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Table of contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 10-Q
___________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-25346
___________________________
ACI WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
___________________________
Delaware47-0772104
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
3520 Kraft Rd, Suite 300Naples,Florida34105
(Address of principal executive offices)(Zip code)
(239) 403-4660
(Registrant’s telephone number, including area code)
___________________________
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  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of the Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒
As of May 4, 2020, there were 115,944,850 shares of the registrant’s common stock outstanding.
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.005 par valueACIWNasdaq Global Select Market




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TABLE OF CONTENTS
Page
Item 1

2

Table of contents
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands, except share and per share amounts)
March 31, 2020December 31, 2019
ASSETS
Current assets
Cash and cash equivalents
$119,124  $121,398  
Receivables, net of allowances of $3,465 and $5,149, respectively
305,647  359,197  
Settlement assets
317,156  391,039  
Prepaid expenses
32,047  24,542  
Other current assets
32,472  24,200  
Total current assets806,446  920,376  
Noncurrent assets
Accrued receivables, net
198,554  213,041  
Property and equipment, net
67,893  70,380  
Operating lease right-of-use assets
53,490  57,382  
Software, net
225,171  234,517  
Goodwill
1,280,226  1,280,525  
Intangible assets, net
344,156  356,969  
Deferred income taxes, net
63,795  51,611  
Other noncurrent assets
70,168  72,733  
TOTAL ASSETS$3,109,899  $3,257,534  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable
$32,166  $37,010  
Settlement liabilities
297,936  368,719  
Employee compensation
35,035  29,318  
Current portion of long-term debt34,177  34,148  
Deferred revenue
90,660  65,784  
Other current liabilities
66,382  76,971  
Total current liabilities556,356  611,950  
Noncurrent liabilities
Deferred revenue46,104  53,155  
Long-term debt1,321,452  1,339,007  
Deferred income taxes, net31,959  32,053  
Operating lease liabilities43,053  46,766  
Other noncurrent liabilities43,177  44,635  
Total liabilities2,042,101  2,127,566  
Commitments and contingencies
Stockholders’ equity
Preferred stock; $0.01 par value; 5,000,000 shares authorized; no shares issued at March 31, 2020, and December 31, 2019
    
Common stock; $0.005 par value; 280,000,000 shares authorized; 140,525,055 shares issued at March 31, 2020, and December 31, 2019
702  702  
Additional paid-in capital656,723  667,658  
Retained earnings906,403  930,830  
Treasury stock, at cost, 24,642,813 and 24,538,703 shares at March 31, 2020, and December 31, 2019, respectively
(398,278) (377,639) 
Accumulated other comprehensive loss(97,752) (91,583) 
Total stockholders’ equity1,067,798  1,129,968  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$3,109,899  $3,257,534  
The accompanying notes are an integral part of the condensed consolidated financial statements.
4

Table of contents
ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)
Three Months Ended March 31,
20202019
Revenues
Software as a service and platform as a service
$192,950  $108,557  
License
28,129  21,078  
Maintenance
53,280  55,111  
Services
17,126  21,109  
Total revenues
291,485  205,855  
Operating expenses
Cost of revenue (1)
165,837  114,941  
Research and development
39,024  36,194  
Selling and marketing
30,083  29,430  
General and administrative
35,926  31,517  
Depreciation and amortization
31,898  21,866  
Total operating expenses
302,768  233,948  
Operating loss(11,283) (28,093) 
Other income (expense)
Interest expense
(17,171) (11,614) 
Interest income
2,900  3,033  
Other, net
(9,758) (1,912) 
Total other income (expense)(24,029) (10,493) 
Loss before income taxes(35,312) (38,586) 
Income tax benefit(10,885) (12,623) 
Net loss$(24,427) $(25,963) 
Loss per common share
Basic
$(0.21) $(0.22) 
Diluted
$(0.21) $(0.22) 
Weighted average common shares outstanding
Basic116,006  116,090  
Diluted116,006  116,090  

(1) The cost of revenue excludes charges for depreciation but includes amortization of purchased and developed software for resale.

The accompanying notes are an integral part of the condensed consolidated financial statements.
5

Table of contents
ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited and in thousands) 
Three Months Ended March 31,
20202019
Net loss$(24,427) $(25,963) 
Other comprehensive income (loss):
Foreign currency translation adjustments
(6,169) 1,321  
Total other comprehensive income (loss)
(6,169) 1,321  
Comprehensive loss
$(30,596) $(24,642) 

The accompanying notes are an integral part of the condensed consolidated financial statements.
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ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited and in thousands, except share amounts)

Three Months Ended March 31, 2020
Common Stock
Additional
Paid-in Capital
Retained Earnings
Treasury Stock
Accumulated Other
Comprehensive Loss
Total
Balance as of December 31, 2019$702  $667,658  $930,830  $(377,639) $(91,583) $1,129,968  
Net loss—  —  (24,427) —  —  (24,427) 
Other comprehensive loss—  —  —  —  (6,169) (6,169) 
Stock-based compensation
—  6,950  —  —  —  6,950  
Shares issued and forfeited, net, under stock plans
—  (17,885) —  19,215  —  1,330  
Repurchase of 1,000,000 shares of common stock
—  —  —  (28,881) —  (28,881) 
Repurchase of stock-based compensation awards for tax withholdings
—  —  —  (10,973) —  (10,973) 
Balance as of March 31, 2020$702  $656,723  $906,403  $(398,278) $(97,752) $1,067,798  
Three Months Ended March 31, 2019
Common Stock
Additional
Paid-in Capital
Retained Earnings
Treasury Stock
Accumulated Other
Comprehensive Loss
Total
Balance as of December 31, 2018$702  $632,235  $863,768  $(355,857) $(92,617) $1,048,231  
Net loss
—  —  (25,963) —  —  (25,963) 
Other comprehensive income
—  —  —  —  1,321  1,321  
Stock-based compensation
—  6,585  —  —  —  6,585  
Shares issued and forfeited, net, under stock plans
—  (1,860) —  7,525  —  5,665  
Repurchase of 23,802 shares of common stock
—  —  —  (631) —  (631) 
Repurchase of stock-based compensation awards for tax withholdings
—  —  —  (2,624) —  (2,624) 
Balance as of March 31, 2019$702  $636,960  $837,805  $(351,587) $(91,296) $1,032,584  
The accompanying notes are an integral part of the condensed consolidated financial statements.
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ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
Three Months Ended March 31,
20202019
Cash flows from operating activities:
Net loss$(24,427) $(25,963) 
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation
5,825  5,901  
Amortization
27,997  18,951  
Amortization of operating lease right-of-use assets
3,556  3,383  
Amortization of deferred debt issuance costs
1,212  753  
Deferred income taxes
(10,413) (17,414) 
Stock-based compensation expense
6,950  6,585  
Other
650  574  
Changes in operating assets and liabilities, net of impact of acquisitions:
Receivables
48,699  94,549  
Accounts payable
(6,087) (10,297) 
Accrued employee compensation
6,985  (8,598) 
Current income taxes
(5,361) (1,041) 
Deferred revenue
22,495  (4,127) 
Other current and noncurrent assets and liabilities
(20,581) (20,829) 
Net cash flows from operating activities
57,500  42,427  
Cash flows from investing activities:
Purchases of property and equipment
(3,597) (5,250) 
Purchases of software and distribution rights
(6,541) (4,578) 
Net cash flows from investing activities
(10,138) (9,828) 
Cash flows from financing activities:
Proceeds from issuance of common stock
947  831  
Proceeds from exercises of stock options
400  4,857  
Repurchase of stock-based compensation awards for tax withholdings(10,973) (2,624) 
Repurchases of common stock
(28,881) (631) 
Proceeds from revolving credit facility
30,000    
Repayment of revolving credit facility
(39,000)   
Repayment of term portion of credit agreement
(9,737) (5,937) 
Payments on or proceeds from other debt, net(3,593) (1,857) 
Net cash flows from financing activities
(60,837) (5,361) 
Effect of exchange rate fluctuations on cash
11,201  433  
Net increase (decrease) in cash and cash equivalents
(2,274) 27,671  
Cash and cash equivalents, beginning of period
121,398  148,502  
Cash and cash equivalents, end of period
$119,124  $176,173  
Supplemental cash flow information
Income taxes paid
$6,639  $5,949  
Interest paid
$21,837  $14,388  
The accompanying notes are an integral part of the condensed consolidated financial statements.
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ACI WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Condensed Consolidated Financial Statements
The unaudited condensed consolidated financial statements include the accounts of ACI Worldwide, Inc. and its wholly-owned subsidiaries (collectively, the “Company”). All intercompany balances and transactions have been eliminated. The condensed consolidated financial statements as of March 31, 2020, and for the three months ended March 31, 2020 and 2019, are unaudited and reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair presentation, in all material respects, of the financial position and operating results for the interim periods. The condensed consolidated balance sheet as of December 31, 2019, is derived from the audited financial statements.

The condensed consolidated financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2019, filed on February 27, 2020. Results for the three months ended March 31, 2020, are not necessarily indicative of results that may be attained in the future.

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

Risks and Uncertainties
The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company's business is highly uncertain and difficult to predict, as the response to the pandemic is in early stages and information is rapidly evolving. The Company has experienced changes in volumes for certain Merchant and Biller customers and has received limited requests for extended payment terms under existing contracts. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Such economic disruption could have a material adverse effect on our business as our customers curtail and reduce capital and overall spending. Policymakers around the globe have responded with fiscal policy actions to support the economy as a whole. The magnitude and overall effectiveness of these actions remains uncertain.

The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, uncertain demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operations challenges faced by its customers. As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain.

Other Current Liabilities
The components of other current liabilities are included in the following table (in thousands):
March 31, 2020December 31, 2019
Operating lease liabilities$14,586  $15,049  
Vendor financed licenses10,390  9,667  
Royalties payable5,162  6,107  
Accrued interest3,308  9,212  
Other32,936  36,936  
Total other current liabilities$66,382  $76,971  

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Settlement Assets and Liabilities
Individuals and businesses settle their obligations to the Company’s various Biller clients using credit or debit cards or via automated clearing house (“ACH”) payments. The Company creates a receivable for the amount due from the credit or debit card processor and an offsetting payable to the client. Upon confirmation that the funds have been received, the Company settles the obligation to the client. Due to timing, in some instances, the Company may (1) receive the funds into bank accounts controlled by and in the Company’s name that are not disbursed to its clients by the end of the day, resulting in a settlement deposit on the Company’s books and (2) disburse funds to its clients in advance of receiving funds from the credit or debit card processor, resulting in a net settlement receivable position.

Off Balance Sheet Settlement Accounts
The Company also enters into agreements with certain Biller clients to process payment funds on their behalf. When an ACH or automated teller machine network payment transaction is processed, a transaction is initiated to withdraw funds from the designated source account and deposit them into a settlement account, which is a trust account maintained for the benefit of the Company’s clients. A simultaneous transaction is initiated to transfer funds from the settlement account to the intended destination account. These “back to back” transactions are designed to settle at the same time, usually overnight, such that the Company receives the funds from the source at the same time as it sends the funds to their destination. However, due to the transactions being with various financial institutions there may be timing differences that result in float balances. These funds are maintained in accounts for the benefit of the client, which is separate from the Company’s corporate assets. As the Company does not take ownership of the funds, these settlement accounts are not included in the Company’s balance sheet. The Company is entitled to interest earned on the fund balances. The collection of interest on these settlement accounts is considered in the Company’s determination of its fee structure for clients and represents a portion of the payment for services performed by the Company. The amount of settlement funds as of March 31, 2020, and December 31, 2019, was $215.5 million and $274.0 million, respectively.

Fair Value
The fair value of the Company’s Credit Agreement approximates the carrying value due to the floating interest rate (Level 2 of the fair value hierarchy). The Company measures the fair value of its Senior Notes based on Level 2 inputs, which include quoted market prices and interest rate spreads of similar securities. The fair value of the Company’s 5.750% Senior Notes due 2026 (“2026 Notes”) was $402.0 million and $432.0 million as of March 31, 2020, and December 31, 2019, respectively.

The fair values of cash and cash equivalents approximate the carrying values due to the short period of time to maturity (Level 2 of the fair value hierarchy).

Goodwill
In accordance with the Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other, the Company assesses goodwill for impairment annually during the fourth quarter of its fiscal year using October 1 balances or when there is evidence that events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Company evaluates goodwill at the reporting unit level and has identified its reportable segments, ACI On Demand and ACI On Premise, as the reporting units.

Changes in the carrying amount of goodwill attributable to each reporting unit during the three months ended March 31, 2020, were as follows (in thousands):
ACI On DemandACI On PremiseTotal
Gross Balance, prior to December 31, 2019
$554,617  $773,340  $1,327,957  
Total impairment prior to December 31, 2019
  (47,432) (47,432) 
Balance, December 31, 2019
554,617  725,908  1,280,525  
Goodwill from acquisitions (1)(299)   (299) 
Balance, March 31, 2020
$554,318  $725,908  $1,280,226  

(1)Goodwill from acquisitions relates to adjustments in the goodwill recorded for the acquisition of E Commerce Group Products, Inc. ("ECG"), along with ECG's subsidiary, Speedpay, Inc. (collectively referred to as "Speedpay") and Walletron, Inc. ("Walletron"), as discussed in Note 3, Acquisition.

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Recoverability of goodwill is measured using a discounted cash flow valuation model incorporating discount rates commensurate with the risks involved. Use of a discounted cash flow model is common practice in impairment testing in the absence of available transactional market evidence to determine the fair value. The calculated fair value was substantially in excess of the current carrying value for all reporting units based upon the October 1, 2019, annual impairment test. Given the adverse economic and market conditions caused by the COVID-19 pandemic, the Company considered a variety of qualitative factors to determine if an additional quantitative impairment test was required subsequent to our annual impairment test. Based on a variety of factors, including the excess of the fair value over the carrying amount in the most recent impairment test, we determined that an additional quantitative impairment test was not required.

Equity Method Investment
On July 23, 2019, the Company invested $18.3 million for a 30% non-controlling financial interest in a payment technology and services company in India. The Company accounted for this investment using the equity method in accordance with ASC 323, Investments - Equity Method and Joint Ventures. Accordingly, the Company recorded an initial investment of $18.5 million, which is included in other noncurrent assets in the condensed consolidated balance sheet as of March 31, 2020 and December 31, 2019. The Company records its share of earnings and losses in the investment on a one-quarter lag basis.

Name Change
Effective January 1, 2020, Official Payments Corporation, a wholly owned subsidiary, changed its name to ACI Payments, Inc. An amended and restated certificate of incorporation was filed with the state of Delaware to reflect the change. The Official Payments Corporation name and corresponding trade name may continue to be used until all stationary and marketing materials are transitioned to ACI Payments, Inc. equivalents.

New Accounting Standards Recently Adopted
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, codified as ASC 326. Subsequent amendments to the guidance were issued as follows: ASU 2018-19 in November 2018; ASU 2019-04 in April 2019; ASU 2019-05 in May 2019; ASU's 2019-10 and 2019-11 in November 2019; and ASU 2020-02 in February 2020. This ASU provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in ASU 2016-13 replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company is required to use a forward-looking expected credit loss model for billed and accrued receivables. The Company adopted ASU 2016-13 as of January 1, 2020. The adoption of ASU 2016-13 did not have a material impact on the condensed consolidated financial statements.

In February 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments, which clarifies or improves various financial instruments topics in the accounting standards codification to increase stakeholder awareness. ASU 2020-03 was effective upon issuance and did not have a material impact on the condensed consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The update provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”). This guidance includes optional expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 is effective for all entities as of March 12, 2020, through December 31, 2022, when the reference rate replacement activity is expected to be completed. The adoption of ASU 2020-04 did not have an impact on the Company's condensed consolidated financial statements.

Recently Issued Accounting Standards Not Yet Effective
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in this update simplify the accounting for income taxes by removing certain exceptions within ASC 740, as well as clarify and simplify other aspects of the accounting for income taxes to promote consistency among reporting entities. ASU 2019-12 is effective for annual and interim periods beginning after December 15, 2020. The Company is currently assessing the impact the adoption of ASU 2019-12 will have on its condensed consolidated financial statements.
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2. Revenue
In accordance with ASC 606, Revenue From Contracts With Customers, revenue is recognized upon transfer of control of promised products and/or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products and services. Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities. See Note 10, Segment Information, for additional information, including disaggregation of revenue based on primary solution category and geographic location.

Total receivables represent amounts billed and amounts earned that are to be billed in the future (i.e., accrued receivables). Included in accrued receivables are services, software as a service ("SaaS"), and platform as a service ("PaaS") revenues earned in the current period but billed in the following period, and amounts due under multi-year software license arrangements with extended payment terms for which the Company has an unconditional right to invoice and receive payment subsequent to invoicing.

Total receivables, net is comprised of the following (in thousands):
March 31, 2020December 31, 2019
Billed receivables$164,282  $213,654  
Allowance for doubtful accounts(3,465) (5,149) 
Billed receivables, net160,817  208,505  
Accrued receivables375,739  399,302  
Significant financing component(32,355) (35,569) 
Total accrued receivables, net343,384  363,733  
Less: current accrued receivables155,430  161,714  
Less: current significant financing component(10,600) (11,022) 
Total long-term accrued receivables, net198,554  213,041  
Total receivables, net$504,201  $572,238  

No customer accounted for more than 10% of the Company’s consolidated receivables balance as of March 31, 2020, or December 31, 2019.

Deferred revenue includes amounts due or received from customers for software licenses, maintenance, services, and/or SaaS and PaaS services in advance of recording the related revenue.

Changes in deferred revenue were as follows (in thousands):
Balance, December 31, 2019
$118,939  
Deferral of revenue45,927  
Recognition of deferred revenue(25,359) 
Foreign currency translation(2,743) 
Balance, March 31, 2020
$136,764  

Revenue allocated to remaining performance obligations represents contracted revenue that will be recognized in future periods, which is comprised of deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. This does not include:
Revenue that will be recognized in future periods from capacity overages that are accounted for as a usage-based royalty.
SaaS and PaaS revenue from variable consideration that will be recognized in accordance with the ‘right to invoice’ practical expedient.
SaaS and PaaS revenue from variable consideration that will be recognized in accordance with the direct allocation method.

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Revenue allocated to remaining performance obligations was $682.2 million as of March 31, 2020, of which the Company expects to recognize approximately 44% over the next 12 months and the remainder thereafter.

During the three months ended March 31, 2020 and 2019, revenue recognized by the Company from performance obligations satisfied in previous periods was not significant.
3. Acquisition
Speedpay
On May 9, 2019, the Company acquired Speedpay, a subsidiary of The Western Union Company (“Western Union”), for $754.1 million in cash, including working capital adjustments, pursuant to a Stock Purchase Agreement, among the Company, Western Union, and ACI Worldwide Corp., a wholly owned subsidiary of the Company. The Company has included the financial results of Speedpay in the condensed consolidated financial statements from the date of acquisition. The combination of the Company and Speedpay bill pay solutions serves more than 4,000 customers across the U.S., bringing expanded reach in existing and complementary market segments such as consumer finance, insurance, healthcare, higher education, utilities, government, and mortgage. The acquisition of Speedpay increases the scale of the Company’s On Demand platform business and allows the acceleration of platform innovation through increased research and development and investment in ACI's On Demand platform infrastructure.

To fund the acquisition, the Company amended its existing Credit Agreement, dated February 24, 2017, for an additional $500.0 million senior secured term loan (“Delayed Draw Term Loan”), in addition to drawing $250.0 million on the available Revolving Credit Facility. See Note 4, Debt, for terms of the Credit Agreement. The remaining acquisition consideration was funded with cash on hand.

The Company expensed approximately $4.7 million of costs related to the acquisition of Speedpay for the three months ended March 31, 2019. These costs, which consist primarily of investment bank, consulting, and legal fees, are included in general and administrative expenses in the accompanying condensed consolidated statements of operations.

Speedpay contributed approximately $88.7 million in revenue and $12.3 million in operating income for the three months ended March 31, 2020.

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In connection with the acquisition, the Company recorded the following amounts based upon its purchase price allocation as of March 31, 2020 (in thousands, except weighted average useful lives):
AmountWeighted Average Useful Lives
Current assets:
Cash and cash equivalents$135  
Receivables, net of allowances17,658  
Settlement assets239,604  
Prepaid expenses317  
Other current assets19,585  
Total current assets acquired277,299  
Noncurrent assets:
Goodwill366,508  
Software113,600  7 years
Customer relationships208,500  15 years
Trademarks10,900  5 years
Other noncurrent assets3,745  
Total assets acquired980,552  
Current liabilities:
Accounts payable6,623  
Settlement liabilities212,892  
Employee compensation1,959  
Other current liabilities3,802  
Total current liabilities acquired225,276  
Noncurrent liabilities:
Other noncurrent liabilities1,219  
Total liabilities acquired226,495  
Net assets acquired$754,057  

During the three months ended March 31, 2020, the Company made adjustments to the preliminary purchase price allocation as additional information became available for accounts payable. These adjustments and any resulting adjustments to the statements of operations were not material to the Company’s previously reported operating results or financial position.

Factors contributing to the purchase price that resulted in the goodwill (which is tax deductible) include the acquisition of management, sales, and technology personnel with the skills to market new and existing products of the Company, enhanced product capabilities, complementary products, and customers.

Unaudited Pro Forma Financial Information
The pro forma financial information in the table below presents the combined results of operations for ACI and Speedpay as if the acquisition had occurred January 1, 2018. 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 transaction been in effect for the periods presented. This pro forma information is not intended to represent or be indicative of actual results had the acquisition occurred as of the beginning of each period, and does not reflect potential synergies, integration costs, or other such costs or savings.

Certain pro forma adjustments have been made to net loss for the three months ended March 31, 2019, to give effect to estimated adjustments that remove the amortization expense on eliminated Speedpay historical identifiable intangible assets, add amortization expense for the value of acquired identified intangible assets (primarily acquired software, customer relationships, and trademarks), and add estimated interest expense on the Company’s additional Delayed Draw Term Loan and Revolving Credit Facility borrowings. Additionally, certain transaction expenses that are a direct result of the acquisition have
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been excluded. The three months ended March 31, 2020, is not presented as Speedpay is included in the Company's consolidated results for the entire period.

The following is the unaudited summarized pro forma financial information (in thousands, except per share data):
Three Months Ended March 31, 2019
Pro forma revenue$294,059  
Pro forma net loss$(21,245) 
Pro forma loss per share:
Basic$(0.18) 
Diluted$(0.18) 

Walletron
On May 9, 2019, the Company also completed the acquisition of Walletron, which delivers patented mobile wallet technology. The Company has included the financial results of Walletron in the condensed consolidated financial statements from the date of acquisition, which were not material.
4. Debt
As of March 31, 2020, the Company had $230.0 million, $746.3 million, and $400.0 million outstanding under its Revolving Credit Facility, Term Loan, and Senior Notes, respectively, with up to $270.0 million of unused borrowings under the Revolving Credit Facility portion of the Credit Agreement, as amended.   

Credit Agreement
On April 5, 2019, the Company (and its wholly-owned subsidiaries, ACI Worldwide Corp. and ACI Payments, Inc. entered into the Second Amended and Restated Credit Agreement (the “Credit Agreement”) with the lenders, and Bank of America, N.A., as administrative agent for the lenders, to amend and restate the Company's existing agreement, as amended, dated February 24, 2017.

The Credit Agreement consists of (a) a five-year $500.0 million senior secured revolving credit facility (the “Revolving Credit Facility”), which includes sublimits for (1) the issuance of standby letters of credit and (2) swingline loans, (b) a five-year $279.0 million senior secured term loan facility (the "Initial Term Loan") and (c) a five-year $500.0 million Delayed Draw Term Loan (together with the Initial Term Loan, the "Term Loans", and together with the Initial Term Loan and the Revolving Credit Facility, the “Credit Facility”). The Credit Agreement also allows the Company to request optional incremental term loans and increases in the revolving commitment. The Credit Facility will mature on April 5, 2024.

At the Company’s option, borrowings under the Credit Facility bear interest at an annual rate equal to, either (a) a base rate determined by reference to the highest of (1) the annual interest rate publicly announced by the administrative agent as its Prime Rate, (2) the federal funds effective rate plus 1/2 of 1%, or (3) a London Interbank Offered Rate (“LIBOR”) rate determined by reference to the costs of funds for U.S. dollar deposits for a one-month interest period, adjusted for certain additional costs, plus 1% or (b) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowings, adjusted for certain additional costs, plus an applicable margin. Based on the calculation of the applicable consolidated total leverage ratio, the applicable margin for borrowings under the Credit Facility is between 0.25% to 1.25% with respect to base rate borrowings and between 1.25% and 2.25% with respect to LIBOR rate borrowings. Interest is due and payable monthly. The interest rate in effect for the Credit Facility as of March 31, 2020, was 3.17%.

The Company is also required to pay (a) a commitment fee related to the unutilized commitments under the Revolving Credit Facility, payable quarterly in arrears, (b) letter of credit fees on the maximum amount available to be drawn under all outstanding letters of credit in an amount equal to the applicable margin on LIBOR rate borrowings under the Revolving Credit Facility on an annual basis, payable quarterly in arrears, and (c) customary fronting fees for the issuance of letters of credit fees and agency fees.

The Company’s obligations under the Credit Facility and cash management arrangements entered into with lenders under the Credit Facility (or affiliates thereof) and the obligations of the subsidiary guarantors are secured by first-priority security interests in substantially all assets of the Company and any guarantor, including 100% of the capital stock of ACI Worldwide Corp. and each domestic subsidiary of the Company, each domestic subsidiary of any guarantor, and 65% of the voting capital stock of each foreign subsidiary of the Company that is directly owned by the Company or a guarantor, in each case subject to
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certain exclusions set forth in the credit documentation governing the Credit Facility. The collateral agreement of the Credit Agreement, as amended, released the lien on certain assets of ACI Payments, Inc., our electronic bill presentment and payment affiliate, to allow ACI Payments, Inc. to comply with certain eligible securities and unencumbered asset requirements related to money transmitter or transfer license rules and regulations.

The Credit Agreement contains a number of covenants that, among other things and subject to certain exceptions, restrict the Company’s and its subsidiaries' ability to: create, incur, assume or suffer to exist any additional indebtedness; create, incur, assume or suffer to exist any liens; enter into agreements and other arrangements that include negative pledge clauses; pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated indebtedness; create restrictions on the payment of dividends or other distributions by subsidiaries; make investments, loans, advances and acquisitions; merge, consolidate or enter into any similar combination or sell assets, including equity interests of the subsidiaries; enter into sale and leaseback transactions; directly or indirectly engage in transactions with affiliates; alter in any material respect the character or conduct of the business; enter into amendments of or waivers under subordinated indebtedness, organizational documents, and certain other material agreements; and hold certain assets and incur certain liabilities.

Expected Discontinuation of LIBOR
In July 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced it will no longer compel banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee has proposed the Secured Overnight Financing Rate ("SOFR") as its recommended alternative to LIBOR, and the first publication of SOFR rates was released in April 2018.

The Company is evaluating the potential impact of the transition from LIBOR as an interest rate benchmark to other potential alternative reference rates, including SOFR. The Company's Credit Agreement is currently indexed to LIBOR and the maturity date of the Credit Agreement extends beyond 2021. The Credit Agreement contemplates the discontinuation of LIBOR and provides options for the Company in such an event. The Company will continue to actively assess the related opportunities and risks involved in this transition.

Senior Notes
On August 21, 2018, the Company completed a $400.0 million offering of the 2026 Notes at an issue price of 100% of the principal amount in a private placement for resale to qualified institutional buyers. The 2026 Notes bear interest at an annual rate of 5.750%, payable semi-annually in arrears on February 15 and August 15 of each year. The 2026 Notes will mature on August 15, 2026.

Maturities on debt outstanding as of March 31, 2020, are as follows (in thousands):
Fiscal Year Ending December 31,
Remainder of 2020$29,213  
202138,950  
202250,431  
202369,906  
2024787,823  
Thereafter400,000  
Total$1,376,323  

The Credit Agreement and 2026 Notes contain certain customary affirmative covenants and negative covenants that limit or restrict, subject to certain exceptions, the incurrence of liens, indebtedness of subsidiaries, mergers, advances, investments, acquisitions, transactions with affiliates, change in nature of business, and the sale of the assets. In addition, the Credit Agreement and 2026 Notes contain certain customary mandatory prepayment provisions. The Company is also required to maintain a consolidated leverage ratio at or below a specified amount and an interest coverage ratio at or above a specified amount. As specified in the Credit Agreement and 2026 Notes agreement, if certain events occur and continue, the Company may be required to repay all amounts outstanding under the Credit Facility and 2026 Notes. As of March 31, 2020, and at all times during the period, the Company was in compliance with its financial debt covenants.

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Total debt is comprised of the following (in thousands):
March 31, 2020December 31, 2019
Term loans$746,323  $756,060  
Revolving credit facility230,000  239,000  
5.750% Senior notes, due August 2026
400,000  400,000  
Debt issuance costs(20,694) (21,905) 
Total debt1,355,629  1,373,155  
Less: current portion of term loans38,950  38,950  
Less: current portion of debt issuance costs(4,773) (4,802) 
Total long-term debt$1,321,452  $1,339,007  

Overdraft Facility
In 2019, the Company and ACI Payments, Inc. entered in to a $140.0 million uncommitted overdraft facility with Bank of America, N.A. The overdraft facility bears interest at LIBOR plus 0.875% based on the Company’s average outstanding balance and the frequency in which overdrafts occur. The overdraft facility acts as a secured loan under the terms of the Credit Agreement to provide an additional funding mechanism for timing differences that can occur in the bill payment settlement process. Amounts outstanding on the overdraft facility are included in other current liabilities in the condensed consolidated balance sheet. As of March 31, 2020, there was no amount outstanding on the overdraft facility. As of December 31, 2019, there was $1.5 million outstanding on the overdraft facility.

Other
As of March 31, 2020, and December 31, 2019, $13.8 million was outstanding related to certain multi-year license agreements for internal-use software, of which $6.0 million and $7.8 million was included in other current liabilities and other noncurrent liabilities, respectively, in the condensed consolidated balance sheets. Upon execution, these arrangements have been treated as a non-cash investing and financing activity for purposes of the condensed consolidated statements of cash flows.
5. Stock-Based Compensation Plans
Employee Stock Purchase Plan
Shares issued under the 2017 Employee Stock Purchase Plan during the three months ended March 31, 2020 and 2019, totaled 31,794 and 32,174, respectively.

Stock Options
A summary of stock option activity is as follows:
Number of
Shares
Weighted Average
Exercise Price ($)
Weighted Average
Remaining Contractual
Term (Years)
Aggregate Intrinsic Value
of In-the-Money
Options ($)
Outstanding as of December 31, 20194,006,816  $18.18  
Exercised(23,223) 17.21  
Forfeited(57,744) 19.08  
Expired(6,090) 18.44  
Outstanding as of March 31, 20203,919,759  $18.17  3.13$23,427,581  
Exercisable as of March 31, 20203,772,523  $18.10  3.18$22,816,683  

The total intrinsic value of stock options exercised during the three months ended March 31, 2020 and 2019, was $0.3 million and $5.3 million, respectively. There were no stock options granted during the three months ended March 31, 2020 or 2019.

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Long-term Incentive Program Performance Share Awards
A summary of nonvested long-term incentive program performance share awards (“LTIP performance shares”) is as follows:
Number of Shares
at Expected Attainment
Weighted Average
Grant Date Fair Value
Nonvested as of December 31, 2019669,469  $20.12  
Vested(668,240) 20.12  
Forfeited(5,368) 20.12  
Change in attainment4,139  20.12  
Nonvested as of March 31, 2020  $  

During the three months ended March 31, 2020, a total of 668,240 LTIPs vested. The Company withheld 165,237 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

Restricted Share Awards
A summary of nonvested restricted share awards (“RSAs”) is as follows:
Number of
Shares
Weighted Average
Grant Date Fair Value
Nonvested as of December 31, 201992,842  $20.13  
Vested(88,913) 20.12  
Forfeited(3,929) 20.35  
Nonvested as of March 31, 2020  $  

During the three months ended March 31, 2020, a total of 88,913 RSAs vested. The Company withheld 28,233 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

Total Shareholder Return Awards
A summary of nonvested total shareholder return awards (“TSRs”) is as follows:
Number of
Shares
Weighted Average
Grant Date Fair Value
Nonvested as of December 31, 20191,062,291  $35.77  
Granted677,195  30.01  
Vested(199,413) 24.37  
Forfeited(59,733) 38.95  
Change in payout rate(14,259) 24.37
Nonvested as of March 31, 20201,466,081  $34.64  

During the three months ended March 31, 2020, a total of 199,413 TSRs awards granted in fiscal 2017 vested and achieved a payout rate of 93% based on the Company's total shareholder return as compared to a group of peer companies over a three-year performance period. The Company withheld 53,033 of those shares to pay the employees’ portion of the minimum payroll withholding taxes.

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The fair value of TSRs granted during the three months ended March 31, 2020 and 2019, were estimated on the date of grant using the Monte Carlo simulation model, acceptable under ASC 718, using the following weighted average assumptions: