2016 ANNUAL REPORT ENABLING REAL-TIME ELECTRONIC PAYMENTS FOR ANYONE, ANYWHERE, AT ANY TIME The payments landscape is moving to real time, and ACI is leading the way. Our unique Universal Payments® (UP®) software powers global eCommerce by equipping financial institutions, intermediaries and merchants with the ability to deliver real-time, any-to-any payments that are reliable, efficient and highly secure. Available through ACI’s private cloud or managed on customers’ premises, UP solutions offer access to more payment endpoints and services than any other provider — enabling our customers to create the innovative products and services needed to stand out in today’s competitive market. 2016 marked an important year in the continued buildout of UP solutions for customers both in the cloud and on premise, with ACI answering the call for innovation across eCommerce, immediate payments, retail payments, transaction banking, bill payments and more.” Philip G. Heasley President and Chief Executive Officer FELLOW STAKEHOLDERS Decisions (ReD) and the 2015 acquisition of PAY.ON. This solution helps merchants overcome the challenges Electronic payment systems are the backbone of global of accepting locally-preferred payment methods as well commerce. These systems must function very quickly, as cross-border payments processing with integrated seamlessly, securely and reliably without regard to where fraud management. Since the launch, the solution has a transaction is initiated or completed. won numerous industry awards and seen rapid adoption throughout the world. Universal connectivity ACI’s Universal Payments (UP) solutions deliver the Milestone year for UP Retail Payments™ universal connectivity needed to make real-time electronic solution adoption payments possible by anyone, anywhere, at any time. In 2016, ACI achieved significant momentum among 2016 marked an important year in the continued buildout financial institutions, with 46 customers — including three of UP solutions for customers both in the cloud and on new customers — adopting the UP Retail Payments™ premise, with ACI answering the call for innovation across solution. This solution helps banks transform at their own eCommerce, immediate payments, retail payments, pace by providing a bridge between current systems and transaction banking, bill payments and more. Unrivaled in next-generation needs. Customers can leverage existing the industry, ACI’s UP capabilities provide access to more investments in BASE24® while using the UP Framework™ payment endpoints and services than any other provider. and UP BASE24-eps® to add new payment types and Financial growth expand payment volumes. With improved margins, faster time to market and reduced complexity, UP Retail 2016 represented another strong year financially. With Payments helps financial institutions drive consistency increased demand across all solution segments, ACI across all channels and enhance the customer experience. delivered new bookings growth of 6% and total bookings growth of 16%, which increased our five-year backlog Immediate payments take hold globally by $126 million to $4 billion. Year-over-year revenues The payments landscape is moving to a real-time continued to grow, increasing 4% over 2015. The majority paradigm. The speed of technology, regulatory change and of our revenue is recurring due to our highly attractive new, alternative entrants are challenging payment norms software model, which is comprised of SaaS and and creating an open, more innovative environment. ACI’s subscription contracts. (These amounts are adjusted for track record for successfully implementing immediate foreign currency fluctuations and the Community Financial payments solutions spans nearly ten years and has Services (CFS) divestiture.) In early 2016, we divested our positioned the company as a proven expert in this area. In CFS unit for $200 million in cash. We used the funds to 2016 and early 2017, our UP Immediate Payments™ solution repurchase $60 million in stock, which more than offset was chosen by several major customers, including Jack the earnings per share dilution of the divestiture. Over the Henry & Associates (U.S.), Rabobank (Netherlands), Turkish course of the year, we reduced our debt balance by Bank (U.K.), TransferWise (U.K.) and Westpac (Australia). $185 million. We also established a global partnership with VocaLink Fast-growing cloud opportunity (U.K.). The possibilities for new innovation and business expansion are accelerating as ACI solutions help providers Merchants, as well as many banks, increasingly prefer offer new, real-time products and services that meet private cloud delivery of payment solutions versus market demands. managing a payments system on their premises. This lowers their risk, reduces complexity and shortens time Looking ahead to 2017 to market. In response to European demand, in 2016 Our 2016 customer, technology and financial ACI opened a new data center in Limerick, Ireland. This accomplishments are a source of great pride, and we state-of-the-art facility offers the utmost in cyber security, feel invigorated by the even brighter future that lies data privacy and scalability to run mission-critical payment ahead for ACI. systems. With cloud deployments representing roughly 40% of our business and growing fast, ACI’s data center Thank you to our dedicated employees, our supportive investments in Limerick and in the U.S. aim to accelerate customers and partners, and our committed shareholders. adoption of cloud-based solutions for customers around We look forward to an exciting 2017 ahead. the world. eCommerce solution helps merchants drive borderless payments In 2016, ACI unveiled the UP eCommerce Payments™ solution — the realization of ACI’s eCommerce strategy — made possible through the 2014 acquisition of Retail Philip G. Heasley ?aTbXST]cP]S2WXTU4gTRdcXeT>ŢRTa More than 5,100 organizations in 80+ countries rely on ACI to execute $14 trillion in payments and securities each day. 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, 2016 Commission File Number 0-25346 ACI WORLDWIDE, INC. (Exact name of registrant as specified in its charter) Delaware 47-0772104 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3520 Kraft Rd, Suite 300 Naples, FL 34105 (Address of principal executive offices, including zip code) (239) 403-4600 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Common Stock, $.005 par value, NASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ‘ No È 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 ‘ No È 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 È No ‘ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes È No ‘ 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 Act. (Check one): Large accelerated filer È Accelerated filer ‘ Non-accelerated filer ‘ Smaller reporting company ‘ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È The aggregate market value of the Company’s voting common stock held by non-affiliates on June 30, 2016 (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 $19.51 was $1,708,864,375. 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 and are excluded from the calculation. As of February 24, 2017, there were 117,305,774 shares of the registrant’s common stock outstanding. Documents Incorporated by Reference – Portions of the registrant’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on June 14, 2017, are incorporated by reference in Part III of this report. This registrant’s Proxy Statement will be filed with the Securities and Exchange Commission pursuant to Regulation 14A. TABLE OF CONTENTS Page PART I Item 1. Business 4 Item 1A. Risk Factors 19 Item 1B. Unresolved Staff Comments 30 Item 2. Properties 30 Item 3. Legal Proceedings 31 Item 4. Mine Safety Disclosures 31 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 32 Item 6. Selected Financial Data 34 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35 Item 7A.