Principles of Consolidation. Our Financial Statements include all of our accounts and our subsidiaries’ accounts. All material intercompany accounts and transactions have been eliminated.

Translation of Foreign Currency. Our foreign subsidiaries use the local currency of the countries in which they operate as their functional currency. Their assets and liabilities are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. Revenues, expenses, and cash flows are translated at the average rates of exchange prevailing during the period. Foreign currency translation adjustments are included in comprehensive income in stockholders’ equity. Foreign currency transaction gains and losses are included in the determination of net income.

Use of Estimates in Preparation of Our Financial Statements. The preparation of our Financial Statements 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 our Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The more critical estimates and related assumptions that affect our financial position and results of operations are in the areas of: (i) revenue recognition; (ii) impairment assessments of long-lived assets; (iii) income taxes; and (iv) loss contingencies.

Revenue Recognition. We adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) as of January 1, 2018 using the cumulative effect method and recorded a cumulative adjustment increasing beginning retained earnings (net of tax) by approximately $7 million, primarily related to contracts that we were previously required to defer revenue as we did not have vendor specific objective evidence of fair value for certain undelivered elements. Since we adopted ASC 606 using the cumulative effect method, comparative information in our Financial Statements for the year ended December 31, 2017 has not been adjusted and continues to be as previously reported. The adoption of ASC 606 did not have a material impact to our Income Statements in any period presented. The adoption of ASC 606 resulted in a change in the presentation of investments in client contracts in our Cash Flows. Previous to the adoption, investments in client contracts were included in cash flows from investing activities. Investments in client contracts for the years ended December 31, 2019 and 2018 are included in cash flows from operating activities.

Our revenue from client contracts is primarily related to our cloud and related solutions and, to a lesser degree, software and service and related maintenance arrangements, and is measured based on consideration specified within each of our contracts, excluding sales incentives and amounts collected on behalf of third parties, if any. We account for various products and services separately if they are distinct performance obligations. A product or service, or group of products or services, is a distinct performance obligation if it is separately identifiable from other items in the context of the contract and if our client can benefit from the product or service on their own or with other resources that are readily available to that client. We recognize revenue when we satisfy our performance obligations by transferring control of a particular product or service, or group of products or services, to our clients, as described in more detail below. Taxes assessed on our products and services based on governmental authorities at the time of invoicing are excluded from our revenues.

Our cloud and related solutions revenues relate to: (i) our software-as-a-service (“SaaS”), revenue management solutions, and various related ancillary services; (ii) our managed services offering in which we operate software solutions (primarily our software solutions) on behalf of our clients; and (iii) cloud-based payment processing transaction services.

We contract for our cloud-based revenue management solutions using long-term arrangements whose terms have typically ranged from three to five years. These arrangements consist of a series of multiple services delivered daily or monthly, to include such things as: (i) revenue and customer experience services; (ii) business support services (e.g., workforce management tools, consumer credit verifications, etc.); (iii) digital enablement and delivery functions; and (iv) customer statement invoice printing and mailing services. The fees for these services typically are billed to our clients monthly based upon actual monthly volumes and/or usage of services (e.g., the number of client customers maintained on our solutions, the number of transactions processed on our solutions, and/or the quantity and content of the monthly statements and mailings processed through our solutions).

For cloud-based revenue management solution contracts, the total contract consideration (including impacts of discounts or incentives) is primarily variable dependent upon actual monthly volumes and/or usage of services; however, these contracts can also include ancillary fixed consideration in the form of one-time, monthly or annual fees. Although there may be multiple performance obligations, there is generally no allocation of value between the individual performance obligations as all are considered cloud and related solutions revenues that are recognized based on activities performed in each daily or monthly period.

We contract for managed services solutions using long-term arrangements whose terms have typically ranged from three to five years. Under managed services agreements, we may operate software products (primarily our software solutions) on behalf of our clients: (i) out of a client’s data center; (ii) out of a data center we own and operate; or (iii) out of a third-party data center we contract with for such services. Managed services can also include us providing other services, such as transitional services, fulfillment, remittance processing, operational consulting, back office, and end user billing services.

For managed services contracts, the total contract consideration is typically a fixed monthly fee, but these contracts may also have variable fee components. The fees for these services typically are billed to our clients on a monthly basis. Unless managed services are included with a software license contract (as discussed further below), there is generally only one performance obligation and revenues are recognized for these arrangements on a ratable basis as the services are performed.

Our contracts for payment processing transaction services are generally month-to-month or fixed term with automatic renewals. Services provided under these arrangements primarily include automated clearing house (ACH) transaction processing, credit/debit card processing, web-based and telephone payment processing and real-time check verification and authentication services. The fees for these services typically are billed on a monthly basis.

Our payment processing services are comprised of one performance obligation. Revenues for payment processing services is based primarily on a fee per transaction or a percentage of the transaction principal and recognized as delivered over a series of daily service periods. Transaction fees collected from clients are recognized as revenue on a gross basis when we are the principal in completing the payment processing transaction. As a principal to the transaction, we control the service of processing payments on our platform. We bear primary responsibility for the fulfillment of the payment service, contract directly with our clients, and have full discretion in determining the fee charged to our clients which is independent of the costs we incur when we utilize payment processors or other financial institutions to perform services on our behalf. We therefore bear full margin risk when completing a payment processing transaction. Transaction fees paid to third-party payment processors and other financial institutions are primarily comprised of interchange and other payment-related fees paid in conjunction with the delivery of service to clients under our payment services contracts. These fees are recognized in cost of revenues.

Fees related to set-up or implementation activities for both cloud-based solution and managed services contracts are deferred and recognized ratably over the related service period to which the activities relate.

Depending on the significance of variable consideration, number of products/services, complex pricing structures and long-term nature of these types of contracts, the judgments and estimates made in this area could have a significant effect on the amount and timing of revenues recognized in any period.

Our software and services revenues relate primarily to: (i) software license sales on either a perpetual or term license basis; and (ii) professional services to implement the software. Our software and services contracts are often contracted in bundled arrangements that include not only the software license and related implementation services, but they can also include maintenance, managed services and/or additional professional services.

For our software arrangements, the total contract consideration is allocated between the separate performance obligations based on stand-alone selling prices for software licenses, cost plus applicable margin for services and established pricing for maintenance. The initial sale of our software products generally requires significant production, modification or customization, such that the delivery of the software license and the related professional services required to implement the software represent one combined performance obligation that is satisfied over time based on hours worked (hours-based method). We are using hours worked on the project, compared against expected hours necessary to complete the project, as the measure to determine progress toward completion as we believe it is the most appropriate metric to measure such progress. The software and services fees are generally fixed fees billed to our clients on a milestone or date basis.

The determination of the performance obligations and allocation of value for software license arrangements require significant judgment. We generally determine stand-alone selling prices using pricing calculations (which include regional market factors) for our software license fees and maintenance, and cost-plus margins for services. Additionally, our use of an hours-based method of accounting for software license and other professional services performance obligations that are satisfied over time requires estimates of total project revenues and costs, along with the expected hours necessary to complete a project. Changes in estimates as a result of additional information or experience on a project as work progresses are inherent characteristics of this method of revenue recognition as we are exposed to various business risks in completing these types of performance obligations. The estimation process to support our hours-based recognition method is more difficult for projects of greater length and/or complexity. The judgments and estimates made in this area could: (i) have a significant effect on revenues recognized in any period by changing the amount and/or the timing of the revenues recognized; and/or (ii) impact the expected profitability of a project, including whether an overall loss on an arrangement has occurred. To mitigate the inherent risks in using this hours-based method, we track our performance on projects and reevaluate the appropriateness of our estimates as part of our monthly accounting cycle.

In certain instances, we sell software license volume upgrades, which provide our clients the right to use our software to process higher transaction volume levels. In these instances, we analyze the contract to determine if the volume upgrade is a separate performance obligation and if so, we recognize the value associated with the software license as revenues on the effective date of the volume upgrade.

A portion of our professional services revenues are contracted separately (e.g., business consulting services, etc.). Such contracts can either be on a fixed-price or time-and-materials basis. Revenues from fixed-price professional service contracts are recognized using an hours-based method, as these professional services represent a performance obligation that is satisfied over time. Revenues from professional services contracts billed on a time-and-materials basis are recognized as the services are performed.

Our maintenance revenues relates primarily to support of our software once it has been implemented. Maintenance revenues are recognized ratably over the software maintenance period as services are provided. Our maintenance consists primarily of client and product support, technical updates (e.g., bug fixes, etc.), and unspecified upgrades or enhancements to our software products. If specified upgrades or enhancements are offered in a contract, which are rare, they are accounted for as a separate performance obligation. Maintenance can be invoiced to our clients on a monthly, quarterly or annual basis.

As of December 31, 2019, our aggregate amount of the transaction price allocated to the remaining performance obligations is approximately $1 billion, which is made up of fixed fee consideration and guaranteed minimums expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied). We expect to recognize approximately 80% of this amount by the end of 2022, with the remaining amount recognized by the end of 2028. We have excluded from this amount variable consideration expected to be recognized in the future related to performance obligations that are unsatisfied. The majority of our future revenues are related to our cloud and related solution client contracts that include variable consideration dependent upon a series of monthly volumes and/or daily usage of services and have contractual terms ending from 2020 through 2028.

The nature, amount, timing and uncertainty of our revenue and how revenue and cash flows are affected by economic factors is most appropriately depicted by type of revenue as presented below (in thousands) and by geographic region as presented in Note 3.

	For the Year Ended December 31,
	2019		2018
Cloud and related solutions	$	896,164	$	766,377
Software and services		52,364		58,101
Maintenance		48,282		50,581
Total revenues	$	996,810	$	875,059

Billed and Unbilled Accounts Receivable. Billed accounts receivable represents our unconditional rights to consideration. Once invoiced, our payment terms are generally between 30-60 days, and rarely do we have contracts with financing arrangements. Unbilled accounts receivable represents our rights to consideration for work completed but not billed. Unbilled accounts receivable is transferred to billed accounts receivable when the rights become unconditional which is generally at the time of invoicing.

The following table rolls forward our unbilled accounts receivable from January 1, 2018 to December 31, 2019 (in thousands):

	Unbilled Receivables
Beginning Balance, January 1, 2018	$	33,104
Recognized during the period		237,134
Reclassified to receivables		(231,689	)
Other		(1,322	)
Ending Balance, December 31, 2018		37,227
Recognized during the period		252,445
Reclassified to receivables		(255,983	)
Other		(239	)
Ending Balance, December 31, 2019	$	33,450

Deferred Revenue. Deferred revenue represents consideration received from clients in advance of services being performed.

The following table rolls forward our deferred revenue from January 1, 2018 to December 31, 2019 (in thousands):

	Deferred Revenue
Beginning Balance, January 1, 2018	$	(47,611	)
Revenue recognized that was included in deferred revenue at the beginning of the period		38,832
Consideration received in advance of services performed net of revenue recognized in the current period		(50,861	)
Other		1,877
Ending Balance, December 31, 2018		(57,763	)
Revenue recognized that was included in deferred revenue at the beginning of the period		39,352
Consideration received in advance of services performed net of revenue recognized in the current period		(44,051	)
Other		(1,184	)
Ending Balance, December 31, 2019	$	(63,646	)

Postage. We pass through to our clients the cost of postage that is incurred on behalf of those clients, and typically require an advance payment on expected postage costs. These advance payments are included in client deposits in the accompanying Consolidated Balance Sheets (“Balance Sheets” or “Balance Sheet”) and are classified as current liabilities regardless of the contract period. We net the cost of postage against the postage reimbursements for those clients where we require advance deposits, and include the net amount (which is not material) in cloud and related solutions revenues.

Cash and Cash Equivalents. We consider all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. As of December 31, 2019 and 2018, our cash equivalents consist primarily of institutional money market funds, commercial paper, and time deposits held at major banks.

As of December 31, 2019 and 2018, we had $2.7 million and $3.0 million, respectively, of restricted cash that serves to collateralize outstanding letters of credit. This restricted cash is included in cash and cash equivalents in our Balance Sheets.

Short-term Investments and Other Financial Instruments. Our financial instruments as of December 31, 2019 and 2018 include cash and cash equivalents, short-term investments, accounts receivable, accounts payable, and debt. Due to their short maturities, the carrying amounts of cash equivalents, accounts receivable, and accounts payable approximate their fair value.

Our short-term investments and certain of our cash equivalents are considered “available-for-sale” and are reported at fair value in our Balance Sheets, with unrealized gains and losses, net of the related income tax effect, excluded from earnings and reported in a separate component of stockholders’ equity. Realized and unrealized gains and losses were not material in any period presented.

Primarily all short-term investments held by us as of December 31, 2019 and 2018 have contractual maturities of less than two years from the time of acquisition. Our short-term investments at December 31, 2019 and 2018 consisted almost entirely of fixed income securities. Proceeds from the sale/maturity of short-term investments in 2019, 2018, and 2017 were $52.1 million, $190.8 million, and $193.5 million, respectively.

The following table represents the fair value hierarchy based upon three levels of inputs, of which Levels 1 and 2 are considered observable and Level 3 is unobservable, for our financial assets measured at fair value (in thousands):

	December 31, 2019						December 31, 2018
	Level 1		Level 2		Total		Level 1		Level 2		Total
Cash equivalents:
Money market funds	$	4,847	$	—	$	4,847	$	4,392	$	—	$	4,392
Commercial paper		—		26,964		26,964		—		9,078		9,078
Short-term investments:
Corporate debt securities		—		22,159		22,159		—		16,357		16,357
U.S. government agency bonds		—		—		—		—		3,724		3,724
Asset-backed securities		—		3,950		3,950		—		3,522		3,522
Total	$	4,847	$	53,073	$	57,920	$	4,392	$	32,681	$	37,073

Valuation inputs used to measure the fair values of our money market funds were derived from quoted market prices. The fair values of all other financial instruments are based upon pricing provided by third-party pricing services. These prices were derived from observable market inputs.

We have chosen not to record our debt at fair value, with changes recognized in earnings each reporting period. The following table indicates the carrying value and estimated fair value of our debt as of the indicated periods (in thousands):

	December 31, 2019				December 31, 2018
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
2018 Credit Agreement (carrying value including current maturities)	$	136,875	$	136,875	$	144,375	$	144,375
2016 Convertible debt (par value)		230,000		262,775		230,000		228,275

The fair value for our Credit Agreement was estimated using a discounted cash flow methodology, while the fair value for our convertible debt was estimated based upon quoted market prices or recent sales activity, both of which are considered Level 2 inputs. See Note 5 for discussion regarding our debt.

Settlement Assets and Settlement Liabilities. Settlement assets and settlement liabilities represent cash collected on behalf of our clients via payment processing services which is held for an established holding period until settlement with the client. The holding period is generally one to four business days depending on the payment model and contractual terms with the client. During the holding period, cash is held in trust with various major financial institutions and a corresponding liability is recorded for the amounts owed to the clients. At any given time, there may be differences between the cash held in trust and the corresponding liability due to the timing of operating-related cash transfers.

Concentrations of Credit Risk. In the normal course of business, we are exposed to credit risk. The principal concentrations of credit risk relate to cash deposits, cash equivalents, short-term investments, and accounts receivable. We regularly monitor credit risk exposures and take steps to mitigate the likelihood of these exposures resulting in a loss. We hold our cash deposits, cash equivalents, and short-term investments with financial institutions we believe to be of sound financial condition.

We are exposed to credit risk related to settlement assets and risk of loss related to our settlement obligations. We hold our settlement assets in major financial institutions we believe to be of sound financial condition. To mitigate the risk of loss due to non-performance or non-payment by a client, we perform credit risk evaluations based on multiple criteria and may require a cash deposit from the client depending on the risk profile. If a deposit is required, the cash is held in a segregated bank account for the duration of the relationship with the client. These deposits are restricted and are fully offset by corresponding liabilities and are included in other assets and other liabilities in our Balance Sheet.

We generally do not require collateral or other security to support accounts receivable. We evaluate the credit worthiness of our clients in conjunction with our revenue recognition processes, as well as through our ongoing collectability assessment processes for accounts receivable. We maintain an allowance for doubtful accounts receivable based upon factors surrounding the credit risk of specific clients, historical trends, and other information. We use various judgments and estimates in determining the adequacy of the allowance for doubtful accounts receivable. See Note 3 for additional details of our concentration of accounts receivable.

The activity in our allowance for doubtful accounts receivable is as follows (in thousands):

	2019			2018			2017
Balance, beginning of year	$	3,115		$	4,149		$	3,080
Additions to expense		778			462			2,434
Write-offs		(158	)		(1,659	)		(1,392	)
Recoveries		—			—			5
Other		—			163			22
Balance, end of year	$	3,735		$	3,115		$	4,149

Property and Equipment. Property and equipment are recorded at cost (or at estimated fair value if acquired in a business combination) and are depreciated over their estimated useful lives ranging from three to ten years. Leasehold improvements are depreciated over the shorter of their economic life or the lease term. Depreciation expense is computed using the straight-line method for financial reporting purposes. Depreciation expense for all property and equipment is reflected in our Income Statements separately in the aggregate and is not included in the cost of revenues or the other components of operating expenses. Depreciation for income tax purposes is computed using accelerated methods.

Software. We expend substantial amounts on R&D, particularly for new solutions and services, or for enhancements of existing solutions and services. For development of software solutions that are to be licensed by us, we expense all costs related to the development of the software until technological feasibility is established. For development of software to be used internally (e.g., cloud-based systems software), we expense all costs prior to the application development stage.

During 2019, 2018, and 2017, we expended $128.0 million, $124.0 million, and $113.2 million, respectively, on R&D projects. We did not capitalize any R&D costs in 2019, 2018, and 2017, as the costs subject to capitalization during these periods were not material. We did not have any capitalized R&D costs included in our December 31, 2019 and 2018 Balance Sheets.

Realizability of Long-Lived Assets. We evaluate our long-lived assets, other than goodwill, for possible impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. A long-lived asset is impaired if estimated future undiscounted cash flows associated with that asset are insufficient to recover the carrying amount of the long-lived asset. If deemed impaired, the long-lived asset is written down to its fair value.

Goodwill. We evaluate our goodwill for impairment on an annual basis. In addition, we evaluate our goodwill on a more periodic basis (e.g., quarterly) if events occur or circumstances change that could indicate a potential impairment may have occurred. Goodwill is considered impaired if the carrying value of the reporting unit which includes the goodwill is greater than the estimated fair value of the reporting unit.

Contingencies. We accrue for a loss contingency when: (i) it is probable that an asset has been impaired, or a liability has been incurred; and (ii) the amount of the loss can be reasonably estimated. The determination of accounting for loss contingencies is subject to various judgments and estimates. We do not record the benefit from a gain contingency until the benefit is realized.

Earnings Per Common Share (“EPS”). Basic and diluted EPS amounts are presented on the face of our Income Statements.

The reconciliation of the basic and diluted EPS denominators related to the common shares is included in the following table (in thousands):

	2019		2018		2017
Basic weighted-average common shares		32,051		32,488		32,415
Dilutive effect of restricted stock		282		218		444
Dilutive effect of Stock Warrants		132		149		6
Diluted weighted-average common shares		32,465		32,855		32,865

The Convertible Notes have a dilutive effect only in those quarterly periods in which our average stock price exceeds the current effective conversion price (see Note 5).

The Stock Warrants have a dilutive effect only in those quarterly periods in which our average stock price exceeds the exercise price of $26.68 per warrant (under the treasury stock method) and are not subject to performance vesting conditions (see Note 12).

Potentially dilutive common shares related to unvested restricted stock and Stock Warrants were excluded from the computation of diluted EPS, as the effect was antidilutive, were not material in any period presented.

Equity Method Investment. During the twelve months ended December 31, 2019, we made an additional $4.0 million investment in a payment technology and services company that enables omni-channel digital payments in Latin America. As of December 31, 2019 and 2018, we held an 8% and 4% noncontrolling interest with a carrying value of $6.6 million and $2.8 million, respectively.

Stock-Based Compensation. Stock-based compensation represents the cost related to stock-based awards granted to employees and non-employee directors. We measure stock-based compensation cost at the grant date of the award, based on the estimated fair value of the award and recognize the cost (net of estimated forfeitures) over the requisite service period.

Income Taxes. We account for income taxes using the asset and liability method. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are recognized for expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

Accounting Pronouncements Adopted. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASC 842”). This ASU requires lessees to recognize a lease liability and a right-of-use asset for all leases, including operating leases, with a term greater than twelve months on its balance sheet.

We adopted ASC 842 in January 2019, utilizing the effective date method of transition. Since we adopted ASC 842 utilizing the effective date method, prior period information in our Financial Statements has not been adjusted and continues to be as previously reported. We elected the package of practical expedients permitted under the transition guidance within the new standard. In conjunction with the adoption of ASC 842, we recorded a balance sheet gross up of approximately $80 million, related to the right-of-use assets and lease liabilities, and have included the amortization of the right-of-use-assets in the changes in other current and non-current assets and liabilities and the accretion and payments of lease liabilities in the changes in trade accounts payable and accrued liabilities, respectively, on our Statement of Cash Flows.