UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________

FORM 10-Q

___________________________

(Mark One)



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

For the quarterly period ended June 30, ~~2019~~2020



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

For the transition period from to

Commission File Number 0-25346

___________________________

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.)

~~Delaware~~

~~47-0772104~~

~~(State or other jurisdiction of incorporation or organization)~~

~~(I.R.S. Employer Identification No.)~~

3520 Kraft Rd,

Suite 300

Naples,

Florida

34105

(Address of principal executive offices)

(Zip code)

(~~239~~) (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 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, a non-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” in Rule 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 in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August ~~5, 2019,~~3, 2020, there were ~~116,714,472~~116,388,958 shares of the registrant’s common stock outstanding.

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

~~TABLE OF CONTENTS~~

Page

PART I – FINANCIAL INFORMATION

Item 1

Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of June 30, ~~2019,~~2020, and December 31, ~~2018~~2019

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019

Notes to Condensed Consolidated Financial Statements

910

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

2526

Item 3

Quantitative and Qualitative Disclosures About Market Risk

4145

Item 4

Controls and Procedures

4245

PART II – OTHER INFORMATION

Unregistered Sales of Equity Securities and Use of Proceeds

4346

Item 3

Defaults Upon Senior Securities

4347

Item 4

Mine Safety Disclosures

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)


	June 30, 2019			December 31, 2018				June 30, 2020		December 31, 2019
ASSETS							ASSETS
Current assets							Current assets
Cash and cash equivalents	$	139,396		$	148,502		Cash and cash equivalents	$	129,223	$	121,398
Receivables, net of allowances of $3,781 and $3,912, respectively	286,393			348,182
Receivables, net of allowances of $3,661 and $5,149, respectively							Receivables, net of allowances of $3,661 and $5,149, respectively	324,659		359,197
Settlement assets	613,290			32,256			Settlement assets	338,372		391,039
Prepaid expenses	30,645			23,277			Prepaid expenses	29,620		24,542
Other current assets	52,259			14,260			Other current assets	30,533		24,200
Total current assets	1,121,983			566,477			Total current assets	852,407		920,376
Noncurrent assets							Noncurrent assets
Accrued receivables, net	177,513			189,010			Accrued receivables, net	199,964		213,041
Property and equipment, net	70,805			72,729			Property and equipment, net	69,011		70,380
Operating lease right-of-use assets	62,316			—			Operating lease right-of-use assets	54,816		57,382
Software, net	246,314			137,228			Software, net	216,287		234,517
Goodwill	1,279,472			909,691			Goodwill	1,280,226		1,280,525
Intangible assets, net	374,908			168,127			Intangible assets, net	335,697		356,969
Deferred income taxes, net	63,569			27,048			Deferred income taxes, net	59,301		51,611
Other noncurrent assets	53,440			52,145			Other noncurrent assets	69,868		72,733
TOTAL ASSETS	$	3,450,320		$	2,122,455		TOTAL ASSETS	$	3,137,577	$	3,257,534
LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities							Current liabilities
Accounts payable	$	46,975		$	39,602		Accounts payable	$	42,795	$	37,010
Settlement liabilities	589,742			31,605			Settlement liabilities	314,017		368,719
Employee compensation	38,976			38,115			Employee compensation	36,717		29,318
Current portion of long-term debt	34,089			20,767			Current portion of long-term debt	34,206		34,148
Deferred revenue	79,311			104,843			Deferred revenue	73,729		65,784
Other current liabilities	81,156			61,688			Other current liabilities	78,995		76,971
Total current liabilities	870,249			296,620			Total current liabilities	580,459		611,950
Noncurrent liabilities							Noncurrent liabilities
Deferred revenue	59,122			51,292			Deferred revenue	63,692		53,155
Long-term debt	1,352,096			650,989			Long-term debt	1,282,889		1,339,007
Deferred income taxes, net	23,243			31,715			Deferred income taxes, net	31,140		32,053
Operating lease liabilities	50,550			—			Operating lease liabilities	45,999		46,766
Other noncurrent liabilities	42,483			43,608			Other noncurrent liabilities	42,661		44,635
Total liabilities	2,397,743			1,074,224			Total liabilities	2,046,840		2,127,566
Commitments and contingencies							Commitments and contingencies
Stockholders’ equity							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
Preferred stock; $0.01 par value; 5,000,000 shares authorized; 0 shares issued at June 30, 2020, and December 31, 2019							Preferred stock; $0.01 par value; 5,000,000 shares authorized; 0 shares issued at June 30, 2020, and December 31, 2019	—		—
Common stock; $0.005 par value; 280,000,000 shares authorized; 140,525,055 shares issued at June 30, 2020, and December 31, 2019							Common stock; $0.005 par value; 280,000,000 shares authorized; 140,525,055 shares issued at June 30, 2020, and December 31, 2019	702		702
Additional paid-in capital	650,797			632,235			Additional paid-in capital	667,554		667,658
Retained earnings	843,530			863,768			Retained earnings	920,478		930,830
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		)
Treasury stock, at cost, 24,158,059 and 24,538,703 shares at June 30, 2020, and December 31, 2019, respectively							Treasury stock, at cost, 24,158,059 and 24,538,703 shares at June 30, 2020, and December 31, 2019, respectively	(399,663)		(377,639)
Accumulated other comprehensive loss	(93,026		)	(92,617		)	Accumulated other comprehensive loss	(98,334)		(91,583)
Total stockholders’ equity	1,052,577			1,048,231			Total stockholders’ equity	1,090,737		1,129,968
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,450,320		$	2,122,455		TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,137,577	$	3,257,534

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)


	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018				2020		2019		2020		2019
Revenues													Revenues
Software as a service and platform as a service	$	172,499		$	113,600		$	281,056		$	217,880		Software as a service and platform as a service	$	180,573	$	172,499	$	373,523	$	281,056
License	52,541			45,555			73,619			73,601			License	50,136		52,541		78,265		73,619
Maintenance	51,922			55,048			107,033			111,707			Maintenance	52,749		51,922		106,029		107,033
Services	20,656			20,792			41,765			41,117			Services	16,452		20,656		33,578		41,765
Total revenues	297,618			234,995			503,473			444,305			Total revenues	299,910		297,618		591,395		503,473
Operating expenses													Operating expenses
Cost of revenue (1)	155,240			116,261			270,181			223,597			Cost of revenue (1)	147,346		155,240		313,183		270,181
Research and development	39,235			37,862			75,429			74,653			Research and development	35,578		39,235		74,602		75,429
Selling and marketing	32,962			33,160			62,392			65,053			Selling and marketing	24,455		32,962		54,538		62,392
General and administrative	49,319			28,837			80,836			57,486			General and administrative	29,758		49,319		65,684		80,836
Depreciation and amortization	26,744			21,033			48,610			42,378			Depreciation and amortization	33,635		26,744		65,533		48,610
Total operating expenses	303,500			237,153			537,448			463,167			Total operating expenses	270,772		303,500		573,540		537,448
Operating loss	(5,882		)	(2,158		)	(33,975		)	(18,862		)
Operating income (loss)													Operating income (loss)	29,138		(5,882)		17,855		(33,975)
Other income (expense)													Other income (expense)
Interest expense	(15,323		)	(9,717		)	(26,937		)	(19,082		)	Interest expense	(14,142)		(15,323)		(31,313)		(26,937)
Interest income	2,997			2,742			6,030			5,486			Interest income	2,954		2,997		5,854		6,030
Other, net	1,402			(1,677		)	(510		)	(1,732		)	Other, net	2,041		1,402		(7,717)		(510)
Total other income (expense)	(10,924		)	(8,652		)	(21,417		)	(15,328		)	Total other income (expense)	(9,147)		(10,924)		(33,176)		(21,417)
Loss before income taxes	(16,806		)	(10,810		)	(55,392		)	(34,190		)
Income (loss) before income taxes													Income (loss) before income taxes	19,991		(16,806)		(15,321)		(55,392)
Income tax expense (benefit)	(22,531		)	3,764			(35,154		)	(188		)	Income tax expense (benefit)	5,916		(22,531)		(4,969)		(35,154)
Net income (loss)	$	5,725		$	(14,574	)	$	(20,238	)	$	(34,002	)	Net income (loss)	$	14,075	$	5,725	$	(10,352)	$	(20,238)
Income (loss) per common share													Income (loss) per common share
Basic	$	0.05		$	(0.13	)	$	(0.17	)	$	(0.29	)	Basic	$	0.12	$	0.05	$	(0.09)	$	(0.17)
Diluted	$	0.05		$	(0.13	)	$	(0.17	)	$	(0.29	)	Diluted	$	0.12	$	0.05	$	(0.09)	$	(0.17)
Weighted average common shares outstanding													Weighted average common shares outstanding
Basic	116,586			115,548			116,287			115,595			Basic	116,033		116,586		116,019		116,287
Diluted	118,786			115,548			116,287			115,595			Diluted	117,264		118,786		116,019		116,287

(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.~~

~~Table of contents~~

~~ACI WORLDWIDE, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~

~~(unaudited and in thousands)~~

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.

Table of contents

ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited and in thousands)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net income (loss)	$	14,075	$	5,725	$	(10,352)	$	(20,238)
Other comprehensive loss:
Foreign currency translation adjustments	(582)		(1,730)		(6,751)		(409)
Total other comprehensive loss	(582)		(1,730)		(6,751)		(409)
Comprehensive income (loss)	$	13,493	$	3,995	$	(17,103)	$	(20,647)

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 STOCKHOLDERS’ EQUITY

(unaudited and in 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


	Three Months Ended June 30, 2020
	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance as of March 31, 2020	$	702	$	656,723	$	906,403	$	(398,278)	$	(97,752)	$	1,067,798
Net income	—		—		14,075		—		—		14,075
Other comprehensive loss	—		—		—		—		(582)		(582)
Stock-based compensation	—		7,932		—		—		—		7,932
Shares issued and forfeited, net, under stock plans	—		2,899		—		(1,234)		—		1,665

Repurchase of stock-based compensation awards for tax withholdings	—		—		—		(151)		—		(151)
Balance as of June 30, 2020	$	702	$	667,554	$	920,478	$	(399,663)	$	(98,334)	$	1,090,737


	Three Months Ended June 30, 2019
	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive 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	—		(535)		—		2,346		—		1,811

Repurchase of stock-based compensation awards for tax withholdings	—		—		—		(185)		—		(185)
Balance as of June 30, 2019	$	702	$	650,797	$	843,530	$	(349,426)	$	(93,026)	$	1,052,577

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 STOCKHOLDERS’ EQUITY

(unaudited and in thousands, except share amounts)


																			Six Months Ended June 30, 2020
																			Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance as of December 31, 2019																		Balance as of December 31, 2019	$	702	$	667,658	$	930,830	$	(377,639)	$	(91,583)	$	1,129,968
Net loss																		Net loss	—		—		(10,352)		—		—		(10,352)
Other comprehensive loss																		Other comprehensive loss	—		—		—		—		(6,751)		(6,751)
Stock-based compensation																		Stock-based compensation	—		14,882		—		—		—		14,882
Shares issued and forfeited, net, under stock plans																		Shares issued and forfeited, net, under stock plans	—		(14,986)		—		17,981		—		2,995
Repurchase of 1,000,000 shares of common stock																		Repurchase of 1,000,000 shares of common stock	—		—		—		(28,881)		—		(28,881)
Repurchase of stock-based compensation awards for tax withholdings																		Repurchase of stock-based compensation awards for tax withholdings	—		—		—		(11,124)		—		(11,124)
Balance as of June 30, 2020																		Balance as of June 30, 2020	$	702	$	667,554	$	920,478	$	(399,663)	$	(98,334)	$	1,090,737

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

Table of contents

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


	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities:
Net loss	$	(10,352)	$	(20,238)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation	11,752		11,831
Amortization	57,762		42,799
Amortization of operating lease right-of-use assets	8,801		7,029
Amortization of deferred debt issuance costs	2,416		1,683
Deferred income taxes	(4,742)		(41,331)
Stock-based compensation expense	14,882		20,957
Other	1,772		1,533
Changes in operating assets and liabilities, net of impact of acquisitions:
Receivables	29,053		88,596
Accounts payable	6,287		1,294
Accrued employee compensation	8,177		(1,163)
Current income taxes	(9,367)		(5,634)
Deferred revenue	22,236		(17,981)
Other current and noncurrent assets and liabilities	(13,148)		(32,510)
Net cash flows from operating activities	125,529		56,865
Cash flows from investing activities:
Purchases of property and equipment	(10,615)		(9,915)
Purchases of software and distribution rights	(15,057)		(11,300)
Acquisition of businesses, net of cash acquired	—		(758,546)

Net cash flows from investing activities	(25,672)		(779,761)
Cash flows from financing activities:
Proceeds from issuance of common stock	1,894		1,753
Proceeds from exercises of stock options	1,122		5,816
Repurchase of stock-based compensation awards for tax withholdings	(11,124)		(2,809)
Repurchases of common stock	(28,881)		(631)
Proceeds from revolving credit facility	30,000		250,000
Repayment of revolving credit facility	(69,000)		(15,000)
Proceeds from term portion of credit agreement	—		500,000
Repayment of term portion of credit agreement	(19,475)		(9,424)
Payments for debt issuance costs	—		(12,830)
Payments on or proceeds from other debt, net	(4,686)		(2,220)
Net cash flows from financing activities	(100,150)		714,655
Effect of exchange rate fluctuations on cash	8,118		(865)
Net increase (decrease) in cash and cash equivalents	7,825		(9,106)
Cash and cash equivalents, beginning of period	121,398		148,502
Cash and cash equivalents, end of period	$	129,223	$	139,396
Supplemental cash flow information
Income taxes paid	$	12,121	$	15,476
Interest paid	$	29,026	$	23,937

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

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ACI WORLDWIDE, INC. AND SUBSIDIARIES

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 its wholly-owned subsidiaries (collectively, the “Company”). All intercompany balances and transactions have been eliminated. The condensed consolidated financial statements as of June 30, ~~2019,~~2020, and for the three and six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, 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, ~~2018,~~2019, 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 Form 10-K for the fiscal year ended December 31, ~~2018,~~2019, filed on ~~March 1, 2019.~~February 27, 2020. Results for the three and six months ended June 30, ~~2019,~~2020, 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.

Risks and Uncertainties

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company's business is highly uncertain and difficult to predict, as the response to the pandemic and available information continues to be evolving. The Company has experienced changes in volumes for certain Merchant and Biller customers and has received limited requests for extended payment terms under existing contracts. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Such economic disruption could have a material adverse effect on our business as our customers curtail and reduce capital and overall spending. Policymakers around the globe have responded with fiscal policy actions to support the economy as a whole. The magnitude and overall effectiveness of these actions remains uncertain.

The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, uncertain demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operations challenges faced by its customers. As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.

Other Current ~~Liabilitie~~sLiabilities

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


	June 30, 2020		December 31, 2019
Operating lease liabilities	$	13,976	$	15,049
Vendor financed licenses	17,873		9,667
Royalties payable	5,097		6,107
Accrued interest	8,868		9,212
Other	33,181		36,936
Total other current liabilities	$	78,995	$	76,971

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

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Settlement Assets and Liabilities

Individuals and businesses settle their obligations to the Company’s various ~~biller~~Biller clients using credit or debit cards or via automated clearing house (“ACH”) payments. The Company creates a receivable for the amount due from the credit or debit card 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 (1) 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.~~books and (2) disburse funds to its clients in advance of receiving funds from the credit or debit card processor, resulting in a net settlement receivable position.

Off Balance Sheet Settlement Accounts

The Company also enters into agreements with certain ~~biller~~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, 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 June 30, ~~2019,~~2020, and December 31, ~~2018,~~2019, was ~~$203.2~~$165.9 million and ~~$256.5~~$274.0 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 5.750% Senior Notes due 2026 (“2026 Notes”) was $416.7 million and $432.0 million as of June 30, ~~2019,~~2020, and December 31, ~~2018, was $418.0 million and $395.0 million,~~2019, 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 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~~reportable segments, ACI On Demand and ACI On Premise, as ~~its~~the reporting units.

Changes in the carrying amount of goodwill attributable to each reporting unit during the six months ended June 30, ~~2019,~~2020, were as follows (in thousands):


	ACI On Demand		ACI On Premise		Total
Gross Balance, prior to December 31, 2019	$	554,617	$	773,340	$	1,327,957
Total impairment prior to December 31, 2019	—		(47,432)		(47,432)
Balance, December 31, 2019	554,617		725,908		1,280,525
Goodwill from acquisitions (1)	(299)		—		(299)
Balance, June 30, 2020	$	554,318	$	725,908	$	1,280,226

(1)Goodwill from acquisitions relates to adjustments in 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, Acquisition.

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.~~

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Recoverability of goodwill is measured using a discounted cash flow valuation 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, ~~2018,~~2019, annual impairment test. Given the adverse economic and market conditions caused by the COVID-19 pandemic, the Company considered a variety of qualitative factors to determine if an additional quantitative impairment test ~~and there have been no indications~~was required subsequent to our annual impairment test. Based on a variety of ~~impairment~~factors, including the excess of the fair value over the carrying amount in the ~~subsequent periods.~~most recent impairment test, we determined that an additional quantitative impairment test was not required.

Equity Method Investment

On July 23, 2019, the Company invested $18.3 million for a 30% non-controlling financial interest in a payment technology and services company in India. The Company accounted for this investment using the equity method in accordance with ASC 323, Investments - Equity Method and Joint Ventures. The Company records its share of earnings and losses in the investment on a one-quarter lag basis. Accordingly, the Company recorded an investment of $18.1 million and $18.5 million, which is included in other noncurrent assets in the condensed consolidated balance sheet as of June 30, 2020 and December 31, 2019, respectively.

Name Change

Effective January 1, 2020, Official Payments Corporation, a wholly owned subsidiary, changed its name to ACI Payments, Inc. An amended and restated certificate of incorporation was filed with the state of Delaware to reflect the change. The Official Payments Corporation name and corresponding trade name may continue to be used until all stationary and marketing materials are transitioned to ACI Payments, Inc. equivalents.

New Accounting Standards Recently Adopted

In ~~February~~June 2016, the Financial Accounting Standards Board ~~(“FASB”~~("FASB") issued Accounting Standards Update ~~(“ASU”~~("ASU") ~~2016-2,~~ ~~Leases~~ (codified as “ASC 842”). ASC 842 requires lessees to recognize right-of-use (“ROU”) assets and lease liabilities on the balance sheet for all leases 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. The Company adopted ASC 842 on January 1, 2019 (the effective 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 for the Company’s ongoing accounting including the combination of lease and non-lease components into a single lease component which the Company has elected to apply to its facilities leases. As of January 1, 2019, the Company recognized ROU assets and operating lease liabilities of $63.3 million and $68.6 million, respectively. Refer to Note 13, ~~Leases, for further details.~~

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~~In February 2018, the FASB issued ASU 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~~codified as ASC 326. Subsequent amendments to the guidance were issued as follows: ASU 2018-19 in November ~~2018,~~2018; ASU 2019-04 in April ~~2019, and~~2019; ASU 2019-05 in May ~~2019~~.2019; ASU's 2019-10 and 2019-11 in November 2019; and ASU 2020-02 in February 2020. 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~~is required to use a forward-looking expected credit loss model for ~~accounts~~billed and accrued receivables. The Company adopted ASU 2016-13 as of January 1, 2020. The adoption of ASU 2016-13 did not have a material impact on the condensed consolidated financial statements.

In February 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments, which clarifies or improves various financial instruments topics in the accounting standards codification to increase stakeholder awareness. ASU 2020-03 was effective upon issuance and did not have a material impact on the condensed consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The update provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”). This guidance includes optional expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 is effective for all entities as of March 12, 2020, through December 31, 2022, when the reference rate replacement activity is expected to be completed. The adoption of ASU 2020-04 did not have an impact on the Company's condensed consolidated financial statements.

Recently Issued Accounting Standards Not Yet Effective

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in this update simplify the accounting for income taxes by removing certain exceptions within ASC 740, as well as clarify and simplify other aspects of the accounting for income taxes to promote consistency among reporting entities. ASU 2019-12 is effective for annual and interim periods beginning after December 15, ~~2019.~~2020. The Company is currently assessing the impact the adoption of ASU ~~2016-13~~2019-12 will have on its condensed consolidated ~~balance sheet, results~~financial statements.

Table of ~~operations, and statement of cash flows.~~contents

2. Revenue

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

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 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 subsequent to invoicing.

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


	June 30, 2020		December 31, 2019
Billed receivables	$	183,408	$	213,654
Allowance for doubtful accounts	(3,661)		(5,149)
Billed receivables, net	179,747		208,505
Accrued receivables	374,845		399,302
Significant financing component	(29,969)		(35,569)
Total accrued receivables, net	344,876		363,733
Less: current accrued receivables	155,320		161,714
Less: current significant financing component	(10,408)		(11,022)
Total long-term accrued receivables, net	199,964		213,041
Total receivables, net	$	524,623	$	572,238

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 June 30, ~~2019,~~2020, or December 31, ~~2018.~~2019.

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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 (in thousands):


Balance, December 31, 2019	$	118,939
Deferral of revenue	80,744
Recognition of deferred revenue	(60,410)
Foreign currency translation	(1,852)
Balance, June 30, 2020	$	137,421

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:

•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.

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Revenue allocated to remaining performance obligations was ~~$647.8~~$672.2 million as of June 30, ~~2019,~~2020, of which the Company expects to recognize approximately ~~45%~~44% over the next 12 months and the remainder thereafter.

During the three and six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, revenue recognized by the Company from performance obligations satisfied in previous periods was not significant.

3. Acquisition

Speedpay

On May 9, 2019, the Company acquired Speedpay, a subsidiary of The Western Union Company (“Western Union”), for ~~$755.3~~$754.1 million in cash, including working capital adjustments, pursuant to a Stock Purchase Agreement, among the Company, Western Union, and ACI Worldwide Corp., a wholly owned subsidiary of the Company. The Company has included the financial results of Speedpay in the 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~~increased 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~~ACI's On ~~Demand's~~Demand platform infrastructure.

To fund the acquisition, the Company amended its existing Credit Agreement, dated February 24, 2017, for an additional $500.0 million senior secured term loan (“Delayed Draw Term Loan”), in addition to drawing $250.0 million on the available Revolving Credit Facility. See Note 4, Debt, for terms of the Credit Agreement. The remaining acquisition consideration was funded with cash on hand.

The Company expensed approximately $16.6 million and $21.3 million of costs related to the acquisition of Speedpay for the three and six months ended June 30, 2019, respectively. These costs, which consist primarily of investment bank, consulting, and legal fees, are included in general and administrative expenses in the accompanying condensed consolidated statements of operations.

Speedpay contributed approximately $80.2 million in total revenue and $15.0 million in total operating income for the three months ended June 30, 2020. Speedpay contributed approximately $168.9 million in total revenue and $27.3 million in total operating income for the six months ended June 30, 2020. Speedpay contributed approximately $49.3 million in total revenue and $7.6 million in total operating income for the three and six months ended June 30, 2019.

The consideration paid by the Company to complete the acquisition has been allocated preliminarily to the assets acquired and liabilities assumed based upon estimated fair values as of the date of the acquisition. The allocation of purchase price is based upon external valuation and other analyses that have not been completed as of the 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~~2020 (in thousands, except weighted average useful lives):


	Amount		Weighted Average Useful Lives
Current assets:
Cash and cash equivalents	$	135
Receivables, net of allowances	17,658
Settlement assets	239,604
Prepaid expenses	317
Other current assets	19,585
Total current assets acquired	277,299
Noncurrent assets:
Goodwill	366,508
Software	113,600		7 years
Customer relationships	208,500		15 years
Trademarks	10,900		5 years
Other noncurrent assets	3,745
Total assets acquired	980,552
Current liabilities:
Accounts payable	6,623
Settlement liabilities	212,892
Employee compensation	1,959
Other current liabilities	3,802
Total current liabilities acquired	225,276
Noncurrent liabilities:
Other noncurrent liabilities	1,219
Total liabilities acquired	226,495
Net assets acquired	$	754,057

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

During the six months ended June 30, 2020, the Company made adjustments to the preliminary purchase price allocation as additional information became available for accounts payable. These adjustments and any resulting adjustments to the statements of operations were not material to the Company’s previously reported operating results or financial position. The Company's review of the purchase price allocation has been completed.

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 pro forma financial information in the table below presents the combined results of operations for ACI and Speedpay as if the acquisition had occurred January 1, 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 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 additional Delayed Draw Term Loan and Revolving Credit Facility borrowings. Additionally, certain transaction expenses that are a direct result of the acquisition have

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been ~~excluded from the~~excluded. The three and six months ended June 30, ~~2019 and 2018.~~2020, are not presented as Speedpay is included in the Company's consolidated results for the entire periods.

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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, 2019		Six Months Ended June 30, 2019
Pro forma revenue	$	334,077	$	628,136
Pro forma net income (loss)	$	15,249	$	(5,996)
Pro forma income (loss) per share:
Basic	$	0.13	$	(0.05)
Diluted	$	0.13	$	(0.05)

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 June 30, ~~2019,~~2020, the Company had ~~$235.0~~$200.0 million, ~~$775.5~~$736.6 million, and $400.0 million outstanding under its Revolving Credit Facility, Term Loan, and Senior Notes, respectively, with up to ~~$265.0~~$300.0 million of unused borrowings under the Revolving Credit Facility portion of the Credit Agreement, as amended.

Credit Agreement

On April 5, 2019, the Company (and its wholly-owned subsidiaries, ACI Worldwide Corp. and ACI Payments, Inc. entered into the Second Amended and Restated Credit Agreement (the “Credit Agreement”) with ~~ACI Worldwide Corp., Official Payments Corporation ("OPAY"),~~ the lenders, and Bank of America, N.A., as administrative agent for 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 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 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~~five-year $500.0 million senior secured revolving credit facility (the “Revolving Credit Facility”), which includes sublimits for (1) the issuance of standby letters of credit and (2) swingline loans, (b) a ~~five-year~~five-year $279.0 million senior secured term loan facility (the "Initial Term Loan") and (c) a ~~five-year~~five-year $500.0 million Delayed Draw Term Loan (together with the Initial Term Loan, the "Term Loans", and together with the Initial Term Loan and the Revolving Credit Facility, the “Credit Facility”). The Credit Agreement also allows the Company to request optional incremental term loans and increases in the revolving commitment. The Credit Facility will mature on April 5, 2024.

At the Company’s option, borrowings under the Credit Facility bear interest at an annual rate equal to, either (a) a base rate determined by reference to the highest of (1) the annual interest rate publicly announced by the administrative agent as its Prime Rate, (2) the federal funds effective rate plus 1/2 of 1%, or (3) a London Interbank Offered Rate (“LIBOR”) rate determined by reference to the costs of funds for U.S. dollar deposits for a one-month interest period, adjusted for certain additional costs, plus 1% or (b) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowings, adjusted for certain additional costs, plus an applicable margin. Based on the calculation of the applicable consolidated total leverage ratio, the applicable margin for borrowings under the Credit Facility is between 0.25% to 1.25% with respect to base rate borrowings and between 1.25% and 2.25% with respect to LIBOR rate borrowings. Interest is due and payable monthly. The interest rate in effect for the Credit Facility as of June 30, ~~2019, for the Credit Facility~~2020, was ~~4.65%~~2.43%.

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

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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

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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,~~ACI Payments, Inc., our electronic bill presentment and payment affiliate, to allow ~~OPAY~~ACI Payments, Inc. 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 and its subsidiaries' ability 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.

Expected Discontinuation of LIBOR

In July 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced it will no longer compel banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee has proposed the Secured Overnight Financing Rate ("SOFR") as its recommended alternative to LIBOR, and the first publication of SOFR rates was released in April 2018.

The Company is evaluating the potential impact of the transition from LIBOR as an interest rate benchmark to other potential alternative reference rates, including SOFR. The Company's Credit Agreement is currently indexed to LIBOR and the maturity date of the Credit Agreement extends beyond 2021. The Credit Agreement contemplates the discontinuation of LIBOR and provides options for the Company in such an event. The Company will continue to actively assess the related opportunities and risks involved in this transition.

Senior Notes

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

Maturities on debt outstanding as of June 30, ~~2019,~~2020, are as follows (in thousands):


Fiscal Year Ending December 31,
Remainder of 2020	$	19,475
2021	38,950
2022	50,431
2023	69,906
2024	757,823
Thereafter	400,000
Total	$	1,336,585

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 April 5, 2024, and the 2026 Notes will mature on August 15, 2026. The Revolving Credit Facility and 2026 Notes do not amortize. The Term 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. As specified in the Credit Agreement and 2026 Notes agreement, if certain events occur and continue, the Company may be required to repay all amounts outstanding under the Credit Facility and 2026 Notes. As of June 30, ~~2019,~~2020, and at all times during the period, the Company was in compliance with its financial debt covenants.

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


	June 30, 2020		December 31, 2019
Term loans	$	736,585	$	756,060
Revolving credit facility	200,000		239,000
5.750% Senior notes, due August 2026	400,000		400,000
Debt issuance costs	(19,490)		(21,905)
Total debt	1,317,095		1,373,155
Less: current portion of term loans	38,950		38,950
Less: current portion of debt issuance costs	(4,744)		(4,802)
Total long-term debt	$	1,282,889	$	1,339,007

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~~ACI Payments, Inc. 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,~~2020, there was no0 amount outstanding on the overdraft facility. As of December 31, 2019, there was $1.5 million outstanding on the overdraft facility.

Other

~~During the~~ ~~six~~ ~~months ended June 30, 2019, the~~The Company ~~financed~~finances certain multi-year license agreements for internal-use ~~software~~software. Upon execution, these arrangements have been treated as a non-cash investing and financing activity for ~~$10.4 million, with annual payments through April 2022.~~purposes of the condensed consolidated statements of cash flows. As of June 30, ~~2019, $19.8~~2020, $13.8 million iswas outstanding, ~~under these and other license agreements previously entered into,~~ of which ~~$11.6~~$9.4 million and ~~$8.2~~$4.4 million is included in other current liabilities and other noncurrent liabilities, respectively, in the ~~condensed~~ consolidated balance sheet. ~~Upon execution, these arrangements have been treated as a non-cash investment~~As of December 31, 2019, $13.8 million was outstanding, of which $6.0 million and ~~financing activity for purposes of~~$7.8 million was included in other current liabilities and other noncurrent liabilities, respectively, in the ~~condensed~~ consolidated ~~statements of cash flows.~~balance sheet.

5. Stock-Based Compensation Plans

Employee Stock Purchase Plan

Shares issued under the 2017 Employee Stock Purchase Plan during the six months ended June 30, 2020 and 2019, totaled 72,228 and ~~2018, totaled~~ 60,362, ~~and 77,118,~~ respectively.

2020 Equity and Incentive Compensation Plan

On June 9, 2020, upon recommendation of the Company’s board of directors (the “board”), stockholders approved the ACI Worldwide, Inc. 2020 Equity and Incentive Compensation Plan (the “2020 Plan”). The 2020 Plan authorizes the board to provide for equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, dividend equivalents, and certain other awards, including those denominated or payable in, or otherwise based on, the Company’s common stock ("awards"). The purpose of the 2020 Plan is to provide incentives and rewards for service and/or performance by providing awards to non-employee directors, officers, other employees, and certain consultants and other service providers of the Company and its subsidiaries. Following the approval of the 2020 Plan, the 2016 Equity and Performance Incentive Plan (the “2016 Incentive Plan”) was terminated. Termination of the 2016 Incentive Plan did not affect any equity awards outstanding under the 2016 Incentive Plan.

Subject to adjustment and share counting rules as described in the 2020 Plan, a total of 6,658,754 shares of common stock are available for awards granted under the 2020 Plan. Shares underlying certain awards under the 2020 Plan, the Company’s 2005 Equity and Performance Incentive Plan (the "2005 Incentive Plan"), and the 2016 Incentive Plan (each including as amended or amended and restated) that are cancelled or forfeited, expire, are settled for cash, or are unearned after June 9, 2020, will again be available under the 2020 Plan.

The board generally will be able to amend the 2020 Plan, subject to stockholder approval in certain circumstances, as described in the 2020 Plan.

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Stock Options

A summary of stock 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, 2019	4,006,816	$	18.18
Exercised	(1,110,583)	19.58
Forfeited	(57,744)	19.08
Expired	(6,090)	18.44
Outstanding as of June 30, 2020	2,832,399	$	17.61	3.98	$	26,562,039
Exercisable as of June 30, 2020	2,685,163	$	17.48	4.11	$	25,532,991

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 grant date fair value of stock options granted during the six months ended June 30, 2018, was $7.03.~~ The total intrinsic value of stock options exercised during the six months ended June 30, 2020 and 2019, ~~and 2018,~~ was ~~$6.0~~$10.5 million and ~~$11.3~~$6.0 million, respectively. There were no stock options granted during the six months ended June 30, 2020 or 2019.

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~~The fair value of options granted during the six months ended June 30, 2018, were estimated on the date of grant using the Black-Scholes option-pricing model, acceptable under ASC 718,~~ ~~Compensation – Stock Compensation~~ ~~(“ASC 718”), with the following weighted average assumptions:~~



	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 periods commensurate with the options’ expected life. The expected life of the options 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 U.S. Treasury zero coupon bonds issued with a term equal to the expected life at the date of grant of the options. The expected dividend yield is zero, as the Company has historically 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”) is as follows:


	Number of Shares at Expected Attainment	Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2019	669,469	$	20.12
Vested	(668,240)	20.12
Forfeited	(5,368)	20.12
Change in attainment	4,139	20.12
Nonvested as of June 30, 2020	—	$	—

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,~~2020, a total of 668,240 LTIPs vested. The Company withheld 165,237 of those shares to pay the ~~Company revised~~employees’ portion of 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.minimum payroll withholding taxes.

Restricted Share Awards

A summary of nonvested restricted share awards (“RSAs”) is as follows:


	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2019	92,842	$	20.13
Vested	(88,913)	20.12
Forfeited	(3,929)	20.35
Nonvested as of June 30, 2020	—	$	—

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 six months ended June 30, ~~2019,~~2020, a total of ~~104,763~~88,913 RSAs vested. The Company withheld ~~32,371~~28,233 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

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Total Shareholder Return Awards

~~A summary of nonvested~~During the six months ended June 30, 2020 and 2019, pursuant to the 2016 Incentive Plan, the Company granted total shareholder return awards (“TSRs”). 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%. To determine the grant date fair value of the TSRs, a Monte Carlo simulation model is used. The Company recognizes compensation expense for the TSRs over a three-year performance period based on the grant date fair value.

A summary of nonvested TSRs is as follows:


	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2019	1,062,291	$	35.77
Granted	677,195	30.01
Vested	(199,413)	24.37
Forfeited	(79,246)	39.41
Change in payout rate	(14,259)	24.37
Nonvested as of June 30, 2020	1,446,568	$	34.56

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

During the six months ended June 30, 2020, a total of 199,413 TSRs awards granted in fiscal 2017 vested and achieved a payout rate of 93% based on the Company's total shareholder return as compared to a group of peer companies over a three-year performance period. The Company withheld 53,033 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

The fair value of TSRs granted during the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, 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,
	2020		2019
Expected life (years)	2.8		2.8
Risk-free interest rate	0.5	%	2.5	%
Expected volatility	31.4	%	29.3	%
Expected dividend yield	—		—

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 Units

~~A summary of nonvested~~During the six months ended June 30, 2020 and 2019, pursuant to the 2020 Plan and the 2016 Incentive Plan, respectively, the Company granted restricted share unit awards (“RSUs”). RSUs generally have requisite service periods of three years and vest in increments of 33% on the anniversary of the grant dates. RSUs granted to our board vest one year from grant or as of the next annual shareholders meeting, whichever is earlier. Under each arrangement, RSUs are 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 is as follows:


	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2019	1,009,404	$	29.96
Granted	787,871	25.65
Vested	(399,605)	29.14
Forfeited	(114,303)	29.68
Nonvested as of June 30, 2020	1,283,367	$	27.59

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

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During the six months ended June 30, ~~2019,~~2020, a total of ~~257,982~~399,605 RSUs vested. The Company withheld ~~57,403~~109,652 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

As of June 30, ~~2019,~~2020, there were unrecognized compensation costs of ~~$27.4~~$30.1 million related to nonvested RSUs, $27.1 million related to nonvested TSRs, ~~$27.4 million related to nonvested RSUs, $3.8 million related to nonvested LTIP performance shares, $1.3 million related to nonvested RSAs,~~ and ~~$0.8~~less than $0.1 million related to nonvested stock options, which the Company expects to recognize over weighted average periods of 2.1 years, ~~1.8 years, 0.7 years, 0.7~~1.9 years, and 0.7 years, respectively.

The Company recorded stock-based compensation expense recognized under ASC 718 for the three months ended June 30, 2020 and 2019, ~~and 2018,~~ of ~~$14.4~~$7.9 million and ~~$7.7~~$14.4 million, respectively, with corresponding tax benefits of ~~$2.8~~$1.4 million and ~~$1.2~~$2.8 million, respectively. The Company recorded stock-based compensation expense recognized under ASC 718 for the six months ended June 30, 2020 and 2019, ~~and 2018,~~ of ~~$21.0~~$14.9 million and ~~$14.1~~$21.0 million, respectively, with the corresponding tax benefits of ~~$4.0~~$2.8 million and ~~$2.2~~$4.0 million, respectively.

6. Software and Other Intangible Assets

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


	June 30, 2020										December 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Net Balance		Gross Carrying Amount		Accumulated Amortization		Net Balance
Software for resale	$	136,618	$	(124,271)	$	12,347	$	138,823	$	(122,061)	$	16,762
Software for internal use	415,690		(211,750)		203,940		400,065		(182,310)		217,755
Total software	$	552,308	$	(336,021)	$	216,287	$	538,888	$	(304,371)	$	234,517

As of June 30, 2019, software net book value totaled $246.3 million, net of $275.6 million of accumulated amortization. Included in this net book value amount is software for resale of $21.5 million and software acquired or developed for internal use of $224.8 million.

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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 for resale is computed using the greater of (a) the ratio of current gross revenues to the total of current and future gross revenues expected to be derived from the software or (b) the straight-line method over anthe remaining estimated useful life of generally ~~three~~five to ten years. Software for resale amortization expense recorded during the three months ended June 30, 2020 and 2019, ~~and 2018,~~ totaled ~~$3.0~~$2.1 million and ~~$3.4~~$3.0 million, respectively. Software for resale amortization expense recorded induring the six months ended June 30, 2020 and 2019, ~~and 2018,~~ totaled ~~$6.0~~$4.0 million and ~~$7.0~~$6.0 million, respectively. These software amortization expense amounts are reflected in cost of revenue in the condensed consolidated statements of operations.

Amortization of software for internal use is computed using the straight-line method over an estimated useful life of generally ~~three~~one to ten years. Software for internal use amortization expense recorded during the three months ended June 30, 2020 and 2019, ~~and 2018,~~ totaled ~~$13.3~~$18.5 million and ~~$10.3~~$13.3 million, respectively. Software for internal use amortization expense recorded during the six months ended June 30, 2020 and 2019, ~~and 2018,~~ totaled ~~$23.7~~$35.2 million and ~~$20.8~~$23.7 million, respectively. These software amortization expense amounts are 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 subject to amortization at each balance sheet date are as follows (in thousands):


	June 30, 2020															December 31, 2019
			Gross Carrying Amount			Accumulated Amortization			Net Balance			Gross Carrying Amount			Accumulated Amortization			Net Balance
Customer relationships	$	502,748		$	(175,681)		$	327,067		$	507,785		$	(160,775)		$	347,010
Trademarks and trade names	27,142			(18,512)			8,630			27,312			(17,353)			9,959
Total other intangible assets	$	529,890		$	(194,193)		$	335,697		$	535,097		$	(178,128)		$	356,969

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 recorded during the three months ended June 30, 2020 and 2019, ~~and 2018,~~ totaled ~~$7.6~~$9.2 million and ~~$4.8~~$7.6 million, respectively. Other intangible assets amortization expense ~~for~~recorded during the six months ended June 30, 2020 and 2019, totaled $18.5 million and ~~2018, totaled~~ $13.1 million, ~~and $9.7 million,~~ respectively.

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Based on capitalized intangible assets as of June 30, ~~2019,~~2020, estimated amortization expense amounts in future fiscal years are as follows (in thousands):


Fiscal Year Ending December 31,	Software Amortization		Other Intangible Assets Amortization
Remainder of 2020	$	37,072	$	18,346
2021	61,612		36,379
2022	43,302		36,234
2023	27,501		35,932
2024	20,551		31,520
Thereafter	26,249		177,286
Total	$	216,287	$	335,697

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~~

~~A summary of the 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

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Of the $3.4 million restructuring liability, $1.6 million and $1.8 million are recorded in other current liabilities and operating lease liabilities, respectively, in the condensed consolidated balance sheet as of June 30, 2019.

8. Common Stock and Treasury Stock

In 2005, the board approved a stock repurchase program authorizing the Company, as market and business conditions warrant, to acquire its common stock and periodically authorize additional funds for the program. In February 2018, the board approved the repurchase of the Company's common stock ~~for~~of up to $200.0 million, in place of the remaining purchase amounts previously authorized.

The Company repurchased ~~23,802~~1,000,000 shares for ~~$0.6~~$28.9 million under the program during the six months ended June 30, ~~2019.~~2020. Under the program to date, the Company has repurchased ~~44,153,195~~46,357,495 shares for approximately ~~$548.5~~$612.3 million. As of June 30, ~~2019,~~2020, the maximum remaining amount authorized for purchase under the stock repurchase program was ~~$176.0~~$112.1 million.

9. 8. Earnings (Loss) Per Share

Basic earnings (loss) per share is computed in accordance with ASC 260, Earnings ~~per~~Per Share, based on weighted average outstanding common shares. Diluted earnings (loss) per share is computed based on basic weighted average outstanding common shares adjusted for the dilutive effect of stock options, RSUs, and ~~RSUs.~~certain contingently issuable shares for which performance targets have been achieved.

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


	Three Months Ended June 30,			Six Months Ended June 30,
	2020	2019	2020	2019
Weighted average shares outstanding:
Basic weighted average shares outstanding	116,033	116,586	116,019	116,287
Add: Dilutive effect of stock options and RSUs	1,231	2,200	—	—
Diluted weighted average shares outstanding	117,264	118,786	116,019	116,287

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 ~~2.1~~1.8 million and ~~7.9~~2.1 million options to purchase shares, ~~RSAs,~~ RSUs, and contingently issuable shares during the three months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively, as their effect would be anti-dilutive. The diluted loss per share computation excludes ~~7.5~~6.1 million and ~~8.3~~7.5 million options to purchase shares, ~~RSAs,~~ RSUs, and contingently issuable shares during the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively, as their effect would be anti-dilutive.

Common stock outstanding as of June 30, ~~2019,~~2020, and December 31, ~~2018,~~2019, was ~~116,684,869~~116,366,996 and ~~116,123,361,~~115,986,352, respectively.

~~10.~~ 9. Other, Net

Other, net is primarily comprised of foreign currency transaction gains of ~~$1.4~~$1.9 million and ~~losses of $1.7~~$1.4 million for the three months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Other, net is primarily comprised of foreign currency transaction losses of ~~$0.5~~$7.9 million and ~~$1.7~~$0.5 million for the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

~~11.~~ Table of contents

10. Segment Information

The Company reports financial performance based on its segments, ACI On ~~Premise~~Demand and ACI On ~~Demand,~~Premise, 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”). The CODM, together with other senior management personnel, focus their review on consolidated financial information and the allocation of resources based on operating results, including revenues and Segment Adjusted EBITDA, for each segment, separate from Corporate operations.

ACI On Demand serves the needs of banks, merchants, and billers who use payments to facilitate their core business. 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 offerings, or in a multi-tenant environment for PaaS offerings.

ACI On Premise serves customers who manage their software on ~~site.~~site or through a third-party public cloud environment. These 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 Demand serves the needs of banks, merchants and corporates who use payments to facilitate their core business. 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 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: (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).

Corporate and unallocated expenses ~~consists~~consist 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.

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


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenue
ACI On Demand	$	180,573	$	172,499	$	373,523	$	282,347
ACI On Premise	119,337		125,119		217,872		221,126
Total revenue	$	299,910	$	297,618	$	591,395	$	503,473
Segment Adjusted EBITDA
ACI On Demand	$	33,071	$	17,340	$	56,192	$	17,078
ACI On Premise	59,093		57,069		90,002		85,337
Depreciation and amortization	(35,692)		(29,778)		(69,514)		(54,630)
Stock-based compensation expense	(7,932)		(14,372)		(14,882)		(20,957)
Corporate and unallocated expenses	(19,402)		(36,141)		(43,943)		(60,803)
Interest, net	(11,188)		(12,326)		(25,459)		(20,907)
Other, net	2,041		1,402		(7,717)		(510)
Income (loss) before income taxes	$	19,991	$	(16,806)	$	(15,321)	$	(55,392)
Depreciation and amortization
ACI On Demand	$	10,852	$	8,489	$	20,184	$	16,051
ACI On Premise	3,431		3,019		6,537		6,049
Corporate	21,409		18,270		42,793		32,530
Total depreciation and amortization	$	35,692	$	29,778	$	69,514	$	54,630
Stock-based compensation expense
ACI On Demand	$	2,273	$	2,214	$	4,299	$	4,165
ACI On Premise	2,279		2,051		4,309		4,007
Corporate	3,380		10,107		6,274		12,785
Total stock-based compensation expense	$	7,932	$	14,372	$	14,882	$	20,957

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.

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The following is revenue by primary geographic market and primary solution category for the Company’s reportable segments for the periods indicated (in thousands):


	Three Months Ended June 30, 2020										Three Months Ended June 30, 2019
	ACI On Demand		ACI On Premise		Total		ACI On Demand		ACI On Premise		Total
Primary Geographic Markets
Americas - United States	$	158,720	$	48,661	$	207,381	$	155,825	$	35,696	$	191,521
Americas - Other	2,419		1,250		3,669		2,107		12,413		14,520
EMEA	16,524		54,426		70,950		12,492		52,155		64,647
Asia Pacific	2,910		15,000		17,910		2,075		24,855		26,930
Total	$	180,573	$	119,337	$	299,910	$	172,499	$	125,119	$	297,618
Primary Solution Categories
Bill Payments	$	137,122	$	—	$	137,122	$	125,339	$	—	$	125,339
Digital Channels	7,328		7,771		15,099		18,011		9,444		27,455
Merchant Payments	21,413		5,596		27,009		17,942		7,637		25,579
Payments Intelligence	11,852		3,942		15,794		8,874		6,504		15,378
Real-Time Payments	1,004		24,952		25,956		907		21,809		22,716
Retail Payments	1,854		77,076		78,930		1,426		79,725		81,151
Total	$	180,573	$	119,337	$	299,910	$	172,499	$	125,119	$	297,618

	Six Months Ended June 30, 2020										Six Months Ended June 30, 2019
	ACI On Demand		ACI On Premise		Total		ACI On Demand		ACI On Premise		Total
Primary Geographic Markets
Americas - United States	$	334,374	$	77,800	$	412,174	$	248,861	$	62,118	$	310,979
Americas - Other	5,652		19,191		24,843		4,850		23,358		28,208
EMEA	27,442		83,381		110,823		24,560		94,606		119,166
Asia Pacific	6,055		37,500		43,555		4,076		41,044		45,120
Total	$	373,523	$	217,872	$	591,395	$	282,347	$	221,126	$	503,473
Primary Solution Categories
Bill Payments	$	290,808	$	—	$	290,808	$	194,306	$	—	$	194,306
Digital Channels	15,721		15,334		31,055		27,799		18,169		45,968
Merchant Payments	40,427		9,702		50,129		37,281		12,659		49,940
Payments Intelligence	20,865		8,055		28,920		17,855		13,541		31,396
Real-Time Payments	2,001		42,251		44,252		1,525		36,524		38,049
Retail Payments	3,701		142,530		146,231		3,581		140,233		143,814
Total	$	373,523	$	217,872	$	591,395	$	282,347	$	221,126	$	503,473

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


	June 30, 2020		December 31, 2019
Long-lived Assets
United States	$	1,494,545	$	1,526,046
Other	731,324		759,501
Total	$	2,225,869	$	2,285,547

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

~~Table of contents~~

No single customer accounted for more than 10% of the Company’s consolidated revenues during the three and six months ended June 30, ~~2019~~2020 and ~~2018.~~2019. No other country outside the United States accounted for more than 10% of the ~~Company’s~~Company's consolidated revenues during the three and six months ended June 30, ~~2019~~2020 and ~~2018.~~2019.

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11. Income Taxes

The effective tax rate for the three and six months ended June 30, 2020, was 30% and 32%, respectively. The Company reported tax expense on pretax income for the three months ended June 30, 2020 and a tax benefit on a pretax loss for the six months ended June 30, 2020. The Company’s foreign entities recognized earnings of $10.7 million and a loss of $3.7 million for the three and six months ended June 30, 2020, respectively. The effective tax rate for the three months ended June 30, 2020, was negatively impacted by state income tax charges on a domestic profit. The effective tax rate for the six months ended June 30, 2020, was positively impacted by equity compensation excess tax benefits and state income tax benefits on a domestic loss.

~~12.~~ ~~Income Taxes~~

The effective tax rate for the three and six months ended June 30, 2019, was 134% and 63%, respectively. The Company reported an overall tax benefit on a pretax loss for the three and six months ended June 30, 2019. The earnings of the Company’s foreign entities for the three and six months ended June 30, 2019, were $11.0 million and $4.8 million, respectively. The effective tax ~~rate~~rates for the three and six months ended June 30, 2019, was positively impacted by state income tax benefits on a domestic loss. In addition, the Company released a majority of its valuation allowance established against its U.S. foreign tax credit deferred tax asset, resulting in a non-cash benefit to income tax expense of approximately $18.5 million. The Company released the valuation allowance following the acquisition of Speedpay and ~~has~~ determined ~~that~~ it iswould more likely than not ~~that it will~~ be able to utilize the foreign tax credits in future years due to additional income provided by Speedpay.

The effective tax rate for the three and six months ended June 30, 2018, was (35)% and 1%, respectively. The earnings of the Company’s foreign entities for the three and six months ended June 30, 2018, were $7.2 million and $5.4 million, respectively. The effective tax rate for the three and six months ended June 30, 2018, was negatively impacted by losses in certain foreign jurisdictions taxed at lower rates and domestic taxes resulting from the current GILTI tax, partially offset by equity compensation tax benefits.

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

As of June 30, ~~2019,~~2020, and December 31, ~~2018,~~2019, the amount of unrecognized tax benefits for uncertain tax positions was ~~$28.3~~$30.0 million and ~~$28.4~~$29.0 million, respectively, excluding related liabilities for interest and penalties of $1.2 million as of June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

The Company believes it is reasonably possible that the total amount of unrecognized tax benefits will decrease within the next 12 months by approximately ~~$3.9~~$11.7 million, due to the settlement of various audits and the expiration of statutes of limitation.

~~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 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 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

~~Table of contents~~

~~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 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 ASC 323, ~~Investments - Equity Method and Joint Ventures.~~

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;~~

~~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;~~

~~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 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~~ Factors that could cause actual results to differ from those expressed or implied in the forward-looking statements include, but are not limited to, those discussed in our ~~financial statements and related notes contained~~Risk Factors in ~~this report and with the financial statements and related notes and Management’s Discussion & Analysis in~~Part 1, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018, filed March 1, 2019.~~2019, and in Part 2, Item 1A of this Form 10-Q.

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The following discussion should be read together with our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and with our financial statements and related notes contained in this Form 10-Q. Results for the three and six months ended June 30, ~~2019,~~2020, are not necessarily indicative of results that may be attained in the future.

COVID-19 Pandemic

The COVID-19 pandemic resulted in authorities implementing numerous measures to try to contain the virus. These measures may remain in place for a significant period of time and adversely affect our business, operations and financial condition as well as the business, operations and financial conditions of our customers and business partners. The spread of the virus has also caused us to modify our business practices (including employee work locations and cancellation of physical participation in meetings) in ways that may be detrimental to our business (including working remotely and its attendant cybersecurity risks). We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees and customers. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities.

We created a dedicated Crisis Management Team to oversee and execute our business continuity plans and a variety of measures designed to ensure the ongoing availability of our products, solutions and services for our customers, while taking health and safety measures for our employees, including telecommuting, travel restrictions, social distancing policies, and stepped-up facility cleaning practices.

We believe we have sufficient liquidity to continue business operations during this volatile and uncertain period. We have $429 million of available liquidity as of June 30, 2020, consisting of cash on hand and availability under our revolving credit facility. To begin to address the potential long-term financial impacts of the virus, we have delayed non-essential capital spending and operating expenses.

The pandemic presents potential new risks to the Company’s business. We began to see the impacts of COVID-19 on certain customer transaction volumes in late March and continued to see changes in the second quarter of 2020, primarily within our Merchants and Billers customer base of our ACI On Demand segment. The effect of COVID-19 and related events, including those described above, could have an ongoing negative effect on our stock price, business prospects, financial condition, and results of operations. More specifically, for those customers under consumption-based contracts, continued declines in transaction volumes could negatively impact the Company's financial position, results of operations, and cash flows. The Company has also experienced declines in Biller volumes as a result of the change in timing of assessments and due dates for federal, state, and local taxes.

For the reasons discussed above, ACI cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on the Company’s results of operations, financial position, and liquidity. Notwithstanding any actions by national, state, and local governments to mitigate the impact of COVID-19 or by the Company to address the adverse impacts of COVID-19, there can be no assurance that any of the foregoing activities will be successful in mitigating or preventing significant adverse effects on the Company.

Overview

ACI Worldwide ~~Inc., the Universal Payments (“UP”) company,~~ powers electronic payments for more than ~~5,100~~6,000 organizations around the world. More than 1,000 of the largest financial institutions and 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~~myriad organizations utilize our electronic bill ~~payment~~presentment and ~~presentment (“EBPP”)~~payment services. Through our comprehensive suite of software solutions delivered on customers' premises, through a third-party public cloud environment or through ACI's private cloud, we ~~deliver~~provide real-time, immediate payments capabilities and enable athe industry's most complete omni-channel payments experience.

Our products are sold and supported through distribution networks covering three geographic regions – the Americas; Europe, Middle East, and Africa (“EMEA”); and Asia/Pacific. Each distribution network has its own globally coordinated sales force ~~and~~that it 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,~~billers, such as third-party electronic payment processors, payment associations, switch interchanges, and a wide range of transaction-generating endpoints, including ATMs, merchant point-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.~~brand.

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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 software as a service ("SaaS") and 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~~maintain 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. In their 2019 World Payments Report, Capgemini predicts that non-cash transaction volumes will grow in volume at an annual rate of ~~12.7%~~14.0%, or from ~~482.5~~538.6 billion in ~~2016~~2017 to ~~876.4~~1,045.5 billion in ~~2021,~~2022, 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.~~customers, and through the scalability of our platform-based solutions. Furthermore, electronic payments have taken on greater importance during the global COVID-19 crisis as consumers increasingly prefer cashless payment options and shift to shopping and paying bills online.

Adoption of real-time payments. Customer expectations, from both consumers and ~~corporate,~~billers, are driving the payments world to more real-time delivery. In the U.K., payments sent through the traditional ACH multi-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~~Brazil, Malaysia, Singapore, Thailand, the United ~~States.~~States, and various countries in Europe. In Europe, the ECB TIPS and EBA RT1 schemes are driving real-time payments adoption, while in the U.S. market, ~~National Automated Clearinghouse Association (“NACHA”) implemented phase 2 of Same Day ACH in September 2017.~~Zelle and TCH Real-Time Payments are now driving adoption. Corporate customers expect real-time information on the status of their payments instead of waiting for an ~~end of-day~~end-of-day report. Regulators expect banks to be monitoring key measures like liquidity in real time. ACI’s focus ~~has always been~~ on and experience with 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 from in-house information technology departments, third-party electronic payment processors, and third-party software companies located both within and outside of the ~~United States.~~U.S. Many of these companies are significantly larger than usACI and have significantly greater financial, technical, and marketing resources. As electronic payment transaction volumes increase, third-party processors tend to provide ~~competition to our~~competitive 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.~~service. As consolidation in the financial services ~~industry~~and financial technology industries continues, we anticipate that competition for those customers will intensify.

Adoption of cloud technology. To leverage lower-cost computing technologies, some banks, financial intermediaries, merchants, and ~~corporates~~billers are seeking to transition their systems to make use of cloud technology. Our investments and partnerships provide us the grounding to deliver cloud capabilities now and 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~~billers 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 with advanced machine learning capabilities 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 merchant liability shift having gone into effect in 2015 in the ~~United States.~~U.S. (and the fuel dispenser liability shift occurring later in 2020). 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~~While this combats card-present fraud, it results in greater card-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~~retail payments and ~~Real-Time Payments~~real-time payments solutions facilitate key functions that help banks and financial intermediaries address these mandated regulations.

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European Payment Service Directive (PSD2). PSD2, which was ratified by the European Parliament in 2015, required member states to implement new ~~payments~~payment 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 ~~intermediaries~~institutions 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 ~~intermediaries~~institutions 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 a non-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 a non-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 ~~intermediaries~~institutions as customers, often resulting in our solutions being the ~~solutions~~ones that survive in the consolidated entity.

Global vendor sourcing. Global and regional banks, financial intermediaries, ~~and~~ merchants, and ~~corporates~~billers are aiming to reduce the costs in supplier management by picking suppliers ~~who~~that 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~~enables us to be successful in this ~~global sourced~~internationally-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~~payment processing across the enterprise. We believe that the strategy of using service-oriented architectures to allow for re-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, enable one-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 be re-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~~According to analysis from ~~Javelin Strategy & Research, a subsidiary~~the Deloitte Center for Financial Services in 2018, 84% of ~~Greenwich Associates, show that 50% of adults in the United States~~global consumers use ~~their phone for mobile banking. The~~online banking and 72% use ~~of phones for~~ mobile banking ~~is expected to grow to 81%~~applications. Additionally, digital channels are used more frequently than bank branches and ATMs across all generations and in ~~2020.~~all countries. 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, and walk-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. Nearly three out of four (73%) online payments are made at the billers’ sites, rather than through banking ~~websites, up 11% since 2010.~~websites. The biller-direct solutions are seeing strong growth as billers migrate these services to outsourcers, such as ACI, from legacy systems built ~~in house.~~in-house. We believe that EBPP remains ripe for outsourcing, as a significant amount of biller-direct transactions are still processed ~~in house.~~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. ACI is supporting Billers during the COVID-19 crisis with new, automated tools that allow consumers to defer payments, set-up flexible payment plans, and request virtual appointments to discuss payment options.

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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 accretive to our financial performance.

Chief Executive Officer

On February 18, 2020, we announced the appointment of Odilon Almeida as the Company’s new President and Chief Executive Officer, effective March 9, 2020. Mr. Almeida was also appointed to serve as a member of ACI’s board of directors.

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~~$754.1 million in cash, including working capital adjustments, pursuant to a Stock Purchase Agreement, among the Company, The Western Union Company, 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~~service fees, and SaaS and PaaS fees specified in executed contracts (including estimates of variable consideration if required under ASC ~~606)~~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 we believe recognition of the related revenue will occur within the corresponding backlog period.

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.

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Our 60-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 the 60-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 the 60-month backlog period.

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In computing our 60-month backlog estimate, the following items are specifically not taken into account:

•Anticipated increases in transaction, account, or processing volumes 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 the 60-month backlog period.

•The potential impact of 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 updates may result in a revision to the renewal assumptions used in computing the 60-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 our 60-month backlog estimate, by reportable segment, as of June 30, ~~2019,~~2020, March 31, ~~2019,~~2020, and December 31, ~~2018~~2019 (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.


	June 30, 2020		March 31, 2020		December 31, 2019
ACI On Demand	$	3,863	$	3,781	$	3,855
ACI On Premise	1,976		1,933		1,977
Total	$	5,839	$	5,714	$	5,832

	June 30, 2020		March 31, 2020		December 31, 2019
Committed	$	2,140	$	2,095	$	2,168
Renewal	3,699		3,619		3,664
Total	$	5,839	$	5,714	$	5,832

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 several assumptions, as described above. These assumptions may turn out to be inaccurate or wrong for reasons outside of management’s control. For example, our customers may attempt to renegotiate or terminate their contracts for many reasons, including mergers, changes in their financial condition, or general changes in economic conditions (e.g. economic declines resulting from COVID-19) in the customer’s industry or geographic 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 recognized in future periods. Accordingly, there can be no assurance that amounts included in backlog estimates will generate the specified revenues or that the actual revenues will be generated within the corresponding 60-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 for items included in our condensed consolidated statements of operations (in thousands):

Three Month Period Ended June 30, ~~2019,~~2020, Compared to the Three Month Period Ended June 30, ~~2018~~2019


	Three Months Ended June 30,
	2020												2019
	Amount		% of Total Revenue		$ Change vs 2019		% Change vs 2019		Amount		% of Total Revenue
Revenues:
Software as a service and platform as a service	$	180,573	60	%	$	8,074	5	%	$	172,499	58	%
License	50,136		17	%	(2,405)		(5)	%	52,541		18	%
Maintenance	52,749		18	%	827		2	%	51,922		17	%
Services	16,452		5	%	(4,204)		(20)	%	20,656		7	%
Total revenues	299,910		100	%	2,292		1	%	297,618		100	%
Operating expenses:
Cost of revenue	147,346		49	%	(7,894)		(5)	%	155,240		52	%
Research and development	35,578		12	%	(3,657)		(9)	%	39,235		13	%
Selling and marketing	24,455		8	%	(8,507)		(26)	%	32,962		11	%
General and administrative	29,758		10	%	(19,561)		(40)	%	49,319		17	%
Depreciation and amortization	33,635		11	%	6,891		26	%	26,744		9	%
Total operating expenses	270,772		90	%	(32,728)		(11)	%	303,500		102	%
Operating income (loss)	29,138		10	%	35,020		(595)	%	(5,882)		(2)	%
Other income (expense):
Interest expense	(14,142)		(5)	%	1,181		(8)	%	(15,323)		(5)	%
Interest income	2,954		1	%	(43)		(1)	%	2,997		1	%
Other, net	2,041		1	%	639		46	%	1,402		—	%
Total other income (expense)	(9,147)		(3)	%	1,777		(16)	%	(10,924)		(4)	%
Income (loss) before income taxes	19,991		7	%	36,797		(219)	%	(16,806)		(6)	%
Income tax expense (benefit)	5,916		2	%	28,447		(126)	%	(22,531)		(8)	%
Net income	$	14,075	5	%	$	8,350	146	%	$	5,725	2	%

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 June 30, ~~2019,~~2020, increased ~~$62.6~~$2.3 million, or ~~27%~~1%, as compared to the same period in ~~2018, of which $49.3~~2019.

•Speedpay contributed an incremental $34.7 million ~~or 21%, was due to the acquisition of Speedpay.~~

~~Total~~in total revenue ~~was $4.5 million lower for~~during the three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018, due to the~~2019.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $3.7 million decrease in total revenue during the three months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of ~~the acquisition of~~incremental revenue from Speedpay and foreign currency, total revenue for the three months ended June 30, ~~2019, increased $17.8~~2020, decreased $28.7 million, or 8%10%, compared to the same period in ~~2018.~~2019.

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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 condensed consolidated statements of operations. All fees from SaaS and PaaS arrangements that do not qualify for treatment as a distinct performance

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

SaaS and PaaS revenue increased ~~$58.9~~$8.1 million, or ~~52%~~5%, during the three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018, of which $49.3~~2019.

•Speedpay contributed an incremental $34.7 million ~~or 43%, was due to the acquisition of Speedpay.~~in SaaS and PaaS revenue ~~was $0.8 million lower for~~during the three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018 due to the~~2019.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $0.4 million decrease in SaaS and PaaS revenue during the three months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of ~~the acquisition of~~incremental Speedpay revenue and foreign currency, SaaS and PaaS revenue for the three months ended June 30, ~~2019, increased $10.4~~2020, decreased $26.3 million, or 9%15%, compared to the same period in ~~2018,~~2019.

•The decrease was primarily due to changes in the timing of ~~which $8.6 million~~assessments and ~~$1.8 million is attributable~~due dates by Billers that use the Company's technology to ~~acceleration~~enable customer payments of ~~recurring revenue~~federal, state and local taxes and declines in Digital Channels 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.~~customer attrition.

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

License revenue ~~increased $7.0~~decreased $2.4 million, or ~~15%~~5%, during the three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018. License revenue was $2.1 million lower for the three months ended June 30, 2019, compared to the same period in 2018 due to the~~2019.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $1.7 million decrease in license revenue during the three months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of foreign currency, license revenue for the three months ended June 30, ~~2019, increased $9.0~~2020, decreased $0.7 million, or ~~20%~~1%, compared to the same period in ~~2018.~~2019.

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 June 30, 2019, as compared to the same period in 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 $3.1~~increased $0.8 million, or 6%2%, during the three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018. Maintenance revenue was $1.2 million lower for the three months ended June 30, 2019, as compared to the same period in 2018 due to the~~2019.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $1.2 million decrease in maintenance revenue during the three months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of foreign currency, maintenance revenue for the three months ended June 30, ~~2019, decreased $1.9~~2020, increased $2.0 million, or 3%4%, compared to the same period in ~~2018.~~2019.

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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 ~~$0.1~~$4.2 million, or 1%20%, during the three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018. Services revenue was $0.5 million lower for the three months ended June 30, 2019, as compared to the same period in 2018 due to the~~2019.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $0.4 million decrease in services revenue during the three months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of foreign currency, services revenue for the three months ended June 30, ~~2019, increased $0.4~~2020, decreased $3.8 million, or 2%18%, compared to the same period in ~~2018.~~2019.

•The decrease was primarily driven by the timing and magnitude of project-related work during the three months ended June 30, 2020, as compared to the same period in 2019.

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Operating Expenses

Total operating expenses for the three months ended June 30, ~~2019, increased $66.3~~2020, decreased $32.7 million, or ~~28%~~11%, as compared to the same period in ~~2018, of which $41.8~~2019.

•Speedpay contributed an incremental $29.1 million ~~or 18%, and $16.6 million, or 7%, was due~~to total operating expenses during the three months ended June 30, 2020, as compared to the ~~acquisition~~same period in 2019.

•Total operating expenses for three months ended June 30, 2020, included $5.0 million of ~~Speedpay and~~ significant ~~transaction and integration-related~~transaction-related expenses associated with the acquisition of Speedpay ~~respectively.~~

and cost reduction strategies implemented during the period. Total operating expenses for the three months ended June 30, ~~2018,~~2019, included ~~$0.6~~$16.6 million of significant ~~integration and divestiture-related expenses. Total operating~~transaction-related expenses ~~were $3.5 million lower for~~associated with the ~~three months ended June 30, 2019, compared to the same period in 2018, due to the~~acquisition of Speedpay.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $3.7 million decrease in total operating expenses during the three months ended June 30, 2020, compared to the same period in 2019.

•Adjusted for the impact of ~~the acquisition of~~incremental Speedpay operating expenses, significant ~~acquisition and integration-related~~transaction-related expenses, and foreign currency, total operating expenses ~~for~~during the three months ended June 30, ~~2019, increased $12.2~~2020, decreased $46.6 million, or 5%16%, 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.~~2019.

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

Cost of revenue ~~increased $39.0~~decreased $7.9 million, or ~~34%~~5%, during the three months ended June 30, ~~2019,~~2020, compared to the same period in ~~2018,~~2019.

•Speedpay contributed an incremental $22.9 million to cost of ~~which $33.9 million, or 29%, was due~~revenue during the three months ended June 30, 2020, as compared to the ~~acquisition of Speedpay.~~ same period in 2019.

•Cost of revenue ~~was $1.3 million lower~~ for the three months ended June 30, ~~2019, as compared to~~2020 included $2.3 million of significant transaction-related expenses associated with the ~~same period in 2018, due to the~~acquisition of Speedpay.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $1.4 million decrease in cost of revenue during the three months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of ~~the acquisition of~~incremental Speedpay expense, significant transaction-related expenses, and foreign currency, cost of revenue ~~increased $6.4~~decreased $31.6 million, or 6%21%, for the three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018,~~2019.

•The decrease was primarily due to ~~a $4.8 million increase in~~lower payment card interchange and processing ~~fees.~~fees, personnel and related expenses, and amortization of acquired software of $21.7 million, $9.0 million, and $0.9 million, respectively.

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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 $1.4~~decreased $3.7 million, or 4%9%, during the three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018, of which $1.8~~2019.

•Speedpay contributed an incremental $1.3 million ~~or 5%, was due~~ to ~~the acquisition Speedpay.~~ R&D expense ~~was $1.0 million lower for~~during the three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018, due to the~~2019.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $1.0 million decrease in R&D expense during the three months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of ~~the acquisition of~~incremental Speedpay expense and foreign currency, R&D expense ~~increased $0.6~~decreased $4.1 million, or 1%11%, for the three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018,~~2019.

•The decrease was primarily due to ~~an increase in~~lower personnel and related ~~expenses.~~expenses and professional fees of $3.2 million and $0.9 million, respectively.

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 decreased ~~$0.2~~$8.5 million, or 1%26%, during the three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018. The acquisition of~~ 2019.

•Speedpay contributed ~~$1.2~~an incremental $1.1 million 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 June 30, 2019,~~2020, as compared to the same period in ~~2018, due to the~~2019.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $0.8 million decrease in selling and marketing expense during the three months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of ~~the acquisition of~~incremental Speedpay expense and foreign currency, selling and marketing expense decreased ~~$0.7~~$8.8 million, or 2%27%, for the

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three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018,~~2019.

•The decrease was primarily due to ~~a decrease in advertising~~lower personnel and ~~promotions expense.~~related expenses, commissions, and professional fees of $5.5 million, $1.9 million, and $1.4 million, respectively.

General and Administrative

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

General and administrative expense ~~increased $20.5~~decreased $19.6 million, or ~~71%~~40%, during the three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018, of which $0.6~~2019.

•Speedpay contributed an incremental $0.3 million ~~or 2%,~~to general and ~~$16.4 million, or 57%, was due~~administrative expense during the three months ended June 30, 2020, as compared to the ~~acquisition~~same period in 2019.

•General and administrative expenses for the three months ended June 30, 2020, included $2.5 million of ~~Speedpay and~~ significant ~~transaction and integration-related~~transaction-related expenses associated with the acquisition of Speedpay ~~respectively.~~and cost reduction strategies implemented during the period. General and administrative expense for the three months ended June 30, ~~2018,~~2019, included ~~$0.4~~$16.4 million of significant ~~integration and divestiture-related expenses. General and administrative expense was $0.2 million lower for~~transaction-related expenses associated with the ~~three months ended June 30, 2019, as compared to the same period in 2018, due to the~~acquisition of Speedpay.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $0.3 million decrease in general and administrative expense during the three months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of ~~the acquisition of~~incremental Speedpay expense, significant ~~acquisition and integration-related~~transaction-related expenses, and foreign currency, general and administrative expense ~~increased $4.0~~decreased $5.6 million, or ~~14%~~17%, for the three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018,~~2019, primarily due to ~~an increase~~a decrease in personnel and related expenses.

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Depreciation and Amortization

Depreciation and amortization increased ~~$5.7~~$6.9 million, or ~~27%~~26%, during the three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018,~~2019.

•Speedpay contributed an incremental $3.6 million, of ~~which $4.3 million, or 20%, was due to the acquisition of Speedpay. Depreciation~~depreciation and amortization ~~was $0.3 million lower for~~expense during the three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018, due to the~~2019.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $0.2 million decrease in depreciation and amortization during the three months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of ~~the acquisition of~~incremental Speedpay expense and foreign currency, depreciation and amortization increased ~~$1.8~~$3.6 million, or 9%13%, for the three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018.~~2019, primarily due to additional amortization of internal-use software in our On Demand business.

Other Income and Expense

Interest expense for the three months ended June 30, ~~2019, increased $5.6~~2020, decreased $1.2 million, or ~~58%~~8%, as compared to the same period in ~~2018,~~2019, primarily due to ~~higher~~lower comparative ~~debt balances and~~ interest rates.

Interest income includes the portion of software license fees paid by customers under extended payment terms that is attributed to the significant financing component. Interest income for the three months ended June 30, ~~2019, increased $0.3 million, or 9%,~~2020 remained flat as compared to the same period in ~~2018.~~2019.

Other, net primarily consists of foreign currency ~~gain or loss and other non-operating items.~~gains. Foreign currency ~~gain~~gains for the three months ended June 30, 2020 and 2019 was $1.9 million and $1.4 million, ~~and foreign currency loss for the three months ended June 30, 2018 was $1.7 million.~~respectively.

Income Taxes

~~Refer to~~See Note ~~12,~~11, Income Taxes, to our unaudited condensed consolidated financial statements in Part I of this Form 10-Q for additional information.

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RESULTS OF OPERATIONS

Six Month Period Ended June 30, ~~2019,~~2020, Compared to the Six Month Period Ended June 30, ~~2018~~2019


	Six Months Ended June 30,
	2020												2019
	Amount		% of Total Revenue		$ Change vs 2019		% Change vs 2019		Amount		% of Total Revenue
Revenues:
Software as a service and platform as a service	$	373,523	63	%	$	92,467	33	%	$	281,056	56	%
License	78,265		13	%	4,646		6	%	73,619		15	%
Maintenance	106,029		18	%	(1,004)		(1)	%	107,033		21	%
Services	33,578		6	%	(8,187)		(20)	%	41,765		8	%
Total revenues	591,395		100	%	87,922		17	%	503,473		100	%
Operating expenses:
Cost of revenue	313,183		53	%	43,002		16	%	270,181		54	%
Research and development	74,602		13	%	(827)		(1)	%	75,429		15	%
Selling and marketing	54,538		9	%	(7,854)		(13)	%	62,392		12	%
General and administrative	65,684		11	%	(15,152)		(19)	%	80,836		16	%
Depreciation and amortization	65,533		11	%	16,923		35	%	48,610		10	%
Total operating expenses	573,540		97	%	36,092		7	%	537,448		107	%
Operating income (loss)	17,855		3	%	51,830		(153)	%	(33,975)		(7)	%
Other income (expense):
Interest expense	(31,313)		(5)	%	(4,376)		16	%	(26,937)		(5)	%
Interest income	5,854		1	%	(176)		(3)	%	6,030		1	%
Other, net	(7,717)		-1	%	(7,207)		1,413	%	(510)		—	%
Total other income (expense)	(33,176)		(5)	%	(11,759)		55	%	(21,417)		(4)	%
Loss before income taxes	(15,321)		(2)	%	40,071		(72)	%	(55,392)		(11)	%
Income tax benefit	(4,969)		(1)	%	30,185		(86)	%	(35,154)		(7)	%
Net loss	$	(10,352)	(1)	%	$	9,886	(49)	%	$	(20,238)	(4)	%

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 six months ended June 30, ~~2019,~~2020, increased ~~$59.2~~$87.9 million, or ~~13%~~17%, as compared to the same period in ~~2018, of which $49.3~~2019.

•Speedpay contributed an incremental $123.3 million ~~or 11%, was due to the acquisition of Speedpay.~~

~~Total~~in total revenue ~~was $8.2 million lower for~~during the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018, due to the~~2019.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $5.2 million decrease in total revenue during the six months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of ~~the acquisition of~~incremental Speedpay revenue and foreign currency, total revenue for the six months ended June 30, ~~2019, increased $18.1~~2020, decreased $30.2 million, or 4%6%, compared to the same period in ~~2018.~~2019.

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

SaaS and PaaS revenue increased ~~$63.2~~$92.5 million, or ~~29%~~33%, during the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018, of which $49.3~~2019.

•Speedpay contributed an incremental $123.3 million ~~or 23%, was due to the acquisition of Speedpay.~~in SaaS and PaaS revenue ~~was $1.7 million lower for~~during the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018 due to the~~2019.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in $0.7 million decrease in SaaS and PaaS revenue during the six months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of ~~the acquisition of~~incremental revenue from Speedpay and foreign currency, SaaS and PaaS revenue for the six months ended June 30, ~~2019, increased $15.6~~2020, decreased $30.2 million, or 7%11%, compared to the same period in ~~2018,~~2019.

•The decrease was primarily due to changes in the timing of ~~which $8.6 million~~assessments and ~~$7.0 million is attributable~~due dates by Billers that use the Company's technology to ~~acceleration~~enable customer payments of ~~recurring revenue~~federal, state, and local taxes and declines in Digital Channels 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.~~customer attrition.

License Revenue

License revenue ~~remained flat~~increased $4.6 million, or 6%, during the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018. License~~2019.

•The impact of foreign currencies weakening against the U.S. dollar resulted in a $1.8 million decrease in license revenue ~~was $2.7 million lower for~~during the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018 due to the impact of foreign~~2019.

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~~currencies weakening against the U.S. dollar. Excluding~~Adjusted for the impact of foreign currency, license revenue for the six months ended June 30, ~~2019,~~2020, increased ~~$2.7~~$6.4 million, or 4%9%, compared to the same period in ~~2018.~~2019.

•The increase in license revenue was primarily driven by the timing and relative size of license and capacity events during the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018.~~2019.

Maintenance Revenue

Maintenance revenue decreased ~~$4.7~~$1.0 million, or 4%1%, during the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018. Maintenance revenue was $2.9 million lower for the six months ended June 30, 2019, as compared to the same period in 2018 due to the~~2019.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $2.0 million decrease in maintenance revenue during the six months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of foreign currency, maintenance revenue for the six months ended June 30, ~~2019, decreased $1.8~~2020, increased $1.0 million, or 2%1%, compared to the same period in ~~2018.~~2019.

Services Revenue

Services revenue ~~increased $0.6~~decreased $8.2 million, or 2%20%, during the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018. Services revenue was $1.0 million lower for the six months ended June 30, 2019, as compared to the same period in 2018 due to the~~2019.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $0.8 million decrease in services revenue during the six months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of foreign currency, services revenue for the six months ended June 30, ~~2019, increased $1.7~~2020, decreased $7.4 million, or 4%18%, compared to the same period in ~~2018.~~2019.

•The decrease in services revenue was primarily driven by the timing and magnitude of project-related work during the six months ended June 30, 2020, as compared to the same period in 2019.

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Operating Expenses

Total operating expenses for the six months ended June 30, ~~2019,~~2020, increased ~~$74.3~~$36.1 million, or ~~16%~~7%, as compared to the same period in ~~2018, of which $41.8~~2019.

•Speedpay contributed an incremental $105.5 million ~~or 9%, and $21.3 million, or 5%, was due~~to total operating expenses during the six months ended June 30, 2020, as compared to the ~~acquisition of Speedpay and significant transaction and integration-related expenses associated with the acquisition of Speedpay, respectively.~~same period in 2019.

•Total operating expenses for the six months ended June 30, ~~2018,~~2020, included ~~$5.0~~$13.5 million of significant ~~integration~~transaction-related expenses associated with the acquisition of Speedpay and ~~divestiture-related expenses.~~cost reduction strategies implemented during the period. Total operating expenses ~~were $8.8 million lower~~ for the six months ended June 30, 2019, ~~compared to~~included $21.3 million of significant transaction-related expenses associated with the ~~same period in 2018, due to the~~acquisition of Speedpay.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $5.8 million decrease in total operating expenses for the six months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of ~~the acquisition of~~incremental Speedpay operating expenses, significant ~~acquisition and integration-related~~transaction-related expenses, and foreign currency, total operating expenses for the six months ended June 30, ~~2019, increased $25.1~~2020, decreased $55.8 million, or 6%11%, 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.~~2019.

Cost of Revenue

Cost of revenue increased ~~$46.6~~$43.0 million, or ~~21%~~16%, during the six months ended June 30, ~~2019,~~2020, compared to the same period in ~~2018,~~2019.

•Speedpay contributed an incremental $84.9 million to cost of ~~which $33.9 million, or 15%, was due~~revenue during the six months ended June 30, 2020, as compared to the ~~acquisition of Speedpay.~~ same period in 2019.

•Cost of revenue ~~was $3.3 million lower~~ for the six months ended June 30, ~~2019, as compared to~~2020, included $2.3 million of significant transaction-related expenses associated with the ~~same period in 2018, due to the~~acquisition of Speedpay.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $2.2 million decrease in cost of revenue during the six months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of ~~the acquisition of~~incremental Speedpay expense, significant transaction-related expenses, and foreign currency, cost of revenue ~~increased $16.0~~decreased $41.9 million, or 7%16%, for the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018,~~2019.

•The decrease was primarily due to ~~a $9.9 million increase in~~lower payment card interchange and processing fees, ~~and $6.1 million in~~ personnel and related ~~expenses.~~expenses, and amortization of acquired of software of $26.9 million, $11.5 million, and $2.0 million, respectively.

Research and Development

R&D expense ~~increased~~decreased $0.8 million, or 1%, during the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018. The acquisition of~~ 2019.

•Speedpay contributed ~~$1.8~~an incremental $4.1 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,~~2020, as compared to the same period in ~~2018, due to the~~2019.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $1.7 million decrease in R&D expense during the six months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of ~~the acquisition of~~incremental Speedpay expense and foreign currency, R&D expense ~~increased $1.3~~decreased $3.4 million, or 2%5%, for the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018,~~2019, primarily due to ~~an increase in~~lower personnel and related expenses.

Selling and Marketing

Selling and marketing expense decreased ~~$2.7~~$7.9 million, or 4%13%, during the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018. The acquisition of~~ 2019.

•Speedpay contributed ~~$1.2~~an incremental $3.9 million to selling and marketing expense during the six months ended June 30, ~~2019. Selling and marketing expense was $1.7 million lower for the six months ended June 30, 2019,~~2020, as compared to the same period in ~~2018, due to the~~2019.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $1.1 million decrease in selling and marketing expense for the six months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of ~~the acquisition of~~incremental Speedpay expense and foreign currency, selling and marketing expense decreased ~~$2.1~~$10.6 million, or 3%17%, for the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018,~~2019.

•The decrease was primarily due to ~~a decrease in advertising~~lower personnel and ~~promotions expense.~~related expenses, commissions, and professional fees of $5.9 million, $2.6 million, and $2.1 million, respectively.

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General and Administrative

General and administrative expense ~~increased $23.4~~decreased $15.2 million, or ~~41%~~19%, during the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018, of which $0.6~~2019.

•Speedpay contributed an incremental $0.7 million ~~or 1%,~~to general and ~~$21.2 million, or 37%, was due~~administrative expense during the six months ended June 30, 2020, as compared to the ~~acquisition~~same period in 2019.

•General and administrative expenses for the six months ended June 30, 2020, included $11.0 million of ~~Speedpay and~~ significant ~~transaction and integration-related~~transaction-related expenses associated with cost reduction strategies implemented during the ~~acquisition of Speedpay, respectively.~~period. General and administrative expense for the six months ended June 30, ~~2018,~~2019, included ~~$4.4~~$21.2 million of significant ~~integration and divestiture-related expenses. General and administrative expense was $0.8 million lower for~~transaction-related expenses associated with the ~~six months ended June 30, 2019, as compared to the same period in 2018, due to the~~acquisition of Speedpay.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $0.4 million decrease in general and administrative expenses during the six months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of ~~the acquisition of~~incremental Speedpay expense, significant ~~acquisition and integration-related expense,~~transaction-related expenses, and foreign currency, general and administrative expense ~~increased $6.8~~decreased $5.3 million, or ~~13%~~9%, for the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018,~~2019.

•The decrease was primarily due to ~~an increase in~~lower personnel and related ~~expenses.~~expenses of $6.7 million, partially offset by higher professional fees of $1.4 million.

Depreciation and Amortization

Depreciation and amortization increased ~~$6.2~~$16.9 million, or ~~15%~~35%, during the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018,~~2019.

•Speedpay contributed an incremental $11.9 million of ~~which $4.3 million, or 10%, was due to the acquisition of Speedpay. Depreciation~~depreciation and amortization ~~was $0.7 million lower for~~expense during the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018, due to the~~2019.

•The impact of foreign currencies weakening against the U.S. ~~dollar. Excluding~~dollar resulted in a $0.4 million decrease in depreciation and amortization expense during the six months ended June 30, 2020, as compared to the same period in 2019.

•Adjusted for the impact of ~~the acquisition of~~incremental Speedpay expense and foreign currency, depreciation and amortization increased ~~$2.7~~$5.5 million, or 6%11%, for the six months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018.~~2019, primarily due to additional amortization of internal-use software in our On Demand business.

Other Income and Expense

Interest expense for the six months ended June 30, ~~2019,~~2020, increased ~~$7.9~~$4.4 million, or ~~41%~~16%, as compared to the same period in ~~2018,~~2019, primarily due to higher comparative debt balances, ~~and~~partially offset by lower interest rates, as well as $1.8 million of interest expense related to royalty payments recorded during the first quarter of 2019. Excluding the impact of interest expense related to royalty payments, interest expense for the six months ended June 30, 2019, increased $6.1 million, or 32%, as compared to the same period in 2018.rates.

Interest income for the six months ended June 30, ~~2019, increased $0.5~~2020, decreased $0.2 million, or ~~10%~~3%, as compared to the same period in ~~2018.~~2019.

Other, net primarily consists of foreign currency ~~loss and other non-operating items.~~gain or loss. Foreign currency loss for the six months ended June 30, 2020 and 2019, was $7.9 million and ~~2018, was~~ $0.5 million, ~~and $1.7 million,~~ respectively. The higher foreign currency loss in 2020 was due to the market volatility in the wake of the COVID-19 pandemic.

Income Taxes

~~Refer to~~See Note ~~12,~~11, Income Taxes, to our unaudited condensed consolidated financial statements in Part I of this Form 10-Q for additional information.

Segment Results

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

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

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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. We also 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 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 our reportable segments for the periods indicated (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenue
ACI On Demand	$	180,573	$	172,499	$	373,523	$	282,347
ACI On Premise	119,337		125,119		217,872		221,126
Total revenue	$	299,910	$	297,618	$	591,395	$	503,473
Segment Adjusted EBITDA
ACI On Demand	$	33,071	$	17,340	$	56,192	$	17,078
ACI On Premise	59,093		57,069		90,002		85,337
Depreciation and amortization	(35,692)		(29,778)		(69,514)		(54,630)
Stock-based compensation expense	(7,932)		(14,372)		(14,882)		(20,957)
Corporate and unallocated expenses	(19,402)		(36,141)		(43,943)		(60,803)
Interest, net	(11,188)		(12,326)		(25,459)		(20,907)
Other, net	2,041		1,402		(7,717)		(510)
Income (loss) before income taxes	$	19,991	$	(16,806)	$	(15,321)	$	(55,392)
Depreciation and amortization
ACI On Demand	$	10,852	$	8,489	$	20,184	$	16,051
ACI On Premise	3,431		3,019		6,537		6,049
Corporate	21,409		18,270		42,793		32,530
Total depreciation and amortization	$	35,692	$	29,778	$	69,514	$	54,630
Stock-based compensation expense
ACI On Demand	$	2,273	$	2,214	$	4,299	$	4,165
ACI On Premise	2,279		2,051		4,309		4,007
Corporate	3,380		10,107		6,274		12,785
Total stock-based compensation expense	$	7,932	$	14,372	$	14,882	$	20,957

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

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ACI On ~~Premise~~Demand Segment Adjusted EBITDA increased ~~$2.3~~$15.7 million for the three months ended June 30, ~~2019,~~2020, compared to the same period in ~~2018, primarily due to a $3.7 million increase in revenue.~~

~~ACI On Premise Segment Adjusted EBITDA decreased $8.3 million for the six months ended June 30,~~ 2019, ~~compared to the same period in 2018, primarily due to a $5.3 million decrease in revenue and a $3.0 million increase in operating expenses.~~

~~ACI On Demand Segment Adjusted EBITDA increased $20.7 million for the three months ended June 30, 2019, compared to the same period in 2018,~~ of which ~~$12.0~~$9.2 million was due to the acquisition of Speedpay. Excluding the impact of the acquisition of Speedpay, ACI On Demand Segment Adjusted EBITDA increased ~~$8.7~~$6.5 million, primarily due to a ~~$9.7~~$33.1 million ~~increase~~decrease in ~~revenue.~~cash operating expense, partially offset by a $26.7 million decrease in revenue, primarily within the Company's Biller business due to changes in the timing of assessments and due dates for federal, state, and local taxes.

ACI On Demand Segment Adjusted EBITDA increased ~~$24.7~~$39.1 million for the six months ended June 30, ~~2019,~~2020, compared to the same period in ~~2018,~~2019, of which ~~$12.0~~$30.0 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~~$9.1 million, primarily due to a ~~$15.3~~$41.3 million ~~increase~~decrease in ~~revenue,~~cash operating expense, partially offset by a ~~$2.6~~$32.2 million ~~increase~~decrease in revenue, primarily within the Company's Biller business due to changes in the timing of assessments and due dates for federal, state, and local taxes.

ACI On Premise Segment Adjusted EBITDA increased $2.0 million for the three months ended June 30, 2020, compared to the same period in 2019, primarily due to a $7.7 million decrease in cash operating ~~expenses.~~expense, partially offset by a $5.7 million decrease in revenue.

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ACI On Premise Segment Adjusted EBITDA increased $4.7 million for the six months ended June 30, 2020, compared to the same period in 2019, primarily due to a $7.8 million decrease in cash operating expense, partially offset by a $3.2 million decrease in revenue.

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.

Our cash requirements in the future may be financed through additional equity or debt financings. However, the disruption in the capital markets caused by the COVID-19 pandemic could make any new financing more challenging, and there can be no assurance that such financings will be obtained on commercially reasonable terms, or at all. We believe our liquidity will allow us to manage the anticipated impact of COVID-19 on our business operations for the foreseeable future, which could include reductions in revenue and delays in payments from customers and partners. We are compliant with our debt covenants and do not anticipate an inability to service our debt. As the challenges posed by COVID-19 on our business and the economy as a whole evolve rapidly, we will continue to evaluate our liquidity and financial position in light of future developments, particularly those relating to COVID-19.

Available Liquidity

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


	June 30, 2020		December 31, 2019
Cash and cash equivalents	$	129,223	$	121,398
Availability under revolving credit facility	300,000		261,000
Total liquidity	$	429,223	$	382,398

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 ~~decrease~~increase in total liquidity is primarily attributable to ~~$235.0~~positive operating cash flows of $125.5 million, partially offset by $28.9 million of ~~outstanding revolving credit facility borrowings and $21.2~~payments related to stock repurchases, $25.7 million of payments to purchase property and equipment and software and distribution rights, ~~partially offset by positive operating cash flows.~~and $19.5 million of repayments on the Term Loans. We also repaid a net $39.0 million on the Revolving Credit Facility.

The Company and ~~Official~~ACI Payments, ~~Corporation,~~Inc., 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,~~2020, the full $140.0 million was available.

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Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less. As of June 30, ~~2019,~~2020, we had ~~$139.4~~$129.2 million of cash and cash equivalents, of which ~~$71.3~~$46.0 million was held by our foreign subsidiaries. If these funds were needed for our operations in the U.S., we may potentially be required to accrue and pay foreign and U.S. state income taxes to repatriate these funds. As of June 30, ~~2019,~~2020, only the earnings in our Indian foreign subsidiaries are indefinitely reinvested. The earnings of all other foreign entities are no longer indefinitely reinvested. We are also permanently reinvested for outside book/tax basis difference related to foreign subsidiaries. These outside basis differences could reverse through sales of the foreign subsidiaries, as well as various other events, none of which are considered probable as of June 30, ~~2019.~~2020.

Cash Flows

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


	Six Months Ended June 30,
	2020		2019
Net cash provided by (used by):
Operating activities	$	125,529	$	56,865
Investing activities	(25,672)		(779,761)
Financing activities	(100,150)		714,655

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 during the six months ended June 30, ~~2019,~~2020, were ~~$56.9~~$125.5 million as compared to ~~$71.1~~$56.9 million during the same period in ~~2018.~~2019. Net cash provided by operating activities primarily consists of net ~~income (loss)~~loss adjusted to add back depreciation, amortization, and stock-based compensation. Cash flows provided by operating activities were ~~$14.2~~$68.7 million ~~lower~~higher for the six months ended June 30, ~~2019,~~2020, compared to the same period in ~~2018,~~2019, due to higher cash earnings and improvements in 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 six months of 2020, we used cash of $25.7 million to purchase software, property, and equipment, as compared to $21.2 million during the same period in 2019. During the first six months of 2019, we paid $755.2 million, net of $0.1 million in cash acquired, to acquire Speedpay. ~~We also used cash of $21.2 million to purchase software, property and equipment, as compared to $27.9 million during the same period in 2018.~~

Cash Flows from Financing Activities

Net cash flows ~~provided~~used by financing activities for the six months ended June 30, ~~2019,~~2020, were ~~$714.7~~$100.2 million as compared to net cash flows ~~used~~provided by financing activities of ~~$51.6~~$714.7 million during the same period in ~~2018.~~2019. During the first six months of 2020, we repaid a net $39.0 million on the Revolving Credit Facility and $19.5 million on the Term Loans. In addition, we used $28.9 million to repurchase common stock and $11.1 million for the repurchase of stock-based compensation awards for tax withholdings. We also received proceeds of $3.0 million from the exercise of stock options and the issuance of common stock under our 2017 Employee Stock Purchase Plan, as amended. During the first six months of 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~~stock-based compensation 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 repaid $10.4 million on the Initial Term Loan. In addition, we received proceeds of $16.5 million from the exercise of stock options and the issuance of common stock under our 2017 Employee Stock Purchase Plan, as amended, and used $2.6 million for the repurchase of RSAs for tax withholdings. We also used $54.5 million to repurchase common stock.

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 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.

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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 June 30, ~~2019,~~2020, we had ~~$235.0~~$200.0 million and ~~$775.5~~$736.6 million outstanding under our Revolving Credit Facility and Term Loans, respectively, with up to ~~$265.0~~$300.0 million of unused borrowings under the Revolving Credit Facility. The interest rate in effect for the Credit Facility as of June 30, ~~2019,~~2020, was ~~4.65%~~2.43%. As of June 30, ~~2019,~~2020, we also had $400.0 million outstanding of ~~5.750% Senior Notes due~~the 2026 ~~(the “2026 Notes”). Refer to~~Notes. See Note 4, Debt,, to our unaudited condensed consolidated financial statements in Part I of this Form 10-Q for additional information.

Stock Repurchase Program

In 2005, our board of directors (“the board”) approved a stock repurchase program authorizing us, as market and business conditions warrant, to acquire our common stock and periodically authorize additional funds for the program. In February 2018, the board approved the repurchase of our common stock for up to $200.0 million, in place of the remaining purchase amounts previously authorized.

We repurchased ~~23,802~~1,000,000 shares for ~~$0.6~~$28.9 million under the program during the six months ended June 30, ~~2019.~~2020. Under the program to date, we have repurchased ~~44,153,195~~46,357,495 shares for approximately ~~$548.5~~$612.3 million. As of June 30, ~~2019,~~2020, the maximum remaining amount authorized for purchase under the stock repurchase program was approximately ~~$176.0~~$112.1 million.

See Note 7, ~~There is no guarantee as~~Common Stock and Treasury Stock, to ~~the exact number~~our unaudited condensed consolidated financial statements in Part I of shares we will repurchase. Repurchased shares are returned to the status of authorized but unissued shares of common stock. In March 2005, our board approved a plan under Rule 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 Rule 10b5-1 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. Rule 10b5-1 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.this Form 10-Q for additional information.

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Contractual Obligations and Commercial Commitments

For the six months ended June 30, ~~2019,~~2020, there have been no material changes to the contractual obligations and commercial commitments disclosed in Item 7 of our Form 10-K for the fiscal year ended December 31, ~~2018, except as disclosed below (in thousands).~~2019.

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 on Term Loan debt outstanding and interest rate in effect at June 30, 2019, of 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~~
~~six~~ months ended June 30, 2019, the Company financed certain multi-year license agreements for internal-use software for $10.4 million with annual payments through April 2022. As of June 30, 2019, $19.8 million is outstanding under these and other agreements previously entered into, of which $11.6 million and $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 as of June 30, ~~2019,~~2020, is ~~$28.3~~$30.0 million.

Critical Accounting Estimates

The preparation of the condensed consolidated financial statements requires 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 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 that we believe are the most critical to aid in fully understanding and evaluating our reported financial results, include the following:

•Revenue Recognition

~~Business Combinations~~

•Intangible Assets and Goodwill

•Business Combinations

•Stock-Based Compensation

•Accounting for Income Taxes

During the six months ended June 30, ~~2019,~~2020, there were no significant changes to our critical accounting policies and estimates. Please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for our fiscal year ended December 31, ~~2018, filed on March 1,~~ 2019, for a more complete discussion of our critical accounting policies and estimates.

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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 six months ended June 30, ~~2019.~~2020. 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. 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. In those instances where our goods and services have already been sold, receivables may be more difficult to collect. Additionally, 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. At times, we enter into revenue contracts that are denominated in the country’s local currency, primarily in Australia, Canada, the United Kingdom, ~~and~~ other European ~~countries.~~countries, Brazil, India, and Singapore. 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 speculation or arbitrage.

The primary objective of our cash investment policy is to preserve principal without significantly increasing risk. If we maintained similar cash investments for a period of one year based on our cash investments and interest rates on these investments at June 30, ~~2019,~~2020, a hypothetical ten percent increase or decrease in effective interest rates would increase or decrease interest income by ~~approximately~~less than $0.1 million annually.

We had approximately ~~$1.4~~$1.3 billion of debt outstanding as of June 30, ~~2019,~~2020, with ~~$1.0 billion~~$936.6 million outstanding under our Credit Facility and $400.0 million in 2026 ~~Senior~~ Notes. Our Credit Facility has a floating ~~interest~~ rate, which was ~~4.65%~~2.43% as of June 30, ~~2019.~~2020. Our 2026 Notes are fixed-rate long-term debt obligations with a 5.750% interest rate. A hypothetical ten percent increase or decrease in effective interest rates would increase or decrease interest expense related to the Credit Facility by approximately ~~$4.7~~$2.3 million.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Management, under the supervision 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 in Rules 13a-15(e) and 15d-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. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded our disclosure controls and procedures are effective as of June 30, ~~2019.~~2020.

Changes in Internal Control over Financial Reporting

On May 9, 2019, we completed the acquisition of Speedpay. We consider the transaction material to our results of operations, cash flows, and financial position from the date of the acquisition through June 30, 2019, and believe the internal controls and procedures of SpeedpayThere have ~~a material effect on our internal control over financial reporting. See Note 3,~~ ~~Acquisition, to 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 as it executes integration activities.

~~There were~~been no ~~additional~~ changes in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) during the quarter ended June 30, ~~2019,~~2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

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 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in Item 1A of our Form 10-K for the fiscal year ended December 31, ~~2018,~~2019, other than as disclosed ~~below. Additional~~in "COVID-19 Pandemic" in Part 1, Item 2 ("Management's Discussion and Analysis of Financial Condition and Results of Operations") of this report, which is incorporated into this item by reference.

The ongoing COVID-19 pandemic could adversely affect our business, results of operations and financial condition.

The COVID-19 pandemic may also have the effect of heightening many of the other risks ~~and uncertainties,~~described in Item 1A of our Form 10-K for the fiscal year ended December 31, 2019, including risks associated with slowing global economic conditions, demand for our products, delays or cancellations of customer projects, failures to obtain renewals of customer contracts, and ~~uncertainties not presently known~~reluctance of prospective customers to ~~us, or that we currently deem immaterial, could also have an adverse effect on our business, financial condition and/or results of operations.~~switch to a new vendor.

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

Issuer Purchases of Equity Securities

The following table provides information regarding our repurchases of common stock during the three months ended June 30, ~~2019:~~2020:


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, 2020 through April 30, 2020	—		$	—	—	$	112,088,000
May 1, 2020 through May 31, 2020	—		—		—	112,088,000
June 1, 2020 through June 30, 2020	715,154	(1)	29.05		—	112,088,000
Total	715,154		$	29.05	—

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.

(1)Pursuant to our 2005 and 2016 Equity and Performance Incentive Plans, as amended, we granted RSUs and stock options. Under the RSU arrangement, shares are issued without direct cost to the employee. During the three months ended June 30, 2020, 72,114 shares of RSUs vested. We withheld 5,813 of these RSUs to pay the employees’ portion of the applicable minimum payroll withholding. Stock options have a term that may not exceed ten years and vesting is determined by the administrator of the plan. During the three months ended June 30, 2020, 1,049,323 stock options were exercised by means of net settlement. We withheld 709,341 of these stock options to cover the respective exercise price.

In 2005, our board approved a stock repurchase program authorizing us, as market and business conditions warrant, to acquire our common stock and periodically authorize additional funds for the program, with the intention of using existing cash and cash equivalents to fund these repurchases. In February 2018, the board approved the repurchase of the Company's common stock for up to $200.0 million, in place of the remaining purchase amounts previously authorized. As of June 30, ~~2019,~~2020, the maximum remaining amount authorized for purchase under the stock repurchase program was approximately ~~$176.0~~$112.1 million.

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There is no guarantee as to the exact number of shares we will repurchase. Repurchased shares are returned to the status of authorized but unissued shares of common stock. In March 2005, our board approved a plan under Rule 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 Rule 10b5-1 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. Rule 10b5-1 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 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS

The following lists exhibits filed as part of this quarterly report on Form 10-Q:

Exhibit No.

Description

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

3.01

(1)

ACI Worldwide, Inc. Restated Certificate of Incorporation

3.02

(3)

Amended and Restated Bylaws of the Company

3.02

(2)

ACI Worldwide, Inc. Amended and Restated Bylaws of the Company

4.01

(4)

Form of Common Stock Certificate (P)

4.01

(3)

Form of Common Stock Certificate (P)

10.01

(5)

Form of Restricted Share Unit Award Agreement CEO (RSUs)

10.01

(4)*

Form of Nonqualified Stock Option Agreement – Employee for the Company’s 2005 Equity and Performance Incentive Plan, as amended

10.02

(6)

Form of Performance Share Award Agreement CEO (rTSR Performance Share Awards)

10.02

(5)*

Form of 2015 Supplemental Nonqualified Stock Option Agreement - Employee for the Company’s 2005 Equity and Performance Incentive Plan, as amended

10.03

(7)

Form of Restricted Share Unit Award Agreement (RSUs)

10.03

(6)*

Form of 2015 Nonqualified Stock Option Agreement - Employee for the Company’s 2005 Equity and Performance Incentive Plan, as amended

10.04

(8)

Form of Performance Share Award Agreement (rTSR Performance Share Awards)

10.04

(7)*

Form of 2016 Nonqualified Stock Option Agreement for the Company’s 2016 Equity and Performance Incentive Plan, as amended

10.05

(9)

Amendment Agreement to the Amended and Restated Credit Agreement, dated April 5, 2019

10.05

(8)*

ACI Worldwide, Inc. 2020 Equity and Incentive Compensation Plan

10.06

Form of Restricted Share Unit Award Agreement for the Company's 2020 Equity and Incentive Compensation Plan

10.07

Form of Performance Share Award Agreement for the Company's 2020 Equity and Incentive Compensation Plan

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

31.01

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

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

32.01

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

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.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.SCH

XBRL Taxonomy Extension Schema

101.CAL

XBRL Taxonomy Extension Calculation Linkbase

101.CAL

XBRL Taxonomy Extension Calculation Linkbase

101.LAB

XBRL Taxonomy Extension Label Linkbase

101.LAB

XBRL Taxonomy Extension Label Linkbase

101.PRE

XBRL Taxonomy Extension Presentation Linkbase

101.PRE

XBRL Taxonomy Extension Presentation Linkbase

101.DEF

XBRL Taxonomy Extension Definition Linkbase

101.DEF

XBRL Taxonomy Extension Definition Linkbase

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

____________

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.

* Denotes exhibit that constitutes a management contract, or compensatory plan or arrangement.

** 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~~


~~(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.~~


~~(2)~~	~~Incorporated herein by reference to Exhibit 3.1 to the registrant’s current report on Form 8-K filed August 17, 2017.~~


~~(3)~~	~~Incorporated herein by reference to Exhibit 3.1 to the registrant’s current report on Form 8-K filed February 27, 2017.~~


~~(4)~~	~~Incorporated herein by reference to Exhibit 4.01 to the registrant’s Registration Statement No. 33-88292 on Form S-1.~~


~~(5)~~	~~Incorporated herein by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed 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.~~

(P)Paper Exhibit

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

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

(3)Incorporated herein by reference to Exhibit 4.01 to the registrant’s Registration Statement No. 33-88292 on Form S-1.

(4)Incorporated herein by reference to Exhibit 10.01 to the registrant's quarterly report on Form 10-Q for the period ended March 31, 2020.

(5)Incorporated herein by reference to Exhibit 10.02 to the registrant's quarterly report on Form 10-Q for the period ended March 31, 2020.

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(6)Incorporated herein by reference to Exhibit 10.03 to the registrant's quarterly report on Form 10-Q for the period ended March 31, 2020.

(7)Incorporated herein by reference to Exhibit 10.04 to the registrant's quarterly report on Form 10-Q for the period ended March 31, 2020.

(8)Incorporated herein by reference to Appendix A to the registrant's definitive proxy statement on Schedule 14A (Commission File No. 000-25346) filed April 24, 2020.

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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)


Date: August ~~8, 2019~~6, 2020		By:	/s/ SCOTT W. BEHRENS
			Scott W. Behrens
			~~Senior~~ Executive Vice President, Chief Financial Officer and Chief Accounting Officer (Principal Financial Officer)



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



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



	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



	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



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



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



	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



	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



	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



	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		%



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



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



	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



	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	$	—



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	—