Financial Performance - Total revenue for the three months ended September 30, 2023, increased by $56.4 million, or 18%, compared to the same period in 2022[125]. - SaaS and PaaS revenue increased by $15.8 million, or 8%, during the three months ended September 30, 2023, compared to the same period in 2022[128]. - License revenue increased by $36.0 million, or 82%, during the three months ended September 30, 2023, compared to the same period in 2022[131]. - Maintenance revenue increased by $2.8 million, or 6%, during the three months ended September 30, 2023, compared to the same period in 2022[132]. - Services revenue increased by $1.8 million, or 10%, during the three months ended September 30, 2023, compared to the same period in 2022[135]. - Total revenue for the nine months ended September 30, 2023, increased by $5.9 million, or 1%, compared to the same period in 2022[151]. - SaaS and PaaS revenue increased by $28.9 million, or 5%, during the nine months ended September 30, 2023, compared to the same period in 2022[153]. - License revenue decreased by $25.6 million, or 15%, during the nine months ended September 30, 2023, compared to the same period in 2022[154]. - Maintenance revenue increased by $2.3 million, or 2%, during the nine months ended September 30, 2023, compared to the same period in 2022[155]. - Total revenue for the nine months ended September 30, 2023, was $976.0 million, compared to $970.1 million for the same period in 2022[168]. Operating Expenses - Total operating expenses decreased by $2.0 million, or 1%, during the three months ended September 30, 2023, compared to the same period in 2022[136]. - Cost of revenue increased by $5.9 million, or 3%, during the three months ended September 30, 2023, compared to the same period in 2022[138]. - R&D expenses decreased by $2.2 million, or 6%, during the three months ended September 30, 2023, compared to the same period in 2022[140]. - Selling and marketing expense decreased by $3.4 million, or 10%, for the three months ended September 30, 2023, compared to the same period in 2022[142]. - General and administrative expense decreased by $0.7 million, or 2%, for the three months ended September 30, 2023, compared to the same period in 2022[144]. - Total operating expenses increased by $13.4 million, or 1%, for the nine months ended September 30, 2023, compared to the same period in 2022[158]. - Cost of revenue increased by $20.2 million, or 4%, during the nine months ended September 30, 2023, compared to the same period in 2022[159]. - R&D expenses decreased by $8.2 million, or 7%, for the nine months ended September 30, 2023, compared to the same period in 2022[160]. - Selling and marketing expenses decreased by $4.6 million, or 5%, for the nine months ended September 30, 2023, compared to the same period in 2022[161]. - General and administrative expenses increased by $7.9 million, or 9%, for the nine months ended September 30, 2023, compared to the same period in 2022[167]. Income and Profitability - Operating income for the three months ended September 30, 2023, was $61.9 million, representing an 18% margin[1]. - Net income for the three months ended September 30, 2023, was $37.9 million, a 12% increase compared to the same period in 2022[1]. - Net income for the nine months ended September 30, 2023, was a loss of $1.1 million, compared to a net income of $51.9 million for the same period in 2022[150]. Cash Flow and Debt - Cash and cash equivalents as of September 30, 2023, were $139.5 million, with $40.1 million held by foreign subsidiaries[173]. - Operating cash flows were $82.8 million for the nine months ended September 30, 2023, a decrease of $19.2 million compared to the same period in 2022[177]. - The company did not repurchase any shares under the stock repurchase program during the nine months ended September 30, 2023, with a remaining authorization of approximately $200.0 million[175]. - During the first nine months of 2023, the company repaid $53.6 million on Term Loans and $12.5 million of other debt payments[181]. - The company received net proceeds of $24.0 million on the Revolving Credit Facility and $5.3 million from stock options exercise[181]. - As of September 30, 2023, the company had approximately $1.1 billion of debt outstanding, with $668.2 million under the Credit Facility and $400.0 million in 2026 Notes[187]. - The Credit Facility had a floating rate of 7.42% as of September 30, 2023, while the 2026 Notes had a fixed interest rate of 5.750%[187]. - A hypothetical ten percent increase or decrease in effective interest rates would increase or decrease interest income by $0.1 million annually[187]. - Interest expense increased by $5.5 million, or 38%, for the three months ended September 30, 2023, primarily due to higher interest rates[146]. - Interest expense increased by $21.6 million, or 58%, for the nine months ended September 30, 2023, primarily due to higher interest rates[164]. Strategic Initiatives - ACI Worldwide processes $14 trillion in payments daily for over 6,000 organizations globally[105]. - The company's 60-month backlog as of September 30, 2023, is $6.435 billion, with committed backlog at $2.147 billion and renewal backlog at $4.288 billion[122]. - Digital payment transaction volumes are increasing, driven by eCommerce growth and the adoption of real-time payments[108]. - ACI's strategic partnerships with Mastercard, Microsoft, and Mindgate Solutions enhance its position in the real-time payments market[109]. - The company recognizes the shift to cloud technology, optimizing its products on Microsoft Azure to support customer cloud strategies[110]. - ACI aims to grow through acquisitions, seeking candidates that improve solution breadth and access to new markets[115]. - The company sold its corporate online banking solutions for $100 million in September 2022, recognizing a gain of $38.5 million[116]. - The adoption of Request for Payment (RfP) technology is expanding globally, enhancing secure payment requests between consumers and billers[113]. - ACI's focus on omni-commerce aims to provide seamless payment experiences across various channels, increasing customer loyalty and satisfaction[112]. Market Risks - Inflationary pressures have impacted financial performance, particularly in interchange costs associated with the Biller segment[104]. - The company has not entered into any foreign currency hedging transactions, exposing it to market risks related to fluctuations in foreign currency exchange rates[186]. - There were no significant changes to the company's critical accounting policies and estimates during the nine months ended September 30, 2023[185]. - The company used $4.2 million for stock-based compensation awards repurchase for tax withholdings during the first nine months of 2023[181]. - The company had $90.9 million used for common stock repurchase during the first nine months of 2022[181]. - There have been no material changes to the contractual obligations and commercial commitments for the nine months ended September 30, 2023[182].

Financial Data and Key Metrics Changes - Total revenue for Q2 2023 was $323 million, down 2% year-over-year [8][19] - Recurring revenue was $261 million, up 5% when adjusted for foreign exchange impact and divestiture [8] - New ARR bookings for the quarter were $13 million, with trailing 12 months bookings at $91 million, up 2% from the previous year [8] - Adjusted EBITDA for Q2 was $57 million, with a net debt leverage ratio of 2.9 times [19][20] Business Line Data and Key Metrics Changes - Biller segment revenue increased by 5% year-over-year, with adjusted EBITDA up 10% [10][20] - Bank segment revenue was $118 million, with adjusted EBITDA of $52 million [20] - Merchant segment revenue was flat, but EBITDA increased by 23% on a constant currency basis [11][20] Market Data and Key Metrics Changes - The MEASA region showed strong results and a robust pipeline, contributing to new license bookings [9] - The U.S. is expected to see a four-fold increase in real-time payments over the next four years [12] Company Strategy and Development Direction - The company aims to focus on accelerating growth, optimizing its portfolio, and maximizing shareholder value [6][17] - ACI is committed to achieving a revenue growth target of 7% to 9% in 2024 [17][21] - The company is exploring opportunities in real-time payments and AI technologies to enhance its offerings [12][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving guidance for the second half of the year, citing early contract signings as a de-risking factor [7][21] - The CEO emphasized the importance of focusing investments in areas that deliver results quickly, particularly in the Biller segment [28] Other Important Information - ACI plans to attend several investor conferences to increase engagement with the investment community [4][22] - The company has $200 million remaining on its share repurchase authorization [20] Q&A Session Summary Question: Expectations for Merchant segment growth - Management expects accelerating growth in the Merchant segment, primarily from international markets [25] Question: Potential major shifts in business model - Management does not anticipate major shifts but will focus on concentrating investments in high-potential areas [28] Question: Insights on Biller segment win rates and opportunities - Management noted that while win rates are not publicly disclosed, they believe they are gaining market share and expect more impact from larger deals in the second half of the year [31][32]

Table of contents 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, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Or For the transition period from to Commission File Number 0-25346 __________ ...

ACI Worldwide, Inc. (NASDAQ:ACIW) Q1 2023 Earnings Conference Call May 4, 2023 8:30 AM ET Company Participants John Kraft - SVP of Finance and Strategy Tom Warsop - Interim President and CEO Scott Behrens - CFO Conference Call Participants Peter Heckmann - D.A. Davidson Will Johnston - Canaccord Genuity Samuel Salvas - Needham & Company Operator Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the ACI Worldwide, Inc. First Quarte ...

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=ITEM%201.%20Financial%20Statements) Presents ACI Worldwide's unaudited Q1 2023 consolidated financial statements, detailing financial position, performance, and cash flows [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$3.01 billion** from **$3.21 billion**, with liabilities and equity also declining as of March 31, 2023 Condensed Consolidated Balance Sheets (in thousands) | Account | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | **Total Current Assets** | $954,036 | $1,114,805 | | **Total Assets** | **$3,006,801** | **$3,209,895** | | **Total Current Liabilities** | $700,910 | $858,842 | | **Total Liabilities** | **$1,839,174** | **$2,016,708** | | **Total Stockholders' Equity** | **$1,167,627** | **$1,193,187** | | **Total Liabilities and Stockholders' Equity** | **$3,006,801** | **$3,209,895** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2023 saw a **net loss of $32.3 million** and an operating loss, primarily due to a **10% revenue decrease** and higher operating expenses Statements of Operations Highlights (in thousands, except per share data) | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :--- | :--- | :--- | | **Total Revenues** | $289,676 | $323,080 | | *License Revenue* | $18,331 | $60,285 | | *SaaS and PaaS Revenue* | $204,930 | $194,562 | | **Operating Income (Loss)** | $(24,352) | $27,666 | | **Net Income (Loss)** | **$(32,308)** | **$15,490** | | **Diluted EPS** | **$(0.30)** | **$0.13** | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Q1 2023 resulted in a **comprehensive loss of $28.7 million**, primarily driven by the net loss, partially offset by foreign currency translation adjustments Comprehensive Income (Loss) (in thousands) | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :--- | :--- | :--- | | Net Income (Loss) | $(32,308) | $15,490 | | Foreign currency translation adjustments | $3,618 | $(2,100) | | **Comprehensive Income (Loss)** | **$(28,690)** | **$13,390** | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity decreased to **$1.17 billion** by March 31, 2023, primarily due to the net loss, partially offset by stock-based compensation - Total stockholders' equity decreased by **$25.6 million** in Q1 2023, from **$1,193.2 million** to **$1,167.6 million**[16](index=16&type=chunk) - Key changes in Q1 2023 included a **net loss of $32.3 million** and **stock-based compensation of $5.3 million**[16](index=16&type=chunk) - In the comparable period of Q1 2022, the company repurchased **$37.9 million** of common stock[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities increased to **$40.1 million** in Q1 2023, leading to a **$13.6 million** increase in cash and cash equivalents for the quarter Cash Flow Summary (in thousands) | Activity | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :--- | :--- | :--- | | **Net cash from operating activities** | **$40,068** | **$28,874** | | Net cash from investing activities | $(8,739) | $(8,487) | | Net cash from financing activities | $(20,326) | $(25,998) | | Effect of exchange rate fluctuations | $2,557 | $(2,464) | | **Net increase (decrease) in cash** | **$13,560** | **$(8,075)** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes explain accounting policies, debt structure, segment performance, and legal contingencies impacting the financial statements - As of March 31, 2023, the company had a goodwill balance of **$1.2 billion**, allocated to Banks (**$671.7 million**), Merchants (**$137.3 million**), and Billers (**$417.0 million**)[32](index=32&type=chunk) - Total debt outstanding as of March 31, 2023, was approximately **$1.1 billion**, consisting of a Revolving Credit Facility, Term Loans, and Senior Notes[44](index=44&type=chunk) - The company is involved in legal proceedings and investigations following an inadvertent ACH file transmission in April 2021, with a proposed settlement fund of **$5.0 million** for class action lawsuits, subject to court approval[90](index=90&type=chunk)[91](index=91&type=chunk) - Revenue allocated to remaining performance obligations was **$651.4 million** as of March 31, 2023, with about **50%** expected to be recognized in the next 12 months[41](index=41&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 financial results, highlighting a **10% revenue decrease** and net loss, along with key business trends, segment performance, and liquidity [Overview and Key Trends](index=23&type=section&id=Overview%20and%20Key%20Trends) ACI Worldwide's strategy is shaped by key trends in digital payments, cloud adoption, fraud prevention, and omni-commerce - Key operational trends shaping the company's strategy include: - Increasing **digital payment transaction volumes** - Adoption of **real-time payments**, with ACI positioned as a leader through partnerships with Mastercard and Microsoft - Industry transition to **public and private cloud technology** - Growing demand for advanced **fraud prevention** and **payments intelligence** - Rise of **omni-commerce experiences** across multiple channels - Emergence of **Request for Payment (RfP) technology**[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) [Backlog](index=25&type=section&id=Backlog) The 60-month backlog increased to **$6.37 billion** as of March 31, 2023, composed of committed contracts and assumed renewals 60-Month Backlog by Segment (in millions) | Segment | March 31, 2023 (in millions) | December 31, 2022 (in millions) | | :--- | :--- | :--- | | Banks | $2,154 | $2,095 | | Merchants | $821 | $810 | | Billers | $3,395 | $3,390 | | **Total** | **$6,370** | **$6,295** | 60-Month Backlog by Type (in millions) | Type | March 31, 2023 (in millions) | December 31, 2022 (in millions) | | :--- | :--- | :--- | | Committed | $2,266 | $2,338 | | Renewal | $4,104 | $3,957 | | **Total** | **$6,370** | **$6,295** | [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Q1 2023 total revenue fell **10%** to **$289.7 million**, resulting in an operating loss, primarily due to a sharp decline in license revenue Q1 2023 vs Q1 2022 Performance (in thousands) | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$289,676** | **$323,080** | **$(33,404)** | **(10)%** | | License Revenue | $18,331 | $60,285 | $(41,954) | (70)% | | SaaS & PaaS Revenue | $204,930 | $194,562 | $10,368 | 5% | | **Total Operating Expenses** | **$314,028** | **$295,414** | **$18,614** | **6%** | | **Operating Income (Loss)** | **$(24,352)** | **$27,666** | **$(52,018)** | **(188)%** | | **Net Income (Loss)** | **$(32,308)** | **$15,490** | **$(47,798)** | **(309)%** | - The divestiture of the corporate online banking solutions business resulted in a **$12.4 million** decrease in total revenue for Q1 2023[119](index=119&type=chunk) - Weakening foreign currencies against the U.S. dollar led to a **$4.9 million** decrease in total revenue[119](index=119&type=chunk) [Segment Results](index=31&type=section&id=Segment%20Results) In Q1 2023, Banks and Merchants segments saw revenue and Adjusted EBITDA declines, while the Billers segment grew due to higher transaction volumes Segment Revenue (in thousands) | Segment | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :--- | :--- | :--- | | Banks | $88,040 | $132,198 | | Merchants | $34,781 | $41,002 | | Billers | $166,855 | $149,880 | | **Total** | **$289,676** | **$323,080** | Segment Adjusted EBITDA (in thousands) | Segment | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :--- | :--- | :--- | | Banks | $24,681 | $64,714 | | Merchants | $6,544 | $14,713 | | Billers | $29,641 | $26,357 | [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2023, total liquidity was **$530.9 million**, comprising cash and available revolving credit, with no share repurchases in Q1 2023 Available Liquidity (in thousands) | Component | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $142,412 | $124,981 | | Availability under revolving credit facility | $388,440 | $393,500 | | **Total liquidity** | **$530,852** | **$518,481** | - The company did not repurchase any shares under its program in Q1 2023. As of March 31, 2023, **$200.0 million** remained authorized for future repurchases[154](index=154&type=chunk)[71](index=71&type=chunk) - Cash flow from operating activities increased to **$40.1 million** in Q1 2023 from **$28.9 million** in Q1 2022, primarily due to better customer receipt collections[157](index=157&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency fluctuations and interest rate changes, with a significant portion of its debt at floating rates - The company is exposed to **foreign currency risk** as it conducts business globally, with the U.S. dollar being the primary currency for revenue contracts[165](index=165&type=chunk) - The company has **$1.1 billion** in debt, with **$688.1 million** under a floating-rate Credit Facility; a **10%** change in effective interest rates would alter interest expense by about **$4.7 million** annually[166](index=166&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2023, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2023[167](index=167&type=chunk) - No material changes were made to the internal control over financial reporting during the first quarter of 2023[168](index=168&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=35&type=section&id=ITEM%201.%20Legal%20Proceedings) The company faces class action lawsuits and regulatory investigations related to an April 2021 ACH file transmission, with a proposed settlement fund - The company is a defendant in seven class action lawsuits following an inadvertent ACH file transmission in April 2021[91](index=91&type=chunk) - A settlement agreement, subject to court approval, has been reached to establish a **$5.0 million** fund for class members[91](index=91&type=chunk) - The company is also under investigation by the U.S. Consumer Financial Protection Bureau (CFPB) and state authorities regarding the same incident[92](index=92&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=ITEM%201A.%20Risk%20Factors) There have been no material changes to the risk factors disclosed in the company's Form 10-K for the fiscal year ended December 31, 2022 - No material changes to risk factors were reported for the quarter[170](index=170&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase shares in Q1 2023 but withheld shares for RSU tax obligations, with **$200.0 million** remaining authorized for repurchase - No shares were repurchased under the publicly announced program during Q1 2023[173](index=173&type=chunk) - The company withheld **114,492 shares** to satisfy tax withholding obligations for employees on vested RSUs[173](index=173&type=chunk) - On February 24, 2023, the board authorized a new **$200.0 million** stock repurchase program, which is the amount remaining available as of March 31, 2023[174](index=174&type=chunk) [Item 6. Exhibits](index=37&type=section&id=ITEM%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate documents, credit facility agreements, and officer certifications - Key exhibits filed include an Extension Agreement for the credit facility dated April 28, 2023, and CEO/CFO certifications[178](index=178&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________________ FORM 10-K _________________________________ ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 Or ☐ 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 reg ...

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Presents unaudited condensed consolidated financial statements for ACI Worldwide, Inc., highlighting increased net income due to a divestiture and decreased operating cash flow Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $1,210,962 | $937,434 | | Goodwill | $1,226,026 | $1,280,226 | | **Total Assets** | **$3,263,140** | **$3,158,741** | | **Total Current Liabilities** | $997,974 | $754,155 | | Long-term Debt | $947,750 | $1,019,872 | | **Total Liabilities** | **$2,064,924** | **$1,913,964** | | **Total Stockholders' Equity** | $1,198,216 | $1,244,777 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $306,591 | $316,914 | $970,096 | $903,769 | | Operating Income | $3,489 | $27,979 | $55,612 | $47,093 | | Net Income | $23,117 | $13,764 | $51,949 | $18,320 | | Diluted EPS | $0.20 | $0.12 | $0.45 | $0.15 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash from operating activities | $101,966 | $144,483 | | Net cash from investing activities | $73,622 | $(33,009) | | Net cash from financing activities | $(143,008) | $(194,335) | | Net increase (decrease) in cash | $32,520 | $(82,777) | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Details accounting policies, revenue recognition, debt structure, segment performance, and legal contingencies, including a $100.1 million divestiture - On June 7, 2022, the company agreed to divest its corporate online banking solutions for **$100.1 million**, closing on September 1, 2022. A preliminary gain of **$38.5 million** was recognized on the sale[43](index=43&type=chunk)[44](index=44&type=chunk) - As of September 30, 2022, total debt outstanding was approximately **$1.02 billion**, comprising Term Loans, a Revolving Credit Facility, and Senior Notes. The company was in compliance with all financial debt covenants[53](index=53&type=chunk)[54](index=54&type=chunk) - The company reports performance across three operating segments: Banks, Merchants, and Billers. For the nine months ended September 30, 2022, revenues were **$391.6 million** for Banks, **$113.1 million** for Merchants, and **$465.4 million** for Billers[76](index=76&type=chunk)[84](index=84&type=chunk) - The company is involved in legal proceedings and investigations following an inadvertent ACH file transmission in April 2021. A proposed settlement for class action lawsuits involves establishing a **$5.0 million** fund plus attorneys' fees and administrative costs[100](index=100&type=chunk)[101](index=101&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, key industry trends, revenue and expense fluctuations, the $6.08 billion backlog, and liquidity [Overview and Key Trends](index=26&type=section&id=Overview%20and%20Key%20Trends) Business strategy is shaped by accelerating digital and real-time payments, cloud adoption, fraud detection, and omni-commerce trends - Key trends driving the business include increasing digital payment volumes, adoption of real-time payments (e.g., Zelle, FedNow), transition to cloud technology, rising digital payments fraud, the growth of omni-commerce, and the emergence of Request for Payment (RfP) services[114](index=114&type=chunk)[115](index=115&type=chunk)[119](index=119&type=chunk) [Backlog](index=28&type=section&id=Backlog) The 60-month backlog decreased slightly to $6.08 billion, partly due to a $170.1 million divestiture impact 60-Month Backlog by Segment (in millions) | Segment | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Banks | $2,038 | $2,272 | | Merchants | $772 | $754 | | Billers | $3,267 | $3,084 | | **Total** | **$6,077** | **$6,110** | [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Q3 2022 revenue decreased 3% to $306.6 million, while nine-month revenue grew 7% to $970.1 million, with net income significantly boosted by a divestiture gain Q3 2022 vs Q3 2021 Revenue Breakdown (in thousands) | Revenue Type | Q3 2022 | Q3 2021 | % Change | | :--- | :--- | :--- | :--- | | SaaS and PaaS | $195,540 | $191,456 | 2% | | License | $43,661 | $54,454 | (20)% | | Maintenance | $49,163 | $53,519 | (8)% | | Services | $18,227 | $17,485 | 4% | | **Total Revenues** | **$306,591** | **$316,914** | **(3)%** | Nine Months 2022 vs 2021 Revenue Breakdown (in thousands) | Revenue Type | Nine Months 2022 | Nine Months 2021 | % Change | | :--- | :--- | :--- | :--- | | SaaS and PaaS | $597,080 | $583,530 | 2% | | License | $168,260 | $110,383 | 52% | | Maintenance | $151,143 | $159,037 | (5)% | | Services | $53,613 | $50,819 | 5% | | **Total Revenues** | **$970,096** | **$903,769** | **7%** | - Other, net income for Q3 2022 was **$41.5 million**, which included a **$38.5 million** gain from the divestiture of the corporate online banking solutions business[159](index=159&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) Total liquidity was $623.3 million, with cash flow from operations decreasing to $102.0 million, and $90.9 million in share repurchases Available Liquidity (in thousands) | Component | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $134,799 | $122,059 | | Availability under revolving credit facility | $488,500 | $498,500 | | **Total liquidity** | **$623,299** | **$620,559** | - The company repurchased **3,210,313 shares** for **$90.9 million** during the nine months ended September 30, 2022. Approximately **$125.4 million** remained authorized for purchase under the stock repurchase program[194](index=194&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency fluctuations and interest rate changes on its $1.0 billion debt, with a 10% rate change impacting annual interest by $3.0 million - The company is exposed to foreign currency risk as the U.S. dollar is the primary revenue currency, while some operating expenses are in local currencies. It does not use hedging transactions[205](index=205&type=chunk) - The company has **$1.0 billion** of debt, with **$617.3 million** being floating-rate. A hypothetical **10%** change in effective interest rates would change annual interest expense by approximately **$3.0 million**[207](index=207&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal controls - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2022[209](index=209&type=chunk) - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[210](index=210&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company faces investigations and has a proposed $5.0 million settlement for class action lawsuits related to an inadvertent ACH file transmission - The company is under investigation by the CFPB and state regulators due to an inadvertent ACH file transmission incident in April 2021[100](index=100&type=chunk)[211](index=211&type=chunk) - A settlement agreement has been reached for related class-action lawsuits, establishing a **$5.0 million** fund, subject to court approval[101](index=101&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors except new risks from the Eastern Europe crisis and compliance with sanctions impacting Russian operations - A new risk factor has been identified related to the crisis in eastern Europe. The company has augmented services and solutions for its customer in Russia to comply with U.S. and global sanctions, which could have adverse impacts[213](index=213&type=chunk)[214](index=214&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details Q3 2022 stock repurchases of 1,154,825 shares for $24.44 average, with $125.4 million remaining authorized Issuer Purchases of Equity Securities (Q3 2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2022 | 297,700 | $26.95 | | August 2022 | 376,045 | $25.78 | | September 2022 | 481,080 | $21.84 | | **Total** | **1,154,825** | **$24.44** | - As of September 30, 2022, the maximum remaining amount authorized for purchase under the stock repurchase program was approximately **$125.4 million**[217](index=217&type=chunk) [Item 3. Defaults Upon Senior Securities](index=44&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Not applicable - Not applicable[219](index=219&type=chunk) [Item 4. Mine Safety Disclosures](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable - Not applicable[219](index=219&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) Not applicable - Not applicable[219](index=219&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) Lists exhibits filed, including CEO and CFO certifications and XBRL Interactive Data Files - Exhibits filed include CEO and CFO certifications (31.01, 31.02, 32.01, 32.02) and XBRL data files (101 series)[221](index=221&type=chunk)

Table of contents 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, 2022 Or ☐ 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 __________ ...

Table of contents 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 March 31, 2022 Or ☐ 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 _________ ...

Part I [Item 1. Business](index=6&type=section&id=Item%201.%20Business) ACI Worldwide develops and markets real-time digital payment software and solutions globally for banks, merchants, and billers - ACI's core business is providing software and solutions for real-time digital payments to a global customer base[15](index=15&type=chunk) - The company targets three key markets: Banks (large and mid-size globally), Merchants (Tier 1 & 2, online), and Billers (consumer finance, insurance, healthcare, etc.)[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk) - ACI offers solutions through on-premise term licenses or on-demand cloud arrangements (SaaS/PaaS), typically with minimum contract terms of **three to five years**[28](index=28&type=chunk) - As of December 31, 2021, ACI served over **6,000 organizations**, including **19 of the top 20 banks** worldwide, with no single customer accounting for more than **10%** of consolidated revenues[50](index=50&type=chunk) Employee Distribution by Region (as of Dec 31, 2021) | Region | Number of Employees | | :--- | :--- | | Americas | 1,618 | | EMEA | 1,008 | | Asia Pacific | 984 | | **Total** | **3,610** | [Item 1A. Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from intense competition, cybersecurity threats, debt covenants, and the COVID-19 pandemic - The company faces intense competition from larger firms with greater resources and from the in-house IT departments of potential customers[75](index=75&type=chunk)[41](index=41&type=chunk) - Security breaches or system failures could significantly harm the business by disrupting services, damaging its reputation, and leading to loss of customers[77](index=77&type=chunk)[79](index=79&type=chunk) - A significant portion of revenue comes from the Issuing and Acquiring solutions (including BASE24), making the company susceptible to reduced demand or increased competition in this area[123](index=123&type=chunk) - The company's debt contains restrictive covenants that limit operational flexibility, and failure to comply could trigger an event of default[131](index=131&type=chunk)[132](index=132&type=chunk) - The transition away from LIBOR to alternative reference rates like SOFR presents uncertainty and potential impact on the company's Credit Agreement, which is currently indexed to U.S.-dollar-LIBOR[134](index=134&type=chunk)[135](index=135&type=chunk) - The effects of the COVID-19 pandemic, including remote work arrangements and potential economic downturns affecting customers, remain a significant uncertainty for future financial performance[136](index=136&type=chunk)[137](index=137&type=chunk) [Item 2. Properties](index=25&type=section&id=Item%202.%20Properties) ACI leases its Florida headquarters and manages 721,000 square feet of global office and data center space - ACI leases its principal executive headquarters in Coral Gables, Florida[143](index=143&type=chunk) Total Office and Data Center Space (as of end of 2021) | Location | Square Feet | | :--- | :--- | | United States (Owned & Leased) | ~**323,000** | | International (Leased) | ~**398,000** | [Item 3. Legal Proceedings](index=25&type=section&id=Item%203.%20Legal%20Proceedings) Material pending legal proceedings are detailed in Note 13 of the Consolidated Financial Statements - Details on material legal proceedings are located in Note 13, Commitments and Contingencies, within the financial statements section of the report[145](index=145&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=26&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters,%20and%20Issuer%20Purchases%20of%20Equity%20Securities) ACI's common stock trades on NASDAQ, with no dividends and an active $250 million stock repurchase program - The company's common stock (ACIW) is traded on The NASDAQ Global Select Market[147](index=147&type=chunk) - ACI has never declared or paid cash dividends and does not anticipate paying them in the future[149](index=149&type=chunk) - On December 1, 2021, the board approved a new stock repurchase authorization of up to **$250.0 million**, with approximately **$216.3 million** remaining available as of December 31, 2021[150](index=150&type=chunk) Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Oct 2021 | 0 | N/A | | Nov 2021 | 1,000,000 | $34.28 | | Dec 2021 | 1,000,000 | $33.69 | | **Total Q4** | **2,000,000** | **$33.98** | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2021, revenue grew 6% to $1.37 billion, net income rose 76% to $127.8 million, with strong liquidity [Overview and Key Trends](index=27&type=section&id=Overview%20and%20Key%20Trends) ACI's strategy is shaped by digital payment growth, real-time payment adoption, cloud shifts, and fraud management needs - Key trends driving ACI's business include the growth in digital payment volumes, adoption of real-time payments, shift to cloud technology, increased digital fraud, demand for omni-commerce solutions, and the emergence of Request for Payment (RfP)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk) [Backlog](index=29&type=section&id=Backlog) The 60-month backlog totaled $6.11 billion as of December 31, 2021, comprising committed revenue and assumed renewals 60-Month Backlog by Segment (in millions) | Segment | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Banks | $2,272 | $2,167 | | Merchants | $754 | $808 | | Billers | $3,084 | $3,064 | | **Total** | **$6,110** | **$6,039** | 60-Month Backlog Composition (in millions) | Type | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Committed | $2,095 | $2,447 | | Renewal | $4,015 | $3,592 | | **Total** | **$6,110** | **$6,039** | [Results of Operations](index=32&type=section&id=Results%20of%20Operations) In 2021, total revenue grew 6% to $1.37 billion, operating income increased 45%, and net income rose 76% Consolidated Results of Operations (in thousands) | Metric | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $1,370,598 | $1,294,322 | **6%** | | Operating Income | $209,897 | $144,744 | **45%** | | Net Income | $127,791 | $72,660 | **76%** | Revenue by Type (in thousands) | Revenue Type | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | SaaS and PaaS | $774,342 | $769,180 | **1%** | | License | $319,867 | $246,896 | **30%** | | Maintenance | $210,499 | $211,697 | (1)% | | Services | $65,890 | $66,549 | (1)% | - The increase in total revenue was primarily driven by the timing and size of license and capacity renewals during 2021 compared to 2020[185](index=185&type=chunk) - General and administrative expenses decreased by **19%** (**$28.7 million**), largely due to lower significant transaction-related expenses in 2021 (**$11.0 million**) compared to 2020 (**$39.3 million**)[200](index=200&type=chunk) [Segment Results](index=36&type=section&id=Segment%20Results) ACI realigned into Banks, Merchants, and Billers segments, with Banks leading in revenue and Adjusted EBITDA growth - In January 2021, the company changed its organizational and reporting structure to three new segments: Banks, Merchants, and Billers[208](index=208&type=chunk) Segment Financial Data (in thousands) | Metric | Segment | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Revenues** | Banks | $625,125 | $558,498 | | | Merchants | $152,988 | $149,342 | | | Billers | $592,485 | $586,482 | | **Segment Adjusted EBITDA** | Banks | $372,949 | $331,445 | | | Merchants | $54,266 | $53,383 | | | Billers | $129,048 | $135,144 | - The Banks segment's Adjusted EBITDA increased by **$41.5 million**, driven by a **$66.6 million** revenue increase[216](index=216&type=chunk) - The Billers segment's Adjusted EBITDA decreased by **$6.1 million**, primarily due to a **$12.1 million** increase in cash operating expenses that outpaced revenue growth[219](index=219&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) Total liquidity was $620.6 million as of December 31, 2021, with operating cash flow at $220.5 million Available Liquidity (in thousands) | Component | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $122,059 | $165,374 | | Availability under revolving credit facility | $498,500 | $443,500 | | **Total liquidity** | **$620,559** | **$608,874** | Summary of Cash Flows (in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash from Operating | $220,473 | $314,895 | | Net cash used in Investing | ($45,368) | ($30,699) | | Net cash used in Financing | ($256,878) | ($159,889) | - During 2021, the company repurchased **3.0 million shares** for **$107.4 million** under its stock repurchase program[227](index=227&type=chunk) [Critical Accounting Policies and Estimates](index=40&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies involve significant judgments in revenue recognition, goodwill impairment, and stock-based compensation - For revenue recognition, significant judgment is required to determine the stand-alone selling price (SSP) for each performance obligation, using the residual approach for software licenses due to their highly variable pricing[241](index=241&type=chunk) - Goodwill is assessed for impairment annually at the reporting unit level (Banks, Merchants, Billers) using a discounted cash flow model, with calculated fair value substantially exceeding carrying value in the last test[250](index=250&type=chunk)[251](index=251&type=chunk) - The fair value of Total Shareholder Return (TSR) awards is determined using a Monte Carlo simulation model, which requires assumptions about stock price volatility and risk-free interest rates[256](index=256&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency exchange rates and interest rate fluctuations on its floating-rate debt - The company is exposed to foreign currency exchange rate risk due to its global operations but has not entered into any hedging transactions[263](index=263&type=chunk) - The company has interest rate risk on its **$678.2 million** floating-rate Credit Facility, where a hypothetical **10% change** in effective interest rates would impact annual interest expense by approximately **$1.4 million**[265](index=265&type=chunk) [Item 9A. Controls and Procedures](index=45&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2021 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[269](index=269&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2021, an assessment audited and confirmed by Deloitte & Touche, LLP[271](index=271&type=chunk)[272](index=272&type=chunk)[276](index=276&type=chunk) Part III [Items 10-14](index=47&type=section&id=Items%2010-14) Information on directors, executive compensation, and security ownership is incorporated by reference from the 2022 Proxy Statement - Information regarding Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, and Principal Accounting Fees is incorporated by reference from the company's 2022 Proxy Statement[284](index=284&type=chunk)[285](index=285&type=chunk)[286](index=286&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=48&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules) This section presents consolidated financial statements and notes on revenue, debt, segments, and legal contingencies [Consolidated Financial Statements](index=51&type=section&id=Consolidated%20Financial%20Statements) As of December 31, 2021, total assets were $3.16 billion, liabilities $1.91 billion, with $1.37 billion revenue and $127.8 million net income Key Balance Sheet Figures (in thousands) | Account | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $937,434 | $1,154,914 | | Goodwill | $1,280,226 | $1,280,226 | | Total Assets | $3,158,741 | $3,386,903 | | Total Current Liabilities | $754,155 | $905,605 | | Long-term Debt | $1,019,872 | $1,120,742 | | Total Liabilities | $1,913,964 | $2,180,306 | Key Income Statement Figures (in thousands) | Account | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total Revenues | $1,370,598 | $1,294,322 | $1,258,294 | | Operating Income | $209,897 | $144,744 | $123,756 | | Net Income | $127,791 | $72,660 | $67,062 | | Diluted EPS | $1.08 | $0.62 | $0.57 | [Notes to Consolidated Financial Statements](index=58&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail revenue recognition, $1.08 billion debt, segment performance, income taxes, and legal proceedings including an ACH incident - The company's revenue recognition policy involves significant judgments, especially for multi-element arrangements including software licenses, maintenance, and services[353](index=353&type=chunk)[367](index=367&type=chunk) - As of Dec 31, 2021, total debt outstanding was approximately **$1.08 billion**, comprising **$678.2 million** in Term Loans and a **$400.0 million** in 5.750% Senior Notes due 2026[390](index=390&type=chunk)[405](index=405&type=chunk) - In **April 2021**, an inadvertent ACH file transmission during a system test led to investigations by the U.S. Consumer Finance Protection Bureau and state agencies, as well as seven class action lawsuits, with potential for material fines or penalties[480](index=480&type=chunk)[481](index=481&type=chunk) - The company's effective tax rate was **27%** in 2021, compared to **26%** in 2020, with significant impacts from operations in Colombia, Ireland, and Singapore[205](index=205&type=chunk)[457](index=457&type=chunk)