average periods of ~~2.3~~2.1 years, ~~2.3~~1.8 years, ~~1.3~~0.7 years, ~~0.9~~0.7 years, and ~~1.4~~0.7 years, respectively.

The Company recorded stock-based compensation ~~expenses~~expense recognized under ASC 718~~Compensation – Stock Compensation~~, for the three months ended ~~September~~June 30, 2019 and 2018, ~~and 2017, related to stock options, LTIP performance shares, RSAs, PBRSAs, TSR shares, RSUs, and the ESPP~~ of ~~$6.5~~$14.4 million and ~~$8.1~~$7.7 million, respectively, with corresponding tax benefits of ~~$1.5~~$2.8 million and ~~$2.7~~$1.2 million, respectively. The Company recorded stock-based compensation expense recognized under ASC 718 for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018, ~~and 2017,~~ of ~~$20.6~~$21.0 million and ~~$22.7~~$14.1 million, respectively, with the corresponding tax benefits of ~~$3.6~~$4.0 million and ~~$7.7~~$2.2 million, respectively.

6. Software and Other Intangible Assets

~~At September~~

As of June 30, 2018, software net book value totaling $147.3 million, net of $250.0 million of accumulated amortization, includes the net book value of software marketed for external sale of $30.9 million. The remaining software net book value of $116.4 million is comprised of various software that has been acquired or developed for internal use.

~~At December 31, 2017,~~2019, software net book value totaled ~~$155.4~~$246.3 million, net of ~~$230.7~~$275.6 million of accumulated amortization. Included in this net book value amount is software ~~marketed~~ for ~~external sale~~resale of ~~$40.9 million. The remaining~~$21.5 million and software ~~net book value of $114.5 million is comprised of various software that has been~~ acquired or developed for internal ~~use.~~

~~Quarterly amortization~~use of $224.8 million.

Table of contents

As of December 31, 2018, software net book value totaled $137.2 million, net of $252.2 million of accumulated amortization. Included in this net book value amount is software for resale of $27.5 million and software acquired or developed for internal use of $109.7 million.

Amortization of software ~~marketed~~ for ~~external sale~~resale is computed using the greater of (a) the ratio of current revenues to total ~~estimated~~current and future revenues expected to be derived from the software or (b) the straight-line method over an estimated useful life of generally three to ten years. Software for resale amortization expense recorded induring the three months ended ~~September~~June 30, 2019 and 2018, ~~and 2017,~~ totaled ~~$2.6~~$3.0 million and ~~$3.1~~$3.4 million, respectively. Software for resale amortization expense recorded in the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018, totaled $6.0 million and ~~2017, totaled $9.6 million.~~$7.0 million, respectively. These software amortization expense amounts are reflected in cost of revenue in the condensed consolidated statements of operations.

~~Quarterly amortization~~

Amortization of software for internal use is computed using the straight-line method over an estimated useful life of generally three to ten years. Software for internal use ~~includes software acquired through acquisitions that is used to provide certain of our SaaS and PaaS offerings. Amortization of software for internal use in~~amortization expense recorded during the three months ended ~~September~~June 30, 2019 and 2018, ~~and 2017,~~ totaled ~~$10.2~~$13.3 million and ~~$11.5~~$10.3 million, respectively. ~~Amortization of software~~Software for internal use inamortization expense recorded during the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018, ~~and 2017,~~ totaled ~~$31.0~~$23.7 million and ~~$34.1~~$20.8 million, respectively. These software amortization expense amounts are ~~included~~reflected in depreciation and amortization in the condensed consolidated statements of operations.

The carrying amount and accumulated amortization of the Company’s other intangible assets ~~that were~~ subject to amortization at each balance sheet date are as ~~follows:~~

(in thousands)
   September 30, 2018    December 31, 2017
   Gross
Carrying
Amount    Accumulated
Amortization Net Balance    Gross
Carrying
Amount    Accumulated
Amortization Net Balance
Customer relationships
   $ 300,782    $ (128,367 ) $ 172,415    $ 305,218    $ (116,677 ) $ 188,541
Trademarks and tradenames
   16,450    (14,808 ) 1,642    16,646    (13,906 ) 2,740








   $ 317,232    $ (143,175 ) $ 174,057    $ 321,864    $ (130,583 ) $ 191,281

follows (in thousands):



	June 30, 2019							December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Balance		Gross Carrying Amount		Accumulated Amortization			Net Balance
Customer relationships	$	506,831	$	(143,307	)	$	363,524	$	297,991	$	(131,187	)	$	166,804
Trademarks and tradenames	27,253		(15,869		)	11,384		16,348		(15,025		)	1,323
Total other intangible assets	$	534,084	$	(159,176	)	$	374,908	$	314,339	$	(146,212	)	$	168,127

Other intangible assets amortization expense ~~for~~during the three months ended ~~September~~June 30, 2019 and 2018, ~~and 2017,~~ totaled ~~$4.7~~$7.6 million and ~~$4.9~~$4.8 million, respectively. Other intangible assets amortization expense for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018, ~~and 2017,~~ totaled ~~$14.4~~$13.1 million and ~~$14.5~~$9.7 million, respectively.

Based on capitalized ~~software and other~~ intangible assets ~~at September~~as of June 30, ~~2018,~~2019, estimated amortization expense ~~for~~amounts in future fiscal years isare as ~~follows:~~

Fiscal Year Ending December 31,
   Software
Amortization    Other
Intangible
Assets
Amortization
(in thousands)
Remainder of 2018
   $ 13,724    $ 4,670
2019
   47,416    18,325
2020
   37,964    17,438
2021
   24,930    16,939
2022
   11,957    16,789
2023
   6,306    16,478
Thereafter
   5,019    83,418




Total
   $ 147,316    $ 174,057




follows (in thousands):



Fiscal Year Ending December 31,	Software		Other Intangible Assets
Remainder of 2019	$	35,197	$	18,830
2020	62,338		37,046
2021	49,336		36,555
2022	31,603		36,409
2023	23,123		36,107
Thereafter	44,717		209,961
Total	$	246,314	$	374,908

7. Corporate Restructuring and Other Organizational Changes

~~The components~~

A summary of ~~corporate restructuring and other reorganization activities are included in~~ the ~~following table:~~

(in thousands)
   Facility
Closures
Balance, December 31, 2017
   $ 5,945
Amounts paid during the period
   (1,342 )
Foreign currency translation
   (48 )


Balance, September 30, 2018
   $ 4,555

facility closures liability is as follows (in thousands):



Balance, December 31, 2018	$	4,127
Amounts paid during the period	(777		)
Foreign currency translation adjustments	2
Balance, June 30, 2019	$	3,352

Table of contents

Of the ~~$4.6~~$3.4 million ~~facility closure~~restructuring liability, $1.6 million and ~~$3.0~~$1.8 million isare recorded in other current liabilities and ~~noncurrent~~operating lease liabilities, respectively, in the ~~accompanying~~ condensed consolidated balance sheet ~~at September~~as of June 30, ~~2018.~~

7. 2019.

8. Common Stock and Treasury Stock

In 2005, the ~~Company’s Board of Directors (“the Board”)~~board approved a stock repurchase program authorizing the Company, as market and business conditions warrant, to acquire its common stock and periodically ~~authorizes~~authorize additional funds for the program. In February 2018, the ~~Board~~board approved the repurchase of the Company's common stock for up to $200.0 million, ~~for~~in place of the ~~stock repurchase program.~~

remaining purchase amounts previously authorized.

The Company repurchased ~~2,346,427~~23,802 shares for ~~$54.5~~$0.6 million under the program during the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. Under the program to date, the Company has repurchased ~~44,129,393~~44,153,195 shares for approximately ~~$547.8~~$548.5 million. ~~The~~As of June 30, 2019, the maximum remaining amount authorized for purchase under the stock repurchase program was ~~$176.6 million as of September 30, 2018.~~

8. $176.0 million.

9. Earnings ~~(loss)~~(Loss) Per Share

Basic earnings (loss) per share is computed in accordance with ASC 260, Earnings per Share, based on ~~the basis of~~ weighted average outstanding common shares. Diluted earnings (loss) per share is computed based on ~~the basis of~~ basic weighted average outstanding common shares adjusted for the dilutive effect of stock options and ~~other outstanding dilutive securities.~~

RSUs.

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
September 30,    Nine Months Ended
September 30,
   2018    2017    2018    2017
Weighted average shares outstanding:

Basic weighted average shares outstanding
   115,889    118,254    115,615    117,096
Add: Dilutive effect of stock options
   1,603    1,489    —      —








Diluted weighted average shares outstanding
   117,492    119,743    115,615    117,096



	Three Months Ended June 30,		Six Months Ended June 30,
	2019	2018	2019	2018
Weighted average shares outstanding:
Basic weighted average shares outstanding	116,586	115,548	116,287	115,595
Add: Dilutive effect of stock options and RSUs	2,200	—	—	—
Diluted weighted average shares outstanding	118,786	115,548	116,287	115,595

The diluted earnings (loss) per share computation excludes ~~1.2~~2.1 million and ~~3.3~~7.9 million options to purchase shares, RSAs, RSUs, and contingently issuable shares ~~and restricted share awards~~ during the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, as their effect would be anti-dilutive. The diluted loss per share computation excludes ~~8.0~~7.5 million and ~~10.1~~8.3 million options to purchase shares, RSAs, RSUs, and contingently issuable shares ~~and restricted share awards~~ during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, as their effect would be anti-dilutive.

Common stock outstanding as of ~~September~~June 30, ~~2018~~2019, and December 31, ~~2017,~~2018, was ~~115,981,696~~116,684,869 and ~~117,096,731,~~116,123,361, respectively.

10. Other, Net

Other, net

is comprised of foreign currency transaction gains of $1.4 million and losses of $1.7 million for the three months ended June 30, 2019 and 2018, respectively. Other, net is comprised of foreign currency transaction losses of ~~$1.3~~$0.5 million and ~~$1.1~~$1.7 million for the ~~three~~six months ended ~~September~~June 30, 2019 and 2018, ~~and 2017,~~ respectively. ~~Other is comprised of foreign currency transaction losses of $3.0 million and $2.2 million for the nine months ended September 30, 2018 and 2017, respectively.~~

~~10.~~

11. Segment Information

The Company reports financial performance based on its segments, ACI On Premise and ACI On Demand, and analyzes Segment Adjusted EBITDA as a measure of segment profitability.

The Company’s Chief Executive Officer is also the chief operating decision maker (“CODM”)~~, which is also our Chief Executive Officer,~~. The CODM, together with other senior management personnel, focus their review ofon consolidated financial information and the allocation of resources based ~~upon the~~on operating results, including revenues and Segment Adjusted EBITDA, for ~~the segments~~ each segment, separate from Corporate operations.

ACI On Premise ~~and ACI On Demand, separate from the Corporate operations.~~

~~ACI On Premise~~ serves customers who manage their software on site. These ~~on premise~~on-premise customers use the Company’s software to develop sophisticated solutions, which are often part of a larger system located and managed at the customer specified site. These customers require a level of control and flexibility that ACI On Premise solutions can offer, and they have the resources and expertise to take a lead role in managing these solutions.

Table of contents

ACI On Demandserves the needs of ~~retail~~banks, merchants and ~~financial institutions~~corporates who use payments to facilitate their core business. These ~~on demand~~on-demand solutions are maintained and delivered through the cloud via our global data centers and are available in either a single-tenant environment for SaaS offerings, or in a multi-tenant environment for PaaS offerings.

Revenue is attributed to the reportable segments based upon the product sold and mechanism for delivery to the customer. Expenses are attributed to the reportable segments in one of three ~~methods,~~methods: (1) direct costs of the segment, (2) labor costs that can be attributed based upon time tracking for individual products, or (3) costs that are allocated. Allocated costs are generally marketing and sales related activities as well as information technology and facilities related expense for which multiple segments benefit. The Company also allocates certain depreciation costs to the segments.

Segment Adjusted EBITDA is the measure reported to the CODM for purposes of making decisions on allocating resources and assessing the performance of the Company’s segments, and, therefore, Segment Adjusted EBITDA is presented in conformity with ASC 280,Segment Reporting. Segment Adjusted EBITDA is defined as earnings (loss) from operations before interest, income tax expense (benefit), depreciation and amortization (“EBITDA”) adjusted to exclude stock-based compensation, and net other income (expense). During the first quarter of 2018, the Company changed the presentation of its segment measure of profit and loss. As a result the 2017 segment disclosure has been recast to conform with the 2018 presentation.

Corporate and ~~other~~ unallocated expenses consists of the corporate overhead costs that are not allocated to reportable segments. These overhead costs relate to human resources, finance, legal, accounting, merger and acquisition activity, and other costs that are not considered when management evaluates segment performance.

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

   Three Months Ended    Nine Months Ended
   September 30, 2018    September 30, 2017    September 30, 2018    September 30, 2017
Revenue

ACI On Premise
   $ 141,006    $ 126,006    $ 367,431    $ 385,108
ACI On Demand
   104,519    99,729    322,399    312,688








Total revenue
   $ 245,525    $ 225,735    $ 689,830    $ 697,796








Segment Adjusted EBITDA

ACI On Premise
   $ 77,819    $ 65,138    $ 171,477    $ 196,060
ACI On Demand
   3,270    (1,241 )    (4,327 )    (8,794 )
Depreciation and amortization
   (23,545 )    (25,553 )    (72,889 )    (76,772 )
Stock-based compensation
   (6,575 )    (8,084 )    (20,642 )    (22,724 )
Corporate and unallocated expenses
   (22,610 )    (18,837 )    (64,122 )    (111,167 )
Interest, net
   (9,810 )    (9,209 )    (23,406 )    (29,777 )
Other, net
   (1,304 )    (1,059 )    (3,036 )    (2,176 )








Income (loss) before income taxes
   $ 17,245    $ 1,155    $ (16,945 )    $ (55,350 )








Depreciation and amortization

ACI On Premise
   $ 2,772    $ 3,321    $ 8,596    $ 9,915
ACI On Demand
   7,906    8,576    23,468    25,973
Corporate
   12,867    13,656    40,825    40,884








Total depreciation and amortization
   $ 23,545    $ 25,553    $ 72,889    $ 76,772



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenue
ACI On Premise	$	125,119		$	121,395		$	221,126		$	226,425
ACI On Demand	172,499			113,600			282,347			217,880
Total revenue	$	297,618		$	234,995		$	503,473		$	444,305
Segment Adjusted EBITDA
ACI On Premise	$	57,069		$	54,760		$	85,337		$	93,658
ACI On Demand	17,340			(3,364		)	17,078			(7,597		)
Depreciation and amortization	(29,778		)	(24,351		)	(54,630		)	(49,344		)
Stock-based compensation expense	(14,372		)	(7,705		)	(20,957		)	(14,067		)
Corporate and unallocated expenses	(36,141		)	(21,498		)	(60,803		)	(41,512		)
Interest, net	(12,326		)	(6,975		)	(20,907		)	(13,596		)
Other, net	1,402			(1,677		)	(510		)	(1,732		)
Loss before income taxes	$	(16,806	)	$	(10,810	)	$	(55,392	)	$	(34,190	)
Depreciation and amortization
ACI On Premise	$	3,019		$	2,849		$	6,049		$	5,824
ACI On Demand	8,489			7,826			16,051			15,562
Corporate	18,270			13,676			32,530			27,958
Total depreciation and amortization	$	29,778		$	24,351		$	54,630		$	49,344
Stock-based compensation expense
ACI On Premise	$	2,051		$	1,838		$	4,007		$	3,305
ACI On Demand	2,214			1,834			4,165			3,297
Corporate	10,107			4,033			12,785			7,465
Total stock-based compensation expense	$	14,372		$	7,705		$	20,957		$	14,067

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

Table of contents

The following is ~~selected financial data for the Company’s geographical areas and revenues~~revenue by primary geographic ~~location~~market and primary solution category for the ~~periods indicated~~Company’s reportable segments (in thousands):

   Three Months Ended September 30, 2018    Three Months Ended September 30, 2017
(in thousands)
   ACI
On Premise    ACI
On Demand    Total    ACI
On Premise    ACI
On Demand    Total
Primary Geographic Markets

Americas - United States
   $ 26,022    $ 88,401    $ 114,423    $ 36,189    $ 84,669    $ 120,858
Americas - Other
   16,709    2,409    19,118    16,874    2,314    19,188
EMEA
   80,738    12,385    93,123    47,919    12,104    60,023
Asia Pacific
   17,537    1,324    18,861    25,024    642    25,666












Total
   $ 141,006    $ 104,519    $ 245,525    $ 126,006    $ 99,729    $ 225,735












Primary Solution Categories

Bill Payments
   $ —      $ 64,134    $ 64,134    $ —      $ 62,328    $ 62,328
Digital Channels/Online
   7,499    9,327    16,826    13,403    11,555    24,958
Merchant Payments
   6,216    18,052    24,268    6,423    12,458    18,881
Payments Risk Management
   7,259    11,068    18,327    10,887    11,192    22,079
Real Time Payments
   23,704    540    24,244    11,745    520    12,265
Retail Payments
   96,328    1,398    97,726    83,548    1,676    85,224












Total
   $ 141,006    $ 104,519    $ 245,525    $ 126,006    $ 99,729    $ 225,735

   Nine Months Ended September 30, 2018    Nine Months Ended September 30, 2017
(in thousands)
   ACI
On Premise    ACI
On Demand    Total    ACI
On Premise    ACI
On Demand    Total
Primary Geographic Markets

Americas - United States
   $ 82,280    $ 275,171    $ 357,451    $ 118,311    $ 268,125    $ 386,436
Americas - Other
   45,269    7,077    52,346    44,591    7,168    51,759
EMEA
   181,913    36,819    218,732    166,379    35,554    201,933
Asia Pacific
   57,969    3,332    61,301    55,827    1,841    57,668












Total
   $ 367,431    $ 322,399    $ 689,830    $ 385,108    $ 312,688    $ 697,796












Primary Solution Categories

Bill Payments
   $ —      $ 204,673    $ 204,673    $ —      $ 201,259    $ 201,259
Digital Channels/Online
   27,779    30,281    58,060    36,118    33,771    69,889
Merchant Payments
   16,476    44,423    60,899    20,175    35,816    55,991
Payments Risk Management
   25,711    34,524    60,235    22,855    33,604    56,459
Real Time Payments
   53,086    1,474    54,560    35,195    2,418    37,613
Retail Payments
   244,379    7,024    251,403    270,765    5,820    276,585












Total
   $

367,431
   $

322,399
   $

689,830
   $

385,108
   $

312,688
   $

697,796



	Three Months Ended June 30, 2019						Three Months Ended June 30, 2018
	ACI On Premise		ACI On Demand		Total		ACI On Premise		ACI On Demand		Total
Primary Geographic Markets
Americas - United States	$	35,696	$	155,825	$	191,521	$	25,394	$	97,825	$	123,219
Americas - Other	12,413		2,107		14,520		11,776		2,348		14,124
EMEA	52,155		12,492		64,647		62,489		12,425		74,914
Asia Pacific	24,855		2,075		26,930		21,736		1,002		22,738
Total	$	125,119	$	172,499	$	297,618	$	121,395	$	113,600	$	234,995
Primary Solution Categories
Bill Payments	$	—	$	125,339	$	125,339	$	—	$	74,371	$	74,371
Digital Channels	9,444		18,011		27,455		8,917		10,310		19,227
Merchant Payments	7,637		17,942		25,579		5,308		15,411		20,719
Payments Intelligence	6,504		8,874		15,378		7,974		10,247		18,221
Real-Time Payments	21,809		907		22,716		15,741		484		16,225
Retail Payments	79,725		1,426		81,151		83,455		2,777		86,232
Total	$	125,119	$	172,499	$	297,618	$	121,395	$	113,600	$	234,995



	Six Months Ended June 30, 2019						Six Months Ended June 30, 2018
	ACI On Premise		ACI On Demand		Total		ACI On Premise		ACI On Demand		Total
Primary Geographic Markets
Americas - United States	$	62,118	$	248,861	$	310,979	$	56,258	$	186,770	$	243,028
Americas - Other	23,358		4,850		28,208		28,560		4,668		33,228
EMEA	94,606		24,560		119,166		101,175		24,434		125,609
Asia Pacific	41,044		4,076		45,120		40,432		2,008		42,440
Total	$	221,126	$	282,347	$	503,473	$	226,425	$	217,880	$	444,305
Primary Solution Categories
Bill Payments	$	—	$	194,306	$	194,306	$	—	$	140,539	$	140,539
Digital Channels	18,169		27,799		45,968		20,280		20,954		41,234
Merchant Payments	12,659		37,281		49,940		10,383		28,957		39,340
Payments Intelligence	13,541		17,855		31,396		18,329		20,870		39,199
Real-Time Payments	36,524		1,525		38,049		29,382		934		30,316
Retail Payments	140,233		3,581		143,814		148,051		5,626		153,677
Total	$	221,126	$	282,347	$	503,473	$	226,425	$	217,880	$	444,305

The following is ~~selected financial data for~~ the Company’s long-lived assets by geographic location ~~for the periods indicated:~~

(in thousands)
   September 30,
2018    December 31,
2017
Long lived assets

United States
   $ 834,386    $ 759,513
Other
   708,424    613,556




   $ 1,542,810    $ 1,373,069

(in thousands):



	June 30, 2019		December 31, 2018
Long-lived Assets
United States	$	1,538,730	$	811,435
Other	726,038		717,495
Total	$	2,264,768	$	1,528,930

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No single customer accounted for more than 10% of the Company’s consolidated revenues during the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017. Aggregate revenues attributable to our customers in Canada accounted for 11.8% of the Company’s consolidated revenues during the three months ended September 30,~~ 2018. No other country outside the United States and Canada accounted for more than 10% of the Company’s consolidated revenues during the three months ended September 30, 2018. During the three months ended September 30, 2017, no other country outside the United States accounted for more than 10% of the Company’s consolidated revenues. No other country outside the United States accounted for more than 10% of the Company’s consolidated revenues during the ~~nine~~three and six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017.~~

2018.

~~11.~~

12. Income Taxes

~~On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into U.S. Law. In December 2017, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118,~~~~Income Tax Accounting Implications of the Tax Cuts and Jobs Act~~ (“SAB 118”), which allows the Company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. As of September 30, 2018, the Company has not completed its accounting for the tax effects of the enactment of the Tax Act; however, in certain cases, specifically as follows, the Company made a reasonable estimate of (i) the effects on its existing deferred tax balances and (ii) the effects of the~~one-time~~ mandatory repatriation tax. The Company recognized a provisional tax expense of $35.9 million in the year ended December 31, 2017 associated with the items it could reasonably estimate. For the nine months ended September 30, 2018, the Company made an adjustment to its estimate related to executive compensation which resulted in $2.8 million of tax benefit. Due the timing of the release of the Tax Act, the complexity of the Tax Act and regulatory guidance that has recently been released and additional guidance expected to be released, the Company is still analyzing the Tax Act and refining its calculations, which could potentially impact the measurement of its income tax balances. The Company expects to complete its analysis within the measurement period in accordance with SAB 118.

At September 30, 2018, the Company has not yet determined its policy election with respect to whether to record deferred taxes for basis differences expected to reverse as a result of the Global Intangible~~Low-Taxed~~ Income (“GILTI”) provisions in future periods or use the period cost method. The Company has recorded $5.0 million of tax expense in the nine months ended September 30, 2018 for the current impact of the GILTI provisions.

The effective tax rate for the three and six months ended ~~September~~June 30, ~~2018~~2019, was ~~12%.~~134% and 63%, respectively. The Company reported aan overall tax ~~charge for the nine months ended September 30, 2018 while reporting~~benefit on a pretax loss for the ~~same period. The resulting effective tax rate is a negative 11%.~~three and six months ended June 30, 2019. The earnings of the Company’s foreign entities for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019, were ~~$27.3~~$11.0 million and ~~$32.7~~$4.8 million, respectively. The effective tax rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018 were~~2019, was positively impacted by ~~profits in certain foreign jurisdictions taxed at lower rates and equity compensation~~state income tax benefits ~~partially offset by lower~~on a domestic loss. In addition, the Company released a majority of its valuation allowance established against its U.S. foreign tax ~~benefits~~credit deferred tax asset, resulting ~~from the current GILTI~~in a non-cash benefit to income tax ~~and Base Erosion and Anti-Abuse Tax (“BEAT”) charges.~~

expense of approximately $18.5 million. The Company ~~reported a~~released the valuation allowance following the acquisition of Speedpay and has determined that it is more likely than not that it will be able to utilize the foreign tax ~~benefit for the three months ended September 30, 2017 while reporting a pretax profit for the same period. The resulting effective tax rate is a negative 193%.~~ credits in future years due to additional income provided by Speedpay.

The effective tax rate for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2018, was ~~49%.The~~(35)% and 1%, respectively. The earnings of the Company’s foreign entities for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018, were ~~$15.2~~$7.2 million and ~~$40.6~~$5.4 million, respectively. The effective tax ~~rates~~rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 were~~2018, was negatively impacted by ~~profits and~~ losses in certain foreign jurisdictions taxed at lower rates and domestic ~~losses taxed at higher rates.~~

taxes resulting from the current GILTI tax, partially offset by equity compensation tax benefits.

The Company’s effective tax rate could fluctuate ~~significantly~~ on a quarterly basis ~~and could be negatively affected~~due to the ~~extent earnings are lower in the countries in which it operates that have a lower statutory rate~~occurrence of significant and unusual or ~~higher in the countries in which it operates that have a higher statutory rate~~infrequent items, such as vesting of stock-based compensation or ~~to the extent it has losses sustained in countries where the future utilization of losses are uncertain.~~foreign currency gains and losses. The Company’s effective tax rate could also fluctuate due to changes in the valuation of its deferred tax assets or liabilities, or by changes in tax laws, regulations, accounting principles, or interpretations thereof. In addition, the Company is occasionally subject to examination of its income tax returns by tax authorities in the jurisdictions it operates. The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes.

~~The~~

As of June 30, 2019, and December 31, 2018, the amount of unrecognized tax benefits for uncertain tax positions was ~~$27.8~~$28.3 million ~~as of September 30, 2018~~ and ~~$27.2~~$28.4 million, ~~as of December 31, 2017,~~respectively, excluding related liabilities for interest and penalties of ~~$1.1 million and~~ $1.2 million as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017, respectively.~~

2018.

The Company believes it is reasonably possible that the total amount of unrecognized tax benefits will decrease within the next 12 months by approximately ~~$3.7~~$3.9 million, due to the settlement of various audits and the expiration of statutes of limitation.

~~During~~

13. Leases

The Company has operating leases for corporate offices and data centers. Excluding office leases, leases with an initial term of 12 months or less that do not include an option to purchase the ~~three months ended September 30, 2018,~~underlying asset are not recorded on the condensed consolidated balance sheet and are expensed on a straight-line basis over the lease term.

The Company’s leases typically include certain renewal options to extend the leases for up to 25 years, some of which include options to terminate the leases within one year. The exercise of lease renewal options is at the Company’s sole discretion. The Company combines lease and non-lease components of its leases and currently has no leases with options to purchase the leased property. Payments of maintenance and property tax costs paid by the Company ~~made~~are accounted for as variable lease cost, which are expensed as incurred.

The components of lease cost are as follows (in thousands):



	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
Operating lease cost	$	4,287		$	8,323
Variable lease cost	760			1,746
Sublease income	(141		)	(280		)
Total lease cost	$	4,906		$	9,789

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Supplemental cash flow information related to leases is as follows (in thousands):



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,849	$	10,260
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	$	4,984	$	6,202

Supplemental balance sheet information related to leases is as follows (in thousands, except lease term and discount rate):



	June 30, 2019
Assets:
Operating lease right-of-use assets	$	62,316
Liabilities:
Other current liabilities	$	15,193
Operating lease liabilities	50,550
Total operating lease liabilities	$	65,743
Weighted average remaining operating lease term (years)	6.78
Weighted average operating lease discount rate	4.07		%

The Company uses its incremental borrowing rate as the discount rate. As the Company enters into operating leases in multiple jurisdictions and denominated in currencies other than the U.S. dollar, judgment is used to determine the Company’s incremental borrowing rate including (1) conversion of its subordinated borrowing rate (using published yield curves) to an unsubordinated and collateralized rate, (2) adjusting the rate to align with the term of each lease, and (3) adjusting the rate to incorporate the effects of the currency in which the lease is denominated.

Maturities on lease liabilities as of June 30, 2019, are as follows (in thousands):



Fiscal Year Ending December 31,
Remainder of 2019	$	8,605
2020	16,547
2021	11,956
2022	9,130
2023	7,474
Thereafter	21,554
Total lease payments	75,266
Less: imputed interest	9,523
Total lease liability	$	65,743

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Future payments under operating lease agreements accounted for under ASC 840, Leases, as of December 31, 2018, were as follows (in thousands):



Fiscal Year Ending December 31,
2019	$	16,925
2020	14,212
2021	10,538
2022	8,178
2023	6,529
Thereafter	21,196
Total minimum lease payments	$	77,578

As of June 30, 2019, the Company has additional operating leases for office facilities that have not yet commenced with minimum lease payments of $4.0 million. These operating leases will commence between fiscal year 2019 and 2020 with lease terms of three to seven years.

14. Subsequent Event

On July 23, 2019, the Company invested $18.3 million for a ~~final determination~~30% non-controlling financial interest in a payment technology and services company in India. The Company will account for this investment using the equity method in accordance with ~~SAB 118 that the unremitted earnings~~ASC 323, Investments - Equity Method and profits of its entities in Australia, Ireland, New Zealand, Romania, Russia and South Africa are no longer permanently reinvested. The Company continues to evaluate its position regarding any outside basis differences for its entities in those countries. The Company recorded a $0.5 million foreign tax charge related to the remittance of earnings from those countries. There are unremitted foreign earnings in other countries which continue to be reinvested indefinitely. For entities in countries not listed above, the Company continues to evaluate the potential foreign and U.S. state tax liabilities that would result from future repatriations from those~~non-U.S.~~ ~~subsidiaries, if any, and how the Tax Act will affect its existing accounting position regarding the indefinite reinvestment of undistributed foreign earnings.~~

Joint Ventures.

~~12. Accumulated Other Comprehensive Loss~~

~~Activity within accumulated other comprehensive loss for the nine months ended September 30, 2018 and 2017, which consists of foreign currency translation adjustments, were as follows:~~

(in thousands)
   Accumulated
other
comprehensive
loss
Balance at December 31, 2017
   $ (77,356 )
Other comprehensive loss
   (11,110 )


Balance at September 30, 2018
   $ (88,466 )


   Accumulated
other
comprehensive
loss
Balance at December 31, 2016
   $ (94,100 )
Other comprehensive income
   14,526


Balance at September 30, 2017
   $ (79,574 )

~~Item~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This report contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. Generally, forward-looking statements do not relate strictly to historical or current facts and may include words or phrases such as “believes,” “will,” “expects,” “anticipates,” “intends,” and words and phrases of similar impact. The forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended.

Forward-looking statements in this report include, but are not limited to, statements regarding future operations, business strategy, business environment, key trends, and, in each case, statements related to expected financial and other benefits. Many of these factors will be important in determining our actual future results. Any or all of the forward-looking statements in this report may turn out to be incorrect. They may be based on inaccurate assumptions or may not account for known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially from those expressed or implied in any forward-looking statements, and our business, financial condition and results of operations could be materially and adversely affected. In addition, we disclaim any obligation to update any forward-looking statements after the date of this report, except as required by law.

All of the forward-looking statements in this report are expressly qualified by the risk factors discussed in our filings with the Securities and Exchange Commission (“SEC”). Such factors include, but are not limited to, risks related to:

increased competition;

the performance of our strategic products, Universal Payments solutions;

demand for our products;

consolidations and failures in the financial services industry;

customer reluctance to switch to a new vendor;

~~the migration or failure to migrate customers to software as a service (“SaaS”) and platform as a service (“PaaS”) solutions;~~

failure to obtain renewals of customer contracts or to obtain such renewals on favorable terms;

delay or cancellation of customer projects or inaccurate project completion estimates;

the complexity of our products and services and the risk that they may contain hidden defects;

compliance of our products with applicable legislation, governmental regulations, and industry standards;

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failing to comply with money transmitter rules and regulations;

our compliance with privacy regulations;

being subject to security breaches or viruses;

our ability to adequately protect our intellectual property;

increasing intellectual property rights litigation;

certain payment funding methods expose us to the credit and/or operating risk of our clients;

business interruptions or failure of our information technology and communication systems;

our offshore software development activities;

operating internationally;

global economic conditions impact on demand for our products and services;

~~volatility and disruption of the capital and credit markets and adverse changes in the global economy;~~

attracting and retaining employees;

potential future litigation;

our sale of Community Financial Services (“CFS”) assets and liabilities to Fiserv, Inc. (“Fiserv”), including potential claims arising under the transaction agreement, the transition services agreement or with respect to retained liabilities;

future acquisitions, strategic partnerships, and investments;

risk of difficulties integrating E Commerce Group Products, Inc. and its subsidiary, Speedpay, Inc. (collectively referred to as "Speedpay"), which may cause us to fail to realize anticipated benefits of the acquisition;

impairment of our goodwill or intangible assets;

restrictions and other financial covenants in our ~~credit facility;~~

debt;

difficulty meeting our debt service requirements;

the accuracy of our backlog estimates;

exposure to unknown tax liabilities;

the cyclical nature of our revenue and earnings and the accuracy of forecasts due to the concentration of revenue generating activity during the final weeks of each quarter; and

volatility in our stock price.

The cautionary statements in this report expressly qualify all of our forward-looking statements.

The following discussion should be read together with our financial statements and related notes contained in this report and with the financial statements and related notes and Management’s Discussion & Analysis in our Annual Report on Form10-K for the fiscal year ended December 31, ~~2017,~~2018, filed ~~February 27, 2018.~~March 1, 2019. Results for the ~~nine~~three and six months ended ~~September~~June 30, ~~2018,~~2019, are not necessarily indicative of results that may be attained in the future.

Overview

ACI Worldwide, Inc., the Universal Payments (“UP”) company, powers electronic payments for more than 5,100 organizations around the world. More than 1,000 of the largest ~~banks~~financial institutions and ~~financial~~ intermediaries, as well as thousands of leading global merchants, rely on ACI to execute approximately $14 trillion each day in payments and securities. In addition, thousands of organizations utilize our ~~EBPP~~electronic bill payment and presentment (“EBPP”) services. Through our comprehensive suite of solutions, we deliver real-time, immediate payments capabilities and enable a complete omni-channel payments experience.

Our products are sold and supported through distribution networks covering three geographic regions – the ~~Americas, EMEA,~~Americas; Europe, Middle East, and Africa (“EMEA”); and Asia/Pacific. Each distribution network has its own globally coordinated sales force and supplements its sales force with independent reseller and/or distributor networks. Our products and solutions are used globally by banks, financial intermediaries, merchants and corporates, such as third-party electronic payment processors, payment associations, switch interchanges, and a wide range of transaction-generating endpoints, including ATMs, merchantpoint-of-sale (“POS”) terminals, bank branches, mobile phones, tablets, corporations, and Internet commerce sites. Accordingly, our business and operating results are influenced by trends such as information technology spending levels, the growth rate of electronic payments,

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mandated regulatory changes, and changes in the number and type of customers in the financial services industry. Our products are marketed under the ACI Worldwide, ACI Universal Payment, and ACI UP brands.

We derive a majority of our revenues from domestic operations and believe we have large opportunities for growth in international markets as well as continued expansion domestically in the United States. Refining our global infrastructure is a critical component of driving our growth. We have launched a globalization strategy, which includes elements intended to streamline our supply chain and maximize expertise in several geographic locations to support a growing international customer base and competitive needs. We utilize our Irish subsidiaries to manage certain of our intellectual property rights and to oversee and manage certain international product development and commercialization efforts. We increased our ~~SaaS~~software as a service ("SaaS") and ~~PaaS~~platform as a service ("PaaS") capabilities with a data center in Ireland allowing our SaaS and PaaS solutions to be more-broadly offered in the European market. We also continue to grow centers of expertise in Timisoara, Romania and Pune and Bangalore in India, as well as key operational centers such as Cape Town, South Africa and in multiple locations in the United States.

Key trends that currently impact our strategies and operations include:

Increasing electronic payment transaction volumes. Electronic payment volumes continue to increase around the world, taking market share from traditional cash and check transactions. ~~The Boston Consulting Group~~In their World Payments Report, Capgemini predicts ~~that electronic payment transactions~~non-cash transaction volumes will grow ~~in volume~~ at an annual rate of ~~6.7%~~12.7%, or from ~~481~~482.5 billion in 2016 to ~~624.6~~876.4 billion in ~~2020,~~2021, with varying growth rates based on the type of payment and part of the world. We leverage the growth in transaction volumes through the licensing of new systems to customers whose older systems cannot handle increased volume and through the sale of capacity upgrades to existing customers.

Adoption of real-time payments. Customer expectations, from both consumers and corporate, are driving the payments world to more real-time delivery. In the U.K., payments sent through the traditional ACHmulti-day batch service can now be sent through the Faster Payments service giving almost immediate access to the funds, and this is being considered and implemented in several countries including Australia and the United States. In the U.S. market, National Automated Clearinghouse Association (“NACHA”) implemented phase 2 of Same Day ACH in September 2017. Corporate customers expect real-time information on the status of their payments instead of waiting for an endof-day report. Regulators expect banks to be monitoring key measures like liquidity in real time. ACI’s focus has always been on the real-time execution of transactions and delivery of information through real-time tools, such as dashboards, so our experience will be valuable in addressing this trend.

Increasing competition. The electronic payments market is highly competitive and subject to rapid change. Our competition comes fromin-house information technology departments, third-party electronic payment processors, and third-party software companies located both within and outside of the United States. Many of these companies are significantly larger than us and have significantly greater financial, technical, and marketing resources. As electronic payment transaction volumes increase, third-party processors tend to provide competition to our solutions, particularly among customers that do not seek to differentiate their electronic payment offerings or are eliminating banks from the payments service, reducing the need for our solutions. As consolidation in the financial services industry continues, we anticipate that competition for those customers will intensify.

Adoption of cloud technology. ~~In an effort to~~ To leverage lower-cost computing technologies, some banks, financial intermediaries, merchants and corporates are seeking to transition their systems to make use of cloud technology. Our investments provide us the grounding to deliver cloud capabilities in the future. Market sizing data from Ovum indicates that spend on SaaS and PaaS payment systems is growing faster than spend on installed applications.

Electronic payments fraud and compliance. As electronic payment transaction volumes increase, organized criminal organizations continue to find ways to commit a growing volume of fraudulent transactions using a wide range of techniques. Banks, financial intermediaries, and merchants and corporates continue to seek ways to leverage new technologies to identify and prevent fraudulent transactions and other attacks such as denial of service attacks. Due to concerns with international terrorism and money laundering, banks and financial intermediaries in particular are being faced with increasing scrutiny and regulatory pressures. We continue to see opportunity to offer our fraud detection solutions to help customers manage the growing levels of electronic payments fraud and compliance activity.

Adoption of smartcard technology. In many markets, card issuers are being required to issue new cards with embedded chip technology, with the liability shift having gone into effect in 2015 in the United States. Chip-based cards are more secure, harder to copy, and offer the opportunity for multiple functions on one card (e.g., debit, credit, electronic purse, identification, health records, etc.). This results in greatercard-not-present fraud (e.g., fraud at eCommerce sites).

Single Euro Payments Area (SEPA). The SEPA, primarily focused on the European economic community and the U.K., is designed to facilitate lower costs for cross-border payments and reduce timeframes for settling electronic payment transactions.

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The transition to SEPA payment mechanisms will drive more volume to these systems with the potential to cause banks to review the capabilities of the systems supporting these payments. Our Retail Payments and Real-Time Payments solutions facilitate key functions that help banks and financial intermediaries address these mandated regulations.

European Payment Service Directive (PSD2). PSD2, which was ratified by the European Parliament in 2015, required member states to implement new payments regulations in 2018. The XS2A provision effectively creates a new market opportunity where banks in European Union member countries must provide open API standards to customer data, thus allowing authorized third-party providers to enter the market.

Financial institution consolidation. Consolidation continues on a national and international basis, as banks and financial ~~institutions~~intermediaries seek to add market share and increase overall efficiency. Such consolidations have increased, and may continue to increase, in their number, size, and market impact as a result of recent economic conditions affecting the banking and financial industries. There are several potential negative effects of increased consolidation activity. Continuing consolidation of banks and financial ~~institutions~~intermediaries may result in a smaller number of existing and potential customers for our products and services. Consolidation of two of our customers could result in reduced revenues if the combined entity were to negotiate greater volume discounts or discontinue use of certain of our products. Additionally, if anon-customer and a customer combine and the combined entity decides to forego future use of our products, our revenue would decline. Conversely, we could benefit from the combination of anon-customer and a customer when the combined entity continues use of our products and, as a larger combined entity, increases its demand for our products and services. We tend to focus on larger banks and financial ~~institutions~~intermediaries as customers, often resulting in our solutions being the solutions that survive in the consolidated entity.

Global vendor sourcing. Global and regional banks, financial intermediaries, and merchants and corporates are aiming to reduce the costs in supplier management by picking suppliers who can service them across all their geographies instead of allowing each country operation to choose suppliers independently. Our global footprint from both a customer and a delivery perspective enable us to be successful in this global sourced market. However, projects in these environments tend to be more complex and therefore of higher risk.

Electronic payments convergence. As electronic payment volumes grow and pressures to lower overall cost per transaction increase, banks and financial intermediaries are seeking methods to consolidate their payments processing across the enterprise. We believe that the strategy of using service-oriented architectures to allow forre-use of common electronic payment functions, such as authentication, authorization, routing and settlement, will become more common. Using these techniques, banks and financial intermediaries will be able to reduce costs, increase overall service levels, enableone-to-one marketing in multiple bank channels, leverage volumes for improved pricing and liquidity, and manage enterprise risk. Our product strategy is, in part, focused on this trend, by creating integrated payment functions that can bere-used by multiple bank channels, across both the consumer and wholesale bank. While this trend presents an opportunity for us, it may also expand the competition from third-party electronic payment technology and service providers specializing in other forms of electronic payments. Many of these providers are larger than us and have significantly greater financial, technical and marketing resources.

Mobile banking and payments. There is a growing demand for the ability to carry out banking services or make payments using a mobile phone. Recent statistics from Javelin Strategy & Research, a subsidiary of Greenwich Associates, show that 50% of adults in the United States use their phone for mobile banking. The use of phones for mobile banking is expected to grow to 81% in 2020. Our customers have been making use of existing products to deploy mobile banking, mobile payments, and mobile commerce solutions for their customers in many countries. In addition, ACI has invested in mobile products of our own and via partnerships to support mobile functionality in the marketplace.

Electronic bill payment and presentment. EBPP encompasses all facets of bill payment, including biller direct, where customers initiate payments on biller websites, the consolidator model, where customers initiate payments on a financial institution’s website, andwalk-in bill payment, as one might find in a convenience store. The EBPP market continues to grow as consumers move away from traditional forms of paper-based payments. ~~According to Aite Group, the percentage~~Nearly three out of four (73%) online payments are made ~~on biller~~at the billers’ sites, ~~grew from 62% in 2010 to 73% in 2016.~~rather than through banking websites, up 11% since 2010. The biller-direct solutions are seeing strong growth as billers migrate these services to outsourcers, such as ACI, from legacy systems built in house. We believe that EBPP remains ripe for outsourcing, as a significant amount of biller-direct transactions are still processed in house. As billers seek to manage costs and improve efficiency, we believe that they will continue to look to third-party EBPP vendors that can offer a complete solution for their billing needs.

Several other factors related to our business may have a significant impact on our operating results from year to year. For example, the accounting rules governing the timing of revenue recognition are complex and it can be difficult to estimate when we will recognize revenue generated by a given transaction. Factors such as creditworthiness of the customer and timing of transfer of control or acceptance of our products may cause revenues related to sales generated in one period to be deferred and recognized

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in later periods. For arrangements in which services revenue is deferred, related direct and incremental costs may also be deferred. Additionally, while the majority of our contracts are denominated in the U.S. dollar, a substantial portion of our sales are made, and some of our expenses are incurred, in the local currency of countries other than the United States. Fluctuations in currency exchange rates in a given period may result in the recognition of gains or losses for that period.

We continue to seek ways to grow through organic sources, partnerships, alliances, and acquisitions. We continually look for potential acquisitions designed to improve our solutions’ breadth or provide access to new markets. As part of our acquisition strategy, we seek acquisition candidates that are strategic, capable of being integrated into our operating environment, and ~~financially~~ accretive to our financial performance.

Acquisition

Speedpay

On May 9, 2019, we acquired E Commerce Group Products, Inc. ("ECG"), a subsidiary of The Western Union Company (“Western Union”), along with ECG's subsidiary, Speedpay, Inc. (collectively referred to as "Speedpay") for $755.3 million in cash, including working capital adjustments, pursuant to a Stock Purchase Agreement, among the Company, Western Union, and ACI Worldwide Corp., our wholly owned subsidiary. The combination of the Company and Speedpay bill pay solutions serves more than 4,000 customers across the U.S., bringing expanded reach in existing and complementary market segments such as consumer finance, insurance, healthcare, higher education, utilities, government, and mortgage. The acquisition of Speedpay increases the scale of our On Demand platform business and allows the acceleration of platform innovation.

To fund the acquisition, we amended our existing Credit Agreement, dated February 24, 2017, for an additional $500.0 million senior secured term loan, in addition to drawing $250.0 million on the available Revolving Credit Facility. See Note 4, Debt, to our unaudited condensed consolidated financial statements in Part I of this Form 10-Q for terms of the Credit Agreement. The remaining acquisition consideration was funded with cash on hand.

Backlog

Backlog is comprised of:

Committed Backlog, which includes (1) contracted revenue that will be recognized in future periods (contracted but not recognized) from software license fees, maintenance fees, services fees, and SaaS and PaaS fees specified in executed contracts (including estimates of variable consideration if required under ASC 606) and included in the transaction price for those contracts, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods and (2) estimated future revenues from software license fees, maintenance fees, services fees, and SaaS and PaaS fees specified in executed contracts.

Renewal Backlog, which includes estimated future revenues from assumed contract renewals to the extent ~~that~~ we believe recognition of the related revenue will occur within the corresponding backlog period.

~~The adoption of ASC 606 resulted in the following key changes to backlog:~~

~~The introduction of a U.S. GAAP requirement to measure and disclose revenue allocated to remaining performance obligations.~~

A shift in license revenue from Committed Backlog to Renewal Backlog due to the acceleration of license revenue recognition and a corresponding change in the renewal assumptions used to estimate Renewal Backlog.

~~An adjustment to the amount of license revenue included in Renewal Backlog due to the introduction of the significant financing component concept.~~

We have historically included assumed renewals in backlog estimates based upon automatic renewal provisions in the executed contract and our historic experience with customer renewal rates.

Our60-month backlog estimates are derived using the following key assumptions:

License arrangements are assumed to renew at the end of their committed term or under the renewal option stated in the contract at a rate consistent with historical experience. If the license arrangement includes extended payment terms, the renewal estimate is adjusted for the effects of a significant financing component.

Maintenance fees are assumed to exist for the duration of the license term for those contracts in which the committed maintenance term is less than the committed license term.

SaaS and PaaS arrangements are assumed to renew at the end of their committed term at a rate consistent with our historical experiences.

Foreign currency exchange rates are assumed to remain constant over the60-month backlog period for those contracts stated in currencies other than the U.S. dollar.

Our pricing policies and practices are assumed to remain constant over the60-month backlog period.

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In computing our60-month backlog estimate, the following items are specifically not taken into account:

Anticipated increases in transaction, account, or processing volumes ~~in customer systems.~~

by our customers.

Optional annual uplifts or inflationary increases in recurring fees.

Services engagements, other than SaaS and PaaS arrangements, are not assumed to renew over the60-month backlog period.

The potential impact of ~~merger~~consolidation activity within our markets and/or customers.

We review our customer renewal experience on an annual basis. The impact of this review and subsequent ~~update~~updates may result in a revision to the renewal assumptions used in computing the60-month ~~and12-month~~ backlog estimates. 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 our60-month backlog estimate, by reportable segment, as of ~~September 30, 2018,~~ June 30, ~~2018,~~2019, March 31, ~~2018,~~2019, and December 31, ~~2017~~2018 (in millions). The June 30, 2019, 60-month backlog estimate includes approximately $1.5 billion as a result of the acquisition of Speedpay. Dollar amounts reflect foreign currency exchange rates as of each period end. ~~We included our60-month~~ ~~backlog estimate without the application of ASC 606. This is anon-GAAP~~ financial measure that is being presented to provide comparability across accounting periods. We believe this measure provides useful information to investors and others in understanding and evaluating our financial performance.

   As
Reported    Without
application of
ASC 606    As
Reported    Without
application
of ASC 606    As
Reported    Without
application of
ASC 606
   September 30, 2018    June 30, 2018    March 31, 2018    December
31, 2017
ACI On Premise
   $ 1,775    $ 1,645    $ 1,830    $ 1,681    $ 1,874    $ 1,709    $ 1,700
ACI On Demand
   2,401    2,400    2,472    2,472    2,513    2,512    2,404














Total
   $ 4,176    $ 4,045    $ 4,302    $ 4,153    $ 4,387    $ 4,221    $ 4,104














   As
Reported    Without
application of
ASC 606    As
Reported    Without
application
of ASC 606    As
Reported    Without
application of
ASC 606
   September 30, 2018    June 30, 2018    March 31, 2018    December 31,
2017
Committed
   $ 1,760    $ 2,015    $ 1,769    $ 2,022    $ 1,879    $ 2,138    $ 2,062
Renewal
   2,416    2,030    2,533    2,131    2,508    2,083    2,042














Total
   $ 4,176    $ 4,045    $ 4,302    $ 4,153    $ 4,387    $ 4,221    $ 4,104



	June 30, 2019		March 31, 2019		December 31, 2018
ACI On Premise	$	1,880	$	1,861	$	1,875
ACI On Demand	3,813		2,290		2,299
Total	$	5,693	$	4,151	$	4,174

	June 30, 2019		March 31, 2019		December 31, 2018
Committed	$	2,105	$	1,734	$	1,832
Renewal	3,588		2,417		2,342
Total	$	5,693	$	4,151	$	4,174

Estimates of future financial results require substantial judgment and are based on ~~a number of~~several assumptions, as described above. These assumptions may turn out to be inaccurate or wrong ~~including~~ for reasons outside of management’s control. For example, our customers may attempt to renegotiate or terminate their contracts for ~~a number of~~many reasons, including mergers, changes in their financial condition, or general changes in economic conditions in the customer’s industry or geographic ~~location, or we~~location. We may also experience delays in the development or delivery of products or services specified in customer contracts, which may cause the actual renewal rates and amounts to differ from historical experiences. Changes in foreign currency exchange rates may also impact the amount of revenue ~~actually~~ recognized in future periods. Accordingly, there can be no assurance that amounts included in backlog estimates will ~~actually~~ generate the specified revenues or that the actual revenues will be generated within the corresponding60-month period. Additionally, because certain components of Committed Backlog and all of Renewal Backlog estimates are operating metrics, the estimates are not required to be subject to the same level of internal review or controls as contracted but not recognized Committed Backlog.

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RESULTS OF OPERATIONS

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

   Three Months Ended September 30,
   2018 2017
   Amount % of Total
Revenue $ Change
vs 2017 % Change
vs 2017 Amount % of Total
Revenue
Revenues:

Software as a service and platform as a service
   $ 104,519 43 % $ 4,758 5 % $ 99,761 44 %
License
   68,964 28 % 18,947 38 % 50,017 22 %
Maintenance
   54,373 22 % (1,976 ) -4 % 56,349 25 %
Services
   17,669 7 % (1,939 ) -10 % 19,608 9 %


Total revenues
   245,525 100 % 19,790 9 % 225,735 100 %


Operating expenses:

Cost of revenue
   102,473 42 % (4,920 ) -5 % 107,393 48 %
Research and development
   36,008 15 % 2,073 6 % 33,935 15 %
Selling and marketing
   28,252 12 % 3,016 12 % 25,236 11 %
General and administrative
   29,537 12 % 4,235 17 % 25,302 11 %
Depreciation and amortization
   20,896 9 % (1,550 ) -7 % 22,446 10 %


Total operating expenses
   217,166 88 % 2,854 1 % 214,312 95 %


Operating income
   28,359 12 % 16,936 148 % 11,423 5 %
Other income (expense):

Interest expense
   (12,573 ) -5 % (3,199 ) 34 % (9,374 ) -4 %
Interest income
   2,763 1 % 2,598 1575 % 165 0 %
Other, net
   (1,304 ) -1 % (245 ) 23 % (1,059 ) 0 %


Total other income (expense)
   (11,114 ) -5 % (846 ) 8 % (10,268 ) -5 %


Income before income taxes
   17,245 7 % 16,090 1393 % 1,155 1 %
Income tax expense (benefit)
   2,012 1 % 4,245 -190 % (2,233 ) -1 %


Net income
   $ 15,233 6 % $ 11,845 350 % $ 3,388 2 %

~~Three-Month~~

Three Month Period Ended ~~September~~June 30, ~~2018~~2019, Compared to the ~~Three-Month~~Three Month Period Ended ~~September~~June 30, ~~2017~~

2018



	Three Months Ended June 30,
	2019										2018
	Amount			% of Total Revenue		$ Change vs 2018			% Change vs 2018		Amount			% of Total Revenue
Revenues:
Software as a service and platform as a service	$	172,499		58	%	$	58,899		52	%	$	113,600		48	%
License	52,541			18	%	6,986			15	%	45,555			19	%
Maintenance	51,922			17	%	(3,126		)	(6	)%	55,048			23	%
Services	20,656			7	%	(136		)	(1	)%	20,792			9	%
Total revenues	297,618			100	%	62,623			27	%	234,995			100	%
Operating expenses:
Cost of revenue	155,240			52	%	38,979			34	%	116,261			49	%
Research and development	39,235			13	%	1,373			4	%	37,862			16	%
Selling and marketing	32,962			11	%	(198		)	(1	)%	33,160			14	%
General and administrative	49,319			17	%	20,482			71	%	28,837			12	%
Depreciation and amortization	26,744			9	%	5,711			27	%	21,033			9	%
Total operating expenses	303,500			102	%	66,347			28	%	237,153			101	%
Operating loss	(5,882		)	(2	)%	(3,724		)	173	%	(2,158		)	(1	)%
Other income (expense):
Interest expense	(15,323		)	(5	)%	(5,606		)	58	%	(9,717		)	(4	)%
Interest income	2,997			1	%	255			9	%	2,742			1	%
Other, net	1,402			—	%	3,079			(184	)%	(1,677		)	(1	)%
Total other income (expense)	(10,924		)	(4	)%	(2,272		)	26	%	(8,652		)	(4	)%
Loss before income taxes	(16,806		)	(6	)%	(5,996		)	55	%	(10,810		)	(5	)%
Income tax expense (benefit)	(22,531		)	(8	)%	(26,295		)	(699	)%	3,764			2	%
Net income (loss)	$	5,725		2	%	$	20,299		(139	)%	$	(14,574	)	(6	)%

Revenues

Total revenue for the three months ended ~~September~~June 30, ~~2018,~~2019, increased ~~$19.8~~$62.6 million, or 9%27%, as compared to the same period in ~~2017.~~

~~The application~~2018, of ~~ASC 606 resulted in a $0.1~~which $49.3 million, ~~decrease in total revenue for~~or 21%, was due to the ~~three months ended September 30, 2018.~~ acquisition of Speedpay.

Total revenue was ~~$1.4~~$4.5 million lower for the three months ended ~~September~~June 30, ~~2018,~~2019, compared to the same period in ~~2017~~2018, due to the impact of foreign currencies weakening against the U.S. dollar. Excluding the impact of ~~applying ASC 606~~the acquisition of Speedpay and foreign currency, total revenue for the three months ended ~~September~~June 30, ~~2018,~~2019, increased ~~$21.4~~$17.8 million, or 9%8%, compared to the same period in ~~2017 primarily as the result of an increase in license and SaaS and PaaS revenue partially offset by a decrease in services and maintenance revenue.~~

2018.

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

The Company’s SaaS arrangements allow customers to use certain software solutions (without taking possession of the software) in a single-tenant cloud environment on a subscription basis. The Company’s PaaS arrangements allow customers to use certain software solutions (without taking possession of the software) in a multi-tenant cloud environment on a subscription or consumption basis. Included in SaaS and PaaS revenue are fees paid by our customers for use of our Biller solutions. Biller-related fees may be paid by our clients or directly by their customers and may be a percentage of the underlying transaction amount, a fixed fee per executed transaction or a monthly fee for each customer enrolled. SaaS and PaaS costs include payment card interchange fees, the amounts payable to banks and payment card processing fees, which are included in cost of revenue in the ~~accompanying~~ condensed consolidated statements of operations. All ~~revenue~~fees from SaaS and PaaS arrangements that ~~does~~do not qualify for treatment as a distinct performance

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obligation, which includesset-up fees, implementation or customization services, and product support services, are included in SaaS and PaaS revenue.

SaaS and PaaS revenue increased ~~$4.8~~$58.9 million, or 5%52%, during the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017. Total~~2018, of which $49.3 million, or 43%, was due to the acquisition of Speedpay. SaaS and PaaS revenue was ~~$0.2~~$0.8 million lower for the three months ended ~~September~~June 30, ~~2018,~~2019, compared to the same period in ~~2017~~2018 due to the impact of foreign currencies weakening against the U.S. dollar. Excluding the impact of ~~applying ASC 606~~the acquisition of Speedpay and foreign currency, ~~total~~ SaaS and PaaS revenue for the three months ended ~~September~~June 30, ~~2018,~~2019, increased ~~$4.2~~$10.4 million, or 4%9%, compared to the same period in ~~2017.~~

2018, of which $8.6 million and $1.8 million is attributable to acceleration of recurring revenue associated with customer-related consolidation activity and new customers adopting our SaaS and PaaS offerings and existing customers adding new functionality or increasing transaction volumes, respectively.

License Revenue

Customers purchase the right to license ACI software under multi-year, time-based software license arrangements that vary in length but are generally five years. Under these arrangements the software is installed at the customer’s location (i.e.on-premise). Within these agreements are specified capacity limits typically based on customer transaction volume. ACI employs measurement tools that monitor the number of transactions processed by customers and if contractually specified limits are exceeded, additional fees are charged for the overage. Capacity overages may occur at varying times throughout the term of the agreement depending on the product, the size of the customer, and the significance of customer transaction volume growth. Depending on specific circumstances, multiple overages or no overages may occur during the term of the agreement.

Included in license revenue are license and capacity fees that are payable at the inception of the agreement or annually (initial license fees). License revenue also includes license and capacity fees payable quarterly or monthly due to negotiated customer payment terms (monthly license fees). ~~Under ASC 606 the~~The Company recognizes revenue in advance of billings for software license arrangements with extended payment ~~terms. Under ASC 605~~terms and adjusts for the ~~Company recognized revenue for those same software license arrangements as~~effects of the ~~fees become due and payable.~~

~~Total license~~financing component, if significant.

License revenue increased ~~$18.9~~$7.0 million, or ~~38%~~15%, during the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017. The application of ASC 606 resulted in a $0.1 million decrease in total license revenue for the three months ended September 30,~~ 2018. ~~Total license~~License revenue was ~~$0.3~~$2.1 million lower for the three months ended ~~September~~June 30, ~~2018,~~2019, compared to the same period in ~~2017~~2018 due to the impact of foreign currencies weakening against the U.S. dollar. Excluding the impact of ~~applying ASC 606 and~~ foreign currency, ~~total~~ license revenue for the three months ended ~~September~~June 30, ~~2018,~~2019, increased ~~$19.3~~$9.0 million, or ~~39%~~20%, compared to the same period in ~~2017.~~

2018.

The increase in total license revenue was primarily driven by the timing and relative size of license and capacity events during the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017.~~

2018.

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 decreased ~~$2.0~~$3.1 million, or 4%6%, during the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017. Total maintenance~~2018. Maintenance revenue was ~~$0.7~~$1.2 million lower for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017~~2018 due to the impact of foreign currencies weakening against the U.S. dollar. Excluding the impact of ~~applying ASC 606 and~~ foreign currency, ~~total~~ maintenance revenue for the three months ended ~~September~~June 30, ~~2018,~~2019, decreased ~~$1.0~~$1.9 million, or 2%3%, compared to the same period in ~~2017.~~

2018.

Services Revenue

Services revenue includes fees earned through implementation services and other professional services. Implementation services include product installations, product configurations, and custom software modifications (“CSMs”). Other professional services include business consultancy, technical consultancy,on-site support services, CSMs, product education, and testing services. These services include new customer implementations as well as existing customer migrations to new products or new releases of existing products.

Services revenue decreased ~~$1.9~~$0.1 million, or ~~10%~~1%, during the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017. Total services~~2018. Services revenue was ~~$0.3~~$0.5 million lower for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017~~2018 due to the impact of foreign currencies weakening against the U.S. dollar. Excluding the impact of ~~applying ASC 606 and~~ foreign currency, ~~total~~ services revenue for the three months ended ~~September~~June 30, ~~2018, decreased $1.1~~2019, increased $0.4 million, or 6%2%, compared to the same period in ~~2017.~~

2018.

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Operating Expenses

Total operating expenses for the three months ended ~~September~~June 30, ~~2018~~2019, increased ~~$2.9~~$66.3 million, or 1%28%, as compared to the same period in ~~2017.~~

~~The application~~2018, of ~~ASC 606 resulted in a $1.9~~which $41.8 million, ~~increase in total~~or 18%, and $16.6 million, or 7%, was due to the acquisition of Speedpay and significant transaction and integration-related expenses associated with the acquisition of Speedpay, respectively.

Total operating expenses for the three months ended ~~September~~June 30, 2018, ~~which is primarily due to differences in the timing~~included $0.6 million of ~~expense recognition for sales commissions.~~significant integration and divestiture-related expenses. Total operating expenses were ~~$2.0~~$3.5 million lower for the three months ended ~~September~~June 30, ~~2018,~~2019, compared to the same period in ~~2017~~2018, due to the impact of foreign currencies

weakening against the U.S. dollar. Excluding the impact of ~~applying ASC 606~~the acquisition of Speedpay, significant acquisition and integration-related expenses, and foreign currency, total operating expenses for the three months ended ~~September~~June 30, ~~2018,~~2019, increased ~~$3.0~~$12.2 million, or 1%5%, compared to the same period in ~~2017~~2018, primarily ~~because~~due to higher cost of ~~higher~~revenue, general and administrative, research and development, ~~selling~~ and ~~marketing,~~depreciation and ~~general and administrative~~amortization expenses, partially offset by lower ~~cost of revenue~~selling and ~~depreciation and amortization expenses.~~

marketing.

Cost of Revenue

Cost of revenue includes costs to provide SaaS and PaaS services, third-party royalties, amortization of purchased and developed software for resale, the costs of maintaining our software products, as well as the costs required to deliver, install, and support software at customer sites. SaaS and PaaS service costs include payment card interchange fees, ~~assessments~~amounts payable to banks, and payment card processing fees. Maintenance costs include the efforts associated with providing the customer with upgrades,24-hour help desk, postgo-live (remote) support, and production-type support for software that was previously installed at a customer location. Service costs include human resource costs and other incidental costs such as travel and training required for both prego-live and postgo-live support. Such efforts include project management, delivery, product customization and implementation, installation support, consulting, configuration, andon-site support.

Cost of revenue ~~decreased $4.9~~increased $39.0 million, or 5%34%, during the three months ended ~~September~~June 30, ~~2018,~~2019, compared to the same period in ~~2017.~~2018, of which $33.9 million, or 29%, was due to the acquisition of Speedpay. Cost of revenue was ~~$0.6~~$1.3 million lower for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017~~2018, due to the impact of foreign currencies weakening against the U.S. dollar. Excluding the impact of the acquisition of Speedpay and foreign currency, cost of revenue ~~decreased $4.3~~increased $6.4 million, or 4%6%, for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017~~2018, primarily due to ~~lower personnel and related costs of $7.9 million, partially offset by~~ a ~~$3.6~~$4.8 million increase in payment card interchange and processing fees.

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 increased ~~$2.1~~$1.4 million, or 6%4%, during the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017.~~2018, of which $1.8 million, or 5%, was due to the acquisition Speedpay. R&D expense was ~~$0.5~~$1.0 million lower for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017~~2018, due to the impact of foreign currencies weakening against the U.S. dollar. Excluding the impact of the acquisition of Speedpay and foreign currency, R&D expense increased ~~$2.6~~$0.6 million, or 8%1%, for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017 primarily~~2018, due to an increase in personnel and related expenses.

Selling and Marketing

Selling and marketing includes both the costs related to selling our products to current and prospective customers as well as the costs related to promoting the Company, its products and the research efforts required to measure customers’ future needs and satisfaction levels. Selling costs are primarily the human resource and travel costs related to the effort expended to license our products and services to current and potential clients within defined territories and/or industries as well as the management of the overall relationship with customer accounts. Selling costs also include the costs associated with assisting distributors in their efforts to sell our products and services in their respective local markets. 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 ~~increased $3.0~~decreased $0.2 million, or ~~12%~~1%, during the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017.~~2018. The ~~application~~acquisition of ~~ASC 606 resulted in a $1.9~~Speedpay contributed $1.2 million ~~increase in~~to selling and marketing expense during the three months ended June 30, 2019. Selling and marketing expense was $0.7 million lower for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017. Selling and marketing expense was $0.3 million lower for the three months ended September 30,~~ 2018, ~~as compared to the same period in 2017~~ due to the impact of foreign currencies weakening against the U.S. dollar. Excluding the impact of ~~applying ASC 606~~the acquisition of Speedpay and foreign currency, selling and marketing expense ~~increased $1.5~~decreased $0.7 million, or 6%2%, for the

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three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017~~2018, due to ~~an increase~~a decrease in ~~personnel~~advertising and ~~related expenses primarily as the result of an increase in total bookings.~~

promotions expense.

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 ~~$4.2~~$20.5 million, or ~~17%~~71%, during the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017.~~2018, of which $0.6 million, or 2%, and $16.4 million, or 57%, was due to the acquisition of Speedpay and significant transaction and integration-related expenses associated with the acquisition of Speedpay, respectively. General and administrative ~~expenses were $0.3~~expense for the three months ended June 30, 2018, included $0.4 million of significant integration and divestiture-related expenses. General and administrative expense was $0.2 million lower for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017~~2018, due to the impact of foreign currencies weakening against the U.S. dollar. Excluding the impact of the acquisition of Speedpay, significant acquisition and integration-related expenses, and foreign currency, general and administrative expense increased ~~$4.5~~$4.0 million, or ~~18%~~14%, for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017,~~2018, primarily due to an increase in personnel and related expenses.

Depreciation and Amortization

Depreciation and amortization ~~decreased $1.6~~increased $5.7 million, or 7%27%, during the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017.~~2018, of which $4.3 million, or 20%, was due to the acquisition of Speedpay. Depreciation and amortization was ~~$0.1~~$0.3 million lower for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017~~2018, due to the impact of foreign currencies weakening against the U.S. dollar. Excluding the impact of the acquisition of Speedpay and foreign currency, depreciation and amortization ~~decreased $1.5~~increased $1.8 million, or 6%9%, for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017.~~

2018.

Other Income and Expense

Interest expense for the three months ended ~~September~~June 30, ~~2018~~2019, increased ~~$3.2~~$5.6 million, or ~~34%~~58%, as compared to the same period in ~~2017~~2018, primarily due to~~write-off~~ ~~of $1.7 million of deferred~~ higher comparative debt ~~issuance costs from the 2020 Notes upon their redemption as well as comparatively higher~~balances and interest ~~rates on the Term Credit Facility during the three-months ended September 30, 2018.~~

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~~three months ended ~~September~~June 30, ~~2018,~~2019, increased ~~$2.6~~$0.3 million, or 9%, as compared to the same period in ~~2017, which is primarily due to the impact of applying ASC 606. Excluding the impact of applying ASC 606, interest income was flat.~~

2018.

Other, net consists of foreign currency gain or loss and othernon-operating items. Foreign currency ~~losses~~gain for the three months ended ~~September~~June 30, 2019 was $1.4 million and foreign currency loss for the three months ended June 30, 2018 ~~and 2017, were $1.3 million and $1.1 million, respectively.~~

was $1.7 million.

Income Taxes

Refer to Note ~~11,~~12, Income Taxes, to our unaudited condensed consolidated financial statements in Part I of this Form10-Q for additional information.

~~Nine-Month~~

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Six Month Period Ended ~~September~~June 30, ~~2018~~2019, Compared to the ~~Nine-Month~~Six Month Period Ended ~~September~~June 30, ~~2017~~

   Nine Months Ended September 30,
   2018 2017
   Amount % of Total
Revenue $ Change
vs 2017 % Change
vs 2017 Amount % of Total
Revenue
Revenues:

Software as a service and platform as a service
   $ 322,399 47 % $ 9,722 3 % $ 312,677 45 %
License
   142,565 21 % (21,013 ) -13 % 163,578 23 %
Maintenance
   166,080 24 % (749 ) 0 % 166,829 24 %
Services
   58,786 9 % 4,074 7 % 54,712 8 %


Total revenues
   689,830 100 % (7,966 ) -1 % 697,796 100 %


Operating expenses:

Cost of revenue
   326,070 47 % (10,223 ) -3 % 336,293 48 %
Research and development
   110,661 16 % 4,472 4 % 106,189 15 %
Selling and marketing
   93,305 14 % 12,115 15 % 81,190 12 %
General and administrative
   87,023 13 % (43,309 ) -33 % 130,332 19 %
Depreciation and amortization
   63,274 9 % (3,915 ) -6 % 67,189 10 %


Total operating expenses
   680,333 99 % (40,860 ) -6 % 721,193 103 %


Operating income (loss)
   9,497 1 % 32,894 -141 % (23,397 ) -3 %
Other income (expense):

Interest expense
   (31,655 ) -5 % (1,457 ) 5 % (30,198 ) -4 %
Interest income
   8,249 1 % 7,828 1859 % 421 0 %
Other, net
   (3,036 ) 0 % (860 ) 40 % (2,176 ) 0 %


Total other income (expense)
   (26,442 ) -4 % 5,511 -17 % (31,953 ) -5 %


Loss before income taxes
   (16,945 ) -2 % 38,405 -69 % (55,350 ) -8 %
Income tax expense (benefit)
   1,824 0 % 29,145 -107 % (27,321 ) -4 %


Net loss
   $ (18,769 ) -3 % $ 9,260 -33 % $ (28,029 ) -4 %

2018



	Six Months Ended June 30,
	2019										2018
	Amount			% of Total Revenue		$ Change vs 2018			% Change vs 2018		Amount			% of Total Revenue
Revenues:
Software as a service and platform as a service	$	281,056		56	%	$	63,176		29	%	$	217,880		49	%
License	73,619			15	%	18			—	%	73,601			17	%
Maintenance	107,033			21	%	(4,674		)	(4	)%	111,707			25	%
Services	41,765			8	%	648			2	%	41,117			9	%
Total revenues	503,473			100	%	59,168			13	%	444,305			100	%
Operating expenses:
Cost of revenue	270,181			54	%	46,584			21	%	223,597			50	%
Research and development	75,429			15	%	776			1	%	74,653			17	%
Selling and marketing	62,392			12	%	(2,661		)	(4	)%	65,053			15	%
General and administrative	80,836			16	%	23,350			41	%	57,486			13	%
Depreciation and amortization	48,610			10	%	6,232			15	%	42,378			10	%
Total operating expenses	537,448			107	%	74,281			16	%	463,167			104	%
Operating loss	(33,975		)	(7	)%	(15,113		)	80	%	(18,862		)	(4	)%
Other income (expense):
Interest expense	(26,937		)	(5	)%	(7,855		)	41	%	(19,082		)	(4	)%
Interest income	6,030			1	%	544			10	%	5,486			1	%
Other, net	(510		)	—	%	1,222			(71	)%	(1,732		)	—	%
Total other income (expense)	(21,417		)	(4	)%	(6,089		)	40	%	(15,328		)	(3	)%
Loss before income taxes	(55,392		)	(11	)%	(21,202		)	62	%	(34,190		)	(8	)%
Income tax benefit	(35,154		)	(7	)%	(34,966		)	18,599	%	(188		)	—	%
Net loss	$	(20,238	)	(4	)%	$	13,764		(40	)%	$	(34,002	)	(8	)%

Revenues

Total revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2018, decreased $8.0~~2019, increased $59.2 million, or 1%13%, as compared to the same period in ~~2017.~~

~~The application~~2018, of ~~ASC 606 resulted in a $21.5~~which $49.3 million, ~~decrease in total revenue for the nine months ended September 30, 2018, which is primarily~~or 11%, was due to the ~~differences in the timing and amount~~acquisition of ~~revenue recognition for software license fees.~~ Speedpay.

Total revenue was ~~$7.7~~$8.2 million ~~higher~~lower for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, compared to the same period in ~~2017~~2018, due to the impact of foreign currencies ~~strengthening~~weakening against the U.S. dollar. Excluding the impact of ~~applying ASC 606~~the acquisition of Speedpay and foreign currency, total revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, increased ~~$5.8~~$18.1 million, or 1%4%, compared to the same period in ~~2017 primarily as the result of an increase in SaaS and PaaS and services revenue partially offset by decreases in license and maintenance revenue.~~

2018.

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

SaaS and PaaS revenue increased ~~$9.7~~$63.2 million, or 3%29%, during the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017. Total~~2018, of which $49.3 million, or 23%, was due to the acquisition of Speedpay. SaaS and PaaS revenue was ~~$2.3~~$1.7 million ~~higher~~lower for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, compared to the same period in ~~2017~~2018 due to the impact of foreign currencies ~~strengthening~~weakening against the U.S. dollar. Excluding the impact of ~~applying ASC 606~~the acquisition of Speedpay and foreign currency, ~~total~~ SaaS and PaaS revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, increased ~~$7.0~~$15.6 million, or 2%7%, compared to the same period in ~~2017,~~2018, of which $8.6 million and $7.0 million is ~~primarily attributed~~attributable to acceleration of recurring revenue associated with customer-related consolidation activity and new customers adopting our SaaS and ~~PaaS-based~~PaaS offerings and existing customers adding new functionality or increasing ~~processing.~~

transaction volumes, respectively.

License Revenue

~~Total license~~

License revenue ~~decreased $21.0 million, or 13%,~~remained flat during the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017. The application of ASC 606 resulted in a $21.2~~2018. License revenue was $2.7 million ~~decrease in total license revenue~~lower for the ~~nine~~six months ended ~~September~~June 30, ~~2018, as~~2019, compared to the same period in ~~2017. Total license revenue was $2.8 million higher for the nine months ended September 30,~~ 2018 ~~compared to the same period in 2017~~ due to the impact of foreign

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currencies ~~strengthening~~weakening against the U.S. dollar. Excluding the impact of ~~applying ASC 606 and~~ foreign currency, ~~total~~ license revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2018, decreased $2.6~~2019, increased $2.7 million, or 2%4%, compared to the same period in ~~2017.~~

2018.

The ~~decrease~~increase in ~~total~~ license revenue was primarily driven by the timing and relative size of license and capacity events during the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017.~~

2018.

Maintenance Revenue

Maintenance revenue decreased ~~$0.7~~$4.7 million, or 4%, during the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017. Total maintenance~~2018. Maintenance revenue was ~~$2.1~~$2.9 million ~~higher~~lower for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017~~2018 due to the impact of foreign currencies strengthening against the U.S. dollar. Excluding the impact of adopting ASC 606 and foreign currency, total maintenance revenue for the nine months ended September 30, 2018, decreased $2.3 million, or 1%, compared to the same period in 2017.

~~Services Revenue~~

Services revenue increased $4.1 million, or 7%, during the nine months ended September 30, 2018, as compared to the same period in 2017. Total services revenue was $0.5 million higher for the nine months ended September 30, 2018, as compared to the same period in 2017 due to the impact of foreign currencies strengthening against the U.S. dollar. Excluding the impact of applying ASC 606 and foreign currency, total services revenue for the nine months ended September 30, 2018, increased $3.7 million, or 7%, compared to the same period in 2017.

~~Operating Expenses~~

~~Total operating expenses for the nine months ended September 30, 2018 decreased $40.9 million, or 6%, as compared to the same period in 2017.~~

For the nine months ended September 30, 2017, there was $46.7 million of expense recorded in relation to the Baldwin Hackett & Meeks, Inc. (“BHMI”) judgment. The application of ASC 606 resulted in a $4.7 million increase in total operating expenses for the nine months ended September 30, 2018, compared to the same period in 2017, which is primarily due to differences in the timing of expense recognition for sales commissions. Total operating expenses were $6.1 million higher for the nine months ended September 30, 2018, compared to the same period in 2017 due to the impact of foreign currencies strengthening against the U.S. dollar. Excluding the impact of the BHMI judgment, the impact of applying ASC 606 and foreign currency, operating expenses decreased $5.0 million, or 1%, for the nine months ended September 30, 2018, primarily because of lower cost of revenue, general and administrative expenses, and depreciation and amortization expenses, partially offset by higher sales and marketing expenses and research and development expenses.

~~Cost of Revenue~~

Cost of revenue decreased $10.2 million, or 3%, during the nine months ended September 30, 2018, compared to the same period in 2017. Cost of revenue was $2.0 million higher due to the impact of foreign currencies strengtheningweakening against the U.S. dollar. Excluding the impact of foreign currency, ~~cost of~~maintenance revenue for the six months ended June 30, 2019, decreased ~~$12.2~~$1.8 million, or 4%2%, ~~for~~compared to the ~~nine~~same period in 2018.

Services Revenue

Services revenue increased $0.6 million, or 2%, during the six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017 primarily due to~~2018. Services revenue was $1.0 million lower ~~personnel and related costs of $17.7 million, partially offset by a $5.5 million increase in interchange processing fees.~~

~~Research and Development~~

~~R&D expense increased $4.5 million, or 4%, during~~for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017. R&D expense was $1.1 million higher~~2018 due to the impact of foreign currencies ~~strengthening~~weakening against the U.S. dollar. Excluding the impact of foreign currency, ~~R&D expense~~services revenue for the six months ended June 30, 2019, increased ~~$3.4~~$1.7 million, or 3%4%, compared to the same period in 2018.

Operating Expenses

Total operating expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, increased $74.3 million, or 16%, as compared to the same period in ~~2017~~2018, of which $41.8 million, or 9%, and $21.3 million, or 5%, was due to the acquisition of Speedpay and significant transaction and integration-related expenses associated with the acquisition of Speedpay, respectively.

Total operating expenses for the six months ended June 30, 2018, included $5.0 million of significant integration and divestiture-related expenses. Total operating expenses were $8.8 million lower for the six months ended June 30, 2019, compared to the same period in 2018, due to the impact of foreign currencies weakening against the U.S. dollar. Excluding the impact of the acquisition of Speedpay, significant acquisition and integration-related expenses, and foreign currency, total operating expenses for the six months ended June 30, 2019, increased $25.1 million, or 6%, compared to the same period in 2018, primarily due to higher cost of revenue, general and administrative, research and development, and depreciation and amortization expenses, partially offset by lower selling and marketing.

Cost of Revenue

Cost of revenue increased $46.6 million, or 21%, during the six months ended June 30, 2019, compared to the same period in 2018, of which $33.9 million, or 15%, was due to the acquisition of Speedpay. Cost of revenue was $3.3 million lower for the six months ended June 30, 2019, as compared to the same period in 2018, due to the impact of foreign currencies weakening against the U.S. dollar. Excluding the impact of the acquisition of Speedpay and foreign currency, cost of revenue increased $16.0 million, or 7%, for the six months ended June 30, 2019, as compared to the same period in 2018, primarily due to a $9.9 million increase in payment card interchange and processing fees and $6.1 million in personnel and related expenses.

Research and Development

R&D expense increased $0.8 million, or 1%, during the six months ended June 30, 2019, as compared to the same period in 2018. The acquisition of Speedpay contributed $1.8 million to R&D expense during the six months ended June 30, 2019. R&D expense was $2.3 million lower for the six months ended June 30, 2019, as compared to the same period in 2018, due to the impact of foreign currencies weakening against the U.S. dollar. Excluding the impact of the acquisition of Speedpay and foreign currency, R&D expense increased $1.3 million, or 2%, for the six months ended June 30, 2019, as compared to the same period in 2018, primarily due to an increase in personnel and related ~~costs.~~

expenses.

Selling and Marketing

Selling and marketing expense ~~increased $12.1~~decreased $2.7 million, or ~~15%~~4%, during the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017.~~2018. The ~~application~~acquisition of ~~ASC 606 resulted in a $4.7~~Speedpay contributed $1.2 million ~~increase in~~to selling and marketing expense during the six months ended June 30, 2019. Selling and marketing expense was $1.7 million lower for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017. Selling and marketing expense was $1.3 million higher for the nine months ended September 30,~~ 2018, ~~as compared to the same period in 2017~~ due to the impact of foreign currencies strengthening against the U.S. dollar. Excluding the impact of applying ASC 606 and foreign currency, selling and marketing expense increased $6.2 million, or 7%, for the nine months ended September 30, 2018, as compared to the same period in 2017 due to an increase in personnel and related expenses primarily as the result of an increase in new bookings.

~~General and Administrative~~

General and administrative expense decreased $43.3 million, or 33%, during the nine months ended September 30, 2018, as compared to the same period in 2017. For the nine months ended September 30, 2017, there was $46.7 million of expense recorded in relation to the BHMI judgment. General and administrative expense was $0.9 million higher for the nine months ended September 30, 2018, as compared to the same period in 2017 due to the impact of foreign currencies strengtheningweakening against the U.S. dollar. Excluding the impact of the ~~BHMI judgment~~acquisition of Speedpay and foreign currency, selling and marketing expense decreased $2.1 million, or 3%, for the six months ended June 30, 2019, as compared to the same period in 2018, due to a decrease in advertising and promotions expense.

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General and Administrative

General and administrative expense increased $23.4 million, or 41%, during the six months ended June 30, 2019, as compared to the same period in 2018, of which $0.6 million, or 1%, and $21.2 million, or 37%, was due to the acquisition of Speedpay and significant transaction and integration-related expenses associated with the acquisition of Speedpay, respectively. General and administrative expense for the six months ended June 30, 2018, included $4.4 million of significant integration and divestiture-related expenses. General and administrative expense was $0.8 million lower for the six months ended June 30, 2019, as compared to the same period in 2018, due to the impact of foreign currencies weakening against the U.S. dollar. Excluding the impact of the acquisition of Speedpay, significant acquisition and integration-related expense, and foreign currency, general and administrative expense increased ~~$2.5~~$6.8 million, or 3%13%, for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017~~2018, primarily due to an increase in personnel and related expenses.

Depreciation and Amortization

Depreciation and amortization ~~decreased $3.9~~increased $6.2 million, or 6%15%, during the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017.~~2018, of which $4.3 million, or 10%, was due to the acquisition of Speedpay. Depreciation and amortization was ~~$0.8~~$0.7 million ~~higher~~lower for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017~~2018, due to the impact of foreign currencies ~~strengthening~~weakening against the U.S. dollar. Excluding the impact of the acquisition of Speedpay and foreign currency, depreciation and amortization ~~decreased $4.7~~increased $2.7 million, or 7%6%, for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the same period in ~~2017.~~

2018.

Other Income and Expense

Interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, increased ~~$1.5~~$7.9 million, or 5%41%, as compared to the same period in ~~2017~~2018, primarily due to ~~thewrite-off~~ ~~of $1.7~~higher comparative debt balances and interest rates, as well as $1.8 million of ~~deferred debt issuance costs from~~interest expense related to royalty payments recorded during the ~~2020 Notes upon their redemption.~~

~~Interest income~~first quarter of 2019. Excluding the impact of interest expense related to royalty payments, interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019, increased ~~$7.8~~$6.1 million, or 32%, as compared to the same period in ~~2017, which is primarily due~~2018.

Interest income for the six months ended June 30, 2019, increased $0.5 million, or 10%, as compared to the ~~impact of applying ASC 606. Excluding the impact of applying ASC 606, interest income was flat.~~

same period in 2018.

Other, net consists of foreign currency loss and othernon-operating items. Foreign currency ~~losses~~loss for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018, ~~and 2017, were $3.0~~was $0.5 million and ~~$2.2~~$1.7 million, respectively.

Income Taxes

Refer to Note ~~11,~~12, Income Taxes, to our unaudited condensed consolidated financial statements in Part I of this Form10-Q for additional information.

Segment Results

~~The Company reports~~

We report financial performance based on ~~its~~our segments, ACI On Premise and ACI On Demand, and ~~analyzes~~analyze Segment Adjusted EBITDA as a measure of segment profitability.

~~The Company’s~~

Our Chief Executive Officer is also our chief operating decision maker (“CODM”)~~, which is also our Chief Executive Officer,~~. The CODM, together with other senior management personnel, focus their review ofon consolidated financial information and the allocation of resources based ~~upon the~~on operating results, including revenues and Segment Adjusted EBITDA, for ~~the segments ACI On Premise and ACI On Demand,~~each segment, separate from the ~~Corporate~~corporate operations.

ACI On Premise serves customers who manage their software on site. These ~~on premise~~on-premise customers use the Company’s software to develop sophisticated solutions, which are often part of a larger system located and managed at the customer specified site. These customers require a level of control and flexibility that ACI On Premise solutions can offer, and they have the resources and expertise to take a lead role in managing these solutions.

ACI On Demandserves the needs of ~~retail~~banks, merchants and ~~financial institutions~~corporates who use payments to facilitate their core business. ~~The Company sees an increasing demand~~These on-demand solutions are maintained and delivered through the cloud via our global data centers and are available in either a single-tenant environment for SaaS ~~and~~offerings, or in a multi-tenant environment for PaaS ~~offerings, which offer reduced complexity and cost as well as the ability to rapidly implement and scale.~~

offerings.

Revenue is attributed to the reportable segments based upon the product sold and mechanism for delivery to the customer. Expenses are attributed to the reportable segments in one of three methods, (1) direct costs of the segment, (2) labor costs that can be attributed based upon time tracking for individual products, or (3) costs that are allocated. Allocated costs are generally marketing and sales related activities as well as information technology and facilities related expense for which multiple segments benefit. ~~The Company~~We also ~~allocates~~allocate certain depreciation costs to the segments.

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Segment Adjusted EBITDA is the measure reported to the CODM for purposes of making decisions on allocating resources and assessing the performance of ~~the Company’s~~our segments and, therefore, Segment Adjusted EBITDA is presented in conformity with ASC 280,Segment Reporting. Segment Adjusted EBITDA is defined as earnings (loss) from operations before interest, income tax expense (benefit), depreciation and amortization (“EBITDA”) adjusted to exclude stock-based compensation, and net other income (expense).

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

   Three Months Ended    Nine Months Ended
   September 30, 2018    September 30, 2017    September 30, 2018    September 30, 2017
Revenue

ACI On Premise
   $ 141,006    $ 126,006    $ 367,431    $ 385,108
ACI On Demand
   104,519    99,729    322,399    312,688








Total revenue
   $ 245,525    $ 225,735    $ 689,830    $ 697,796








Segment Adjusted EBITDA

ACI On Premise
   $ 77,819    $ 65,138    $ 171,477    $ 196,060
ACI On Demand
   3,270    (1,241 )    (4,327 )    (8,794 )
Depreciation and amortization
   (23,545 )    (25,553 )    (72,889 )    (76,772 )
Stock-based compensation
   (6,575 )    (8,084 )    (20,642 )    (22,724 )
Corporate and unallocated expenses
   (22,610 )    (18,837 )    (64,122 )    (111,167 )
Interest, net
   (9,810 )    (9,209 )    (23,406 )    (29,777 )
Other, net
   (1,304 )    (1,059 )    (3,036 )    (2,176 )








Loss before income taxes
   $ 17,245    $ 1,155    $ (16,945 )    $ (55,350 )








Depreciation and amortization

ACI On Premise
   $ 2,772    $ 3,321    $ 8,596    $ 9,915
ACI On Demand
   7,906    8,576    23,468    25,973
Corporate
   12,867    13,656    40,825    40,884








Total depreciation and amortization
   $ 23,545    $ 25,553    $ 72,889    $ 76,772



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenue
ACI On Premise	$	125,119		$	121,395		$	221,126		$	226,425
ACI On Demand	172,499			113,600			282,347			217,880
Total revenue	$	297,618		$	234,995		$	503,473		$	444,305
Segment Adjusted EBITDA
ACI On Premise	57,069			54,760			85,337			93,658
ACI On Demand	17,340			(3,364		)	17,078			(7,597		)
Depreciation and amortization	(29,778		)	(24,351		)	(54,630		)	(49,344		)
Stock-based compensation expense	(14,372		)	(7,705		)	(20,957		)	(14,067		)
Corporate and unallocated expenses	(36,141		)	(21,498		)	(60,803		)	(41,512		)
Interest, net	(12,326		)	(6,975		)	(20,907		)	(13,596		)
Other, net	1,402			(1,677		)	(510		)	(1,732		)
Loss before income taxes	$	(16,806	)	$	(10,810	)	$	(55,392	)	$	(34,190	)
Depreciation and amortization
ACI On Premise	$	3,019		$	2,849		$	6,049		$	5,824
ACI On Demand	8,489			7,826			16,051			15,562
Corporate	18,270			13,676			32,530			27,958
Total depreciation and amortization	$	29,778		$	24,351		$	54,630		$	49,344
Stock-based compensation expense
ACI On Premise	$	2,051		$	1,838		$	4,007		$	3,305
ACI On Demand	2,214			1,834			4,165			3,297
Corporate	10,107			4,033			12,785			7,465
Total stock-based compensation expense	$	14,372		$	7,705		$	20,957		$	14,067

ACI On Premise Segment Adjusted EBITDA increased ~~$12.7~~$2.3 million for the three months ended ~~September~~June 30, ~~2018,~~2019, compared to the same period in ~~2017~~2018, primarily due to a ~~$15.0~~$3.7 million increase in ~~revenue due to the timing of certain license and capacity events partially offset by an increase in expenses.~~

revenue.

ACI On Premise Segment Adjusted EBITDA decreased ~~$24.6~~$8.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, compared to the same period in ~~2017~~2018, primarily due to ~~the $22.0~~a $5.3 million ~~impact of applying ASC 606 during the nine months ended September 30, 2018.~~

decrease in revenue and a $3.0 million increase in operating expenses.

ACI On Demand Segment Adjusted EBITDA increased ~~$4.5~~$20.7 million for the three months ended ~~September~~June 30, ~~2018,~~2019, compared to the same period in ~~2017 primarily~~2018, of which $12.0 million was due to ~~a $4.8 million increase in revenue.~~

the acquisition of Speedpay. Excluding the impact of the acquisition of Speedpay, ACI On Demand Segment Adjusted EBITDA increased ~~$4.5 for the nine months ended September 30, 2018, compared to the same period in 2017~~$8.7 million, primarily due to a $9.7 million increase in ~~revenues~~revenue.

ACI On Demand Segment Adjusted EBITDA increased $24.7 million for the six months ended June 30, 2019, compared to the same period in 2018, of which $12.0 million was due to the acquisition of Speedpay. Excluding the impact of the acquisition of Speedpay, ACI On Demand Segment Adjusted EBITDA increased $12.7 million, primarily due to a $15.3 million increase in revenue, partially offset by a ~~$5.5~~$2.6 million increase in ~~interchange processing fees and $0.5 million impact~~operating expenses.

Table of ~~applying ASC 606.~~

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Liquidity and Capital Resources

General

Our primary liquidity needs are: (i) to fund normal operating expenses; (ii) to meet the interest and principal requirements of our outstanding indebtedness; and (iii) to fund acquisitions, capital expenditures, and lease payments. We believe these needs will be satisfied using cash flow generated by our operations, our cash and cash equivalents, and available borrowings under our revolving credit facility.

Available Liquidity

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

   As of
September 30,    As of
December 31,
   2018    2017
Cash and cash equivalents
   $ 76,342    $ 69,710
Availability under Revolving Credit Facility
   500,000    498,000




Total liquidity
   $ 576,342    $ 567,710



	June 30, 2019		December 31, 2018
Cash and cash equivalents	$	139,396	$	148,502
Availability under revolving credit facility	265,000		500,000
Total liquidity	$	404,396	$	648,502

The ~~increase~~decrease in total liquidity is primarily attributable to ~~positive operating cash flows~~$235.0 million of ~~$100.5 million, offset by repurchases of common stock of $54.5 million~~outstanding revolving credit facility borrowings and ~~$38.3~~$21.2 million of payments to purchase property and equipment and software and distribution ~~rights.~~

rights, partially offset by positive operating cash flows.

The Company and Official Payments Corporation, a wholly owned subsidiary, maintain a $140.0 million uncommitted overdraft facility with Bank of America, N.A. 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, 2019, the full $140.0 million was available.

Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less. As of ~~September~~June 30, ~~2018, $51.0 million of the $76.3~~2019, we had $139.4 million of cash and cash equivalents, of which $71.3 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. ~~During~~As of June 30, 2019, only the ~~three months ended September 30, 2018, we made a final determination~~earnings in ~~accordance with SAB 118 that the unremitted~~our Indian foreign subsidiaries are indefinitely reinvested. The earnings ~~and profits~~ of ~~our~~all other foreign entities ~~in Australia, Ireland, New Zealand, Romania, Russia and South Africa~~ are no longer ~~permanently~~indefinitely reinvested. We are ~~currently evaluating our existing position regarding the permanent reinvestment of our~~also permanently reinvested for outside book/tax basis difference related to foreign ~~funds in our entities in countries not listed above in light~~subsidiaries. These outside basis differences could reverse through sales of the ~~enactment~~foreign subsidiaries, as well as various other events, none of which are considered probable as of June 30, 2019.

Cash Flows

The following table sets forth summarized cash flow data for the ~~Tax Act. We expect to complete our evaluation and determine the impact the Tax Act may have on our permanent reinvestment assertion within the measurement period provided by SAB 118.~~

   Nine Months Ended
September 30,
(in thousands)    2018    2017
Net cash provided by (used by):

Operating activities
   $ 100,462    $ 85,072
Investing activities
   (39,777 )    (39,894 )
Financing activities
   (53,301 )    (57,320 )

periods indicated (in thousands):

Six Months Ended
June 30,
2019 2018
Net cash provided by (used by):
Operating activities $ 56,865
$ 71,111
Investing activities (779,761 ) (29,351 )
Financing activities 714,655
(51,570 )

Cash Flows from Operating Activities

Net cash flows provided by operating activities ~~for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2018, was $100.5~~2019, were $56.9 million as compared to ~~$85.1~~$71.1 million during the same period in ~~2017. The comparative period increase was~~2018. Net cash provided by operating activities primarily ~~due~~consists of net income (loss) adjusted to aadd back depreciation, amortization, and stock-based compensation. Cash flows provided by operating activities were $14.2 million lower ~~net loss~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019, compared to the same period in ~~2017.~~2018, due to the timing of working capital. Our current policy is to use our operating cash flow primarily for funding capital expenditures, lease payments, stock repurchases, and acquisitions.

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Cash Flows from Investing Activities

During the first ~~nine~~six months of ~~2018~~2019, we paid $755.2 million, net of $0.1 million in cash acquired, to acquire Speedpay. We also used cash of ~~$38.3~~$21.2 million to purchase software, property and equipment, as compared to ~~$39.9~~$27.9 million during the same period in ~~2017.~~

2018.

Cash Flows from Financing Activities

Net cash flows provided by financing activities for the six months ended June 30, 2019, were $714.7 million as compared to net cash flows used by financing activities ~~for the nine months ended September 30, 2018, was $53.3 million as compared to $57.3~~of $51.6 million during the same period in ~~2017.~~2018. During the first ~~nine~~six months of 2019, we received proceeds of $500.0 million from our Delayed Draw Term Loan and $250.0 million from our Revolving Credit Facility to fund our purchase of Speedpay, and we repaid $9.4 million on the Initial Term Credit Loan and $15.0 million on the Revolving Credit Facility. In addition, we received proceeds of $7.6 million from the exercise of stock options and the issuance of common stock under our 2017 Employee Stock Purchase Plan, as amended, and used $2.8 million for the repurchase of restricted share awards (“RSAs”) and restricted share units (“RSUs”) for tax withholdings. We also used $0.6 million to repurchase common stock. During the first six months of 2018, we received proceeds of $400.0 million from the issuance of 5.750% Senior Notes due 2026. We used $300.0 million of the proceeds to redeem in full the Company’s outstanding 6.375% Senior Notes due 2020 and repaid ~~$105.3~~$10.4 million on the Initial Term ~~Credit Facility.~~Loan. In addition, ~~during the first nine months of 2018~~ we received proceeds of ~~$20.7~~$16.5 million from the ~~exercises~~exercise of stock options and the issuance of common stock under our 2017 Employee Stock Purchase Plan, as amended, and used $2.6 million for the repurchase of ~~restricted stock~~RSAs for tax withholdings. ~~During the nine months ended September 30, 2018, we~~We also used $54.5 million to repurchase common stock. During the first nine months of 2017 we received net proceeds of $34.1 million on the Term Credit Facility and repaid a net $84.0 million on the Revolving Credit Facility. In addition, during the nine months ended September 30, 2017, we received proceeds of $12.5 million from the exercises of stock options and the issuance of common stock under our 2005 Employee Stock Purchase Plan, as amended, and used $5.3 million for the repurchase of restricted stock for tax withholdings.

We may decide to use cash to acquire new products and services or enhance existing products and services through acquisitions of other companies, product lines, technologies, and personnel, or through investments in other companies.

We believe ~~that~~ our existing sources of liquidity, including cash on hand and cash provided by operating activities, will satisfy our projected liquidity requirements, which primarily consists of working capital and debt service requirements, for the next twelve months and foreseeable future.

Debt

On April 5, 2019, we entered into the Second Amended and Restated Credit Agreement

(the “Credit Agreement”) to amend and restate our existing agreement, dated February 24, 2017. The Credit Agreement consists of (a) a five-year $500.0 million senior secured revolving credit facility (the “Revolving Credit Facility”), (b) a five-year $279.0 million senior secured term loan facility (the “Initial Term Loan”), and (c) a five-year $500.0 million senior secured term loan facility (the “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”).

As of ~~September~~June 30, ~~2018,~~2019, we had ~~$288.9~~$235.0 million and $775.5 million outstanding under our ~~Term~~Revolving Credit Facility and Term Loans, respectively, with up to ~~$500.0~~$265.0 million of unused borrowings under the Revolving Credit Facility portion of the Credit Agreement, as amended. The amount of unused borrowings actually available varies in accordance with the terms of the agreement. The Credit Agreement contains certain affirmative and negative covenants, including limitations on the incurrence of indebtedness, asset dispositions, acquisitions, investments, dividends and other restricted payments, liens and transactions with affiliates. The Credit Agreement also contains financial covenants relating to maximum permitted leverage ratio and the minimum interest coverage ratio. The facility does not contain any subjective acceleration features and does not have any required payment or principal reduction schedule and is included as a long-term liability in our condensed consolidated balance sheet. At September 30, 2018 (and at all times during this period) we were in compliance with our debt covenants.Facility. The interest rate in effect ~~at September~~for the Credit Facility as of June 30, ~~2018~~2019, was ~~3.99%~~4.65%.

~~Senior Notes~~

~~On August 21, 2018, the Company completed a~~ As of June 30, 2019, we also had $400.0 million ~~offering~~outstanding of 5.750% Senior Notes due 2026 (the “2026 Notes”) ~~at an issue price~~. Refer to Note 4, Debt, to our unaudited condensed consolidated financial statements in Part I of ~~100% of the principal amount in a private placement~~this Form 10-Q for resale to qualified institutional buyers. The 2026 Notes bear interest at a rate of 5.750% per year, payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2019. Interest will accrue from August 21, 2018. The 2026 Notes will mature on August 15, 2026.

additional information.

Stock Repurchase Program

In 2005, ~~the Company’s Board~~our board of ~~Directors~~directors (“the ~~Board”~~board”) approved a stock repurchase program authorizing ~~the Company, from time to time~~us, as market and business conditions warrant, to acquire ~~its~~our common stock and periodically ~~authorizes~~authorize additional funds for the program. In February 2018, the ~~Board~~board approved ~~an additional~~the repurchase of our common stock for up to $200.0 million, ~~for~~in place of the ~~stock repurchase program.~~

~~The Company~~remaining purchase amounts previously authorized.

We repurchased ~~2,346,427~~23,802 shares for ~~$54.5~~$0.6 million under the program during the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. Under the program to date, ~~the Company has~~we have repurchased ~~44,129,393~~44,153,195 shares for approximately ~~$547.8~~$548.5 million. ~~The~~As of June 30, 2019, the maximum remaining amount authorized for purchase under the stock repurchase program was ~~$176.6 million as of September 30, 2018.~~

approximately $176.0 million.

There is no guarantee as to the exact number of shares ~~that~~we will ~~be repurchased by us.~~repurchase. Repurchased shares are returned to the status of authorized but unissued shares of common stock. In March 2005, our ~~Board of Directors~~board approved a plan underRule 10b5-1 of the Securities Exchange Act of 1934 to facilitate the repurchase of shares of common stock under the existing stock repurchase program. Under our Rule10b5-1 plan, we have delegated authority over the timing and amount of repurchases to an independent broker who does not have access to inside information about the Company. Rule10b5-1 allows us, through the independent broker, to purchase shares at times when we ordinarily would not be in the market because of self-imposed trading blackout periods, such as the time immediately preceding the end of the fiscal quarter through a period of three business days following our quarterly earnings release.

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Contractual Obligations and Commercial Commitments

For the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, there have been no material changes to the contractual obligations and commercial commitments disclosed in Item 7 of our Form10-K for the fiscal year ended December 31, ~~2017~~2018, except as disclosed ~~below.~~

   Payments due by Period
(in thousands)    Total    Less than 1
year    1-3 years    3-5 years    More than
5 years
Contractual Obligations

2026 Senior Notes
   $ 400,000    $ —      $ —      $ —      $ 400,000
Senior Notes Interest (1)
   172,500    23,000    46,000    46,000    57,500
Financed internally used software (2)
   11,563    4,688    4,688    2,187    —










Total
   $ 584,063    $ 27,688    $ 50,688    $ 48,187    $ 457,500

below (in thousands).



	Payments Due by Period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Term loan	$	775,535	$	38,950	$	79,644	$	656,941	$	—
Term loan interest (1)	152,542		35,401		65,366		51,775		—
Revolving credit facility	235,000		—		—		235,000		—
Revolving credit facility interest (2)	52,035		10,955		21,909		19,171		—
Financed internal-use software (3)	19,795		11,634		8,161		—		—
Total	$	1,234,907	$	96,940	$	175,080	$	962,887	$	—


(1)	Based ~~upon Senior Notes issued~~on Term Loan debt outstanding and interest rate in effect at June 30, 2019, of ~~$400.0 million at per annum rate of 5.750%~~4.65%.


(2)	Based on Revolving Credit Facility debt outstanding and interest rate in effect at June 30, 2019, of 4.65%.

(3)

During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, the Company financed certain multi-year license agreements for ~~internally-used~~internal-use software for ~~$11.9~~$10.4 million with annual payments through ~~June 2023.~~April 2022. As of ~~September~~June 30, ~~2018, $11.6~~2019, $19.8 million is outstanding under these and other agreements previously entered into, of which ~~$4.7~~$11.6 million and ~~$6.9~~$8.2 million is included in other current liabilities and other noncurrent liabilities, respectively, in the accompanying condensed consolidated balance sheet.

We are unable to reasonably estimate the ultimate amount or timing of settlement of our reserves for income taxes under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740,Income Tax. The liability for unrecognized tax benefits ~~at September~~as of June 30, ~~2018~~2019, is ~~$27.8~~$28.3 million.

Critical Accounting Estimates

The preparation of the condensed consolidated financial statements requires ~~that~~ we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and other assumptions ~~that~~ we believe to be proper and reasonable under the circumstances. We continually evaluate the appropriateness of estimates and assumptions used in the preparation of our condensed consolidated financial statements. Actual results could differ from those estimates.

The accounting policies that reflect our more significant estimates, judgments, and assumptions, and ~~which~~that we believe are the most critical to aid in fully understanding and evaluating our reported financial results, include the following:

Revenue Recognition

~~Allowance for Doubtful Accounts~~

Business Combinations

Intangible Assets and Goodwill

Stock-Based Compensation

Accounting for Income Taxes

During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, there were no significant changes to our critical accounting policies and ~~estimates other than as discussed in Note 2,~~~~Revenue,~~~~andNote 11,~~~~Income Taxes,~~~~in the Notes to the Condensed Consolidated Financial Statements.~~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 Form10-K for our fiscal year ended December 31, ~~2017,~~2018, filed on ~~February 27, 2018,~~March 1, 2019, for a more complete discussion of our critical accounting policies and estimates.

~~Item~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Excluding the impact of changes in interest rates and the uncertainty in the global financial markets, there have been no material changes to our market risk for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. We conduct business in all parts of the world and are thereby exposed to market risks related to fluctuations in foreign currency exchange rates. The U.S. dollar is the single largest currency in which our revenue contracts are denominated. ~~Thus, any~~Any decline in the value of local foreign currencies against the U.S. dollar results in our products and services being more expensive to a potential foreign ~~customer, and in~~customer. In those instances where our goods and services have already been sold, receivables may ~~result in the receivables being~~be more difficult to collect. Additionally, ~~any decline in the value of the U.S. dollar~~ in jurisdictions where the revenue contracts are denominated in U.S. dollars and operating expenses are incurred in the local currency, any decline in the value of the U.S. dollar

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will have an unfavorable impact to operating margins. ~~We at~~At times, we enter into revenue contracts that are denominated in the country’s local currency, ~~principally~~primarily in Australia, Canada, the United Kingdom, and other European countries. This practice serves as a natural hedge to finance the local currency expenses incurred in those locations. We have not entered into any foreign currency hedging transactions. We do not purchase or hold any derivative financial instruments for ~~the purpose of~~ speculation or arbitrage.

The primary objective of our cash investment policy is to preserve principal without significantly increasing risk. ~~Based~~If we maintained similar cash investments for a period of one year based on our cash investments and interest rates on these investments at ~~September~~June 30, ~~2018, and if we maintained this level of similar cash investments for a period of one year,~~2019, a hypothetical ten percent increase or decrease in effective interest rates would increase or decrease interest income by ~~less than~~approximately $0.1 million annually.

We had approximately ~~$688.9 million~~$1.4 billion of debt outstanding ~~at September~~as of June 30, ~~2018,~~2019, with ~~$400 million in Senior Notes and $288.9 million~~$1.0 billion outstanding under our Credit ~~Facility.~~Facility and $400.0 million in 2026 Senior Notes. Our ~~Senior~~Credit Facility has a floating interest rate, which was 4.65% as of June 30, 2019. Our 2026 Notes are fixed-rate long-term debt obligations with a 5.750% interest rate. ~~Our Credit Facility has a floating rate which was 3.99% at September 30, 2018. The potential increase (decrease) in interest expense for the Credit Facility from a~~A hypothetical ten percent increase ~~(decrease)~~or decrease in effective interest rates would beincrease or decrease interest expense related to the Credit Facility by approximately ~~$1.2~~$4.7 million.

~~Item~~

ITEM 4. CONTROLSAND PROCEDURES

Disclosure Controls and Procedures

~~Our management,~~

Management, under the supervision of and with the participation of the Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined inRules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this ~~report, September 30, 2018.~~report. Based on that evaluation, the ~~Company’s~~ Chief Executive Officer and Chief Financial Officer have concluded ~~that the Company’s~~our disclosure controls and procedures are effective as of ~~September~~June 30, ~~2018.~~

2019.

Changes in Internal Control over Financial Reporting

~~The Company adopted ASC 606,~~~~Revenue from Contracts with Customers,~~~~on January 1, 2018, which required management to make changes~~

On May 9, 2019, we completed the acquisition of Speedpay. We consider the transaction material to our ~~policies~~results of operations, cash flows, and ~~processes~~financial position from the date of the acquisition through June 30, 2019, and believe the internal controls and procedures of Speedpay have a material effect on our internal control over financial reporting. See Note 3, Acquisition, to ~~implement new or modify existing~~our unaudited condensed consolidated financial statements included in Part 1 of this Form 10-Q for discussion of the acquisition and related financial data.

We are currently in the process of integrating Speedpay operations, and we anticipate a successful integration of operations and internal controls over financial reporting. Management will continue to evaluate its internal control over financial reporting ~~during the quarter ended March 31, 2018. This included modifications to our existing internal controls over contract reviews and new controls related to the enhanced disclosure requirements.~~

as it executes integration activities.

There ~~have been~~were no additional changes ~~during our quarter ended September 30, 2018,~~ in our internal control over financial reporting (as defined in Rules13a-15(f) ~~under the Exchange Act) that have materially affected, or are reasonably likely to materially effect, our internal control over financial reporting.~~

Our management, under the supervision of and with the participation of the Chief Executive Officer and Chief Financial Officer evaluated any change in the Company’s internal control over financial reporting (as defined in Rules~~13a-15(f)~~ under the Exchange Act) during the ~~Company’s~~ quarter ended ~~September~~June 30, ~~2018, and determined that there were no other changes in the Company’s internal control over financial reporting~~2019, that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

PART II – OTHER INFORMATION

~~Item~~

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are involved in various litigation matters arising in the ordinary course of our business. We are not currently a party to any legal proceedings, the adverse outcome of which, individually or in the aggregate, we believe would be likely to have a material effect on our financial condition or results of operations.

~~Item~~

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in Item 1A of our Form10-K for the fiscal year ended December 31, ~~2017.~~2018, other than as disclosed below. Additional risks and uncertainties, including risks and uncertainties not presently known to us, or that we currently deem immaterial, could also have an adverse effect on our business, financial condition and/or results of operations.

We may experience difficulties integrating Speedpay, which could cause us to fail to realize the anticipated benefits of the acquisition.

Achieving the anticipated benefits of our acquisition of Speedpay will depend in part upon whether we are able to integrate the business in an effective and efficient manner. There can be no assurance that we will be able to fully integrate all aspects of

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Speedpay successfully, advance our business strategy, or fully realize the potential benefits of bringing the businesses together, and the process of integrating Speedpay may disrupt our business and divert our resources. Any delay or inability of management to successfully integrate the operations of Speedpay could compromise our potential to achieve the anticipated long-term strategic benefits of the acquisitions and could have a material adverse effect on the business, financial condition, cash flows, and results of operations.

~~Item~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table provides information regarding ~~the Company’s~~our repurchases of ~~its~~ common stock during the ~~nine~~three months ended ~~September~~June 30, ~~2018:~~

Period
   Total Number
of Shares
Purchased    Average Price
Paid per Share    Total Number of
Shares
Purchased as
Part of Publicly
Announced
Program    Approximate
Dollar Value of
Shares that May
Yet Be
Purchased
Under the
Program
July 1, 2018 through July 31, 2018
   —      $ —      —      $ 176,587,000
August 1, 2018 through August 31, 2018
   —      —      —      176,587,000
September 1, 2018 through September 30, 2018
   —      —      —      176,587,000







Total
   —      $ —      —

2019:



Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
April 1, 2019 through April 30, 2019	502	(1)	$	33.96	—	$	175,956,000
May 1, 2019 through May 31, 2019	—		—		—	175,956,000
June 1, 2019 through June 30, 2019	5,120	(1)	32.71		—	175,956,000
Total	5,622		$	32.82	—


(1)	Pursuant to our 2005 Incentive Plan, we granted RSAs and RSUs. Under each arrangement, shares are issued without direct cost to the employee. During the three months ended June 30, 2019, 90,429 shares of the RSAs and RSUs vested. We withheld 5,622 of those shares to pay the employees’ portion of the applicable payroll taxes.

In ~~fiscal~~ 2005, ~~we announced that~~ our ~~Board of Directors (the “Board”)~~board approved a stock repurchase program authorizing us, ~~from time to time~~ as market and business conditions warrant, to acquire our common stock and ~~that we intended to use~~periodically authorize additional funds for the program, with the intention of using existing cash and cash equivalents to fund these repurchases. ~~Periodically the Board authorizes additional funds for the program.~~ In February 2018, the ~~Board~~board approved the repurchase of the Company's common stock for up to $200.0 million, ~~for~~in place of the ~~stock repurchase program. The~~remaining purchase amounts previously authorized. As of June 30, 2019, the maximum remaining amount authorized for purchase under the stock repurchase program was ~~$176.6 million as of September 30, 2018.~~ approximately $176.0 million.

There is no guarantee as to the exact number of shares ~~that~~we will ~~be repurchased by us.~~repurchase. Repurchased shares are returned to the status of authorized but unissued shares of common stock. In March 2005, our ~~Board of Directors~~board approved a plan under Rule10b5-1 of the Securities Exchange Act of 1934 to facilitate the repurchase of shares of common stock under the existing stock repurchase program. Under our Rule10b5-1 plan, we have delegated authority over the timing and amount of repurchases to an independent broker who does not have access to inside information about the Company. Rule10b5-1 allows us, through the independent broker, to purchase shares at times when we ordinarily would not be in the market because of self-imposed trading blackout periods, such as the time immediately preceding the end of the fiscal quarter through a period of three business days following our quarterly earnings release.

~~Item~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

~~Item~~

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

~~Item~~

ITEM 5. OTHER INFORMATION

Not applicable.

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~~Item~~

ITEM 6. EXHIBITS

The following lists exhibits filed as part of this quarterly report on Form10-Q:



Exhibit No.		Description
2.01	(1)	Stock Purchase Agreement, dated February 28, 2019
3.01	(2)	2013 Amended and Restated Certificate of Incorporation of the Company
3.02	(3)	Amended and Restated Bylaws of the Company
4.01	(4)	Form of Common Stock Certificate (P)
10.01	(5)	Form of Restricted Share Unit Award Agreement CEO (RSUs)
10.02	(6)	Form of Performance Share Award Agreement CEO (rTSR Performance Share Awards)
10.03	(7)	Form of Restricted Share Unit Award Agreement (RSUs)
10.04	(8)	Form of Performance Share Award Agreement (rTSR Performance Share Awards)
10.05	(9)	Amendment Agreement to the Amended and Restated Credit Agreement, dated April 5, 2019
31.01		Certification of Principal Executive Officer pursuant to SEC Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.02		Certification of Principal Financial Officer pursuant to SEC Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.01	*	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.02	*	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase

____________


~~Exhibit~~ ~~No.~~		~~Description~~

~~3.01 (1)~~		~~2013 Amended and Restated Certificate of Incorporation of the Company~~

~~3.02 (2)~~		~~Amended and Restated Bylaws of the Company~~

~~4.01 (3)~~		~~Form of Common Stock Certificate (P)~~

~~4.02 (4)~~		~~Indenture, dated as of August 21, 2018, among ACI Worldwide, Inc., the guarantors listed therein, and Wilmington Trust, National Association, as trustee~~

~~4.03~~		~~Form of 5.750% Senior Notes due 2026 (included as Exhibit A to Exhibit 4.02)~~

~~31.01~~		~~Certification of Principal Executive Officer pursuant to SEC Rule13a-14,~~ ~~as adopted pursuant to Section 302 of theSarbanes-Oxley~~ ~~Act of 2002~~

~~31.02~~		~~Certification of Principal Financial Officer pursuant to SEC Rule13a-14,~~ ~~as adopted pursuant to Section 302 of theSarbanes-Oxley~~ ~~Act of 2002~~

~~32.01~~	*	~~Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley~~ ~~Act of 2002~~

~~32.02~~	*	~~Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley~~ ~~Act of 2002~~

~~101.INS~~		~~XBRL Instance Document~~

~~101.SCH~~		~~XBRL Taxonomy Extension Schema~~

~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase~~

~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase~~

This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference.


(P)	Paper Exhibit

~~(P)~~	~~Paper~~
(1)	Incorporated herein by reference to Exhibit 2.1 to the registrant’s quarterly report on Form 10-Q for the period ended March 31, 2019.

~~(1)~~
(2)	Incorporated herein by reference to Exhibit 3.1 to the registrant’s current report on Form8-K filed August 17, 2017.

~~(2)~~
(3)	Incorporated herein by reference to Exhibit 3.1 to the registrant’s current report on Form8-K filed February 27, 2017.

~~(3)~~
(4)	Incorporated herein by reference to Exhibit 4.01 to the registrant’s Registration StatementNo. 33-88292 on FormS-1.

~~(4)~~
(5)	Incorporated herein by reference to Exhibit ~~4.1~~10.1 to the registrant’s current report on Form8-K filed ~~August 21, 2018.~~ March 8, 2019.


(6)	Incorporated herein by reference to Exhibit 10.2 to the registrant’s current report on Form 8-K filed March 8, 2019.


(7)	Incorporated herein by reference to Exhibit 10.3 to the registrant’s current report on Form 8-K filed March 8, 2019.


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


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

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




	ACI WORLDWIDE, INC. (Registrant)
		~~ACI WORLDWIDE, INC.~~ ~~(Registrant)~~

Date: ~~November~~August 8, ~~2018~~			2019	By:	/s/ SCOTT W. BEHRENS
					Scott W. Behrens
					Senior Executive Vice President, Chief Financial Officer and Chief Accounting Officer (Principal Financial Officer)


	September 30,			December 31,
	2018			2017
ASSETS
Current assets
Cash and cash equivalents	$	76,342		$	69,710
Receivables, net of allowances of $3,598 and $4,799, respectively		279,641			262,845
Recoverable income taxes		8,233			7,921
Prepaid expenses		25,875			23,219
Other current assets		23,244			58,126

Total current assets		413,335			421,821

Noncurrent assets
Accrued receivables, net		181,832			—
Property and equipment, net		75,437			80,228
Software, net		147,316			155,386
Goodwill		909,691			909,691
Intangible assets, net		174,057			191,281
Deferred income taxes, net		28,179			66,749
Other noncurrent assets		54,477			36,483

TOTAL ASSETS	$	1,984,324		$	1,861,639

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	27,381		$	34,718
Employee compensation		48,142			48,933
Current portion of long-term debt		18,765			17,786
Deferred revenue		93,668			107,543
Income taxes payable		1,600			9,898
Other current liabilities		60,075			102,904

Total current liabilities		249,631			321,782

Noncurrent liabilities
Deferred revenue		48,789			51,967
Long-term debt		656,159			667,943
Deferred income taxes, net		26,372			16,910
Other noncurrent liabilities		40,435			38,440

Total liabilities		1,021,386			1,097,042

Commitments and contingencies
Stockholders’ equity
Preferred stock; $0.01 par value; 5,000,000 shares authorized; no shares issued at September 30, 2018 and December 31, 2017		—			—
Common stock; $0.005 par value; 280,000,000 shares authorized; 140,525,055 shares issued at September 30, 2018 and December 31, 2017		702			702
Additionalpaid-in capital		632,547			610,345
Retained earnings		776,078			550,866
Treasury stock, at cost, 24,543,359 and 23,428,324 shares at September 30, 2018 and December 31, 2017, respectively		(357,923	)		(319,960	)
Accumulated other comprehensive loss		(88,466	)		(77,356	)

Total stockholders’ equity		962,938			764,597

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,984,324		$	1,861,639


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2018			2017
Revenues
Software as a service and platform as a service	$	104,519		$	99,761		$	322,399		$	312,677
License		68,964			50,017			142,565			163,578
Maintenance		54,373			56,349			166,080			166,829
Services		17,669			19,608			58,786			54,712

Total revenues		245,525			225,735			689,830			697,796

Operating expenses
Cost of revenue (1)		102,473			107,393			326,070			336,293
Research and development		36,008			33,935			110,661			106,189
Selling and marketing		28,252			25,236			93,305			81,190
General and administrative		29,537			25,302			87,023			130,332
Depreciation and amortization		20,896			22,446			63,274			67,189

Total operating expenses		217,166			214,312			680,333			721,193

Operating income (loss)		28,359			11,423			9,497			(23,397	)

Other income (expense)
Interest expense		(12,573	)		(9,374	)		(31,655	)		(30,198	)
Interest income		2,763			165			8,249			421
Other, net		(1,304	)		(1,059	)		(3,036	)		(2,176	)

Total other income (expense)		(11,114	)		(10,268	)		(26,442	)		(31,953	)

Income (loss) before income taxes		17,245			1,155			(16,945	)		(55,350	)
Income tax expense (benefit)		2,012			(2,233	)		1,824			(27,321	)

Net income (loss)	$	15,233		$	3,388		$	(18,769	)	$	(28,029	)

Earnings (loss) per common share
Basic	$	0.13		$	0.03		$	(0.16	)	$	(0.24	)
Diluted	$	0.13		$	0.03		$	(0.16	)	$	(0.24	)
Weighted average common shares outstanding
Basic		115,889			118,254			115,615			117,096
Diluted		117,492			119,743			115,615			117,096


	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net income (loss)	$	15,233		$	3,388		$	(18,769	)	$	(28,029	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(3,862	)		(594	)		(11,110	)		14,526

Total other comprehensive income (loss)		(3,862	)		(594	)		(11,110	)		14,526

Comprehensive income (loss)	$	11,371		$	2,794		$	(29,879	)	$	(13,503	)


(in thousands)	September 30, 2018		December 31, 2017
Settlement deposits	$	5,477	$	22,282
Settlement receivables		11,462		30,063
Other		6,305		5,781

Total other current assets	$	23,244	$	58,126


	Deferred
(in thousands)	Revenue
Balance, January 1, 2018	$	145,344
Deferral of revenue		145,573
Recognition of deferred revenue		(144,935	)
Foreign currency translation		(3,525	)

Balance, September 30, 2018	$	142,457


	September 30, 2018
(in thousands)	As Reported		Without application of ASC 606		Effect of Change Higher / (Lower)
Assets
Receivables, net of allowances	$	279,641	$	202,829	$	76,812
Recoverable income taxes		8,233		6,711		1,522
Prepaid expenses		25,875		26,616		(741	)
Other current assets		23,244		22,844		400
Accrued receivables, net		181,832		—		181,832
Deferred income taxes, net		28,179		67,261		(39,082	)
Other noncurrent assets		54,477		40,275		14,202
Liabilities
Deferred revenue		93,668		108,162		(14,494	)
Income taxes payable		1,600		153		1,447
Other current liabilities		60,075		60,310		(235	)
Deferred income taxes, net		26,372		6,161		20,211
Stockholders’ equity
Total stockholders’ equity		962,938		734,925		228,013


(in thousands)	As of September 30, 2018			As of December 31, 2017
Term credit facility	$	288,917		$	394,250
Revolving credit facility		—			2,000
5.750% Senior Notes, due August 2026		400,000			—
6.375% Senior Notes, due August 2020		—			300,000
Debt issuance costs		(13,993	)		(10,521	)

Total debt		674,924			685,729
Less current portion of term credit facility		21,768			20,750
Less current portion of debt issuance costs		(3,003	)		(2,964	)

Total long-term debt	$	656,159		$	667,943



	June 30, 2019			December 31, 2018
Term loans	$	775,535		$	284,959
Revolving credit facility	235,000			—
5.750% Senior notes, due August 2026	400,000			400,000
Debt issuance costs	(24,350		)	(13,203		)
Total debt	1,386,185			671,756
Less: current portion of term loans	38,950			23,747
Less: current portion of debt issuance costs	(4,861		)	(2,980		)
Total long-term debt	$	1,352,096		$	650,989


	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value of In-the- Money Options
Outstanding as of December 31, 2017		6,162,717		$	16.83
Granted		170,455			23.36
Exercised		(1,262,994	)		14.57
Forfeited		(81,881	)		18.62

Outstanding as of September 30, 2018		4,988,297		$	17.60		6.30	$	52,585,398

Exercisable as of September 30, 2018		3,533,425		$	16.84		5.64	$	39,930,860


	Nine Months Ended			Nine Months Ended
	September 30, 2018			September 30, 2017
Expected life (years)		5.6			5.6
Interest rate		2.7	%		1.9	%
Volatility		26.4	%		29.4	%
Dividend yield		—			—


Nonvested LTIP Performance Shares	Number of Shares at Expected Attainment			Weighted- Average Grant Date Fair Value
Nonvested as of December 31, 2017		1,125,035		$	18.94
Forfeited		(89,582	)		19.24

Nonvested as of September 30, 2018		1,035,453		$	18.92



	Number of Shares at Expected Attainment		Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2018	540,697		$	19.83
Forfeited	(16,319	)	20.12
Change in attainment	377,557		20.22
Nonvested as of June 30, 2019	901,935		$	19.99


Nonvested Restricted Share Awards	Number of Restricted Share Awards			Weighted-Average Grant Date Fair Value
Nonvested as of December 31, 2017		503,237		$	20.63
Vested		(231,473	)		21.20
Forfeited		(47,411	)		19.88

Nonvested as of September 30, 2018		224,353		$	20.18


Nonvested Performance-Based Restricted Share Awards	Number of Performance-Based Restricted Share Awards			Weighted-Average Grant Date Fair Value
Nonvested as of December 31, 2017		173,636		$	24.41
Vested		(173,636	)		24.41

Nonvested as of September 30, 2018		—		$	—


Nonvested Total Shareholder Return Awards	Number of Shares at Expected Attainment			Weighted- Average Grant Date Fair Value
Nonvested as of December 31, 2017		143,649		$	24.37
Granted		541,214			31.31
Forfeited		(33,970	)		29.90

Nonvested as of September 30, 2018		650,893		$	29.85


Nonvested Restricted Share Units	Number of Restricted Share Units			Weighted- Average Grant Date Fair Value
Nonvested as of December 31, 2017		—		$	—
Granted		714,123			23.81
Vested		(10,000	)		25.72
Forfeited		(38,739	)		23.36

Nonvested as of September 30, 2018		665,384		$	23.81


(in thousands)	September 30, 2018							December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Net Balance		Gross Carrying Amount		Accumulated Amortization			Net Balance
Customer relationships	$	300,782	$	(128,367	)	$	172,415	$	305,218	$	(116,677	)	$	188,541
Trademarks and tradenames		16,450		(14,808	)		1,642		16,646		(13,906	)		2,740

	$	317,232	$	(143,175	)	$	174,057	$	321,864	$	(130,583	)	$	191,281


Fiscal Year Ending December 31,	Software Amortization		Other Intangible Assets Amortization
(in thousands)
Remainder of 2018	$	13,724	$	4,670
2019		47,416		18,325
2020		37,964		17,438
2021		24,930		16,939
2022		11,957		16,789
2023		6,306		16,478
Thereafter		5,019		83,418

Total	$	147,316	$	174,057


(in thousands)	Facility Closures
Balance, December 31, 2017	$	5,945
Amounts paid during the period		(1,342	)
Foreign currency translation		(48	)

Balance, September 30, 2018	$	4,555


	Three Months Ended						Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
Revenue
ACI On Premise	$	141,006		$	126,006		$	367,431		$	385,108
ACI On Demand		104,519			99,729			322,399			312,688

Total revenue	$	245,525		$	225,735		$	689,830		$	697,796

Segment Adjusted EBITDA
ACI On Premise	$	77,819		$	65,138		$	171,477		$	196,060
ACI On Demand		3,270			(1,241	)		(4,327	)		(8,794	)
Depreciation and amortization		(23,545	)		(25,553	)		(72,889	)		(76,772	)
Stock-based compensation		(6,575	)		(8,084	)		(20,642	)		(22,724	)
Corporate and unallocated expenses		(22,610	)		(18,837	)		(64,122	)		(111,167	)
Interest, net		(9,810	)		(9,209	)		(23,406	)		(29,777	)
Other, net		(1,304	)		(1,059	)		(3,036	)		(2,176	)

Income (loss) before income taxes	$	17,245		$	1,155		$	(16,945	)	$	(55,350	)

Depreciation and amortization
ACI On Premise	$	2,772		$	3,321		$	8,596		$	9,915
ACI On Demand		7,906			8,576			23,468			25,973
Corporate		12,867			13,656			40,825			40,884

Total depreciation and amortization	$	23,545		$	25,553		$	72,889		$	76,772


	Three Months Ended September 30, 2018						Three Months Ended September 30, 2017
(in thousands)	ACI On Premise		ACI On Demand		Total		ACI On Premise		ACI On Demand		Total
Primary Geographic Markets
Americas - United States	$	26,022	$	88,401	$	114,423	$	36,189	$	84,669	$	120,858
Americas - Other		16,709		2,409		19,118		16,874		2,314		19,188
EMEA		80,738		12,385		93,123		47,919		12,104		60,023
Asia Pacific		17,537		1,324		18,861		25,024		642		25,666

Total	$	141,006	$	104,519	$	245,525	$	126,006	$	99,729	$	225,735

Primary Solution Categories
Bill Payments	$	—	$	64,134	$	64,134	$	—	$	62,328	$	62,328
Digital Channels/Online		7,499		9,327		16,826		13,403		11,555		24,958
Merchant Payments		6,216		18,052		24,268		6,423		12,458		18,881
Payments Risk Management		7,259		11,068		18,327		10,887		11,192		22,079
Real Time Payments		23,704		540		24,244		11,745		520		12,265
Retail Payments		96,328		1,398		97,726		83,548		1,676		85,224

Total	$	141,006	$	104,519	$	245,525	$	126,006	$	99,729	$	225,735


	Nine Months Ended September 30, 2018						Nine Months Ended September 30, 2017
(in thousands)	ACI On Premise		ACI On Demand		Total		ACI On Premise		ACI On Demand		Total
Primary Geographic Markets
Americas - United States	$	82,280	$	275,171	$	357,451	$	118,311	$	268,125	$	386,436
Americas - Other		45,269		7,077		52,346		44,591		7,168		51,759
EMEA		181,913		36,819		218,732		166,379		35,554		201,933
Asia Pacific		57,969		3,332		61,301		55,827		1,841		57,668

Total	$	367,431	$	322,399	$	689,830	$	385,108	$	312,688	$	697,796

Primary Solution Categories
Bill Payments	$	—	$	204,673	$	204,673	$	—	$	201,259	$	201,259
Digital Channels/Online		27,779		30,281		58,060		36,118		33,771		69,889
Merchant Payments		16,476		44,423		60,899		20,175		35,816		55,991
Payments Risk Management		25,711		34,524		60,235		22,855		33,604		56,459
Real Time Payments		53,086		1,474		54,560		35,195		2,418		37,613
Retail Payments		244,379		7,024		251,403		270,765		5,820		276,585

Total	$	367,431	$	322,399	$	689,830	$	385,108	$	312,688	$	697,796


(in thousands)	Accumulated other comprehensive loss
Balance at December 31, 2017	$	(77,356	)
Other comprehensive loss		(11,110	)

Balance at September 30, 2018	$	(88,466	)


	Accumulated other comprehensive loss
Balance at December 31, 2016	$	(94,100	)
Other comprehensive income		14,526

Balance at September 30, 2017	$	(79,574	)


	As Reported		Without application of ASC 606		As Reported		Without application of ASC 606		As Reported		Without application of ASC 606
	September 30, 2018				June 30, 2018				March 31, 2018				December 31, 2017
ACI On Premise	$	1,775	$	1,645	$	1,830	$	1,681	$	1,874	$	1,709	$	1,700
ACI On Demand		2,401		2,400		2,472		2,472		2,513		2,512		2,404

Total	$	4,176	$	4,045	$	4,302	$	4,153	$	4,387	$	4,221	$	4,104


	As Reported		Without application of ASC 606		As Reported		Without application of ASC 606		As Reported		Without application of ASC 606
	September 30, 2018				June 30, 2018				March 31, 2018				December 31, 2017
Committed	$	1,760	$	2,015	$	1,769	$	2,022	$	1,879	$	2,138	$	2,062
Renewal		2,416		2,030		2,533		2,131		2,508		2,083		2,042

Total	$	4,176	$	4,045	$	4,302	$	4,153	$	4,387	$	4,221	$	4,104


	Three Months Ended September 30,
	2018												2017
	Amount			% of Total Revenue			$ Change vs 2017			% Change vs 2017			Amount			% of Total Revenue
Revenues:
Software as a service and platform as a service	$	104,519			43	%	$	4,758			5	%	$	99,761			44	%
License		68,964			28	%		18,947			38	%		50,017			22	%
Maintenance		54,373			22	%		(1,976	)		-4	%		56,349			25	%
Services		17,669			7	%		(1,939	)		-10	%		19,608			9	%

Total revenues		245,525			100	%		19,790			9	%		225,735			100	%

Operating expenses:
Cost of revenue		102,473			42	%		(4,920	)		-5	%		107,393			48	%
Research and development		36,008			15	%		2,073			6	%		33,935			15	%
Selling and marketing		28,252			12	%		3,016			12	%		25,236			11	%
General and administrative		29,537			12	%		4,235			17	%		25,302			11	%
Depreciation and amortization		20,896			9	%		(1,550	)		-7	%		22,446			10	%

Total operating expenses		217,166			88	%		2,854			1	%		214,312			95	%

Operating income		28,359			12	%		16,936			148	%		11,423			5	%
Other income (expense):
Interest expense		(12,573	)		-5	%		(3,199	)		34	%		(9,374	)		-4	%
Interest income		2,763			1	%		2,598			1575	%		165			0	%
Other, net		(1,304	)		-1	%		(245	)		23	%		(1,059	)		0	%

Total other income (expense)		(11,114	)		-5	%		(846	)		8	%		(10,268	)		-5	%

Income before income taxes		17,245			7	%		16,090			1393	%		1,155			1	%
Income tax expense (benefit)		2,012			1	%		4,245			-190	%		(2,233	)		-1	%

Net income	$	15,233			6	%	$	11,845			350	%	$	3,388			2	%


	Nine Months Ended September 30,
	2018												2017
	Amount			% of Total Revenue			$ Change vs 2017			% Change vs 2017			Amount			% of Total Revenue
Revenues:
Software as a service and platform as a service	$	322,399			47	%	$	9,722			3	%	$	312,677			45	%
License		142,565			21	%		(21,013	)		-13	%		163,578			23	%
Maintenance		166,080			24	%		(749	)		0	%		166,829			24	%
Services		58,786			9	%		4,074			7	%		54,712			8	%

Total revenues		689,830			100	%		(7,966	)		-1	%		697,796			100	%

Operating expenses:
Cost of revenue		326,070			47	%		(10,223	)		-3	%		336,293			48	%
Research and development		110,661			16	%		4,472			4	%		106,189			15	%
Selling and marketing		93,305			14	%		12,115			15	%		81,190			12	%
General and administrative		87,023			13	%		(43,309	)		-33	%		130,332			19	%
Depreciation and amortization		63,274			9	%		(3,915	)		-6	%		67,189			10	%

Total operating expenses		680,333			99	%		(40,860	)		-6	%		721,193			103	%

Operating income (loss)		9,497			1	%		32,894			-141	%		(23,397	)		-3	%
Other income (expense):
Interest expense		(31,655	)		-5	%		(1,457	)		5	%		(30,198	)		-4	%
Interest income		8,249			1	%		7,828			1859	%		421			0	%
Other, net		(3,036	)		0	%		(860	)		40	%		(2,176	)		0	%

Total other income (expense)		(26,442	)		-4	%		5,511			-17	%		(31,953	)		-5	%

Loss before income taxes		(16,945	)		-2	%		38,405			-69	%		(55,350	)		-8	%
Income tax expense (benefit)		1,824			0	%		29,145			-107	%		(27,321	)		-4	%

Net loss	$	(18,769	)		-3	%	$	9,260			-33	%	$	(28,029	)		-4	%


	As of September 30,		As of December 31,
	2018		2017
Cash and cash equivalents	$	76,342	$	69,710
Availability under Revolving Credit Facility		500,000		498,000

Total liquidity	$	576,342	$	567,710


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
July 1, 2018 through July 31, 2018		—	$	—		—	$	176,587,000
August 1, 2018 through August 31, 2018		—		—		—		176,587,000
September 1, 2018 through September 30, 2018		—		—		—		176,587,000

Total		—	$	—		—