Insiders ranked by realized 90-day signed return on their open-market trades at Aci Worldwide, Inc.. Minimum 3 scored trades. Returns are signed - a sale followed by a rally counts against the insider.
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.12pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.36pp
Lean -
Net-tone change vs last year's 10-K.
MD&A
+0.12pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+9
disruption+5
delay+4
fail+3
harm+3
Positive rising
gain+1
better+1
innovations+1
win+1
Risk Factors (Item 1A)
12,597 words
ITEM 1A. RISK FACTORS
We operate in a rapidly changing technological and economic environment that presents numerous risks. Many of these risks are beyond our control and are driven by factors that often cannot be predicted. The following discussion highlights some of these risks.
Risks Related to Our Business and Operations
The markets in which we compete are rapidly changing and highly competitive, and we may not be able to compete effectively.
The markets in which we compete are characterized by rapid change, frequent introduction of new products and services, evolving technologies and industry standards, intense competition, and increasing client expectations. We may not be successful in developing, marketing, or selling new products and services that meet these demands or achieve market acceptance. We must anticipate and respond to these changes in order to remain competitive within our relevant markets. There is no assurance that we will be able to maintain our current market share or customer base. We face intense competition in our businesses and we expect competition to remain intense in the future. We have many competitors that are significantly larger than us and have significantly greater financial, technical and marketing resources, have well-established relationships with our current or potential customers, advertise aggressively or beat us to the market with new products and services. Mergers and acquisitions by, and between, the companies we compete may lead to even larger competitors with more resources. In addition, some of our clients have chosen to develop key products in-house, and others may choose to do so in the future. As a result, we may compete our existing and potential clients’ in-house capabilities. Additionally, we expect that the markets in which we compete will continue to attract new competitors and new technologies. Increased competition in our markets could lead to price reductions, reduced profits, or of market share.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
against+3
exploits+1
inadvertently+1
vulnerabilities+1
fraudulent+1
Positive rising
strengthening+10
enhanced+2
opportunities+1
advantage+1
achieved+1
MD&A (Item 7)
8,941 words
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
ACI Worldwide delivers transformative software solutions that power intelligent payments orchestration in real time so banks, merchants, and billers can drive growth, while continuously modernizing their payment infrastructures, simply and securely. With 50 years of trusted payments expertise, we combine our global footprint with a local presence to offer enhanced payment experiences to stay ahead of constantly changing payment challenges and opportunities.
Our products are sold and supported directly and through distribution networks covering three geographic regions – the Americas, EMEA, and Asia Pacific. Each region has its own globally coordinated sales force, supplemented with local independent resellers and/or distributor networks. Our products and solutions are marketed under the ACI Worldwide brand and used globally by banks of all sizes, central banks, intermediaries, merchants, and billers, such as third-party electronic payment processors, payment associations, switch interchanges, and a wide range of transaction-generating endpoints, including ATMs, merchant POS terminals, bank branches, mobile phones, tablets, corporations, and internet commerce sites.
We derive a majority of our revenues from domestic operations and believe we have large opportunities for growth in international markets, as well as continued expansion domestically in the United States. We also continue to maintain centers of expertise in Timisoara, Romania, and Pune and Bangalore in India, as well as key operational centers such as in Cape Town, South Africa and in multiple locations in the United States.
To compete successfully, we need to maintain a successful research and development effort and adapt to technological changes and evolving industry standards, including the implementation of AI in our products. If we fail to enhance our current products and develop new products in response to changes in technology and industry standards, bring product enhancements or new product developments to market quickly enough, or accurately predict future changes in our customers’ needs and our competitors develop new technologies or products, our products could become less competitive or obsolete. In addition, the success of certain of our products and services rely, in part, on financial institutions, corporate, and other third parties to promote the use of our products and services by their customers. If we are unsuccessful in offering products or services that gain market acceptance and compete effectively, or if third parties insufficiently promote our products and services, it would likely have a material adverse effect on our ability to retain existing clients, to attract new ones, and to grow profitably.
If we experience business interruptions, cybersecurity incidents or failure of our information technology and communication systems, the availability of our products and services could be interrupted which could adversely affect our reputation, business and financial condition.
Our ability to provide reliable service in a number of our businesses depends on the efficient and uninterrupted operation of our data centers, information technology and communication systems, and those of our external service providers or business
Table of Contents
partners. We have experienced non-material incidents in the past. As we continue to grow our private and public cloud offerings, our dependency on the continuing operation and availability of these systems increases. Our systems and data centers, and those of our external service providers or business partners, could be exposed to damage or interruption from fire, natural disasters, constraints within our workforce due to pandemics such as outbreaks of COVID-19, power loss, telecommunications failure, unauthorized entry, computer viruses, cybersecurity incidents, ransom attacks, denial of service attacks, human error, software errors or design defaults, labor issues, vandalism, terrorism, and other events beyond our control. Although we have taken steps to prevent system failures and we have installed back-up systems and procedures to prevent or reduce disruption, such steps may not be sufficient to prevent an interruption of services and our business continuity and disaster recovery planning may not account for all eventualities. Further, our cybersecurity, property and business interruption insurance may not be adequate to compensate us for all losses or failures that may occur.
An operational failure, disruption, or outage in any of these systems, or damage to or destruction of these systems, which causes disruptions in our services, could result in a failure to make required regulatory filings, loss of customers, damage to customer relationships, reduced revenues and profits, refunds of customer charges and damage to our brand and reputation and may require us to incur substantial additional expense to repair or replace damaged equipment and recover data loss caused by the interruption. Any one or more of the foregoing occurrences could have a material adverse effect on our reputation, business, financial condition, cash flows and results of operations. Moreover, to the extent that any system failure or similar event results in damages to our customers or contractual counterparties, those customers and contractual counterparties could seek compensation from us for their losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address.
If our security measures are compromised or we experience a cybersecurity incident or similar attack, or if our services are subject to attacks that degrade or deny the ability of users to access our products or services, our business may be harmed by disrupting delivery of services and damaging our reputation.
As part of our business, we electronically receive, process, store, and transmit information, including personal information and sensitive business information of our customers. Cybersecurity incidents vary in their form and can include the deployment of harmful malware or ransomware, denial-of-services attacks, and other attacks, which may affect business continuity and threaten the availability, confidentiality and integrity of our systems and information. Cybersecurity incidents can also include employee or personnel failures, fraud, phishing or other social engineering attempts, AI deep fakes, zero-day sophistication, supply chain threats, AI created malware or ransomware, or other methods to cause confidential information, payments, account access or access credentials, or other data to be transmitted to an unintended recipient. Cybersecurity threat actors also may attempt to exploitvulnerabilities in both ACI and cloud provider infrastructure along with vulnerabilities in software including software commonly used by companies in cloud-based services and bundled software. Like many other companies, we detect attempts by threat actors to gain access to our systems and networks on a frequent basis, and the frequency of such attempts could increase in the future. Unauthorized access, use, or disruptions to our data, computer systems or databases or other cybersecurity incidents or similar attacks could result in the theft or publication of confidential information, including intellectual property and consumer information, or the deletion or modification of records or could otherwise cause interruptions in our operations. These concerns about security are increased when we transmit information over the Internet. Security breaches and cybersecurity incidents in connection with the delivery of our products and services, including products and services utilizing the Internet, or well-publicized security breaches, and the trend toward broad consumer and general public notification of such incidents, could significantly harm our business, financial condition, cash flows and/or results of operations. We cannot be certain that advances in criminal capabilities, discovery of new vulnerabilities, attempts to exploitvulnerabilities in our systems, data thefts, physical system or network break-ins or inappropriate access, or other developments will not compromise or breach the technology protecting our networks and confidential information. Computer viruses have also been distributed and have rapidly spread over the Internet. Computer viruses could infiltrate our systems, disrupting our delivery of services and making our applications unavailable. Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in our systems and terminate their agreements with us, and could inhibit our ability to attract new customers. A cybersecurity incident or failure or disruption relating to our information or systems or that of our third-party business partners, or any failure by us or our third-party business partners to effectively address, enforce and maintain our information technology infrastructure, systems, or security measures may result in substantial harm to our business strategy, results of operations and financial condition, including major disruptions to business operations, loss of intellectual property, release of confidential information, alteration or corruption of data or systems, costs related to remediation or the payment of ransom, and litigation including individual claims or consumer class actions, commercial litigation, administrative, and civil or criminalinvestigations or actions, regulatory intervention and sanctions or fines, investigation and remediation costs and possible prolongednegative publicity. The shift to a remote/hybrid work model has expanded our attack surface, increasing the complexity of securing our information systems and data.
Table of Contents
Although we maintain a cyber insurance policy, there is no guarantee that such coverage will be sufficient to address costs, liabilities and damages we may incur in connection with a cybersecurity incident or that such coverage will continue to be available on commercially reasonable terms or at all.
We rely on third-party cloud infrastructure and related services to deliver and operate our platform and deliver our solutions, and any disruption, limitation, or change in these cloud services could adversely affect our business, results of operations and financial condition.
Our platform and solutions depend on third-party cloud service providers for computing, storage, networking, and data management infrastructure. We currently use Microsoft Azure and Amazon Web Services and may also utilize other cloud providers for hosting, content delivery, analytics, and AI services. These cloud environments are critical to operating our platform and delivering our solutions. If any of these third-party providers experience interruptions, capacity constraints, cybersecurity incidents, or performance degradation, or if we or our clients encounter technical issues in connecting to their platforms, our platform and solutions could become slow, unreliable, or unavailable. Even temporary outages could harm our reputation, trigger service-level penalties under client contracts, and cause clients to delay renewals or choose our competitors. Because many of the services we use are proprietary to our cloud providers, we may have limited ability to quickly migrate workloads to alternative vendors without incurring substantial costs or service disruption. Our dependence on a small number of cloud vendors also exposes us to risks of pricing increases, changes in service terms, data egress or storage costs, and regional availability limitations. Additionally, cloud service failures can originate not only from the primary vendor but from underlying networks, software updates, or third-party subprocessors integrated into those environments. If our providers fail to maintain adequate security, availability, or compliance certifications, or if regulatory changes restrict cross-border data transfers or cloud usage for certain types of data, we may need to re-architect or relocate infrastructure, resulting in additional expense and operational complexity. Any material disruption, data loss, increase in cost, or limitation in the performance, features, or availability of third-party cloud services could adversely affect our business, results of operations, and reputation.
Our reliance on third parties could adversely affect our operations, compliance, security and reputation.
We rely on third parties to operate our business, including with respect to software development and integration, intermediaries and agents that support international sales, external information technology and cloud service providers, and outsourced customer support providers. These relationships introduce performance, financial, compliance, information security, continuity, and concentration risks that are often outside our control. Our oversight, audit rights, and contractual remedies may be limited, and service level commitments or indemnities may not fully compensate for losses. Failures by our third party partners to perform as expected, maintain adequate internal controls, protect data, meet quality or timeliness standards, or comply with applicable laws and regulations could result in interruptions to critical operations, delays in product delivery, security and privacy incidents, investigations, fines or penalties, adverse contract outcomes, and reputational harm. Replacing or migrating away from a third party can be costly, complex, and time-consuming, and viable alternatives may not be available on acceptable terms or timelines.
Some third parties may also use or integrate AI tools in their development, support, or operational processes. Such use can heighten risks of data leakage or misuse of confidential information, introduce biased or inaccurate outputs, or inadvertently incorporate third-party intellectual property. Limited visibility into a partner’s AI governance, training data, and control frameworks may increase our exposure to compliance, IP, privacy, and reputational risks.
If any key third party were to fail to perform, cease operations, suffer a material disruption, or otherwise not provide services on acceptable terms, we could experience business interruptions, degraded platform or solution performance, increased costs to replace or duplicate services, customer dissatisfaction and churn, and litigation, any of which could materially and adversely affect our business, results of operations and financial condition.
If we engage in acquisitions, strategic partnerships or significant investments in new business, we will be exposed to risks which could materially adversely affect our business.
As part of our business strategy, we anticipate that we may acquire new products and services or enhance existing products and services through acquisitions of other companies, product lines, technologies and personnel, or through investments in, or strategic partnerships with, other companies. Any acquisition, investment or partnership, is subject to a number of risks. Such risks include the diversion of management time and resources, disruption of our ongoing business, potential overpayment for the acquired company or assets, dilution to existing stockholders if our common stock is issued in consideration for an acquisition or investment, incurring or assuming indebtedness or other liabilities in connection with an acquisition which may increase our interest expense and leverage significantly, lack of familiarity with new markets, and difficulties in supporting new product lines.
Table of Contents
Further, even if we successfully complete acquisitions, we may encounter issues not discovered during our due diligence process, including product or service quality issues, intellectual property issues and legal contingencies, the internal control environment of the acquired entity may not be consistent with our standards and may require significant time and resources to improve and we may impair relationships with employees and customers as a result of migrating a business or product line to a new owner. We may also face challenges in integrating any acquired business. These challenges may include eliminating redundant operations, facilities and systems, coordinating management and personnel, retaining key employees, customers and business partners, managing different corporate cultures, and achieving cost reductions and cross-selling opportunities. There can be no assurance that we will be able to fully integrate all aspects of acquired businesses successfully, realize synergies expected to result from the acquisition, advance our business strategy or fully realize the potential benefits of bringing the businesses together, and the process of integrating these acquisitions may further disrupt our business and divert our resources.
Our failure to successfully manage acquisitions or investments, or successfully integrate acquisitions could have a material adverse effect on our business, financial condition, cash flows and/or results of operations. Correspondingly, our expectations related to the benefits related to our recent acquisitions, prior acquisitions or any other future acquisition or investment could be inaccurate.
Failure to successfully complete divestitures or other restructuring activities could negatively affect our operations.
From time to time, we may divest of all or a portion of certain businesses. Divestitures involve risk, including, potential increased expense associated with the divestitures, and potential issues with the acquirers, customers or suppliers of the divested business, or products. Occasionally, we may wind down certain business activities and perform other organizational restructuring projects in an effort to reduce costs and streamline operations. Divestiture activities involve risks as they may divert management's attention from our core businesses, increase expenses on a short‑term basis and lead to potential issues with employees or customers. If we do not complete these activities in a timely manner, or do not realize anticipated cost savings, synergies and efficiencies, business disruption occurs during or following such activities, or we incur unanticipated charges, this may negatively impact our business, financial condition, operating results, and cash flows.
Additionally, we may experience difficulty separating out portions of, or entire, businesses, incur loss of revenue or experience negative impact on margins, or we may not achieve the desired strategic and financial benefits. Such potential transactions may also delayachievement of our strategic objectives, cause us to incur additional expenses, disrupt customer or employee relationships, and expose us to unanticipated or ongoing obligations and liabilities, including as a result of our indemnification obligations. Further, during the pendency of a divestiture, we may be subject to risks such as a decline in the business to be divested, loss of employees, customers, or suppliers and the risk that the transaction may not close, any of which would have a material adverse effect on the business to be divested and our retained business. If a divestiture is not completed for any reason, we may not be able to find another buyer on the same terms, and we may have incurred significant costs without any corresponding benefit.
We may experience difficulties implementing our strategy, and the strategy could prove unsuccessful in growing our business.
Our strategy focuses on investments in real-time payments, large sophisticated global banks and merchants, and fast-growing emerging markets. Successfully implementing our strategy may present organizational and infrastructure challenges, and we may not be able to fully implement or realize the intended benefits of our strategy. Moving to a new business strategy may result in a loss of established efficiency, which may have a negative impact on our business. As we adjust, we also may need to bring on additional talent, which could prove difficult in a competitive job market, especially as remote working continues. The increased focus on opportunities for strategic mergers and acquisitions and research and development could result in financial difficulties and may not always be fruitful. We may also face an increased amount of competition as we attempt to expand and grow our business, which may negatively impact our financial results. In order for us to be successful as we enter and invest in emerging markets, these markets must continue to grow. However, this growth depends on a variety of factors that we are not always able to predict.
Failure to attract and retain senior management personnel and skilled technical employees could harm our ability to grow.
Our senior management team has significant experience in the financial services industry. The loss of this leadership could have an adverse effect on our business, operating results and financial condition. Further, the loss of this leadership may have an adverse impact on senior management’s ability to provide effective oversight and strategic direction for all key functions within our company, which could impact our future business, operating results and financial condition.
Table of Contents
Our future success also depends upon our ability to attract and retain highly-skilled technical personnel. We may need to invest significant amounts of cash and equity to attract and retain new employees, and we may never realize returns on these investments. Because the development of our solutions and services requires knowledge of computer hardware, operating system software, system management software, and application software, our technical personnel must be proficient in a number of disciplines. Competition for such technical personnel is intense, and our failure to hire and retain talented personnel could have a material adverse effect on our business, operating results, and financial condition.
Our future growth will also require sales and marketing, financial and administrative personnel to develop and support new solutions and services, to enhance and support current solutions and services and to expand operational and financial systems. There can be no assurance that we will be able to attract and retain the necessary personnel to accomplish our growth strategies and we may experience constraints that could adversely affect our ability to satisfy client demand in a timely fashion.
Our ability to maintain compliance with applicable laws, rules and regulations and to manage and monitor the risks facing our business relies upon the ability to maintain skilled compliance, security, risk and audit professionals. Competition for such skillsets is intense, and our failure to hire and retain talented personnel could have an adverse effect on our internal control environment and impact our operating results.
Certain anti-takeover provisions contained in our charter and under Delaware law could hinder a takeover attempt.
We are subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware prohibiting, under some circumstances, publicly held Delaware corporations from engaging in business combinations with some stockholders for a specified period of time without the approval of the holders of substantially all of our outstanding voting stock. Such provisions could delay or impede the removal of incumbent directors and could make more difficult a merger, tender offer, or proxy contest involving us, even if such events could be beneficial, in the short term, to the interests of our stockholders. In addition, such provisions could limit the price that some investors might be willing to pay in the future for shares of our common stock. Our certificate of incorporation and bylaws contain provisions relating to the limitation of liability and indemnification of our directors and officers and providing that our stockholders can take action only at a duly called annual or special meeting of stockholders.
Risks Related to Our Customers
Certain payment funding methods expose us to the credit and/or operating risk of our customers.
When we process an automated clearing house or ATM network payment transaction for certain customers, we occasionally transfer funds from our settlement account to the intended destination account before we receive funds from a client’s source account. The vast majority of these occurrences are resolved quickly through normal processes. However, if they are not resolved and we are then unable to reverse the transaction that sent funds to the intended destination, a shortfall in our settlement account will be created. Although we have legal recourse against our clients for the amount of the shortfall, timing of recovery may be delayed by litigation or the amount of any recovery may be less than the shortfall. In either case, we would have to fund the shortfall in our settlement account from our corporate funds.
Our business could be materially detrimentally impacted by loss caused by theft or fraud.
When our payments services are used to process illegitimate transactions, and we settle those funds to customers and are unable to recover them, we sufferlosses and liability. Illegitimate transactions can also expose us to governmental and regulatory enforcement actions and potentially prevent us from satisfying our contractual obligations to our third-party partners, which may cause us to be in breach of our obligations. Our risk management policies, procedures, techniques, and processes may not be sufficient to identify all of the risks to which we are exposed, to enable us to prevent or mitigate the risks we have identified, or to identify additional risks to which we may become subject in the future. Our current business, the changing and uncertain economic, geopolitical and regulatory environment, and our anticipated growth will continue to place significant demands on our risk management and compliance efforts. As our ecosystems grow and our business becomes more complex, we will need to continue developing, improving, and making investments into our risk management infrastructure, techniques, and processes.
Table of Contents
Potential customers may be reluctant to switch to a new vendor, which may adversely affect our growth.
For banks, intermediaries, and other potential customers of our products, switching from one vendor of core financial services software (or from an internally developed legacy system) to a new vendor is a significant endeavor. Many potential customers believe switching vendors involves too many potential disadvantages such as disruption of business operations, loss of accustomed functionality, and increased costs (including conversion and transition costs). As a result, potential customers may resist change. We seek to overcome this resistance through value enhancing strategies such as a defined conversion/migration process, continued investment in the enhanced functionality of our software and system integration expertise. These actions require the expenditure of time and resources, and there can be no assurance that they will result in a potential customer switching to use our products and services. There can be no assurance that our strategies for overcoming potential customers’ reluctance to change vendors will be successful, and this resistance may adversely affect our growth.
Risks Related to Our Intellectual Property
We may be unable to protect our intellectual property and technology.
To protect our proprietary rights in our intellectual property, we rely on a combination of contractual provisions, including customer licenses that restrict use of our products, confidentiality agreements and procedures, and trade secret and copyright laws. Despite such efforts, we may not be able to adequately protect our proprietary rights, or our competitors may independently develop similar technology, duplicate products, or design around any rights we believe to be proprietary. This may be particularly true in countries other than the United States because some foreign laws do not protect proprietary rights to the same extent as certain laws of the United States. Any failure or inability to protect our proprietary rights could materially adversely affect our business. Additionally, various events outside of our control may pose a threat to our intellectual property rights, as well as to our products and services. Effective protection of intellectual property rights is expensive and difficult to maintain, both in terms of application and maintenance costs, as well as the costs of defending and enforcing those rights. The efforts we have taken to protect our intellectual property rights may not be sufficient or effective. Our intellectual property rights may be infringed, misappropriated, or challenged, which could result in them being narrowed in scope or declared invalid or unenforceable.
We also use a limited amount of software licensed by its authors or other third parties under so-called “open source” licenses and may continue to use such software in the future. Some of these licenses contain requirements that we make available source code for modifications or derivative works we create based upon the open source software, and that we license such modifications or derivative works under the terms of a particular open source license or other license granting third parties certain rights of further use. By the terms of certain open source licenses, we could be required to release the source code of our proprietary software if we combine our proprietary software with open source software in a certain manner. Additionally, the terms of many open source licenses have not been interpreted by United States or other courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our solutions. In addition to risks related to license requirements, usage of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on origin of the software.
Our exposure to risks associated with the use of intellectual property may be increased for third-party products distributed by us or as a result of acquisitions since we have a lower level of visibility, if any, into the development process with respect to such third-party products and acquired technology or the care taken to safeguard againstinfringement risks.
We may be subject to increasing litigation over our intellectual property rights.
There has been a substantial amount of litigation in the software industry regarding intellectual property rights. Third parties have in the past, and may in the future, assert claims or initiate litigation related to exclusive patent, copyright, trademark or other intellectual property rights to business processes, technologies and related standards that are relevant to us and our customers. These assertions have increased over time as a result of the general increase in patent claimsassertions, particularly in the United States. Because of the existence of a large number of patents in the electronic commerce field, the secrecy of some pending patents and the rapid issuance of new patents, it is not economical or even possible to determine in advance whether a product or any of its components infringes or will infringe on the patent rights of others. Any claim against us, with or without merit, could be time-consuming, divert management's attention, result in costlylitigation, cause product delivery delays, require us to enter into royalty or licensing agreements or pay amounts in settlement, or require us to develop alternative non-infringing technology.
Table of Contents
We anticipate that software product developers and providers of electronic commerce solutions could increasingly be subject to infringementclaims, and third parties may claim that our present and future products infringe upon their intellectual property rights. Third parties may also claim, and we are aware that at least two parties have claimed on several occasions, that our customers’ use of a business process method which utilizes our products in conjunction with other products infringe on the third-party’s intellectual property rights. These third-party claims could lead to indemnification claimsagainst us by our customers. Claimsagainst our customers related to our products, whether or not meritorious, could harm our reputation and reduce demand for our products. Where indemnification claims are made by customers, resistance even to unmeritoriousclaims could damage the customer relationship. A successful claim by a third-party of intellectual property infringement by us or one of our customers could compel us to enter into costly royalty or license agreements, pay significant damages, or stop selling certain products and incur additional costs to develop alternative non-infringing technology. Royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could adversely affect our business.
In addition, companies that incorporate open source software into their solutions have, from time to time, faced claimschallenging the ownership of solutions developed using open source software. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software.
We are engaged in offshore software development activities, which may not be successful and which may put our intellectual property at risk.
As part of our globalization strategy and to optimize available research and development resources, we utilize our Irish subsidiary to serve as the focal point for certain international product development and commercialization efforts. This subsidiary oversees remote software development operations in Romania and elsewhere, as well as manages certain of our intellectual property rights. In addition, we manage certain offshore development activities in India. While our experience to date with our offshore development centers has been positive, there is no assurance that this will continue. Specifically, there are a number of risks associated with this activity, including but not limited to the following:
• communications and information flow may be less efficient and accurate as a consequence of the time, distance and language differences between our primary development organization and the foreign based activities, resulting in delays in development or errors in the software developed;
• in addition to the risk of misappropriation of intellectual property from departing personnel, there is a general risk of the potential for misappropriation of our intellectual property that might not be readily discoverable;
• the quality of the development efforts undertaken offshore may not meet our requirements because of language, cultural and experiential differences, resulting in potential product errors and/or delays;
• compliance with laws of the foreign countries where the operations are conducted could be complex or costly;
• potential disruption from the involvement of the United States in political and military conflicts around the world; and
• currency exchange rates could fluctuate and adversely impact the cost advantages intended from maintaining these facilities.
Risks Related to Our International Operations
There are a number of risks associated with our international operations that could have a material impact on our operations and financial condition.
We derive a significant portion of our revenues from international operations and anticipate continuing to do so. As a result, we are subject to risks of conducting international operations. One of the principal risks associated with international operations is potentially adverse movements of foreign currency exchange rates. Revenues and profit generated by international operations will increase or decrease compared to prior periods as a result of changes in foreign currency exchange rates. Our exposures resulting from fluctuations in foreign currency exchange rates may change over time as our business evolves and could have an adverse impact on our financial condition, cash flows and/or results of operations. We have not entered into any derivative instruments or hedging contracts to reduce exposure to adverse foreign currency changes.
Other potential risks include difficulties associated with staffing and management in an environment of diverse cultures, laws, and customs, challenges caused by distance, language, and cultural differences, and the increased travel, infrastructure, and legal and compliance costs associated with global operations, failure to anticipate competitive conditions and competition with service providers or other market-players that have greater experience in the foreign markets than we do, failure to conform with applicable business customs, including translation into foreign languages, cultural context, and associated expenses, changes to the way we do business as compared with our current operations, inability to support and integrate with local third-party service providers, difficulties in maintaining our company culture, difficulty in gaining acceptance and maintaining
Table of Contents
compliance with industry self-regulatory bodies, compliance with U.S. and foreign anti-corruption, anti-bribery, and anti-money laundering laws, increased exposure to public health issues such as pandemics, and related industry and governmental actions to address these issues, competing with more established companies in international markets, reliance on independent distributors, longer payment cycles, potentially unfavorable changes to foreign tax rules, unfavorable trade treaties or tariffs, compliance with foreign regulatory requirements, effects of a variety of foreign laws and regulations, including restrictions on access to personal information, reduced protection of intellectual property rights, variability of foreign economic conditions, governmental currency controls, difficulties in enforcing our contracts in foreign jurisdictions, trade wars, and general economic and political conditions in the countries where we sell our products and services. Some of our products may contain encrypted technology, the export of which is regulated by the United States government. Changes in U.S. and other applicable export laws and regulations restricting the export of software or encryption technology could result in delays or reductions in our shipments of products internationally. There can be no assurance that we will be able to successfully address these challenges.
Political, military, and other international developments can undermine bilateral cooperation in key policy areas, significantly disrupt trade, and otherwise adversely affect economic conditions.
Macroeconomic and geopolitical conditions could adversely affect our business, results of operations and financial condition.
Adverse or uncertain macroeconomic conditions, including inflation, interest rate volatility, recessionary pressures, reduced consumer spending, banking stress, and foreign currency fluctuations, may lead customers to delay or reduce spending, extend sales and implementation cycles, pressure pricing and renewals, impair collections, increase our operating costs, and limit access to capital. Our global operations also expose us to differing local conditions and exchange‑rate movements that can affect reported results.
Current and potential conflicts continue to challenge global companies, including us. We currently have one employee in Russia, a dormant customer in Russia, and customers located in the Middle East. The U.S. and other global governments have placed restrictions on how companies may transact with, and provide services or solutions to certain countries, including Russia.
Geopolitical instability and related government actions (such as sanctions and export controls), can disrupt financial markets and payment networks, depress transaction volumes, restrict cross‑border activity, and increase operational risks. We may be required to suspend or modify services, incur additional compliance and resiliency costs, or experience outages or vendor disruptions. Any of these developments could materially adversely affect our business, results of operations and financial condition.
Risks Related to Our Products and Services
If customers do not adopt our new payment solution, ACI Connetic, as anticipated, our business, results of operations and financial condition could be adversely affected.
We have invested significant resources to design, develop, launch and commercialize ACI Connetic, which is our comprehensive cloud-native payments hub solution. Customer adoption of ACI Connetic depends on our ability to provide compelling functionality and predictable implementation and migration paths from our existing products and solutions. Introducing a new platform presents numerous operational, technical, financial and commercial risks. Unanticipateddefects, outages, latency, or other performance shortfalls could harm our reputation for reliability, trigger service credits or other remedies under customer agreements, increase our support and remediation costs, delay sales cycles, and reduce renewals or expansions. Customers may delay or decline adoption if they perceive operational risk, insufficient incremental value, heightened or unnecessary switching costs, or a disruption to their existing user experience. Even where customers elect to adopt ACI Connetic, implementation at a customer may prove to be more difficult, costly or time consuming than originally anticipated. In addition, our competitors may offer their own solutions with features that our customers prefer. Larger or better-capitalized competitors may replicate or outpace our innovations in ACI Connetic, bundle offerings, leverage broader ecosystems, or use pricing and contract terms that make it more difficult for us to retain our current customers or win new business. If a material number of our customers choose not to adopt ACI Connetic or if we are unable to attract sufficient new customers to fuel our growth, our revenue could be adversely affected.
The introduction of ACI Connetic also creates risks of cannibalization and pricing pressure if our current customers migrate from higher‑priced legacy arrangements to ACI Connetic with different pricing or consumption models. Any shift toward usage‑based or cloud‑delivered services could introduce revenue variability, require new go‑to‑market motions, or necessitate changes to partner programs and channel economics. Additionally, to the extent ACI Connetic incorporates third‑party
Table of Contents
technologies, cloud infrastructure, data residency options, artificial intelligence or machine learning features, or new compliance tooling, we may be exposed to supplier performance, intellectual property, regulatory, model governance, explainability, and data privacy risks, as well as evolving security standards and threat vectors. Meeting financial services regulatory expectations across multiple jurisdictions is complex and may require incremental investment, controls, certifications, and audits, and any failure or delay could impede adoption or result in penalties or contractual remedies.
If we fail to execute on our ACI Connetic roadmap or if we do not gain a threshold level of market acceptance, we may experience slower than expected growth, lower retention rates, reduced revenue and margins and reputational harm. The timing and magnitude of these effects are subject to uncertainty given the rapid pace of technological change and competition in the payments industry. Even if market adoption of ACI Connetic occurs, it may take longer or cost more than we anticipate and may not generate the revenues we expect, which could materially adversely affect our business, results of operations and financial condition.
Global economic conditions could reduce the demand for our products and services or otherwise adversely impact our cash flows, operating results and financial condition.
For the foreseeable future, we expect to derive most of our revenue from products and services we provide to the banking and financial services industries. Given this focus, we are exposed to global economic conditions, and adverse economic trends that may accelerate the timing, or increase the impact of, risks to our financial performance.
The global electronic payments industry and the banking and financial services industries depend heavily upon the overall levels of consumer, business and government spending. Adverse economic conditions such as those caused by a global economic downturn, the Russia-Ukraine conflict, and the potential for disruptions in these industries as well as the general software sector could result in a decrease in consumers’ use of banking services and financial service providers resulting in significant decreases in the demand for our products and services which could adversely affect our business and operating results. A lessening demand in either the overall economy, the banking and financial services industry or the software sector could also result in the implementation by banks and related financial service providers of cost reduction measures or reduced capital spending resulting in longer sales cycles, deferral or delay of purchase commitments for our products and increased price competition which could lead to a material decrease in our future revenues and earnings.
Our business may be negatively affected by domestic and global economic and credit conditions.
Our business is sensitive to the strength of domestic and global economic and credit conditions, particularly as they affect, either directly or indirectly, the banking and financial services industries. Economic and credit conditions are influenced by a number of factors, including political conditions, consumer confidence, unemployment levels, interest rates, tax rates, commodity prices, and government actions to stimulate economic growth. The imposition or threat of protectionist trade policies or import or export tariffs, global and regional market conditions and spending trends in the financial, retail and hospitality industries, new tax legislation across multiple jurisdictions, modified or new global or regional trade agreements, uncertainty over further potential changes in Eurozone participation and fluctuations in oil and commodity prices, among other things, have created a challenging and unpredictable environment in which to market our products and services across our different geographies and industries. A challenging economic environment could cause existing and potential customers to not purchase or to delay purchasing our products and services. Continued inflationary pressures could negatively impact our customers' ability to purchase our products and services, thereby negatively impacting our revenue and results of operations. A negative or unpredictable economic climate could create uncertainty or financial pressures that impact the ability or willingness of our customers to make capital expenditures, thereby affecting their decision to purchase or roll out our products or services or to pay accounts receivable owed to us. Additionally, if customers respond to a negative or unpredictable economic climate by consolidation, it could reduce our base of potential customers.
If our products and services fail to comply with legislation, government regulations, and industry standards to which our customers are subject, it could result in a loss of customers and decreased revenue.
Legislation, governmental regulation, and industry standards affect how our business is conducted, and in some cases, could subject us to the possibility of future lawsuits arising from our products and services. Globally, legislation, governmental regulation and industry standards may directly or indirectly impact our current and prospective customers’ activities, as well as their expectations and needs in relation to our products and services. For example, our products are affected by VISA, Mastercard and other major payment brand electronic payment standards that are generally updated twice annually. Beyond this, our products are affected by PCI Security Standards. As a provider of electronic data processing to financial institutions, we must comply with FFIEC regulations and are subject to FFIEC examinations.
Table of Contents
Legislation and regulation related to credit availability, data usage, privacy, or other related regulatory developments could have an adverse effect on our customers or us. A heightened regulatory environment in the financial services industry may have an adverse impact on our clients and our business. Laws and regulations concerning the handling of personal information are expanding and becoming more complex. Our failure, or perceived failure, to comply with these and other laws and regulations could adversely affect our business and harm our reputation.
Additionally, since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a number of substantial regulations affecting the supervision and operation of the financial services industry within the U.S. have been adopted, including those that establish the Consumer Financial Protection Bureau (“CFPB”). The CFPB has issued regulations and guidance under U.S. consumer financial protection laws that apply to, and conducts direct examinations of, “supervised banks and nonbanks” as well as “supervised service providers.” CFPB rules, examinations and enforcement actions may require us to adjust our activities and may increase our compliance costs. Changes to applicable financial services laws or regulations could adversely impact our business.
Furthermore, due to our increased use of the internet for sales and marketing, laws specifically governing digital commerce, the internet, mobile applications, search engine optimization, behavioral advertising, privacy and email marketing may have an impact on our business. Existing and future laws governing issues such as digital and social marketing, privacy, consumer protection or commercial email may limit our ability to market and provide our products and services.
Our software products may contain undetectederrors or other defects, which could damage our reputation with customers, decrease profitability, and expose us to liability.
Our software products are complex. Software may contain bugs or defects that could unexpectedlyinterfere with the operation of the software products when first introduced or as new versions are released. Additionally, errors could occur during our provision of services, including processing services such as our bill payment services and other services delivered through public or private cloud. Software defects or service errors may result in the loss of, or delay in, market acceptance of our products and services and a corresponding loss of sales or revenues.
Customers depend upon our products and services for mission-critical applications, and product defects or service errors may hurt our reputation with customers. In addition, software product defects or errors could subject us to liability for damages, performance and warranty claims, government inquiries or investigations, claims and litigation, and fines or penalties from governmental authorities, which could be material. We may incur additional costs or expenses to remediate the issues.
The artificial intelligence technology incorporated into our products include new and evolving technologies that may present both legal and business risks.
We have incorporated AI into our products. AI technologies are complex and rapidly evolving, and we face significant competition from other companies as well as an evolving legal and regulatory landscape. The incorporation of AI into our products may subject us to new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns, or other complications that could harm our business, reputation, financial condition or results of operations. Intellectual property ownership and license rights, including copyright, surrounding AI technologies has not been fully addressed by federal or state laws or by U.S. courts, and the manner in which we configure and use these technologies may expose us to claims of copyright infringement or other intellectual property misappropriation. New laws have been adopted in the EU, and it is possible that new laws and regulations will be adopted in the United States and in other countries, or that existing laws and regulations will be interpreted in ways that would affect the operation of our solution and the way in which we use AI. Further, the cost to comply with such laws or regulations could be significant and would increase our operating expenses, which could harm our business, reputation, financial condition and results of operations.
Uncertainty around and rapid evolution of AI technologies may require additional investment, including research and development of new approaches and processes, which could be costly and increase our expenses. AI can generate written content which contains bias, factual errors, misrepresentations, offensive language, or inappropriate statements. While we seek to use AI in a way that is designed to minimize these risks, there are still risks of such events occurring. Our failure to address these risks could harm our business, reputation, financial condition and results of operations. In addition, the use of AI involves significant technical complexity and requires specialized expertise, and competition for specialized personnel in the AI industry is intense. Any disruption or failure in our AI systems or infrastructure could result in delays or errors in our operations, which could harm our business, reputation, financial condition and results of operations.
Table of Contents
The use of AI by our workforce may present risks to our business.
Our workforce is exposed to and uses AI technologies for certain tasks related to our business. We have guidelines specifically directed at the use of AI tools in the workplace. Nevertheless, our workforce may use these authorized or unauthorized tools, which poses potential risks relating to the protection of data, including cybersecurity risk, exposure of our proprietary confidential information to unauthorized recipients and the misuse of our or third-party intellectual property. Use of AI technology by our workforce even when used consistent with our guidelines, may result in allegations or claimsagainst us related to violation of third-party intellectual property rights, unauthorized access to or use of proprietary information and failure to comply with open source software requirements. AI technology may also produce inaccurate responses that could lead to errors in our decision-making, solution development or other business activities, which could have a negative impact on our business, operating results and financial condition. Our ability to mitigate these risks will depend on our continued effective training, monitoring and enforcement of appropriate policies, guidelines and procedures governing the use of AI technology, and compliance by our workforce.
Risks Related to Legal, Regulatory, and Tax Matters
If we fail to comply with the complex regulations applicable to our payments business, we could be subject to liability or our revenues may be reduced.
ACI Payments, Inc. is licensed as a money transmitter in those states where such licensure is required. These licenses require us to demonstrate and maintain certain levels of net worth and liquidity, require us to file periodic reports and subject us to inspections by state regulatory agencies. In addition, our payment business is generally subject to federal regulation in the United States, including anti-money laundering regulations and certain restrictions on transactions to or from certain individuals or entities. The complexity of these regulations will continue to increase our cost of doing business. Any violations of these laws may also result in civil or criminalpenaltiesagainst us and our officers or the prohibition against us providing money transmitter services in particular jurisdictions. We could also be forced to change our business practices or be required to obtain additional licenses or regulatory approvals that could cause us to incur substantial costs.
In addition, our customers must ensure that our services comply with the government regulations, including the EU GDPR, DORA, and industry standards that apply to their businesses. Federal, state, foreign or industry authorities could adopt laws, rules, or regulations affecting our customers’ businesses that could lead to increased operating costs that may lead to reduced market acceptance. In addition, action by regulatory authorities relating to credit availability, data usage, privacy, or other related regulatory developments could have an adverse effect on our customers and, therefore, could have a material adverse effect on our business, financial condition, and results of operations.
Our business could be harmed if we fail to comply with privacy and cybersecurity laws and regulations imposed on providers of services to financial institutions.
As a provider of services to financial institutions, we may be bound by the same limitations on disclosure of the information we receive from our customers as apply to the financial institutions themselves. The processing of personal data and other types of information subjects us to a number of domestic and international laws that govern and regulate the processing of personal information and other types of protected data. These laws regulate and address a range of issues including data privacy (e.g., restrictions or technological or process requirements regarding the processing of data), cybersecurity (e.g., requirements for the protection of personal information against compromise of the confidentiality, integrity, or availability of personal information), breach notification, and data governance. These laws can vary substantially from jurisdiction to jurisdiction, and are rapidly evolving. We are subject to laws and regulations relating to the collection, use, retention, privacy, protection, security, and transfer of information, including personal information of our employees and customers. These laws and regulations may change or be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible they will be interpreted and applied in ways that will materially and adversely affect our business. These laws and other developments relating to cross-border data transfer could result in increased costs of compliance and limitations on our customers and us. If we fail to comply with applicable laws and regulations, including the EU GDPR, DORA, CCPA, and other laws, we could be exposed to regulatory investigations and actions, lawsuits for breach of contract or to governmental or consumer claims, our customer relationships and reputation could be harmed, and we could be inhibited in our ability to obtain new customers. Compliance with these and new laws could involve substantial expenses and divert resources from other initiatives and projects. More restrictive privacy, data protection and cybersecurity laws adopted in the future could have an adverse impact on our business.
U.S. and other banking agencies have adopted or proposed enhanced cyber risk management standards that would apply to us and our financial institution clients and that would address cyber risk governance and management, management of internal and external dependencies, and incident response, cyber resilience, and situational awareness. Several states in the U.S. have adopted or proposed new privacy and cybersecurity laws targeting these issues. Legislation and regulations on cybersecurity,
Table of Contents
data privacy, data protection and data localization may compel us to need to modify our systems, invest in new systems or alter our business practices or our policies on data governance and privacy. These actions could significantly increase our operational costs.
Our risk management and information security programs are subject to oversight and periodic reviews by governmental agencies that regulate our business. In the event an examination of our information security and risk management functions results in adverse findings, such findings could be made public or communicated to our regulated financial institution customers, which could have a material adverse effect on us.
If we fail to comply with the applicable requirements of the payment card networks and Nacha, they could seek to fine us, suspend us or terminate our registrations, which could adversely affect our business.
In order to provide our transaction processing services, one or more of our subsidiaries are registered with Visa and Mastercard and other networks as a payment facilitator and/or a third-party sender. As such, we are subject to card association and network rules that could subject us or our clients to a variety of fines or penalties that may be levied by the card associations or networks for certain acts or omissions by us, processing clients or merchants. In addition, we are subject to Nacha rules relating to payment transactions processed by us using the ACH network and to various federal and state laws regarding such operations, including laws pertaining to electronic fund transfer, money transfer, as well as the Payment Card Industry Data Security Standard enforced by the major card brands. The rules of Nacha and the card networks are set by their respective boards, and the card network rules may be influenced by card issuers, some of which offer competing transaction processing services.
If we fail to comply with these rules, we could be fined and our registrations or certifications could be suspended or terminated. The suspension or termination of our registrations or certifications, or any changes to the association and network rules, that we do not successfully address, or any other action by the card networks to restrict our ability to process transactions over such networks, could limit our ability to provide transaction processing services to clients and result in a reduction of revenue or increased costs of operation, which, in either case, could have a material adverse effect on our business and results of operations.
We are subject to consent orders and other compliance agreements (the “Consent Orders and Compliance Agreements”) entered into in connection with the settlement of state and federal regulators’ investigations. Failure to comply with the Consent Orders and Compliance Agreements could result in further, and more significant, enforcement actions against us.
We are required to conduct our operations in compliance with the Consent Orders and Compliance Agreements. While we have complied with the Consent Orders and Compliance Agreements, and have implemented processes by which we believe we will maintain compliance with the Consent Orders and Compliance Agreements going forward, we cannot be certain that we will maintain compliance with the Consent Orders and Compliance Agreements in all instances. In the event that we are deemed to be non-compliant with the terms of the Consent Orders and/or Compliance Agreements, the state and/or federal regulators have the authority to subject us to additional, and potentially more significant, corrective actions and could seek to initiate further enforcement actions against us, including seeking civil money penalties. Any failure by us to comply with the terms of the Consent Orders and Compliance Agreements or additional actions could adversely affect our business, financial condition and results of operations. In addition, our competitors may not be subject to similar actions, which could limit our ability to compete effectively.
We may face exposure to unknown tax liabilities, which could adversely affect our financial condition, cash flows and/or results of operations.
We are subject to income and non-income based taxes in the United States and in various foreign jurisdictions. Significant judgment is required in determining our worldwide income tax liabilities and other tax liabilities. We believe that our tax-saving strategies comply with applicable tax law. If the governing tax authorities have a different interpretation of the applicable law and successfullychallenge any of our tax positions, our financial condition, cash flows and/or results of operations could be adversely affected.
Our U.S. companies are the subject of an examination by several state tax departments. Some of our foreign subsidiaries are currently the subject of a tax examination by the local taxing authorities. Other foreign subsidiaries could face challenges from various foreign tax authorities. It is not certain that the local authorities will accept our tax positions. We believe our tax positions comply with applicable tax law and intend to vigorously defend our positions. However, differing positions on certain issues could be upheld by foreign tax authorities, which could adversely affect our financial condition and/or results of operations.
Table of Contents
Changes in tax laws and regulations could adversely affect our results of operations and cash flows from operations.
Our operations are subject to tax by federal, state, local, and international taxing jurisdictions. Changes in tax laws or their interpretations in our significant tax jurisdictions could materially increase the amount of taxes we owe, thereby negatively impacting our results of operations as well as our cash flows from operations. Additionally, future tax laws, regulations or guidance from the Internal Revenue Service, the Securities and Exchange Commission, or the Financial Accounting Standards Board could cause us to adjust current estimates in future periods, which could impact our earnings and have an adverse effect on our results of operations and cash flow. Additionally, our tax returns and positions are subject to review and audit by federal, state, local and international taxing authorities. An unfavorable outcome to a tax audit could result in higher tax expense, thereby negatively impacting our results of operations as well as our cash flows from operations.
The U.S. Congress, the Organization for Economic Co-operation and Development (the “OECD”) and other government agencies in jurisdictions in which we do business remain focused on the taxation of multinational corporations. Under the OECD Inclusive Framework, over 140 countries have agreed to implement a two-pillar solution to address the challenges posed by the digitalization of the economy. The Pillar Two Framework (“Pillar Two”) introduces a 15% global minimum effective tax rate for certain multinational groups. Based on legislation enacted to date and currently available guidance, we have not recorded a material tax liability related to Pillar Two. However, these global minimum tax rules are new and technically complex, and governments continue to issue updates on how they should be interpreted and applied. Differences in how jurisdictions implement the rules, as well as future guidance from the OECD or taxing authorities, could change our tax obligations in future periods. We continue to evaluate the impact of these legislative changes as additional guidance becomes available. While Pillar Two did not significantly impact us in 2025, uncertainty remains regarding the implementation and impact of these initiatives, which could adversely affect our business or financial results in future years. Furthermore, our implementation of new practices and processes designed to comply with changing tax laws and regulations could require us to make substantial changes to our business practices, allocate additional resources, and increase our costs, which could negatively affect our business, results of operations, and financial condition.
Risks Related to Our Industry
Consolidations and failures in the financial services industry may adversely impact the number of customers and our revenues in the future.
Mergers, acquisitions, and personnel changes at key financial services organizations have the potential to adversely affect our business, financial condition, cash flows, and results of operations. Our business is concentrated in the financial services industry, making us susceptible to consolidation in, or contraction of, the number of participating institutions within that industry.
Our stock price may be volatile.
No assurance can be given that operating results will not vary from quarter to quarter, and past performance may not accurately predict future performance. Any fluctuations in quarterly operating results may result in volatility in our stock price. Our stock price may also be volatile, in part, due to external factors such as speculation regarding potential transactions, announcements by third parties or competitors, inherent volatility in the technology sector, variability in demand from our existing customers, failure to meet the expectations of market analysts, the level of our operating expenses, changing market conditions in the software industry, and the global economic downturn. In addition, the financial markets have experienced significant price and volume fluctuations that have particularly affected the stock prices of many technology companies and financial services companies, and these fluctuations sometimes are unrelated to the operating performance of these companies. Broad market fluctuations, as well as industry-specific and general economic conditions may adversely affect the market price of our common stock.
Risks Related to Our Financial Performance
Our future profitability depends on demand for our products.
Our revenue and profitability depend on the overall demand for our products and services. A significant portion of our total revenues result from licensing our Issuing and Acquiring solutions, including our BASE24 product line and providing related services and maintenance. Any reduction in demand for, or increase in competition with respect to, our Issuing and Acquiring solutions could have a material adverse effect on our financial condition, cash flows and/or results of operations.
Table of Contents
Failure to obtain renewals of customer contracts or obtain such renewals on favorable terms could adversely affect our results of operations and financial condition.
Failure to achievefavorable renewals of customer contracts could negatively impact our business. Our contracts with our customers generally run for a period of five years, or three years in the case of certain acquired SaaS and PaaS contracts. At the end of the contract term, customers have the opportunity to renegotiate their contracts with us and to consider whether to engage one of our competitors to provide products and services. Failure to achieve high renewal rates on commercially favorable terms could adversely affect our results of operations and financial condition.
The delay or cancellation of a customer project or inaccurate project completion estimates may adversely affect our operating results and financial performance.
Any unanticipateddelays in a customer project, changes in customer requirements or priorities during the project implementation period, or a customer’s decision to cancel a project, may adversely impact our operating results and financial performance. In addition, during the project implementation period, we perform ongoing estimates of the progress being made on complex and difficult projects and documenting this progress is subject to potential inaccuracies. Changes in project completion estimates are heavily dependent on the accuracy of our initial project completion estimates and our ability to evaluate project profits and losses. Any inaccuracies or changes in estimates resulting from changes in customer requirements, delays or inaccurate initial project completion estimates may result in increased project costs and adversely impact our operating results and financial performance.
Changes in card association and debit network fees or products could increase costs or otherwise limit our operations.
From time to time, card associations and debit networks, including the card networks which we utilize, increase the processing and other fees (including what is commonly called “interchange fees”) that they charge. It is possible that competitive and other pressures will result in us absorbing a portion of such increases in the future, or not being able to increase our own fees, which would increase our operating costs, reduce our profit margin, limit our growth, and adversely affect our business, results of operations and financial condition.
Our balance sheet includes significant amounts of goodwill and intangible assets. The impairment of a significant portion of these assets could negatively affect our financial results.
Our balance sheet includes goodwill and intangible assets that represent a significant portion of our total assets at December 31, 2025. On at least an annual basis, we assess whether there have been impairments in the carrying value of goodwill and intangible assets. If the carrying value of the asset is determined to be impaired, then it is written down to fair value by a charge to operating earnings. An impairment of a significant portion of goodwill or intangible assets could materially negatively affect our results of operations.
Management’s backlog estimate may not be accurate and may not generate the predicted revenues.
Estimates of future financial results are inherently unreliable. Our backlog estimates require substantial judgment and are based on a number of assumptions, including management’s current assessment of customer and third-party contracts that exist as of the date the estimates are made, as well as revenues from assumed contract renewals, to the extent that we believe that recognition of the related revenue will occur within the corresponding backlog period. A number of factors could result in actual revenues being less than the amounts reflected in backlog. Our customers or third-party partners may attempt to renegotiate or terminate their contracts for a number of reasons, including mergers, changes in their financial condition, or general changes in economic conditions within their industries or geographic locations, or we may experience delays in the development or delivery of products or services specified in customer contracts. Actual renewal rates and amounts may differ from historical experience used to estimate backlog amounts. Changes in foreign currency exchange rates may also impact the amount of revenue actually recognized in future periods. Accordingly, there can be no assurance that contracts included in backlog will actually generate the specified revenues or that the actual revenues will be generated within a 12-month or 60-month period. Additionally, because backlog estimates are operating metrics, the estimates are not required to be subject to the same level of internal review or controls as a U.S. generally accepted accounting principles (“GAAP”) financial measure.
Table of Contents
Our revenue and earnings are highly cyclical, our quarterly results fluctuate significantly, and we have revenue-generating transactions concentrated in the final weeks of a quarter which may prevent accurate forecasting of our financial results and cause our stock price to decline.
Our revenue and earnings are highly cyclical causing significant quarterly fluctuations in our financial results. Revenue and operating results are usually strongest during the third and fourth fiscal quarters ending September 30 and December 31, primarily due to the sales and budgetary cycles of our customers. We experience lower revenues, and possible operating losses, in the first and second quarters ending March 31 and June 30. Our financial results may also fluctuate from quarter to quarter and year to year due to a variety of factors, including changes in product sales mix that affect average selling prices, and the timing of customer renewals (any of which may impact the pattern of revenue recognition).
In addition, large portions of our customer contracts are executed in the final weeks of each quarter. Before these contracts are executed, we create and rely on forecasted revenues for planning, modeling and earnings guidance. Forecasts, however, are only estimates and actual results may vary for a particular quarter or longer periods of time. Consequently, significant discrepancies between actual and forecasted results could limit our ability to plan, budget or provide accurate guidance, which could adversely affect our stock price. Any publicly-stated revenue or earnings projections are subject to this risk.
Risks Related to Financing
Our outstanding debt contains restrictions and other financial covenants that limit our flexibility in operating our business.
Our credit facility contains customary affirmative and negative covenants for debt of these types that limit our ability to engage in specified types of transactions. If an event of default occurs, the lenders or trustees will be entitled to take various actions, including, but not limited to, demanding payment for all amounts outstanding. If adverse global economic conditions persist or worsen, we could experience decreased revenues from our operations attributable to reduced demand for our products and services and as a result, we could fail to satisfy the financial and other restrictive covenants to which we are subject under our existing debt, resulting in an event of default. If we are unable to cure the default or obtain a waiver, we will not be able to access our credit facility and there can be no assurance that we would be able to obtain alternative financing. See Note 3, Debt , to our Notes to Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K for additional information.
Our existing levels of debt and debt service requirements may adversely affect our financial condition or operational flexibility and prevent us from fulfilling our obligations under our outstanding indebtedness.
Our level of debt could have adverse consequences for our business, financial condition, operating results and operational flexibility, including the following: (i) the debt level may cause us to have difficulty borrowing money in the future for working capital, capital expenditures, acquisitions or other purposes; (ii) our debt level may limit operational flexibility and our ability to pursue business opportunities and implement certain business strategies; (iii) we use a large portion of our operating cash flow to pay principal and interest on our credit facility, which reduces the amount of money available to finance operations, acquisitions and other business activities; (iv) we have a higher level of debt than some of our competitors or potential competitors, which may cause a competitive disadvantage and may reduce flexibility in responding to changing business and economic conditions, including increased competition and vulnerability to general adverse economic and industry conditions; (v) some of our debt has a variable rate of interest, which exposes us to the risk of increased interest rates; (vi) there are significant maturities on our debt that we may not be able to fulfill or that may be refinanced at higher rates; and (vii) if we fail to satisfy our obligations under our outstanding debt or fail to comply with the financial or other restrictive covenants required under our credit facility, an event of default could cause all of our debt to become due and payable and could permit the lenders under our credit facility to foreclose on the assets securing such debt.
Despite our current levels of debt, we may still incur substantially more debt, including secured debt, and similar liabilities,
which would increase the risks described in these risk factors relating to indebtedness.
Although the agreements governing our credit facility include restrictions on our ability to incur additional debt, those agreements do not prohibit us from incurring additional debt or pursuing other financing arrangements. As a result, the amount of additional debt and other obligations that we could incur could be substantial. Accordingly, to the extent permitted under our credit agreement, we could incur significant additional debt, liabilities or similar obligations in the future. In addition, if we form or acquire any subsidiaries in the future, those subsidiaries also could incur debt or similar liabilities. If new debt or similar liabilities are added to our current debt levels, the related risks that we now face could increase.
Table of Contents
We may, from time to time, seek to opportunistically refinance, amend, reprice and/or otherwise replace any of our debt, obtain additional debt financing or enter into other financing arrangements, reduce or extend our debt, lower our interest payments or the cost of capital available to us under certain types of financing arrangements, or otherwise seek to improve our financial position or the terms of our debt or other financing agreements. These actions may include open market debt repurchases, negotiated repurchases, or other repayments, redemptions or retirements of our debt or other financing arrangements. The amount of debt that may be borrowed or issued, refinanced, and/or repurchased, repaid, redeemed or otherwise retired, if any, will depend on market conditions, trading levels of our debt, our cash position, compliance with our debt covenants and other considerations. Any such actions could impact our financial condition or results of operations.
General Risk Factors
Our business and operating results could be adversely affected by events outside of our control, including natural disasters, wars and outbreaks of disease or other adverse public health developments .
We may be impacted by natural disasters, wars, and outbreaks of disease or other adverse public health developments such as pandemics. These events could cause disruptions or restrictions on us, our partners and customers, including restrictions on travel, temporary closure of facilities, and other restrictions. Such disruptions or restrictions may result in delays or losses of sales and delays in the development or implementation of our products. These events could also result in a decrease in consumers’ use of our customers’ services, further adversely affecting our business and operating results.
If our revenues or mix of revenues are below anticipated levels or if our operating results are below analyst or investor expectations, the market price of our common stock could be adversely affected.
A significant percentage of our expenses, particularly personnel and facilities costs, are relatively fixed and based in part on anticipated revenue levels, which can be difficult to predict. A decline in revenues without a corresponding and timely slowdown in expense growth could adversely affect our business. Significant revenue shortfalls in any quarter may cause significant declines in operating results since we may be unable to reduce spending in a timely manner.
Quarterly or annual operating results that are below the expectations of public market analysts could adversely affect the market price of our common stock. Factors that could cause fluctuations in our operating results include:
• a change in customer demand for our products, which is highly dependent on our ability to continue to offer innovative technology solutions in very competitive markets;
• the timing of customer orders;
• the timing of product implementations, which are highly dependent on customers’ resources and discretion;
• overall economic conditions, which may affect our customers’ and potential customers’ budgets for information technology expenditures;
• foreign exchange rate volatility, which can have a significant effect on our total revenues and costs when our foreign operations are translated to U.S. dollars;
• the incurrence of costs relating to the integration of software products and operations in connection with acquisitions of technologies or businesses; and
• the timing and market acceptance of new products or product enhancements by either us or our competitors.
Table of Contents
Our business and operating results are influenced by trends such as information technology spending levels, the growth rate of digital payments, mandated regulatory changes, and changes in the number and type of customers in the financial services industry, as well as economic growth, and purchasing habits.
Key trends that currently impact our strategies and operations include:
Increasing digital payment transaction volumes . The adoption of digital payments continues to accelerate, driven by the increased adoption of instant payments and other financial inclusion efforts of countries throughout the world, with countries such as India, Brazil, Indonesia, Malaysia, and most recently Colombia, growing dramatically. Contactless payments adoption for in-person payments was thrust forward in response to the COVID-19 pandemic, and that usage has not abated. ACI leverages growth in transaction volumes through the licensing of payment technologies to banks and intermediaries seeking to take advantage of that growth, supporting 44 global payment schemes and providing the central infrastructure to 11 central banks directly operating the scheme using ACI software. With the launch of ACI Connetic, our comprehensive cloud-native payments hub solution available as a SaaS solution, participating in this growth is now accessible to banks of all sizes, significantly increasing ACI’s addressable market for software solutions.
ISO 20022 and enhanced payment standards. In 2024 and 2025, banks and processors across the globe achieved major milestones with the certification and go-live of ISO 20022 compliance across the major wires networks, including Fedwire, Swift, CHAPS, and CHIPS. ACI solutions were instrumental in this new initiative, regularly processing more than two-thirds of Fedwire payments traffic and approximately 15% of Swift payments traffic globally. These go-live events were highly consequential in financial services globally, and with the enhanced data standards described, the financial system stands to be easier to secure and provide much richer analytics.
Adoption of cloud technology . ACI has recognized the industry’s technical inflection point as financial institutions transition from traditional on‑premises infrastructure to private and public cloud environments, and we are actively supporting our customers’ cloud strategies. Cloud technology enables the financial services ecosystem to reduce technical risk, accelerate innovation, improve time‑to‑market for new revenue-generating solutions, and enhance scalability, resiliency, and long‑term operating economics. As banks, intermediaries, merchants, and billers modernize their systems to take advantage of these capabilities, our ongoing investments and partnerships allow us to deliver cloud benefits today while maintaining ACI’s core strengths in performance, resiliency, and scalability. In addition, cloud‑native, multi‑tenant SaaS solutions expand our reach to smaller institutions by providing scalable, easy‑to‑integrate offerings at accessible price points. Building on these foundations, ACI Connetic—our fully cloud‑native banking platform launched in 2025—advances this strategy by conforming fully to Cloud Native Computing Foundation principles and by being deployable across public cloud environments such as Microsoft Azure and Amazon Web Services, as well as customers’ private clouds. Working closely with key hardware and software partners including IBM and Red Hat, we ensure ACI Connetic can operate at scale in public, private, and multi‑cloud deployments, supporting the needs of the largest global banks and processors, particularly in highly regulated markets where concentration risk and data sovereignty considerations drive deployment strategy.
Table of Contents
Payments Intelligence and Artificial Intelligence . The accelerated adoption of real-time payments and new risks associated with AI agents driving new exploits increases the urgency for industry-wide collaborationagainstfraud. As the threat of scams becomes a greaterconcern for remitting and receiving institutions, consumers are challenged with increased friction to prevent account take-over and criminalssuccessfully persuading consumers to push transactions themselves, inadvertently, to mule accounts they have full control of, created with fake or synthetic identity, or simply "borrowed" with or without consent of the legit account holders. While AI will be used to accelerate vulnerabilities, it can also be used to automate financial protection, including but not limited to recognition of synthetic identities and automated remediation. Banks and intermediaries, merchants, and billers are pursuing solutions to mitigate their risks while improving their customer experience, protecting their margins, and securing their revenue streams, especially with their new products and offerings. We continue to see opportunities for AI and other advanced analytics capabilities to stop fraudulent behavior and enable frictionless customer experiences.
The GENIUS Act and stablecoins. With the passage of the 2025 GENIUS Act in the United States, stablecoins gained international attention and prominence. As a leading software provider of solutions to move value around the world, ACI already plays a significant role in enabling stablecoin workflows as fiat currency funds are transferred to and from issuers and stablecoins are minted and burned. We recognize the importance of stablecoins to global value transfer, especially cross-border transfers, and ACI Connetic at its core design is the ideal platform for initiating, managing, and receiving those transfers. As customers are evaluating payment hubs, we expect that ACI Connetic and our strategy for stablecoin support will be well-received in the market.
Several other factors related to our business may have a significant impact on our operating results from year to year. For example, the accounting rules governing the timing of revenue recognition are complex, and it can be difficult to estimate when we will recognize revenue generated by a given transaction. Factors such as creditworthiness of the customer and timing of transfer of control or acceptance of our products may cause revenues related to sales generated in one period to be deferred and recognized in later periods. For arrangements in which services revenue is deferred, related direct and incremental costs may also be deferred. Additionally, while the majority of our contracts are denominated in the U.S. dollar, a substantial portion of our sales are made, and some of our expenses are incurred, in the local currency of countries other than the United States. Fluctuations in currency exchange rates in a given period may result in the recognition of gains or losses for that period.
We continue to seek ways to grow through organic sources, partnerships, alliances, and acquisitions. We continually look for potential acquisitions designed to improve our solutions’ breadth or provide access to new markets. As part of our acquisition strategy, we seek acquisition candidates that are strategic, capable of being integrated into our operating environment, and accretive to our financial performance.
Backlog
Backlog is comprised of:
• Committed Backlog, which includes (1) contracted revenue that will be recognized in future periods (contracted but not recognized) from software license fees, maintenance fees, service fees, and SaaS and PaaS fees specified in executed contracts (including estimates of variable consideration if required under ASC 606, Revenue From Contracts with Customers ) and included in the transaction price for those contracts, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods and (2) estimated future revenues from software license fees, maintenance fees, services fees, and SaaS and PaaS fees specified in executed contracts.
• Renewal Backlog, which includes estimated future revenues from assumed contract renewals to the extent we believe recognition of the related revenue will occur within the corresponding backlog period.
Our backlog estimates assume renewals based upon automatic renewal provisions in the executed contract and our historic experience with customer renewal rates.
Our 60-month backlog estimates are derived using the following key assumptions:
• License arrangements are assumed to renew at the end of their committed term or under the renewal option stated in the contract at a rate consistent with historical experience. If the license arrangement includes extended payment terms, the renewal estimate is adjusted for the effects of a significant financing component.
• Maintenance fees are assumed to exist for the duration of the license term for those contracts in which the committed maintenance term is less than the committed license term.
• SaaS and PaaS arrangements are assumed to renew at the end of their committed term at a rate consistent with our historical experiences.
Table of Contents
• Foreign currency exchange rates are assumed to remain constant over the 60-month backlog period for those contracts stated in currencies other than the U.S. dollar.
• Our pricing policies and practices are assumed to remain constant over the 60-month backlog period.
In computing our 60-month backlog estimate, the following items are specifically not taken into account:
• Anticipated increases in transaction, account, or processing volumes by our customers.
• Optional annual uplifts or inflationary increases in recurring fees.
• Services engagements, other than SaaS and PaaS arrangements, are not assumed to renew over the 60-month backlog period.
• The potential impact of consolidation activity within our markets and/or customers.
We review our customer renewal experience on an annual basis. The impact of this review and subsequent updates may result in a revision to the renewal assumptions used in computing the 60-month backlog estimates. In the event a significant revision to renewal assumptions is determined to be necessary, prior periods will be adjusted for comparability purposes.
The following table sets forth our 60-month backlog estimate, by reportable segment, as of December 31, 2025; September 30, 2025; June 30, 2025; March 31, 2025; and December 31, 2024 (in millions). Dollar amounts reflect foreign currency exchange rates as of each period end. This is a non-GAAP financial measure being presented to provide comparability across accounting periods. We believe this measure provides useful information to investors and others in understanding and evaluating our financial performance.
December 31,
September 30,
June 30,
March 31,
December 31,
Payment Software
Biller
Total
December 31,
September 30,
June 30,
March 31,
December 31,
Committed
Renewal
Total
Estimates of future financial results require substantial judgment and are based on several assumptions, as described above. These assumptions may turn out to be inaccurate or wrong for reasons outside of management’s control. For example, our customers may attempt to renegotiate or terminate their contracts for many reasons, including mergers, changes in their financial condition, or general changes in economic conditions in the customer’s industry or geographic location. We may also experience delays in the development or delivery of products or services specified in customer contracts, which may cause the actual renewal rates and amounts to differ from historical experiences. Changes in foreign currency exchange rates may also impact the amount of revenue recognized in future periods. Accordingly, there can be no assurance that amounts included in backlog estimates will generate the specified revenues or that the actual revenues will be generated within the corresponding 60-month period. Additionally, because certain components of Committed Backlog and all of Renewal Backlog estimates are operating metrics, the estimates are not required to be subject to the same level of internal review or controls as contracted but not recognized Committed Backlog.
Table of Contents
Results of Operations
The following tables present the consolidated statements of operations, as well as the percentage relationship to total revenues of items included in our consolidated statements of operations (in thousands):
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Amount
% of Total
Revenue
$ Change vs 2024
% Change vs 2024
Amount
% of Total
Revenue
Revenues:
Software as a service and platform as a service
License
Maintenance
Services
Total revenues
Operating expenses:
Cost of revenue
Research and development
Selling and marketing
General and administrative
Depreciation and amortization
Total operating expenses
Operating income
Other income (expense):
Interest expense
Interest income
Other, net
Total other income (expense)
Income before income taxes
Income tax expense
Net income
Revenues
Total revenue for the year ended December 31, 2025, increased $165.5 million, or 10%, as compared to the same period in 2024.
• The impact of certain foreign currencies strengtheningagainst the U.S. dollar resulted in a $8.9 million increase in total revenue during the year ended December 31, 2025, as compared to the same period in 2024.
• Adjusted for the impact of foreign currency, total revenue for the year ended December 31, 2025, increased $156.6 million, or 10%, as compared to the same period in 2024.
Table of Contents
Software as a Service (“SaaS”) and Platform as a Service (“PaaS”) Revenue
The Company’s SaaS arrangements allow customers to use certain software solutions (without taking possession of the software) in a multi-tenant or single-tenant cloud environment on a subscription basis. The Company’s PaaS arrangements allow customers to use certain software solutions (without taking possession of the software) in a multi-tenant cloud environment on a subscription or consumption basis. Included in SaaS and PaaS revenue are fees paid by our customers for use of our Biller solutions. Biller-related fees may be paid by our clients or directly by their customers and may be a percentage of the underlying transaction amount, a fixed fee per executed transaction or a monthly fee for each customer enrolled. SaaS and PaaS costs include payment card interchange fees, the amounts payable to banks and payment card processing fees, which are included in cost of revenue in the accompanying consolidated statements of operations. All fees from SaaS and PaaS arrangements that do not qualify for treatment as a distinct performance obligation, which includes set-up fees, implementation or customization services, and product support services, are included in SaaS and PaaS revenue.
SaaS and PaaS revenue increased $110.5 million, or 12%, during the year ended December 31, 2025, as compared to the same period in 2024.
• The impact of certain foreign currencies strengtheningagainst the U.S. dollar resulted in a $2.6 million increase in SaaS and PaaS revenue during the year ended December 31, 2025, as compared to the same period in 2024.
• Adjusted for the impact of foreign currency, SaaS and PaaS revenue for the year ended December 31, 2025, increased $107.9 million, or 12%, as compared to the same period in 2024.
• The increase was primarily driven by new customer go-lives since December 31, 2024, and higher transaction volumes during the year ended December 31, 2025, as compared to the same period in 2024.
License Revenue
Customers purchase the right to license ACI software under multi-year, time-based software license arrangements that vary in length but are generally five years. Under these arrangements the software is installed at the customer’s location (i.e. on-premise). Within these agreements are specified capacity limits typically based on customer transaction volume. ACI employs measurement tools that monitor the number of transactions processed by customers and if contractually specified limits are exceeded, additional fees are charged for the overage. Capacity overages may occur at varying times throughout the term of the agreement depending on the product, the size of the customer, and the significance of customer transaction volume growth. Depending on specific circumstances, multiple overages or no overages may occur during the term of the agreement.
Included in license revenue are license and capacity fees that are payable at the inception of the agreement. License revenue also includes license and capacity fees payable annually, quarterly, or monthly due to negotiated customer payment terms. The Company recognizes revenue in advance of billings for software license arrangements with extended payment terms and adjusts for the effects of the financing component, if significant.
License revenue increased $49.2 million, or 12%, during the year ended December 31, 2025, as compared to the same period in 2024.
• The impact of certain foreign currencies strengtheningagainst the U.S. dollar resulted in a $4.6 million increase in license revenue during the year ended December 31, 2025, as compared to the same period in 2024.
• Adjusted for the impact of foreign currency, license revenue for the year ended December 31, 2025, increased $44.6 million, or 11%, as compared to the same period in 2024.
• The increase in license revenue was driven by the relative size of new license and capacity events during the year ended December 31, 2025, as compared to the same period in 2024.
Table of Contents
Maintenance Revenue
Maintenance revenue includes standard and premium customer support and any post contract support fees received from customers for the provision of product support services.
Maintenance revenue increased $10.5 million, or 6%, during the year ended December 31, 2025, as compared to the same period in 2024.
• The impact of foreign currencies strengtheningagainst the U.S. dollar resulted in a $0.9 million increase in maintenance revenue during the year ended December 31, 2025, as compared to the same period in 2024.
• Adjusted for the impact of foreign currency, maintenance revenue for the year ended December 31, 2025, increased $9.6 million, or 5%, as compared to the same period in 2024.
• The increase was primarily driven by consumer price index uplifts on contracted maintenance.
Services Revenue
Services revenue includes fees earned through implementation services and other professional services. Implementation services include product installations, product configurations, and custom software modifications (“CSMs”). Other professional services include business consultancy, technical consultancy, on-site support services, product education, and testing services. These services include new customer implementations as well as existing customer migrations to new products or new releases of existing products.
Services revenue decreased $4.7 million, or 5%, during the year ended December 31, 2025, as compared to the same period in 2024.
• The impact of foreign currencies strengtheningagainst the U.S. dollar resulted in a $0.8 million increase in services revenue during the year ended December 31, 2025, as compared to the same period in 2024.
• Adjusted for the impact of foreign currency, services revenue for the year ended December 31, 2025, decreased $5.5 million, or 6%, as compared to the same period in 2024.
• The decrease was primarily driven by the timing and magnitude of project-related work during the year ended December 31, 2025, as compared to the same period in 2024.
Operating Expenses
Total operating expenses for the year ended December 31, 2025, increased $143.7 million, or 11%, as compared to the same period in 2024.
• Total operating expenses for the year ended December 31, 2025, included $7.7 million for cost reduction strategies and $1.2 million of other significant transaction-related expenses during the period. Total operating expenses for the year ended December 31, 2024, included $8.6 million for cost reduction strategies and $1.0 million of other significant transaction-related expenses during the period.
• The impact of foreign currencies strengtheningagainst the U.S. dollar resulted in a $2.4 million increase in total operating expenses for the year ended December 31, 2025, as compared to the same period in 2024.
• Adjusted for the impact of cost reduction strategies, significant transaction-related expenses, and foreign currency, total operating expenses for the year ended December 31, 2025, increased $142.0 million, or 11%, as compared to the same period in 2024.
Table of Contents
Cost of Revenue
Cost of revenue includes costs to provide SaaS and PaaS, third-party royalties, amortization of purchased and developed software for resale, the costs of maintaining our software products, as well as the costs required to deliver, install, and support software at customer sites. SaaS and PaaS service costs include payment card interchange fees, amounts payable to banks, and payment card processing fees. Maintenance costs include the efforts associated with providing the customer with upgrades, 24-hour help desk, post go-live (remote) support, and production-type support for software that was previously installed at a customer location. Service costs include human resource costs and other incidental costs such as travel and training required for both pre go-live and post go-live support. Such efforts include project management, delivery, product customization and implementation, installation support, consulting, configuration, and on-site support.
Cost of revenue increased $105.9 million, or 13%, during the year ended December 31, 2025, as compared to the same period in 2024.
• The impact of foreign currencies strengtheningagainst the U.S. dollar resulted in a $0.7 million increase in cost of revenue during the year ended December 31, 2025, as compared to the same period in 2024.
• Adjusted for the impact of foreign currency, cost of revenue increased $105.2 million, or 13%, for the year ended December 31, 2025, as compared to the same period in 2024.
• The increase was primarily due to higher payment card interchange and processing fees of $85.2 million. The remaining increase was due to higher personnel and related expenses of $20.0 million, including a $4.5 million increase in stock-based compensation expense.
Research and Development
Research and development (“R&D”) expenses are primarily human resource costs related to the creation of new products, improvements made to existing products as well as compatibility with new operating system releases and generations of hardware.
R&D expense increased $20.9 million, or 14%, during the year ended December 31, 2025, as compared to the same period in 2024.
• The impact of foreign currencies strengtheningagainst the U.S. dollar resulted in a $0.5 million increase in R&D expense during the year ended December 31, 2025, as compared to the same period in 2024.
• Adjusted for the impact of foreign currency, R&D expense increased $20.4 million, or 14%, during the year ended December 31, 2025, as compared to the same period in 2024.
• The increase was primarily due to higher personnel and related expenses, including a $3.2 million increase in stock-based compensation expense.
Selling and Marketing
Selling and marketing includes both the costs related to selling our products to current and prospective customers as well as the costs related to promoting the Company, its products and the research efforts required to measure customers’ future needs and satisfaction levels. Selling costs are primarily the human resource and travel costs related to the effort expended to license our products and services to current and potential clients within defined territories and/or industries as well as the management of the overall relationship with customer accounts. Selling costs also include the costs associated with assisting distributors in their efforts to sell our products and services in their respective local markets. Marketing costs include costs incurred to promote the Company and its products, perform or acquire market research to help the Company better understand impending changes in customer demand for and of our products, and the costs associated with measuring customers’ opinions toward the Company, our products and personnel.
Selling and marketing expense increased $6.7 million, or 6%, during the year ended December 31, 2025, as compared to the same period in 2024.
• The impact of foreign currencies strengtheningagainst the U.S. dollar resulted in a $0.5 million increase in selling and marketing expense during the year ended December 31, 2025, as compared to the same period in 2024.
• Adjusted for the impact of foreign currency, selling and marketing expense increased $6.2 million, or 5%, during the year ended December 31, 2025, as compared to the same period in 2024.
• The increase was primarily due to higher personnel and related expenses, including a $3.4 million increase in stock-based compensation expense.
Table of Contents
General and Administrative
General and administrative expenses are primarily human resource costs including executive salaries and benefits, personnel administration costs, and the costs of corporate support functions such as legal, administrative, human resources, and finance and accounting.
General and administrative expense increased $24.3 million, or 21%, during the year ended December 31, 2025, as compared to the same period in 2024.
• General and administrative expenses for the year ended December 31, 2025, included $7.7 million for cost reduction strategies and $1.2 million of other significant transaction-related expenses during the period. General and administrative expenses for the year ended December 31, 2024, included $4.3 million for cost reduction strategies and $1.0 million of other significant transaction-related expenses during the period.
• The impact of foreign currencies strengtheningagainst the U.S. dollar resulted in a $0.4 million increase in general and administrative expense during the year ended December 31, 2025, as compared to the same period in 2024.
• Adjusted for the impact of cost reduction strategies, significant transaction-related expenses, and foreign currency, general and administrative expense increased $20.3 million, or 18%, for the year ended December 31, 2025, as compared to the same period in 2024.
• The increase was primarily due to higher personnel and related expenses of $22.5 million, including a $18.0 million increase in stock-based compensation expense, partially offset by a decrease in professional and other legal fees of $2.2 million.
Depreciation and Amortization
Depreciation and amortization decreased $14.1 million, or 13%, during the year ended December 31, 2025, as compared to the same period in 2024.
• Depreciation and amortization for the year ended December 31, 2024, included $4.4 million of accelerated depreciation related to the closure of a facility.
• The impact of foreign currencies strengtheningagainst the U.S. dollar resulted in a $0.3 million increase in depreciation and amortization expense during the year ended December 31, 2025, as compared to the same period in 2024.
• Adjusted for the impact of the facility closure and foreign currency, depreciation and amortization decreased $10.0 million, or 9%, for the year ended December 31, 2025, as compared to the same period in 2024.
• The decrease was primarily due to a decrease in amortization for fully amortized intangibles acquired through acquisitions.
Other Income and Expense
Interest expense for the year ended December 31, 2025, decreased $14.6 million, or 20%, as compared to the same period in 2024, primarily due to lower comparative debt balances during 2025 as well as a decrease in interest rates.
Interest income includes the portion of software license fees paid by customers under extended payment terms that is attributed to the significant financing component. Interest income for the year ended December 31, 2025, decreased $1.1 million, or 7%, as compared to the same period in 2024.
Other, net is primarily comprised of foreign currency transaction gains and losses. During the year ended December 31, 2025, other, net also included the $25.9 million gain on the sale of the Company's equity method investment and the $1.1 million loss on extinguishment of debt. Other, net was $19.7 million of income and $1.2 million of expense for the years ended December 31, 2025 and 2024, respectively.
Income Taxes
The effective tax rates for the years ended December 31, 2025 and 2024, were approximately 26% and 19%, respectively. Our effective tax rates vary from our federal statutory rate due to operating in multiple foreign countries, each with its own tax laws and rates. Of the foreign jurisdictions in which we operate, our effective tax rates as of December 31, 2025 and 2024 were primarily impacted by operations in Ireland and India for 2025, and Ireland for 2024.
Refer to Note 10, Income Taxes , to our Notes to Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K for additional information.
Table of Contents
Prior Year Results
For discussion of the year ended December 31, 2024, compared to the year ended December 31, 2023, see Results of Operations in Part II, Item 7 of our annual report on Form 10-K for the year ended December 31, 2024.
Segment Results
Refer to Note 9, Segment Information, to our Notes to Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K for discussion on identification of operating segments.
The following is selected financial data for our reportable segments for the periods indicated (in thousands):
Years Ended December 31,
Revenues
Payment Software
Biller
Total revenue
Segment Adjusted EBITDA
Payment Software
Biller
Depreciation and amortization
Stock-based compensation expense
Corporate and unallocated expenses
Interest, net
Other, net
Income before income taxes
Payment Software Segment Adjusted EBITDA increased $48.7 million for the year ended December 31, 2025, compared to the same period in 2024, primarily due to a $74.3 million increase in revenue primarily related to an increase in license revenues, partially offset by a $25.6 million increase in cash operating expense.
Biller Segment Adjusted EBITDA increased $9.5 million for the year ended December 31, 2025, compared to the same period in 2024, primarily due to a $91.2 million increase in revenue, partially offset by a $81.7 million increase in cash operating expense primarily for payment card interchange and other processing fees.
Prior Year Results
For discussion of 2024 compared to 2023, see Segment Results in Part II, Item 7 of our annual report on Form 10-K for the year ended December 31, 2024. Beginning in the first quarter of 2025, the Company reported financial performance based on its new operating segments, Payment Software, which merged the previously reported operating segments Banks and Merchants, and maintained Biller.
Liquidity and Capital Resources
General
Our primary liquidity needs are: (i) to fund normal operating expenses; (ii) to meet the interest and principal requirements of our outstanding indebtedness; and (iii) to fund acquisitions, capital expenditures, and lease payments. We believe these needs will be satisfied using cash flow generated by our operations, our cash and cash equivalents, and available borrowings under our revolving credit facility over the next 12 months and beyond.
Table of Contents
Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less. As of December 31, 2025, we had $196.5 million of cash and cash equivalents, of which $96.8 million was held by our foreign subsidiaries. The Company has recognized deferred income taxes for local country income and withholding taxes that could be incurred on distributions of certain non-U.S. earnings in foreign subsidiaries, as these earnings are not intended to be indefinitely reinvested.
Available Liquidity
The following table sets forth our available liquidity for the periods indicated (in thousands):
December 31,
Cash and cash equivalents
Availability under revolving credit facility
Total liquidity
The decrease in total liquidity is primarily due to increased borrowings on the revolving credit facility used to redeem the Company's outstanding 2026 Notes.
The Company and ACI Payments, Inc., a wholly owned subsidiary, maintain a $75.0 million uncommitted overdraft facility with Bank of America, N.A. The overdraft facility acts as a secured loan under the terms of the Credit Agreement to provide an additional funding mechanism for timing differences that can occur in the bill payment settlement process. As of December 31, 2025, the full $75.0 million was available.
Stock Repurchase Program
The Board approved a stock repurchase program authorizing the Company, as market and business conditions warrant, to acquire its common stock and periodically authorizes additional funds for the program. In October 2025, the Board approved the repurchase of the Company's common stock of up to $500.0 million in place of the remaining purchase amounts previously authorized.
We repurchased 4,179,747 shares for $203.8 million under our stock repurchase program during the year ended December 31, 2025. Under the program to date, we have repurchased 67,047,584 shares for approximately $1.3 billion. As of December 31, 2025, the maximum remaining amount authorized for purchase under the stock repurchase program was approximately $456.4 million.
Our stock repurchase authorization does not have an expiration date and the pace of our repurchase activity will depend on factors such as our working capital needs, cash requirements for acquisitions, debt repayment obligations, our stock price, and global economic and market conditions. Our stock repurchases may be affected from time to time through open market purchases and pursuant to a Rule 10b5-1 plan and they may be accelerated, suspended, delayed or discontinued at any time. See Note 6, Common Stock and Treasury Stock , to our Notes to Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K for additional information.
Table of Contents
Cash Flows
The following table sets forth summary cash flow data for the periods indicated (in thousands).
Years Ended December 31,
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Cash Flows from Operating Activities
The primary source of operating cash flows is cash collections from our customers for purchase and renewal of licensed software products and various services including software and platform as a service, maintenance, and other professional services. Our primary uses of operating cash flows include employee expenditures, taxes, interest payments, and leased facilities.
Cash flows provided by operating activities were $322.8 million for the year ended December 31, 2025, compared to $358.7 million for the same period in 2024. Operating cash flows for the current year decreased primarily due to lower customer receipt collections as a result of lower invoiced amounts at the prior year-end and higher income taxes paid, partially offset by improvedprofitability.
Our cash flow from operating activities can fluctuate from period to period due to several factors, including: the timing of billings, which are typically higher in the third and fourth quarters in conjunction with sales timing and are variable based upon license renewal timing; collections, which will lag the quarters with higher billings; the timing and amounts of interest due to interest rate fluctuations; income tax and other payments; and our operating results.
Cash Flows from Investing Activities
The changes in cash flows from investing activities primarily relate to the timing of our purchases and investments in capital and other assets, including strategic acquisitions, that support our growth.
During the year ended December 31, 2025, we received net proceeds of $46.0 million from the sale of our equity method investment. We used cash of $33.4 million to purchase software, property, and equipment, as compared to $45.1 million during the same period in 2024.
Cash Flows from Financing Activities
The changes in cash flows from financing activities primarily relate to borrowings and repayments related to our debt instruments and other debt, stock repurchases, and net proceeds related to employee stock programs.
During 2025, we repaid $400.0 million for the redemption of the 2026 Notes and $20.9 million of other debt payments. In addition, we used $202.6 million to repurchase common stock and $28.2 million for the repurchase of stock-based compensation awards for tax withholdings. We received net proceeds of $130.0 million on the Revolving Credit Facility and $160.0 million on the Incremental Term Loan, used for the redemption of the 2026 Notes. In addition, we received proceeds of $11.3 million from the exercise of stock options and the issuance of common stock under our 2017 Employee Stock Purchase Plan, as amended, and $14.0 million for settlement assets and liabilities due to processing timing. During 2024, we repaid a net $57.2 million on the Term Loan under the Amendment, $54.0 million on the Revolving Credit Facility, $14.9 million of other debt payments, and $5.1 million of debt issuance costs. In addition, we used $127.7 million to repurchase common stock, $13.1 million for the repurchase of stock-based compensation awards for tax withholdings, and $25.5 million for settlement assets and liabilities due to processing timing. We received proceeds of $9.2 million from the exercise of stock options and the issuance of common stock under our 2017 Employee Stock Purchase Plan, as amended.
Prior Year Results
For discussion of 2024 compared to 2023, see Liquidity and Capital Resources in Part II, Item 7 of our annual report on Form 10-K for the year ended December 31, 2024.
Table of Contents
Contractual Obligations
Our largest contractual obligations as of December 31, 2025, include the following:
• principal payments related to our Credit Agreement that are included in our consolidated balance sheet and the related periodic interest payments;
• scheduled payments related to liabilities for certain multi-year license agreements for internal-use software that are included in our consolidated balance sheet;
• operating lease obligations that are included in our consolidated balance sheet; and
• other contractual commitments associated with agreements that are enforceable and legally binding.
In addition, we have gross unrecognized income tax benefits, including related interest and penalties, recorded on our consolidated balance sheet, the nature of which is uncertain with respect to settlement or release with the relevant tax authorities. See Note 10, Income Taxes, of our Notes to Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K.
Notes 3, Debt, 11, Leases, and 12, Commitments and Contingencies , of our Notes to Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K provide additional information regarding our contractual obligations and contingencies.
Critical Accounting Policies and Estimates
The preparation of the consolidated financial statements requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and other assumptions that we believe to be proper and reasonable under the circumstances. We continually evaluate the appropriateness of estimates and assumptions used in the preparation of our consolidated financial statements. Actual results could differ from those estimates.
The following key accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the consolidated financial statements. See Note 1, Nature of Business and Summary of Significant Accounting Policies, and Note 2, Revenue , to our Notes to Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K for a further discussion of significant accounting policies and revenue recognition.
Revenue Recognition
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 we expect to be entitled to receive in exchange for those products and services.
Our software license arrangements provide the customer with the right to use functional intellectual property for the duration of the contract term. Implementation, support, and other services are typically considered distinct performance obligations when sold with a software license. Significant judgment is required to determine the stand-alone selling price (“SSP”) for each performance obligation, the amount allocated to each performance obligation and whether it depicts the amount that we expect to be entitled to receive in exchange for the related product and/or service. As the selling prices of our software licenses are highly variable, we estimate SSP of our software licenses using the residual approach when the software license is sold with other services and observable SSPs exist for the other services. We use a range of amounts to estimate SSP for maintenance and services. These ranges are based on stand-alone sales and vary based on the type of service and geographic region. If the SSP of a performance obligation is not directly observable, we will maximize observable inputs to determine its SSP.
When a software license arrangement contains payment terms that are extended beyond one year, a significant financing component may exist. The significant financing component is calculated as the difference between the stated value and present value of the software license fees and is recognized as interest income over the extended payment period. Judgment is used in determining: (1) whether the financing component in a software license agreement is significant and, if so, (2) the discount rate used in calculating the significant financing component.
We assess the significance of the financing component based on the ratio of license fees paid over time to total license fees. If determined to be significant, the financing component is calculated using a rate that discounts the license fees to the cash selling price.
Table of Contents
Our SaaS-based and PaaS-based arrangements represent a single promise to provide continuous access to our software solutions and their processing capabilities in the form of a service through one of our data centers. These arrangements may include fixed and/or variable consideration. Fixed consideration is recognized over the term of the arrangement and variable consideration, which is a function of transaction volume or another usage-based measure, generally meets the allocation objective and revenue is recognized as the usage occurs.
We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the creditworthiness of the customer, economic conditions in the customer’s industry and geographic location, and general economic conditions.
Certain of our arrangements are through unrelated distributors or sales agents. For software license arrangements in which we act as a distributor of another company’s product, and in certain circumstances, modify or enhance the product, revenues are recorded on a gross basis. These include arrangements in which we take control of the products and are responsible for providing the product or service. For software license arrangements in which we act as a sales agent for another company’s product, revenues are recorded on a net basis. Judgment is required in evaluating the facts and circumstances of our relationship with the distributor or sales agent as well as our operating history and practices that can impact the timing of revenue recognition related to these arrangements. For software license arrangements in which we utilize a third-party distributor or sales agent, we recognize revenue upon transfer of control of the software license(s) to the third-party distributor or sales agent.
We may execute more than one contract or agreement with a single customer at or near the same time. The separate contracts or agreements may be viewed as one combined arrangement or separate agreements for revenue recognition purposes. We evaluate whether the agreements were negotiated as a package with a single commercial objective, whether the products or services promised in the agreements represent a single performance obligation, or whether the amount of consideration to be paid in one agreement depends on the price and/or performance of another agreement to reach appropriate conclusions regarding whether such arrangements are related or separate. The conclusions reached can impact the allocation of the transaction price to each performance obligation and the timing of revenue recognition related to those arrangements.
Intangible Assets and Goodwill
Our business acquisitions typically result in the recording of intangible assets. As of December 31, 2025 and 2024, our intangible assets, excluding goodwill, net of accumulated amortization, were $147.1 million and $165.4 million, respectively. The determination of the value of such intangible assets requires management to make estimates and assumptions that affect the consolidated financial statements. We assess potential impairments to intangible assets when there is evidence that events or changes in circumstances indicate the carrying amount of an asset may not be recovered. Judgments regarding the existence of impairment indicators and future cash flows related to intangible assets are based on operational performance of our businesses, market conditions, and other factors. Although there are inherent uncertainties in this assessment process, the estimates and assumptions used, including estimates of future cash flows, volumes, market penetration and discount rates, are consistent with our internal planning. If these estimates or their related assumptions change in the future, we may be required to record an impairment charge on all or a portion of our intangible assets. Furthermore, we cannot predict the occurrence of future impairment-triggering events nor the impact such events might have on our reported asset values. Future events could cause us to conclude that impairment indicators exist and that intangible assets associated with acquired businesses are impaired. Any resulting impairmentloss could have an impact on our results of operations.
Other intangible assets are amortized using the straight-line method over periods ranging from four to 20 years.
As of December 31, 2025 and 2024, our goodwill was $1.2 billion. In accordance with 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. We evaluate goodwill at the reporting unit level and have identified our reportable segments, Payment Software and Billers, as our reporting units. 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 valuation model is common practice in impairment testing in the absence of available transactional market evidence to determine the fair value.
Table of Contents
The key assumptions used in the discounted cash flow valuation model include discount rates, growth rates, cash flow projections, and terminal value rates. Discount rates, growth rates, and cash flow projections are the most sensitive and susceptible to change, as they require significant management judgment. Discount rates are determined by using a weighted average cost of capital (“WACC”). The WACC considers market and industry data, as well as Company-specific risk factors. Operational management, considering industry and Company-specific historical and projected data, develops growth rates and cash flow projections for each reporting unit. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long-term growth rates. If the calculated fair value is less than the current carrying value, impairment of the reporting unit may exist. The implied fair value of goodwill is determined in a manner similar to how goodwill is calculated in a business combination. If the implied fair value of goodwill exceeds the carrying value of goodwill assigned to the reporting unit, there is no impairment. If the carrying value of goodwill assigned to the reporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded to write down the carrying value. The calculated fair value substantially exceeds the current carrying value for all reporting units. No reporting units were deemed to be at risk of failing Step 1 of the goodwill impairment test under ASC 350.
Stock-Based Compensation
On June 9, 2020, upon recommendation of the Board, stockholders approved the ACI Worldwide, Inc. 2020 Equity and Incentive Compensation Plan (the “2020 Plan”). The 2020 Plan authorizes the Board to provide for equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, dividend equivalents, and certain other awards, including those denominated or payable in, or otherwise based on, our common stock ("awards"). The purpose of the 2020 Plan is to provide incentives and rewards for service and/or performance by providing awards to non-employee directors, officers, other employees, and certain consultants and other service providers of us and our subsidiaries. Following the approval of the 2020 Plan, the 2016 Incentive Plan was terminated. Termination of the 2016 Incentive Plan did not affect any equity awards outstanding under the 2016 Incentive Plan or 2005 Incentive Plan.
Performance share awards granted with a total shareholder return component ("TSRs") are shares that are earned, if at all, based upon achievement of performance goals over a specified period. For 2025, 2024, and 2023, performance share awards granted are earned, if at all, based upon achievement, over a specified period that must not be less than one year and is typically a three-year performance period. The awards have operating performance goals that include (i) adjusted EBITDA metrics and (ii) revenue growth rates as determined by the Company with a TSR multiplier up to plus or minus 20%. Up to 200% of the performance shares could be earned upon achievement of the performance goals, including the multiplier. To determine the grant date fair value of the TSRs, a Monte Carlo simulation model is used. We recognize compensation expense for the TSRs over the performance period based on the grant date fair value. On a quarterly basis, management evaluates the probability that the threshold performance goals will be achieved, if at all, and the anticipated level of attainment to determine the amount of compensation expense to record in the consolidated financial statements.
Restricted share unit awards (“RSUs”) generally have requisite service periods of three years and may vest 100% upon the three-year anniversary or in equal increments quarterly or annually. Under each arrangement, RSUs are issued without direct cost to the employee on the vesting date. We estimate the fair value of RSUs based upon the market price of our stock on the date of grant. We recognize compensation expense for RSUs on a straight-line basis over the requisite service period.
The assumptions utilized in the Monte Carlo simulation models, as well as the description of the plans the stock-based awards are granted under are described in further detail in Note 5, Stock-Based Compensation Plans , to our Notes to Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K.
Accounting for Income Taxes
Accounting for income taxes requires significant judgments in the development of estimates used in income tax calculations. Such judgments include, but are not limited to, the likelihood we would realize the benefits of net operating loss carryforwards and/or foreign tax credit carryforwards, the adequacy of valuation allowances, and the rates used to measure transactions with foreign subsidiaries. As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. The judgments and estimates used are subject to challenge by domestic and foreign taxing authorities.
We account for income taxes in accordance with ASC 740, Income Taxes . As part of our process of determining current tax liability, we exercise judgment in evaluating positions we have taken in our tax returns. We periodically assess our tax exposures and establish, or adjust, estimated unrecognized benefits for probable assessments by taxing authorities, including the Internal Revenue Service, and various foreign and state authorities. Such unrecognized tax benefits represent the estimated provision for income taxes expected to ultimately be paid. It is possible that either domestic or foreign taxing authorities could
Table of Contents
challenge those judgments or positions and draw conclusions that would cause us to incur tax liabilities in excess of, or realize benefits less than, those currently recorded. In addition, changes in the geographical mix or estimated amount of annual pretax income could impact our overall effective tax rate.
To the extent recovery of deferred tax assets is not more likely than not, we record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. Although we have considered future taxable income along with prudent and feasible tax planning strategies in assessing the need for a valuation allowance, if we should determine that we would not be able to realize all or part of our deferred tax assets in the future, an adjustment to deferred tax assets would be charged to income in the period any such determination was made. Likewise, in the event we are able to realize our deferred tax assets in the future in excess of the net recorded amount, an adjustment to deferred tax assets would increase income in the period any such determination was made.
New Accounting Standards Recently Adopted
For information related to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 1, Nature of Business and Summary of Significant Accounting Policies , to our Notes to Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K.
