ACI WORLDWIDE, INC. [ACIW] Filings

10-Q 1 aciw-20220630.htm 10-Q aciw-20220630

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


☐			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.)

2811 Ponce de Leon Blvd

PH 1

Coral Gables,

Florida

33134

(Address of principal executive offices)

(Zip code)

(305) 894-2200

(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 2, 2022, there were 114,047,260 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

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	TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION

Item 1	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of June 3 0 , 2022, and December 31, 2021	3
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 3 0 , 2022 and 2021	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Si x Months Ended June 3 0 , 2022 and 2021	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 3 0 , 2022 and 2021	7
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 3 0 , 2022 and 2021	8
	Notes to Condensed Consolidated Financial Statements	9

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4	Controls and Procedures	37

PART II – OTHER INFORMATION

Item 1	Legal Proceedings	38
Item 1A	Risk Factors	38
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3	Defaults Upon Senior Securities	39
Item 4	Mine Safety Disclosures	39
Item 5	Other Information	39
Item 6	Exhibits	40

Signature		41

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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, 2022		December 31, 2021
ASSETS
Current assets
Cash and cash equivalents	$	118,953	$	122,059
Receivables, net of allowances of $2,923 and $2,861, respectively	326,852		320,405
Settlement assets	549,019		452,396
Prepaid expenses	34,027		24,698
Other current assets	16,951		17,876
Total current assets	1,045,802		937,434
Noncurrent assets
Accrued receivables, net	268,075		276,164
Property and equipment, net	56,233		63,050
Operating lease right-of-use assets	40,833		47,825
Software, net	147,133		157,782
Goodwill	1,280,226		1,280,226
Intangible assets, net	261,782		283,004
Deferred income taxes, net	53,885		50,778
Other noncurrent assets	64,699		62,478
TOTAL ASSETS	$	3,218,668	$	3,158,741
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	41,084	$	41,312
Settlement liabilities	548,524		451,575
Employee compensation	40,076		51,379
Current portion of long-term debt	55,688		45,870
Deferred revenue	81,065		84,425
Other current liabilities	78,565		79,594
Total current liabilities	845,002		754,155
Noncurrent liabilities
Deferred revenue	31,231		25,925
Long-term debt	1,031,134		1,019,872
Deferred income taxes, net	30,982		36,122
Operating lease liabilities	35,120		43,346
Other noncurrent liabilities	36,835		34,544
Total liabilities	2,010,304		1,913,964
Commitments and contingencies
Stockholders’ equity
Preferred stock; $0.01 par value; 5,000,000 shares authorized; no shares issued at June 30, 2022, and December 31, 2021	—		—
Common stock; $0.005 par value; 280,000,000 shares authorized; 140,525,055 shares issued at June 30, 2022, and December 31, 2021	702		702
Additional paid-in capital	690,574		688,313
Retained earnings	1,160,113		1,131,281
Treasury stock, at cost, 26,229,902 and 24,795,009 shares at June 30, 2022, and December 31, 2021, respectively	(528,758)		(475,972)
Accumulated other comprehensive loss	(114,267)		(99,547)
Total stockholders’ equity	1,208,364		1,244,777
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,218,668	$	3,158,741

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

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ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenues
Software as a service and platform as a service	$	206,978	$	196,328	$	401,540	$	392,074
License	64,314		34,727		124,599		55,929
Maintenance	50,562		53,155		101,980		105,518
Services	18,571		17,459		35,386		33,334
Total revenues	340,425		301,669		663,505		586,855
Operating expenses
Cost of revenue (1)	179,333		158,614		345,619		318,099
Research and development	40,642		35,029		78,449		69,543
Selling and marketing	35,391		28,660		69,999		56,798
General and administrative	28,362		31,937		54,237		59,712
Depreciation and amortization	32,240		32,005		63,078		63,589
Total operating expenses	315,968		286,245		611,382		567,741
Operating income	24,457		15,424		52,123		19,114
Other income (expense)
Interest expense	(11,784)		(11,260)		(22,678)		(22,735)
Interest income	3,051		2,865		6,210		5,719
Other, net	2,006		1,434		4,256		52
Total other income (expense)	(6,727)		(6,961)		(12,212)		(16,964)
Income before income taxes	17,730		8,463		39,911		2,150
Income tax expense (benefit)	4,388		1,962		11,079		(2,406)
Net income	$	13,342	$	6,501	$	28,832	$	4,556
Income per common share
Basic	$	0.12	$	0.06	$	0.25	$	0.04
Diluted	$	0.12	$	0.05	$	0.25	$	0.04
Weighted average common shares outstanding
Basic	114,669		117,718		114,976		117,605
Diluted	115,205		119,010		115,649		118,958

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

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

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ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited and in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	13,342	$	6,501	$	28,832	$	4,556
Other comprehensive income (loss):
Foreign currency translation adjustments	(12,620)		1,466		(14,720)		(1,650)
Total other comprehensive income (loss)	(12,620)		1,466		(14,720)		(1,650)
Comprehensive income	$	722	$	7,967	$	14,112	$	2,906

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

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ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited and in thousands, except share amounts)


	Three Months Ended June 30, 2022
	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance as of March 31, 2022	$	702	$	685,354	$	1,146,771	$	(506,513)	$	(101,647)	$	1,224,667
Net income	—		—		13,342		—		—		13,342
Other comprehensive loss	—		—		—		—		(12,620)		(12,620)
Stock-based compensation	—		6,800		—		—		—		6,800
Shares issued and forfeited, net, under stock plans	—		(1,580)		—		2,867		—		1,287
Repurchase of 924,240 shares of common stock	—		—		—		(24,847)		—		(24,847)
Repurchase of stock-based compensation awards for tax withholdings	—		—		—		(265)		—		(265)
Balance as of June 30, 2022	$	702	$	690,574	$	1,160,113	$	(528,758)	$	(114,267)	$	1,208,364


	Three Months Ended June 30, 2021
	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance as of March 31, 2021	$	702	$	670,018	$	1,001,545	$	(378,987)	$	(95,561)	$	1,197,717
Net income	—		—		6,501		—		—		6,501
Other comprehensive income	—		—		—		—		1,466		1,466
Stock-based compensation	—		7,720		—		—		—		7,720
Shares issued and forfeited, net, under stock plans	—		(1,339)		—		6,496		—		5,157
Repurchase of 1,000,000 shares of common stock	—		—		—		(39,411)		—		(39,411)
Repurchase of stock-based compensation awards for tax withholdings	—		—		—		(590)		—		(590)
Balance as of June 30, 2021	$	702	$	676,399	$	1,008,046	$	(412,492)	$	(94,095)	$	1,178,560

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

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ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited and in thousands, except share amounts)


	Six Months Ended June 30, 2022
	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance as of December 31, 2021	$	702	$	688,313	$	1,131,281	$	(475,972)	$	(99,547)	$	1,244,777
Net income	—		—		28,832		—		—		28,832
Other comprehensive loss	—		—		—		—		(14,720)		(14,720)
Stock-based compensation	—		14,758		—		—		—		14,758
Shares issued and forfeited, net, under stock plans	—		(12,497)		—		15,723		—		3,226
Repurchase of 2,055,488 shares of common stock	—		—		—		(62,707)		—		(62,707)
Repurchase of stock-based compensation awards for tax withholdings	—		—		—		(5,802)		—		(5,802)
Balance as of June 30, 2022	$	702	$	690,574	$	1,160,113	$	(528,758)	$	(114,267)	$	1,208,364


	Six Months Ended June 30, 2021
	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance as of December 31, 2020	$	702	$	682,431	$	1,003,490	$	(387,581)	$	(92,445)	$	1,206,597
Net income	—		—		4,556		—		—		4,556
Other comprehensive loss	—		—		—		—		(1,650)		(1,650)
Stock-based compensation	—		14,423		—		—		—		14,423
Shares issued and forfeited, net, under stock plans	—		(20,455)		—		29,296		—		8,841
Repurchase of 1,000,000 shares of common stock	—		—		—		(39,411)		—		(39,411)
Repurchase of stock-based compensation awards for tax withholdings	—		—		—		(14,796)		—		(14,796)
Balance as of June 30, 2021	$	702	$	676,399	$	1,008,046	$	(412,492)	$	(94,095)	$	1,178,560

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

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ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)


	Six Months Ended June 30,
	2022		2021
Cash flows from operating activities:
Net income	$	28,832	$	4,556
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation	11,008		10,708
Amortization	52,721		56,278
Amortization of operating lease right-of-use assets	5,489		5,000
Amortization of deferred debt issuance costs	2,299		2,357
Deferred income taxes	(6,385)		(9,558)
Stock-based compensation expense	14,758		14,423
Other	1,124		436
Changes in operating assets and liabilities:
Receivables	(14,040)		76,754
Accounts payable	(1,319)		(2,540)
Accrued employee compensation	(10,201)		(8,401)
Deferred revenue	5,532		297
Other current and noncurrent assets and liabilities	(22,055)		(45,325)
Net cash flows from operating activities	67,763		104,985
Cash flows from investing activities:
Purchases of property and equipment	(3,657)		(8,075)
Purchases of software and distribution rights	(10,738)		(15,652)


Net cash flows from investing activities	(14,395)		(23,727)
Cash flows from financing activities:
Proceeds from issuance of common stock	1,962		1,648
Proceeds from exercises of stock options	1,397		7,044
Repurchase of stock-based compensation awards for tax withholdings	(5,802)		(14,796)
Repurchases of common stock	(62,707)		(39,411)
Proceeds from revolving credit facility	60,000		—
Repayment of revolving credit facility	(20,000)		(30,000)

Repayment of term portion of credit agreement	(21,219)		(19,475)

Payments on or proceeds from other debt, net	(9,369)		(8,272)
Net decrease in settlement assets and liabilities	(4,575)		(78,081)
Net cash flows from financing activities	(60,313)		(181,343)
Effect of exchange rate fluctuations on cash	(1,062)		(388)
Net decrease in cash and cash equivalents	(8,007)		(100,473)
Cash and cash equivalents, including settlement deposits, beginning of period	184,142		265,382
Cash and cash equivalents, including settlement deposits, end of period	$	176,135	$	164,909
Reconciliation of cash and cash equivalents to the Consolidated Balance Sheets
Cash and cash equivalents	$	118,953	$	146,213
Settlement deposits	57,182		18,696
Total cash and cash equivalents, including settlement deposits	$	176,135	$	164,909
Supplemental cash flow information
Income taxes paid	$	18,467	$	21,263
Interest paid	$	20,296	$	20,242

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, 2022, and for the three and six months ended June 30, 2022 and 2021, 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, 2021, is derived from the audited financial statements.

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, 2021, filed on February 24, 2022. Results for the three and six months ended June 30, 2022, 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. These estimates and assumptions are affected by management’s application of accounting policies, as well as uncertainty in the current economic environment due to COVID-19. Actual results could differ from those estimates.

Revision of Prior Period Financial Statements

As of December 31, 2021, the Company revised the previously reported consolidated statements of cash flows to include settlement deposits in total cash and cash equivalents and settlement receivables and settlement liabilities net activity in cash flows from financing activities, both of which were previously included in cash flows from operating activities. This immaterial revision did not have an effect on its previously reported consolidated balance sheets, statements of operations, statements of comprehensive income, or statements of stockholders' equity.

A summary of the revisions to the previously reported balances are presented in the table below for comparative purposes (in thousands):


	Six Months Ended June 30, 2021
	As reported		Revision adjustment		As revised
Cash flows from operating activities:
Other current and noncurrent assets and liabilities	$	(42,094)	$	(3,231)	$	(45,325)
Net cash flows from operating activities	108,216		(3,231)		104,985

Cash flows from financing activities:
Net decrease in settlement assets and liabilities	$	—	$	(78,081)	$	(78,081)
Net cash flows from financing activities	(103,262)		(78,081)		(181,343)

Net decrease in cash and cash equivalents	$	(19,161)	$	(81,312)	$	(100,473)
Cash and cash equivalents, including settlement deposits, beginning of period	165,374		100,008		265,382
Cash and cash equivalents, including settlement deposits, end of period	146,213		18,696		164,909

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Other Current Liabilities

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


	June 30, 2022		December 31, 2021
Vendor financed licenses	$	13,423	$	12,521
Operating lease liabilities	11,738		11,518
Accrued interest	8,791		8,776
Royalties payable	3,409		4,102
Other	41,204		42,677
Total other current liabilities	$	78,565	$	79,594

Settlement Assets and Liabilities

Individuals and businesses settle their obligations to the Company’s various 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 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 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 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, 2022, and December 31, 2021, was $227.2 million and $272.8 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 $388.0 million and $419.0 million as of June 30, 2022, and December 31, 2021, 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).

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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 segments, Banks, Merchants, and Billers, as the reporting units. As of June 30, 2022, the Company's goodwill balance of $1.3 billion was allocated $725.9 million to Banks, $137.3 million to Merchants, and $417.0 million to Billers.

Recoverability of goodwill is measured using a discounted cash flow model incorporating discount rates commensurate with the risks involved. Use of a discounted cash flow model is common practice in impairment testing in the absence of available transactional market evidence to determine the fair value. The calculated fair value was substantially in excess of the current carrying value for all reporting units based upon the October 1, 2021, annual impairment test and there have been no indications of impairment in the subsequent periods.

Equity Method Investment

In July 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 $18.5 million and $19.3 million, which is included in other noncurrent assets in the condensed consolidated balance sheet as of June 30, 2022, and December 31, 2021, respectively.

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. See Note 10, Segment Information, for additional information, including disaggregation of revenue based on primary solution category.

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, 2022		December 31, 2021
Billed receivables	$	166,163	$	162,479
Allowance for doubtful accounts	(2,923)		(2,861)
Billed receivables, net	163,240		159,618
Current accrued receivables, net	163,612		160,787
Long-term accrued receivables, net	268,075		276,164
Total accrued receivables, net	431,687		436,951
Total receivables, net	$	594,927	$	596,569

One customer accounted for 12.4% and 13.8% of the Company's consolidated receivables balance as of June 30, 2022 and December 31, 2021.

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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, 2021	$	110,350
Deferral of revenue	68,352
Recognition of deferred revenue	(62,717)
Foreign currency translation	(3,689)
Balance, June 30, 2022	$	112,296

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 or meets the allocation objective.

Revenue allocated to remaining performance obligations was $749.6 million as of June 30, 2022, of which the Company expects to recognize approximately 46% over the next 12 months and the remainder thereafter.

During the three and six months ended June 30, 2022 and 2021, revenue recognized by the Company from performance obligations satisfied in previous periods was not significant.

3. Divestiture

Corporate Online Banking Solutions

On June 7, 2022, the Company announced a definitive agreement to divest its corporate online banking solutions related assets and liabilities to One Equity Partners ("OEP") for $100.0 million. The sale includes employees and customer contracts as well as technology assets and intellectual property and is expected to close during the three months ending September 30, 2022.

The Company and OEP have also entered into a Transition Services Agreement ("TSA"), whereby the Company will continue to perform certain functions on OEP's behalf during a migration period not expected to exceed 18 months. The TSA is meant to reimburse the Company for direct costs in order to provide such functions, which are no longer generating revenue for the Company.

4. Debt

As of June 30, 2022, the Company had $40.0 million, $656.9 million, and $400.0 million outstanding under its Revolving Credit Facility, Term Loans, and Senior Notes, respectively, with up to $458.5 million of unused borrowings under the Revolving Credit Facility portion of the Credit Agreement, as amended, and up to $1.5 million of unused borrowings under the Letter of Credit agreement. The amount of unused borrowings actually available varies in accordance with the terms of the agreement.

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 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.

On May 5, 2022, the Company and Bank of America entered into the LIBOR Transition Amendment (the "Amendment") that replaced the LIBOR reference rate with the Secured Overnight Financing Rate ("SOFR") reference rate. No other terms or conditions of the Credit Agreement were changed as a result of the Amendment.

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The Credit Agreement consists of (a) a 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 $279.0 million senior secured term loan facility (the "Initial Term Loan") and (c) a five-year $500.0 million Delayed Draw Term Loan (together with the Initial Term Loan, the "Term Loans", and together with the Initial Term Loan and the Revolving Credit Facility, the “Credit Facility”). The Credit Agreement also allows the Company to request optional incremental term loans and increases in the revolving commitment. The 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) SOFR 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 SOFR 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 SOFR rate borrowings. Interest is due and payable monthly. The interest rate in effect for the Credit Facility as of June 30, 2022, was 3.37%.

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 SOFR 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.

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. The 2026 Notes will mature on August 15, 2026.

Maturities on debt outstanding as of June 30, 2022, are as follows (in thousands):


Fiscal Year Ending December 31,
Remainder of 2022	$	29,212
2023	69,906
2024	597,823
2025	—
2026	400,000
Thereafter	—
Total	$	1,096,941

As of June 30, 2022, and at all times during the period, the Company was in compliance with its financial debt covenants.

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


	June 30, 2022		December 31, 2021
Term loans	$	656,941	$	678,160
Revolving credit facility	40,000		—
5.750% Senior notes, due August 2026	400,000		400,000
Debt issuance costs	(10,119)		(12,418)
Total debt	1,086,822		1,065,742
Less: current portion of term loans	60,169		50,431
Less: current portion of debt issuance costs	(4,481)		(4,561)
Total long-term debt	$	1,031,134	$	1,019,872

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Overdraft Facility

In 2019, the Company and ACI Payments, Inc. entered in to an uncommitted overdraft facility with Bank of America, N.A. The overdraft facility bears interest at the federal funds effective rate plus 2.250% 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, 2022, there was $75.0 million available and no amount outstanding on the overdraft facility. As of December 31, 2021, there was no amount outstanding on the overdraft facility.

Other

The Company finances certain multi-year license agreements for internal-use software. Upon execution, these arrangements have been treated as a non-cash investing and financing activity for purposes of the condensed consolidated statements of cash flows. During the six months ended June 30, 2022, the Company financed certain multi-year license agreements for internal-use software for $10.7 million, with annual payments through April 2024. As of June 30, 2022, $9.5 million was outstanding on these and other license agreements previously entered into, of which $5.9 million and $3.6 million is included in other current liabilities and other noncurrent liabilities, respectively, in the condensed consolidated balance sheet. As of December 31, 2021, $2.9 million was outstanding on these agreements, all of which is included in other current liabilities in the condensed consolidated balance sheet.

5. 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, 2022						December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Balance		Gross Carrying Amount		Accumulated Amortization		Net Balance
Software for internal use	$	445,098	$	(297,965)	$	147,133	$	440,242	$	(283,109)	$	157,133
Software for resale	124,401		(124,401)		—		127,904		(127,255)		649
Total software	$	569,499	$	(422,366)	$	147,133	$	568,146	$	(410,364)	$	157,782

Amortization of software for internal use is computed using the straight-line method over an estimated useful life of generally three to eight years. Software for internal use amortization expense recorded during the three months ended June 30, 2022 and 2021, totaled $17.1 million and $17.4 million, respectively. Software for internal use amortization expense recorded during the six months ended June 30, 2022 and 2021, totaled $33.8 million and $34.3 million, respectively. These software amortization expense amounts are reflected in depreciation and amortization in the condensed consolidated statements of operations.

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 the remaining estimated useful life of generally five to ten years. Software for resale amortization expense recorded during the three months ended June 30, 2021 totaled $1.4 million. There was no software for resale amortization expense recorded during the three months ended June 30, 2022. Software for resale amortization expense recorded during the six months ended June 30, 2022 and 2021, totaled $0.7 million and $3.4 million, respectively. These software amortization expense amounts are reflected in cost of revenue 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, 2022						December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Balance		Gross Carrying Amount		Accumulated Amortization		Net Balance
Customer relationships	$	500,290	$	(242,608)	$	257,682	$	507,962	$	(230,152)	$	277,810
Trademarks and trade names	23,323		(19,223)		4,100		23,839		(18,645)		5,194
Total other intangible assets	$	523,613	$	(261,831)	$	261,782	$	531,801	$	(248,797)	$	283,004

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Other intangible assets amortization expense recorded during the three months ended June 30, 2022 and 2021, totaled $9.1 million and $9.2 million, respectively. Other intangible assets amortization expense recorded during the six months ended June 30, 2022 and 2021, totaled $18.3 million and $18.5 million, respectively.

Based on capitalized intangible assets as of June 30, 2022, 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 2022	$	33,222	$	17,974
2023	50,446		35,767
2024	33,058		31,371
2025	22,384		22,983
2026	7,966		22,983
Thereafter	57		130,704
Total	$	147,133	$	261,782

6. Stock-Based Compensation Plans

Employee Stock Purchase Plan

Shares issued under the 2017 Employee Stock Purchase Plan during the six months ended June 30, 2022 and 2021, totaled 70,242 and 55,486, respectively.

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, 2021	1,640,319	$	18.42
Exercised	(77,403)	18.04


Outstanding as of June 30, 2022	1,562,916	$	18.44	2.59	$	11,639,158
Exercisable as of June 30, 2022	1,562,916	$	18.44	2.59	$	11,639,158

The total intrinsic value of stock options exercised during the six months ended June 30, 2022 and 2021, was $1.1 million and $7.6 million, respectively. There were