ACI Worldwide

end-to-end solutions for secure electronic payments

annual report 2008

W    O    R    L    D    W    I    D    E

Fellow Shareholders,

2008 was a year of change in the macro economy and in our customer 
base, particularly in the financial services client segment. One significant 
outcome of the banking crisis of 2008 was the realization in the
marketplace that the payments business is critical to banking sector 
profitability. Payments are now crucial to the health and success of 
financial firms and will drive banking competition in the future.  ACI is 
well placed to grow its electronic payments software business as our end 
users recognize the critical nature of our intellectual property offering. 
Simply speaking, the turmoil in the markets has underscored the 
advantage our products provide; ACI implements services and 
technology that manages the liability and deposit side of financial 
institutions and large processors. In a world where our customers need 
to rebalance their business models, ACI solutions are pivotal to their 
profitability and growth.

As I shared with you in last year’s letter, ACI has broadened the 
company’s focus to emphasize more complete solutions that offer an 
end-to-end framework for integrated payments. The thesis that our 
customers could and would invest in multiple products was proven
correct by our strong 2008 operating business performance.  ACI has 
been fortunate insofar as we repositioned our business during the 2006 
and 2007 fiscal years. Hence, looking back at October 2007 when the US 
equity markets peaked, our business model was not yet fully operational 
and our share price was not mirroring the market’s lofty performance. 
Thus, we do not regard the latter half of 2008 as a time where ACI was 
losing momentum; in fact, 2008 marked our next step towards gaining 
business momentum.

During 2008 we completed some critical business initiatives. We 
achieved the globalization of our employee headcount to better serve 
and mirror our geographic regions of growth and reap the benefits of 
our 2007 investment in service centers in both Romania and India. We 
continued to invest in and build upon the IBM Alliance and both parties 
are now focused upon the execution of our robust 6-quarter pipeline. We 
signed several important transactions during 2008 which combined
ACI’s software technology with IBM’s industry-leading (cid:54)ystem z 
hardware platforms in both Europe and in Asia. 

Risk Management

We expended capital in software research and development in the context 
of our new IBM (cid:36)lliance in order to maintain our industry-leading 
competitive advantage.  ACI also witnessed sizable amounts of contracted 
business graduate from our implementation backlog and move into current 
period GAAP revenue.  And, on the marketing and business side, we 
succeeded in moving several significant legacy “pay up-front” contracts 
with large US banking institutions to economic five-year term renewals.   
ACI remains a critical piece of the solution for banking institutions and the 
renewal of significant deals in the fourth quarter of 2008 underscored our 
importance to our end-user financial services clients. 

Backlog was impacted during 2008 by the extreme volatility of developed 
country currencies such as the Euro and the British pound. We ended the 
year at $1.407 billion in 60-month backlog, a very positive milestone given 
that we sold product throughout the world and backlog was negatively 
impacted by approximately $80 million due to declining European 
currencies. Nonetheless, in spite of currency market volatility, our sales still 
demonstrated strong growth in add-on business and renewed pricing 
power in our term extensions. New account and new sales business was 
slightly reduced compared to the previous year as we instituted a more 
disciplined approach to bidding out the cost of implementation and 
assessing the ultimate profitability of each customer.  The fourth quarter of 
2008 witnessed a record achievement by ACI whereby we signed contracts 
valued at $189 million, led by more prudently structured and far-reaching 
term renewal transactions in the United States business segment.

Mindful of the overall credit market environment, ACI has been prudently 
managing its cash and we held $113 million in cash and equivalents at 
December 31, 2008. We have instituted strong accounts receivable
practices and our collections are actually more robust than we have ever 
seen. 

Due to our focus upon long term economically valuable clients, we have 
seen a consistent and healthy rise in the monthly recurring fee income 
throughout our geographies _ up $17 million year-over-year _ as we de-
emphasized pay up-front deals. The higher recurring monthly revenue is 
more appropriately aligned with our monthly expense base and represents 
a move towards a more sustainable and predictable revenue business.

Retail Payments

Finally, the measures we have taken in 2008, ranging from migrating both 
our software engineering talent and development centers closer to the end-
customers globally to managing our expenses more prudently and renewing 
economically valuable contracts, have led to a 12% rise in revenue to $418 
million as compared to our 2007 calendar year revenue performance.  We 
achieved this rise in spite of the extreme fluctuations seen in European to 
US currency exchange rates. While the weakness of the British pound 
impacted our revenues, it equally benefited us as our sterling expense base 
shrunk in dollar cost terms. The currency market unrest reinforced the 
importance of, and utility of, our global headcount whereby revenues and 
expenses in a given country are more naturally aligned and, therefore, 
naturally hedged. 

Institutionally, during the past year, we also strengthened the executive team. 
I brought Ron Totaro to ACI in March 2008 and he serves as our Chief 
Operating Officer. In turn, Ron hired a Chief Product Officer and 
numerous strategy, planning and services team leaders across all our 
operating geographies. Ron’s direct reports focused in great detail upon 
product pricing strategy, methodologies and go-to market business plans in 
addition to multi-year product roadmaps. We worked with partners at IBM 
consulting to design and build a highly disciplined services and
implementation organization with a tightly structured corporate 
management office, deal review committee and implementation services 
methodology to create more consistent ownership, framework and 
processes globally. We are near the end of our long-term restructuring 
process and anticipate that there is a further $8 million of costs we identified 
in the latter half of 2008 that will be removed from our organization during 
the first half of 2009. With this process structure in place, we will continue 
to focus on profitable revenue growth and cost containment. 

In addition to the upheaval in the banking sector in 2008, we began to see 
margin pressure at both switch and issuer customers throughout the 
marketplace. We are optimistic that customers will react to this constraint by 
investing more intelligently in their systems upgrades needs.  We also expect 
that, while the ongoing banking  crisis means that merger activity will 
decrease the number of active customer licenses in our developed markets, 
we will also see higher capacity fee deals and higher margins in this line of 

Wholesale Payments

business. There are also ancillary opportunities in the large retailer segment 
as well that we have just begun to harness through a dedicated retailer sales 
account team. 

In the coming year, our business expectations revolve around improving 
margins and growing profitability. We are satisfied with our business 
pipeline and the quality of deals that we are seeing and believe that ACI 
management has a very good understanding of the seasonality and drivers 
as well as costs of adding new business in different geographies. We have a 
disciplined approach to scoping new business as well as to managing deal 
profitability.  The value of our software intellectual property only 
continues to rise and we are encouraged by the trends and developments 
in our business sector. 

In looking forward to 2009, we see our customers looking to reduce 
operational costs and maximize productivity of their assets.  Furthermore, 
we envision exciting opportunities in markets such as China, India and in 
Latin America. ACI established sales and operating entities in both China 
and India in 2008 in anticipation of payments hub and risk management 
solutions growth as well as Indian consumer payment systems expansions. 
In our Europe, Middle East & Africa (EMEA) segment, we think growth 
will occur in Single Euro Payments Area mandates instigating investment 
in software systems. In addition to migration opportunities, we also see a 
lot of interesting professional services opportunities in the EMEA division 
as we grow support packages for sunset products. And, finally, in the 
Americas division we see both large retailers and processors struggling 
with redundant legacy technologies at a time when they are focused upon 
improving their business productivity and margins. 

As always, I am grateful for the continued support of our employees, 
customers, partners and shareholders as we invest in ACI’s long-term 
success. I am confident that the steps we have taken over the past three 
years are building a stronger, more valuable, cohesive and productive 
company. We believe that the financial performance of ACI is already 
demonstrating the effectiveness of the steps we have already taken. We 
look forward to another year of strong operating performance which will 
only be enhanced by the depth of our organizational team and the exciting 
opportunities across our global footprint.

Philip G. Heasley
President and Chief Executive Officer

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008
Commission File Number 0-25346

ACI WORLDWIDE, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

120 Broadway, Suite 3350
New York, New York 10271
(Address of principal executive
offices, including zip code)

47-0772104
(I.R.S. Employer
Identification No.)

(646) 348-6700
(Registrant’s telephone
number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.005 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the

Securities Act. Yes n

No ¥

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of

the Act). Yes n

No ¥

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject
to such filing requirements for the past
90 days. Yes ¥

No n

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¥

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¥

Accelerated filer n

Non-accelerated filer n
(Do not check if a smaller reporting company)

Smaller reporting company n

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the

Act). Yes n

No ¥

The aggregate market value of the Company’s voting common stock held by non-affiliates of the registrant on
June 30, 2008 (the last business day of the registrant’s most recently completed second fiscal quarter), based upon
the last sale price of the common stock on that date of $17.59, was $596,639,203. For purposes of this calculation,
executive officers, directors and holders of 10% or more of the outstanding shares of the registrant’s common stock
are deemed to be affiliates of the registrant.

As of February 27, 2009, there were 34,931,432 shares of the registrant’s common stock outstanding.

(This page intentionally left blank)

TABLE OF CONTENTS

PART I

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1.
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases

of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Item 12.
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions, and Directors Independence . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14.

Page

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25

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26
26
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55
55
55
58

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58

58
58
59

Item 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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112

PART IV

1

Forward-Looking Statements

This report contains forward-looking statements based on current expectations that involve a number of risks
and uncertainties. Generally, forward-looking statements do not relate strictly to historical or current facts, and
include words or phrases such as “management anticipates,” “we believe,” “we anticipate,” “we expect,” “we plan,”
“we will,” “we are well positioned,” and words and phrases of similar impact, and include, but are not limited to,
statements regarding future operations, business strategy, business environment and key trends, as well as
statements related to expected financial and other benefits from our recent acquisition of Visual Web Solutions,
Inc., and Stratasoft Sdn Bhd and those related to our organizational restructuring activities. The forward-looking
statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any
or all of the forward-looking statements in this document may turn out to be incorrect. They may be based on
inaccurate assumptions or may not account for known or unknown risks and uncertainties. Consequently, no
forward-looking statement is guaranteed, and our actual future results may vary materially from the results
expressed or implied in our forward-looking statements. The cautionary statements in this report expressly qualify
all of our forward-looking statements. In addition, we are not obligated, and do not intend, to update any of our
forward-looking statements at any time unless an update is required by applicable securities laws. Factors that could
cause actual results to differ from those expressed or implied in the forward-looking statements include, but are not
limited to, those discussed in Item 1A in the section entitled “Risk Factors — Factors That May Affect Our Future
Results or The Market Price of Our Common Stock.”

Trademarks and Service Marks

ACI, the ACI logo, BASE24, ON/2, OpeN/2, ENGUARD, Network Express, PaymentWare and CO-ach,
among others, are registered trademarks and/or registered service marks of ACI Worldwide, Inc., or one of its
subsidiaries, in the United States and/or other countries. BASE24-eps, ACI Retail Commerce Server, NET24,
Commerce Gateway, Smart Chip Manager, Proactive Risk Manager, PRM, ICE, WebGate, SafeTGate, DataWise,
ACI Wholesale Payment System, ACI Money Transfer System or MTS, MTS-eps, ACI Enterprise Banker, ACI
Payments Manager, ACI Card Management System, ACI Dispute Management System, and WPS, among others,
have pending registrations or are common-law trademarks and/or service marks of ACI Worldwide, Inc., or one of
its subsidiaries, in the United States and/or other countries. Other parties’ marks referred to in this report are the
property of their respective owners.

2

ITEM 1. BUSINESS

General

PART I

ACI Worldwide, Inc., a Delaware corporation, and our subsidiaries (collectively referred to as “ACI”, “ACI
Worldwide”, the “Company,” “we,” “us” or “our”) develop, market, install and support a broad line of software
products and services primarily focused on facilitating electronic payments. In addition to our own products, we
distribute, or act as a sales agent for, software developed by third parties. These products and services are used
principally by financial institutions, retailers and electronic payment processors, both in domestic and international
markets. Most of our products are sold and supported through distribution networks covering three geographic
regions — the Americas, Europe/Middle East/Africa (“EMEA”) and Asia/Pacific. Each distribution network has its
own sales force that it supplements with independent reseller and/or distributor networks. Our products are
marketed under the ACI Worldwide brand.

The electronic payments market is comprised of financial institutions, retailers, third-party electronic payment
processors, payment associations, switch interchanges and a wide range of transaction-generating endpoints,
including automated teller machines (“ATM”), retail merchant locations, bank branches, mobile phones, corpo-
rations and Internet commerce sites. The authentication, authorization, switching, settlement and reconciliation of
electronic payments is a complex activity due to the large number of locations and variety of sources from which
transactions can be generated, the large number of participants in the market, high transaction volumes, geo-
graphically dispersed networks, differing types of authorization, and varied reporting requirements. These activities
are typically performed online and are often conducted 24 hours a day, seven days a week. ACI Worldwide, Inc. was
formed as a Delaware corporation in November 1993 under the name ACI Holding, Inc. and is largely the successor
to Applied Communications, Inc. and Applied Communications Inc. Limited, which we acquired from Tandem
Computers Incorporated on December 31, 1993.

On July 24, 2007, our stockholders approved the adoption of an Amended and Restated Certificate of
Incorporation to change our corporate name from “Transaction Systems Architects, Inc.” to “ACI Worldwide, Inc.”.
We have been marketing our products and services under the ACI Worldwide brand since 1993 and have gained
significant market recognition under this brand name. Historically, we operated with three business units: ACI
Worldwide, Insession Technologies and Intranet Worldwide. In the first quarter of fiscal 2006, we restructured our
organization combining the products and services within these three business units into one operating unit under the
ACI Worldwide name.

On February 23, 2007, our Board of Directors approved a change in the Company’s fiscal year from a
September 30 fiscal year-end to a December 31 fiscal year-end, effective as of January 1, 2008 for the year ended
December 31, 2008. In accordance with applicable Securities and Exchange Commission (“SEC”) rules and
regulations, we filed a Transition Report on Form 10-Q for the transition period from October 1, 2007 to
December 31, 2007, with the SEC on February 19, 2008. Accordingly, the consolidated financial statements
included herein present our financial position as of December 31, 2008 and 2007 and September 30, 2007, and the
results of our operations, cash flows and changes in stockholders’ equity for the year ended December 31, 2008, the
three month period ended December 31, 2007, and the years ended September 30, 2007 and 2006.

Acquisitions

On May 31, 2006, we acquired the outstanding shares of eps Electronic Payment Systems AG (“eps AG”). The
aggregate purchase price for eps AG was $30.4 million, which was comprised of cash payments of $19.1 million,
330,827 shares of common stock valued at $11.1 million, and direct costs of the acquisition. eps AG, with
operations in Germany, Romania, the United Kingdom and other European locations, offered electronic payment
and complementary solutions focused largely in the German market. The acquisition of eps AG occurred in two
closings. The initial closing occurred on May 31, 2006, and the second closing occurred on October 31, 2006. Cash
consideration paid at the initial closing totaled $13.0 million, net of $3.1 million of cash acquired and the remaining
cash consideration of $6.1 million was paid on October 31, 2006. All shares of the Company’s common stock issued
as consideration for the eps AG acquisition were issued at the initial closing. We accounted for the acquisition of eps

3

AG in its entirety as of May 31, 2006, and recorded a liability, included in accrued and other liabilities at
September 30, 2006, in the amount of $6.1 million, for the remaining cash consideration that was paid on
October 31, 2006. We accounted for this as a delayed delivery of consideration as the price was fixed and not subject
to change, with complete decision-making and control of eps AG held by us as of the date of the initial closing.

Under the terms of the acquisition, the parties established a cash escrow arrangement in which approximately
$1.0 million of the cash consideration paid at the initial closing was held in escrow as security for a potential
contingent obligation. We distributed the escrow in October 2006 in accordance with the terms of the escrow
arrangement as the contingent liability paid by the Company was recovered from a third party. Additionally, certain
of the sellers of eps AG have committed to certain indemnification obligations as part of the sale of eps AG. Those
obligations are secured by the shares of common stock issued to the sellers pursuant to the eps AG acquisition to the
degree such shares are restricted at the time such an indemnification obligation is triggered, if at all, the likelihood
of which is deemed remote. The restrictions were lifted by the Company during the year ended December 31, 2008.

On August 28, 2006, we entered into an Agreement and Plan of Merger with P&H Solutions, Inc. (“P&H”)
under the terms of which P&H became our wholly-owned subsidiary. P&H was a provider of web-based enterprise
business banking solutions to financial institutions. The acquisition of P&H closed on September 29, 2006. The
aggregate purchase price for P&H, including direct costs of the acquisition, was $133.7 million, net of $20.2 million
of cash acquired. Under the terms of the acquisition, the parties established a cash escrow arrangement in which
$11.7 million of the cash consideration paid at closing was held in escrow as security for tax and other
contingencies. We distributed the escrow in October 2007 in accordance with the terms of the escrow arrangement.
During the year ended September 30, 2007, we adjusted the initial purchase price allocation resulting in additional
goodwill of $0.4 million, net due to tax adjustments and recovery of bad debt reserves.

On February 7, 2007, we acquired Visual Web Solutions, Inc. (“Visual Web”), a provider of international trade
finance and web-based cash management solutions, primarily to financial institutions in the Asia/Pacific region.
These solutions complement and have been integrated with our U.S.-centric cash management and online banking
solutions to create a more complete international offering. Visual Web had wholly-owned subsidiaries in Singapore
for sales and customer support and in Bangalore, India for product development and services.

The aggregate purchase price of Visual Web, including direct costs of the acquisition, was $8.3 million, net of
$1.1 million of cash acquired. Under the terms of the acquisition, the parties established a cash escrow arrangement
in which $1.1 million of the cash consideration paid at closing is held in escrow as security for tax and other
contingencies.

On April 2, 2007, we acquired Stratasoft Sdn Bhd (“Stratasoft”), a provider of electronic payment solutions in
Malaysia. This acquisition compliments our strategy to move to a direct sales model in selected markets in Asia.
The aggregate purchase price of Stratasoft, including direct costs of the acquisition, was $2.5 million, net of
$0.7 million of cash acquired. We will pay an additional aggregate amount of up to $0.6 million (subject to foreign
currency fluctuations) to the sellers if Stratasoft achieves certain financial targets set forth in the purchase
agreement for the period ended December 31, 2008. During the year ended December 31, 2008, we completed the
assessment for the period ended December 31, 2007 and determined that Stratasoft did not meet the financial targets
set forth in the purchase agreement. Under the terms of the acquisition, the parties established a cash escrow
arrangement in which $0.5 million of the cash consideration paid at closing is held in escrow as security for tax and
other contingencies.

Assets of Businesses Transferred Under Contractual Arrangements

On September 29, 2006, we completed the sale of the eCourier and Workpoint product lines to PlaNet Group,
Inc. We have retained rights to distribute these products as components of our electronic payments solutions. See
Note 16, “Assets of Businesses Transferred Under Contractual Arrangements”, in the Notes to Consolidated
Financial Statements for further detail.

4

Products

ACI Worldwide software products perform a wide range of functions designed to facilitate electronic

payments. Generally, our products address three primary market segments:

(cid:129) Retail banking, including debit and credit card issuers

(cid:129) Wholesale banking, including corporate cash management and treasury management operations

(cid:129) Retailers

In addition, we market our solutions to third-party electronic payment processors, who serve all three of the
above market segments. We also offer solutions that are not industry-specific, but complement our payments
products, to address needs for systems connectivity, data synchronization, testing and simulation and systems
monitoring.

We offer five primary software product lines:

(cid:129) Retail Payment Engines

(cid:129) Risk Management

(cid:129) Payments Management

(cid:129) Wholesale Payments

(cid:129) Application Services Solutions

An overview of major software products within these software product lines follows:

Retail Payment Engines

Generally, our Retail Payment Engines are designed to route electronic payment transactions from transaction
generators to the acquiring institutions so that they can be authorized for payment. The software often interfaces
with regional or national switches to access the account-holding financial institution or card issuer for approval or
denial of the transactions (authorization). The software returns messages to the original transaction generator (e.g.
an ATM), thereby completing the transactions. Depending on how the software is configured, it can perform all of
the functions necessary to authenticate, authorize, route and settle an electronic payment transaction, or it can
interact with other systems to ensure that these functions are performed. Electronic payments software may be
required to interact with dozens of devices, switch interchanges and communication protocols around the world. We
currently offer a range of retail payment engine solutions, as follows:

(cid:129) BASE24. BASE24 is an integrated family of software products marketed to customers operating electronic
payment networks in the retail banking and retail industries. The modular architecture of the product enables
customers to select the application and system components that are required to operate their networks.
BASE24 offers a broad range of features and functions for electronic payment processing. BASE24 allows
customers to adapt to changing network needs by supporting over 40 different types of ATM and point of sale
(“POS”) terminals, over 50 interchange interfaces, and various authentication, authorization and reporting
options. A substantial portion of ACI Worldwide’s revenues are derived from licensing the BASE24 family
of products and providing related services and maintenance.

The BASE24 product line operates exclusively on Hewlett-Packard Company (“HP”) NonStop servers. The
HP NonStop parallel-processing environment offers fault-tolerance, linear expandability and distributed
processing capabilities. The combination of features offered by BASE24 and the HP NonStop technology
are important characteristics in high volume, 24-hour per day electronic payment systems.

(cid:129) BASE24-eps (formerly called BASE24-es). BASE24-eps is an integrated electronic payments processing
product that supports similar features as BASE24, but uses a more modern set of technologies and
architecture. BASE24-eps uses an object-based architecture and languages such as C++ and Java to offer
a more flexible, open architecture for the processing of a wide range of electronic payment transactions.
BASE24-eps also uses a scripting language to improve overall transaction processing flexibility and improve

5

time to market for new services, reducing the need for traditional systems modifications. BASE24-eps is
licensed as a standalone electronic payments solution for financial institutions, retailers and electronic
payment processors, and it represents the future platform to which current BASE24, ON/2, OpeN/2, and AS/
X customers are expected to migrate over time. BASE24-eps, which operates on International Business
Machines Corporation (“IBM”) System z, IBM System p, HP NonStop, HP-UX and Sun Solaris servers,
provides flexible integration points to other applications and data within enterprises to support 24-hour per
day access to money, services and information.

(cid:129) ACI Retail Commerce Server. Retail Commerce Server is an integrated suite of electronic payments
products that facilitate a broad range of capabilities, specifically focused on retailers. These capabilities
include debit and credit card processing, automated clearing house (“ACH”) processing, electronic benefits
transfer, card issuance and management, check authorization, customer loyalty programs and returned check
collection. The Retail Commerce Server product line operates on open systems technologies such as
Microsoft Windows, UNIX and Linux, with most of the current installations deployed on the Microsoft
Windows platform.

(cid:129) NET24. NET24 is a message-oriented middleware product that acts as the layer of software that manages
the interface between application software and computer operating systems and helps customers perform
network and legacy systems integration projects. The NET24 product operates exclusively on the HP
NonStop platform, and represents the middleware product on which BASE24 and BASE24-eps operate
when deployed on HP NonStop servers. NET24 supports process management, network communications,
systems configuration and management, and asynchronous messaging.

(cid:129) ON/2. ON/2 is an integrated electronic payments processing system, exclusively designed for the Stratus
VOS operating environment. It authenticates, authorizes, routes and switches transactions generated at
ATM’s and merchant POS sites.

(cid:129) OpeN/2. OpeN/2 is an integrated electronic payments processing system, designed for open-systems
environments such as Microsoft Windows, UNIX and Linux. It offers a wide range of electronic payments
processing capabilities for financial institutions, retailers and electronic payment processors.

(cid:129) AS/X. AS/X, a product acquired in the eps AG acquisition, is an integrated electronic payments processing
system designed for open-systems environments such as UNIX. It supports a wide range of electronic
payments processing capabilities for financial institutions and electronic payment processors in Germany
and Switzerland.

During the year ended December 31, 2008, the three month period ended December 31, 2007, and the years
ended September 30, 2007 and 2006, approximately 47%, 51%, 49% and 57%, respectively, of our total revenues
were derived from licensing the BASE24 product line, which revenue amounts do not include revenue associated
with licensing the BASE24-eps product.

Risk Management

(cid:129) ACI Proactive Risk Manager (“PRM”). PRM is a neural network-based fraud detection system designed
to help card issuers, merchants, merchant acquirers and financial institutions combat fraud schemes. The
system combines the pattern recognition capability of neural-network transaction scoring with custom risk
models of expert rules-based strategies and advanced client/server account management software. PRM
operates on IBM System z, HP NonStop, Sun Solaris and Microsoft Windows servers. There are six editions
of PRM, each of which is tailored for specific industry needs. The six editions are debit, credit, merchant,
private label, money laundering detection and enterprise.

Payments Management

(cid:129) ACI Payments Management Solutions. Payments Management solutions are integrated products bringing
value-added solutions to information captured during online processing. The suite of products includes
management of dispute processing, card management and card statement products, merchant accounting
applications, and settlement and reconciliation solutions for online and offline payment processing. The

6

suite also includes a transaction warehouse product that accumulates and stores e-payment transaction
information for subsequent transaction inquiry via browser-based presentation allowing transaction mon-
itoring, alerting and executive analysis. These products operate on IBM System z, IBM System p, HP
NonStop, Sun Solaris and Microsoft Windows servers.

(cid:129) ACI Payments Manager (“PM”). PM is an integrated, modular software solution that automates the
processing, settlement and reconciliation of electronic transactions, as well as provides plastic card issuance
and account management. PM’s primary focus is to enable efficient back-office management through cost
reductions and streamlined daily operations. The solution accesses a central transaction database that can be
updated in batch or near-real time from the payment engine. PM integrates all transaction and processing
data for transaction analysis, settlement processing, and card account and customer data. Application
functions are accessed via the ACI desktop environment, an integrated graphical presentation and devel-
opment tool.

(cid:129) ACI Card Management System (“CMS”). CMS is a complete plastic card system for issuing cards,
maintaining account information, tracking card usage and providing customer service. It supports multiple
account types and allows online display and modification of pertinent account information. It can be linked
with a card authorization system for authorizing debit transactions from ATM and POS devices on the host
system. Optionally, CMS can also be linked to a front-end processor for purposes of forwarding file
maintenance activity and accepting financial transaction activity.

(cid:129) ACI Smart Chip Manager (“SCM”). SCM supports the deployment of stored-value and other chip card
applications used at smart card-enabled devices. The solution facilitates authorization of funds transfers
from existing accounts to cards. It also leverages chip technology to enhance debit/credit card authentication
and security. SCM supports Europay/Mastercard/VISA (“EMV”) standards for debit and credit card
processing, and manages the complete lifecycle of the deployment of multi-function chip cards. In addition,
SCM has been deployed in government identification environments, providing the core operating envi-
ronment for multi-function electronic identification cards.

(cid:129) ACI Dispute Management System (“DMS”). DMS provides issuers the ability to work retail discrepancies
caused by processing errors, disputes, charge backs and fraud. Failure to comply with card association rules
or government regulations can result in the loss of chargeback and representation rights or fines. ACI’s DMS
runs through a Case Management work flow, tracking disputes with debit and credit cards, EBT transactions,
electronic banking and bill pay, ACH, and network adjustments. An audit trail of operator actions ensures
that staff members follow procedures. DMS also provides an interface to institutions’ general ledger and
transaction processing systems, which saves time and ensures better audit trails. Because electronic banking
disputes may be subject to governmental and internal audits, DMS stores all due dates and required customer
notifications to maintain a complete historical file on each claim. Furthermore, users can create specific
compliance reports.

Wholesale Payments

Our wholesale payments solutions are focused on global, super-regional and regional financial institutions that
provide treasury management services to large corporations. In addition, the market includes non-bank financial
institutions with the need to conduct their own internal treasury management activities.

Our wholesale payments solutions include high value payments processing, bulk payments processing, global
messaging and Continuous Link Settlement processing, and are collectively referred to as the ACI Money Transfer
System (“MTS”). The high value payments processing products, which produce the majority of revenues within the
MTS solution set, are used to generate, authorize, route, settle and control high value wire transfer transactions in
domestic and international environments. The MTS product operates on IBM System p servers using the AIX
operating system and communicates over proprietary networks using a variety of messaging formats, including
S.W.I.F.T., EBA, Target, Ellips, CEC, RTGSplus, Fedwire, CHIPS and Telex. In 2008, we announced a plan to
deploy this product on IBM System z.

7

ACI Enterprise Banker is a comprehensive Internet-based business banking product for financial institutions,
including banks, brokerage firms and credit unions and can be flexibly packaged for small, medium and large
business customers. This product provides these customers with electronic payment initiation capability, infor-
mation reporting, and numerous other payment related services that allow the business customer to manage all its
banking needs via the Internet.

Application Services Solutions

The Application Services Solutions provide specific technology extensions to augment the business services
provided in the Retail Payment Engines, Risk Management, Payments Management and Wholesale Payments
solutions.

Our Application Services Solutions consist of a suite of infrastructure software products that facilitate
communication, data movement, transaction processing, systems monitoring and business process automation
across incompatible computing systems that include mainframes, distributed computing networks and the Internet.
The primary Company-owned software products within this suite are ICE, WebGate, SafeTGate, ENGUARD and
DataWise. In addition, as part of the S2 Systems acquisition, we acquired a product called Network Express and as
part of the eps AG acquisition, we acquired a product called Asset. The primary third-party products distributed as
part of our Application Services Solutions are GoldenGate, and VersaTest. ICE is a set of networking software
products that allow applications running on the HP NonStop server to connect with applications running on, or
access data stored on, computers that use the Systems Network Architecture protocol. WebGate is a product suite
that allows HP NonStop servers to communicate with applications using web-based technology. SafeTGate is a
family of security solutions that work in conjunction with ICE and WebGate. GoldenGate and DataWise are
transactional data management products that capture, route, enhance and apply transactions in real time across a
wide variety of data sources, most commonly for business continuity and data integration. ENGUARD is a proactive
monitoring, alarm and dispatching software tool. Network Express provides network communications and
middleware capabilities to support legacy systems integration and connectivity. Asset is a simulation and testing
tool that allows companies involved in electronic payments to simulate devices and transactions, and perform
application testing. VersaTest provides online testing, simulation and support utilities for HP NonStop servers.

Third-Party Partners

We have two major types of third-party partners: strategic alliances, where we work closely with industry
leaders who drive key industry trends and mandates, and product partners, where we market or embed the products
of other software companies.

Strategic alliances help us add value to our solutions, stay abreast of current market conditions, and extend our
reach within our core markets. The following is a list of those companies with whom we have strategic alliances:

(cid:129) Hewlett-Packard Company

(cid:129) International Business Machines Corporation

(cid:129) Sun Microsystems, Inc.

(cid:129) Stratus Technologies

(cid:129) Microsoft Corporation

(cid:129) Diebold, Incorporated

(cid:129) NCR Corporation

(cid:129) Wincor-Nixdorf

(cid:129) Visa International

(cid:129) MasterCard International Incorporated

(cid:129) Oracle Corporation

8

Product partner relationships extend our product portfolio, improve our ability to get our solutions to market
rapidly and enhance our ability to deliver market-leading solutions. We share revenues with these product partners
based on relative responsibilities for the customer account. The agreements with product partners generally grant us
the right to distribute or represent their products on a worldwide basis and have a term of several years. The
following is a list of currently active product partners:

(cid:129) GoldenGate, Inc.

(cid:129) Ascert, LLC

(cid:129) ACE Software Solutions, Inc.

(cid:129) Faircom Corporation

(cid:129) Paragon Application Systems, Inc.

(cid:129) Financial Software and Services, PTT

(cid:129) International Business Machines Corporation

(cid:129) CB.Net Ltd.

(cid:129) Side International S.A.

(cid:129) eClassic Systems

(cid:129) RDM Corporation

(cid:129) Intuit, Inc.

(cid:129) Vasco Data Security

(cid:129) NCR Corporation

(cid:129) Online Banking Solutions

(cid:129) Metatomix Inc.

(cid:129) PlaNet Group, Inc.

(cid:129) Accuity, Inc

(cid:129) RSA, The Security Division of EMC Corporation

(cid:129) iPay Technologies, LLC

(cid:129) Parsam Technologies, LLC

Services

We offer our customers a wide range of professional services, including analysis, design, development,
implementation, integration and training. We have service professionals within each of our three geographic regions
who generally perform the majority of the work associated with installing and integrating our software products,
rather than relying on third-party systems integrators. Our service professionals have extensive experience
performing such installation and integration services for clients operating on a range of computing platforms.
We offer the following types of services for our customers:

(cid:129) Technical Services. The majority of our technical services are provided to customers who have licensed
one or more of our software products. Services offered include programming and programming support,
day-to-day systems operations, network operations, help desk staffing, quality assurance testing, problem
resolution, system design, and performance planning and review. Technical services are typically priced on a
weekly basis according to the level of technical expertise required and the duration of the project.

(cid:129) Project Management. We offer a Project Management and Implementation Plan (“PMIP”) which provides
customers with a variety of support services, including on-site product integration reviews, project planning,

9

training, site preparation, installation, testing and go-live support, and project management throughout the
project life cycle. We offer additional services, if required, on a fee basis. PMIPs are offered for a fee that
varies based on the level and quantity of included support services.

(cid:129) Facilities Management. We offer facilities management services whereby we operate a customer’s
electronic payments system for multi-year periods. Pricing and payment terms for facilities management
services vary on a case-by-case basis giving consideration to the complexity of the facility or system to be
managed, the level and quantity of technical services required, and other factors relevant to the facilities
management agreement.

(cid:129) ACI On Demand. We offer a service whereby we host a customer’s system for them as opposed to the
customer licensing and installing the system on their own site. We offer several of our solutions in this
manner, including our retail and wholesale payment engines, risk management and online banking products.
Each customer gets a unique image of the system that can be tailored to meet their needs. The product is
generally located on facilities and hardware that we provide. Pricing and payment terms depend on which
solutions the customer requires and their transaction volumes. Generally, customers are required to commit
to a minimum contract of three to five years.

Customer Support

We provide our customers with product support that is available 24 hours a day, seven days a week. If requested
by a customer, the product support group can remotely access that customer’s systems on a real-time basis. This
allows the product support groups to help diagnose and correct problems to enhance the continuous availability of a
customer’s business-critical systems. We offer our customers both a general maintenance plan and an extended
service option.

(cid:129) General Maintenance. After software installation and project completion, we provide maintenance

services to customers for a monthly fee. Maintenance services include:

(cid:129) 24-hour hotline for problem resolution

(cid:129) Customer account management support

(cid:129) Vendor-required mandates and updates

(cid:129) Product documentation

(cid:129) Hardware operating system compatibility

(cid:129) User group membership

(cid:129) Enhanced Support Program. Under the extended service option, referred to as the Enhanced Support
Program, each customer is assigned an experienced technician to work with its system. The technician
typically performs functions such as:

(cid:129) Install and test software fixes

(cid:129) Retrofit customer-specific software modifications (“CSMs”) into new software releases

(cid:129) Answer questions and resolve problems related to CSM code

(cid:129) Maintain a detailed CSM history

(cid:129) Monitor customer problems on HELP24 hotline database on a priority basis

(cid:129) Supply on-site support, available upon demand

(cid:129) Perform an annual system review

We provide new releases of our products on a periodic basis. New releases of our products, which often contain
product enhancements, are typically provided at no additional fee for customers under maintenance agreements.

10

Agreements with our customers permit us to charge for substantial product enhancements that are not provided as
part of the maintenance agreement.

Competition

The electronic payments market is highly competitive and subject to rapid change. Competitive factors
affecting the market for our products and services include product features, price, availability of customer support,
ease of implementation, product and company reputation, and a commitment to continued investment in research
and development.

Our competitors vary by product line, geography and market segment. Generally, our most significant
competition comes from in-house information technology departments of existing and potential customers, as well
as third-party electronic payments processors (some of whom are ACI Worldwide customers). Many of these
companies are significantly larger than us and have significantly greater financial, technical and marketing
resources. Key competitors by product line include the following:

Retail Payment Engines

The principal third-party software competitors for the Retail Payment Engines product line are Fidelity
National Information Services, Inc. and S1 Corporation, as well as small, regionally-focused companies such as
Aleric Technology, Inc, Distra Pty Ltd, Compass Plus, Opus Software Solutions Private Ltd and CTL, Ltd. Primary
electronic payment processing competitors in this area include global entities such as First Data Corporation, Fiserv,
Inc., Metavante, Euronet, Visa and Mastercard, as well as regional or country-specific processors.

Risk Management

Principal competitors for the Risk Management product line are Fair Isaac, Norkom Technologies, Actimize,
Inc., Retail Decisions, Mantas, SearchSpace, Americas Software and Visa DPS, as well as dozens of smaller
companies focused on niches of this segment such as anti-money laundering.

Payments Management

Principal competitors for our Payments Management product line are Fidelity National Information Services,

Inc., Baldwin Hacket and Meeks, Inc., ATOS Origin S.A. and Bell ID.

Wholesale Payments

Principal competitors for our Wholesale Payments product line are Fundtech Ltd, LogicaCMG plc, Tieto
Enator, Clear2Pay, Dovetail, Bankserv, SWIFT, Intuit Corporation, S1 Corporation, Metavante, Fiserv Inc.,
Nucleus Software Exports Ltd, Aurion Pro Solutions Ltd and a number of core banking processors.

Application Services Solutions

The principal competitor for our Application Services Solutions product line is Hewlett-Packard Company, as

well as dozens of small, niche-focused competitors.

As markets continue to evolve in the electronic payments, risk management and smartcard sectors, we may
encounter new competitors for our products and services. As electronic payment transaction volumes increase and
banks face price competition, third-party processors may become stronger competition in our efforts to market our
solutions to smaller financial institutions. In the larger financial institution market, we believe that third-party
processors may be less competitive since large institutions attempt to differentiate their electronic payment product
offerings from their competition, and are more likely to develop or continue to support their own internally-
developed solutions or use third-party software packages such as those offered by us.

11

Research and Development

Our product development efforts focus on new products and improved versions of existing products. We
facilitate user group meetings. The user groups are generally organized geographically or by product lines. The
groups help us determine our product strategy, development plans and aspects of customer support. We believe that
the timely development of new applications and enhancements is essential to maintain our competitive position in
the market.

In developing new products, we work closely with our customers and industry leaders to determine require-
ments. We work with device manufacturers, such as Diebold, NCR and Wincor-Nixdorf, to ensure compatibility
with the latest ATM technology. We work with interchange vendors, such as MasterCard and Visa, to ensure
compliance with new regulations or processing mandates. We work with computer hardware and software
manufacturers, such as Hewlett-Packard Company, IBM Corporation, Microsoft Corporation, Sun Microsystems,
Inc. and Stratus Technologies, Inc. to ensure compatibility with new operating system releases and generations of
hardware. Customers often provide additional information on requirements and serve as beta-test partners.

Our total research and development expenses during the year ended December 31, 2008, the three month
period ended December 31, 2007, and the years ended September 30, 2007 and 2006 were $45.9 million,
$16.4 million, $52.1 million, and $40.8 million, or 11.0%, 16.2%, 14.2%, and 11.7% of total revenues, respectively.

Customers

We provide software products and services to customers in a range of industries worldwide, with financial
institutions, retailers and e-payment processors comprising our largest industry segments. As of December 31,
2008, our customers include over 100 of the 500 largest banks in the world, as measured by asset size, 11 of the top
20 retailers in the United States and over 90 retailers worldwide, as measured by revenue. As of December 31, 2008,
we had 826 customers in 88 countries on six continents. Of this total, 430 are in the Americas region, 243 are in the
EMEA region and 153 are in the Asia/Pacific region. No single customer accounted for more than 10% of our
consolidated revenues for the year ended December 31, 2008, three-month period ended December 31, 2007, or
years ended September 30, 2007 or 2006.

Selling and Marketing

Our primary method of distribution is direct sales by employees assigned to specific regions or specific
products. In addition, we use distributors and sales agents to supplement our direct sales force in countries where
business practices or customs make it appropriate, or where it is more economical to do so. We generate a majority
of our sales leads through existing relationships with vendors, direct marketing programs, customers and prospects,
or through referrals.

Key international distributors and sales agents for us during the year ended December 31, 2008 included:

(cid:129) PTESA (Colombia)

(cid:129) PTESAVEN (Venezuela)

(cid:129) North Data (Uruguay)

(cid:129) Hewlett-Packard Peru (Peru)

(cid:129) P.T. Abhimata Persada (Indonesia)

(cid:129) Financial Software and Systems, Ltd. (India)

(cid:129) Korea Computer, Inc. (Korea)

(cid:129) DataOne Asia Co. Ltd (Thailand)

(cid:129) Syscom (Taiwan and China)

(cid:129) Optimisa S.A. (Chile)

12

We distribute the products of other vendors as complements to our existing product lines. We are typically
responsible for the sales and marketing of the vendor’s products, and agreements with these vendors generally
provide for revenue sharing based on relative responsibilities.

In addition to our principal sales office in Omaha, we also have sales offices located outside the United States
in Athens, Bahrain, Buenos Aires, Dubai Internet City, Frankfurt, Gouda, Kuala Lumpur, Johannesburg, Madrid,
Manila, Melbourne, Mexico City, Milan, Moscow, Mumbai, Naples, Paris, Riyadh, Sao Paulo, Seoul, Shanghai,
Singapore, Sydney, Tokyo, Toronto, and Watford.

Proprietary Rights and Licenses

We rely on a combination of trade secret and copyright laws, license agreements, contractual provisions and
confidentiality agreements to protect our proprietary rights. We distribute our software products under software
license agreements that typically grant customers nonexclusive licenses to use our products. Use of our software
products is usually restricted to designated computers, specified locations and/or specified capacity, and is subject
to terms and conditions prohibiting unauthorized reproduction or transfer of our software products. We also seek to
protect the source code of our software as a trade secret and as a copyrighted work. Despite these precautions, there
can be no assurance that misappropriation of our software products and technology will not occur.

In addition to our own products, we distribute, or act as a sales agent for, software developed by third parties.
However, we typically are not involved in the development process used by these third parties. Our rights to those
third-party products and the associated intellectual property rights are limited by the terms of the contractual
agreement between us and the respective third-party.

Although we believe that our owned and licensed intellectual property rights do not infringe upon the
proprietary rights of third parties, there can be no assurance that third parties will not assert infringement claims
against us. Further, there can be no assurance that intellectual property protection will be available for our products
in all foreign countries.

Like many companies in the electronic commerce and other high-tech industries, third parties have in the past
and may in the future assert claims or initiate litigation related to 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 claims assertions, particularly
in the United States. Third parties may also claim that the third-party’s intellectual property rights are being
infringed by our customers’ use of a business process method which utilizes products in conjunction with other
products, which could result in indemnification claims against us by our customers. Any claim against us, with or
without merit, could be time-consuming, result in costly litigation, 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. We could also be required to defend or indemnify our customers against such claims. 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 even stop selling certain products
and incur additional costs to develop alternative non-infringing technology.

Foreign Operations

We derive a significant portion of our revenues from foreign operations. For detail of revenue by geographic

region see Note 12, “Segment Information”, in the Notes to Consolidated Financial Statements.

Employees

As of December 31, 2008, we had a total of approximately 2,154 employees of whom 1,195 were in the

Americas region, 619 were in the EMEA region and 340 were in the Asia/Pacific region.

None of our employees are subject to a collective bargaining agreement. We believe that relations with our

employees are good.

13

Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the
“Exchange Act”), are available free of charge on our website at www.aciworldwide.com as soon as reasonably
practicable after we file such information electronically with the SEC. The information found on our website is not
part of this or any other report we file with or furnish to the SEC. The public may read and copy any materials that we
file with the SEC at the SEC’s Public Reference Room at 100 F Street, Room 1580, NW, Washington DC 20549. The
public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC at www.sec.gov.

Executive Officers of the Registrant

As of March 3, 2009, our executive officers, their ages and their positions were as follows.

Name

Philip G. Heasley . . . . . . . . . . . . . . . . .
J. Ronald Totaro . . . . . . . . . . . . . . . . .
Scott W. Behrens . . . . . . . . . . . . . . . . .

Age

59
45
37

Dennis P. Byrnes . . . . . . . . . . . . . . . . .

45

David McCann . . . . . . . . . . . . . . . . . .
David N. Morem . . . . . . . . . . . . . . . . .
Craig A. Maki . . . . . . . . . . . . . . . . . . .

53
51
42

Position

President, Chief Executive Officer and Director
Senior Vice President and Chief Operating Officer
Senior Vice President, Chief Financial Officer,
Controller and Chief Accounting Officer
Senior Vice President, General Counsel and
Secretary
Senior Vice President and Chief Information Officer
Senior Vice President, Global Business Operations
Senior Vice President, Treasurer and Chief Corporate
Development Officer

Mr. Heasley has been a director and our President and Chief Executive Officer since March 2005. Mr. Heasley
has a comprehensive background in payment systems and financial services. From October 2003 to March 2005,
Mr. Heasley served as Chairman and Chief Executive Officer of PayPower LLC, an acquisition and consulting firm
specializing in financial services and payment services. Mr. Heasley served as Chairman and Chief Executive
Officer of First USA Bank from October 2000 to November 2003. Prior to joining First USA Bank, from 1987 until
2000, Mr. Heasley served in various capacities for U.S. Bancorp, including Executive Vice President, and President
and Chief Operating Officer. Before joining U.S. Bancorp, Mr. Heasley spent 13 years at Citicorp, including three
years as President and Chief Operating Officer of Diners Club, Inc. Mr. Heasley is also a director of Fidelity
National Title Group now known as Fidelity National Finance, Inc. (NYSE: FNF) and Tier Technologies, Inc.
(NASDAQ: TIER). Mr. Heasley also served as a director of Kintera, Inc. (NASDAQ: KNTA) until May 2008 when
it was acquired by Blackbaud, Inc. (NASDAQ: BLKB). Mr. Heasley also serves as a director on the board of Public
Radio International and serves on the National Infrastructure Advisory Council.

Mr. Totaro joined the Company in March 2008 and serves as Senior Vice President and Chief Operating
Officer. Mr. Totaro is responsible for strategic planning, sales operations and global products. Prior to joining ACI,
he was vice president and general manager of global credit scoring solutions at Fair Isaac Corporation. Mr. Totaro
was vice president of interactive marketing and media at AOL Time Warner from 2000 to 2002 and previously held
management positions at Andersen Consulting LLP, GE Capital Corporation and American Express TRS Company.
Mr. Totaro holds an undergraduate degree from the State University of New York and an MBA from the Ross School
of Business at the University of Michigan.

Mr. Behrens serves as Senior Vice President, Chief Financial Officer, Controller and Chief Accounting Officer.
Mr. Behrens joined ACI in June 2007 as the Company’s Controller and Chief Accounting Officer. Mr. Behrens was
appointed Chief Financial Officer in December 2008 and Chief Accounting Officer in October 2007. Prior to
joining ACI, Mr. Behrens served as Senior Vice President, Corporate Controller and Chief Accounting Officer at
SITEL Corporation from January 2005 to June 2007. He also served as Vice President of Financial Reporting at
SITEL Corporation from April 2003 to January 2005. From 1993 to 2003, Mr. Behrens was with Deloitte & Touche,

14

LLP, including two years as a Senior Audit Manager. Mr. Behrens holds a B.S. (Honors) from the University of
Nebraska — Lincoln.

Mr. Byrnes serves as Senior Vice President, General Counsel and Secretary. Mr. Byrnes joined the Company in
June 2003. Mr. Byrnes served as First Vice President and Senior Counsel for Bank One Corporation from October
2002 to June 2003. From April 1996 to November 2001, Mr. Byrnes was with Sterling Commerce, Inc., an
electronic commerce software and services company, where he served in several capacities, including as that
company’s general counsel.

Mr. McCann joined the Company in October 2005 and serves as Senior Vice President, Chief Information
Officer. Mr. McCann served as Senior Vice President, Software Development at First Data Corporation from 2002
to October 2005. Prior to joining First Data Corporation, Mr. McCann worked at US Bancorp serving as Senior
Vice President, Wealth and Commercial Systems from 1999 to 2002 and Senior Vice President, Payment Systems
from 1995 to 1998. Mr. McCann served as Vice President of Citicorp Diners Club from 1987 to 1995 and held
various leadership and technical positions with Citicorp Diners Club from 1981 to 1987.

Mr. Morem joined the Company in June 2005 and serves as Senior Vice President, Global Business Operations.
Prior to his appointment as Senior Vice President, Global Business Operations in January 2008, Mr. Morem served
as Chief Administrative Officer of the Company. Prior to joining ACI, Mr. Morem held executive positions at GE
Home Loans, Bank One Card Services and U.S. Bank. Mr. Morem brings more than 25 years of experience in
process management, finance, credit operations, credit policy and change management. Mr. Morem holds a B.A.
degree from the University of Minnesota and an M.B.A. from the University of St. Thomas.

Mr. Maki serves as Senior Vice President, Treasurer and Chief Corporate Development Officer. Mr. Maki
joined the Company in June 2006, Mr. Maki was appointed Treasurer in January 2008. Prior to joining the
Company, Mr. Maki served as Senior Vice President for Stephens, Inc. from 1999 through 2006. From 1994 to 1999,
Mr. Maki was a Director in the Corporate Finance group at Arthur Andersen and from 1991 to 1994, he was a Senior
Consultant at Andersen Consulting. Mr. Maki graduated from the University of Wyoming and received his Master
of Business Administration from the University of Denver.

Former Executive Officer

Mr. Launder served as President of Global Operations and was responsible for the management of global sales
and support in all three of our distribution channels. Prior to his appointment as President of Global Operations in
April 2007, Mr. Launder served as President of ACI’s Europe, Middle East and Africa (EMEA) distribution channel
from 2000 through April 2007 and as President of ACI’s Asia/Pacific distribution channel from December 2006
through April 2007. In these roles, he was responsible for sales and support in EMEA and Asia/Pacific. He first
joined ACI in 1989 and was responsible for the EMEA operation until the end of 1996. Mr. Launder then spent three
years in the payments industry working as a consultant. In the spring of 2000 he returned to ACI, to head up the
EMEA channel. Prior to joining ACI, Mr. Launder worked for Olivetti Computers, IBM and in the 1980s Tandem
Computers where he was the sales director for Tandem Computers’ UK subsidiary. Mr. Launder resigned from the
Company effective February 28, 2009.

ITEM 1A. RISK FACTORS

Factors That May Affect Our Future Results or the Market Price of Our Common Stock

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.

The global financial crisis affecting the banking system and financial markets and the current global eco-
nomic conditions could reduce the demand for our products and services or otherwise adversely impact
our cash flows, operating results and financial condition.

The global financial crisis, declining real estate and retail markets, changes in bank credit quality in the United
States or abroad, extreme capital and credit market volatility, higher unemployment and declining business and

15

consumer confidence have precipitated a global recession. The global electronic payments industry and the banking
and financial services industries depend heavily upon the overall levels of consumer, business and government
spending. 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. The current economic conditions could result in a decrease in
consumers’ use of banking services and financial service providers and the implementation by banks and related
financial service provides of cost reduction measures which could result in significant decreases in the demand for
our products and services and adversely affect our operating results.

Moreover, to the degree that that the financial crisis and the volatility in the credit markets makes it more
difficult for our customers to maintain sufficient liquidity to meet their operating needs or obtain financing,
customers may be unable to timely meet their payment obligations to us and we may experience greater difficulties
in accounts receivable collection, increases in bad debt write-offs and additions to reserves in our receivables
portfolio which could have a material adverse impact on our cash flows, operating results and financial condition.

Our current credit facility contains restrictions and other financial covenants that limit our flexibility in
operating our business.

Our credit facility contains customary affirmative and negative covenants for credit facilities of this type that
limit our ability to engage in specified types of transactions. These covenants limit our ability, and the ability of our
subsidiaries, to, among other things: pay dividends on, repurchase or make distributions in respect of our capital
stock or make other restricted payments; make certain investments; sell certain assets; create liens; incur additional
indebtedness or issue certain preferred shares; consolidate, merge, sell or otherwise dispose of all or substantially all
of our assets; and enter into certain transactions with our affiliates. Our credit facility also requires us to meet certain
quarterly financial tests, including a maximum leverage ratio and a minimum interest coverage ratio. Our credit
facility includes customary events of default, including, but not limited to, failure to pay principal or interest, breach
of covenants or representations and warranties, cross-default to other indebtedness, judgment default and insol-
vency. If an event of default occurs under the credit facility, the lenders 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 credit facility, 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 we cannot assure you that
we would be able to seek alternative financing.

The volatility and disruption of the capital and credit markets and adverse changes in the global economy
may negatively impact our liquidity and our ability to access financing.

While we intend to finance our operations and growth of our business with existing cash and cash flow from
operations, if adverse global economic conditions persist or worsen, we could experience a decrease in cash from
operations attributable to reduced demand for our products and services and as a result, we may need to borrow
additional amounts under our existing credit facility or we may require additional financing for our continued
operation and growth. However, due to the existing uncertainty in the capital and credit markets and the impact of
the current economic crisis on our operating results and financial conditions, the amount of available unused
borrowings under our existing credit facility may be insufficient to meet our needs and/or our access to capital
outside of our existing credit facility may not be available on terms acceptable to us or at all. Additionally, if one or
more of the financial institutions in our syndicate were to default on its obligation to fund its commitment, the
portion of the committed facility provided by such defaulting financial institution would not be available to us. We
cannot assure you that alternative financing on acceptable terms would be available to replace any defaulted
commitments.

16

Our announced restructuring and efficiency efforts as part of the implementation of our strategic plan
may not achieve the expected efficiencies and cost savings which could affect our results of operations
and financial condition.

In August 2008 we announced the implementation of our strategic plan and our expectations related to certain
cost take-outs during 2008 and 2009 to be achieved primarily through a reduction in the work force, reallocation of
headcount to different geographies and consolidation of non-core products and facilities. While we expect our cost
saving initiatives to result in significant cost savings throughout our organization, our estimated savings are based
on several assumptions that may prove to be inaccurate, and as a result we cannot assure you that we will realize
these cost savings. The failure to achieve our estimated cost savings, or a significant delay in our achievement of the
expected benefits, could negatively affect our financial condition and results of operations. Factors that could cause
actual results to differ materially from our expectations with regard to our announced restructuring include:

(cid:129) timing and execution of plans and programs that may be subject to local labor law requirements, including

consultation with appropriate work councils;

(cid:129) changes in assumptions related to severance and postretirement costs;

(cid:129) risks associated with litigation for wrongful termination;

(cid:129) new business initiatives and changes in product roadmaps and development efforts;

(cid:129) changes in employment levels and turnover rates; and

(cid:129) changes in product demand and the business environment.

While we have and will continue to implement these strategies, there can be no assurance that we will be able
to do so successfully or that we will realize the projected benefits of these and other cost saving plans. If we are
unable to realize these anticipated cost reductions, our financial health may be adversely affected. Moreover, our
continued implementation of cost saving plans may result in the continued diversion of management time and
resources and the disruption of our operations, services to customers and performance.

We may face risks related to recent restatements of our financial statements.

Prior to filing this Annual Report, we determined that we needed to restate our consolidated financial
statements for the quarter ended March 31, 2008 to make adjustments related to the recognition of $1.9 million of
revenue during that quarter for a software project in the Asia/Pacific reportable operating segment which should
have been deferred until further project milestones were achieved. As a result, we also amended our quarterly
reports on Form 10-Q/A for the periods ended June 30, 2008 and September 30, 2008 to report year-to-date data
reflecting the adjustments made in the restated consolidated financial statements for the quarter ended March 31,
2008.

In addition, during fiscal 2007, we restated our consolidated balance sheet as of September 30, 2005, and our
consolidated statements of operations, our consolidated statements of stockholders’ equity and comprehensive
income and consolidated statements of cash flows for each of the years ended September 30, 2005 and 2004. In
addition, we restated selected financial data for fiscal years 2004, 2003 and 2002.

Companies that restate their financial statements sometimes face litigation claims and/or SEC proceedings
following such a restatement. We could face monetary judgments, penalties or other sanctions which could
adversely affect our financial condition and could cause our stock price to decline.

Consolidation 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, and results of operations. Our business is concentrated in the
financial services industry, making us susceptible to a downturn in that industry. Consolidation activity among
financial institutions has increased in recent years. There are several potential negative effects of increased
consolidation activity. Continuing consolidation of financial institutions could cause us to lose existing and

17

potential customers for our products and services. For instance, consolidation of two of our customers could result
in reduced revenues if the combined entity were to negotiate greater volume discounts or discontinue use of certain
of our products. Additionally, if a non-customer and a customer combine and the combined entity in turn decided to
forego future use of our products, our revenues would decline.

Most of our customers are in the banking and financial services industries which are subject to economic
changes that could reduce the demand for our products and services.

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. Our financial condition depends on the health of the general economy
as well as the software sector and financial services industry as our revenue and profits are driven by demand for our
products and services. Changes in economic conditions and unforeseen events like recession, the current financial
and mortgage crisis, inflation or changes in bank credit quality in the United States or abroad, could occur and
reduce consumers’ use of banking services and financial service providers. Any event of this kind, or implemen-
tation for any reason by banks or related financial service providers of cost reduction measures, could result in
significant decreases in the demand for our products and services and adversely affect our operating results. When
an economy is struggling, companies in many industries delay or reduce technology purchases. A lessening demand
in either the overall economy, the software sector or the financial services industry could result in reduced capital
spending by our customers, 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.

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 experiences 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 subject to the same level of internal review or controls as
a generally accepted accounting principles (“GAAP”) financial measure.

Management has identified a material weakness in our internal control over financial reporting.

Effective internal control over financial reporting is necessary for compliance with the Sarbanes-Oxley Act of
2002 and appropriate financial reporting. Management is responsible for establishing and maintaining adequate
internal control over financial reporting. Internal control over financial reporting is a process, under the supervision
of our CEO and CFO, designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of our financial statements for external reporting purposes in accordance with GAAP. As disclosed
in this Annual Report, management’s assessment of our internal control over financial reporting identified a
material weakness related to accounting for software implementation service and license arrangements in the Asia/
Pacific region, as discussed in Item 9A. Controls and Procedures. No assurance can be given that we will be able to
successfully implement revised internal controls and procedures, if any, or that revised controls and procedures, if
any, will be effective in remedying the potential material weakness in our prior controls and procedures, nor can we
provide assurance that we will not identify additional material weaknesses in the future. If we are unable to
implement these changes effectively or if other material weaknesses develop and we are unable to effectively
address these matters, there could be a material adverse effect on our business, financial condition and results of
operations.

18

We may face exposure to unknown tax liabilities, which could adversely affect our financial condition
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. In
addition, we expect to continue to benefit from implemented tax-saving strategies. We believe that these tax-saving
strategies comply with applicable tax law. If the governing tax authorities have a different interpretation of the
applicable law and successfully challenge any of our tax positions, our financial condition and/or results of
operations could be adversely affected.

Our tax positions in our United States federal income tax returns filed for the 2005 and 2006 tax years are the
subject of an ongoing examination by the Internal Revenue Service (“IRS”). We believe that our tax positions
comply with applicable tax law and intend to vigorously defend our positions. This examination could result in the
IRS issuing proposed adjustments that could adversely affect our financial condition and/or results of operations.

One of our foreign subsidiaries is 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.

Our stock price may be volatile.

Prices on the global financial markets for equity securities declined precipitously since September 2008. 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 announcements by third
parties or competitors, inherent volatility in the technology sector, and changing market conditions in the software
industry.

There are a number of risks associated with our international operations.

We have historically derived a majority 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. 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 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, reliance on
independent distributors, longer payment cycles, potentially unfavorable changes to foreign tax rules, compliance
with foreign regulatory requirements, reduced protection of intellectual property rights, variability of foreign
economic conditions, changing restrictions imposed by United States export laws, and general economic and
political conditions in the countries where we sell our products and services.

The software market is a rapidly changing and highly competitive industry, and we may not be able to
compete effectively.

The software market is characterized by rapidly changing technologies, intense competition and evolving
industry standards. There is no assurance that we will be able to maintain our current market share or customer base.
We have many competitors that are significantly larger than we are and have significantly greater financial,
technical and marketing resources. 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, 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 loss of business.

19

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, in fiscal
2006 we established a new subsidiary in Ireland 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. 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:

(cid:129) 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;

(cid:129) 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;

(cid:129) 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;

(cid:129) potential disruption from the involvement of the United States in political and military conflicts around the

world; and

(cid:129) currency exchange rates could fluctuate and adversely impact the cost advantages intended from main-

taining these facilities.

One of our most strategic products, BASE24-eps, could prove to be unsuccessful in the market.

Our BASE24-eps product is strategic for us, in that it is designated to help us win new accounts, replace legacy
payments systems on multiple hardware platforms and help us transition our existing customers to a new, open-
systems product architecture. Our business, financial condition and/or results of operations could be materially
adversely affected if we are unable to generate adequate sales of BASE24-eps, if market acceptance of BASE24-eps
is delayed, or if we are unable to successfully deploy BASE24-eps in production environments.

Our announcement of the maturity of certain legacy retail payment products may result in decreased
customer investment in our products and our strategy to migrate customers to our next generation
products may be unsuccessful which may adversely impact our business and financial condition.

Our announcement related to the maturity of certain retail payment engines may result in customer decisions
not to purchase or otherwise invest in these engines, related products and/or services. Alternatively, the maturity of
these products may result in delayed customer purchase decisions or the renegotiation of contract terms based upon
scheduled maturity activities. In addition, our strategy related to migrating customers to our next generation
products may be unsuccessful. Reduced investments in our products, deferral or delay in purchase commitments by
our customers or our failure to successfully manage our migration strategy could have a material adverse effect on
our business, liquidity and financial condition.

Our future profitability depends on demand for our products; lower demand in the future could adversely
affect our business.

Our revenue and profitability depend on the overall demand for our products and services. Historically, a
majority of our total revenues resulted from licensing our BASE24 product line and providing related services and
maintenance. Any reduction in demand for, or increase in competition with respect to, the BASE24 product line
could have a material adverse effect on our financial condition and/or results of operations.

We have historically derived a substantial portion of our revenues from licensing of software products that
operate on HP NonStop servers. Any reduction in demand for HP NonStop servers, or any change in strategy by HP

20

related to support of its NonStop servers, could have a material adverse effect on our financial condition and/or
results of operations.

If we are unable to successfully perform under the terms of our alliance with IBM or our customers are
not receptive to the alliance, our business, financial condition and/or results of operations may be
adversely affected.

In December 2007, we entered into a Master Alliance Agreement and certain other related agreements with
International Business Machines Corporation (“IBM”) to create a strategic alliance between us and IBM (the
“Alliance”). Pursuant to the Alliance Agreement, we agreed to enable our payment application software products on
certain of IBM’s hardware platforms, including the IBM System z Platform and we agreed to enter into collective
sales and marketing efforts with IBM to offer a combination of ACI and IBM solutions. We cannot be certain that we
will be able to successfully enable our products on IBM’s hardware platforms or that our customers and potential
customers will be receptive to this Alliance or our new sales and marketing strategy. If we are unable to enable our
software products on the IBM hardware platforms or the market does not react positively to the Alliance, our
business, financial condition and/or results of operations could be materially adversely affected.

Our outsourcing agreement with IBM may not achieve the level of savings that we anticipate and many
associated changes in systems and personnel are being made, increasing operational and control risk
during transition, which may have an impact on the business and its financial condition.

Our seven-year outsourcing agreement with IBM is estimated to deliver operating cost savings for us of
$25 million to $30 million over the course of the contract and reduce our capital expenditures. The estimated cost
savings and capital expenditure reductions are dependent upon many factors, and unanticipated changes in
operations may cause actual cost savings and capital expenditure reductions to be substantially less than expected.

In addition, as a part of the outsourcing agreement, many functions are being transitioned to IBM and many
new personnel are assuming responsibilities across these functions, increasing the risk of operational delays,
potential errors and control failures which may have an impact on us and our financial condition. Additionally, new
information technology systems and process changes are also being put into place increasing the risk of operational
delays, potential errors and control failures which may have an adverse impact on us and our financial condition.

Our software products may contain undetected errors or other defects, which could damage our
reputation with customers, decrease profitability, and expose us to liability.

Our software products are complex. They may contain undetected errors or flaws when first introduced or as
new versions are released. These undetected errors may result in loss of, or delay in, market acceptance of our
products and a corresponding loss of sales or revenues. Customers depend upon our products for mission-critical
applications, and these errors may hurt our reputation with customers. In addition, software product errors or
failures could subject us to product liability, as well as performance and warranty claims, which could materially
adversely affect our business, financial condition and/or results of operations.

Security breaches or computer viruses could harm our business by disrupting delivery of services and
damaging our reputation.

As part of our business, we electronically receive, process, store, and transmit sensitive business information of
our customers. Unauthorized access to our computer systems or databases could result in the theft or publication of
confidential 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 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 and/or results of operations. We cannot
be certain that advances in criminal capabilities, discovery of new vulnerabilities, attempts to exploit vulnerabilities
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

21

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.

If our products and services fail to comply with government regulations and industry standards to which
are customers are subject, it could result in a loss of customers and decreased revenue.

Our customers are subject to a number of government regulations and industry standards with which our
products and services must comply. For example, our products are affected by VISA and MasterCard electronic
payment standards that are generally updated twice annually. 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.

If we fail to comply with privacy regulations imposed on providers of services to financial institutions,
our business could be harmed.

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. If we are subject to
these limitations and we fail to comply with applicable regulations, we could be exposed to suits for breach of
contract or to governmental proceedings, our customer relationships and reputation could be harmed, and we could
be inhibited in our ability to obtain new customers. In addition, if more restrictive privacy laws or rules are adopted
in the future on the federal or state level, or, with respect to our international operations, by authorities in foreign
jurisdictions on the national, provincial, state, or other level, that could have an adverse impact on our business.

If we experience system failures, the products and services we provide to our customers could be delayed
or interrupted, which could harm our business and reputation and result in the loss of customers.

Our ability to provide reliable service in a number of our businesses depends on the efficient and uninterrupted
operations of our computer network systems and data centers. Our systems and operations could be exposed to
damage or interruption from fire, natural disaster, power loss, telecommunications failure, unauthorized entry, and
computer viruses. Although we have taken steps to prevent system failures, we cannot be certain that our measures
will be successful. Further, our property and business interruption insurance may not be adequate to compensate us
for all losses or failures that may occur. Any significant interruptions could:

(cid:129) increase our operating expenses to correct problems caused by the interruption;

(cid:129) harm our business and reputation;

(cid:129) result in a loss of customers; or

(cid:129) expose us to liability.

Any one or more of the foregoing occurrences could have a material adverse effect on our business, financial

condition, and results of operations.

We may be unable to protect our intellectual property and technology and may be subject to increasing
litigation over our intellectual property rights.

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.

22

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 claims assertions, 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,
result in costly litigation, 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.

We anticipate that software product developers and providers of electronic commerce solutions could
increasingly be subject to infringement claims, 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 claims against us by our customers. Claims against 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 unmeritorious claims 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 agree-
ments, if required, may not be available on terms acceptable to us or at all, which could adversely affect our
business.

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 against
infringement risks.

Risks associated with future acquisitions and investments could materially adversely affect our business.

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 other companies. During
fiscal 2007, we acquired Visual Web and Stratasoft. Any acquisition or investment, including the acquisitions of
Visual Web and Stratasoft, is subject to a number of risks. Such risks include the diversion of management time and
resources, disruption of our ongoing business, 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, lack of familiarity with new markets, and difficulties in supporting new product lines.

Further, even if we successfully complete acquisitions, we face challenges in integrating any acquired
business. These challenges include eliminating redundant operations, facilities and systems, coordinating man-
agement and personnel, retaining key employees, 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 or fully realize the potential benefits of bringing them together, and the
process of integrating these acquisitions may 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 and/or results of operations. Correspondingly, our
expectations related to the benefits related to the Visual Web and Stratasoft acquisitions, prior acquisitions in 2005
and 2006 or any other future acquisition or investment could be inaccurate.

23

We may become involved in litigation that could materially adversely affect our business financial
condition and/or results of operations.

From time to time, we are involved in litigation relating to claims arising out of our operations. Any claims,
with or without merit, could be time-consuming and result in costly litigation. Failure to successfully defend against
these claims could result in a material adverse effect on our business, financial condition, results of operations
and/or cash flows.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We lease office space in New York, New York for our principal executive headquarters. We also lease office
space in Omaha, Nebraska, for our principal product development group, sales and support groups for the Americas,
as well as our corporate, accounting and administrative functions. We moved into our new Omaha-based facility
during the year ended December 31, 2008, which facility is under a lease that continues through 2028. Our EMEA
headquarters is located in Watford, England. The lease for the Watford facility expires at the end of 2016. Our Asia/
Pacific headquarters is located in Singapore, with the lease for this facility expiring in fiscal 2011. We also lease
office space in numerous other locations in the United States and in many other countries.

We believe that our current facilities are adequate for our present and short-term foreseeable needs and that
additional suitable space will be available as required. We also believe that we will be able to renew leases as they
expire or secure alternate suitable space. See Note 17, “Commitments and Contingencies”, in the Notes to
Consolidated Financial Statements for additional information regarding our obligations under our facilities leases.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we are involved in various litigation matters arising in the ordinary course of our business.
Other than as described below, we are not currently a party to any legal proceedings, the adverse outcome of which,
individually or in the aggregate, we believe would be likely to have a material adverse effect on our financial
condition or results of operations.

Class Action Litigation.

In November 2002, two class action complaints were filed in the U.S. District Court
for the District of Nebraska (the “Court”) against us and certain individuals alleging violations of Sections 10(b) and
20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Pursuant to a Court order, the two
complaints were consolidated as Desert Orchid Partners v. Transaction Systems Architects, Inc., et al., with
Genesee County Employees’ Retirement System designated as lead plaintiff. The complaints, as amended, sought
unspecified damages, interest, fees, and costs and alleged that (i) during the purported class period, we and the
named defendants misrepresented our historical financial condition, results of operations and our future prospects,
and failed to disclose facts that could have indicated an impending decline in our revenues, and (ii) prior to August
2002, the purported truth regarding our financial condition had not been disclosed to the market while simulta-
neously alleging that the purported truth about our financial condition was being disclosed throughout that time,
commencing in April 1999. We and the individual defendants filed a motion to dismiss and the lead plaintiff
opposed the motion. Prior to any ruling on the motion to dismiss, on November 7, 2006, the parties entered into a
Stipulation of Settlement for purposes of settling all of the claims in the Class Action Litigation, with no admissions
of wrongdoing by us or any individual defendant. The settlement provides for an aggregate cash payment of
$24.5 million of which, net of insurance, we contributed approximately $8.5 million. The settlement was approved
by the Court on March 2, 2007 and the Court ordered the case dismissed with prejudice against us and the individual
defendants.

On March 27, 2007, James J. Hayes, a class member, filed a notice of appeal with the United States Court of
Appeals for the Eighth Circuit appealing the Court’s order. On August 13, 2008, the Court of Appeals affirmed the
judgment of the district court dismissing the case. Thereafter, Mr. Hays petitioned the Court of Appeals for a
rehearing en banc, which petition was denied on September 22, 2008. On January 23, 2009 we were informed that

24

Mr. Hayes filed a petition with the U.S. Supreme Court seeking a writ of certiorari which was docketed on
February 20, 2009.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to vote of stockholders during the fourth quarter of 2008.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS

AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock trades on The NASDAQ Global Select Market under the symbol ACIW. The following
table sets forth, for the periods indicated, the high and low sale prices of our common stock as reported by The
NASDAQ Global Select Market:

Year Ended
December 31, 2008
High

Low

Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . $17.94
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . $22.49
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . $23.19
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21.39

$ 8.86
$14.16
$16.10
$12.32

Three Months
Ended
December 31, 2007
High

Low

$26.19

$16.51

Year Ended
September 30, 2007

High

Low

$36.68
$35.48
$38.72
$37.14

$20.65
$30.60
$28.10
$31.45

As of February 27, 2009, there were 242 holders of record of our common stock. A substantially greater
number of holders of our common stock are “street name” or beneficial holders, whose shares are held of record by
banks, brokers and other financial institutions.

Dividends

We have never declared nor paid cash dividends on our common stock. We do not presently anticipate paying
cash dividends. However, any future determination relating to our dividend policy will be made at the discretion of
our board of directors and will depend upon our financial condition, capital requirements and earnings, as well as
other factors the board of directors may deem relevant.

Issuer Purchases of Equity Securities

We did not repurchase any of our common stock during the three-month period ended December 31, 2008.

Our board of directors has approved a stock repurchase program authorizing us, from time to time as market
and business conditions warrant, to acquire up to $210 million of our common stock. The maximum remaining
dollar value of shares authorized for repurchase under the stock repurchase plan was approximately $56 million at
December 31, 2008. We can provide no assurance that any future purchases of shares will be made under this
program. Any determination by the board of directors to repurchase any shares in 2009 will depend upon market
conditions, our liquidity, our financial position, alternative use of capital and other factors.

25

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data has been derived from our consolidated financial statements. This data
should be read together with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations”, and the consolidated financial statements and related notes included elsewhere in this Annual Report.
The data for the consolidated balance sheet as of September 30, 2004 has been restated in prior years to reflect the
impact of the stock-based compensation adjustments, but such restated data has not been audited and is derived
from our books and records. The financial information below is not necessarily indicative of the results of future
operations. Future results could differ materially from historical results due to many factors, including those
discussed in Item 1A in the section entitled “Risk Factors — Factors That May Affect Our Future Results or the
Market Price of our Common Stock.”

Year Ended
December 31,
2008

Three Months
Ended
December 31,
2007

2006
(In thousands, except per share data)

2007

Year Ended September 30,

2005

2004

Income Statement Data:
Total revenues . . . . . . . . . . . .
Net income (loss)(1) . . . . . . .
Earnings (loss) per share:

$417,653
$ 10,582

$101,282
$ (2,016)

$366,218
$ (9,131)

$347,902
$ 55,365

$313,237
$ 43,099

$292,784
$ 46,306

Basic . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . .

$
$

0.31
0.30

$
$

(0.06)
(0.06)

$
$

(0.25)
(0.25)

$
$

1.48
1.45

$
$

1.14
1.12

$
$

1.25
1.21

Shares used in computing
earnings per share:

Basic . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . .

34,498
34,795

35,700
35,700

36,933
36,933

37,369
38,237

37,682
38,507

37,001
38,117

As of December 31,
2008
2007

2007

As of September 30,
2006
2005

2004

Balance Sheet Data:
Working capital(2) . . . . . . . . . . . . .
Total assets(2) . . . . . . . . . . . . . . . .
Current portion of debt . . . . . . . . .
Debt (long-term portion)(2)(3) . . . .
Stockholders’ equity(1) . . . . . . . . .

$ 80,280
552,842
—
76,014
213,841

$ 39,585
570,458
—
75,911
241,039

$ 17,358
506,741
—
76,546
225,012

$ 67,932
539,365
—
78,093
267,212

$120,594
363,700
2,165
905
217,438

$124,088
325,959
7,027
2,672
187,462

(1) We adopted FAS 123(R) using the modified prospective transition method on October 1, 2005.

(2) On September 29, 2006, we acquired P&H. The aggregate purchase price for P&H was approximately

$134 million, of which $73 million was financed by long-term debt.

(3) Debt (long-term portion) also includes long-term capital lease obligations of $1.0 million, $0.9 million,
$1.5 million, $3.1 million, $0.8 million, and $0.3 million as of December 31, 2008 and 2007, and September 30,
2007, 2006, 2005, and 2004, respectively, which is included in other noncurrent liabilities in the consolidated
balance sheets.

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

RESULTS OF OPERATIONS

OVERVIEW

We develop, market, install and support a broad line of software products and services primarily focused on
facilitating electronic payments. In addition to our own products, we distribute, or act as a sales agent for, software
developed by third parties. Our products are sold and supported through distribution networks covering three

26

geographic regions — the Americas, EMEA and Asia/Pacific. Each distribution network has its own sales force and
supplements its sales force with independent reseller and/or distributor networks. Our products and services are
used principally by financial institutions, retailers and electronic payment processors, both in domestic and
international markets. Accordingly, our business and operating results are influenced by trends such as information
technology spending levels, the growth rate of the electronic payments industry, mandated regulatory changes, and
changes in the number and type of customers in the financial services industry. Our products are marketed under the
ACI Worldwide brand.

We derive a majority of our revenues from non-domestic operations and believe our greatest opportunities for
growth exist largely in international markets. Refining our global infrastructure is a critical component of driving
our growth. We have launched a globalization strategy which includes elements intended to streamline our supply
chain and provide low-cost centers of expertise to support a growing international customer base. In fiscal 2006, we
established a new subsidiary in Ireland 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. During 2008, we have continued our efforts
to try and take a direct selling and support strategy in certain countries where historically we have used third-party
distributors to represent our products, in an effort to develop closer relationships with our customers and develop a
stronger overall position in those countries. We also moved our principal executive offices to New York City in
September 2006 to manage our global infrastructure more strategically.

We have launched a service called ACI On Demand, wherein we host our payment systems and sell them as a

service to banks, retailers and processors.

On February 23, 2007, our board of directors approved a change in the Company’s fiscal year from a
September 30 fiscal year-end to a December 31 fiscal year-end, effective as of January 1, 2008 for the fiscal year
ended December 31, 2008. In accordance with applicable SEC Rules, we filed a Transition Report on Form 10-Q for
the transition period from October 1, 2007 to December 31, 2007, with the SEC on February 19, 2008. Accordingly,
the consolidated financial statements included herein present our financial position as of December 31, 2008 and
2007 and September 30, 2007, and the results of our operations, cash flows and changes in stockholders’ equity for
the year ended December 31, 2008, the three-month period ended December 31, 2007, and the years ended
September 30, 2007 and 2006.

Key trends that currently impact our strategies and operations include:

(cid:129) Global Financial Markets Uncertainty. The continuing uncertainty in the global financial markets has
negatively impacted general business conditions. It is possible that a weakening economy could adversely
affect our customers, their purchasing plans, or even their solvency, but we cannot predict whether or to what
extent this will occur. We have diversified counterparties and customers, but we continue to monitor our
counterparty and customer risks closely. While the effects of the economic conditions in the future are not
predictable, we believe our global presence, the breadth and diversity of our service offerings and our
enhanced expense management capabilities position us well in a slower economic climate.

(cid:129) Availability of Credit. There have been significant disruptions in the capital and credit markets during the
past year and many lenders and financial institutions have reduced or ceased to provide funding to
borrowers. The availability of credit, confidence in the entire financial sector, and volatility in financial
markets has been adversely affected. These disruptions are likely to have some impact on all institutions in
the U.S. banking and financial industries, including our lenders and the lenders of our customers. The
Federal Reserve Bank has been providing vast amounts of liquidity into the banking system to compensate
for weaknesses in short-term borrowing markets and other capital markets. A reduction in the Federal
Reserve’s activities or capacity could reduce liquidity in the markets, thereby increasing funding costs or
reducing the availability of funds to finance our existing operations as well as those of our customers. We are
not currently dependent upon short-term funding, and the limited availability of credit in the market has not
affected our revolving credit facility or our liquidity or materially impacted our funding costs.

(cid:129) Increasing electronic payment transaction volumes. Electronic payment volumes continue to increase
taking market share from traditional cash and check transactions. In 2006, we

around the world,

27

commissioned an industry study that determined that electronic payment volumes are expected to grow at
approximately 13% per year for the following five years, with varying growth rates based on the type of
payment and part of the world. We leverage the growth in transaction volumes through the licensing of new
systems to customers whose older systems cannot handle increased volume and through the licensing of
capacity upgrades to existing customers.

(cid:129) Increasing competition. The electronic payments market is highly competitive and subject to rapid
change. Our competition comes from in-house information technology departments, third-party electronic
payment processors and third-party software companies located both within and outside of the United States.
Many of these companies are significantly larger than us and have significantly greater financial, technical
and marketing resources. As electronic payment transaction volumes increase, third-party processors tend to
provide competition to our solutions, particularly among customers that do not seek to differentiate their
electronic payment offerings. As consolidation in the financial services industry continues, we anticipate
that competition for those customers will intensify.

(cid:129) Aging payments software.

In many markets, electronic payments are processed using software developed
by internal information technology departments, much of which was originally developed over ten years
ago. Increasing transaction volumes, industry mandates and the overall costs of supporting these older
technologies often serve to make these older systems obsolete, creating opportunities for us to replace this
aging software with newer and more advanced products.

(cid:129) Adoption of open systems technology.

In an effort to leverage lower-cost computing technologies and
current technology staffing and resources, many financial institutions, retailers and electronic payment
processors are seeking to transition their systems from proprietary technologies to open technologies such as
Microsoft Windows, UNIX and Linux. Our continued investment in open systems technologies is, in part,
designed to address this demand.

(cid:129) Electronic payments fraud and compliance. As electronic payment transaction volumes increase, criminal
elements continue to find ways to commit a growing volume of fraudulent transactions using a wide range of
techniques. Financial institutions, retailers and electronic payment processors continue to seek ways to
leverage new technologies to identify and prevent fraudulent transactions. Due to concerns with interna-
tional terrorism and money laundering, financial institutions in particular are being faced with increasing
scrutiny and regulatory pressures. We continue to see opportunity to offer our fraud detection solutions to
help customers manage the growing levels of electronic payment fraud and compliance activity.

(cid:129) Adoption of smartcard technology.

In many markets, card issuers are being required to issue new cards
with embedded chip technology. Chip-based cards are more secure, harder to copy and offer the opportunity
for multiple functions on one card (e.g. debit, credit, electronic purse, identification, health records, etc.).
The EMV standard for issuing and processing debit and credit card transactions has emerged as the global
standard, with many regions throughout the world working on EMV rollouts. The primary benefit of EMV
deployment is a reduction in electronic payment fraud, with the additional benefit that the core infrastructure
necessary for multi-function chip cards is being put in place (e.g. chip card readers in ATM’s and POS
devices). We are working with many customers around the world to facilitate EMV deployments, leveraging
several of our solutions.

(cid:129) Single Euro Payments Area (“SEPA”) and Faster Payments Mandates. The SEPA and Faster Payment
initiatives, primarily focused on the European Economic Community and the United Kingdom, are designed
to facilitate lower costs for cross-border payments and facilitate reduced timeframes for settling electronic
payment transactions. Our retail and wholesale banking solutions provide key functions that help financial
institutions address these mandated regulations.

(cid:129) Financial institution consolidation. Consolidation continues on a national and international basis, as
financial institutions seek to add market share and increase overall efficiency. Such consolidations have
increased, and may continue to increase, in their number, size and market impact as a result of the global
economic crisis and the financial crisis affecting the banking and financial industries. There are several
potential negative effects of increased consolidation activity. Continuing consolidation of financial

28

institutions may result in a smaller number of existing and potential customers for our products and services.
Consolidation of two of our customers could result in reduced revenues if the combined entity were to
negotiate greater volume discounts or discontinue use of certain of our products. Additionally, if a non-
customer and a customer combine and the combined entity in turn decides to forego future use of our
products, our revenue would decline. Conversely, we could benefit from the combination of a non-customer
and a customer when the combined entity continues use of our products and, as a larger combined entity,
increases its demand for our products and services. We tend to focus on larger financial institutions as
customers, often resulting in our solutions being the solutions that survive in the consolidated entity.

(cid:129) Electronic payments convergence. As electronic payment volumes grow and pressures to lower overall
cost per transaction increase, financial institutions are seeking methods to consolidate their payment
processing across the enterprise. We believe that the strategy of using service-oriented-architectures to allow
for re-use of common electronic payment functions such as authentication, authorization, routing and
settlement will become more common. Using these techniques, financial institutions will be able to reduce
costs, increase overall service levels, enable one-to-one marketing in multiple bank channels and manage
enterprise risk. Our product development strategy is, in part, focused on this trend, by creating integrated
payment functions that can be re-used by multiple bank channels, across both the consumer and wholesale
bank. While this trend presents an opportunity for us, it may also expand the competition from third-party
electronic payment technology and service providers specializing in other forms of electronic payments.
Many of these providers are larger than us and have significantly greater financial, technical and marketing
resources.

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 in the software industry are
complex and it can be difficult to estimate when we will recognize revenue generated by a given transaction. Factors
such as maturity of the software product licensed, payment terms, creditworthiness of the customer, and timing of
delivery or acceptance of our products often 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
United States 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. Also during the year ended September 30, 2007, we
entered into two interest rate swaps with a commercial bank whereby we pay a fixed rate of 5.375% and 4.90% and
receive a floating rate indexed to the 3-month LIBOR from the counterparty on a notional amount of $75 million
and $50 million that is not yet outstanding under the credit facility, respectively. Fluctuations in interest 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 both organic sources 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 financially accretive to our financial performance.

International Business Machines Corporation Alliance

On December 16, 2007, we entered into an Alliance Agreement (“Alliance”) with International Business
Machines Corporation (“IBM”) relating to joint marketing and optimization of our electronic payments application
software and IBM’s middleware and hardware platforms, tools and services. On March 17, 2008, the Company and
IBM entered into Amendment No. 1 to the Alliance (“Amendment No. 1” and included hereafter in all references to
the “Alliance”), which changed the timing of certain payments to be made by IBM. Under the terms of the Alliance,
each party will retain ownership of its respective intellectual property and will independently determine product
offering pricing to customers. In connection with the formation of the Alliance, we granted warrants to IBM to
purchase up to 1,427,035 shares of our common stock at a price of $27.50 per share and up to 1,427,035 shares of
our common stock at a price of $33.00 per share. The warrants are exercisable for five years.

29

The stated initial term of the Alliance is five years, subject to extension for successive two-year terms if not

previously terminated by either party and subject to earlier termination for cause.

During the year ended December 31, 2008, we received a second payment from IBM of $37.3 million per the
Alliance. This payment has been recorded in the Alliance agreement liability in the accompanying consolidated
balance sheet as of December 31, 2008. This amount represents a prepayment of funding for technical enablement
milestones and incentive payments to be earned under the Alliance and related agreements, and accordingly a
portion of this payment is subject to refund by us to IBM under certain circumstances. As of December 31, 2008,
$20.7 million is refundable subject to achievement of future milestones.

International Business Machines Corporation Outsourcing Agreement

On March 17, 2008, we entered into a Master Services Agreement (“Outsourcing Agreement”) with IBM to
outsource our internal information technology (“IT”) environment to IBM. Under the terms of the Outsourcing
Agreement, IBM provides us with global IT infrastructure services including the following services, which were
provided by our employees: cross functional delivery management services, asset management services, help desk
services, end user services, server system management services, storage management services, data network
services, enterprise security management services and disaster recovery/business continuity plans (collectively, the
“IT Services”). We retain responsibility for our security policy management and on-demand business operations.

The initial term of the Outsourcing Agreement is seven years, commencing on March 17, 2008. We have the
right to extend the Outsourcing Agreement for one additional one-year term unless otherwise terminated in
accordance with the terms of the Outsourcing Agreement. Under the Outsourcing Agreement, we retain the right to
terminate the agreement both for cause and for convenience. However, upon any termination of the Outsourcing
Agreement by us for any reason (other than for material breach by IBM), we will be required to pay a termination
charge to IBM, which charge may be material.

We pay IBM for the IT Services through a combination of fixed and variable charges, with the variable charges
fluctuating based on our actual need for such services as well as the applicable service levels and statements of
work. Based on the currently projected usage of these IT Services, we expect to pay $116 million to IBM in service
fees and project costs over the initial seven-year term.

In addition, IBM is providing us with certain transition services required to transition our IT operations
embodied in the IT Services in accordance with a mutually agreed upon transition plan (the “Transition Services”).
We currently expect the Transition Services to be completed approximately 18 months after the effective date of the
Outsourcing Agreement and to pay IBM approximately $8 million for the Transition Services over a period of five
years. We have recorded approximately $6.6 million of expense for Transition Services during the year ended
December 31, 2008 that are included in general and administrative expenses in the accompanying consolidated
statement of operations. We expect to recognize the remaining expense for Transition Services during the first half
of 2009. We incurred an additional $0.9 million of staff augmentation costs related to the Transition Services during
the year ended December 31, 2008 that are included in general and administrative expenses in the accompanying
consolidated statement of operations.

To protect our expectations regarding IBM’s performance, the Outsourcing Agreement has performance
standards and minimum services levels that IBM must meet or exceed. If IBM fails to meet a given performance
standard, we would, in certain circumstances, receive a credit against the charges otherwise due.

Additionally, to assure that the charges under the Outsourcing Agreement do not become significantly higher
than the market rate for such services, we have the right to periodically perform benchmark studies to determine
whether IBM’s price and performance are consistent with the then current market. We have the right to conduct such
benchmark studies, at its cost, beginning in the second year of the Outsourcing Agreement.

As a result of the Outsourcing Agreement, 16 of our employees became employees of IBM and another 62

positions were eliminated.

30

2008 Restructuring Plan

During the year ended December 31, 2008, we reduced our headcount by 110 employees as a part of our
strategic plan to reduce operating expenses. In connection with these actions, during the year ended December 31,
2008, $5.6 million of termination costs were recognized in general and administrative expense in the accompanying
consolidated statement of operations. Headcount reductions will continue during the first half of 2009 and we
expect to recognize an additional $3.0 million to $5.0 million of expense.

Approximately $3.0 million of the severance costs related to the headcount reduction were paid prior to
December 31, 2008, the majority of the remaining liability is expected to be paid during the first quarter of 2009,
with a portion being spread through the third quarter of 2009. We expect to complete our restructuring activities by
the end of the first half of 2009.

ACQUISITIONS

On May 31, 2006, we acquired the outstanding shares of eps Electronic Payment Systems AG (“eps AG”),
headquartered in Frankfurt, Germany. The acquisition of eps AG occurred in two closings. The initial closing
occurred on May 31, 2006, and the second closing occurred on October 31, 2006. eps AG, with operations in
Germany, Romania, the United Kingdom and other European locations, offered electronic payment and comple-
mentary solutions focused largely in the German market. The acquisition of eps AG has provided us additional
opportunities to sell our value added solutions, such as Proactive Risk Manager and Smart Chip Manager, into the
German marketplace, as well as to sell eps AG’s testing and dispute management solutions into markets beyond
Germany. In addition, eps AG’s presence in Romania has helped us more rapidly develop our global offshore
development and support capabilities. The aggregate purchase price for eps AG was $30.4 million, which was
comprised of cash payments of $19.1 million, 330,827 shares of common stock valued at $11.1 million, and direct
costs of the acquisition.

On September 29, 2006, we completed the acquisition of P&H Solutions, Inc. (“P&H”). P&H was a leading
provider of enterprise business banking solutions and provides a complement to our existing revenue producing
activities. The aggregate purchase price for P&H, including direct costs of the acquisition, was $133.7 million, net
of $20.2 million of cash acquired, approximately $73.3 million of which was financed by the Credit Agreement
described in Note 6, “Debt”, in the Notes to Consolidated Financial Statements, with the remaining cash of
$60.4 million derived from the sale of investments The acquisition of P&H has extended our wholesale payments
solutions suite, provided us with an Application Software Provider (“ASP”)-based offering and allowed us to
distribute P&H’s solutions into international markets through our global distribution channel.

On February 7, 2007, we acquired Visual Web Solutions, Inc. Visual Web marketed trade finance and web-
based cash management solutions, primarily to financial institutions in the Asia/Pacific region. Visual Web had
sales and customer support office in Singapore, and a product development facility in Bangalore, India. The
aggregate purchase price of Visual Web, including direct costs of the acquisition, was $8.3 million, net of
$1.1 million of cash acquired.

On April 2, 2007, we acquired Stratasoft Sdn. Bhd. Stratasoft was a Kuala Lumpur based company focused on
the provision of mainframe based payments systems to the Malaysian market. Prior to the acquisition, Stratasoft had
been a distributor of our OCM 24 product within the Malaysian market since 1995. The aggregate purchase price of
Stratasoft, including direct costs of the acquisition, was $2.5 million, net of $0.7 million of cash acquired.

ASSETS OF BUSINESSES TRANSFERRED UNDER CONTRACTUAL ARRANGEMENTS

On September 29, 2006, we completed the sale of the eCourier and Workpoint product lines to PlaNet Group,
Inc. We retained rights to distribute these products as components of our electronic payments solutions. See
Note 16, “Assets of Businesses Transferred Under Contractual Arrangements”, in the Notes to Consolidated
Financial Statements for further detail.

31

BACKLOG

Included in backlog estimates are all software license fees, maintenance fees and services specified in executed
contracts, as well as revenues from assumed contract renewals to the extent that 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 estimate represents expected revenues from existing customers using the following key

assumptions:

(cid:129) 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.

(cid:129) License and facilities management arrangements are assumed to renew at the end of their committed term at

a rate consistent with our historical experiences.

(cid:129) Non-recurring license arrangements are assumed to renew as recurring revenue streams.

(cid:129) 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.

(cid:129) 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:

(cid:129) Anticipated increases in transaction volumes in customer systems.

(cid:129) Optional annual uplifts or inflationary increases in recurring fees.

(cid:129) Services engagements, other than facilities management, are not assumed to renew over the 60-month

backlog period.

(cid:129) The potential impact of merger activity within our markets and/or customers is not reflected in the

computation of our 60-month backlog estimate.

For the three months ended December 31, 2007, we completed a comprehensive review of the assumptions
used and data required in computing our backlog estimates. The 60-month and 12-month backlog estimates set forth
below for the period ended September 30, 2007 have been revised to reflect these adjustments.

The review identified two categories of adjustments:

(cid:129) Adjustments due to inaccurate or incomplete data resulting in a historical over-statement of previously

reported backlog estimates, and

(cid:129) Adjustments required to conform with the recently adopted backlog policy resulting in a historical under-

statement of previously reported backlog estimates.

While this review is complete and we do not expect further adjustments to previously reported backlog
estimates, we continue to review the processes, procedures, tools, and assumptions used in preparing backlog
estimates.

In addition, we also completed a review of our customer renewal experience over the 12-month period ended
December 31, 2007 which was further updated for the 6-month period ended June 30, 2008. The impact of this
review and subsequent update resulted in a revision to the renewal assumptions used in computing the 60-month and
12-month backlog estimates. Backlog results for all reported periods have been updated to reflect our most recent
customer renewal experience. We expect to perform an annual review of customer renewal experience. In the event
a revision to renewal assumptions is determined to be necessary, prior periods will be adjusted for comparability
purposes.

32

The following table sets forth our 60-month backlog estimate, by geographic region, as of December 31, 2008,
September 30, 2008, June 30, 2008, March 31, 2008, December 31, 2007 and September 30, 2007 (in millions).
Dollar amounts reflect foreign currency exchange rates as of each period end.

December 31,
2008

September 30,
2008

June 30,
2008

March 31,
2008

December 31,
2007

September 30,
2007

Americas . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . .
Asia/Pacific . . . . . . . . . . . . . . . . . . .

$ 771
480
156

$ 744
511
159

$ 744
534
159

$ 731
523
154

Total . . . . . . . . . . . . . . . . . . . . . .

$1,407

$1,414

$1,437

$1,408

$ 739
505
144

$1,388

$ 723
491
135

$1,349

Included in our 60-month backlog estimates are amounts expected to be recognized during the initial license
term of customer contracts (“Committed Backlog”) and amounts expected to be recognized from assumed renewals
of existing customer contracts (“Renewal Backlog”). Amounts expected to be recognized from assumed contract
renewals are based on the Company’s historical renewal experience. The estimated Committed and Renewal
60-month Backlog estimate as of December 31, 2008 is $757 million and $650 million, respectively.

We also estimate 12-month backlog, segregated between monthly recurring and non-recurring revenues, using
a methodology consistent with the 60-month backlog estimate. Monthly recurring revenues include all monthly
license fees, maintenance fees and processing services fees. Non-recurring revenues include other software license
fees and services. Amounts included in our 12-month backlog estimate assume renewal of one-time license fees on
a monthly fee basis if such renewal is expected to occur in the next 12 months. The following table sets forth our
12-month backlog estimate, by geographic region, as of December 31, 2008, December 31, 2007 and September 30,
2007 (in millions). Dollar amounts reflect currency exchange rates as of each period end.

December 31, 2008

December 31, 2007

September 30, 2007

Monthly
Recurring

Non-

Recurring Total

Monthly
Recurring

Non-

Recurring Total

Monthly
Recurring

Non-

Recurring Total

Americas . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . .
Asia/Pacific . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . .

$133
73
28

$234

$40
37
14

$91

$173
110
42

$325

$130
73
26

$229

$ 30
66
11

$107

$160
139
37

$336

$125
70
26

$221

$ 34
66
8

$108

$159
136
34

$329

Estimates of future financial results are inherently unreliable. Our backlog estimates require substantial
judgment and are based on a number of assumptions as described above. These assumptions may turn out to be
inaccurate or wrong, including for reasons outside of management’s control. For example, our customers 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 in the customer’s industry or geographic location, or
we may 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 actually recognized in future periods. Accordingly,
there can be no assurance that amounts included in backlog estimates will actually generate the specified revenues
or that the actual revenues will be generated within the corresponding 12-month or 60-month period. Additionally,
because backlog estimates are operating metrics, the estimates are not subject to the same level of internal review or
controls as a GAAP financial measure.

33

The following table sets forth certain financial data and the percentage of total revenues for the periods

indicated (amounts in thousands):

RESULTS OF OPERATIONS

Year Ended
December 31,
2008

Year Ended September 30,

2007

2006

Amount

% of Total
Revenue

Amount

% of Total
Revenue

Amount

% of Total
Revenue

Revenues:

Initial license fees (ILFs) . . . . . .
Monthly license fees (MLFs) . . .

$ 94,999
74,211

22.7% $ 87,341
62,144
17.8%

23.8% $107,347
68,282
17.0%

Software license fees . . . . . . .
Maintenance fees . . . . . . . . . . . .
Services. . . . . . . . . . . . . . . . . . .

169,210
130,015
118,428

40.5%
31.1%
28.4%

149,485
121,233
95,500

40.8%
33.1%
26.1%

175,629
103,708
68,565

30.9%
19.6%

50.5%
29.8%
19.7%

Total revenues . . . . . . . . . . . .

417,653

100.0%

366,218

100.0%

347,902

100.0%

22.9%
11.7%
19.2%
19.4%

2.4%

84.5%

15.5%

2.2%
(0.1)%
(0.2)%

Expenses:

Cost of software license fees . . .
Cost of maintenance and

services . . . . . . . . . . . . . . . . .
Research and development . . . . .
Selling and marketing . . . . . . . .
General and administrative . . . . .
Settlement of class action

litigation . . . . . . . . . . . . . . . .

45,487

10.9%

42,237

11.5%

31,124

8.9%

124,744
45,896
74,028
105,785

29.9%
11.0%
17.7%
25.3%

98,605
52,088
70,280
100,589

26.9%
14.2%
19.2%
27.5%

79,622
40,768
66,720
67,440

—

0.0%

—

0.0%

8,450

Total expenses . . . . . . . . . . . .

395,940

94.8%

363,799

99.3%

294,124

Operating income . . . . . . . . . . .

21,713

5.2%

2,419

0.7%

53,778

Other income (expense):

Interest income . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . .

2,609
(5,013)
8,247

0.6%
(1.2)%
2.0%

4,082
(6,644)
(3,740)

1.1%
(1.8)%
(1.0)%

7,825
(185)
(543)

Total other income

(expense) . . . . . . . . . . . . . .

5,843

1.4%

(6,302)

(1.7)%

7,097

2.0%

Income (loss) before income

taxes . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . .

27,556
16,974

6.6%
4.1%

(3,883)
5,248

(1.1)%
1.4%

60,875
5,510

Net income (loss) . . . . . . . . . . . . .

$ 10,582

2.5% $ (9,131)

(2.5)% $ 55,365

17.5%
1.6%

15.9%

2008 Compared to 2007

The following discussion of the results of operations compares the year ended December 31, 2008 to the year
ended September 30, 2007. The results of the transition period from October 1, 2007 to December 31, 2007 are
compared to the three-month period ended December 31, 2006 in a discussion that follows.

Revenues

Total revenues for the year ended December 31, 2008 increased $51.4 million, or 14.0%, compared to the year
ended September 30, 2007 as a result of a $19.7 million, or 13.2%, increase in software license fee revenues, an

34

$8.8 million, or 7.2%, increase in maintenance fee revenues, and a $22.9 million, or 24.0%, increase in services
revenues.

During the year ended December 31, 2008, we recognized approximately $18.0 million of revenues associated
with certain Faster Payments implementations in the United Kingdom. Of this amount, approximately $5.3 million
is reported in initial license fees revenue, $0.6 million is reported in maintenance fees, and approximately
$12.1 million is reported as services revenue.

The remainder of the software license fees and services revenue increase is due to the completion of various
customer implementation projects resulting in revenue recognition of previously deferred amounts that typically
result in increases to non-recurring initial license fee and services revenues. Completion of customer implemen-
tation projects also allows us to begin recognition of recurring maintenance fees which will result in a gradual
increase in maintenance fees revenues over time.

The company has also reduced its emphasis on non-recurring license fees most notably with renewals or term
extensions for existing customers. The increase in monthly license fees can be attributed to these efforts in addition
to completing certain implementation projects as noted above. In certain instances, customers elect to pay their
recurring license and/or capacity fees annually. While recurring in nature, these annually recurring revenues are
included as initial license fees.

License Fee Revenues

Customers purchase the right to license ACI software for the term of their agreement which term is generally
60 months. Within these agreements are specified capacity limits typically based on transaction volumes. 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.

Initial License Fee (ILF) Revenue

ILF revenue includes license and capacity revenues that do not recur on a monthly or quarterly basis. Included
in ILF revenues are license and capacity fees that are recognizable at the inception of the agreement and license and
capacity fees that are recognizable at interim points during the term of the agreement, including those that are
recognizable annually, due to negotiated customer payment terms. ILF revenues during the year ended Decem-
ber 31, 2008 compared to the year ended September 30, 2007, increased by $7.7 million. The EMEA and Asia-
Pacific reportable operating segments increased by $14.0 million and $0.7 million, respectively, offset by a decrease
in the America’s reportable operating segment of $7.0 million. The increases were driven by recognition of ILF
revenues associated with new deals or term renewals signed during the year as well as customer “go-live” events
that occurred throughout the year, most notably the Faster Payments implementations in the United Kingdom. The
decline in ILF revenues in the America’s reportable operating segment is largely attributable to certain agreements
being recognized ratably as Monthly License Fee Revenue rather than as a one-time fee as discussed below.
Included in the above are capacity related revenue increases of $6.9 million in the EMEA reportable operating
segment offset by a decrease of $3.9 million in the America’s reportable operating segment, within the year ended
December 31, 2008 as compared to the year ended September 30, 2007.

Monthly License Fee (MLF) Revenue

MLF revenues are license and capacity revenues that are paid up-front but recognized as revenue ratably over
an extended period and license and capacity revenues that are paid in monthly or quarterly increments due to
negotiated customer payment terms. The $12.1 million increase in MLF revenues during the year ended Decem-
ber 31, 2008, as compared to the year ended September 30, 2007, is primarily in the America’s reportable operating
segment with only modest changes in both the EMEA and Asia-Pacific reportable operating segments. Within this
increase is an $8.1 million increase in the amount of paid up-front revenue recognized ratably by customers in the
Americas reportable operating segment and a $4.0 million increase in license and capacity fees that are both

35

invoiced and recognized monthly or quarterly. Approximately $4.0 million of the increase in MLF revenue is due to
paid up-front revenue that is recognized ratably, is short-term in nature, and is not expected to recur in future
periods.

Maintenance Fee Revenue

Maintenance fee revenue includes standard and enhanced maintenance or any post contract support fees
received from customers for the provision of product support services. The increase in maintenance fee revenues
during the year ended December 31, 2008, compared to the year ended September 30, 2007, is primarily a result of
an increase in the number of customers that achieved live status, primarily in the Americas and EMEA reportable
operating segments, subsequent to September 30, 2007.

Services Revenue

Services revenues include fees earned through implementation services, professional services and processing
services. Implementation services include product installations, product upgrades, customer specific modifications
(“CSMs”) and product education. Professional services include business consultancy, technical consultancy, on site
support services, CSMs, product education, and testing services. Processing services include hosting, on-demand,
and facilities management services.

Services revenue increased $22.9 million, or 24.0%, for the year ended December 31, 2008, primarily as a
result of an increase in implementation services revenue in the EMEA reportable operating segment, and to a lesser
extent, the Americas and Asia-Pacific reportable operating segments. The increase in the EMEA reportable
operating segment was largely attributable to $12.0 million of revenues associated with Faster Payments imple-
mentations. The remainder of the increase is primarily related to the completion of certain customer implemen-
tations allowing for the recognition of cumulative services performed over the duration of the project.

Expenses

Total operating expenses for the year ended December 31, 2008 increased $32.1 million, or 8.8%, compared to
the year ended September 30, 2007 as a result of a $26.1 million, or 26.5%, increase in cost of maintenance and
services, a $5.2 million, or 5.2%, increase in general and administrative costs, a $3.3 million, or 7.7%, increase in
cost of software license fees, and a $3.7 million, or 5.3%, increase in cost of selling and marketing. These increases
were partially offset by a $6.2 million, or 11.9%, decrease in research and development costs.

Cost of Software License Fees

Cost of software license fees represents the costs associated with maintaining software products that have
already been developed. Software license fees costs include human resource costs and other incidental costs for
maintaining software products as well as the amortization of previously capitalized internally developed and
acquired software costs. Examples of maintaining software products include product management, documentation,
publications and education.

The cost of software license fees for the year ended December 31, 2008 increased compared to the year ended
September 30, 2007 due to higher personnel and related costs of $4.9 million attributable to reallocations of
personnel from certain business functions (primarily research and development, services, and sales and marketing)
to invest in the Global Product Management function and to support the fulfillment of the technical enablement
milestones under the Alliance and other development work. Additionally, cost of software license fees expense
increased $1.3 million resulting from an increase in amortization. This increase was partially offset by $2.5 million
of reimbursement from IBM for certain expenditures determined to be direct and incremental to satisfying the
technical enablement milestones under the Alliance and are recorded as a reduction of cost of software license fees.
The remainder of the change compared to the year ended September 30, 2007 is primarily due to an increase in other
deferred implementation costs.

36

Cost of Maintenance and Services

Cost of maintenance and services includes costs to provide hosting services and both the costs of maintaining
our software products at customer sites as well as the service costs required to deliver, install and support software at
customer sites. Maintenance costs include the efforts associated with providing the customer with upgrades,
24-hour helpdesk, 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 maintenance and services for the year ended December 31, 2008 increased compared to the year ended
September 30, 2007 as a result of higher personnel and related costs of $20.6 million required primarily to support
the implementation services for the increase in large complex multi-product installations. Costs of maintenance and
services also increased as a result of the recognition of $2.8 million of previously deferred expenses associated with
the completion of certain Faster Payments implementations in the EMEA reportable operating segment and a large
multi-product implementation in the Americas operating segment offset by an increase of $2.3 million in additional
deferred implementation costs for various products currently being installed and $0.4 million of reimbursement
from IBM. Additionally, cost of maintenance and services increased $3.2 million for the year ended December 31,
2008 primarily as a result of an increase in distributor commission expense and an increase of $1.6 million from
higher third party software maintenance expense compared to the year ended September 30, 2007. The remaining
$0.6 million increase is related to miscellaneous items including insurance, telecommunications, and facilities
costs.

Research and Development

Research and development (“R&D”) expenses are primarily human resource costs related to the creation of
new products as well as improvements made to existing products. Continued R&D effort on existing products
addresses issues, if any, related to regulatory requirements and processing mandates as well as compatibility with
new operating system releases and generations of hardware.

R&D expense for the year ended December 31, 2008 decreased as compared to the year ended September 30,
2007, due to lower personnel and related costs of $2.0 million resulting from reallocations of personnel primarily to
the services function in support of large complex, multi-product customer installations and $4.2 million of
reimbursement from IBM for certain expenditures determined to be direct and incremental to satisfying the
technical enablement milestones under the Alliance and are recorded as a reduction of R&D 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 needed to promote the Company and its
products as well as perform or acquire market research to help us better understand what products our customers are
looking for in the future. Marketing costs also include the costs associated with measuring customers’ opinions
toward the Company, our products and personnel.

Selling and marketing expense for the year ended December 31, 2008 increased $3.7 million compared to the
year ended September 30, 2007 a result of an increase of $1.6 million in personnel and related costs and $0.7 million
in advertising and promotional expenses to support the 2008 sales plan and Alliance joint sales and marketing
initiatives. In addition, selling and marketing expenses increased as a result of a $0.5 million investment in sales
support tools and a $0.4 million increase in professional fees. The remaining increase of $0.6 million is primarily
due to an increase in telecommunications and facilities costs.

37

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 for the year ended December 31, 2008 increased $5.2 million compared to
the year ended September 30, 2007. Included in the year ended September 30, 2007, with no corresponding amount
during the year ended December 31, 2008, were approximately $11.9 million of expenses related to the historical
stock option review. Included in the year ended December 31, 2008, with no corresponding amounts during the year
ended September 30, 2007, were $7.5 million of expenses for Transition Services related to the IBM Outsourcing
Agreement. In addition, general and administrative expense increased $5.1 million as a result of the services
performed under the IBM Outsourcing Agreement offset by a $2.5 million reduction in personnel and related costs
due to the headcount reduction associated with the outsource agreement. The remaining increase in general and
administrative expenses is primarily the result of a $3.9 million increase in severance expense, $1.9 million increase
in professional fees primarily related to the 2008 restructuring activities and related reinvestments, and $1.0 million
of consulting expense incurred for the development of our corporate management office and $0.2 million of costs
incurred related to moving into our new Omaha facility.

Other Income and Expense

Other income and expense includes interest income and expense, foreign currency gains and losses, and other
non-operating items. Fluctuating currency rates impacted the year ended December 31, 2008 by $13.8 million in net
foreign currency gains, compared to $1.9 million net loss during the year ended September 30, 2007. A $5.8 million
loss on change in fair value of interest rate swaps was incurred during the year ended December 31, 2008, compared
to a $2.1 million loss in the year ended September 30, 2007. Interest income for the year ended December 31, 2008
decreased $1.5 million, or 36.1%, as compared to the year ended September 30, 2007 as a result of lower interest
rates and interest income on an amended income tax return in 2007 that did not recur in 2008. Interest expense
decreased $1.6 million, or 24.5%, for the year ended December 31, 2008 compared to the year ended September 30,
2007 as a result of lower interest rates and interest expense on income tax returns in 2007 that did not recur in 2008.

Income Taxes

The effective tax rate for the year ended December 31, 2008 was 61.6%. The effective tax rate is higher than
the U.S. effective rate of 35% due to the impact of our inability to recognize income tax benefits during the period
resulting from losses sustained in certain tax jurisdictions where the future utilization of the losses are uncertain and
by the recognition of tax expense associated with the transfer of certain intellectual property rights from U.S. to
non-U.S. entities. The effective tax rate for the year ended September 30, 2007 was (135.2)%. This rate was negative
due to a tax charge compared to a pretax loss, primarily related to reporting losses in countries in which we are
unable to record a tax benefit and reporting profits in countries where we do record a tax charge.

2007 Compared to 2006

The following discussion of the results of operations compares the year ended September 30, 2007 to the year

ended September 30, 2006.

Revenues

Total revenues for the year ended September 30, 2007 increased $18.3 million, or 5.3%, as compared to the
same period in 2006. The increase is the result of a $17.5 million, or 16.9%, increase in maintenance fee revenues
and a $26.9 million, or 39.3%, increase in services revenues, partially offset by a $26.1 million, or 14.9% decrease
in software license fee revenue. Included in the years ended September 30, 2007 and 2006 was approximately
$45.0 million and $2.9 million, respectively, of revenue related to acquired businesses. Excluding the impact of the
acquired businesses, total revenues decreased primarily as a result of a $29.6 million, or 16.9%, decrease in software
license fee revenues, partially offset by a $5.8 million, or 5.6%, increase in maintenance fee revenue.

38

The majority of the revenue increase during the year ended September 30, 2007 resulted from growth in the
Americas, with an increase of $15.1 million, or 8.3%, over fiscal 2006. Excluding the impact of the acquired
businesses, the Americas declined $21.8 million, or 12.0%, compared to fiscal 2006. This was primarily the result of
a decline in initial license fees as well as services revenues, which is a result of our practice to not pursue discounted
paid up front licensing fee transactions. The EMEA and Asia/Pacific operating segments increased by $2.0 million,
or 1.5%, and $1.2 million, or 3.4%, respectively, compared to fiscal 2006. Excluding the impact of acquired
businesses, EMEA saw a slight decline of $1.1 million, or 0.9%, primarily driven by a decline in license fees
partially offset by an increase in services and maintenance revenue. This was also the case for the Asia/Pacific
operating segment, which declined $0.9 million, or 2.5%, when excluding acquired businesses.

The decrease in software license fee revenues for the year ended September 30, 2007 is primarily due to our
decision to not pursue discounted paid up front deals, which lead to a decline in initial license fees. It was further
impacted by the mix of sales and timing of revenue recognition. This change in sales mix and revenue recognition
timing during the year has the corresponding effect of increasing backlog, and to the extent that customers were
billed, increasing deferred revenue during the year.

The increase in maintenance fee revenues of $5.8 million, excluding the impact of acquired businesses of
$11.7 million, during the year ended September 30, 2007, as compared to the same period in 2006, is primarily the
result of an increase in the overall installed base in the EMEA reportable operating segment, and, to a lesser extent,
in the Asia/Pacific reportable operating segment.

The slight increase in services revenues of $0.1 million, excluding the impact of acquired businesses of
$26.8 million, for the year ended September 30, 2007, as compared to the same period in 2006, resulted primarily
from steady activity in the EMEA and Asia/Pacific reportable operating segments.

Expenses

Total operating expenses for the year ended September 30, 2007 increased $69.7 million, or 23.7%, as
compared to the same period in 2006. Included in the years ended September 30, 2007 and 2006 was approximately
$63.5 million and $4.0 million, respectively, of operating expenses related to acquired businesses. Additionally,
there were approximately $11.8 million of costs incurred during the year ended September 30, 2007, and
$0.3 million of costs incurred in the same period in 2006, related to the historical stock option review, preparation
of restated historical financial information, cash settlement of vested options, and efforts to become current with our
filings with the SEC.

Excluding the impact of the acquired businesses, total expenses increased primarily as a result of a
$21.0 million, or 31.5%, increase in general and administrative costs, a $2.9 million, or 3.8%, increase in
maintenance and services costs, a $0.2 million, or 0.8%, increase in the cost of software license fees, partially offset
by a $4.8 million, or 7.2%, decrease in selling and marketing costs, a $0.8 million, or 2.1%, decrease in research and
development (“R&D”) costs and $8.5 million recorded in 2006 related to settlement of the class action litigation.

The increase in the cost of software license fees for the year ended September 30, 2007, as compared to the
same period in 2006, excluding the impact of the acquired businesses, was a direct result of a change in product mix
in EMEA and Asia/Pacific, partially offset by a decrease in the use of contractors in the Americas.

Cost of maintenance and services for the year ended September 30, 2007 increased as compared to the same
period in 2006, excluding the impact of the acquired businesses, in line with the corresponding increase in services
revenue in the International operating segments as well as a renewed focus on service activities.

R&D costs for the year ended September 30, 2007 increased slightly as compared to the same period in 2006,
excluding the impact of the acquired businesses, due to headcount investment in our Ireland operation. This was
partially offset by declining headcount in developed countries concurrent with a shift to low cost geographies such
as Romania and India. In addition, we reallocated resources from the R&D function into services activities.

The decrease in selling and marketing costs for the year ended September 30, 2007 as compared to same period
in 2006, excluding the impact of the acquired businesses, was a result of sales productivity initiatives and a decrease

39

in advertising and promotion costs due to the timing of certain marketing events and trade shows. This was partially
offset by an increase in travel and entertainment expenses related to customer projects.

Approximately $11.5 million of the increase in general and administrative costs during the year ended
September 30, 2007, as compared to the same period in 2006, excluding the impact of the acquired businesses, was
due to expenses incurred related to the historical stock option review, preparation of restated historical financial
information, cash settlement of vested options, and efforts to become current with our filings with the SEC. Also
included were $2.6 million and $0.6 million of restructuring and other employee related expense respectively. The
remaining difference was driven by investment in infrastructure and the timing of audit professional fees.

Other Income and Expense

Interest income for the year ended September 30, 2007 decreased $3.7 million, or 47.8%, as compared to the
same period in 2006. The decrease in interest income is due to interest income of $1.9 million on a refund of income
taxes recorded during the year ended September 30, 2006 as well as a decrease in interest bearing assets during the
year ended September 30, 2007 as compared to the same period in 2006 due to acquisition activity and the share
repurchase program.

Interest expense for the year ended September 30, 2007 increased $6.5 million, as compared to the same period
in 2006. As discussed in Note 6, “Debt” in the Notes to Consolidated Financial Statements, we entered into a long
term credit facility agreement with aggregate available borrowings of $150 million on September 29, 2006 under
which $75 million was outstanding as of September 30, 2007.

Other income and expense consists of foreign currency gains and losses, and other non-operating items. Other
expense for the year ended September 30, 2007 was $3.7 million as compared to other expense for the same period
in 2006 of $0.5 million. Comparative changes in other income and expense amounts were attributable to fluctuating
currency rates which impacted the amounts of foreign currency gains or losses recognized by us during the
respective fiscal years and the loss on the change in fair value of our interest rate swaps. We realized $1.9 million in
net foreign currency losses during the year ended September 30, 2007 as compared with $0.2 million in net losses
during the same period in 2006 and a $2.1 million loss on change in fair value of interest rate swaps during the year
ended September 30, 2007. These losses were partially offset by a $0.4 million gain under a contractual
arrangement.

Income Taxes

The effective tax rates for the years ended September 30, 2007 and 2006 were approximately (135.2%) and
9.1%, respectively. Our effective tax rate each year varies from our federal statutory rate because we operate in
multiple foreign countries where we apply their tax laws and rates which vary from those that we apply to the
income we generate from our domestic operations. The effective tax rate for the year ended September 30, 2007 is
negative due to a tax charge compared to a pretax loss, primarily related to reporting losses in countries in which we
are unable to record a tax benefit and reporting profits in countries where we do record a tax charge. The effective
tax rate for the year ended September 30, 2006 was lower than the same period in 2007 because we completed the
federal tax audit for fiscal years 1997 through 2003 during fiscal 2006 and we also released a valuation reserve we
had previously established on our foreign tax credit carryforwards. With the final settlement of the federal tax audit
we released all accruals and tax contingencies for those years resulting in a 6.4% reduction in the effective tax rate.
During the year ended September 30, 2006, we were able to utilize significant foreign tax credits and based on this
fact, as well as our estimates of our ability to utilize the remaining foreign tax credits in future years we also released
the valuation reserves related to our carryover general limitation foreign tax credits, resulting in a 20.7% decrease in
the effective tax rate.

40

Segment Results

The following table presents revenues and operating income for the periods indicated by geographic region (in

thousands):

Revenues:

Year Ended
December 31,
2008

Years Ended
September 30,

2007

2006

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$207,350
169,046
41,257

$195,775
133,776
36,667

$180,718
131,738
35,446

$417,653

$366,218

$347,902

Operating income (loss):

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 21,714
2,140
(2,141)

$ 14,578
(16,942)
4,783

$ 42,713
3,876
7,189

$ 21,713

$

2,419

$ 53,778

41

Transition Period Ended December 31, 2007 compared to Quarter Ended December 31, 2006

The following table presents the consolidated statements of operations as well as the percentage relationship to

total revenues of items included in our Consolidated Statements of Operations (amounts in thousands):

Three Months Ended December 31,
2007
2006

Amount

% of Total
Revenue

Amount

% of Total
Revenue

Revenues:

Initial license fees (ILFs) . . . . . . . . . . . . . . . . . . . . . . . . . .
Monthly license fees (MLFs) . . . . . . . . . . . . . . . . . . . . . . .

$ 30,274
15,992

29.9% $25,948
15,237
15.8%

Software license fees . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46,266
32,167
22,849

45.6%
31.8%
22.6%

41,185
28,729
23,375

27.8%
16.3%

44.1%
30.8%
25.1%

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

101,282

100.0%

93,289

100.0%

Expenses:

Cost of software licenses fees. . . . . . . . . . . . . . . . . . . . . . .
Cost of maintenance and services . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . .

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other income (expense):

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other income (expense) . . . . . . . . . . . . . . . . . . . . .

Income before income taxes. . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,214
24,689
16,411
20,673
26,443

98,430

2,852

763
(1,389)
(334)

(960)

1,892
3,908

10.1%
24.4%
16.2%
20.4%
26.1%

97.2%

2.8%

0.8%
(1.4)%
(0.3)%

(0.9)%

1.9%
3.9%

10,211
24,147
11,985
18,150
23,831

88,324

4,965

885
(1,460)
(293)

(868)

4,097
1,476

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (2,016)

(2.0)% $ 2,621

10.9%
25.9%
12.8%
19.5%
25.5%

94.7%

5.3%

0.9%
(1.6)%
(0.3)%

(0.9)%

4.4%
1.6%

2.8%

Revenues

Total revenues for the three months ended December 31, 2007 increased $8.0 million, or 8.6%, as compared to
the same period of 2006. Included in the three months ended December 31, 2007 revenue with no corresponding
amount in the same period of 2006 was approximately $0.8 million of revenue related to the acquisitions of Visual
Web and Stratasoft. Excluding the impact of the acquired businesses, total revenues increased primarily as a result
of a $5.1 million, or 12.3%, increase in software license fee revenues, a $3.1 million, or 10.7%, increase in
maintenance fee revenues partially offset by a $1.0 million or 4.2% decrease in services revenue.

The increase in software license fee revenues, excluding the impact of Visual Web and Stratasoft, during the
three months ended December 31, 2007, as compared to the same period of 2006, is primarily due to greater license
and capacity fee revenues in the Americas and EMEA reportable operating segments. This increase is primarily due
to increased capacity requirements for existing customers which is often combined with the renewal of license term.

The increase in maintenance fee revenues, excluding the impact of Visual Web and Stratasoft, during the three
months ended December 31, 2007, as compared to the same period of 2006, is primarily a result of an increase in the

42

number of customers in the EMEA reportable operating segment that achieved go live status since December 31,
2006.

The decrease in services revenues, excluding the impact of Visual Web and Stratasoft, during the three months
ended December 31, 2007, as compared to the same period of 2006, resulted from a $1.3 million or a 17.7% decline
of implementation services primarily in the EMEA reportable operating segment. This was a result of a series of
large projects that were completed during the three months ended December 31, 2006. Recognition of imple-
mentation services is often a function of timing, as in this case, which drives variances between years. Processing
services increased by $0.8 million or 10.7%, driven primarily by Enterprise Banker application services growth
offset by the cancellation of a facilities management contract in the Americas reportable operating segment.

Expenses

Total operating expenses for the three months ended December 31, 2007 increased $10.1 million, or 11.4%, as
compared to the same period of 2006. Included in the three months ended December 31, 2007 operating expenses
with no corresponding amount in the same period of 2006 was approximately $2.3 million of operating expenses
related to acquired businesses.

Excluding the impact of the acquired businesses, total expenses increased primarily as a result of a $3.4 million,
or 28.0% increase in research and development costs, a $2.3 million, or 12.8%, increase in selling and marketing
costs, a $2.5 million, or 10.5% increase in general and administrative costs, offset by a $0.1 million, or 0.5%,
decrease in maintenance and service costs and a $0.3 million, or 2.7%, decrease in the cost of software license fees.

Cost of software license fees for the three months ended December 31, 2007 was consistent with the same
period of 2006. Expenses of $0.3 million related to acquired businesses were incurred during the three months
ended December 31, 2007.

Cost of maintenance and services for the three months ended December 31, 2007 increased $0.5 million, or
2.2%, as compared to the same period of 2006. Expenses of $0.6 million related to acquired businesses were
incurred during the three months ended December 31, 2007.

Research and development (“R&D”) costs for the three months ended December 31, 2007 increased
$4.4 million, or 36.9%, as compared to the same period of 2006. The increase resulted from expenses of
$1.1 million related to acquired businesses and $3.3 million of expenses associated with B24-eps R&D activities,
build-out of ACI On Demand and other software optimization efforts.

Selling and marketing costs for the three months ended December 31, 2007 increased $2.5 million, or 13.9%,
as compared to the same period of 2006. The increase resulted from expenses of $0.2 million related to acquired
businesses as well as an approximate $2.0 million increase in commissions driven by a relative increase in sales
activity partly attributable to the change from a fiscal year to a calendar year-end. The remaining expense was
driven by timing of advertising and promotions activities.

General and administrative costs for the three months ended December 31, 2007 increased $2.6 million, or
11.0%, as compared to the same period of 2006. Included in costs for the three months ended December 31, 2007,
with no corresponding amount in the same period of 2006, are general and administrative costs of approximately
$0.1 million related to acquired businesses. Additionally, included in the three months ended December 31, 2007,
were $3.0 million of accounting and tax professional fees, $1.3 million of expense associated with early termination
of the corporate jet lease, $0.7 million of restructuring and other employee related expense, $0.5 million of
professional fees to support the Alliance, $0.5 million of increased rent and utilities expense related to improve-
ments made in our United Kingdom and Canada facilities and $0.4 million of other expenses offset by $1.3 million
for release of the accrual related to LTIP Performance Shares granted in fiscal 2005 and 2006. Approximately
$2.6 million of the expenses incurred in the three months ended December 31, 2006, with no corresponding amount
during the same period in 2007, related to the historical stock option review and management analysis.

43

Other Income and Expense.

Other income and expense includes interest income and expense, foreign currency gains and losses, and other
non-operating items. Fluctuating currency rates impacted the three months ended December 31, 2007 by
$1.9 million in net foreign currency gains, as compared with $0.6 million in net losses during the same period
in 2006. A $2.5 million loss on change in fair value of interest rate swaps was incurred during the three months
ended December 31, 2007 with no corresponding amount in the same period of 2006. Interest income for the three
months ended December 31, 2007 decreased $0.1 million or 13.8% as compared to the corresponding period of
2006. Interest expense was consistent for the three months ended December 31, 2007 and 2006.

Income Taxes

The effective tax rate for the three months ended December 31, 2007 and 2006 was approximately 206.6% and
36.0%, respectively. The effective tax rate for the three months ended December 31, 2007 was negatively impacted
by losses in foreign countries in which the Company was not able to record tax benefits. The effective tax rate for the
three months ended December 31, 2006 was positively impacted primarily by a U.S. tax law change during the
quarter that extended the research and development tax credit and negatively impacted primarily by the recognition
of tax expense associated with the transfer of certain intellectual property rights out of the U.S.

Segment Results

The following table presents revenues and operating income for the periods indicated by geographic region (in

thousands):

Revenues:

Three Months Ended
December 31,

2007

2006

Americas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 49,618
43,094
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,570
Asia/Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$47,134
37,555
8,600

$101,282

$93,289

Operating income (loss):

Americas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,883
403
(434)

$ 2,622
697
1,646

$

2,852

$ 4,965

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2008, our principal sources of liquidity consisted of $113.0 million in cash and cash
equivalents and $75.0 million of unused borrowings under our revolving credit facility. The amount of unused
borrowings actually available under the revolving credit facility varies in accordance with the terms of the
agreement. We believe that the amount currently available along with our current cash balance provides sufficient
liquidity. We are not currently dependent upon short-term funding, and the limited availability of credit in the
market has not affected our revolving credit facility, our liquidity or materially impacted our funding costs. We had
bank borrowings of $75.0 million outstanding under our revolving credit facility as of December 31, 2008.
However, due to the existing uncertainty in the capital and credit markets and the impact of the current economic
crisis on our operating results and financial conditions, the amount of available unused borrowings under our
existing credit facility may be insufficient to meet our needs and/or our access to capital outside of our existing
credit facility may not be available on terms acceptable to us or at all. Additionally, if one or more of the financial
institutions in our syndicate were to default on its obligation to fund its commitment, the portion of the committed

44

facility provided by such defaulting financial institution would not be available to us. We cannot assure you that
alternative financing on acceptable terms would be available to replace any defaulted commitments.

In connection with funding the purchase of P&H, as discussed in Note 6, “Debt” in the Notes to Consolidated
Financial Statements, on September 29, 2006, we entered into a five year revolving credit facility with a syndicate
of financial institutions, as lenders, providing for revolving loans and letters of credit in an aggregate principal
amount not to exceed $150 million. We have the option to increase the aggregate principal amount to $200 million.
The facility has a maturity date of September 29, 2011. Obligations under the facility are unsecured and
uncollateralized, but are jointly and severally guaranteed by certain of our domestic subsidiaries.

The credit facility contains certain affirmative and negative covenants including certain financial measure-
ments. The facility also provides for certain events of default. The facility does not contain any subjective
acceleration features and does not have any required payment or principal reduction schedule and is included as a
non-current liability in our consolidated balance sheet.

On August 27, 2007, we entered into an amendment to our credit agreement which amended the definition of
consolidated EBITDA, as it relates to the calculation for our debt covenants, to exclude certain non-recurring items
and to incorporate the change in our fiscal year end to a calendar year, effective January 1, 2008.

We have previously obtained certain extensions and may continue to seek additional extensions under our
credit facilities. The extensions waived certain potential breaches of representations and covenants under our credit
facilities and established extended deadlines for the delivery of certain financial reports during the period in which
we were not current with our SEC reporting obligations.

We may select either a base rate loan or a LIBOR based loan. Base rate loans are computed at the national
prime interest rate plus a margin ranging from 0% to 0.125%. LIBOR based loans are computed at the applicable
LIBOR rate plus a margin ranging from 0.625% to 1.375%. The margins are dependent upon our total leverage ratio
at the end of each quarter.

On October 5, 2006, we exercised our right to convert the rate on our initial borrowing to the LIBOR based
option, thereby reducing the effective interest rate to 6.12%. The interest rate in effect at December 31, 2008 was
5.21%. There is also an unused commitment fee to be paid annually of 0.15% to 0.3% based on our leverage ratio.
The initial principal borrowings of $75 million were outstanding at December 31, 2008. There is $75 million
remaining under the credit facility for future borrowings. See Note 7, “Derivative Instruments and Hedging
Activities”, in the Notes to Consolidated Financial Statements for further detail.

On July 18, 2007, we entered into an interest rate swap with a commercial bank whereby we pay a fixed rate of
5.375% and receive a floating rate indexed to the 3-month LIBOR (5.36% at inception) from the counterparty on a
notional amount of $75 million. The swap effective date was July 20, 2007, and terminates on October 4, 2010. The
variable rate re-prices quarterly.

On August 16, 2007, we entered into an interest rate swap with a commercial bank whereby we pay a fixed rate
of 4.90% and receive a floating rate indexed to the 3-month LIBOR from the counterparty on a notional amount of
$50 million. The swap effective date is October 4, 2007, and terminates on October 4, 2010. The variable rate will be
first determined on the effective date and will re-price quarterly.

Since these interest rate swaps do not qualify for hedge accounting under SFAS No. 133, Accounting for
Derivatives and Hedging Instruments, changes in market interest rates will impact our earnings. See Item 7a,
Quantitative and Qualitative Disclosures About Market Risk and Note 7, “Derivative Instruments and Hedging
Activities”, in the Notes to the Consolidated Financial Statements.

The board of directors approved a stock repurchase program authorizing us, from time to time as market and
business conditions warrant, to acquire up to $210.0 million of our common stock. During the year ended
December 31, 2008, we repurchased 1,639,755 shares of our common stock at an average price of $18.33 per share
the program to date, we have purchased approximately
under
6,049,484 shares for approximately $154 million. The maximum remaining dollar value of shares authorized
for purchase under the stock repurchase program was approximately $56 million as of December 31, 2008.

this stock repurchase program. Under

45

Purchases will be made from time to time as market and business conditions warrant, in open market, negotiated or
block transactions, subject to applicable laws, rules and regulations.

We may also decide to use cash to 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 other
companies.

Cash Flows

The following table sets forth summary cash flow data for the periods indicated. Please refer to this summary

as you read our discussion of the sources and uses of cash in each year.

Year Ended
December 31,
2008

Year Ended
September 30,

2007

2006

(Amounts in thousands)

Net cash provided by (used in):

Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 77,826
(16,956)
(27,687)

$ 24,847
(25,964)
(50,005)

$ 60,701
(79,437)
45,156

2008 compared to 2007

Net cash flows provided by operating activities during the year ended December 31, 2008 amounted to
$77.8 million as compared to $24.8 million during the year ended September 30, 2007. The comparative period
increase in net cash flows from operating activities of $53.0 million was principally the result of the following
items: $40.9 million received from IBM primarily for prepayment of estimated incentives payments pursuant to the
terms of the Alliance, an increase of $19.7 million from net income of $10.6 million during the year ended
December 31, 2008 compared to a net loss of $9.1 million during the year ended September 30, 2007, the payment
of $10.6 million for P&H acquisition-related compensation charges during the year ended September 30, 2007, the
payment of a class action litigation settlement of $8.5 million during the year ended September 30, 2007, and an
increase in accruals for other expenses of $1.5 million during the year ended December 31, 2008. Additionally, non-
cash expense increased by $16.1 million during the year ended December 31, 2008 for items including depreciation,
amortization, deferred taxes, and the interest rate swaps. These items were partially offset by decreased cash
collections on customer receivables and decreased deferred revenues during the year ended December 31, 2008 as
compared to the year ended September 30, 2007 of $44.3 million.

Net cash flows used in investing activities totaled $17.0 million during the year ended December 31, 2008 as
compared to $26.0 million used in investing activities during the year ended September 30, 2007. During the year
ended December 31, 2008, we used cash of $12.0 million to purchase software, property and equipment and
$6.3 million for costs related to fulfillment of the technical enablement milestones under the Alliance. We also used
cash of $0.2 million for contingency payments on prior acquisitions. These uses of cash were partially offset during
the year ended December 31, 2008, by $1.5 million received from IBM for reimbursement of estimated capital-
izable technical enablement milestones costs pursuant to the terms of the Alliance. During the year ended
September 30, 2007, we used cash of $6.1 million to pay costs related to the second closing of the purchase of eps
AG, $0.7 million related to the P&H acquisition, $8.3 million for the acquisition of Visual Web, $2.5 million for the
acquisition of Stratasoft, and other direct acquisition costs. These uses of cash were partially offset during the year
ended September 30, 2007 by $0.5 million in proceeds from an asset transfer. We also used cash of $8.9 million to
purchase software, property and equipment during the year ended September 30, 2007.

Net cash flows used in financing activities totaled $27.7 million during the year ended December 31, 2008 as
compared to net cash flows used of $50.0 million during the year ended September 30, 2007. During the years ended
December 31, 2008 and September 31, 2007, we used cash of $30.1 million and $46.7 million, respectively, to
purchase shares of our common stock under the stock repurchase program. We also made payments to third-party
financial institutions, primarily related to debt and capital leases, totaling $3.3 million and $3.4 million during the
years ended December 31, 2008 and September 30, 2007, respectively. During the years ended December 31, 2008

46

and September 30, 2007, we received proceeds of $4.0 million and $0.1 million, respectively, including corre-
sponding excess tax benefits, from the exercises of stock options. During the year ended December 31, 2008, we
received proceeds of $1.7 million for the issuance of common stock for purchases under our Employee Stock
Purchase Plan.

We realized a $17.2 million decrease in cash during the year ended December 31, 2008 and a $1.8 million

increase in cash during year ended September 30, 2007 related to foreign exchange rate variances.

2007 compared to 2006

Net cash flows provided by operating activities during the year ended September 30, 2007 amounted to
$24.8 million as compared to net cash flows provided by operating activities of $60.7 million during the same period
in 2006. The comparative period decrease in net cash flows from operating activities of $35.9 million was
principally the result of the following items: a decrease of $64.5 million from net income of $55.4 million during the
year ended September 30, 2006 to a net loss of $9.1 million, the payment of $10.6 million for P&H acquisition-
related compensation charges, the payment of a class action litigation settlement of $8.5 million, the receipt of a
cash refund of $10.9 million related to the settlement of the IRS audit of tax years 1997 through 2003 during fiscal
2006, and a decrease in accruals for other expenses of $16.6 million during the year ended September 30, 2007.
These items were partially offset by increased cash collections on customer receivables and higher deferred
revenues during the yea ended September 30, 2007 as compared to the same period in 2006 of $45.4 million and
increased non-cash expenses of $29.8 million, such as depreciation, amortization and deferred taxes. The 2006 and
2007 acquisitions have increased accrued expenses due to the volume of expenses and increased depreciation and
amortization due to the intangibles and fixed assets related to the acquisitions.

Net cash flows used in investing activities totaled $26.0 million during the year ended September 30, 2007 as
compared to $79.4 million used in investing activities during the same period in 2006. During the year ended
September 30, 2007, we used cash of $6.1 million to pay costs related to the second closing of the purchase of eps
AG, $0.7 million related to the P&H acquisition, $8.3 million for the acquisition of Visual Web, $2.5 million for the
acquisition of Stratasoft, and other direct acquisition costs. These uses of cash were partially offset in the year ended
September 30, 2007 by $0.5 million in proceeds from an asset transfer. We also used cash of $8.9 million to
purchase software, property and equipment. During the year ended September 30, 2006, we used cash of
$50.9 million to increase our holding of marketable securities and $6.0 million to purchase software, property
and equipment. We also used cash of $13.0 million for the acquisition of eps AG and $133.3 million for the
acquisition of P&H. These uses of cash were partially offset in the year ended September 30, 2006 by $123.8 million
provided by the sale of marketable securities.

Net cash flows used in financing activities totaled $50.0 million during the year ended September 30, 2007 as
compared to net cash flows provided of $45.2 million during the same period in 2006. In the year ended
September 30, 2007 and 2006, we used cash of $46.7 million and $39.7 million, respectively, to purchase shares of
our common stock under the stock repurchase program. We also made payments to third-party financial institutions,
primarily related to debt and capital leases, totaling $3.4 million and $3.7 million during the years ended
September 30, 2007 and 2006, respectively. During the years ended September 30, 2007 and 2006, we received
proceeds of $0.1 million and $14.0 million, respectively, including corresponding excess tax benefits, from the
exercises of stock options. In the year ended September 30, 2006, we received proceeds of $75.0 million from
borrowings under our revolving credit facility to finance the purchase of P&H.

We realized a $1.8 million increase in cash during the year ended September 30, 2007 and a $0.04 million

increase in cash during the same period in 2006 related to foreign exchange rate variances.

47

Transition Period Ended December 31, 2007 compared to Quarter Ended December 31, 2006

The following table sets forth summary cash flow data for the periods indicated. Please refer to this summary

as you read our discussion of the sources and uses of cash in each period.

Three Months Ended
December 31,

2007

2006

(Amounts in thousands)

Net cash provided by (used in):

Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$12,123
5,898
20,382

(611)
$
(13,836)
(6,085)

Net cash flows provided by operating activities for the three months ended December 31, 2007 amounted to
$12.1 million as compared to net cash flows used by operating activities of $0.6 million during the same period in
2006. The comparative period increase in net cash flows from operating activities of $12.7 million was principally
the result of the following items: $8.5 million paid during the three months ended December 31, 2006 for settlement
of the class action lawsuit, a $16.1 million increase in deferred revenue and a decrease in accruals for other expenses
of $21.1 million in the three months ended December 31, 2007. These items were partially offset by a net loss of
$2.0 million for the three months ended December 31, 2007 as compared to net income of $2.6 million for the same
period in 2006 and decreased cash collections on customer receivables of $27.1 million in the three months ended
December 31, 2007 as compared to the same period in 2006 and decreased non-cash expenses of $1.3 million, such
as depreciation, amortization, change in fair value of interest rate swaps and deferred taxes.

Net cash flows provided by investing activities totaled $5.9 million in the three months ended December 31,
2007 as compared to $13.8 million used in investing activities during the same period in 2006. During the three
months ended December 31, 2007, we used cash of $47,000 for a contingency payment under the S2 Systems, Inc.
purchase agreement. We also used cash of $3.9 million to purchase software, property and equipment. These uses of
cash flow were offset in the three months ended December 31, 2007 by $9.3 million received related to the Alliance
and $0.5 million in proceeds from asset transferred under contractual arrangement. During the three months ended
December 31, 2006, we used cash of $2.5 million to increase our holdings of marketable securities and $5.1 million
to purchase software, property and equipment. We also used cash of $6.2 million for the acquisition of eps AG and
$0.6 million related to the acquisition of P&H during the three months ended December 31, 2006. These uses of
cash were partially offset in the three months ended December 31, 2006 by $0.5 million provided by assets
transferred under contractual arrangement.

Net cash flows provided by financing activities totaled $20.4 million in the three months ended December 31,
2007 as compared to net cash flows used of $6.1 million during the same period in 2006. In the three months ended
December 31, 2007 and 2006, we used cash of $4.0 million and $4.4 million, respectively, to purchase shares of our
common stock under the stock repurchase program. We also made payments to third-party financial institutions,
primarily related to debt and capital leases, totaling $0.6 million and $1.5 million during the three months ended
December 31, 2007 and 2006, respectively. In 2007 and 2006, we received proceeds of $0.7 million and $42,000,
respectively, including corresponding excess tax benefits, from the exercises of stock options. In the three months ended
December 31, 2007, we received $24.0 million for issuance of common stock warrants related to the Alliance and
$0.3 million in proceeds for the issuance of common stock for a purchase under our Employee Stock Purchase Plan.

We also realized a $2.2 million decrease in cash during the three months ended December 31, 2007 compared

to a $0.3 million increase in cash during the same period of 2006 related to foreign exchange rate variances.

Contractual Obligations and Commercial Commitments

We lease office space and equipment under operating leases that run through August 2028, and also lease
certain property under capital lease agreements that expire in various years through 2012. Additionally, we have
entered into a long term credit facility agreement that expires in 2011. Under the Outsourcing Agreement with IBM,
we will pay IBM for IT services through a combination of fixed and variable charges subject to actual services
needed, applicable service levels and statements of work. The total amount paid is subject to a minimum

48

commitment as provided in the Outsourcing Agreement. Contractual obligations as of December 31, 2008 are as
follows (in thousands):

Payments due by Period

Total

Less than
1 Year

1-3 Years

3-5 Years

More than
5 Years

Contractual Obligations

Operating lease obligations . . . . . . . . . . . . . . . . $ 67,548
Capital leases . . . . . . . . . . . . . . . . . . . . . . . . . .
2,553
75,000
Long-term credit facility . . . . . . . . . . . . . . . . . .
10,746
Long-term credit facility interest(1) . . . . . . . . . .
49,215
IBM Outsourcing Minimum Commitment . . . . .

$ 9,721
1,423
—
3,908
8,036

$ 13,961
895
75,000
6,838
16,359

$ 7,183
235
—
—
15,742

$36,683
—
—
—
9,078

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $205,062

$23,088

$113,053

$23,160

$45,761

(1) Based upon the interest rate in effect at December 31, 2008, of 5.21%.

The following table discloses aggregate information about our derivative financial instruments as of Decem-

ber 31, 2008, the source of fair value of these instruments and their maturities.

Source of fair value

Total

Fair Value of Contracts at Period-End
Less than
1 Year

1-3 Years

3-5 Years

More than
5 Years

Derivative financial instruments(1) . . . . . . . . . . . . .

$8,624

$5,263

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$8,624

$5,263

$3,361

$3,361

$—

$—

$—

$—

(1) Fair value of interest rate swaps at December 31, 2008 was provided by the counter-party to the underlying

contract.

We are unable to reasonably estimate the ultimate amount or timing of settlement of our reserves for income
taxes under FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (as amended). The liability
for unrecognized tax benefits at December 31, 2008 is $11.5 million.

Off-Balance Sheet Arrangements

We do not have any obligations that meet the definition of an off-balance sheet arrangement and that have or

are reasonably likely to have a material effect on our consolidated financial statements.

Critical Accounting 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, “Summary of Significant Accounting
Policies” in the Notes to Consolidated Financial Statements for a further discussion of revenue recognition and
other significant accounting policies.

Revenue Recognition

For software license arrangements for which services rendered are not considered essential to the functionality
of the software, we recognize revenue upon delivery, provided (1) there is persuasive evidence of an arrangement,

49

(2) collection of the fee is considered probable, and (3) the fee is fixed or determinable. In most arrangements,
because vendor-specific objective evidence of fair value does not exist for the license element, we use the residual
method to determine the amount of revenue to be allocated to the license element. Under the residual method, the
fair value of all undelivered elements, such as post contract customer support or other products or services, is
deferred and subsequently recognized as the products are delivered or the services are performed, with the residual
difference between the total arrangement fee and revenues allocated to undelivered elements being allocated to the
delivered element. For software license arrangements in which we have concluded that collectibility issues may
exist, revenue is recognized as cash is collected, provided all other conditions for revenue recognition have been
met. In making the determination of collectibility, we consider the creditworthiness of the customer, economic
conditions in the customer’s industry and geographic location, and general economic conditions.

Our sales focus continues to shift from our more-established products to more complex arrangements
involving multiple products inclusive of our BASE24-eps product and less-established (collectively referred to
as “newer”) products. As a result of this shift to newer products and more complex, multiple product arrangements,
absent other factors, we initially experience an increase in deferred revenue and a corresponding decrease in current
period revenue due to differences in the timing of revenue recognition for the respective products. Revenues from
newer products are typically recognized upon acceptance or first production use by the customer whereas revenues
from mature products, such as BASE24, are generally recognized upon delivery of the product, provided all other
conditions for revenue recognition have been met. For those arrangements where revenues are being deferred and
we determine that related direct and incremental costs are recoverable, such costs are deferred and subsequently
expensed as the revenues are recognized. Newer products are continually evaluated by our management and product
development personnel to determine when any such product meets specific internally defined product maturity
criteria that would support its classification as a mature product. Evaluation criteria used in making this deter-
mination include successful demonstration of product features and functionality; standardization of sale, instal-
lation, and support functions; and customer acceptance at multiple production site installations, among others. A
change in product classification (from newer to mature) would allow us to recognize revenues from new sales of the
product upon delivery of the product rather than upon acceptance or first production use by the customer, resulting
in earlier recognition of revenues from sales of that product, as well as related costs, provided all other revenue
recognition criteria have been met. BASE24-eps was reclassified as a mature product as of October 1, 2006.

When a software license arrangement includes services to provide significant modification or customization of
software, those services are not considered to be separable from the software. Accounting for such services
delivered over time is referred to as contract accounting. Under contract accounting, we generally use the
percentage-of-completion method. Under the percentage-of-completion method, we record revenue for the soft-
ware license fee and services over the development and implementation period, with the percentage of completion
generally measured by the percentage of labor hours incurred to-date to estimated total labor hours for each
contract. Estimated total labor hours for each contract are based on the project scope, complexity, skill level
requirements, and similarities with other projects of similar size and scope. For those contracts subject to contract
accounting, estimates of total revenue and profitability under the contract consider amounts due under extended
payment terms. For arrangements where we believe it is reasonably assured that no loss will be incurred under the
arrangement and fair value for maintenance services does not exist, we use a zero margin approach of applying
percentage-of-completion accounting until software customization services are completed. We exclude revenues
due on extended payment terms from our current percentage-of-completion computation until such time that
collection of the fees becomes probable.

We may execute more than one contract or agreement with a single customer. The separate contracts or
agreements may be viewed as one multiple-element arrangement or separate arrangements for revenue recognition
purposes. Judgment is required when evaluating the facts and circumstances related to each situation in order to
reach appropriate conclusions regarding whether such arrangements are related or separate. Those conclusions can
impact the timing of revenue recognition related to those arrangements.

Allowance for Doubtful Accounts

We maintain a general allowance for doubtful accounts based on our historical experience, along with
additional customer-specific allowances. We regularly monitor credit risk exposures in our accounts receivable. In

50

estimating the necessary level of our allowance for doubtful accounts, management considers the aging of our
accounts receivable, the creditworthiness of our customers, economic conditions within the customer’s industry,
and general economic conditions, among other factors. Should any of these factors change, the estimates made by
management would also change, which in turn would impact the level of our future provision for doubtful accounts.
Specifically, if the financial condition of our customers were to deteriorate, affecting their ability to make payments,
additional customer-specific provisions for doubtful accounts may be required. Also, should deterioration occur in
general economic conditions, or within a particular industry or region in which we have a number of customers,
additional provisions for doubtful accounts may be recorded to reserve for potential future losses. Any such
additional provisions would reduce operating income in the periods in which they were recorded.

Intangible Assets and Goodwill

Our business acquisitions typically result in the recording of intangible assets, and the recorded values of those
assets may become impaired in the future. As of December 31, 2008, December 31, 2007 and September 30, 2007,
our intangible assets, excluding goodwill, net of accumulated amortization, were $30.3 million, $38.1 million and
$39.7 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 that 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 is impaired. Any resulting impairment loss could have an adverse impact on our results of
operations.

Other intangible assets are amortized using the straight-line method over periods ranging from 18 months to

12 years.

As of December 31, 2008, December 31, 2007 and September 30, 2007, our goodwill was $200.0 million,
$206.8 million and $205.7 million, respectively. In accordance with SFAS No. 142, Goodwill and Other Intangible
Assets (“SFAS No. 142”), we assess goodwill for impairment at least annually or when there is evidence that events
or changes in circumstances indicate that the carrying amount of the asset may not be recovered. During this
assessment, management relies on a number of factors, including operating results, business plans and anticipated
future cash flows. When SFAS No. 142 was adopted we selected the end of our fiscal year (or September 30) as our
annual impairment testing date. During the current year, we changed our fiscal year end from September 30 to
December 31. As a result of the change in our fiscal year, we evaluated our annual goodwill impairment testing date
and concluded to change our impairment testing date to October 1st versus the end of our new fiscal year.

Stock-Based Compensation

Effective October 1, 2005 we began recording compensation expense associated with stock-based awards in
accordance with SFAS No. 123(R). We adopted the modified prospective transition method provided for under
SFAS No. 123(R), and consequently have not retroactively adjusted results from prior periods. Under this transition
method, compensation cost associated with stock-based awards for fiscal years 2007 and 2006 includes (i) amor-
tization related to the remaining unvested portion of stock-based awards granted prior to September 30, 2005, based
on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123; and (ii) amor-
tization related to stock-based awards granted subsequent to September 30, 2005, based on the grant date fair value
estimated in accordance with the provisions of SFAS No. 123(R).

Under the provisions of SFAS No. 123(R), stock-based compensation cost for stock option awards is estimated
at the grant date based on the award’s fair value as calculated by the Black-Scholes option-pricing model and is

51

recognized as expense ratably over the requisite service period. We recognize stock-based compensation costs for
only those shares that are expected to vest. The impact of forfeitures that may occur prior to vesting is estimated and
considered in the amount of expense recognized. Forfeiture estimates will be revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates. The Black-Scholes option-pricing model requires various
highly judgmental assumptions including volatility and expected option life. If any of the assumptions used in the
Black-Scholes model change significantly, stock-based compensation expense may differ materially for future
awards from that recorded for existing awards.

We also have stock options outstanding that vest upon attainment by the Company of certain market
conditions. In order to determine the grant date fair value of these stock options that vest based on the achievement
of certain market conditions, a Monte Carlo simulation model is used to estimate (i) the probability that the
performance goal will be achieved and (ii) the length of time required to attain the target market price.

Long term incentive program performance share awards (“LTIP Performance Shares”) were issued during the
years ended September 30, 2007, 2006 and 2005. These awards are earned based on the achievement over a
specified period of performance goals related to certain performance indicators. In order to determine compensation
expense to be recorded for these LTIP Performance Shares, each quarter management evaluates the probability that
the target performance goals will be achieved, if at all, and the anticipated level of attainment.

During the year ended December 31, 2008, pursuant to our 2005 Incentive Plan, we granted restricted share
awards (“RSAs”). These awards have requisite service periods of four years and vest in increments of 25% on the
anniversary dates of the grants. Under each arrangement, stock is issued without direct cost to the employee. We
estimate the fair value of the RSAs based upon the market price of our stock at the date of grant. The RSA grants
provide for the payment of dividends on our common stock, if any, to the participant during the requisite service
period (vesting period) and the participant has voting rights for each share of common stock.

The assumptions utilized in the Black-Scholes option-pricing model as well as the description of the plans the
stock-based awards are granted under are described in further detail in Note 13, “Stock-Based Compensation
Plans”, in the Notes to Consolidated Financial Statements.

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 the Company
operates. The judgments and estimates used are subject to challenge by domestic and foreign taxing authorities. It is
possible that either domestic or foreign taxing authorities could challenge those judgments and estimates 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 likely, 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.

Recently Issued Accounting Standards

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS 141(R)”), which
replaces SFAS 141. SFAS 141(R) establishes principles and requirements for how an acquirer in a business
combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities

52

assumed, and any controlling interest; recognizes and measures the goodwill acquired in the business combination
or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) is to be applied
prospectively to business combinations for which the acquisition date is on or after an entity’s fiscal year that begins
after December 15, 2008. We will assess the impact of SFAS 141(R) if and when a future acquisition occurs.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements — an amendment of ARB No. 51 (“SFAS 160”). SFAS 160 establishes new accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this
statement requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated
financial statements and separate from the parent’s equity. The amount of net income attributable to the
noncontrolling interest will be included in consolidated net income on the face of the income statement. SFAS 160
clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity
transactions if the parent retains its controlling financial interest. In addition, this statement requires that a parent
recognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using
the fair value of the noncontrolling equity investment on the deconsolidation date. SFAS 160 also includes
expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. SFAS 160 is
effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008.
Earlier adoption is prohibited. We are currently evaluating the impact, if any, the adoption of SFAS 160 will have on
our consolidated financial statements.

In February 2008, the FASB issued FASB Staff Position (“FSP”) Financial Accounting Standard (“FAS”)
157-2, Effective Date of FASB Statement No. 157. FSP FAS 157-2 delays the effective date of SFAS No. 157 from
2008 to 2009 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually).

On March 19, 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities, (“SFAS 161”). SFAS 161 amends FASB Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, (“SFAS 133”) and was issued in response to concerns and criticisms about the lack of adequate
disclosure of derivative instruments and hedging activities. SFAS 161 requires; (i) qualitative disclosures regarding
the objectives and strategies for using derivative instruments and engaging in hedging activities in the context of an
entity’s overall risk exposure, (ii) quantitative disclosures in tabular format of the fair values of derivative
instruments and their gains and losses, and (iii) disclosures about credit-risk related contingent features in
derivative instruments. SFAS 161 is effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, but early application is encouraged. We are currently evaluating the impact, if
any, the adoption of SFAS 161 will have on our consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles.
SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in
the preparation of financial statements of nongovernmental entities that are presented in conformity with generally
accepted accounting principles in the United States. It is effective 60 days following the SEC’s approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. The adoption of this statement is not expected to have
a material effect on our financial statements.

In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities (FSP EITF 03-6-1). FSP EITF 03-6-1 clarified that all
outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends participate in
undistributed earnings with common shareholders. Awards of this nature are considered participating securities and
the two-class method of computing basic and diluted earnings per share must be applied. FSP EITF 03-6-1 is
effective for fiscal years beginning after December 15, 2008. The implementation of this standard will not have a
material impact on our consolidated financial position and results of operations.

In October 2008, the FASB issued Staff Position No. FAS 157-3, Determining the Fair Value of a Financial
Asset When the Market for That Asset is Not Active (FSP 157-3). FSP 157-3 clarifies the application of SFAS 157,
which the Company adopted as of January 1, 2008, in cases where a market is not active. We have considered the

53

guidance provided by FSP 157-3 in its determination of estimated fair values of financial assets as of December 31,
2008, and the impact was not material.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Excluding the impact of changes in interest rates and the uncertainty in the global financial markets, there have
been no material changes to our market risk for the year ended December 31, 2008. We conduct business in all parts
of the world and are thereby exposed to market risks related to fluctuations in foreign currency exchange rates. The
U.S. dollar is the single largest currency in which our revenue contracts are denominated. Thus, any decline in the
value of local foreign currencies against the U.S. dollar results in our products and services being more expensive to
a potential foreign customer, and in those instances where our goods and services have already been sold, may result
in the receivables being more difficult to collect. Additionally, any decline in the value of the U.S. dollar in
jurisdictions where the revenue contracts are denominated in U.S. dollars and operating expenses are incurred in
local currency will have an unfavorable impact to operating margins. We at times enter into revenue contracts that
are denominated in the country’s local currency, principally in Australia, Canada, the United Kingdom and other
European countries. This practice serves as a natural hedge to finance the local currency expenses incurred in those
locations. We have not entered into any foreign currency hedging transactions. We do not purchase or hold any
derivative financial instruments for the purpose of speculation or arbitrage.

The primary objective of our cash investment policy is to preserve principal without significantly increasing
risk. Based on our cash investments and interest rates on these investments at December 31, 2008, and if we
maintained this level of similar cash investments for a period of one year, a hypothetical ten percent increase or
decrease in interest rates would increase or decrease interest income by approximately $0.2 million annually.

During the year ended September 30, 2007, we entered into two interest rate swaps, including a forward
starting swap, with a commercial bank whereby we pay a fixed rate of 5.375% and 4.90% and receive a floating rate
indexed to the 3-month LIBOR from the counterparty on a notional amount of $75 million and $50 million,
respectively. As of December 31, 2008, the fair value liability of the interest rate swaps was approximately
$8.6 million, of which $5.3 million and $3.3 million was included in other current liabilities and other noncurrent
liabilities, respectively, on the consolidated balance sheet. The potential loss in fair value liability of the interest rate
swaps resulting from a hypothetical 10 percent adverse change in interest rates was approximately $0.4 million at
December 31, 2008. Because our interest rate swaps do not qualify for hedge accounting, changes in the fair value
of the interest rate swaps are recognized in the consolidated statement of operations, along with the related income
tax effects.

Effective January 1, 2008, we adopted the provisions of SFAS No. 157, Fair Value Measurements
(“SFAS 157”), for financial assets and financial liabilities. SFAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles and expands disclosures about fair value
measurements.

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants. SFAS 157 establishes a fair value hierarchy for valuation inputs
that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest
priority to unobservable inputs. The fair value hierarchy is as follows:

(cid:129) Level 1 Inputs — Unadjusted quoted prices in active markets for identical assets or liabilities that the

reporting entity has the ability to access at the measurement date.

(cid:129) Level 2 Inputs — Inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in
active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs
other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities,
prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market
data by correlation or other means.

54

(cid:129) Level 3 Inputs — Unobservable inputs for determining the fair values of assets or liabilities that reflect an
entity’s own assumptions about the assumptions that market participants would use in pricing the assets or
liabilities.

Derivatives. Derivatives are reported at fair value utilizing Level 2 inputs. We utilize valuation models

prepared by a third-party with observable market data inputs to estimate fair value of its interest rate swaps.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The required consolidated financial statements and notes thereto are included in this Annual Report and are

listed in Part IV, Item 15.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

a) Evaluation of Disclosure Controls and Procedures

Our management, under the supervision of and with the participation of the Chief Executive Officer and Chief
Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of
the period covered by this report, December 31, 2008.

In connection with our evaluation of disclosure controls and procedures, we have concluded that we have a
material weakness in our internal control over financial reporting, as described below. Therefore, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not
effective as of December 31, 2008.

b) Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial
reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of
our consolidated financial statements for external purposes in accordance with United States Generally Accepted
Accounting Principles (“US GAAP”). Under the supervision of, and with the participation of our Chief Executive
Officer and Chief Financial Officer, management assessed the effectiveness of internal control over financial
reporting as of December 31, 2008. Management based its assessment on criteria established in “Internal Control
Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”).

Based on this evaluation, management concluded that the following material weakness in internal control over

financial reporting existed as of December 31, 2008.

The Company did not maintain effective policies and procedures related to its accounting for software
implementation service and license arrangements in the Asia Pacific region. Specifically, the Company did not
have adequate corporate oversight, sufficient local US GAAP knowledge and experience, and sufficient
accounting and communication processes in place to ensure proper revenue recognition for service and related
license revenue. As a result of this material weakness, the Company restated its March 31, 2008 financial
statements to reflect the correction of a material misstatement related to service and licensing revenue and
related costs for a software implementation services project that should have been deferred until additional
project milestones were achieved.

As a result of the material weakness described above, management has concluded that its internal control over
financial reporting was not effective as of December 31, 2008. The effectiveness of internal control over financial
reporting as of December 31, 2008 has been audited by KPMG LLP, an independent registered public accounting
firm.

55

c) Changes in Internal Control over Financial Reporting

As previously disclosed, we have implemented remediation activities related to material weaknesses identified
in our assessment of internal control over financial reporting as of September 30, 2007. The material weaknesses as
of September 30, 2007 related to our internal control over the accounting for the recognition of revenue and the
accounting for income taxes. As of December 31, 2008, we believe the remediation activities are properly designed
and have been in place for a sufficient amount of time to conclude that they operating effectively as of December 31,
2008. Therefore, these material weaknesses have been remediated during the fourth quarter of 2008.

During management’s evaluation of internal control over financial reporting as of December 31, 2008, we
identified a material weakness related to accounting for software implementation service and license arrangements
in the Asia Pacific region. During the 4th quarter of 2008, the Company developed and implemented the following
initiatives which have significantly improved the accounting for and oversight of these software implementation
and license arrangement. However, these initiatives have not been in place for a sufficient period of time to conclude
on their operating effectiveness.

Remedial actions for the material weakness identified as of December 31, 2008 related to accounting for

software implementation services and licenses arrangements in the Asia Pacific region

1) Created an Implementation Services Methodology which sets forth the processes, methodology, tools, roles
and responsibilities in managing our implementation projects on a global basis inclusive of a global Project
Completion Policy.

2) Established a Corporate Management Office to provide a standard methodology on how to manage,

coordinate, report and escalate projects during implementation.

3) Established a Deal Review Committee to review and coordinate the closing of a contract and subsequently

create detailed project plans for implementation.

4) Created a disciplined process to account for all service hours.

5) Implemented bi-weekly meetings to increase corporate oversight of implementation service and license

arrangements across the channels.

Additionally, in the first quarter of 2009, we developed a formal communication strategy and plan to educate and
train personnel on ACI’s Implementation Services Methodology, Corporate Management Office and Deal Review
Committee processes.

Except for the changes described above, there have been no changes during the Company’s quarter ended
December 31, 2008 in our internal control over financial reporting (as defined in Rules 13a-15(f) under the
Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.

56

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
ACI Worldwide, Inc.:

We have audited ACI Worldwide, Inc.’s (the Company) internal control over financial reporting as of
December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is
responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control over Financial Reporting (Item 9A(b)). Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim
financial statements will not be prevented or detected on a timely basis. In its assessment, management has
identified a material weakness related to its accounting for software implementation service and license arrange-
ments in the Asia Pacific region. We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of ACI Worldwide, Inc. and
subsidiaries as of December 31, 2008 and 2007 and September 30, 2007 and the related consolidated statements
of operations, stockholders’ equity and comprehensive income (loss), and cash flows for the year ended Decem-
ber 31, 2008, the three-month period ended December 31, 2007, and each of the years in the two-year period ended
September 30, 2007. This material weakness was considered in determining the nature, timing, and extent of audit
tests applied in our audit of the 2008 consolidated financial statements, and this report does not affect our report
dated March 3, 2009, which expressed an unqualified opinion on those consolidated financial statements.

In our opinion, because of the effect of the aforementioned material weakness on the achievement of the
objectives of the control criteria, the Company has not maintained effective internal control over financial reporting
as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.

Omaha, Nebraska
March 3, 2009

57

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information under the heading “Executive Officers of the Registrant” in Part 1, Item 1 of this Form 10-K is

incorporated herein by reference.

The information required by this item with respect to our directors is included in the section entitled
“Nominees” under “Proposal 1 — Election of Directors” in our Proxy Statement for the Annual Meeting of
Stockholders to be held on June 10, 2009 (the “2009 Proxy Statement”) and is incorporated herein by reference.

Information included in the section entitled “Section 16(a) Beneficial Ownership Reporting Compliance” in

our 2009 Proxy Statement is incorporated herein by reference.

Information related to the audit committee and the audit committee financial expert is included in the section
entitled “Report of Audit Committee” in our 2009 Proxy Statement is incorporated herein by reference. In addition,
the information included in the section entitled “Corporate Governance” in our 20098 Proxy Statement is
incorporated herein by reference.

Code of Business Conduct and Code of Ethics

We have adopted a Code of Business Conduct and Ethics for our directors, officers (including our principal
executive officer, principal financial officer, principle accounting officer and controller) and employees. We have
also adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers (the “Code of Ethics”),
which applies to our Chief Executive Officer, our Chief Financial Officer, our Chief Accounting Officer, Controller,
and persons performing similar functions. The full text of both the Code of Business Conduct and Ethics and Code
of Ethics is published on our website at www.aciworldwide.com in the “Investors — Corporate Governance”
section. We intend to disclose future amendments to, or waivers from, certain provisions of the Code of Business
Conduct and Ethics and the Code of Ethics on our website promptly following the adoption of such amendment or
waiver.

ITEM 11. EXECUTIVE COMPENSATION

Information included in the sections entitled “Director Compensation,” “Compensation Discussion and
Analysis,” “Compensation Committee Report” and “Executive Compensation” in our 2009 Proxy Statement is
incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED STOCKHOLDER MATTERS

Information included in the sections entitled “Information Regarding Stock Ownership” in our 2009 Proxy

Statement is incorporated herein by reference.

Information included in the section entitled “Information Regarding Equity Compensation Plans” in our 2009

Proxy Statement is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR

INDEPENDENCE

Information included in the section entitled “Certain Relationships and Related Transactions,” if any, in our

2009 Proxy Statement is incorporated herein by reference.

58

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information included in the sections entitled “Report of Audit Committee” and “Proposal 2 — Ratification of
Appointment of the Company’s Independent Auditors” in our 2009 Proxy Statement is incorporated herein by
reference.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Documents filed as part of this annual report on Form 10-K:

PART IV

(1) Financial Statements. The following index lists consolidated financial statements and notes thereto filed

as part of this annual report on Form 10-K:

Report of Independent Registered Public Accounting Firm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2008 and 2007 and September 30, 2007 . . . . . . . . . . .
Consolidated Statements of Operations for the year ended December 31, 2008, the three-month period

Page

63
64

ended December 31, 2007, and each of the two years in the period ended September 30, 2007 . . . . . .

65

Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the year ended

December 31, 2008, the three-month period ended December 31, 2007, and each of the two years in
the period ended September 30, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for the year ended December 31, 2008, the three-month period

ended December 31, 2007, and each of the two years in the period ended September 30, 2007 . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66

67
68

(2) Financial Statement Schedules. All schedules have been omitted because they are not applicable or the

required information is included in the consolidated financial statements or notes thereto.

(3) Exhibits. The following exhibit index lists exhibits incorporated herein by reference, filed as part of this

annual report on Form 10-K, or furnished as part of this annual report on Form 10-K:

Exhibit
No.

3.01(1)
3.02(2)
4.01(3)
10.01(4)*
10.02(5)*
10.03(6)*
10.04(7)*
10.05(8)*
10.06(9)*
10.07(10)*
10.08(11)*
10.9(12)*
10.10(13)*

10.11(14)*

EXHIBIT INDEX

Description

Amended and Restated Certificate of Incorporation of the Company, and amendments thereto
Amended and Restated Bylaws of the Company
Form of Common Stock Certificate
Stock and Warrant Holders Agreement, dated as of December 30, 1993
ACI Holding, Inc. 1994 Stock Option Plan, as amended
Transaction Systems Architects, Inc. 1996 Stock Option Plan, as amended
Transaction Systems Architects, Inc. 1997 Management Stock Option Plan, as amended
ACI Worldwide, Inc. 1999 Stock Option Plan, as amended
ACI Worldwide, Inc. 1999 Employee Stock Purchase Plan, as amended
Transaction Systems Architects, Inc. 2000 Non-Employee Director Stock Option Plan, as amended
Transaction Systems Architects, Inc. 2002 Non-Employee Director Stock Option Plan, as amended
ACI Worldwide, Inc. 2005 Equity and Performance Incentive Plan, as amended
Severance Compensation Agreement (Change-in-Control) between the Company and certain
officers, including executive officers
Indemnification Agreement between the Company and certain officers, including executive officers

59

10.23(26)*
10.24(27)* MessagingDirect Ltd. Amended and Restated Employee Share Option Plan, as amended
10.25(28)

Exhibit
No.

10.12(15)
10.13(16)*
10.14(17)*
10.15(18)*
10.16(19)*
10.17(20)*
10.18(21)*
10.19(22)*

10.20(23)*

10.21(24)*

10.22(25)*

10.26(29)

10.27(30)

10.28(31)*
10.29(33)*

10.30(33)*

10.31(34)*
10.32(35)*

10.32(36)*
10.34(37)*

10.35(38)*

10.36(39)

10.37(40)
10.38(41)
10.39(42)

21.01
23.01
31.01

Description

Asset Purchase Agreement by and between S2 Systems, Inc. and the Company
Form of Stock Option Agreement for the Company’s 1994 Stock Option Plan
Form of Stock Option Agreement for the Company’s 1996 Stock Option Plan
Form of Stock Option Agreement for the Company’s 1997 Management Stock Option Plan
Form of Stock Option Agreement for the Company’s 1999 Stock Option Plan
Form of Stock Option Agreement for the Company’s 2000 Non-Employee Director Plan
Form of Stock Option Agreement for the Company’s 2002 Non-Employee Director Plan
Form of Nonqualified Stock Option Agreement — Non-Employee Director for the Company’s 2005
Equity and Performance Incentive Plan, as amended
Form of Nonqualified Stock Option Agreement — Employee for the Company’s 2005 Equity and
Performance Incentive Plan, as amended
Form of LTIP Performance Shares Agreement for the Company’s 2005 Equity and Performance
Incentive Plan, as amended
Amended and Restated Employment Agreement by and between the Company and Philip G.
Heasley, dated January 7, 2009
Stock Option Agreement by and between the Company and Philip G. Heasley, dated March 9, 2005

Share Purchase Agreement dated as of May 11, 2006 by and between Transaction Systems
Architects, Inc.; PREIPO Bating- und Beteiligungsgesellschaft mbH; RP Vermo¨gensverwaltung
GmbH; Mr. Christian Jaron; Mr. Johann Praschinger; and eps Electronic Payment Systems AG
Agreement and Plan of Merger dated August 28, 2006 by and among Transaction Systems
Architects, Inc., Parakeet MergerSub Corp., and P&H Solutions, Inc.
Credit Agreement by and among Transaction Systems Architects, Inc. and Wachovia Bank, National
Association
Description of the 2007 Calendar Year Management Incentive Compensation Plan
Separation, Non-Compete, Non-Solicitation and Non-Disclosure Agreement and General Release
with Anthony J. Parkinson dated May 10, 2007
2007 Form of Change-in-Control Employment Agreement between the Company and certain
officers, including executive officers
Description of the 2008 Management Incentive Compensation Plan
Separation, Non-Compete, Nonsolicitation and Non-Disclosure Agreement and General Release
with Mark R. Vipond dated August 11, 2008
2008 Executive Management Incentive Compensation Plan
2008 Form of Change-in-Control Employment Agreement between the Company and certain
officers, including executive officers
Form of Restricted Share Award Agreement for the Company’s 2005 Equity and Performance
Incentive Plan, as amended
Master Alliance Agreement between ACI Worldwide, Inc. and International Business Machines
Corporation
Warrant Agreement between ACI Worldwide, Inc. and International Business Machines Corporation
Warrant Agreement between ACI Worldwide, Inc. and International Business Machines Corporation
Master Services Agreement by and between ACI Worldwide, Inc. and International Business
Machines Corporation
Subsidiaries of the Registrant (filed herewith)
Consent of Independent Registered Public Accounting Firm (filed herewith)
Certification of Chief Executive Officer pursuant to S.E.C. Rule 13a-14, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

60

Exhibit
No.

31.02

32.01**

32.02**

Description

Certification of Chief Financial Officer pursuant to S.E.C. Rule 13a-14, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

Incorporated herein by reference to registrant’s current report on Form 8-K filed July 30, 2007.

Incorporated herein by reference to Exhibit 3.2 to the registrant’s current report on Form 8-K filed Decem-
ber 18, 2008.

Incorporated herein by reference to Exhibit 4.01 to the registrant’s Registration Statement No. 33-88292 on
Form S-1.

Incorporated herein by reference to Exhibit 10.9 to the registrant’s Registration Statement No. 33-88292 on
Form S-1.

Incorporated herein by reference to Exhibit 10.1 to the registrant’s quarterly report on Form 10-Q for the
period ended March 31, 2006.

Incorporated herein by reference to Exhibit 10.2 to the registrant’s quarterly report on Form 10-Q for the
period ended March 31, 2006.

Incorporated herein by reference to Exhibit 10.3 to the registrant’s quarterly report on Form 10-Q for the
period ended March 31, 2006.

Incorporated herein by reference to Exhibit 10.4 to the registrant’s quarterly report on Form 10-Q for the
period ended March 31, 2006.

Incorporated herein by reference to Exhibit 4.1 to the registrant’s Post-Effective Amendment No. 2 to
Registration Statement No. 333-113550 on Form S-8 filed June 11, 2008.

(10) Incorporated herein by reference to Exhibit 10.6 to the registrant’s quarterly report on Form 10-Q for the

period ended March 31, 2006.

(11) Incorporated herein by reference to Exhibit 10.7 to the registrant’s quarterly report on Form 10-Q for the

period ended March 31, 2006.

(12) Incorporated herein by reference to registrant’s quarterly report on Form 10-Q for the period ended March 31, 2007.

(13) Incorporated herein by reference to Exhibit 10.16 to the registrant’s annual report on Form 10-K for the fiscal

year ended September 30, 2003.

(14) Incorporated herein by reference to Exhibit 10.17 to the registrant’s annual report on Form 10-K for the fiscal

year ended September 30, 2003.

(15) Incorporated herein by reference to Exhibit 2.1 to the registrant’s current report on Form 8-K filed on July 1, 2005.

(16) Incorporated herein by reference to Exhibit 10.18 to the registrant’s annual report on Form 10-K for the fiscal

year ended September 30, 2004.

(17) Incorporated herein by reference to Exhibit 10.19 to the registrant’s annual report on Form 10-K for the fiscal

year ended September 30, 2004.

(18) Incorporated herein by reference to Exhibit 10.20 to the registrant’s annual report on Form 10-K for the fiscal

year ended September 30, 2004.

(19) Incorporated herein by reference to Exhibit 10.2 to the registrant’s quarterly report on Form 10-Q for the

period ended June 30, 2007.

(20) Incorporated herein by reference to Exhibit 10.22 to the registrant’s annual report on Form 10-K for the fiscal

year ended September 30, 2004.

(21) Incorporated herein by reference to Exhibit 10.23 to the registrant’s annual report on Form 10-K for the fiscal

year ended September 30, 2004.

61

(22) Incorporated herein by reference to Exhibit 10.3 to the registrant’s quarterly report on Form 10-Q for the

period ended June 30, 2007.

(23) Incorporated herein by reference to Exhibit 10.1 to the registrant’s quarterly report on Form 10-Q for the

period ended September 30, 2008.

(24) Incorporated herein by reference to Exhibit 10.5 to the registrant’s quarterly report on Form 10-Q for period

ended June 30, 2007.

(25) Incorporated herein by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed on

January 7, 2009.

(26) Incorporated herein by reference to Exhibit 10.2 to the registrant’s current report on Form 8-K filed on

March 10, 2005.

(27) Incorporated herein by reference to Exhibit 10.5 to the registrant’s quarterly report on Form 10-Q for the

period ended March 31, 2006.

(28) Incorporated herein by reference to Exhibit 2.1 to the registrant’s quarterly report on Form 10-Q for the period

ended June 30, 2006.

(29) Incorporated herein by reference to Exhibit 2.1 to the registrant’s current report on Form 8-K filed on

September 1, 2006.

(30) Incorporated herein by reference to Exhibit 10.33 to the registrant’s annual report on Form 10-K for the fiscal

year ended September 30, 2006.

(31) Incorporated herein by reference to Exhibit 10.1 of the registrant’s current report on Form 8-K filed March 21,

2007.

(32) Incorporated herein by reference to Exhibit 10.1 the registrant’s current report on Form 8-K filed May 16,

2007.

(33) Incorporated herein by reference to Exhibit 10.2 the registrant’s current report on Form 8-K filed September 7,

2007.

(34) Incorporated herein by reference to Exhibit 10.1 the registrant’s current report on Form 8-K filed February 4,

2008.

(35) Incorporated herein by reference to Exhibit 10.1 the registrant’s current report on Form 8-K filed August 15,

2008.

(36) Incorporated herein by reference to Annex A to the registrant’s Proxy Statement for its 2008 Annual Meeting

(File No. 000-25346) filed on April 21, 2008.

(37) Incorporated herein by reference to Exhibit 10.1 the registrant’s current report on Form 8-K filed January 7,

2009.

(38) Incorporated herein by reference to Exhibit 10.2 to the registrant’s quarterly report on Form 10-Q for the

period ended September 30, 2008.

(39) Incorporated herein by reference to Exhibit 10.1 to the registrant’s quarterly report on Form 10-Q for the

period ended December 31, 2007.

(40) Incorporated herein by reference to Exhibit 10.1 to the registrant’s quarterly report on Form 10-Q for the

period ended December 31, 2007.

(41) Incorporated herein by reference to Exhibit 10.1 to the registrant’s quarterly report on Form 10-Q for the

period ended December 31, 2007.

(42) Incorporated herein by reference to Exhibit 10.4 to the registrant’s quarterly report on Form 10-Q for the

period ended March 31, 2008.

* Denotes exhibit that constitutes a management contract, or compensatory plan or arrangement.

** This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or
otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that the Company specifically incorporates it by reference.

62

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
ACI Worldwide, Inc.:

We have audited the accompanying consolidated balance sheets of ACI Worldwide, Inc. and subsidiaries (the
Company) as of December 31, 2007 and 2008 and September 30, 2007, and the related consolidated statements of
operations, stockholders’ equity and comprehensive income (loss), and cash flows for the year ended December 31,
2008, the three-month period ended December 31, 2007 and each of the years in the two-year period ended
September 30, 2007. These consolidated financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of ACI Worldwide, Inc. and subsidiaries as of December 31, 2008 and 2007 and September 30,
2007, and the results of their operations and their cash flows for the year ended December 31, 2008, the three-month
period ended December 31, 2007, and each of the years in the two-year period ended September 30, 2007, in
conformity with U.S. generally accepted accounting principles.

As discussed in note 15 to the consolidated financial statements, the Company adopted Financial Accounting
Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of
FASB Statement No. 109, as of October 1, 2007.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), ACI Worldwide, Inc.’s internal control over financial reporting as of December 31, 2008, based on
criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Orga-
nizations of the Treadway Commission (COSO), and our report dated March 3, 2009, expressed an adverse opinion
on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Omaha, Nebraska
March 3, 2009

63

ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30,
December 31,
December 31,
2008
2007
2007
(In thousands, except share amounts)

$ 112,966

$ 97,011

$ 60,794

ASSETS

Current assets

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Billed receivables, net of allowances of $1,920, $1,723 and

$2,041, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoverable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . .
Software, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

77,738
17,412
17,005
3,140
9,483
8,800
246,544
19,421
29,438
199,986
30,347
12,899
14,207
$ 552,842

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued employee compensation . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alliance agreement liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued and other current liabilities. . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note payable under credit facility . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alliance agreement noncurrent liability . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 16,047
19,955
99,921
78
6,195
24,068
166,264
24,296
75,000
2,091
37,327
34,023
339,001

Commitments and contingencies
Stockholders’ equity

87,932
11,132
5,824
6,336
9,803
8,399
226,437
19,503
31,430
206,770
38,088
30,530
17,700
$ 570,458

$ 16,351
22,659
115,519
—
9,331
22,992
186,852
27,253
75,000
3,245
—
37,069
329,419

70,384
11,955
7,088
3,852
10,572
7,233
171,878
19,356
31,764
205,715
39,685
24,315
14,028
$ 506,741

$ 14,677
22,625
97,042
2,251
—
17,925
154,520
30,280
75,000
3,265
—
18,664
281,729

Preferred stock , $0.01 par value; 5,000,000 shares authorized; no
shares issued and outstanding at December 31, 2008 and 2007
and September 30, 2007, respectively . . . . . . . . . . . . . . . . . . . .

Common stock; $0.005 par value; 70,000,000 shares authorized;
40,821,516 shares issued at December 31, 2008 and 2007 and
September 30, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost, 5,909,000, 5,144,947 and

5,115,367 shares outstanding at December 31, 2008 and 2007
and September 30, 2007, respectively . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . .

—

—

204
24,003

204
24,003

—

204
—

(147,808)
302,237
58,468
(23,263)
213,841

(140,320)
311,108
47,886
(1,842)
241,039

(140,340)
312,642
53,226
(720)
225,012

TOTAL LIABILITIES AND STOCKHOLDERS’

EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 552,842

$ 570,458

$ 506,741

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

64

ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Year
Ended
December 31,
2008

For the Three
Months Ended
December 31,
2007

For the Years
Ended September 30,
2007
2006

(In thousands, except per share amounts)

Revenues:
Software license fees . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance fees . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$169,210
130,015
118,428

$ 46,266
32,167
22,849

$149,485
121,233
95,500

$175,629
103,708
68,565

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . .

417,653

101,282

366,218

347,902

Expenses:
Cost of software license fees . . . . . . . . . . . . . . . . . . . .
Cost of maintenance and services . . . . . . . . . . . . . . . .
Research and development. . . . . . . . . . . . . . . . . . . . . .
Selling and marketing . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . .
Settlement of class action litigation . . . . . . . . . . . . . . .

45,487
124,744
45,896
74,028
105,785
—

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .

395,940

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other income (expense) . . . . . . . . . . . . . . . . .

Income (loss) before income taxes . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . .

21,713

2,609
(5,013)
8,247

5,843

27,556
16,974

10,214
24,689
16,411
20,673
26,443
—

98,430

2,852

763
(1,389)
(334)

(960)

1,892
3,908

42,237
98,605
52,088
70,280
100,589
—

31,124
79,622
40,768
66,720
67,440
8,450

363,799

294,124

2,419

53,778

4,082
(6,644)
(3,740)

(6,302)

(3,883)
5,248

7,825
(185)
(543)

7,097

60,875
5,510

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 10,582

$ (2,016)

$ (9,131)

$ 55,365

Earnings (loss) per share information
Weighted average shares outstanding

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34,498
34,795

35,700
35,700

36,933
36,933

37,369
38,237

Earnings (loss) per share

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

0.31
0.30

$
$

(0.06)
(0.06)

$
$

(0.25)
(0.25)

$
$

1.48
1.45

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

65

ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND
COMPREHENSIVE INCOME (LOSS)

Balance at September 30, 2005 . . . . . . . . . . . . . . . . . . .

Comprehensive income information:

Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income:

Foreign currency translation adjustments . . . . . . . . . .
Change in unrealized investment holding loss . . . . . . .
Comprehensive income . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . .
Issuance of common stock pursuant to Employee Stock

Purchase Plan . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercises of stock options . . . . . . . . . . . . . . . . . . . .
Issuance of common stock in connection with eps AG

acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit of stock options exercised . . . . . . . . . . . . .
Stock option compensation . . . . . . . . . . . . . . . . . . . .
Balance at September 30, 2006 . . . . . . . . . . . . . . . . . . .

Comprehensive income (loss) information:

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):

Foreign currency translation adjustments . . . . . . . . . .
Comprehensive income (loss) . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . .
Exercises of stock options . . . . . . . . . . . . . . . . . . . .
Stock option settlements . . . . . . . . . . . . . . . . . . . . .
Tax benefit of stock options exercised and settled . . . . . .
Stock based compensation . . . . . . . . . . . . . . . . . . . .
Employee Stock Purchase Plan compensation . . . . . . . .
Balance at September 30, 2007 . . . . . . . . . . . . . . . . . . .

Comprehensive loss information:

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss:

Foreign currency translation adjustments . . . . . . . . . .
Comprehensive loss . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . .
Issuance of common stock pursuant to Employee Stock

Purchase Plan . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercises of stock options . . . . . . . . . . . . . . . . . . . .
Stock option settlements . . . . . . . . . . . . . . . . . . . . .
Tax benefit of stock options exercised and cash settled . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . .
Issuance of common stock warrants . . . . . . . . . . . . . .
Cumulative effect of a change in accounting principle -

adoption of FIN 48 . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . .

Comprehensive loss information:

Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss:

Foreign currency translation adjustments . . . . . . . . . .
Comprehensive loss . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . .
Issuance of common stock pursuant to Employee Stock

Purchase Plan . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercises of stock options . . . . . . . . . . . . . . . . . . . .
Tax benefit of stock options exercised and cash settled . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . .
Non-vested restricted share awards subject to

redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeiture of non-vested restricted share awards . . . . . . .
Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . .

Common
Stock

Common
Stock
Warrants

Treasury
Stock

Additional
Paid-in
Capital

Retained
Earnings
(Accumulated
Deficit)

Accumulated
Other
Comprehensive
Income (Loss)

Total

(In thousands)

$202

$ — $ (68,596) $288,001

$ 6,992

$ (9,161)

$217,438

—

—
—

—

—
2

—
—
—
204

—

—

—
—
—
—
—
—
204

—

—

—

—
—
—
—
—
—

—
$204

—

—

—

—
—
—
—

—
—
$204

—

—
—

—

—
—

— (40,156)

—

—
—

—

—
—

507
6,002

751
5,752

3,125
7,930
—
3,610
—
—
—
6,314
—
— (94,313) 307,553

—

—

—

—

—

—

—
— (46,187)
160
—
(155)
— (3,399)
—
1,074
—
—
7,311
—
—
258
—
—
— (140,340) 312,642

—

—

—

—
—
—
—
—
24,003

—

—

(3,708)

2,165
1,563
—
—
—
—

—

—

—

(631)
(953)
(151)
206
(5)
—

—

—
$24,003 $(140,320) $311,108

—

—

—

—

—

— (30,063)

—

—

—

—
—
—
—

2,618
7,854
—
—

(1,141)
(4,013)
498
7,888

—
—

(12,328)
225
$24,003 $(147,808) $302,237

12,328
(225)

55,365

—
—

—

—
—

—
—
—
62,357

—

566
6

—

—
—

—
—
—
(8,589)

55,365

566
6
55,937
(40,156)

1,258
11,756

11,055
3,610
6,314
267,212

(9,131)

—

(9,131)

—

7,869

—
—
—
—
—
—
53,226

(2,016)

—

—

—
—
—
—
—
—

—
—
—
—
—
—
(720)

—

(1,122)

—

—
—
—
—
—
—

7,869
(1,262)
(46,187)
5
(3,399)
1,074
7,311
258
225,012

(2,016)

(1,122)
(3,138)
(3,708)

1,534
610
(151)
206
(5)
24,003

(3,324)
$47,886

—
$ (1,842)

(3,324)
$241,039

10,582

—

10,582

—

—

—
—
—
—

(21,421)

—

—
—
—
—

(21,421)
(10,839)
(30,063)

1,477
3,841
498
7,888

—
—
$58,468

—
—
$(23,263)

—
—
$213,841

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

66

ACI WORLDWIDE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flows from operating activities:

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income (loss) to net cash flows from operating

activities
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax expense of intellectual property shift . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on reversal of asset retirement obligation . . . . . . . . . . . . . . . . . . . . .
Gain on transfer of assets under contractual obligations . . . . . . . . . . . . . . . .
(Gain) loss on disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense (recovery) . . . . . . . . . . . . . . . . . . . . . .
Tax benefit of stock options exercised and cash settled . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities, net of impact of acquisitions:

Billed and accrued receivables, net
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued employee compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from alliance agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued settlement for class action litigation . . . . . . . . . . . . . . . . . . . . .
Current income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current and noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . .

Cash flows from investing activities:

Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of software and distribution rights . . . . . . . . . . . . . . . . . . . . . . .
Purchases of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alliance technical enablement expenditures . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from alliance agreement, net of common stock warrants . . . . . . . . .
Proceeds from transfer of assets under contractual arrangements . . . . . . . . . .
Acquisition of business, net of cash acquired. . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash flows from investing activities . . . . . . . . . . . . . . . . . . . . . . .

Cash flows from financing activities:

Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock warrants . . . . . . . . . . . . . . . . . . .
Proceeds from exercises of stock options . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit of stock options exercised . . . . . . . . . . . . . . . . . . . . . .
Purchases of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings under revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . .
Payments on debt and capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment for debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash flows from financing activities . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate fluctuations on cash . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplemental cash flow information

For the Year
Ended
December 31,
2008

For the Three
Months Ended
December 31,
2007
(In thousands)

For the Years
Ended
September 30,

2007

2006

$ 10,582

$ (2,016)

$ (9,131) $ 55,365

6,506
15,544
1,942
336
(949)
(219)
290
5,800
4,739
7,888
357

(5,401)
(187)
617
(2,494)
51
40,935
(2,609)
—
2,130
(7,012)
(1,020)
77,826

(7,021)
(4,936)
—
—
(6,328)
1,498
—
(169)
—
(16,956)

1,704
—
3,841
142
(30,063)
—
(3,311)
—
—
(27,687)
(17,228)
15,955
97,011
$112,966

1,496
3,724
591
84
—
(386)
17
2,475
(741)
(5)
97

(17,552)
(384)
(702)
2,799
(73)
—
3,982
—
2,443
16,171
103
12,123

(2,227)
(1,658)
—
—
—
9,330
500
(47)
—
5,898

279
24,003
610
109
(3,994)
—
(625)
—
—
20,382
(2,186)
36,217
60,794
$ 97,011

5,900
14,603
1,912
336
—
(404)
(28)
2,077
(6,832)
7,569
1,043

11,145
(1,659)
(2,293)
(3,343)
(12,162)
—
2,949
(8,450)
(1,122)
20,738
1,999
24,847

(7,784)
(1,107)
(2,500)
2,500
—
—
500
(17,579)
6
(25,964)

3,984
4,377
637
—
—
—
452
—
(9,810)
6,314
1,370

(6,226)
(810)
151
(1,381)
(2,483)
—
(334)
8,450
(1,600)
(7,354)
9,599
60,701

(3,928)
(2,060)
(50,938)
123,763
—
—
—
(146,274)
—
(79,437)

—
—
40
31
(46,707)
—
(3,369)
—
—
(50,005)
1,768
(49,354)
110,148

1,258
—
11,756
2,240
(39,676)
75,000
(3,724)
(1,680)
(18)
45,156
35
26,455
83,693
$ 60,794 $ 110,148

Income taxes paid, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 9,940
$ 4,392

$
243
$ 1,271

$ 14,450 $
3,573 $
$

2,069
153

Supplemental noncash investing activities

Shares issued in connection with acquisitions . . . . . . . . . . . . . . . . . . . . . .
Costs accrued in connection with acquisitions . . . . . . . . . . . . . . . . . . . . . .

$
$

—
—

$
$

— $
— $

— $ 11,055
606
47 $

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

67

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Nature of Business

ACI Worldwide, Inc., a Delaware corporation, and its subsidiaries (collectively referred to as “ACI” or the
“Company”), develop, market, install and support a broad line of software products and services primarily focused
on facilitating electronic payments. In addition to its own products, the Company distributes, or acts as a sales agent
for software developed by third parties. These products and services are used principally by financial institutions,
retailers, and electronic-payment processors, both in domestic and international markets.

The Company derives a substantial portion of its total revenues from licensing its BASE24 family of software
products and providing services and maintenance related to those products. During the year ended December 31,
2008, three month period ended December 31, 2007, and years ended September 30, 2007 and 2006, approximately
47%, 51%, 49%, and 57% respectively, of the Company’s total revenues were derived from licensing the BASE24
product line, which does not include the BASE24-eps product, and providing related services and maintenance. A
substantial majority of the Company’s licenses are time-based (“term”) licenses.

Effective January 1, 2008, the Company changed its fiscal year end from September 30 to December 31. The
Company’s new fiscal year commenced January 1, 2008 and ended on December 31, 2008. This Annual Report on
Form 10-K presents the Company’s financial position as of December 31, 2008 to December 31, 2007 and
September 30, 2007 and the results of operations for the year ended December 31, 2008 with the results of
operations for the three months ended December 31, 2007 and the years ended September 30, 2007 and 2006. The
Company changed its fiscal year end to align its sales contracting and delivery processes with its customers and to
allow for more effective communication with the capital markets and investment community by being consistent
with its peer group.

Consolidated Financial Statements

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.
Recently acquired subsidiaries that are included in the Company’s consolidated financial statements as of the date
of acquisition include: Visual Web Solutions, Inc. (“Visual Web”) and Stratasoft Sdn Bhd (“Stratasoft”) acquired
during the year ended September 30, 2007; eps Electronic Payment Systems AG (“eps AG”), and its subsidiaries
and P&H Solutions, Inc. (“P&H”), acquired during the year ended September 30, 2006. All significant intercom-
pany balances and transactions have been eliminated.

Capital Stock

Our outstanding capital stock consists of a single class of common stock. Each share of common stock is
entitled to one vote upon each matter subject to a stockholders vote and to dividends if and when declared by the
Board of Directors.

Use of Estimates and Risks and Uncertainties

The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

Our financial condition, results of operations, and cash flows are subject to various risks and uncertainties.
Factors that could affect our future financial statements and cause actual results to vary materially from expectations
include, but are not limited to, the global financial crisis affecting the banking system and financial markets, current
global economic conditions, demand for the Company’s products, increased competition, changes in the software

68

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

market, risks from operating internationally, the Company’s alliance with IBM, the Company’s outsourcing
agreement with IBM, the protection of the Company’s intellectual property, volatility in the Company’s stock price,
the performance of the Company’s strategic product — BASE24-eps, consolidation and other changes in the
financial services industry, the Company’s tax positions, the complexity of our products and the risk that they may
contain hidden defects, future acquisitions and investments, the Company’s offshore software development
activities, litigation, security breaches or computer viruses, governmental regulations and industry standards,
the Company’s compliance with privacy regulations, system failures, the Company’s restructuring plan, the
maturity of certain legacy retail payment products, restrictions and other financial covenants in the Company’s
credit facility, and volatility and disruption of the capital and credit markets.

Revenue Recognition, Accrued Receivables and Deferred Revenue

Software License Fees. The Company recognizes software license fee revenue in accordance with American
Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) 97-2, Software Revenue
Recognition (“SOP 97-2”), SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition With Respect to
Certain Transactions (“SOP 98-9”), and Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin
(“SAB”) 101, Revenue Recognition in Financial Statements, as codified by SAB 104, Revenue Recognition. For
software license arrangements for which services rendered are not considered essential to the functionality of the
software, the Company recognizes revenue upon delivery, provided (1) there is persuasive evidence of an
arrangement, (2) collection of the fee is considered probable and (3) the fee is fixed or determinable. In most
arrangements, vendor-specific objective evidence (“VSOE”) of fair value does not exist for the license element;
therefore, the Company uses the residual method under SOP 98-9 to determine the amount of revenue to be
allocated to the license element. Under SOP 98-9, the fair value of all undelivered elements, such as post contract
customer support (“maintenance” or “PCS”) or other products or services, is deferred and subsequently recognized
as the products are delivered or the services are performed, with the residual difference between the total
arrangement fee and revenues allocated to undelivered elements being allocated to the delivered element.

When a software license arrangement includes services to provide significant modification or customization of
software, those services are not separable from the software and are accounted for in accordance with Accounting
Research Bulletin (“ARB”) No. 45, Long-Term Construction-Type Contracts (“ARB No. 45”), and the relevant
guidance provided by SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type
Contracts (“SOP 81-1”). Accounting for services delivered over time (generally in excess of twelve months) under
ARB No. 45 and SOP 81-1 is referred to as contract accounting. Under contract accounting, the Company generally
uses the percentage-of-completion method. Under the percentage-of-completion method, the Company records
revenue for the software license fee and services over the development and implementation period, with the
percentage of completion generally measured by the percentage of labor hours incurred to-date to estimated total
labor hours for each contract. For those contracts subject to percentage-of-completion contract accounting,
estimates of total revenue and profitability under the contract takes into consideration amounts due under extended
payment terms. In certain cases, the Company provides its customers with extended payment terms whereby
payment is deferred beyond when the services are rendered. In other projects, the Company provides its customer
with extended payment terms that are refundable in the event certain milestones are not achieved or the project
scope changes. The Company excludes revenues due on extended payment terms from its current percentage-of-
completion computation until such time that collection of the fees becomes probable. In the event project
profitability is assured and estimable within a range, percentage-of-completion revenue recognition is computed
using the lowest level of profitability in the range. If the range of profitability is not estimable but some level of
profit is assured, revenues are recognized to the extent direct and incremental costs are incurred until such time that
project profitability can be estimated. In the event some level of profitability cannot be reasonably assured,
completed-contract accounting is applied. If it is determined that a loss will result from the performance of a
contract, the entire amount of the loss is recognized in the period in which it is determined that a loss will result.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For software license arrangements in which a significant portion of the fee is due more than 12 months after
delivery, the software license fee is deemed not to be fixed or determinable. For software license arrangements in
which the fee is not considered fixed or determinable, the software license fee is recognized as revenue as payments
become due and payable, provided all other conditions for revenue recognition have been met. For software license
arrangements in which the Company has concluded that collection of the fees is not probable, revenue is recognized
as cash is collected, provided all other conditions for revenue recognition have been met. In making the
determination of collectibility, the Company considers the creditworthiness of the customer, economic conditions
in the customer’s industry and geographic location, and general economic conditions.

SOP 97-2 requires the seller of software that includes PCS to establish VSOE of fair value of the undelivered
element of the contract in order to account separately for the PCS revenue. For certain of the Company’s products,
VSOE of the fair value of PCS is determined by reference to stated renewals with consistent pricing of PCS and PCS
renewals as a percentage of the software license fees. In other products, the Company determines VSOE by
reference to contractual renewals, when the renewal terms are substantive. In those cases where VSOE of the fair
value of PCS is determined by reference to stated renewals, the Company considers factors such as whether the
period of the initial PCS term is relatively long when compared to the term of the software license or whether the
PCS renewal rate is significantly below the Company’s normal pricing practices.

In the absence of customer-specific acceptance provisions, software license arrangements generally grant
customers a right of refund or replacement only if the licensed software does not perform in accordance with its
published specifications. If the Company’s product history supports an assessment by management that the
likelihood of non-acceptance is remote, the Company recognizes revenue when all other criteria of revenue
recognition are met.

For those software license arrangements that include customer-specific acceptance provisions, such provisions
are generally presumed to be substantive and the Company does not recognize revenue until the earlier of the receipt
of a written customer acceptance, objective demonstration that the delivered product meets the customer-specific
acceptance criteria or the expiration of the acceptance period. The Company also defers the recognition of revenue
on transactions involving less-established or newly released software products that do not have a product history.
The Company recognizes revenues on such arrangements upon the earlier of receipt of written acceptance or the
first production use of the software by the customer.

For software license arrangements in which the Company acts as a sales agent for another company’s products,
revenues are recorded on a net basis. These include arrangements in which the Company does not take title to the
products, is not responsible for providing the product or service, earns a fixed commission, and assumes credit risk
only to the extent of its commission. For software license arrangements in which the Company acts as a distributor
of another company’s product, and in certain circumstances, modifies or enhances the product, revenues are
recorded on a gross basis. These include arrangements in which the Company takes title to the products and is
responsible for providing the product or service.

For software license arrangements in which the Company permits the customer to receive or exchange for
unspecified future software products during the software license term, the Company recognizes revenue ratably
over the license term, provided all other revenue recognition criteria have been met. For software license
arrangements in which the customer has the right to change or alternate its use of currently licensed products,
revenue is recognized upon delivery of the first copy of all of the licensed products, provided all other revenue
recognition criteria have been met. For software license arrangements in which the customer is charged variable
software license fees based on usage of the product, the Company recognizes revenue as usage occurs over the term
of the licenses, provided all other revenue recognition criteria have been met.

Certain of the Company’s software license arrangements include PCS terms that fail to achieve VSOE of fair
value due to non-substantive renewal periods, or contain a range of possible PCS renewal amounts that is not
sufficiently narrow to establish VSOE of fair value. For these arrangements, VSOE of fair value of PCS does not

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

exist and revenues are therefore recognized ratably over the contractually specified PCS term. The Company
typically classifies revenues associated with these arrangements in accordance with the contractually specified
amounts assigned to the various elements, including software license fees and maintenance fees. The following are
amounts included in revenues in the consolidated statements of operations for which VSOE of fair value does not
exist for each element (in thousands):

Year Ended
December 31,
2008

Three Months
Ended
December 31,
2007

Software license fees . . . . . . . . . . . . . . . . . . . .
Maintenance fees . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$18,212
6,494
11,131

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$35,837

$2,576
1,101
1,317

$4,994

Year Ended
September 30,

2007

2006

$ 9,792
4,440
4,568

$15,432
5,632
4,441

$18,800

$25,505

Maintenance Fees. The Company typically enters into multi-year time-based software license arrangements
that vary in length but are generally five years. These arrangements include an initial (bundled) PCS term of one or
two years with subsequent renewals for additional years within the initial license period. For arrangements in which
the Company looks to substantive renewal rates to evidence VSOE of fair value of PCS and in which the PCS
renewal rate and term are substantive, VSOE of fair value of PCS is determined by reference to the stated renewal
rate. For these arrangements, PCS revenues are recognized ratably over the PCS term specified in the contract. In
arrangements where VSOE of fair value of PCS cannot be determined (for example, a time-based software license
with a duration of one year or less or when the range of possible PCS renewal amounts is not sufficiently narrow),
the Company recognizes revenue for the entire arrangement ratably over the PCS term.

For those arrangements that meet the criteria to be accounted for under contract accounting, the Company
determines whether VSOE of fair value exists for the PCS element. For those situations in which VSOE of fair value
exists for the PCS element, PCS is accounted for separately and the balance of the arrangement is accounted for
under ARB No. 45 and the relevant guidance provided by SOP 81-1. For those arrangements in which VSOE of fair
value does not exist for the PCS element, revenue is recognized to the extent direct and incremental costs are
incurred until such time as the services are complete. Once services are complete, all remaining revenue is then
recognized ratably over the remaining PCS period.

Services. The Company provides various professional services to customers, primarily project management,
software implementation and software modification services. Revenues from arrangements to provide professional
services are generally recognized as the related services are performed. For those arrangements in which services
revenue is deferred and the Company determines that the costs of services are recoverable, such costs are deferred
and subsequently expensed in proportion to the services revenue as it is recognized.

Hosting. The Company’s hosting-related arrangements contain multiple products and services. As these
arrangements generally do not contain a contractual right to take possession of the software at anytime during the
hosting period without significant penalty, the Company applies the separation provisions of Emerging Issues Task
Force (EITF) 00-21, Revenue Arrangements with Multiple Deliverables. The Company uses the relative fair value
method of revenue recognition to allocate the total consideration derived from the arrangement to each of the elements.
Any up-front fees allocated to the hosting services are recognized over the estimated life of the hosting relationship.
Professional services revenues are recognized as the services are performed when the services have stand-alone value
and over the estimated life of the hosting relationship when the services do not have stand-alone value. Hosting-related
revenue is reflected in the appropriate revenue line item in the statements of operations based upon the nature of the
product or service.

The Company may execute more than one contract or agreement with a single customer. The separate contracts
or agreements may be viewed as one multiple-element arrangement or separate agreements for revenue recognition

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

purposes. The Company evaluates the facts and circumstances related to each situation in order to reach appropriate
conclusions regarding whether such arrangements are related or separate. The conclusions reached can impact the
timing of revenue recognition related to those arrangements.

Accrued Receivables. Accrued receivables represent amounts to be billed in the near future (less than

12 months).

Deferred Revenue. Deferred revenue includes (1) amounts currently due and payable from customers, and
payments received from customers, for software licenses, maintenance and/or services in advance of providing the
product or performing services, (2) amounts deferred whereby VSOE of the fair value of undelivered elements in a
bundled arrangement does not exist, and (3) amounts deferred if other conditions for revenue recognition have not
been met.

Cash, Cash Equivalents and Marketable Securities

The Company classifies any investments in auction rate notes as marketable securities. Although auction rate
notes are AAA rated and are traded via the auction process within a period of three months or less, the Company
determined that classification of these securities as marketable securities is appropriate due to the potential
uncertainties inherent with any auction process plus the long-term nature of the underlying securities. The Company
considers all other highly liquid investments with original maturities of three months or less to be cash equivalents.

Concentrations of Credit Risk

In the normal course of business, the Company is exposed to credit risk resulting from the possibility that a loss
may occur from the failure of another party to perform according to the terms of a contract. The Company regularly
monitors credit risk exposures. Potential concentration of credit risk in the Company’s receivables with respect to
the banking, other financial services and telecommunications industries, as well as with retailers, processors and
networks is mitigated by the Company’s credit evaluation procedures and geographical dispersion of sales
transactions. The Company generally does not require collateral or other security to support accounts receivable.

The Company maintains a general allowance for doubtful accounts based on historical experience, along with
additional customer-specific allowances. The Company regularly monitors credit risk exposures in accounts
receivable. In estimating the necessary level of our allowance for doubtful accounts, management considers the
aging of accounts receivable, the creditworthiness of customers, economic conditions within the customer’s
industry, and general economic conditions, among other factors.

The following reflects activity in the Company’s allowance for uncollectible accounts receivable (in

thousands):

Balance, beginning of period. . . . . . . . . . . . . . . . .
Additions related to acquisition of eps AG . . . . .
Additions related to acquisition of P&H . . . . . .
Additions related to acquisition of Stratasoft . . .
Provision charged to general and administrative
expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts written off, net of recoveries . . . . . . . .

$1,723
—
—
—

564
(367)

Year Ended
December 31,
2008

Three Months
Ended
December 31,
2007

Year Ended
September 30,

2007

2006

$2,110
—
—
339

$2,390
113
235
—

$2,041
—
—
—

215
(533)

373
(781)

206
(834)

Balance, end of period . . . . . . . . . . . . . . . . . . . . .

$1,920

$1,723

$2,041

$2,110

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Amounts charged to general and administrative expenses during the year ended December 31, 2008, three
month period ended December 31, 2007 and years ended September 30, 2007, and 2006 reflect increases in the
allowance for doubtful accounts based upon collection experience in the geographic regions in which the Company
conducts business, net of collection of customer-specific receivables which were previously reserved for as doubtful
of collection.

Property and Equipment

Property and equipment are stated at cost. Depreciation of these assets is generally computed using the

straight-line method over the following estimated useful lives:

Computer and office equipment . . . . . . . . . . . . . . .
Furniture and fixtures. . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . Lesser of useful life of improvement or remaining

3-5 years
7 years

Vehicles and other . . . . . . . . . . . . . . . . . . . . . . . . .

term of lease
4-5 years

Assets under capital leases are amortized over the shorter of the asset life or the lease term.

Software

Software may be for internal use or available for sale. Costs related to certain software, which is available for
sale, are capitalized in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 86, Accounting
for Costs of Computer Software to be Sold, Leased, or Otherwise Marketed (“SFAS No. 86”), when the resulting
product reaches technological feasibility. The Company generally determines technological feasibility when it has a
detailed program design that takes product function, feature and technical requirements to their most detailed,
logical form and is ready for coding. Software for internal use is capitalized in accordance with AICPA SOP 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal Use (“internal-use software”)
(“SOP 98-1”).

Amortization of software costs to be sold or marketed externally, begins when the product is available for
licensing to customers and is determined on a product-by-product basis. The annual amortization shall be the
greater of the amount computed using (a) the ratio that current gross revenues for a product bear to the total of
current and anticipated future gross revenues for that product or (b) the straight-line method over the remaining
estimated economic life of the product, including the period being reported on. Due to competitive pressures, it may
be possible that the estimates of anticipated future gross revenue or remaining estimated economic life of the
software product will be reduced significantly. As a result, the carrying amount of the software product may be
reduced accordingly. Amortization of internal-use software, is generally computed using the straight-line method
over estimated useful lives of three years.

Goodwill and Other Intangibles

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), the Company
assesses goodwill for impairment at least annually. During this assessment management relies on a number of
factors, including operating results, business plans and anticipated future cash flows. The Company assesses
potential impairments to other intangible assets when there is evidence that events or changes in circumstances
indicate that the carrying amount of an asset may not be recovered.

When SFAS No. 142 was issued in 2001, the Company adopted the end of its fiscal year (or September 30) as
its annual impairment testing date. As a result of the change in the Company’s fiscal year, it evaluated its annual
goodwill impairment testing date and concluded to change its impairment testing date to October.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other intangible assets are amortized using the straight-line method over periods ranging from 18 months to

12 years.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of a long-lived asset may not be recoverable. An impairment loss is recorded if the
sum of the future cash flows expected to result from the use of the asset (undiscounted and without interest charges)
is less than the carrying amount of the asset. The amount of the impairment charge is measured based upon the fair
value of the asset.

Interest Rate Swap Agreements

The Company maintains an interest-rate risk-management strategy that uses interest rate swaps to mitigate the
risk of variability in future cash flows (and related interest expense) associated with currently outstanding and
forecasted floating rate bank borrowings due to changes in interest rates. The Company assesses interest rate cash
flow risk by identifying and monitoring changes in interest rate exposures that may adversely impact expected
future cash flows and by evaluating hedging opportunities. The Company monitors interest rate cash flow risk
attributable to both the Company’s outstanding and forecasted debt obligations. The risk management involves the
use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in
interest rates on the Company’s future cash flows.

The Company used variable debt to finance an acquisition. The variable-rate debt obligations expose the
Company to variability in interest payments due to changes in interest rates. To limit the variability of a portion of its
interest payments, the Company entered into interest rate swap agreements to manage fluctuations in cash flows
resulting from interest rate risk. These swaps change the variable-rate cash flow exposure on the debt obligations to
fixed cash flows. Under the terms of the interest rate swaps, the Company receives variable interest rate payments
and makes fixed interest rate payments, thereby creating the equivalent of fixed-rate debt. As of December 31, 2008,
the Company had two interest rate swap agreements with a combined notional amount of $125 million. These
interest rate swap agreements did not qualify as accounting hedges under SFAS No. 133, Accounting for Derivate
Instruments and Certain Hedging Activities (“SFAS No. 133”).

In June 1998, the FASB issued SFAS No. 133. In June 2000, the FASB issued SFAS No. 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities, an Amendment to SFAS No. 133 (“SFAS No. 138”).
SFAS No. 133 and SFAS No. 138 require that all derivative instruments be recorded on the balance sheet at their
respective fair values. See Note 7, “Derivative Instruments and Hedging Activities”, for additional details on the
Company’s interest rate swaps.

Treasury Stock

The Company accounts for shares of its common stock that are repurchased without intent to retire as treasury
stock. Such shares are recorded at cost and reflected separately on the consolidated balance sheets as a reduction of
stockholders’ equity. The Company issues shares of treasury stock upon exercise of stock options, payment of
earned performance shares, and for issuances of common stock pursuant to the Company’s employee stock
purchase plan. The Company also issued shares of treasury stock in connection with the eps AG acquisition in which
the Company issued restricted shares of the Company’s common stock. For purposes of determining the cost of the
treasury shares re-issued, the Company uses the average cost method.

Stock-Based Compensation Plans

On October 1, 2005,

the Company adopted SFAS No. 123 (revised 2004), Share-Based Payment
(“SFAS No. 123(R)”), which requires the measurement and recognition of compensation cost for all share-based

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

payment awards made to employees based on estimated fair values. SFAS No. 123(R) also amends SFAS No. 95,
Statement of Cash Flows, to require that excess tax benefits, as defined, realized from the exercise of stock options
be reported as a financing cash inflow rather than as a reduction of taxes paid in cash flows from operations. In
March 2005, the SEC issued SAB No. 107, which does not modify any of SFAS No. 123(R)’s conclusions or
requirements, but rather includes recognition, measurement and disclosure guidance for companies as they
implement SFAS No. 123(R). The Company applied the provisions of SAB 107 in its adoption of SFAS No. 123(R).

Upon adoption of SFAS No. 123(R), all of the Company’s existing stock-based compensation awards were
determined to be equity-classified awards. A portion of these options were reclassified as liability-classified awards
as they cash settled during fiscal 2007, because the Company was not current with its filings with the SEC. The
Company adopted SFAS No. 123(R) using the modified prospective transition method. Under the modified
prospective transition method, the Company is required to recognize noncash compensation costs for the portion of
stock-based awards that are outstanding as of October 1, 2005 for which the requisite service has not been rendered
(i.e. nonvested awards). The compensation cost is based on the grant date fair value of those awards as calculated for
pro forma disclosures under SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”). The
Company recognized compensation cost relating to the nonvested portion of those awards in the consolidated
financial statements beginning with the date on which SFAS No. 123(R) was adopted through the end of the
requisite service period.

In accordance with SFAS No. 123(R), the Company recognizes stock-based compensation costs for only those
shares expected to vest, on a straight-line basis over the requisite service period of the award, which is generally the
option vesting term. The impact of forfeitures that may occur prior to vesting is also estimated and considered in the
amount of expense recognized. Forfeiture estimates will be revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. In the Company’s pro forma information required under SFAS No. 123 for
periods prior to adoption of SFAS No. 123(R), the Company accounted for forfeitures as they occurred. Share-based
compensation expense is recorded in operating expenses depending on where the respective individual’s com-
pensation is recorded. The Company generally utilizes the Black-Scholes option-pricing model to determine the fair
value of stock options on the date of grant. The assumptions utilized in the Black-Scholes option-pricing model, as
well as the description of the plans the stock-based awards are granted under, are described in further detail in
Note 13, “Stock-Based Compensation Plans”.

Pursuant to the Company’s 2005 Equity and Performance Incentive Plan, the Company granted long-term
incentive program performance share awards (“LTIP Performance Shares”) to key employees of the Company,
including named executive officers. These LTIP Performance Shares are earned, if at all, based upon the
achievement, over a specified period that must not be less than one year and is typically a three-year period
(the “Performance Period”), of performance goals related to (i) the compound annual growth over the Performance
Period in the Company’s 60-month contracted backlog as determined by the Company, (ii) the compound annual
growth over the Performance Period in the diluted earnings per share as reported in the Company’s consolidated
financial statements, and (iii) the compound annual growth over the Performance Period in the total revenues as
reported in the Company’s consolidated financial statements. In no event will any of the LTIP Performance Shares
become earned if the Company’s earnings per share is below a predetermined minimum threshold level at the
conclusion of the Performance Period. Expense related to these awards is accrued if the attainment of performance
indicators is probable as determined by management. The expense is recognized over the applicable Performance
Period.

During the year ended December 31, 2008, pursuant to the Company’s 2005 Incentive Plan, the Company
granted restricted share awards (“RSAs”). These awards have requisite service periods of four years and vest in
increments of 25% on the anniversary dates of the grants. Under each arrangement, stock is issued without direct
cost to the employee. The Company estimates the fair value of the RSAs based upon the market price of the
Company’s stock at the date of grant. The RSA grants provide for the payment of dividends on the Company’s
common stock, if any, to the participant during the requisite service period (vesting period) and the participant has

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

voting rights for each share of common stock. The Company recognizes compensation expense for RSAs on a
straight-line basis over the requisite service period.

Translation of Foreign Currencies

The Company’s foreign subsidiaries typically use the local currency of the countries in which they are located
as their functional currency. Their assets and liabilities are translated into United States dollars at the exchange rates
in effect at the balance sheet date. Revenues and expenses are translated at the average exchange rates during the
period. Translation gains and losses are reflected in the consolidated financial statements as a component of
accumulated other comprehensive income (loss). Transaction gains and losses, including those related to inter-
company accounts, that are not considered to be of a long-term investment nature are included in the determination
of net income (loss). Transaction gains and losses, including those related to intercompany accounts, that are
considered to be of a long-term investment nature are reflected in the consolidated financial statements as a
component of accumulated other comprehensive income (loss).

Since the undistributed earnings of the Company’s foreign subsidiaries are considered to be indefinitely

reinvested, the components of accumulated other comprehensive income (loss) have not been tax effected.

Income Taxes

The provision for income taxes is computed using the asset and liability method, under which deferred tax
assets and liabilities are recognized for the expected future tax consequences of temporary differences between the
financial reporting and tax bases of assets and liabilities. Deferred tax assets are reduced by a valuation allowance
when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company periodically assesses its tax exposures and establishes, or adjusts, estimated reserves for
probable assessments by taxing authorities, including the Internal Revenue Service (“IRS”), and various foreign and
state authorities. Such reserves represent the estimated provision for income taxes expected to ultimately be paid.

Recently Issued Accounting Standards

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial
Accounting Standards (“SFAS”) No. 141(R), Business Combinations (“SFAS 141(R)”), which replaces SFAS 141.
SFAS 141(R) establishes principles and requirements for how an acquirer in a business combination recognizes and
measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any controlling
interest; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain
purchase; and determines what information to disclose to enable users of the financial statements to evaluate the
nature and financial effects of the business combination. SFAS 141(R) is to be applied prospectively to business
combinations for which the acquisition date is on or after an entity’s fiscal year that begins after December 15, 2008.
The Company will assess the impact of SFAS 141(R) if and when a future acquisition occurs.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements — an amendment of ARB No. 51 (“SFAS 160”). SFAS 160 establishes new accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this
statement requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated
financial statements and separate from the parent’s equity. The amount of net income (loss) attributable to the
noncontrolling interest will be included in consolidated net income (loss) on the face of the statement of operations.
SFAS 160 clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation
are equity transactions if the parent retains its controlling financial interest. In addition, this statement requires that a
parent recognize a gain or loss in net income (loss) when a subsidiary is deconsolidated. Such gain or loss will be
measured using the fair value of the noncontrolling equity investment on the deconsolidation date. SFAS 160 also
includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. Earlier adoption is prohibited. The Company is currently evaluating the impact, if any, the
adoption of SFAS 160 will have on its consolidated financial statements.

In February 2008, the FASB issued FASB Staff Position (“FSP”) Financial Accounting Standard (“FAS”)
157-2, Effective Date of FASB Statement No. 157. FSP FAS 157-2 delays the effective date of SFAS No. 157 from
2008 to 2009 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually).

On March 19, 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities, (“SFAS 161”). SFAS 161 amends FASB Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, (“SFAS 133”) and was issued in response to concerns and criticisms about the lack of adequate
disclosure of derivative instruments and hedging activities. SFAS 161 requires (i) qualitative disclosures regarding
the objectives and strategies for using derivative instruments and engaging in hedging activities in the context of an
entity’s overall risk exposure, (ii) quantitative disclosures in tabular format of the fair values of derivative
instruments and their gains and losses, and (iii) disclosures about credit-risk related contingent features in
derivative instruments. SFAS 161 is effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, but early application is encouraged. The Company is currently evaluating the
impact, if any, the adoption of SFAS 161 will have on its consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles.
SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in
the preparation of financial statements of nongovernmental entities that are presented in conformity with generally
accepted accounting principles in the United States. It is effective 60 days following the SEC’s approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. The adoption of this statement is not expected to have
a material effect on the Company’s financial statements.

In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities (FSP EITF 03-6-1). FSP EITF 03-6-1 clarified that all
outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends participate in
undistributed earnings with common shareholders. Awards of this nature are considered participating securities and
the two-class method of computing basic and diluted earnings per share must be applied. FSP EITF 03-6-1 is
effective for fiscal years beginning after December 15, 2008. The adoption of this standard will not have a material
impact on the Company’s consolidated financial position and results of operations.

In October 2008, the FASB issued Staff Position No. FAS 157-3, Determining the Fair Value of a Financial
Asset When the Market for That Asset is Not Active (FSP 157-3). FSP 157-3 clarifies the application of SFAS 157,
which the Company adopted as of January 1, 2008, in cases where a market is not active. The Company has
considered the guidance provided by FSP 157-3 in its determination of estimated fair values of financial assets as of
December 31, 2008, and the impact was not material.

2. Acquisitions

Fiscal 2007 Acquisitions

Visual Web Solutions, Inc.

On February 7, 2007, the Company acquired Visual Web Solutions, Inc. (“Visual Web”), a provider of
international trade finance and web-based cash management solutions, primarily to financial institutions in the
Asia/Pacific region. These solutions complement and have been integrated with the Company’s U.S.-centric cash
management and online banking solutions to create a more complete international offering. Visual Web had wholly-

77

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

owned subsidiaries in Singapore for sales and customer support and in Bangalore, India for product development
and services.

The financial operating results of Visual Web beginning February 7, 2007 have been included in the

consolidated financial results of the Company.

The aggregate purchase price of Visual Web, including direct costs of the acquisition, was $8.3 million, net of
$1.1 million of cash acquired. Under the terms of the acquisition, the parties established a cash escrow arrangement
in which $1.1 million of the cash consideration paid at closing is held in escrow as security for tax and other
contingencies. The allocation of the purchase price to specific assets and liabilities was based, in part, upon outside
appraisals of the fair value of certain assets.

In connection with the acquisition, the Company recorded the following amounts based upon its preliminary

purchase price allocation (in thousands, except weighted-average useful lives):

Amount

Weighted-Average
Useful Lives

Current assets:

Billed receivables, net of allowances . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

801
333
441

Noncurrent assets:

Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Developed software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships, noncompetes, and other intangible assets. . . .

Total assets acquired

Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

558
1,339
6,863
1,241

11,576
2,310
971

Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,281

Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 8,295

6.0 years

8.0 years

During the year ended September 30, 2007, the Company adjusted the initial purchase price allocation
resulting in an increase in goodwill of $0.5 million, net due to tax contingencies. The finalization of the purchase
price allocation may result in certain adjustments to the preliminary amounts including tax contingencies and
escrow settlements. Factors contributing to the purchase price which resulted in the recognized goodwill (none of
which will be tax deductible) include the acquisition of management, sales, and technology personnel with the skills
to develop and market new products of the Company. Pro forma results are not presented because they are not
significant.

Stratasoft Sdn Bhd

On April 2, 2007, the Company acquired Stratasoft Sdn Bhd (“Stratasoft”), a provider of electronic payment
solutions in Malaysia. This acquisition compliments the Company’s strategy to move to a direct sales model in
selected markets in Asia.

The financial operating results of Stratasoft beginning April 2, 2007 have been included in the consolidated

financial results of the Company.

78

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The aggregate purchase price of Stratasoft, including direct costs of the acquisition, was $2.5 million, net of
$0.7 million of cash acquired. The Company will pay an additional aggregate amount of up to $0.6 million (subject
to foreign currency fluctuations) to the sellers if Stratasoft achieves certain financial targets set forth in the purchase
agreement for the year ended December 31, 2008. During the year ended December 31, 2008, the Company
completed the assessment for the year ended December 31, 2007 and determined that Stratasoft did not meet the
financial targets set forth in the purchase agreement.

Under the terms of the acquisition, the parties established a cash escrow arrangement in which $0.5 million of
the cash consideration paid at closing is held in escrow as security for tax and other contingencies. The allocation of
the purchase price to specific assets and liabilities was based, in part, upon outside appraisals of the fair value of
certain assets.

In connection with the acquisition, the Company recorded the following amounts based upon its preliminary

purchase price allocation (in thousands, except weighted-average useful lives):

Amount

Weighted-Average
Useful Lives

Current assets:

Billed receivables, net of allowances. . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 573
10
396

Noncurrent assets:

Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships and noncompete . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

57
712
1,283
25

3,056
114
414

Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

528

Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,528

6.9 years

Prior to the acquisition, Stratasoft had been a distributor of the Company’s products within the Malaysian
market. Preexisting relationships included trade receivables and payables and certain contracts which were
measured at fair value at the acquisition date, resulting in no gain or loss.

During the year ended September 30, 2007, the Company adjusted the initial purchase price allocation
resulting in an increase in goodwill of $0.1 million, net due to tax contingencies. Factors contributing to the
purchase price which resulted in the recognized goodwill (none of which will be tax deductible) included the
acquisition of management, sales, and technology personnel with the skills to develop and market new products of
the Company. Pro forma results are not presented because they are not significant.

Fiscal 2006 Acquisitions

eps Electronic Payment Systems AG

On May 31, 2006, the Company acquired the outstanding shares of eps AG. The aggregate purchase price for
eps AG was $30.4 million, which was comprised of cash payments of $19.1 million, 330,827 shares of common
stock valued at $11.1 million, and direct costs of the acquisition. eps AG, with operations in Germany, Romania, the
United Kingdom and other European locations, offered electronic payment and complementary solutions focused

79

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

largely in the German market. The acquisition of eps AG has provided the Company additional opportunities to sell
its value added solutions, such as Proactive Risk Manager and Smart Chip Manager, into the German marketplace,
as well as to sell eps AG’s testing and dispute management solutions into markets beyond Germany. In addition, eps
AG’s presence in Romania has helped the Company more rapidly develop its global offshore development and
support capabilities.

The financial operating results of eps AG beginning June 1, 2006 have been included in the consolidated

financial results of the Company.

The acquisition of eps AG occurred in two closings. The initial closing occurred on May 31, 2006, and the
second closing occurred on October 31, 2006. Cash consideration paid at the initial closing totaled $13.0 million,
net of $3.1 million of cash acquired and the remaining cash consideration of $6.1 million was paid on October 31,
2006. All shares of the Company’s common stock issued as consideration for the eps AG acquisition were issued at
the initial closing. The Company accounted for the acquisition of eps AG in its entirety as of May 31, 2006, and
recorded a liability, in the amount of $6.1 million for the remaining cash consideration that was paid on October 31,
2006. The Company accounted for this as a delayed delivery of consideration as the price was fixed and not subject
to change, with complete decision-making and control of eps AG held by the Company as of the date of the initial
closing.

As noted, the consideration paid for eps AG included 330,827 shares of the Company’s common stock, all of
which were issued from the Company’s treasury stock. Under the terms of the eps AG acquisition, certain of the
shares issued have restrictions that prohibit their resale for five years, provided, however, that these resale
restrictions expire with respect to 20% of the shares each year commencing with the first anniversary of the initial
closing. Due to the resale restrictions, with the assistance of an independent appraiser, the Company determined that
a discount to the quoted market price of the Company’s common stock in the amount of 19% was appropriate for
determining the fair market value of the shares issued. The Company valued the shares issued using an average of
the market price of the Company’s common stock two days prior and subsequent to the parties agreeing to the terms
of the acquisition and its announcement net of the 19% discount for the non-marketability of the shares. The fair
market value of each share issued related to the eps AG acquisition was determined to be $33.42 per share.

Under the terms of the acquisition, the parties established a cash escrow arrangement in which approximately
$1.0 million of the cash consideration paid at the initial closing was held in escrow as security for a potential
contingent obligation. The Company distributed the escrow in October 2006 in accordance with the terms of the
escrow arrangement as the contingent liability paid by the Company was recovered from a third party. Additionally,
certain of the sellers of eps AG have committed to certain indemnification obligations as part of the sale of eps AG.
Those obligations are secured by the shares of common stock issued to the sellers pursuant to the eps AG acquisition
to the degree such shares are restricted at the time such an indemnification obligation is triggered, if at all, the
likelihood of which is deemed remote. The restrictions were lifted by the Company during the year ended
December 31, 2008.

The allocation of the purchase price to specific assets and liabilities was based, in part, upon outside appraisals
of the fair value of certain assets of eps AG. The following table summarizes the estimated fair values of the assets

80

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

acquired and liabilities assumed in connection with the acquisition, as well as the weighted-average useful lives of
intangible assets (in thousands, except weighted-average useful lives):

Amount

Weighted-Average
Useful Lives

Current assets:

Billed receivables, net of allowances . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,902
175
451

Noncurrent assets:

Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Developed software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships, trade names and other intangible assets . . . . .

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

183
5,012
22,349
5,681

35,753
5,279
76

Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,355

Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$30,398

5.0 years

7.4 years

During the year ended September 30, 2007, the Company adjusted the initial purchase price allocation
resulting in a decrease in goodwill of $0.5 million, net due to tax contingencies and severance liabilities. During
fiscal 2006, the Company adjusted goodwill by $4.4 million in the fourth quarter for certain items, primarily related
to the establishment of deferred tax liabilities.

Factors contributing to the purchase price which resulted in the recognized goodwill, none of which is tax
deductible, include the acquisition of management, sales and technology personnel with the skills to develop and
market new products for the Company.

P&H Solutions, Inc.

On August 28, 2006, the Company entered into an Agreement and Plan of Merger with P&H under the terms of
which P&H became a wholly-owned subsidiary of the Company. P&H was a provider of web-based enterprise
business banking solutions to financial institutions. The acquisition of P&H closed September 29, 2006. The
aggregate purchase price for P&H, including direct costs of the acquisition, was $133.7 million, net of $20.2 million
of cash acquired. The Company’s accompanying consolidated statements of operations for fiscal 2006 do not
include any results of P&H operations as the acquisition occurred on the last business day of fiscal 2006.

Under the terms of the acquisition, the parties established a cash escrow arrangement in which approximately
$11.7 million of the cash consideration paid at the initial closing was held in escrow as security for a potential
contingent obligation. The escrow agent has distributed the escrow funds in accordance with the terms of the escrow
agreement.

The financial operating results of P&H beginning October 1, 2006, have been included in the consolidated

financial results of the Company.

The allocation of the purchase price to specific assets and liabilities was based, in part, upon outside appraisals
of the fair value of certain assets of P&H. The following table summarizes the estimated fair values of the assets

81

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

acquired and liabilities assumed in connection with the acquisition, as well as the weighted-average useful lives of
intangible assets (in thousands, except weighted-average useful lives):

Amount

Weighted-Average
Useful Lives

Current assets:

Billed receivables, net of allowances . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,131
1,782
3,730

Noncurrent assets:

Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Developed software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships, noncompetes, and other intangible assets . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,317
24,550
99,180
25,134
12,092

177,916
22,340
21,831

Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

44,171

Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $133,745

5.7 years

7.6 years

During the year ended September 30, 2007, the Company adjusted the initial purchase price allocation
resulting in a net increase in goodwill of $0.4 million due to tax adjustments and recovery of bad debt reserves.
Factors contributing to the purchase price which resulted in the recognized goodwill, none of which is tax
deductible, include the acquisition of management, sales and technology personnel with the skills to develop and
market new products for the Company and to develop and market the Company’s products in an Application
Software Provider (“ASP”) hosting model.

Unaudited Pro Forma Financial Information

The unaudited financial information in the table below summarizes the combined results of operations of
ACI’s significant acquisitions (eps AG and P&H), on a pro forma basis, as though the companies had been
combined as of the beginning of the period presented. Visual Web and Stratasoft were not significant individually or
aggregated, and therefore, pro forma information is not presented. These results include certain adjustments related
to the acquisitions, including adjustments associated with increased interest expense on debt incurred to fund the
acquisitions, the depreciation of property, plant and equipment, the amortization of intangible assets, and the related
income tax effects (in thousands, except per share amounts):

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share:

Year Ended
September 30,
2006

$391,664
47,771

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

1.28
1.25

82

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The pro forma information is shown for illustrative purposes only and is not necessarily indicative of future
results of operations of the Company or results of operations of the Company that would have actually occurred had
the transactions been in effect for the periods presented.

3. Property and Equipment

As of December 31, 2008 and 2007 and September 30, 2007, net property and equipment, which includes
assets under capital leases primarily in computer and office equipment, consisted of the following (in thousands):

Computer and office equipment. . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . .
Vehicles and other . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: accumulated depreciation and amortization . . . . . .

December 31,
2008

December 31,
2007

September 30,
2007

$ 31,057
11,284
6,335
258

48,934
(29,513)

$ 38,706
11,702
11,269
151

61,828
(42,325)

$ 41,723
7,699
11,264
104

60,790
(41,434)

Property and equipment, net . . . . . . . . . . . . . . . . . . .

$ 19,421

$ 19,503

$ 19,356

Note: During the year ended December 31, 2008, the Company wrote-off $16.2 million of fully depreciated

gross assets disposed of during facility moves in Omaha and Watford.

Asset Retirement Obligations

We have contractual obligations with respect to the retirement of certain leasehold improvements at maturity
of facility leases and the restoration of facilities back to their original state at the end of the lease term. Accruals are
made based on management’s estimates of current market restoration costs, inflation rates and discount rates. At the
inception of a lease, the present value of the expected cash payment is recognized as an asset retirement obligation
with a corresponding amount recognized in property assets. The property asset amount is amortized, and the
liability is accreted, over the period from lease inception to the time we expect to vacate the premises resulting in
both depreciation and interest charges in the consolidated statement of operations. Discount rates used are based on
credit-adjusted risk-free interest rates. Based on our current lease commitments, obligations are required to be
settled commencing during fiscal year 2009 and ending during fiscal year 2016. Revisions to these obligations may
be required if our estimates of restoration costs change. At December 31, 2008 and 2007 and September 30, 2007,
we had obligations of $1.3 million, $2.5 million and $2.6 million, respectively, recorded in other liabilities in the
accompanying consolidated balance sheets.

During the year ended December 31, 2008, the Company terminated the lease for one of its facilities in
Watford, England. Pursuant to the termination agreement, the Company paid a termination fee of approximately
$0.9 million that was recorded in general and administrative expenses in the accompanying consolidated statement
of operations for the year ended December 31, 2008. Under the termination agreement, the Company was relieved
of its contractual obligations with respect to the restoration of facilities back to their original condition. As a result,
the Company recognized a gain of approximately $1.0 million related to the relief from this liability, which is also
recorded in general and administrative expenses in the accompanying consolidated statement of operations.

83

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4. Goodwill

Changes in the carrying amount of goodwill attributable to each reporting unit with goodwill balances during
the year ended December 31, 2008, three month period ended December 31, 2007 and year ended September 2007
were as follows (in thousands):

Americas

EMEA

Asia/Pacific

Total

Balance, September 30, 2006 . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . .
Additions — P&H(1) . . . . . . . . . . . . . . . . . . . . .
Additions — S2(2) . . . . . . . . . . . . . . . . . . . . . . .
Reductions — eps AG(3) . . . . . . . . . . . . . . . . . .
Additions — acquisition of Visual Web . . . . . . . .
Additions — acquisition of Stratasoft . . . . . . . . .

Balance, September 30, 2007 . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . .
Additions — S2(4) . . . . . . . . . . . . . . . . . . . . . . .
Additions — acquisition of Visual Web(5) . . . . . .

Balance, December 31, 2007 . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . .
Additions — S2(6) . . . . . . . . . . . . . . . . . . . . . . .
Additions — acquisition of Visual Web(5) . . . . . .

$138,085
(679)
359
47
—
1,865
—

139,677
31
13
—

139,721
(546)
155
—

$44,105
5,897
—
—
(509)
—
—

49,493
113
—
—

49,606
(6,223)
—
—

$ 9,328
953
—
—
—
5,465
799

16,545
484
—
414

17,443
(381)
—
211

$191,518
6,171
359
47
(509)
7,330
799

205,715
628
13
414

206,770
(7,150)
155
211

Balance, December 31, 2008 . . . . . . . . . . . . . . . . .

$139,330

$43,383

$17,273

$199,986

(1) P&H purchase accounting adjustments primarily consist of adjustments to accruals and tax contingencies. The

purchase price allocation for the P&H acquisition was finalized as of September 29, 2007.

(2) Adjustment during the year ended September 30, 2007 to S2 acquisition relates to a contingency payment made

in accordance with the purchase agreement.

(3) eps AG purchase accounting adjustments primarily consist of adjustments to deferred tax balances.

(4) Adjustment to S2 Systems, Inc. acquisition relates to settlement of escrow balances in accordance with the

purchase agreement.

(5) Visual Web purchase accounting adjustment relates to an adjustment to tax contingencies.

(6) Adjustment to S2 Systems, Inc. acquisition relates to contingency payments made in accordance with the

purchase agreement.

Goodwill is assessed for impairment on October 1st at the reporting unit level. During this assessment,
management relies on a number of factors, including operating results, business plans and anticipated future cash
flows. The initial step requires the Company to determine the fair value of each reporting unit and compare it to the
carrying value, including goodwill, of such reporting unit. If the fair value exceeds the carrying value, no
impairment loss is to be recognized. However, if the carrying value of the reporting unit exceeds its fair value, the
goodwill of this unit may be impaired. The amount of impairment, if any, is then measured based upon the estimated
fair value of goodwill at the valuation date. During the year ended December 31, 2008, and years ended
September 30, 2007 and 2006, the Company performed an impairment test for each reporting unit. No impairment
losses were recognized for the years reported.

84

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5. Software and Other Intangible Assets

At December 31, 2008, software net book value totaling $29.4 million, net of $33.0 million of accumulated
depreciation, includes software marketed for external sale of $19.4 million. The remaining software net book value
of $10.0 million is comprised of various software that has been acquired or developed for internal use.

Amortization of acquired software marketed for external sale is computed using the greater of the ratio of
current revenues to total estimated revenues expected to be derived from the software or the straight-line method
over an estimated useful life of generally three to six years. Software amortization expense recorded during the year
ended December 31, 2008, three month period ended December 31 2007, and the years ended September 30, 2007
and 2006 totaled $9.1 million, $2.1 million, $8.1 million and $2.2 million, respectively. The majority of these
software amortization expense amounts are reflected in either cost of software license fees or general and
administrative expenses in the consolidated statements of operations.

The carrying amount and accumulated amortization of the Company’s other intangible assets that were subject

to amortization at each balance sheet date are as follows (in thousands):

Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . .
Purchased contracts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks and tradenames . . . . . . . . . . . . . . . . . . . . .
Covenant not to compete . . . . . . . . . . . . . . . . . . . . . . .

Less: accumulated amortization . . . . . . . . . . . . . . . . . . .

December 31,
2008

December 31,
2007

September 30,
2007

$ 39,020
11,030
2,236
1,537

53,823
(23,476)

$ 40,538
11,593
2,266
1,546

55,943
(17,855)

$ 40,488
11,643
2,246
1,531

55,908
(16,223)

Other intangible assets, net . . . . . . . . . . . . . . . . . . . .

$ 30,347

$ 38,088

$ 39,685

The Company added other intangible assets of $1.2 million and $1.3 million, respectively, from the acquisition
of Visual Web and Stratasoft in the year ended September 30, 2007 and $25.1 million and $5.7 million, respectively,
from the acquisitions of P&H and eps AG in the year ended September 30, 2006. Other intangible assets
amortization expense recorded during the year ended December 31, 2008, three month period ended December 31,
2007, and the years ended September 30, 2007, and 2006 totaled $6.4 million, $1.6 million, $6.5 million and
$2.1 million, respectively. Based on capitalized intangible assets at December 31, 2008, and assuming no
impairment of these intangible assets, estimated amortization expense amounts in future fiscal years are as follows
(in thousands):

Fiscal Year Ending December 31,

Software
Amortization

Other Intangible
Assets Amortization

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10,244
8,898
6,665
3,263
251
117

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$29,438

$ 6,022
5,979
5,625
4,554
4,308
3,859

$30,347

85

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6. Debt

Long-term Credit Facility

In connection with funding the purchase of P&H, on September 29, 2006 the Company entered into a five year
revolving credit facility with a syndicate of financial institutions, as lenders, providing for revolving loans and
letters of credit in an aggregate principal amount not to exceed $150 million. The Company has the option to
increase the aggregate principal amount to $200 million. The facility has a maturity date of September 29, 2011, at
which time any principal amounts outstanding are due. Obligations under the facility are unsecured and
uncollateralized, but are jointly and severally guaranteed by certain domestic subsidiaries of the Company.

The Company may select either a base rate loan or a LIBOR based loan. Base rate loans are computed at the
national prime interest rate plus a margin ranging from 0% to 0.125%. LIBOR based loans are computed at the
applicable LIBOR rate plus a margin ranging from 0.625% to 1.375%. The margins are dependent upon the
Company’s total leverage ratio at the end of each quarter. The initial borrowing rate on September 29, 2006 was set
using the base rate option, effecting a rate of 8.25%. Interest is due and payable quarterly.

On October 5, 2006, the Company exercised its right to convert the rate on its initial borrowing to the LIBOR
based option, thereby reducing the effective interest rate to 6.12%. The interest rate in effect at December 31, 2008
was 5.21%. On July 18, 2007 the Company entered into an interest rate swap with a commercial bank to fix the
interest rate. See Note 7, “Derivative Instruments and Hedging Activities”, for details. There is also an unused
commitment fee to be paid annually of 0.15% to 0.3% based on the Company’s leverage ratio. The initial principal
borrowings of $75 million were outstanding at December 31, 2008. The amount of unused borrowings actually
available under the revolving credit facility varies in accordance with the terms of the agreement. In connection with
the borrowing, the Company incurred debt issue costs of $1.7 million.

The credit facility contains certain affirmative and negative covenants including certain financial measure-
ments. The facility also provides for certain events of default. The facility does not contain any subjective
acceleration features and does not have any required payment or principal reduction schedule and is included as
non-current in the accompanying consolidated balance sheet.

On August 27, 2007, the Company entered into an amendment to its credit agreement with Wachovia Bank
which amended the definition of consolidated EBITDA, as it relates to the calculation for the Company’s debt
covenants, to exclude certain non-recurring items, and to incorporate the change in the Company’s fiscal year end to
a calendar year, effective January 1, 2008.

At December 31, 2008, the fair value of the Company’s long-term credit facility approximates its carrying

value.

7. Derivative Instruments and Hedging Activities

The Company maintains an interest-rate risk-management strategy that uses derivative instruments to mitigate
the risk of variability in future cash flows (and related interest expense) associated with currently outstanding and
forecasted floating rate bank borrowings due to changes in the benchmark interest rate (“LIBOR”). The Company
believes the resulting cost of funds is lower than it would have been had the Company converted the bank revolving
facility to a fixed-rate structure.

At December 31, 2008, the Company had $75 million of outstanding variable-rate borrowings under a 5-year
$150 million revolver facility that matures on September 29, 2011. The variable-rate benchmark is 3-month
LIBOR — see Note 6, “Debt”.

86

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the year ended September 30, 2007, the Company entered into interest-rate swaps to convert its existing

and forecasted variable-rate borrowing needs to fixed rates as follows:

(cid:129) On July 18, 2007, the Company entered into an interest rate swap with a commercial bank whereby the
Company pays a fixed rate of 5.375% and receives a floating rate indexed to the 3-month LIBOR (5.36% at
inception) from the counterparty on a notional amount of $75 million with re-pricing of the variable rate
quarterly. The swap effective date was July 20, 2007 and terminates on October 4, 2010. Net cash settlement
payments occur quarterly on the 4th of each October, January, April and July commencing October 4, 2007,
through and including the termination date. The fair value liability at December 31, 2008 of this swap was
$5.4 million.

(cid:129) On August 16, 2007, the Company entered into a forward starting interest rate swap with a commercial bank
whereby the Company pays a fixed rate of 4.90% and receives a floating rate indexed to the 3-month LIBOR
from the counterparty on a notional amount of forecasted borrowings of $50 million with re-pricing of the
variable rate quarterly. The swap effective date was October 4, 2007 and terminates on October 4, 2010. The
variable rate will be first determined on the effective date. Net cash settlement payments occur quarterly on
the 4th of each January, April, July and October commencing January 4, 2008, through and including the
termination date. The fair value liability at December 31, 2008 of this swap was $3.2 million.

Although the Company believes that these interest rate swaps will mitigate the risk of variability in future cash
flows associated with existing and forecasted variable rate borrowings during the term of the swaps, neither swap
currently qualifies for hedge accounting. Accordingly, the loss resulting from the change in the fair value of the
interest rate swaps for the year ended December 31, 2008, three month period ended December 31, 2007 and year
ended September 30, 2007 of $5.8 million, $2.5 million, and $2.1 million, respectively, is reflected as expense in
other income (expense), net in the accompanying consolidated statements of operations. Changes in the fair value of
the interest rate swaps were as follows (in thousands):

Beginning fair value, September 30, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss recognized in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair value, September 30, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss recognized in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair value, December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net settlement payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss recognized in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Asset
(Liability)

$ —
(2,077)

$(2,077)
(2,475)

(4,552)
1,728
(5,800)

Fair value, December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(8,624)

As of December 31, 2008, the $8.6 million fair value liability is recorded as $5.3 million and $3.3 million in
other current liabilities and other noncurrent liabilities, respectively, in the accompanying consolidated balance
sheet.

Net settlements are measured monthly and paid quarterly. The net settlements are recorded in other income
(expense) in the accompanying consolidated statements of operations. Included in the $8.6 million fair value at
December 31, 2008, is approximately $0.3 million of net settlement obligations paid by the Company subsequent to
December 31, 2008.

8. Fair Value of Financial Instruments

Effective January 1, 2008, the Company adopted the provisions of SFAS No. 157, Fair Value Measurements
(“SFAS 157”), for financial assets and financial liabilities. In accordance with Financial Accounting Standards

87

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Board Staff Position No. 157-2, Effective Date of FASB Statement No. 157, the Company will delay application of
SFAS 157 for non-financial assets and non-financial liabilities, until January 1, 2009. SFAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements.

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants. SFAS 157 establishes a fair value hierarchy for valuation inputs
that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest
priority to unobservable inputs. The fair value hierarchy is as follows:

(cid:129) Level 1 Inputs — Unadjusted quoted prices in active markets for identical assets or liabilities that the

reporting entity has the ability to access at the measurement date.

(cid:129) Level 2 Inputs — Inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in
active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs
other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities,
prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market
data by correlation or other means.

(cid:129) Level 3 Inputs — Unobservable inputs for determining the fair values of assets or liabilities that reflect an
entity’s own assumptions about the assumptions that market participants would use in pricing the assets or
liabilities.

Derivatives. Derivatives are reported at fair value utilizing Level 2 inputs. The Company utilizes valuation
models prepared by a third-party with observable market data inputs to estimate fair value of its interest rate swaps.

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring
basis as of December 31, 2008, segregated by the level of the valuation inputs within the fair value hierarchy utilized
to measure fair value (in thousands):

Description

December 31,
2008

Fair Value Measurements at
Reporting Date Using

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Derivative liabilities . . . . . . . . . . . . . . . . .

$8,624

$—

$8,624

$—

Certain non-financial assets and non-financial liabilities measured at fair value on a recurring basis include
reporting units measured at fair value in the first step of a goodwill impairment test. Certain non-financial assets
measured at fair value on a non-recurring basis include non-financial assets and non-financial liabilities measured at
fair value in the second step of a goodwill impairment test, as well as intangible assets and other non-financial long-
lived assets measured at fair value for impairment assessment. As stated above, SFAS 157 will be applicable to these
fair value measurements beginning January 1, 2009.

The Company pays interest quarterly on its long-term revolving credit facility based upon the LIBOR rate plus
a margin ranging from 0.625% to 1.375%, the margin being dependent upon the Company’s total leverage ratio at
the end of the quarter. At December 31, 2008, the fair value of the Company’s long-term revolving credit facility
approximates its carrying value.

88

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

9. Corporate Restructuring and Other Reorganization Charges

We summarize the components of corporate restructuring and other reorganization charges in the following

table:

Balance, September 30, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to previously recognized liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts paid during fiscal 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance, September 30, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional restructuring charges incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts paid during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance, December 31, 2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional restructuring charges incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts paid during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Termination
Benefits

$

784
2,932
(69)
(962)
41

2,726
477
(1,829)
23

1,397
5,888
(4,697)
(41)

Balance, December 31, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,547

Other includes the impact of foreign currency translation.

At December 31, 2008, December 31, 2007 and September 30, 2007, the liabilities were classified as short-
term in accrued employee compensation in the accompanying consolidated balance sheets. See Note 19, “Inter-
national Business Machines Corporation Information Technology Outsourcing Agreement” for additional sever-
ance charges incurred.

During the year ended December 31, 2008, the Company reduced its headcount by 110 employees as a part of
its strategic plan to reduce operating expenses. In connection with these actions, during the year ended December 31,
2008, approximately $5.6 million of termination costs were recognized in general and administrative expense in the
accompanying consolidated statement of operations. The charges, by segment, were as follows for the year ended
December 31, 2008: $2.2 million in the Americas segment, $2.6 million in the EMEA segment, and $0.8 million in
the Asia/Pacific segment. Approximately $3.0 million of these termination costs were paid during the year ended
December 31, 2008. The remaining liability is expected to be paid over the next 12 months.

2007

During the year ended September 30, 2007, the Company committed to actions to reduce headcount. In
connection with the restructuring, the Company established a plan of termination that impacted 30 employees.
These actions resulted in severance-related restructuring charges of $2.6 million, which are reflected in the general
and administrative line item of the consolidated statement of operations. The charges, by channel, were as follows:
$0.9 million in the Americas channel and $1.7 million in the EMEA channel. As of September 30, 2007,
$2.6 million is accrued in accrued employee compensation in the accompanying consolidated balance sheet. These
amounts were paid by the Company during the three month period ended December 31, 2007 and the year ended
December 31, 2008.

89

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2006

During the year ended September 30, 2006, the Company restructured its Product and Americas Sales
organizations. These actions resulted in severance-related restructuring charges of $0.9 million, which are reflected
in operating expenses. The allocation of these charges was as follows: $0.1 million in cost of maintenance and
services, $0.6 million in selling and marketing, $0.1 million in research and development, and $0.1 million in
general and administrative. The charges, by channel, were as follows: $0.6 million in the Americas channel,
$0.1 million in the EMEA channel, and $0.2 million in the Asia/Pacific channel. Additional severance-related
restructuring charges of $0.3 million, net of adjustments of $0.1 million to previously recognized liabilities, were
incurred during the year ended September 30, 2007. As of September 30, 2007, all amounts had been paid related to
these actions.

10. Common Stock, Treasury Stock and Earnings Per Share

The Company’s board of directors has approved a stock repurchase program authorizing the Company, from
time to time as market and business conditions warrant, to acquire up to $210.0 million of its common stock. Under
the program to date, the Company has purchased approximately 6,049,520 shares for approximately $154 million.
The maximum remaining dollar value of shares authorized for purchase under the stock repurchase program was
approximately $56 million as of December 31, 2008.

During the third quarter of the year ended September 30, 2006, the Company began to issue shares of treasury
stock upon exercise of stock options, payment of earned performance shares, issuance of restricted stock awards and
for issuances of common stock pursuant to the Company’s employee stock purchase plan. Shares of treasury stock
were also issued during the year ended September 30, 2006 in connection with the acquisition of eps AG. Treasury
shares issued during the year ended September 30, 2006 included 720,471 shares issued pursuant to stock option
exercises, 20,547 issued pursuant to the Company’s employee stock purchase plan, and 330,827 related to the
acquisition of eps AG. Treasury shares issued during the year ended September 30, 2007 included 10,343 shares
issued pursuant to stock option exercises and 1,483 for earned performance shares. Treasury shares issued during
the three month period ended December 31, 2007 included 51,160 shares issued pursuant to stock option exercises.
Treasury shares issued during the year ended December 31, 2008 included 311,640 and 471,400 shares issued
pursuant to stock option exercises and restricted share award grants, respectively.

Options to purchase shares of the Company’s common stock at an exercise price of one cent per share are
included in common stock for presentation purposes on the 2006 consolidated balance sheet, and are included in
common stock outstanding for earnings per share computation for the year ended September 30, 2006. These penny
options were cash settled due to the stock option suspension during the year ended September 30, 2007.

Earnings (loss) per share is computed in accordance with SFAS No. 128, Earnings per Share. Basic earnings
(loss) per share is computed on the basis of weighted average outstanding common shares. Diluted earnings (loss)
per share is computed on the basis of basic weighted average outstanding common shares adjusted for the dilutive
effect of stock options and other outstanding dilutive securities.

90

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table reconciles the average share amounts used to compute both basic and diluted earnings

(loss) per share (in thousands):

Year Ended
December 31,
2008

Three Months
Ended
December 31,
2007

Years Ended
September 30,

2007

2006

Weighted average share outstanding:
Basic weighted average shares outstanding . . . . . .
Add: Dilutive effect of stock options, restricted

stock awards and other dilutive securities. . . . . .

34,498

35,700

36,933

37,369

297

—

—

868

Diluted weighted average shares outstanding . . . . .

34,795

35,700

36,933

38,237

For the year ended December 31, 2008, 5.8 million options to purchase shares, contingently issuable shares,
and common stock warrants were excluded from the diluted net income per share computation as their effect would
be anti-dilutive. For the three months ended December 31, 2007, 3.9 million options to purchase shares,
contingently issuable shares, and common stock warrants were excluded from the diluted net income (loss) per
share computation due to the net loss. For the year ended September 30, 2007, 4.0 million options to purchase
shares, restricted share awards and contingently issuable shares were excluded from the diluted net income (loss)
per share computation due to the net loss. For the year ended September 30, 2006, 0.5 million options to purchase
shares and contingently issuable shares were excluded from the diluted net income per share computation as their
effect would be anti-dilutive.

11. Other Income/Expense

Other income (expense) is comprised of the following items (in thousands):

Year Ended
December 31,
2008

Three Months
Ended
December 31,
2007

Foreign currency transaction gains (losses) . . . . . .
Change in fair value of interest rate swap . . . . . . .
Gain under contractual arrangement (Note 17) . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$13,814
(5,800)
219
14

$ 1,890
(2,475)
386
(135)

Years Ended
September 30,
2007

2006

$(1,915)
(2,077)
404
(152)

$(173)
—
—
(370)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 8,247

$ (334)

$(3,740)

$(543)

12. Segment Information

The Company’s chief operating decision maker, together with other senior management personnel, currently
focus their review of consolidated financial information and the allocation of resources based on reporting of
operating results, including revenues and operating income, for the geographic regions of the Americas, Europe/
Middle East/Africa (“EMEA”) and Asia/Pacific. The Company’s products are sold and supported through
distribution networks covering these three geographic regions, with each distribution network having its own
sales force. The Company supplements its distribution networks with independent reseller and/or distributor
arrangements. As such, the Company has concluded that its three geographic regions are its reportable operating
segments.

The Company’s chief operating decision makers review financial information presented on a consolidated
basis, accompanied by disaggregated information about revenues and operating income by geographical region.

91

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company allocated segment support expenses such as global product delivery, business operations and
management based upon percentage of revenue per segment. Corporate costs are allocated as a percentage of the
headcount by segment. The following is selected segment financial data for the periods indicated (in thousands):

Year Ended
December 31,
2008

Three Months
Ended
December 31,
2007

Years Ended
September 30,

2007

2006

Revenues:

Americas . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Pacific . . . . . . . . . . . . . . . . . . . . . . . .

$207,350
169,046
41,257

$ 49,618
43,094
8,570

$195,775
133,776
36,667

$180,718
131,738
35,446

$417,653

$101,282

$366,218

$347,902

Depreciation and amortization expense:

Americas . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Pacific . . . . . . . . . . . . . . . . . . . . . . . .

$ 15,705
4,566
1,779

$

3,712
1,127
381

$ 14,292
5,112
1,099

$

3,568
3,958
835

$ 22,050

$

5,220

$ 20,503

$

8,361

Stock-based compensation expense:

Americas . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Pacific . . . . . . . . . . . . . . . . . . . . . . . .

$

3,895
2,689
1,304

$

7,888

Operating income (loss):

Americas . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Pacific . . . . . . . . . . . . . . . . . . . . . . . .

$ 21,714
2,140
(2,141)

$

$

$

46
(46)
(5)

(5)

$

4,033
2,759
777

$

3,302
2,359
653

$

7,569

$

6,314

2,883
403
(434)

$ 14,578
(16,942)
4,783

$ 42,713
3,876
7,189

$ 21,713

$

2,852

$

2,419

$ 53,778

December 31,
2008

December 31,
2007

September 30,
2007

Long-lived assets:

Americas — United States . . . . . . . . . . . . . . . . . . . . .
Americas — Other . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$190,940
3,594
77,205
21,660

$194,304
5,147
91,799
22,241

$212,927
5,169
70,596
21,856

$293,399

$313,491

$310,548

92

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31,
2008

December 31,
2007

September 30,
2007

Total assets:

Americas — United States . . . . . . . . . . . . . . . . . . . . .
Americas — Other . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia/Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$314,296
14,506
178,085
45,955

$306,014
24,579
190,234
49,631

$257,585
25,069
174,415
49,672

$552,842

$570,458

$506,741

Additionally, the Company offers five primary software product lines that are sold in each of the geographic

regions listed above. Following are revenues, by product line (in thousands):

Year Ended
December 31,
2008

Three Months
Ended
December 31,
2007

Retail payment engines . . . . . . . . . . . . . . . . .
Risk management . . . . . . . . . . . . . . . . . . . . .
Payments management
. . . . . . . . . . . . . . . . .
Wholesale payments . . . . . . . . . . . . . . . . . . .
Application services solutions . . . . . . . . . . . .

$263,641
17,058
18,871
78,857
39,226

$ 62,818
2,790
4,794
16,204
14,676

Years Ended
September 30,

2007

2006

$230,003
14,797
16,995
64,155
40,268

$240,850
16,159
13,817
27,140
49,936

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$417,653

$101,282

$366,218

$347,902

Aggregate revenues attributable to customers in the United Kingdom accounted for 12.7% and 14.9% of the
Company’s consolidated revenues during the year ended December 31, 2008 and the three-month period ended
December 31, 2007, respectively. No country outside of the United States accounted for more than 10% of the
Company’s consolidated revenues during the years ended September 30, 2007 and 2006. No single customer
accounted for more than 10% of the Company’s consolidated revenues during the year end December 31, 2008, the
three month period ended December 31, 2007 and the years ended September 30, 2007 and 2006.

During the year ended December 31, 2008, the three month period ended December 31, 2007 and the years
ended September 30, 2007 and 2006, revenues in the United States accounted for approximately $156.6 million,
$36.0 million, $138.1 million and $118.8 million, respectively, of consolidated revenue. Long-lived assets
attributable to operations in the United States were approximately $190.9 million, $194.3 million and $212.9 mil-
lion, as of December 31, 2008 and 2007 and September 30, 2007, respectively.

13. Stock-Based Compensation Plans

Employee Stock Purchase Plan

Under the Company’s 1999 Employee Stock Purchase Plan (the “ESPP”), a total of 1,500,000 shares of the
Company’s common stock have been reserved for issuance to eligible employees. Participating employees are
permitted to designate up to the lesser of $25,000 or 10% of their annual base compensation for the purchase of
common stock under the ESPP. Purchases under the ESPP are made one calendar month after the end of each fiscal
quarter. The price for shares of common stock purchased under the ESPP is 85% of the stock’s fair market value on
the last business day of the three-month participation period. Shares issued under the ESPP during the year ended
December 31, 2008, the three month period ended December 31, 2007, and the year ended September 30, 2006
totaled 101,671, 78,932, and 43,761, respectively. No shares were issued under the ESPP during fiscal 2007 while
the Company was not current with its filings with the SEC.

93

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Additionally, the discount offered pursuant to the Company’s ESPP discussed above is 15%, which exceeds the
5% non-compensatory guideline in SFAS No. 123(R) and exceeds the Company’s estimated cost of raising capital.
Consequently, the entire 15% discount to employees is deemed to be compensatory for purposes of calculating
expense using a fair value method. Compensation cost related to the ESPP in the year ended December 31, 2008, the
three month period ended December 31, 2007, and the years ended September 30, 2007 and 2006 was approx-
imately $0.2 million, $0.1 million, $0.3 million and $0.2 million, respectively.

On July 24, 2007, the Company’s stockholders approved a proposal to amend the ESPP to extend the term of
the ESPP by ten years to April 30, 2018. The term of the amended ESPP commenced May 1, 2008 and continues
until April 30, 2018 subject to earlier termination by the Company’s Board of Directors.

Stock Incentive Plans — Active Plans

The Company has a 2005 Equity and Performance Incentive Plan, as amended (the “2005 Incentive Plan”),
under which shares of the Company’s common stock have been reserved for issuance to eligible employees or non-
employee directors of the Company. The 2005 Incentive Plan provides for the grant of incentive stock options,
nonqualified stock options, stock appreciation rights, restricted stock awards, performance awards and other
awards. The maximum number of shares of the Company’s common stock that may be issued or transferred in
connection with awards granted under the 2005 Incentive Plan will be the sum of (i) 5,000,000 shares and (ii) any
shares represented by outstanding options that had been granted under designated terminated stock option plans that
are subsequently forfeited, expire or are canceled without delivery of the Company’s common stock.

On July 24, 2007, the stockholders of the Company approved the First Amendment to the 2005 Incentive Plan
which increased the number of shares authorized for issuance under the plan from 3,000,000 to 5,000,000 and
contained certain other amendments, including an amendment to provide that the exercise price for any options
granted under the 2005 Incentive Plan, as amended, may not be less than the market value per share of common
stock on the date of grant.

Stock options granted pursuant to the 2005 Incentive Plan are granted at an exercise price not less than the
market value per share of the Company’s common stock on the date of the grant. Prior to the adoption of the First
Amendment to the 2005 Incentive Plan, stock options granted under the 2005 Incentive Plan were granted with an
exercise price not less than the market value per share of common stock on the date immediately preceding the date
of grant. Under the 2005 Incentive Plan, the term of the outstanding options may not exceed ten years. Vesting of
options is determined by the Compensation Committee of the Board of Directors, the administrator of the 2005
Incentive Plan, and can vary based upon the individual award agreements.

Performance awards granted pursuant to the 2005 Incentive Plan become payable upon the achievement of
specified management objectives. Each performance award specifies: (i) the number of performance shares or units
granted, (ii) the period of time established to achieve the management objectives, which may not be less than one
year from the grant date, (iii) the management objectives and a minimum acceptable level of achievement as well as
a formula for determining the number of performance shares or units earned if performance is at or above the
minimum level but short of full achievement of the management objectives, and (iv) any other terms deemed
appropriate.

Restricted stock awards granted pursuant to the 2005 Incentive Plan have requisite service periods of four years
and vest in increments of 25% on the anniversary dates of the grants. Under each arrangement, stock is issued
without direct cost to the employee.

Upon adoption of the 2005 Incentive Plan in March 2005, the Board terminated the following stock option
plans of the Company: (i) the 2002 Non-Employee Director Stock Option Plan, as amended, (ii) the MDL Amended
and Restated Employee Share Option Plan, (iii) the 2000 Non-Employee Director Stock Option Plan, (iv) the 1997
Management Stock Option Plan, (v) the 1996 Stock Option Plan; and (vi) the 1994 Stock Option Plan, as amended.

94

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Termination of these stock option plans did not affect any options outstanding under these plans immediately prior
to termination thereof.

The Company has a 1999 Stock Option Plan whereby 4,000,000 shares of the Company’s common stock have
been reserved for issuance to eligible employees of the Company and its subsidiaries. The term of the outstanding
options is ten years. The options generally vest annually over a period of three or four years.

Exchange Program

On August 1, 2001, the Company announced a voluntary stock option exchange program (the “Exchange
Program”) offering to exchange all outstanding options to purchase shares of the Company’s common stock granted
under the 1994 Stock Option Plan, 1996 Stock Option Plan and 1999 Stock Option Plan held by eligible employees
or eligible directors for new options under the same option plans by August 29, 2001. The Exchange Program
required any person tendering an option grant for exchange to also tender all subsequent option grants with a lower
exercise price received by that person during the six months immediately prior to the date the options accepted for
exchange are cancelled. Options to acquire a total of 3,089,100 shares of common stock with exercise prices ranging
from $2.50 to $45.00 were eligible to be exchanged under the Exchange Program. The offer expired on August 28,
2001, and the Company cancelled 1,946,550 shares tendered by 578 employees. As a result of the Exchange
Program, the Company granted replacement stock options to acquire 1,823,000 shares of common stock at an
exercise price of $10.04. The difference between the number of shares cancelled and the number of shares granted
relates to options cancelled by employees who terminated their employment with the Company between the
cancellation date and regrant date. With the exception of three employee grants, the exercise price of the
replacement options was the fair market value of the common stock on the grant date of the new options, which
was March 4, 2002 (a date at least six months and one day after the date of cancellation). Under APB Opinion
No. 25, non-cash, stock based compensation expense was recognized for any option for which the exercise price was
below the market price on the applicable measurement date. This expense was amortized over the service periods of
the options. For three employees, the cancellation of their awards were within the six months and one day waiting
period and were, therefore, treated as variable awards when they were reissued on March 4, 2002. Under the variable
method, charges are taken each reporting period to reflect increases in the fair value of the stock over the option
exercise price until the stock option is exercised or otherwise cancelled. The new shares had a service period of
18 months beginning on the grant date of the new options, except for options tendered by executive officers under
the 1994 Stock Option Plan, which vested 25% annually on each anniversary of the grant date of the new options.
The Exchange Program was designed to comply with FASB Interpretation No. 44, Accounting for Certain
Transactions Involving Stock Compensation, for fixed plan accounting.

Stock Incentive Plans — Terminated Plans with Options Outstanding

The Company had a 2002 Non-Employee Director Stock Option Plan that was terminated in March 2005
whereby 250,000 shares of the Company’s common stock had been reserved for issuance to eligible non-employee
directors of the Company. The term of the outstanding options is ten years. All outstanding options under this plan
are fully vested.

The Company had a 1996 Stock Option Plan that was terminated in March 2005 whereby 1,008,000 shares of
the Company’s common stock had been reserved for issuance to eligible employees of the Company and its
subsidiaries and non-employee members of the Board of Directors. The term of the outstanding options is ten years.
The options generally vest annually over a period of four years.

The Company had a 1994 Stock Option Plan that was terminated in March 2005 whereby 1,910,976 shares of
the Company’s common stock had been reserved for issuance to eligible employees of the Company and its
subsidiaries. The term of the outstanding options is ten years. The stock options vest ratably over a period of four
years.

95

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accounting for Share-Based Payments Pursuant to SFAS No. 123(R)

The Company adopted SFAS No. 123(R) as of October 1, 2005 using the modified prospective transition
method. This revised accounting standard eliminated the ability to account for share-based compensation trans-
actions using the intrinsic value method in accordance with APB Opinion No. 25, and requires instead that such
transactions be accounted for using a fair-value-based method. SFAS No. 123(R) requires entities to record noncash
compensation expense related to payment for employee services by an equity award in their financial statements
over the requisite service period. In March 2005, the SEC issued SAB 107, which does not modify any of
SFAS No. 123(R)’s conclusions or requirements, but rather includes recognition, measurement and disclosure
guidance for companies as they implement SFAS No. 123(R).

Upon adoption of SFAS No. 123(R), all of the Company’s existing share-based compensation awards were
determined to be equity classified awards. A portion of these options were reclassified to liability classification as
they cash settled during fiscal 2007, because the Company was not current with its filings with the SEC. Under the
modified prospective transition method, the Company is required to recognize noncash compensation costs for the
portion of share-based awards that are outstanding as of October 1, 2005 for which the requisite service has not been
rendered (i.e., nonvested awards). These compensation costs are based on the grant date fair value of those awards as
calculated for pro forma disclosures under SFAS No. 123. The Company is recognizing compensation costs related
to the nonvested portion of those awards in the financial statements from the SFAS No. 123(R) adoption date
through the end of the requisite service period.

A summary of stock options issued under the various Stock Incentive Plans previously described and changes

is as follows:

Weighted-
Average
Remaining
Contractual
Term
(Years)

Aggregate
Intrinsic Value
of In-the-Money
Options ($)

Number of
Shares

Outstanding, September 30, 2005 . . . . . . . . . 3,926,218
300,000
(720,471)
(46,657)

Granted . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled/Forfeited/Expired . . . . . . . . . . . .

Outstanding, September 30, 2006 . . . . . . . . . 3,459,090
901,496
(10,343)
(641,812)

Granted . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled/Forfeited/Expired . . . . . . . . . . . .

Outstanding, September 30, 2007 . . . . . . . . . 3,708,431
—
(51,160)
(66,946)

Granted . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled/Forfeited/Expired . . . . . . . . . . . .

Outstanding, December 31, 2007 . . . . . . . . . . 3,590,325
551,700
(311,640)
(402,088)

Granted . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled/Forfeited/Expired . . . . . . . . . . . .

Weighted-
Average
Exercise
Price ($)

$16.79
33.23
16.32
22.18

18.24
33.99
9.29
16.73

22.35
—
10.75
27.39

22.43
17.46
12.33
29.68

Outstanding, December 31, 2008 . . . . . . . . . . 3,428,297
Exercisable, December 31, 2008 . . . . . . . . . . 1,848,455

$21.69
$19.50

6.41
5.20

$4,633,788
$4,579,188

96

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The weighted-average grant date fair value of stock options granted during the years ended December 31, 2008
and September 30, 2007 was $9.62, and $17.41, respectively. No stock options were granted during the three month
period ended December 31, 2007. During the first six months of fiscal 2006, the Company issued new shares of
common stock for the exercise of stock options. Beginning in the third quarter of the year ended September 30,
2006, the Company issued treasury shares for the exercise of stock options. The total intrinsic value of stock options
exercised during the year ended December 31, 2008, the three months ended December 31, 2007, and the years
ended September 30, 2007 and 2006 was $1.7 million, $0.6 million $0.2 million and $12.0 million, respectively.

The fair value of options granted in the respective fiscal years was estimated on the date of grant using the
Black-Scholes option-pricing model, a pricing model acceptable under SFAS No. 123(R), with the following
weighted-average assumptions:

Year Ended
December 31,
2008

Year Ended
September 30,
2007
2006

Expected life (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.2
3.1%
54.9%
—

5.0

5.4
4.9% 4.8%
50.4% 51.0%

—

—

No stock options were granted during the three month period ended December 31, 2007.

Expected volatilities are based on the Company’s historical common stock volatility derived from historical
stock price data for historical periods commensurate with the options’ expected life. The expected life of options
granted represents the period of time that options granted are expected to be outstanding. The Company used the
simplified method for determining the expected life as permitted under SAB 110, Topic 14, Share-Based Payment.
The simplified method was used as the historical data did not provide a reasonable basis upon which to estimate the
expected term. This is due to the extended period during which individuals were unable to exercise options while the
Company was not current with its filings with the SEC. The risk-free interest rate is based on the implied yield
currently available on United States Treasury zero coupon issues with a term equal to the expected life at the date of
grant of the options. The expected dividend yield is zero as the Company has historically paid no dividends and does
not anticipate dividends to be paid in the future.

97

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the years ended September 30, 2007, 2006 and 2005, pursuant to the Company’s 2005 Incentive Plan,
the Company granted long-term incentive program performance share awards (“LTIP Performance Shares”). A
summary of nonvested LTIP Performance Shares are as follows:

Nonvested LTIP Performance Shares

Number of
Shares at
Expected
Attainment

Weighted-
Average
Grant Date
Fair Value

Nonvested at September 30, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nonvested at September 30, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in expected attainment for 2005 and 2006 grants . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nonvested at September 30, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in expected attainment for 2005 and 2006 grants . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nonvested at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in expected attainment for 2007 grants . . . . . . . . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55,500
186,000
(2,379)
(19,971)

219,150
174,947
—
(55,260)
(26,720)

312,117
—
—
(132,110)
(5,060)

174,947
—
—
(139,891)
(35,056)

$28.27
29.18
29.10
28.79

28.99
34.25
—
28.98
28.91

31.95
—
—
29.00
29.10

34.25
—
—
34.24
34.30

Nonvested at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

$ —

These LTIP Performance Shares are earned, if at all, based upon the achievement, over a specified period that
must not be less than one year and is typically a three-year period (the “Performance Period”), of performance goals
related to (i) the compound annual growth over the Performance Period in the Company’s 60-month backlog as
determined and defined by the Company, (ii) the compound annual growth over the Performance Period in the
diluted earnings per share as reported in the Company’s consolidated financial statements, and (iii) the compound
annual growth over the Performance Period in the total revenues as reported in the Company’s consolidated
financial statements. In no event will any of the LTIP Performance Shares become earned if the Company’s earnings
per share is below a predetermined minimum threshold level at the conclusion of the Performance Period. Assuming
achievement of the predetermined minimum earnings per share threshold level, up to 150% of the LTIP Perfor-
mance Shares may be earned upon achievement of performance goals equal to or exceeding the maximum target
levels for compound annual growth over the Performance Period in the Company’s 60-month backlog, diluted
earnings per share and total revenues. Management must evaluate, on a quarterly basis, the probability that the
target performance goals will be achieved, if at all, and the anticipated level of attainment in order to determine the
amount of compensation costs to record in the consolidated financial statements.

Through September 30, 2007, the Company had accrued compensation costs assuming an attainment level of
110% for the awards granted in 2005 and 2006. During the three months ended December 31, 2007, the Company
changed the expected attainment to 0% based upon revised forecasted diluted earnings per share, which the

98

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Company did not expect to achieve the predetermined earnings per share minimum threshold level required for the
LTIP Performance Shares granted in 2005 and 2006 to be earned. As the performance goals were considered
improbable of achievement, the Company reversed compensation costs related to the awards granted in 2005 and
2006 during the three months ended December 31, 2007. The Company did not achieve the predetermined earnings
per share minimum threshold level as of September 30, 2008; therefore, the LTIP Performance Shares granted in
2005 and 2006 were not earned and were not issued.

Through September 30, 2008, the Company had accrued compensation costs assuming an attainment level of
100% for the awards granted during the year ended September 30, 2007. During the three months ended
December 31, 2008, the Company changed the expected attainment to 0% based upon revised forecasted diluted
earnings per share, which the Company did not expect to achieve the predetermined earnings per share minimum
threshold level required for the LTIP Performance Shares granted in 2007 to be earned. As the performance goals
were considered improbable of achievement, the Company reversed compensation costs related to the awards
granted in fiscal 2007 during the three months ended December 31, 2008.

During the year ended December 31, 2008, pursuant to the Company’s 2005 Incentive Plan, the Company
granted restricted share awards (“RSAs”). These awards have requisite service periods of four years and vest in
increments of 25% on the anniversary dates of the grants. Under each arrangement, stock is issued without direct
cost to the employee. The Company estimates the fair value of the RSAs based upon the market price of the
Company’s stock at the date of grant. The RSA grants provide for the payment of dividends on the Company’s
common stock, if any, to the participant during the requisite service period (vesting period) and the participant has
voting rights for each share of common stock. The Company recognizes compensation expense for RSAs on a
straight-line basis over the requisite service period.

A summary of nonvested RSAs are as follows:

Nonvested Restricted Share Awards

Number of
Restricted
Share Awards

Weighted-Average Grant
Date Fair Value

Nonvested at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
471,400
—
(9,000)

Nonvested at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . .

462,400

$ —
17.95
—
17.17

$17.97

As of December 31, 2008, there were unrecognized compensation costs of $11.7 million related to nonvested
stock options and $4.8 million related to nonvested RSAs that the Company expects to recognize over weighted-
average periods of 2.4 years and 3.4 years, respectively.

Excluding the impact of the reversals of compensation expense for the LTIP Performance Shares, the Company
recorded stock-based compensation expenses recognized under SFAS No. 123(R) during the year ended Decem-
ber 31, 2008, three month period ended December 31, 2007 and years ended September 30, 2007 and 2006 related to
stock options, LTIP Performance Shares, RSAs, and the ESPP of $10.0 million, $2.1 million, $7.6 million and
$6.3 million, respectively, with corresponding tax benefits of $3.6 million, and $0.8 million, $2.9 million and
$2.2 million, respectively. Prior to the adoption of SFAS No. 123(R), tax benefits resulting from tax deductions in
excess of the compensation cost recognized for those options were classified as operating cash flows. Tax benefits in
excess of the option’s grant date fair value are now classified as financing cash flows. Estimated forfeiture rates,
stratified by employee classification, have been included as part of the Company’s calculations of compensation
costs. The Company recognizes compensation costs for stock option awards which vest with the passage of time
with only service conditions on a straight-line basis over the requisite service period.

99

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the three months ended December 31, 2007, the Company reclassified 31,393 vested options from
equity classification to liability classification, as these options were expected to cash settle subsequent to
December 31, 2007 due to the suspension of option exercises because the Company was not current with its
filings with the SEC. As a result, the Company recorded a liability of approximately $0.1 million and recorded
compensation expense of $0.1 million in the three months ended December 31, 2007. During the year ended
September 30, 2007, the Company reclassified 520,686 vested options from equity classification to liability
classification as these options cash settled during the fiscal year ended September 30, 2007, due to the suspension of
option exercises during the Company’s historic stock option review and the period the Company was not current
with its filings with the SEC. As a result, the Company incurred cash outlays of approximately $8.1 million, and
recorded compensation expense of $4.7 million in the fiscal year ended September 30, 2007, which is recorded in
general and administrative expense in the accompanying consolidated statement of operations.

14. Employee Benefit Plans

ACI 401(k) Plan

The ACI 401(k) Plan is a defined contribution plan covering all domestic employees of ACI. Participants may
contribute up to 60% of their pretax annual compensation up to a maximum of $15,500 (for employees who are
under the age of 50 on December 31, 2008) or a maximum of $20,500 (for employees aged 50 or older on
December 31, 2008). The Company matches participant contributions 160% on every dollar deferred to a maximum
of 2.5% of compensation, not to exceed $4,000 per employee annually. Company contributions charged to expense
during the year ended December 31, 2008, the three month period ended December 31, 2007 and the years ended
September 30, 2007, and 2006 were $3.0 million, $0.6 million, $2.9 million, and $2.5 million, respectively.

ACI Worldwide EMEA Group Personal Pension Scheme

The ACI Worldwide EMEA Group Personal Pension Scheme is a defined contribution plan covering
substantially all ACI Worldwide (EMEA) Limited (“ACI-EMEA”) employees. For those ACI-EMEA employees
who elect to participate in the plan, the Company contributes a minimum of 8.5% of eligible compensation to the
plan for employees employed at December 1, 2000 (up to a maximum of 15.5% for employees aged over 55 years
on December 1, 2000) or 6.0% of eligible compensation for employees employed subsequent to December 1, 2000.
ACI-EMEA contributions charged to expense during the year ended December 31, 2008, the three month period
ended December 31, 2007 and the years ended September 30, 2007 and 2006 were $1.8 million, $0.5 million,
$1.9 million, and $1.7 million, respectively.

15.

Income Taxes

For financial reporting purposes, income (loss) before income taxes includes the following components (in

thousands):

Year Ended
December 31,
2008

Three Months
Ended
December 31,
2007

Year Ended
September 30,

2007

2006

United States . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$29,276
(1,720)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$27,556

$1,527
365

$1,892

$ 17,061
(20,944)

$51,904
8,971

$ (3,883)

$60,875

100

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The provision (benefit) for income taxes consists of the following (in thousands):

Federal . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . .

Year Ended
December 31,
2008
Deferred

$ 6,712
(1,418)
2,231

Total

$ 9,721
533
6,720

Current

$3,009
1,951
4,489

Three Months Ended
December 31,
2007
Deferred

Total

Current

$5,953
376
1,959

$(4,699)
(201)
520

$1,254
175
2,479

Total . . . . . . . . . . . . . . . . . . . . . .

$9,449

$ 7,525

$16,974

$8,288

$(4,380)

$3,908

Federal . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . .

Year Ended September 30,

Current

$ 2,153
2,256
(1,861)

2007
Deferred

$2,887
(50)
(137)

Total

Current

$ 5,040
2,206
(1,998)

$3,023
837
3,120

2006
Deferred

$(2,672)
592
610

Total

$ 351
1,429
3,730

Total . . . . . . . . . . . . . . . . . . . . . .

$ 2,548

$2,700

$ 5,248

$6,980

$(1,470)

$5,510

Differences between the income tax provisions computed at the statutory federal income tax rate and per the

consolidated statements of operations are summarized as follows (in thousands):

Year Ended
December 31,
2008

Three Months
Ended
December 31,
2007

Tax expense at federal rate of 35% . . . . . . . . . .
State income taxes, net of federal benefit. . . .
Increase (decrease) in valuation allowance . . .
Foreign tax rate differential . . . . . . . . . . . . . .
Research and development credits . . . . . . . . .
Extraterritorial income exclusion . . . . . . . . . .
Manufacturing deduction . . . . . . . . . . . . . . .
Nontaxable municipal interest . . . . . . . . . . . .
Tax examination settlement, including

reduction of contingency reserves . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 9,645
241
898
7,020
(195)
—
(376)
(20)

—
(239)

$ 662
29
(83)
2,713
(49)
—
(65)
(3)

—
704

Year Ended
September 30,

2007

2006

$(1,357)
1,434
(1,845)
7,508
(195)
(70)

$ 21,306
929
(13,479)
1,724
(41)
(359)

(71)

(815)

—
(156)

(3,907)
152

Income tax provision. . . . . . . . . . . . . . . . .

$16,974

$3,908

$ 5,248

$ 5,510

101

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The deferred tax assets and liabilities result from differences in the timing of the recognition of certain income
and expense items for tax and financial accounting purposes. The sources of these differences at each balance sheet
date are as follows (in thousands):

December 31,

2008

2007

September 30,
2007

Current net deferred tax assets:

Foreign tax credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of investments . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for uncollectible accounts . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. net operating loss carryforwards . . . . . . . . . . . . . . . . .
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

— $

4,754
310
6,053
1,779
2,098
3,618
805

253
4,754
531
2,008
526
—
1,717
885

$

355
4,754
589
2,313
—
—
1,455
996

Total current deferred tax assets . . . . . . . . . . . . . . . . . . .
Less: valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . .

19,417
(2,412)

10,674
(4,850)

10,462
(3,374)

Net current deferred tax assets . . . . . . . . . . . . . . . . . . . .

$ 17,005

$ 5,824

$ 7,088

Noncurrent net deferred tax assets:
Noncurrent deferred tax assets

Foreign tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General business credits . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. net operating loss carryforwards . . . . . . . . . . . . . . .
Stock based compensation . . . . . . . . . . . . . . . . . . . . . . .
Foreign net operating loss carryforwards. . . . . . . . . . . . .
Capital loss carryforwards . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alliance deferred costs. . . . . . . . . . . . . . . . . . . . . . . . . .
FIN 48 adoption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,603
2,817
2,156
7,410
7,759
—
3,805
1,176
7,972
2,369
967

$ 13,925
4,440
5,742
4,786
7,296
241
6,623
1,103
3,407
4,069
1,036

$ 16,868
4,440
6,356
4,626
7,463
2,561
7,153
759
—
—
434

Total noncurrent deferred tax assets . . . . . . . . . . . . . .

38,034

52,668

50,660

Noncurrent deferred tax liabilities

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . .

(16,939)

(18,781)

(18,923)

Total noncurrent deferred tax liabilities . . . . . . . . . . . . . .

(16,939)

(18,781)

(18,923)

Less: valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . .

(10,287)

(6,602)

(10,687)

Net noncurrent deferred tax assets (liabilities) . . . . . . . . .

$ 10,808

$ 27,285

$ 21,050

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during the periods in which those temporary differences
become deductible. The Company considers projected future taxable income, carryback opportunities and tax
planning strategies in making this assessment. Based upon the level of historical taxable income and projections for

102

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

future taxable income over the periods which the deferred tax assets are deductible, the Company believes it is more
likely than not that it will realize the benefits of these deductible differences, net of the valuation allowances
recorded. During the year ended December 31, 2008, the Company increased its valuation allowance by $1.2 million
and decreased its valuation allowance by $2.6 million during the three month period ended December 31, 2007.

During the fourth quarter of the year ended September 30, 2007, the Company determined that it was more
likely than not that it would fully realize the deferred tax asset related to operating losses in certain foreign
jurisdictions. Consequently, the Company released $3.3 million in valuation allowance reserves in those foreign
jurisdictions.

The Company had U.S. foreign tax credit carryforwards at December 31, 2008 of $0.7 million, which will
begin to expire in 2015. The Company also had domestic general business credit carryforwards at December 31,
2008 of $2.8 million relating to the pre-acquisition periods of acquired companies, which will begin to expire in
2022. Approximately $0.1 million of these credits are alternative minimum tax (“AMT”) credits which have an
indefinite carryforward life.

At December 31, 2008, the Company had tax credits associated with various foreign subsidiaries of

$0.9 million. The Company has provided a $0.6 million valuation allowance related to these tax credits.

The Company had domestic net operating loss carryforwards (“NOLs”) for tax purposes of $10.3 million at
December 31, 2008. Of this amount, $10.0 million are related to the pre-acquisition periods of acquired companies,
which begin to expire in 2020.

At December 31, 2008, the Company had foreign tax NOLs of $28.0 million, of which $13.1 million may be
utilized over an indefinite life, with the remainder expiring over the next 15 years. The Company has provided a
$5.6 million valuation allowance against the tax benefit associated with these NOLs.

As of December 31, 2008 all of the Company’s capital loss carryforwards had expired. Accordingly, both the
deferred tax asset and valuation allowance related to the expired losses were reversed. The Company had foreign
capital loss carryforwards for tax purposes of $0.4 million for which a full valuation allowance has been provided.
These losses are available indefinitely to offset future capital gains.

The Internal Revenue Service (“IRS”) began an audit of the Company’s US tax return for the fiscal years
September 30, 2005 and 2006. One significant foreign subsidiary is 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 the Company’s tax positions. The Company believes its tax positions
comply with applicable tax law and intends to vigorously defend its positions. However, differing positions on
certain issues could be upheld by tax authorities, which could adversely affect the Company’s financial condition
and results of operations.

The undistributed earnings of the Company’s foreign subsidiaries of approximately $42.3 million are
considered to be indefinitely reinvested. Accordingly, no provision for U.S. federal and state income taxes or
foreign withholding taxes has been provided for such undistributed earnings.

During the year ended September 30, 2006, the Company reached an agreement with the IRS to settle open
audit issues related to years 1997 through 2003, resulting in a refund to the Company. The amount of the refund was
$8.9 million. The refund and corresponding interest were dependent on the Company’s claims being approved by
the Joint Committee on Taxation (the “Joint Committee”). In November 2005, the Company was notified that the
Joint Committee approved the conclusions reached by the IRS with respect to the audit of the Company’s 1997
through 2003 tax years. During the year ended September 30, 2006, the Company received and recorded the effects
of the refund in its consolidated financial statements, including interest of $1.9 million and entries to relieve related
tax contingency reserves and other accruals relating to the audit in the amount of $3.9 million.

103

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company adopted the provisions of FIN 48 and FSP FIN 48-1 effective October 1, 2007. FIN 48 prescribes
a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or
expected to be taken in a tax return and also provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition.

As a result of the implementation of FIN 48, the Company recognized a decrease to retained earnings of

$3.3 million, which included at October 1, 2007 an increase of $2.7 million in net unrecognized tax benefits.

The unrecognized tax benefit at December 31, 2008 was $11.5 million, all of which is included in other
noncurrent liabilities in the consolidated balance sheet. Of this amount, $9.0 million represents the net unrecog-
nized tax benefits that, if recognized, would favorably impact the effective income tax rate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Balance of unrecognized tax benefits at December 31, 2007. . . . . . . . . . . . . . . . . . . . .
Increases for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases for tax positions established for the current period . . . . . . . . . . . . . . . . . . .
Decreases for settlements with taxing authorities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions resulting from lapse of applicable statute of limitation . . . . . . . . . . . . . .
Adjustment resulting from foreign currency translation . . . . . . . . . . . . . . . . . . . . . . .

Unrecognized
Tax Benefit

$14,971
324
(3,621)
1,209
(823)
(174)
(351)

Balance of unrecognized tax benefits at December 31, 2008. . . . . . . . . . . . . . . . . . . . .

$11,535

The above table reflects the movements in the unrecognized tax benefits for the 12 months ended December 31,
2008. The activity in the unrecognized tax benefits for the three-month period from adoption of FIN 48 through
December 31, 2007 was immaterial and, therefore, is not presented in the above table.

The Company files income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, and
many foreign jurisdictions. The U.S., United Kingdom and Canada are the main taxing jurisdictions in which the
Company operates. The years open for audit vary depending on the tax jurisdiction. In the U.S., the Company’s tax
returns for years following fiscal year 2003 are open for audit. In the United Kingdom, the Company’s tax returns
for the years following 2002 are open for audit, while in Canada, the Company’s tax returns for years following
2001 are open for audit.

The Internal Revenue Service is currently auditing the Company’s fiscal year 2005 and 2006 income tax
returns. The Company’s Canadian income tax returns covering fiscal years 2002 through 2005 are under audit by
the Canada Revenue Agency. The Company believes it is reasonably possible that the total amount of unrecognized
tax benefits will decrease within the next 12 months by approximately $1.8 million due to the expiration of statutes
of limitations and the settlement of various audits.

The Company accrues interest related to uncertain tax positions in interest expense or interest income and
recognizes penalties related to uncertain tax positions in other income or other expense. As of December 31, 2008,
$1.5 million is accrued for the payment of interest and penalties related to income tax liabilities.

16. Assets of Businesses Transferred Under Contractual Arrangements

On September 29, 2006, the Company entered into an agreement whereby certain assets and liabilities related
to the Company’s MessagingDirect business and WorkPoint product line were legally conveyed to an unrelated
party for a total selling price of $3.0 million. Net assets with a book value of $0.1 million were legally transferred

104

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

under the agreement. At September 30, 2006, the Company had $1.3 million of assets related to this transfer
recorded in other current assets, and $1.2 million of liabilities recorded in other current liabilities.

An initial payment of $0.5 million was due at signing and was paid in October of 2006. The remaining
$2.5 million is to be paid in installments through 2010. In accordance with the terms of the Asset Purchase
Agreement, the Company had certain obligations to fulfill on behalf of the buyer. Among other things, the Company
was obligated to provide continuing support for certain customers of the aforementioned product lines by furnishing
a certain level of staffing to provide the support as well as administrative services for a period after the transaction.
The Company was reimbursed for such services at a rate equal to cost plus five percent. Additionally, the Company
will remain a reseller of these products for royalty fee of 50% of revenues generated from sales. Subsequent to the
close of the transaction, the Company signed a termination agreement for the Edmonton, Canada office lease and all
further obligations effective March 31, 2007. The buyer was required to obtain facilities at another location and
vacate the current premises on or before the termination date.

Based on the continuing relationship and involvement subsequent to the closing date, uncertainty regarding
collectability of the note receivable, as well as the level of financing provided by the Company, the above
transaction was not accounted for as a divestiture for accounting purposes. The accounting treatment for this type of
transaction is outlined in SEC Staff Accounting Bulletin Topic 5E. Under this accounting treatment, the assets and
liabilities to be divested are classified in other current assets and accrued other liabilities within the Company’s
consolidated balance sheet. Under that guidance, the Company expected to recognize a gain of $2.5 million in
future periods as payments are received. These future payments will be recognized as gains in the period in which
they are recovered, once the net assets have been written down to zero. In October 2006 and October 2007, the
Company collected $0.5 million of cash pursuant to the contractual arrangements and recognized a pretax gain of
$0.4 million in each period. The remaining $0.1 million was recorded as interest income. During the year ended
December 31, 2008, the Company offset $0.3 million in invoices payable to the unrelated party against payments
due and recognized a pretax gain of $0.2 million. The remaining $0.1 million was recorded as interest income.

17. Commitments and Contingencies

In accordance with FASB Interpretation (“FIN”) No. 45, Guarantor’s Accounting and Disclosure Require-
ments for Guarantees, Including Indirect Guarantees of Indebtedness of Others (“FIN No. 45”), the Company
recognizes the fair value for guarantee and indemnification arrangements it issues or modifies, if these arrange-
ments are within the scope of the interpretation. In addition, the Company must continue to monitor the conditions
that are subject to the guarantees and indemnifications as required under the previously existing generally accepted
accounting principles, in order to identify if a loss has occurred. If the Company determines it is probable that a loss
has occurred, then any such estimable loss would be recognized under those guarantees and indemnifications.
Under its customer agreements, the Company may agree to indemnify, defend and hold harmless its customers from
and against certain losses, damages and costs arising from claims alleging that the use of its software infringes the
intellectual property of a third party. Historically, the Company has not been required to pay material amounts in
connection with claims asserted under these provisions and accordingly, the Company has not recorded a liability
relating to such provisions.

Under its customer agreements, the Company also may represent and warrant to customers that its software
will operate substantially in conformance with its documentation and that the services the Company performs will
be performed in a workmanlike manner, by personnel reasonably qualified by experience and expertise to perform
their assigned tasks. Historically, only minimal costs have been incurred relating to the satisfaction of warranty
claims. In addition, from time to time, the Company may guarantee the performance of a contract on behalf of one
or more of its subsidiaries, or a subsidiary may guarantee the performance of a contract on behalf of another
subsidiary.

Other guarantees include promises to indemnify, defend and hold harmless the Company’s executive officers,
directors and certain other key officers. The Company’s certificate of incorporation provides that it will indemnify,

105

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and advance expenses to, its directors and officers to the maximum extent permitted by Delaware law. The
indemnification covers any expenses and liabilities reasonably incurred by a person, by reason of the fact that such
person is or was or has agreed to be a director or officer, in connection with the investigation, defense and settlement
of any threatened, pending or completed action, suit, proceeding or claim. The Company’s certificate of incor-
poration authorizes the use of indemnification agreements and the Company enters into such agreements with its
directors and certain officers from time to time. These indemnification agreements typically provide for a broader
scope of the Company’s obligation to indemnify the directors and officers than set forth in the certificate of
incorporation. The Company’s contractual indemnification obligations under these agreements are in addition to
the respective directors’ and officers’ rights under the certificate of incorporation or under Delaware law.

Operating Leases

The Company leases office space and equipment under operating leases that run through February 2028. The
leases that the Company has entered into do not impose restrictions as to the Company’s ability to pay dividends or
borrow funds, or otherwise restrict the Company’s ability to conduct business. On a limited basis, certain of the
lease arrangements include escalation clauses which provide for rent adjustments due to inflation changes with the
expense recognized on a straight-line basis over the term of the lease. Lease payments subject to inflation
adjustments do not represent a significant portion of the Company’s future minimum lease payments. A number of
the leases provide renewal options, but in all cases such renewal options are at the election of the Company. Certain
of the lease agreements provide the Company with the option to purchase the leased equipment at its fair market
value at the conclusion of the lease term.

Total rent expense for the year ended December 31, 2008, three month period ended December 31, 2007, and
years ended September 30, 2007 and 2006 was $18.7 million, $5.2 million, $15.4 million, and $11.4 million,
respectively.

Capital Leases

The Company leases certain property under capital lease agreements that expire during various years through
2012. The long term portion of capital leases is included in long term liabilities. Amortization expense of assets
under capital lease is included in depreciation expense.

Aggregate minimum lease payments under these agreements in future fiscal years are as follows (in

thousands):

Fiscal Year Ending December 31,

Capital
Leases(1)

Operating
Leases

2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,423
499
396
235
—
—

$ 9,721
7,880
6,081
4,917
2,266
36,683

Total

$11,144
8,379
6,477
5,152
2,266
36,683

Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . .

$2,553

$67,548

$70,101

Amount representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . .

(237)

Present value of minimum lease payments . . . . . . . . . . . . . . . . . . .

$2,316

(1) Reflected in the balance sheet as accrued and other current and other noncurrent liabilities of $1.3 million and

$1.0 million, respectively.

106

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Legal Proceedings

From time to time, the Company is involved in various litigation matters arising in the ordinary course of its
business. Other than as described below, the Company is not currently a party to any legal proceedings, the adverse
outcome of which, individually or in the aggregate, the Company believes would be likely to have a material
adverse effect on the Company’s financial condition or results of operations.

Class Action Litigation.

In November 2002, two class action complaints were filed in the U.S. District Court
for the District of Nebraska (the “Court”) against the Company and certain former officers alleging violations of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Pursuant to a Court
order, the two complaints were consolidated as Desert Orchid Partners v. Transaction Systems Architects, Inc., et
al., with Genesee County Employees’ Retirement System designated as lead plaintiff. The complaints, as amended,
sought unspecified damages, interest, fees, and costs and alleged that (i) during the purported class period, the
Company and the former officers misrepresented the Company’s historical financial condition, results of operations
and its future prospects, and failed to disclose facts that could have indicated an impending decline in the
Company’s revenues, and (ii) prior to August 2002, the purported truth regarding the Company’s financial condition
had not been disclosed to the market while simultaneously alleging that the purported truth about the Company’s
financial condition was being disclosed throughout that time, commencing in April 1999. The Company and the
individual defendants filed a motion to dismiss and the lead plaintiff opposed the motion. Prior to any ruling on the
motion to dismiss, on November 7, 2006, the parties entered into a Stipulation of Settlement for purposes of settling
all of the claims in the Class Action Litigation, with no admissions of wrongdoing by the Company or any individual
defendant. The settlement provides for an aggregate cash payment of $24.5 million of which, net of insurance, the
Company contributed approximately $8.5 million. The settlement was approved by the Court on March 2, 2007 and
the Court ordered the case dismissed with prejudice against the Company and the individual defendants.

On March 27, 2007, James J. Hayes, a class member, filed a notice of appeal with the United States Court of
Appeals for the Eighth Circuit appealing the Court’s order. On August 13, 2008, the Court of Appeals affirmed the
judgment of the district court dismissing the case. Thereafter, Mr. Hays petitioned the Court of Appeals for a
rehearing en banc, which petition was denied on September 22, 2008. On January 23, 2009 the Company was
informed that Mr. Hayes filed a petition with the U.S. Supreme Court seeking a writ of certiorari which was
docketed on February 20, 2009.

18.

International Business Machines Corporation Alliance

On December 16, 2007, the Company entered into an Alliance Agreement (“Alliance”) with International
Business Machines Corporation (“IBM”) relating to joint marketing and optimization of the Company’s electronic
payments application software and IBM’s middleware and hardware platforms, tools and services. On March 17,
2008, the Company and IBM entered into Amendment No. 1 to the Alliance (“Amendment No. 1” and included
hereafter in all references to the “Alliance”), which changed the timing of certain payments to be made by IBM.
Under the terms of the Alliance, each party will retain ownership of its respective intellectual property and will
independently determine product offering pricing to customers. In connection with the formation of the Alliance,
the Company granted warrants to IBM to purchase up to 1,427,035 shares of the Company’s common stock at a
price of $27.50 per share and up to 1,427,035 shares of the Company’s common stock at a price of $33.00 per share.
The warrants are exercisable for five years. At the date of issuance, the Company utilized a valuation model
prepared by a third-party to estimate fair value of the common stock warrants.

Under the terms of the Alliance, on December 16, 2007, IBM paid the Company an initial non-refundable
payment of $33.3 million in consideration for the estimated fair value of the warrants described above. The fair
value of the warrants granted, as subsequently determined by an independent third party appraiser, is approximately
$24.0 million and is recorded as common stock warrants in the accompanying consolidated balance sheet as of
December 31, 2008 and 2007. The remaining balance of $9.3 million is related to prepaid incentives and other

107

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

obligations and is recorded in the Alliance agreement liability in the accompanying consolidated balance sheet as of
December 31, 2007.

During the year ended December 31, 2008, the Company received an additional payment from IBM of
$37.3 million per Amendment No. 1. This payment has been recorded in the Alliance agreement liability in the
accompanying consolidated balance sheet as of December 31, 2008. This amount represents a prepayment of
funding for technical enablement milestones and incentive payments to be earned under the Alliance and related
agreements and, accordingly, a portion of this payment is subject to refund by the Company to IBM under certain
circumstances. As of December 31, 2008, $20.7 million is refundable subject to achievement of future milestones.

The future costs incurred by the Company related to internally developed software associated with the
technical enablement milestones will be capitalized in accordance with SFAS No. 86, Accounting for Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed (“SFAS 86”), when the resulting product reaches
technological feasibility. Prior to reaching technological feasibility, the costs will be expensed as incurred. The
Company will receive partial reimbursement from IBM for expenditures incurred if certain technical enablement
milestones and delivery dates specified in the Alliance are met. Reimbursements from IBM for expenditures
determined to be direct and incremental to satisfying the technical enablement milestones will be used to offset the
amounts expensed or capitalized as described above but not in excess of non-refundable cash received or receivable.
During the year ended December 31, 2008, the Company incurred $8.2 million of costs related to fulfillment of the
technical enablement milestones. The reimbursement of these costs was recorded as a reduction of the Alliance
agreement liability and a reduction in capitalizable costs under SFAS 86 in the accompanying consolidated balance
sheet as of December 31, 2008, and a reduction of operating expenses in the accompanying consolidated statement
of operations for the year ended December 31, 2008.

Also, during the year ended December 31, 2008, the Company reached certain technical enablement

milestones for which approximately $5.1 million has been collected as of December 31, 2008.

Changes in the Alliance agreement liability were as follows (in thousands):

Balance, September 30, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IBM payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance, December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IBM payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technical enablement milestones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs related to fulfillment of technical enablement milestones . . . . . . . . . . . . . . . . . . . .

Alliance
Agreement
Liability

$

—
33,334
(24,003)

9,331
37,333
5,100
(8,242)

Balance, December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 43,522

Of the $43.5 million Alliance agreement liability, $6.2 million is short-term and $37.3 million is long-term in

the accompanying consolidated balance sheet as of December 31, 2008.

IBM will pay the Company additional amounts upon meeting certain prescribed technical enablement
obligations and incentives payable upon IBM recognizing revenue from end-user customers as a result of the
Alliance. The revenue related to the incentive payments will be deferred until the Company has reached substantial
completion of the technical enablement milestones. Subsequent to reaching substantial completion, revenue will be
recognized as sales incentives are earned.

The stated initial term of the Alliance is five years, subject to extension for successive two year terms if not

previously terminated by either party and subject to earlier termination for cause.

108

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

19.

International Business Machines Corporation Information Technology Outsourcing Agreement

On March 17, 2008, the Company entered into a Master Services Agreement (“Outsourcing Agreement”) with
IBM to outsource the Company’s internal information technology (“IT”) environment to IBM. Under the terms of
the Outsourcing Agreement, IBM provides the Company with global IT infrastructure services including the
following services, which services were provided by the Company: cross functional delivery management services,
asset management services, help desk services, end user services, server system management services, storage
management services, data network services, enterprise security management services and disaster recovery/
business continuity plans (collectively, the “IT Services”). The Company retains responsibility for its security
policy management and on-demand business operations.

The initial term of the Outsourcing Agreement is seven years, commencing on March 17, 2008. The Company
has the right to extend the Outsourcing Agreement for one additional one-year term unless otherwise terminated in
accordance with the terms of the Outsourcing Agreement. Under the Outsourcing Agreement, the Company retains
the right to terminate the agreement both for cause and for its convenience. However, upon any termination of the
Outsourcing Agreement by the Company for any reason (other than for material breach by IBM), the Company will
be required to pay a termination charge to IBM, which charge may be material.

The Company pays IBM for the IT Services through a combination of fixed and variable charges, with the
variable charges fluctuating based on the Company’s actual need for such services as well as the applicable service
levels and statements of work. Based on the currently projected usage of these IT Services, the Company expects to
pay $116 million to IBM in service fees and project costs over the initial seven-year term.

In addition, IBM is providing the Company with certain transition services required to transition the
Company’s IT operations embodied in the IT Services in accordance with a mutually agreed upon transition plan
(the “Transition Services”). The Company currently expects the Transition Services to be completed approximately
18 months after the effective date of the Outsourcing Agreement and to pay IBM approximately $8 million for the
Transition Services over a period of five years. These Transition Services will be recognized as incurred based on
the capital or expense nature of the cost. The Company has expensed approximately $6.6 million for Transition
Services during the year ended December 31, 2008, that are included in general and administrative expenses in the
accompanying consolidated statement of operations. Of the $6.6 million recognized, approximately $1.0 million
has been paid, approximately $4.0 million is included in other noncurrent liabilities and $1.4 million is included in
other liabilities in the accompanying consolidated balance sheet at December 31, 2008. The Company incurred an
additional $0.9 million of staff augmentation costs related to the Transition Services during the year ended
December 31, 2008 that are included in general and administrative expenses in the accompanying consolidated
statement of operations.

The Outsourcing Agreement has performance standards and minimum services levels that IBM must meet or
exceed. If IBM fails to meet a given performance standard, the Company would, in certain circumstances, receive a
credit against the charges otherwise due.

Additionally, the Company has the right to periodically perform benchmark studies to determine whether
IBM’s price and performance are consistent with the then current market. The Company has the right to conduct
such benchmark studies, at its cost, beginning in the second year of the Outsourcing Agreement.

As a result of the Outsourcing Agreement, 16 employees of the Company became employees of IBM and an
additional 62 positions were eliminated by the Company. During the year ended December 31, 2008, $1.8 million of
termination costs were recognized in general and administrative expense in the accompanying consolidated
statements of operations. The charges, by segment, were as follows: $1.5 million in the Americas segment,
$0.1 million in the EMEA segment, and $0.2 million in the Asia Pacific segment.

109

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Balance, December 31, 2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional restructuring charges incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts paid during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Termination
Benefits

$ —
1,836
(1,192)
(179)

Balance, December 31, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

465

Other includes the impact of foreign currency translation.

As of December 31, 2008, $0.5 million is accrued in accrued employee compensation for these termination
costs in the accompanying consolidated balance sheet. The Company anticipates that these amounts will be paid by
the end of fiscal 2009.

20. Quarterly Financial Data

Quarter Ended

December 31,
2008
(Unaudited)

September 30,
2008
(Unaudited)

June 30,
2008
(Unaudited)

March 31,
2008
(Unaudited)

Revenues:
Software license fees. . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance fees . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 46,797
31,748
30,666

$ 46,460
33,963
28,137

$ 38,214
32,867
38,138

$37,739
31,437
21,487

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .

109,211

108,560

109,219

90,663

Expenses:
Cost of software license fees . . . . . . . . . . . . . . . . . . .
Cost of maintenance and services . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Research and development
Selling and marketing . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . .

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating income (loss). . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other income (expense) . . . . . . . . . . . . . . . .

Income (loss) before income taxes . . . . . . . . . . . . . .
Income tax expense. . . . . . . . . . . . . . . . . . . . . . . . . .

9,291
26,891
9,256
15,990
28,211

89,639

19,572

678
(1,460)
5,172

4,390

23,962
11,024

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 12,938

$

1,717

Earnings (loss) per share

Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

0.38
0.37

$
$

0.05
0.05

110

11,739
33,544
11,393
18,547
30,379

11,966
36,044
12,694
22,741
24,515

105,602

107,960

12,491
28,265
12,553
16,750
22,680

92,739

2,958

1,259

(2,076)

635
(1,149)
932

418

3,376
1,659

703
(1,038)
2,333

1,998

3,257
2,429

593
(1,366)
(190)

(963)

(3,039)
1,862

$

$
$

828

$ (4,901)

0.02
0.02

$ (0.14)
$ (0.14)

ACI WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Quarter Ended

September 30,
2007
(Unaudited)

June 30,
2007
(Unaudited)

March 31,
2007
(Unaudited)

December 31,
2006
(Unaudited)

Revenues:
Software license fees. . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance fees . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 28,856
31,316
24,700

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .

84,872

$40,920
31,287
25,902

98,109

$38,524
29,901
21,523

89,948

$41,185
28,729
23,375

93,289

Expenses:
Cost of software license fees . . . . . . . . . . . . . . . . . . .
Cost of maintenance and services . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Research and development
Selling and marketing . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . .

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating income (loss). . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other income (expense) . . . . . . . . . . . . . . . .

Income (loss) before income taxes . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . .

10,901
24,318
14,640
18,437
24,215

92,511

(7,639)

1,243
(2,156)
(1,577)

(2,490)

(10,129)
(1,514)

9,932
26,789
13,422
16,894
26,190

93,227

4,882

940
(1,431)
(1,533)

(2,024)

2,858
5,581

11,193
23,351
12,041
16,799
26,353

89,737

211

1,014
(1,597)
(337)

(920)

(709)
(295)

10,211
24,147
11,985
18,150
23,831

88,324

4,965

885
(1,460)
(293)

(868)

4,097
1,476

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (8,615)

$ (2,723)

$ (414)

$ 2,621

Earnings (loss) per share

Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (0.24)
$ (0.24)

$ (0.07)
$ (0.07)

$ (0.01)
$ (0.01)

$ 0.07
$ 0.07

(1) Other, net for the fourth quarter of the year ended September 30, 2007, includes $2.1 million in expense related
to recording the liability for the fair value on two interest rate swaps. See Note 7, “Derivative Instruments and
Hedging Activities”, for additional details.

111

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has

duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

ACI WORLDWIDE, INC.
(Registrant)

Date: March 3, 2009

By:

/s/ PHILIP G. HEASLEY
Philip G. Heasley
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the

following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name

Title

Date

/s/ PHILIP G. HEASLEY
Philip G. Heasley

/s/ SCOTT W. BEHRENS
Scott W. Behrens

/s/ HARLAN F. SEYMOUR
Harlan F. Seymour

/s/ ALFRED R. BERKELEY
Alfred R. Berkeley

/s/

/s/

JAN H. SUWINSKI
Jan H. Suwinski

JOHN D. CURTIS
John D. Curtis

/s/

JOHN M. SHAY JR.
John M. Shay Jr.

/s/

JAMES C. MCGRODDY
James C. McGroddy

/s/

JOHN E. STOKELY
John E. Stokely

President, Chief Executive Officer and
Director
(principal executive officer)

Senior Vice President, Chief Financial
Officer and Chief Accounting Officer
(principal financial officer)

March 3, 2009

March 3, 2009

Chairman of the Board and Director

March 3, 2009

Director

March 3, 2009

Director

March 3, 2009

Director

March 3, 2009

Director

March 3, 2009

Director

March 3, 2009

Director

March 3, 2009

112

(This page intentionally left blank)

(This page intentionally left blank)

BOARD OF DIRECTORS
Harlan F. Seymour
Chairman of the Board, ACI Worldwide, Inc
Principal, HFS LLC

PRINCIPAL OFFICES
Corporate Headquarters
ACI Worldwide, Inc. United States – New York

–

Offices

Philip G. Heasley
President and Chief Executive Officer
ACI Worldwide, Inc

Alfred R. Berkeley, III
Chairman and Chief Executive Officer,
Pipeline Trading Systems

John D. Curtis
Attorney

Argentina

India

Romania

Australia

Ireland

Russia

Bahrain

Brazil

Italy 

Japan 

Singapore

S. Africa

Canada 

Korea 

Spain

James  McGroddy
Former Senior Vice President, IBM

John M. Shay, Jr.
Former Partner, Ernst & Young LLP

China 

France 

Malaysia 

U. A. E.

Mexico 

U.K.

Germany 

Netherlands 

U.S.A.

John E. Stokely
President, JES, Inc. LLC

Jan H. Suwinski
Professor, Cornell University

Greece 

Philippines

INVESTOR INFORMATION
Copies of ACI Worldwide, Inc.’s Annual Report on (cid:41)orm 10-K for the year ended
(cid:39)e(cid:70)ember 3(cid:20), 2008, as filed with the  Securities and Exchange Commission
will be sent, free of charge, to stockholders upon written request to:

Investor Relations Department
ACI Worldwide, Inc.
120 Broadway, Suite 3350
New York, New York 10271 

Transfer Agent
Communications regarding change of address, transfer of stock ownership or lost stock
(cid:70)ertificates should be directed to:

Wells Fargo Shareowner Services 
161 North Concord Exchange 
South St, Paul, Minnesota 55075

Stock Listing
The company’s common stock trades on the NASDAQ Global Select Market
symbol ACIW

®

 under the

Independent Public Accountants
KPMG LLP
Two Central Park Plaza
Suite 1501 Omaha, Nebraska 68102

ACI Worldwide, Inc.
120 BROADWAY
SUITE 3350
NEW YORK, NEW YORK 10271
WWW.ACIWORLDWIDE.COM