XML 18 R7.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Condensed Consolidated Financial Statements | 9 Months Ended
--- | ---
Sep. 30, 2017
Accounting Policies [Abstract] |
Condensed Consolidated Financial Statements | 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 September 30, 2017, and for the three and nine months ended September 30, 2017 and 2016, 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, 2016 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, 2016, filed on March 1, 2017. Results for the three and nine months ended September 30, 2017 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 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. Receivables, net Receivables represent amounts billed and amounts earned that are to be billed in the near future. Included in accrued receivables are services, software as a service (“SaaS”) and platform as a service (“Platform”) revenues earned in the current period but billed in a subsequent period as well as license revenues that are fixed and determinable but billed in future periods.
(in thousands) |  | September 30, 2017 |  |  | December 31, 2016 |
Billed Receivables |  | $ | 160,622 |  |  | $ | 250,116 |
Allowance for doubtful accounts |  |  | (4,157 | ) |  |  | (3,873 | )
Billed, net |  |  | 156,465 |  |  |  | 246,243 |
Accrued Receivables |  |  | 25,804 |  |  |  | 21,919 |
Receivables, net |  | $ | 182,269 |  |  | $ | 268,162 |
Other Current Assets and Other Current Liabilities
(in thousands) |  | September 30, 2017 |  |  | December 31, 2016 |
Settlement deposits |  | $ | 6,392 |  |  | $ | 10,496 |
Settlement receivables |  |  | 7,239 |  |  |  | 14,327 |
Other |  |  | 11,337 |  |  |  | 8,755 |
Total other current assets |  | $ | 24,968 |  |  | $ | 33,578 |
(in thousands) |  | September 30, 2017 |  |  | December 31, 2016 |
Settlement payables |  | $ | 13,107 |  |  | $ | 24,016 |
Accrued interest |  |  | 2,469 |  |  |  | 7,356 |
Vendor financed licenses |  |  | 2,092 |  |  |  | 9,213 |
Royalties payable |  |  | 7,073 |  |  |  | 7,197 |
Other |  |  | 28,275 |  |  |  | 31,059 |
Total other current liabilities |  | $ | 53,016 |  |  | $ | 78,841 |
Individuals and businesses settle their obligations to the Company’s various clients, primarily utility and other public sector clients, using credit or debit cards or via ACH payments. The Company creates a receivable for the amount due from the credit or debit card company and an offsetting payable to the client. Once confirmation is received that the funds have been received, the Company settles the obligation to the client. Due to timing, in some instances, the Company may receive the funds into bank accounts controlled by and in the Company’s name that are not disbursed to its clients by the end of the day resulting in a settlement deposit on the Company’s books. Off Balance Sheet Accounts The Company also enters into agreements with certain clients to process payment funds on their behalf. When an automated clearing house 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, the settlement accounts are not included in the Company’s balance sheet. The Company is entitled to interest earned on the fund balances. The collection of interest on these settlement accounts is considered in the Company’s determination of its fee structure for clients and represents a portion of the payment for services performed by the Company. The amount of settlement funds as of September 30, 2017 and December 31, 2016 were $223.9 million and $270.0 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 Senior Notes was $305.4 million and $309.8 million at September 30, 2017 and December 31, 2016, 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 Changes in the carrying amount of goodwill attributable to each reporting unit with goodwill balances during the nine months ended September 30, 2017 were as follows:
(in thousands) |  | ACI On Demand |  |  | ACI On Premise |  |  | Total |
Gross Balance prior to December 31, 2016 |  | $ | 183,783 |  |  | $ | 773,340 |  |  | $ | 957,123 |
Total impairment prior to December 31, 2016 |  |  | — |  |  |  | (47,432 | ) |  |  | (47,432 | )
Balance, December 31, 2016 |  |  | 183,783 |  |  |  | 725,908 |  |  |  | 909,691 |
Adjustments |  |  | — |  |  |  | — |  |  |  | — |
Balance, September 30, 2017 |  | $ | 183,783 |  |  | $ | 725,908 |  |  | $ | 909,691 |
In accordance with the Accounting Standards Codification (“ASC 350”), Intangibles – Goodwill and Other, we assess goodwill for impairment annually during the fourth quarter of our 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. 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 our October 1, 2016 annual impairment test and there have been no indications of impairment in the subsequent periods. The Company evaluates goodwill at the reporting unit level, and as discussed in Note 10, Segment Information, during the first quarter of 2017, it announced a change in organizational structure to better align with the Company’s strategic direction. This change in the Company’s operating segments also resulted in a change in reporting units to coincide with the new operating segments - ACI On Demand and ACI On Premise. The Company allocated goodwill to the new reporting units using a relative fair value approach. In addition, the Company performed an assessment of potential goodwill impairment for all reporting units immediately prior to the reallocation and determined that no impairment was indicated. Recently Issued Accounting Standards Not Yet Effective In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (codified as “ASC 606”). ASC 606 will supersede the revenue recognition requirements in Accounting Standard Codification 605, Revenue Recognition, and most industry-specific guidance. The standard requires that entities recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. On July 9, 2015, the FASB deferred the effective date to fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. The Company will adopt the standard effective January 1, 2018 (the effective date). The standard permits the use of either the retrospective or modified retrospective transition method. The Company will adopt the standard under the modified retrospective transition method which will result in an adjustment to retained earnings for the cumulative effect of applying the standard to active contracts as of the adoption date. As this method does not result in recast of the prior year financial statements, ASC 606 requires the Company to provide additional disclosures during the year of adoption for the amount by which each financial statement line item is affected by adoption of the new standard and explanation of the reasons for significant changes. During 2016, the Company began its detailed assessment of the impact of ASC 606 and completed its initial assessment of the impact on its license, maintenance, and services revenues. This assessment continued during early 2017, with increased focus on the impact of ASC 606 on SaaS and Platform revenues, detailed review of customer contracts under ASC 606 for each revenue stream, identification of key data requirements for contract reviews and necessary changes to processes, systems, and internal controls. As of September 30, 2017 the Company has completed its initial assessment of the impact of ASC 606 on all revenue streams. The Company has considered and evaluated the data necessary to comply with the expanded disclosures required under the new standard and has started to make changes to its processes and systems. The Company continues to evaluate the impact of the standard on its consolidated financial statements and related disclosures and is actively engaged in the process of preparing its transition adjustment under the modified retrospective transition method. The Company continues to believe that the most significant impacts relate to changes in the timing and amount of recognition for software license revenues and sales commission expenses and the expanded qualitative and quantitative disclosures required under the new standard. The Company expects revenue related to maintenance, services, and SaaS and Platform to remain substantially unchanged. While the Company continues to make progress in preparing for the adoption of ASC 606, work remains due to the complexity of applying ASC 606 to our contracts, the increased number of judgments and estimates required, and the volume of contracts that are subject to review. Accordingly, our assessment of ASC 606 will continue through the effective date. As it relates to software license revenues, under ASC 606 the Company will recognize revenue in advance of billings for certain software license arrangements with extended payment terms as opposed to when payments become due and payable. Additionally, certain of those same software license arrangements will contain a significant financing component which will result in a change in the amount of the contract value that is allocated to software license revenue. Because the requirement to have vendor-specific objective evidence (“VSOE”) of fair value for undelivered elements is eliminated under the new standard, the Company expects the amounts allocated to software license, maintenance, and services revenues for most software license arrangements to be recognized as each element is delivered or provided to the customer. Under current U.S. GAAP, when software license arrangements include post contract customer support (maintenance or “PCS”) terms that fail to achieve VSOE of fair value, the Company recognizes all revenues in the arrangement ratably over the longer service period. The Company has performed a detailed review of its active software license arrangements (as of August 31, 2017) including contracts with software license payment terms that extend beyond one year from the delivery of the software license and continue beyond December 31, 2017. The Company assessed whether those arrangements contain a significant financing component and, if so, calculated the amount of significant financing component at contract execution and the estimated remaining balance on January 1, 2018. Upon adoption of ASC 606, the Company will record an accrued receivable in its condensed consolidated balance sheet which represents the Company’s unconditional right to consideration at its present value (i.e. adjusted for the significant financing component) with an offsetting increase to retained earnings. The significant financing component will be recognized as interest income in the Company’s condensed consolidated statement of operations over the remaining contract term. The amounts allocated to the significant financing component would have been recognized as revenue under current U.S. GAAP. The Company has determined that its SaaS-based and Platform-based arrangements represent a single promise to provide continuous access (i.e. a stand-ready obligation) to its software solutions and their processing capabilities in the form of a service through one of the Company’s data centers. As each day of providing access to the software solution(s) is substantially the same and the customer simultaneously receives and consumes the benefits as access is provided, the Company has determined that its SaaS-based and Platform-based arrangements include a single performance obligation comprised of a series of distinct services. The Company’s SaaS-based and Platform-based arrangements may include fixed consideration, variable consideration or a combination of the two. Variable consideration in these arrangements is typically a function of a tier-based pricing structure that provides that customer with levels of transaction volume that “reset” with varying frequencies (e.g. monthly, quarterly or annually) and the corresponding rate per transaction within each level. Depending upon the structure of a particular arrangement, the Company will either: (1) allocate the variable amount to each distinct service period within the series and recognize revenue as each distinct service period is performed (i.e. direct allocation), (2) estimate total variable consideration at contract inception (giving consideration to any constraints that may apply) and recognize the total transaction price over the period to which it relates, or (3) apply ‘right to invoice’ practical expedient. At this time, the Company believes that revenue from most of its SaaS-based and Platform-based arrangements will be recognized under the direct allocation method or by applying the ‘right to invoice’ practical expedient, which will result in the same pattern of recognition as under current U.S. GAAP. The Company has determined that most of its sales commissions meet the definition of incremental costs of obtaining a contract. Accordingly, the costs associated with those sales commissions will be capitalized and expense recognized as the related goods or services are transferred to the customer. The Company currently recognizes sales commission expenses as they are incurred. Upon adoption of ASC 606, the Company will record an asset in its condensed consolidated balance sheet (as part of the transition adjustment) for the amount of unamortized sales commissions that were incurred in obtaining contracts in prior periods with an offsetting increase to retained earnings. The Company will recognize the capitalized sales commissions as a selling and marketing expense in the Company’s condensed consolidated statement of operations over a period that is consistent with the transfer of the goods and services to which the asset relates. In February 2016, the FASB issued ASU 2016-02, Leases. This standard requires a lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by leases with lease terms of more than 12 months. In addition, this standard requires both lessees and lessors to disclose certain key information about lease transactions. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company will adopt the standard effective January 1, 2019. During the nine months ended September 30, 2017, the Company began its detailed assessment of the impact of ASU 2016-02. While the Company continues to evaluate the impact of the standard on its condensed consolidated financial statements and related disclosures, at this time the Company cannot estimate the quantitative impact of adopting the new standard. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments, an update that addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows. Among the cash flow matters addressed in the update are payments for costs related to debt prepayments or extinguishments, payments related to settlement of certain types of debt instruments, payments of contingent consideration made after a business combination, proceeds from insurance claims and corporate-owned life insurance policies, and distributions received from equity method investees, among others. The standard is effective for fiscal year beginning after December 31, 2017, including interim periods within that fiscal year. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period, and all of the amendments must be adopted together in the same period. The amendments will be applied using a retrospective transition method to each period presented, unless impracticable for specific cash flow matters, in which case the amendments would be applied prospectively as of the earliest date practicable. The Company does not expect the impact of ASU 2016-15 to be material to its consolidated statement of cash flows. In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other than Inventory, to simplify the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Currently, U.S. GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in U.S. GAAP. The limited amount of authoritative guidance about the exception has led to diversity in practice and is a source of complexity in financial reporting, particularly for an intra-entity transfer of intellectual property. Under the amendments of ASU 2016-16, an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Consequently, this amendment eliminates the exception for an intra-entity transfer of an asset other than inventory. The standard is effective for fiscal year beginning after December 15, 2017, including interim reporting periods within that fiscal year. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements have not been issued or made available for issuance. The amendments to this ASU should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company is currently assessing the impact of ASU 2016-16 on its financial position, results of operations, and cash flow. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, an update that eliminates Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities, including unrecognized assets and liabilities. Under the amendments in ASU 2017-04, an entity should perform its annual or interim goodwill test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. The standard is effective for annual or interim goodwill impairment tests in fiscal years beginning December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently assessing the impact of ASU 2017-04 on its annual goodwill impairment test and possible early adoption. In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting, an update that provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting under ASC 718, Compensation – Stock Compensation. Under the amendments in ASU 2017-09, an entity should account for the effects of a modification unless all of the following criteria are met: 1) the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified - if the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification; 2) the vesting conditions of the modified award are the same as the conditions of the original award immediately before the original award is modified; 3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The standard is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. The Company has elected to early adopt these amendments prospectively in the second quarter of 2017. The adoption did not have a material effect on the Company’s financial position, results of operations, or cash flow as of and for the nine months ended September 30, 2017.

X
- References No definition available. + Details
Name: | us-gaap_AccountingPoliciesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for organization, consolidation and basis of presentation of financial statements disclosure. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -URI http://asc.fasb.org/topic&trid=2122149 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 + Details
Name: | us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration