XML 22 R9.htm IDEA: XBRL DOCUMENT
v3.20.1

Condensed Consolidated Financial Statements | 3 Months Ended
--- | ---
Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Condensed Consolidated Financial Statements | 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 March 31, 2020, and for the three months ended March 31, 2020 and 2019, are unaudited and reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair presentation, in all material respects, of the financial position and operating results for the interim periods. The condensed consolidated balance sheet as of December 31, 2019, 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, 2019, filed on February 27, 2020. Results for the three months ended March 31, 2020, are not necessarily indicative of results that may be attained in the future. The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Risks and Uncertainties The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company's business is highly uncertain and difficult to predict, as the response to the pandemic is in early stages and information is rapidly evolving. The Company has experienced changes in volumes for certain Merchant and Biller customers and has received limited requests for extended payment terms under existing contracts. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Such economic disruption could have a material adverse effect on our business as our customers curtail and reduce capital and overall spending. Policymakers around the globe have responded with fiscal policy actions to support the economy as a whole. The magnitude and overall effectiveness of these actions remains uncertain. The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, uncertain demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operations challenges faced by its customers. As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain. Other Current Liabilities The components of other current liabilities are included in the following table (in thousands):
| March 31, 2020 |  | December 31, 2019
Operating lease liabilities | $ | 14,586 |  |  | $ | 15,049 |
Vendor financed licenses | 10,390 |  |  | 9,667 |
Royalties payable | 5,162 |  |  | 6,107 |
Accrued interest | 3,308 |  |  | 9,212 |
Other | 32,936 |  |  | 36,936 |
Total other current liabilities | $ | 66,382 |  |  | $ | 76,971 |
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 March 31, 2020, and December 31, 2019, was $215.5 million and $274.0 million, respectively. Fair Value The fair value of the Company’s Credit Agreement approximates the carrying value due to the floating interest rate (Level 2 of the fair value hierarchy). The Company measures the fair value of its Senior Notes based on Level 2 inputs, which include quoted market prices and interest rate spreads of similar securities. The fair value of the Company’s 5.750% Senior Notes due 2026 (“2026 Notes”) was $402.0 million and $432.0 million as of March 31, 2020, and December 31, 2019, respectively. The fair values of cash and cash equivalents approximate the carrying values due to the short period of time to maturity (Level 2 of the fair value hierarchy). Goodwill In accordance with the Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other, the Company assesses goodwill for impairment annually during the fourth quarter of its fiscal year using October 1 balances or when there is evidence that events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Company evaluates goodwill at the reporting unit level and has identified its reportable segments, ACI On Demand and ACI On Premise, as the reporting units. Changes in the carrying amount of goodwill attributable to each reporting unit during the three months ended March 31, 2020, were as follows (in thousands):
|  | ACI On Demand |  | ACI On Premise |  | Total
Gross Balance, prior to December 31, 2019 |  | $ | 554,617 |  |  |  | $ | 773,340 |  |  |  | $ | 1,327,957 |
Total impairment prior to December 31, 2019 |  | — |  |  |  | (47,432) |  |  |  | (47,432) |
Balance, December 31, 2019 |  | 554,617 |  |  | 725,908 |  |  | 1,280,525 |
Goodwill from acquisitions (1) |  | (299) |  |  | — |  |  | (299) |
Balance, March 31, 2020 |  | $ | 554,318 |  |  | $ | 725,908 |  |  | $ | 1,280,226 |
(1)Goodwill from acquisitions relates to adjustments in the goodwill recorded for the acquisition of E Commerce Group Products, Inc. ("ECG"), along with ECG's subsidiary, Speedpay, Inc. (collectively referred to as "Speedpay") and Walletron, Inc. ("Walletron"), as discussed in Note 3, Acquisition. Recoverability of goodwill is measured using a discounted cash flow valuation model incorporating discount rates commensurate with the risks involved. Use of a discounted cash flow model is common practice in impairment testing in the absence of available transactional market evidence to determine the fair value. The calculated fair value was substantially in excess of the current carrying value for all reporting units based upon the October 1, 2019, annual impairment test. Given the adverse economic and market conditions caused by the COVID-19 pandemic, the Company considered a variety of qualitative factors to determine if an additional quantitative impairment test was required subsequent to our annual impairment test. Based on a variety of factors, including the excess of the fair value over the carrying amount in the most recent impairment test, we determined that an additional quantitative impairment test was not required. Equity Method Investment On July 23, 2019, the Company invested $18.3 million for a 30% non-controlling financial interest in a payment technology and services company in India. The Company accounted for this investment using the equity method in accordance with ASC 323, Investments - Equity Method and Joint Ventures. Accordingly, the Company recorded an initial investment of $18.5 million, which is included in other noncurrent assets in the condensed consolidated balance sheet as of March 31, 2020 and December 31, 2019. The Company records its share of earnings and losses in the investment on a one-quarter lag basis. Name Change Effective January 1, 2020, Official Payments Corporation, a wholly owned subsidiary, changed its name to ACI Payments, Inc. An amended and restated certificate of incorporation was filed with the state of Delaware to reflect the change. The Official Payments Corporation name and corresponding trade name may continue to be used until all stationary and marketing materials are transitioned to ACI Payments, Inc. equivalents. New Accounting Standards Recently Adopted In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, codified as ASC 326. Subsequent amendments to the guidance were issued as follows: ASU 2018-19 in November 2018; ASU 2019-04 in April 2019; ASU 2019-05 in May 2019; ASU's 2019-10 and 2019-11 in November 2019; and ASU 2020-02 in February 2020. This ASU provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in ASU 2016-13 replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company is required to use a forward-looking expected credit loss model for billed and accrued receivables. The Company adopted ASU 2016-13 as of January 1, 2020. The adoption of ASU 2016-13 did not have a material impact on the condensed consolidated financial statements. In February 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments, which clarifies or improves various financial instruments topics in the accounting standards codification to increase stakeholder awareness. ASU 2020-03 was effective upon issuance and did not have a material impact on the condensed consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The update provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”). This guidance includes optional expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 is effective for all entities as of March 12, 2020, through December 31, 2022, when the reference rate replacement activity is expected to be completed. The adoption of ASU 2020-04 did not have an impact on the Company's condensed consolidated financial statements. Recently Issued Accounting Standards Not Yet Effective In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in this update simplify the accounting for income taxes by removing certain exceptions within ASC 740, as well as clarify and simplify other aspects of the accounting for income taxes to promote consistency among reporting entities. ASU 2019-12 is effective for annual and interim periods beginning after December 15, 2020. The Company is currently assessing the impact the adoption of ASU 2019-12 will have on its condensed consolidated financial statements.

X
- References No definition available. + Details
Name: | us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsAbstract
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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -URI http://asc.fasb.org/topic&trid=2122149 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -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