# ACI WORLDWIDE, INC. (ACIW) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from ACI WORLDWIDE, INC.'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/935036/000093503622000010/aciw-20211231.htm
Accession: 0000935036-22-000010
Filing date: 2022-02-24
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/ACIW/
All MD&A years: /company/ACIW/mda/
Next year: /company/ACIW/mda/fy2022/ (FY 2022)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

ACI Worldwide powers digital payments for more than 6,000 organizations around the world. More than 1,000 of the largest banks and intermediaries, as well as thousands of global merchants, rely on ACI to execute $14 trillion each day in payments and securities. In addition, myriad organizations utilize our electronic bill presentment and payment services. Through our comprehensive suite of software solutions delivered on customers’ premises, through the public cloud or through ACI’s private cloud, we provide real-time, immediate payments capabilities and enable the industry’s most complete omni-channel payments experience.

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 reseller and/or distributor networks. Our products and solutions are used globally by banks and 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,

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corporations, and internet commerce sites. Accordingly, 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. Our products are marketed under the ACI Worldwide brand.

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. Refining our global infrastructure is a critical component of driving our growth. 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.

Key trends that currently impact our strategies and operations include:

Increasing digital payment transaction volumes. The adoption of digital payments continues to accelerate, propelled by the digitization of cash, financial inclusion efforts of countries throughout the world, the Internet of Things, rapid growth of eCommerce and the adoption of real-time payments. COVID-19 has further accelerated this growth as more people, governments, and businesses have embraced digital payments—a change likely to continue once the pandemic is over. We leverage the growth in transaction volumes through the licensing of new systems to customers whose older systems cannot handle increased volume, through the sale of capacity upgrades to existing customers, and through the scalability of our platform-based solutions.

Adoption of real-time payments. Expectations from both consumers and businesses are continuing to drive the payments world to more real-time delivery. This is bolstered by the new data-rich ISO 20022 messaging format, which promises to deliver greater value to banks and their customers. We are seeing global players with existing schemes working to expand capacity in anticipation of volume growth (further driven by COVID-19) and new payment types. Mature markets, including India, the United Kingdom, Australia, Malaysia, Singapore, Thailand, and the Nordics (P27), continue to accelerate innovation, especially in terms of overlay services and cross-border connectivity. The United States is driving real-time payments adoption through Zelle, TCH Real-Time Payments, and the planned FedNow service, while Brazil's PIX was launched in November 2020. ACI's broad software portfolio, experience, and strategic partnerships with Mastercard, Microsoft, and Mindgate Solutions continue to position us as the leaders in real-time payments, helping to drive seamless connectivity, increased security, and end-to-end modernization for organizations throughout the world.

Adoption of cloud technology. To leverage lower-cost computing technologies, increase time to market, accelerate innovation, and ensure scalability and resiliency, banks and intermediaries, merchants, and billers are seeking to transition their systems to make use of cloud technology. Our investments and partnerships, as demonstrated by our product enablement and initial optimization onto Microsoft Azure, enable us to leverage the hybrid cloud technology benefits of automation and rapid deployment and delivery, while preserving the ACI fundamentals of resiliency and scalability, to deliver cloud capabilities now and in the future. Market sizing data from Ovum (now Omdia) indicates that spend on SaaS and PaaS payment systems is growing faster than spend on installed applications.

Digital payments fraud and compliance. The rise in digital payment transaction volumes and payment types has subsequently led to an increase in online fraud in many guises and across all channels. Driven in part by COVID-19, we have seen an increase in phishing and friendly fraud, as well as remote banking fraud and authorized push payment scams. Real-time payments bring a new level of urgency, as money cannot easily be retrieved once it has been sent. Banks and intermediaries, merchants, and billers must find faster, smarter, more accurate and increasingly automated ways to secure customers and meet regulatory pressures. We continue to see opportunity to offer our fraud detection solutions with advanced machine learning capabilities to help customers manage the growing levels of digital payments fraud and compliance activity.

Omni-commerce. Shoppers are increasingly browsing, buying, and returning items across channels, including in-store, online, and mobile. COVID-19 has accelerated this trend, leading to an increase in contactless payments, click and collect, and curbside collection. Merchants from all industries, including grocers, fuel and convenience stores, are being tasked with delivering seamless experiences that include pay-in-aisle, kiosks, mobile app payments, QR code payments, eCommerce, traditional and mobile POS, buy online pickup in-store (BOPIS) and buy online return in-store (BORIS). We believe there is significant opportunity to provide merchants with the tools to deliver a seamless, secure, personalized experience that creates loyalty and satisfaction, and drives conversion rates while protecting consumer data and preventing fraud.

Request for Payment (RfP). Markets across the world are introducing an innovative payments service called Request for Payment (RfP). This technology is known by different names in different markets: Collect payments in India, Request 2 Pay in Europe, Request To Pay (RTP) in the United Kingdom, or Request for Payment (RfP) in the United States. RfP offers secure

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messaging between consumers and billers or merchants, wherein a biller or merchant can request a payment from a consumer through the use of a trusted app, most likely a banking app. RfP is primarily being implemented on top of real-time payments, which are continuing to grow and flourish as countries around the world develop and launch their real-time schemes as noted above. ACI is in a unique position to deliver this overlay service given our real-time payments software, our relationships with banks, merchants and billers, and global real-time connectivity.

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) 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.

We have historically included assumed renewals in backlog estimates 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.

•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.

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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, 2021; September 30, 2021; June 30, 2021; March 31, 2021; and December 31, 2020 (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.

[[GREPCENT_TABLE]]
[["","December 31, 2021","","September 30, 2021","","June 30, 2021","","March 31, 2021","","December 31, 2020"],["Banks","$","2,272","","","$","2,310","","","$","2,248","","","$","2,117","","","$","2,167"],["Merchants","754","","","788","","","839","","","811","","","808"],["Billers","3,084","","","3,112","","","3,094","","","3,016","","","3,064"],["Total","$","6,110","","","$","6,210","","","$","6,181","","","$","5,944","","","$","6,039"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","December 31, 2021","","September 30, 2021","","June 30, 2021","","March 31, 2021","","December 31, 2020"],["Committed","$","2,095","","","$","2,240","","","$","2,283","","","$","2,308","","","$","2,447"],["Renewal","4,015","","","3,970","","","3,898","","","3,636","","","3,592"],["Total","$","6,110","","","$","6,210","","","$","6,181","","","$","5,944","","","$","6,039"]]
[[/GREPCENT_TABLE]]

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 (e.g. economic declines resulting from COVID-19) 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.

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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, 2021 Compared to Year Ended December 31, 2020

[[GREPCENT_TABLE]]
[["","2021","","2020"],["","Amount","","% of Total Revenue","","$ Change vs 2020","","% Change vs 2020","","Amount","","% of TotalRevenue"],["Revenues:"],["Software as a service and platform as a service","$","774,342","","","57","%","","$","5,162","","","1","%","","$","769,180","","","60","%"],["License","319,867","","","23","%","","72,971","","","30","%","","246,896","","","19","%"],["Maintenance","210,499","","","15","%","","(1,198)","","","(1)","%","","211,697","","","16","%"],["Services","65,890","","","5","%","","(659)","","","(1)","%","","66,549","","","5","%"],["Total revenues","1,370,598","","","100","%","","76,276","","","6","%","","1,294,322","","","100","%"],["Operating expenses:"],["Cost of revenue","638,871","","","47","%","","16,412","","","3","%","","622,459","","","48","%"],["Research and development","144,310","","","11","%","","5,017","","","4","%","","139,293","","","11","%"],["Selling and marketing","126,539","","","9","%","","22,972","","","22","%","","103,567","","","8","%"],["General and administrative","123,801","","","9","%","","(28,667)","","","(19)","%","","152,468","","","12","%"],["Depreciation and amortization","127,180","","","9","%","","(4,611)","","","(3)","%","","131,791","","","10","%"],["Total operating expenses","1,160,701","","","85","%","","11,123","","","1","%","","1,149,578","","","89","%"],["Operating income","209,897","","","15","%","","65,153","","","45","%","","144,744","","","11","%"],["Other income (expense):"],["Interest expense","(45,060)","","","(3)","%","","11,570","","","(20)","%","","(56,630)","","","(4)","%"],["Interest income","11,522","","","1","%","","(106)","","","(1)","%","","11,628","","","1","%"],["Other, net","(1,294)","","","\u2014","%","","(178)","","","16","%","","(1,116)","","","\u2014","%"],["Total other income (expense)","(34,832)","","","(2)","%","","11,286","","","(24)","%","","(46,118)","","","(3)","%"],["Income before income taxes","175,065","","","13","%","","76,439","","","78","%","","98,626","","","8","%"],["Income tax expense","47,274","","","3","%","","21,308","","","82","%","","25,966","","","2","%"],["Net income","$","127,791","","","10","%","","$","55,131","","","76","%","","$","72,660","","","6","%"]]
[[/GREPCENT_TABLE]]

Revenues

Total revenue for the year ended December 31, 2021, increased $76.3 million, or 6%, as compared to the same period in 2020.

•The impact of certain foreign currencies strengthening against the U.S. dollar resulted in a $7.3 million increase in total revenue during the year ended December 31, 2021, as compared to the same period in 2020.

•Adjusted for the impact of foreign currency, total revenue for the year ended December 31, 2021, increased $69.0 million, or 5%, as compared to the same period in 2020.

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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 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 revenue from SaaS and PaaS arrangements that does 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 $5.2 million, or 1%, during the year ended December 31, 2021, as compared to the same period in 2020.

•The impact of certain foreign currencies strengthening against the U.S. dollar resulted in a $3.1 million increase in SaaS and PaaS revenue during the year ended December 31, 2021, as compared to the same period in 2020.

•Adjusted for the impact of foreign currency, SaaS and PaaS revenue for the year ended December 31, 2021, increased $2.1 million, as compared to the same period in 2020.

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 or annually (initial license fees). License revenue also includes license and capacity fees payable quarterly or monthly due to negotiated customer payment terms (monthly license fees). 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 $73.0 million, or 30%, during the year ended December 31, 2021, as compared to the same period in 2020.

•The impact of certain foreign currencies weakening against the U.S. dollar resulted in a $0.8 million decrease in license revenue during the year ended December 31, 2021, as compared to the same period in 2020.

•Adjusted for the impact of foreign currency, license revenue for the year ended December 31, 2021, increased $73.8 million, as compared to the same period in 2020.

•The increase in license revenue was primarily driven by renewal timing and relative size of license and capacity events during the year ended December 31, 2021, as compared to the same period in 2020.

Maintenance Revenue

Maintenance revenue includes standard, enhanced, and premium customer support and any post contract support fees received from customers for the provision of product support services.

Maintenance revenue decreased $1.2 million, or 1%, during the year ended December 31, 2021, as compared to the same period in 2020.

•The impact of foreign currencies strengthening against the U.S. dollar resulted in a $3.9 million increase in maintenance revenue during the year ended December 31, 2021, as compared to the same period in 2020.

•Adjusted for the impact of foreign currency, maintenance revenue for the year ended December 31, 2021, decreased $5.1 million, or 2%, as compared to the same period in 2020.

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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 $0.7 million, or 1%, during the year ended December 31, 2021, as compared to the same period in 2020.

•The impact of foreign currencies strengthening against the U.S. dollar resulted in a $1.1 million increase in services revenue during the year ended December 31, 2021, as compared to the same period in 2020.

•Adjusted for the impact of foreign currency, services revenue for the year ended December 31, 2021, decreased $1.8 million, or 3%, as compared to the same period in 2020.

Operating Expenses

Total operating expenses for the year ended December 31, 2021, increased $11.1 million, or 1%, as compared to the same period in 2020.

•Total operating expenses for the year ended December 31, 2021, included $13.4 million of expense related to significant transactions and cost reduction strategies implemented during the period. Total operating expenses for the year ended December 31, 2020, included $44.6 million of significant transaction-related expenses associated with cost reduction strategies implemented during the period and integration of the Speedpay acquisition.

•The impact of foreign currencies strengthening against the U.S. dollar resulted in a $9.4 million increase in total operating expenses for the year ended December 31, 2021, as compared to the same period in 2020.

•Adjusted for the impact of significant transaction-related expenses and foreign currency, total operating expenses for the year ended December 31, 2021, increased $32.9 million, or 3%, as compared to the same period in 2020.

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 $16.4 million, or 3%, during the year ended December 31, 2021, as compared to the same period in 2020.

•Cost of revenue for the year ended December 31, 2020, included $4.3 million of significant transaction-related expenses associated with the acquisition of Speedpay and cost reduction strategies implemented during the period.

•The impact of foreign currencies strengthening against the U.S. dollar resulted in a $3.8 million increase in cost of revenue during the year ended December 31, 2021, as compared to the same period in 2020.

•Adjusted for the impact of significant transaction-related expenses and foreign currency, cost of revenue increased $16.9 million, or 3%, for the year ended December 31, 2021, as compared to the same period in 2020.

•The increase was primarily due to higher payment card interchange and processing fees of $18.3 million, partially offset by lower personnel and related expenses of $3.8 million.

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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 $5.0 million, or 4%, during the year ended December 31, 2021, as compared to the same period in 2020.

•R&D expense for the years ended December 31, 2021 and 2020, included $2.4 million and $1.0 million, respectively, of expenses related to significant transactions and cost reduction strategies implemented during the period.

•The impact of foreign currencies strengthening against the U.S. dollar resulted in a $1.6 million increase in R&D expense during the year ended December 31, 2021, as compared to the same period in 2020.

•Adjusted for the impact of significant transaction-related expenses and foreign currency, R&D expense increased $2.0 million, or 1%, during the year ended December 31, 2021, as compared to the same period in 2020.

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 $23.0 million, or 22%, during the year ended December 31, 2021, as compared to the same period in 2020.

•The impact of foreign currencies strengthening against the U.S. dollar resulted in a $1.6 million increase in selling and marketing expense during the year ended December 31, 2021, as compared to the same period in 2020.

•Adjusted for the impact of foreign currency, selling and marketing expense increased $21.4 million, or 20%, for the year ended December 31, 2021, as compared to the same period in 2020.

•The increase was primarily due to higher personnel and related expenses and advertising expenses of $17.0 million and $4.4 million, respectively.

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 decreased $28.7 million, or 19%, during the year ended December 31, 2021, as compared to the same period in 2020.

•General and administrative expenses for the year ended December 31, 2021 and 2020, included $11.0 million and $39.3 million, respectively, of expenses related to significant transaction and cost reduction strategies implemented during the period.

•The impact of foreign currencies strengthening against the U.S. dollar resulted in a $1.4 million increase in general and administrative expense during the year ended December 31, 2021, as compared to the same period in 2020.

•Adjusted for the impact of significant transaction-related expenses and foreign currency, general and administrative expense decreased $1.8 million, or 2%, for the year ended December 31, 2021, as compared to the same period in 2020.

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Depreciation and Amortization

Depreciation and amortization decreased $4.6 million, or 3%, during the year ended December 31, 2021, as compared to the same period in 2020.

•The impact of foreign currencies strengthening against the U.S. dollar resulted in a $1.0 million increase in depreciation and amortization expense during the year ended December 31, 2021, as compared to the same period in 2020.

•Adjusted for the impact of foreign currency, depreciation and amortization decreased $5.6 million, or 4%, for the year ended December 31, 2021, as compared to the same period in 2020.

Other Income and Expense

Interest expense for the year ended December 31, 2021, decreased $11.6 million, or 20%, as compared to the same period in 2020, primarily due to lower comparative debt balances.

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, 2021, decreased $0.1 million, or 1%, as compared to the same period in 2020.

Other, net is primarily comprised of foreign currency transaction gains and losses. Other, net was $1.3 million and $1.1 million of expense for the years ended December 31, 2021 and 2020.

Income Taxes

The effective tax rates for the years ended December 31, 2021 and 2020, were approximately 27% and 26%, respectively. Our effective tax rates vary from our federal statutory rates due to operating in multiple foreign countries where we apply foreign tax laws and rates which differ from those we apply to the income generated from our domestic operations. Of the foreign jurisdictions in which we operate, our December 31, 2021, effective rate was most impacted by our operations in Colombia, Ireland, and Singapore, and our December 31, 2020, effective tax rate was most impacted by our operations in Ireland, Mexico, Singapore, and the United Kingdom.

Refer to Note 11, Income Taxes, to our Notes to Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K for additional information.

Prior Year Results

For discussion of the year ended December 31, 2020, compared to the year ended December 31, 2019, see Results of Operations in Part II, Item 7 of our annual report on Form 10-K for the year ended December 31, 2020.

Segment Results

In January 2021, we made a change in organizational structure to align with our strategic direction. As a result, the Company reassessed its segment reporting structure due to changes in how the Company's chief operating decision maker ("CODM") assesses the Company's performance and allocates resources. Beginning with the first quarter of 2021, we report financial performance based on our new segments, Banks, Merchants, and Billers, and analyze Segment Adjusted EBITDA as a measure of segment profitability.

Our Chief Executive Officer is also our CODM. The CODM, together with other senior management personnel, focus their review on consolidated financial information and the allocation of resources based on operating results, including revenues and Segment Adjusted EBITDA, for each segment, separate from the corporate operations. No operating segments have been aggregated to form the reportable segments.

Banks. ACI provides payment solutions to large and mid-size banks globally for retail banking, real time, digital, and other payment services. These solutions transform banks’ complex payment environments to speed time to market, reduce costs, and deliver a consistent experience to customers across channels while enabling them to prevent and rapidly react to fraudulent activity. In addition, they enable banks to meet the requirements of different real-time payments schemes and to quickly create differentiated products to meet consumer, business, and merchant demands.

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Merchants. ACI’s support of merchants globally includes Tier 1 and Tier 2 merchants, online-only merchants and the payment service providers, independent selling organizations, value-added resellers, and acquirers who service them. These customers operate in a variety of verticals, including general merchandise, grocery, hospitality, dining, transportation, and others. Our solutions provide merchants with a secure, omni-channel payments platform that gives them independence from third-party payment providers. They also offer secure solutions to online-only merchants that provide consumers with a convenient and seamless way to shop.

Billers. Within the biller segment, ACI provides electronic bill presentment and payment (“EBPP”) services to companies operating in the consumer finance, insurance, healthcare, higher education, utility, government, and mortgage categories. The solutions enable these customers to support a wide range of payment options and provide a convenient consumer payments experience that drives consumer loyalty and increases revenue.

Revenue is attributed to the reportable segments based upon the customer. Expenses are attributed to the reportable segments in one of three methods, (1) direct costs of the segment, (2) labor costs that can be attributed based upon time tracking for individual projects, or (3) costs that are allocated. Allocated costs are generally marketing and sales related activities.

Segment Adjusted EBITDA is the measure reported to the CODM for purposes of making decisions on allocating resources and assessing the performance of our segments and, therefore, Segment Adjusted EBITDA is presented in conformity with ASC 280, Segment Reporting. Segment Adjusted EBITDA is defined as earnings (loss) from operations before interest, income tax expense (benefit), depreciation and amortization (“EBITDA”) adjusted to exclude net other income (expense).

Corporate and unallocated expenses includes global facilities and information technology costs and long-term product roadmap expenses in addition to the corporate overhead costs that are not allocated to reportable segments. The overhead costs relate to human resources, finance, legal, accounting, and merger and acquisition activity. These costs along with depreciation and amortization and stock-based compensation are not considered when management evaluates segment performance.

The following is selected financial data for our reportable segments for the periods indicated (in thousands):

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2021","","2020"],["Revenues"],["Banks","$","625,125","","","$","558,498"],["Merchants","152,988","","","149,342"],["Billers","592,485","","","586,482"],["Total revenue","$","1,370,598","","","$","1,294,322"],["Segment Adjusted EBITDA"],["Banks","$","372,949","","","$","331,445"],["Merchants","54,266","","","53,383"],["Billers","129,048","","","135,144"],["Depreciation and amortization","(133,393)","","","(140,316)"],["Stock-based compensation expense","(27,242)","","","(29,602)"],["Corporate and unallocated expenses","(185,731)","","","(205,310)"],["Interest, net","(33,538)","","","(45,002)"],["Other, net","(1,294)","","","(1,116)"],["Income before income taxes","$","175,065","","","$","98,626"]]
[[/GREPCENT_TABLE]]

Banks Segment Adjusted EBITDA increased $41.5 million for the year ended December 31, 2021, compared to the same period in 2020, primarily due to a $66.6 million increase in revenue, partially offset by a $25.1 million increase in cash operating expense.

Merchants Segment Adjusted EBITDA increased $0.9 million for the year ended December 31, 2021, compared to the same period in 2020, primarily due to a $3.6 million increase in revenue, partially offset by a $2.7 million increase in cash operating expense.

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Billers Segment Adjusted EBITDA decreased $6.1 million for the year ended December 31, 2021, compared to the same period in 2020, primarily due to a $12.1 million increase in cash operating expense, partially offset by a $6.0 million increase in revenue.

Prior Year Results

For discussion of 2020 compared to 2019, see Segment Results in Part II, Item 7 of our annual report on Form 10-K for the year ended December 31, 2020.

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, cash and cash equivalents, and available borrowings under our revolving credit facility over the next 12 months and beyond.

Our cash requirements in the future may be financed through additional equity or debt financings. However, the disruption in the capital markets caused by the COVID-19 pandemic could make any new financing more challenging, and there can be no assurance that such financings will be obtained on commercially reasonable terms, or at all. We believe our liquidity will allow us to manage the anticipated impact of COVID-19 on our business operations for the foreseeable future, which could include reductions in revenue and delays in payments from customers and partners. We are compliant with our debt covenants and do not anticipate an inability to service our debt. As the challenges posed by COVID-19 on our business and the economy as a whole evolve, we continue to evaluate our liquidity and financial position in light of further developments, particularly those relating to COVID-19.

Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less. As of December 31, 2021, we had $122.1 million of cash and cash equivalents, of which $59.7 million was held by our foreign subsidiaries. If these funds were needed for our operations in the United States, we may potentially be required to accrue and pay foreign and U.S. state income taxes to repatriate these funds. As of December 31, 2021, only the earnings in our Indian foreign subsidiaries are indefinitely reinvested. The earnings of all other foreign entities are no longer indefinitely reinvested. We are also permanently reinvested for outside book/tax basis differences related to foreign subsidiaries. These outside basis differences could reverse through sales of the foreign subsidiaries, as well as various other events, none of which are considered probable as of December 31, 2021.

Available Liquidity

The following table sets forth our available liquidity for the periods indicated (in thousands):

[[GREPCENT_TABLE]]
[["","December 31,"],["","2021","","2020"],["Cash and cash equivalents","$","122,059","","","$","165,374"],["Availability under revolving credit facility","498,500","","","443,500"],["Total liquidity","$","620,559","","","$","608,874"]]
[[/GREPCENT_TABLE]]

The increase in total liquidity is primarily attributable to positive operating cash flows of $220.5 million, partially offset by $45.4 million of payments to purchase property and equipment and software and distribution rights, $39.0 million of repayments on the Term Loans and $107.4 million of payments related to stock repurchases. We also repaid a net $55.0 million on the Revolving Credit Facility.

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, 2021, the full $75.0 million was available.

Stock Repurchase Program

Our 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 December 2021, the board approved the repurchase of the Company's common stock of up to $250.0 million, in place of the remaining purchase amounts previously authorized.

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We repurchased 3,000,000 shares for $107.4 million under our stock repurchase program during the year ended December 31, 2021. Under the program to date, we have repurchased 49,357,495 shares for approximately $719.7 million. As of December 31, 2021, the maximum remaining amount authorized for purchase under the stock repurchase program was approximately $216.3 million.

Subsequent to December 31, 2021, the Company has repurchased additional shares under the repurchase program.

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 7, 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.

Cash Flows

The following table sets forth summary cash flow data for the periods indicated (in thousands).

[[GREPCENT_TABLE]]
[["","Years Ended December 31,"],["","2021","","2020"],["Net cash provided by (used in):"],["Operating activities","$","220,473","","","$","314,895"],["Investing activities","(45,368)","","","(30,699)"],["Financing activities","(256,878)","","","(159,889)"]]
[[/GREPCENT_TABLE]]

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 includes employee expenditures, taxes, interest payments, leased facilities,

Cash flows provided by operating activities were $94.4 million lower for the year ended December 31, 2021, compared to the same period in 2020, due to the timing of working capital. Our current policy is to use our operating cash flow primarily for funding capital expenditures, lease payments, stock repurchases, and acquisitions.

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, 2021, we used $45.4 million to purchase software, property, and equipment, as compared to $46.6 million during the same period in 2020.

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 2021, we repaid a net $55.0 million on the Revolving Credit Facility and $39.0 million on the Term Loans. In addition, we used $107.4 million to repurchase common stock and we received proceeds of $12.3 million from the exercise of stock options and the issuance of common stock under our 2017 Employee Stock Purchase Plan, as amended. We also used $14.8 million for the repurchase of stock-based compensation awards for tax withholdings and $37.8 million for settlement assets and liabilities due to processing timing. During 2020, we repaid a net $184.0 million on the Revolving Credit Facility and $39.0 million on the Term Loans. In addition, we used $28.9 million to repurchase common stock, and we received proceeds of $15.7 million from the exercise of stock options and the issuance of common stock under our 2017 Employee Stock Purchase Plan, as amended. We also used $11.6 million for the repurchase of stock-based compensation awards for tax withholdings and received $101.7 million from settlement assets and liabilities due to processing timing.

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Prior Year Results

For discussion of 2020 compared to 2019, see Liquidity and Capital Resources in Part II, Item 7 of our annual report on Form 10-K for the year ended December 31, 2020.

Contractual Obligations

Our largest contractual obligations as of December 31, 2021, include the following:

•principal payments related to our Credit Agreement that are included in our consolidated balance sheet and the related periodic interest payments;

•semi-annual interest payments on our 2026 Notes and the ultimate principal payment that is included in our consolidated balance sheet;

•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 11, Income Taxes, of our Notes to Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K.

Notes 4, Debt, 12, Leases, and 13, 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.

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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.

Our SaaS-based and PaaS-based arrangements represent a single promise to provide continuous access to its 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, 2021 and 2020, our intangible assets, excluding goodwill, net of accumulated amortization, were $283.0 million and $322.0 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 impairment loss 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, 2021 and 2020, our goodwill was $1.3 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, Banks, Merchants, 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.

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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.

Business Combinations

We apply the provisions of ASC 805, Business Combinations, in the accounting for our acquisitions. It requires us to recognize the assets acquired and the liabilities assumed at their acquisition date fair values, separately from goodwill. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.

Critical estimates in valuing certain intangible assets include but are not limited to future expected cash flows from customer relationships, covenants not to compete, and acquired developed technologies; brand awareness and market position, as well as assumptions about the period of time the brand will continue to be used in our product portfolio; and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Other estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed.

Stock-Based Compensation

On June 9, 2020, upon recommendation of our 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.

Total shareholder return awards (“TSRs”) are performance shares that are earned, if at all, based upon our total shareholder return as compared to a group of peer companies over a three-year performance period. The award payout can range from 0% to 200%. To determine the grant date fair value of TSRs, a Monte Carlo simulation model is used. We recognize compensation expense for the TSRs over a three-year performance period based on the grant date fair value.

Restricted share unit awards (“RSUs”) generally have requisite service periods of three years and vest in increments of 33% on the anniversary of the grant dates. 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 6, Stock-Based Compensation Plans, to our Notes to Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K.

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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 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.