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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 September 30, 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 November 2, 2020, there were 116,761,531 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)

September 30, 2020December 31, 2019
ASSETS
Current assets
Cash and cash equivalents
$133,845 $121,398 
Receivables, net of allowances of $3,517 and $5,149, respectively
309,496 359,197 
Settlement assets
376,382 391,039 
Prepaid expenses
25,913 24,542 
Other current assets
24,695 24,200 
Total current assets870,331 920,376 
Noncurrent assets
Accrued receivables, net
205,885 213,041 
Property and equipment, net
67,028 70,380 
Operating lease right-of-use assets
47,017 57,382 
Software, net
204,239 234,517 
Goodwill
1,280,226 1,280,525 
Intangible assets, net
328,257 356,969 
Deferred income taxes, net
60,397 51,611 
Other noncurrent assets
69,054 72,733 
TOTAL ASSETS$3,132,434 $3,257,534 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable
$38,932 $37,010 
Settlement liabilities
349,510 368,719 
Employee compensation
42,638 29,318 
Current portion of long-term debt34,236 34,148 
Deferred revenue
59,414 65,784 
Other current liabilities
65,452 76,971 
Total current liabilities590,182 611,950 
Noncurrent liabilities
Deferred revenue71,870 53,155 
Long-term debt1,234,319 1,339,007 
Deferred income taxes, net27,270 32,053 
Operating lease liabilities39,952 46,766 
Other noncurrent liabilities45,997 44,635 
Total liabilities2,009,590 2,127,566 
Commitments and contingencies
Stockholders’ equity
Preferred stock; $0.01 par value; 5,000,000 shares authorized; no shares issued at September 30, 2020, and December 31, 2019
  
Common stock; $0.005 par value; 280,000,000 shares authorized; 140,525,055 shares issued at September 30, 2020, and December 31, 2019
702 702 
Additional paid-in capital675,941 667,658 
Retained earnings936,344 930,830 
Treasury stock, at cost, 23,794,109 and 24,538,703 shares at September 30, 2020, and December 31, 2019, respectively
(393,651)(377,639)
Accumulated other comprehensive loss(96,492)(91,583)
Total stockholders’ equity1,122,844 1,129,968 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$3,132,434 $3,257,534 
The accompanying notes are an integral part of the condensed consolidated financial statements.
3

Table of contents
ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share amounts)

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Revenues
Software as a service and platform as a service
$190,369 $192,952 $563,892 $474,008 
License
56,773 92,058 135,038 165,677 
Maintenance
53,049 52,638 159,078 159,671 
Services
15,692 17,253 49,270 59,018 
Total revenues
315,883 354,901 907,278 858,374 
Operating expenses
Cost of revenue (1)
158,579 174,168 471,762 444,349 
Research and development
33,573 36,543 108,175 111,972 
Selling and marketing
22,154 30,417 76,692 92,809 
General and administrative
37,000 27,286 102,684 108,122 
Depreciation and amortization
33,395 31,169 98,928 79,779 
Total operating expenses
284,701 299,583 858,241 837,031 
Operating income31,182 55,318 49,037 21,343 
Other income (expense)
Interest expense
(12,925)(18,987)(44,238)(45,924)
Interest income
2,927 2,988 8,781 9,018 
Other, net
1,356 (2,369)(6,361)(2,879)
Total other income (expense)(8,642)(18,368)(41,818)(39,785)
Income (loss) before income taxes22,540 36,950 7,219 (18,442)
Income tax expense (benefit)6,674 5,136 1,705 (30,018)
Net income$15,866 $31,814 $5,514 $11,576 
Income per common share
Basic
$0.14 $0.27 $0.05 $0.10 
Diluted
$0.13 $0.27 $0.05 $0.10 
Weighted average common shares outstanding
Basic116,558 116,169 116,217 116,337 
Diluted117,804 118,307 117,644 118,460 

(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.
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ACI WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited and in thousands)
 
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net income$15,866 $31,814 $5,514 $11,576 
Other comprehensive income (loss):
Foreign currency translation adjustments
1,842 (1,610)(4,909)(2,019)
Total other comprehensive income (loss)1,842 (1,610)(4,909)(2,019)
Comprehensive income
$17,708 $30,204 $605 $9,557 

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 STOCKHOLDERS’ EQUITY
(unaudited and in thousands, except share amounts)

Three Months Ended September 30, 2020
Common StockAdditional
Paid-in Capital
Retained EarningsTreasury StockAccumulated Other
Comprehensive Loss
Total
Balance as of June 30, 2020$702 $667,554 $920,478 $(399,663)$(98,334)$1,090,737 
Net income— — 15,866 — — 15,866 
Other comprehensive income— — — — 1,842 1,842 
Stock-based compensation
— 8,061 — — — 8,061 
Shares issued and forfeited, net, under stock plans
— 326 — 6,038 — 6,364 
Repurchase of stock-based compensation awards for tax withholdings
— — — (26)— (26)
Balance as of September 30, 2020$702 $675,941 $936,344 $(393,651)$(96,492)$1,122,844 
Three Months Ended September 30, 2019
Common StockAdditional
Paid-in Capital
Retained EarningsTreasury StockAccumulated Other
Comprehensive Loss
Total
Balance as of June 30, 2019$702 $650,797 $843,530 $(349,426)$(93,026)$1,052,577 
Net income— — 31,814 — — 31,814 
Other comprehensive loss
— — — — (1,610)(1,610)
Stock-based compensation
— 9,371 — — — 9,371 
Shares issued and forfeited, net, under stock plans
— 485 — 1,299 — 1,784 
Repurchase of 1,204,300 shares of common stock
— — — (34,986)— (34,986)
Repurchase of stock-based compensation awards for tax withholdings
— — — (13)— (13)
Balance as of September 30, 2019$702 $660,653 $875,344 $(383,126)$(94,636)$1,058,937 
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)

Nine Months Ended September 30, 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 income— — 5,514 — — 5,514 
Other comprehensive loss— — — — (4,909)(4,909)
Stock-based compensation
— 22,943 — — — 22,943 
Shares issued and forfeited, net, under stock plans
— (14,660)— 24,019 — 9,359 
Repurchase of 1,000,000 shares of common stock
— — — (28,881)— (28,881)
Repurchase of stock-based compensation awards for tax withholdings
— — — (11,150)— (11,150)
Balance as of September 30, 2020$702 $675,941 $936,344 $(393,651)$(96,492)$1,122,844 
Nine Months Ended September 30, 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 income— — 11,576 — — 11,576 
Other comprehensive loss
— — — — (2,019)(2,019)
Stock-based compensation
— 30,328 — — — 30,328 
Shares issued and forfeited, net, under stock plans
— (1,910)— 11,170 — 9,260 
Repurchase of 1,228,102 shares of common stock
— — — (35,617)— (35,617)
Repurchase of stock-based compensation awards for tax withholdings
— — — (2,822)— (2,822)
Balance as of September 30, 2019$702 $660,653 $875,344 $(383,126)$(94,636)$1,058,937 
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)
Nine Months Ended September 30,
20202019
Cash flows from operating activities:
Net income$5,514 $11,576 
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation
18,012 17,916 
Amortization
86,992 70,627 
Amortization of operating lease right-of-use assets
14,145 10,877 
Amortization of deferred debt issuance costs
3,613 2,909 
Deferred income taxes
(10,540)(39,323)
Stock-based compensation expense
22,943 30,328 
Other
4,339 2,431 
Changes in operating assets and liabilities, net of impact of acquisitions:
Receivables
41,261 34,690 
Accounts payable
1,680 (8,414)
Accrued employee compensation
13,585 1,740 
Current income taxes
(2,595)(8,536)
Deferred revenue
14,361 (17,735)
Other current and noncurrent assets and liabilities
(21,252)(20,148)
Net cash flows from operating activities
192,058 88,938 
Cash flows from investing activities:
Purchases of property and equipment
(14,091)(18,739)
Purchases of software and distribution rights
(21,556)(18,565)
Acquisition of businesses, net of cash acquired
 (757,268)
Other
 (18,474)
Net cash flows from investing activities
(35,647)(813,046)
Cash flows from financing activities:
Proceeds from issuance of common stock
2,853 2,662 
Proceeds from exercises of stock options
6,518 6,677 
Repurchase of stock-based compensation awards for tax withholdings(11,150)(2,822)
Repurchases of common stock
(28,881)(35,617)
Proceeds from revolving credit facility
30,000 280,000 
Repayment of revolving credit facility
(109,000)(15,000)
Proceeds from term portion of credit agreement
 500,000 
Repayment of term portion of credit agreement
(29,212)(19,162)
Payments for debt issuance costs
 (12,830)
Payments on or proceeds from other debt, net(10,044)(8,209)
Net cash flows from financing activities
(148,916)695,699 
Effect of exchange rate fluctuations on cash
4,952 1,488 
Net increase (decrease) in cash and cash equivalents12,447 (26,921)
Cash and cash equivalents, beginning of period
121,398 148,502 
Cash and cash equivalents, end of period
$133,845 $121,581 
Supplemental cash flow information
Income taxes paid
$19,733 $21,205 
Interest paid
$46,489 $47,741 
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 September 30, 2020, and for the three and nine months ended September 30, 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 and nine months ended September 30, 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 and available information continues to be 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):
September 30, 2020December 31, 2019
Operating lease liabilities$13,569 $15,049 
Vendor financed licenses13,270 9,667 
Royalties payable4,775 6,107 
Accrued interest3,065 9,212 
Other30,773 36,936 
Total other current liabilities$65,452 $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 September 30, 2020, and December 31, 2019, was $164.5 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 $423.0 million and $432.0 million as of September 30, 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 nine months ended September 30, 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, September 30, 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. The Company records its share of earnings and losses in the investment on a one-quarter lag basis. Accordingly, the Company recorded an investment of $18.8 million and $18.5 million, which is included in other noncurrent assets in the condensed consolidated balance sheet as of September 30, 2020, and December 31, 2019, respectively.

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):
September 30, 2020December 31, 2019
Billed receivables$168,973 $213,654 
Allowance for doubtful accounts(3,517)(5,149)
Billed receivables, net165,456 208,505 
Accrued receivables380,300 399,302 
Significant financing component(30,375)(35,569)
Total accrued receivables, net349,925 363,733 
Less: current accrued receivables154,665 161,714 
Less: current significant financing component(10,625)(11,022)
Total long-term accrued receivables, net205,885 213,041 
Total receivables, net$515,381 $572,238 

No customer accounted for more than 10% of the Company’s consolidated receivables balance as of September 30, 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 revenue108,976 
Recognition of deferred revenue(96,379)
Foreign currency translation(252)
Balance, September 30, 2020
$131,284 

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 $731.7 million as of September 30, 2020, of which the Company expects to recognize approximately 39% over the next 12 months and the remainder thereafter.

During the three and nine months ended September 30, 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 increased 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 $0.9 million and $22.2 million of costs related to the acquisition of Speedpay for the three and nine months ended September 30, 2019, respectively. 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 $80.3 million and $249.2 million in total revenue for the three and nine months ended September 30, 2020, respectively. Due to integration activities, the Company is no longer able to separately identify the contribution to operating income generated from the acquisition of Speedpay for the three and nine months ended September 30, 2020.

Speedpay contributed approximately $87.7 million and $137.1 million in total revenue for the three and nine months ended September 30, 2019, respectively. Speedpay contributed approximately $7.5 million and $15.2 million in total operating income for the three and nine months ended September 30, 2019, respectively.
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In connection with the acquisition, the Company recorded the following amounts based upon its purchase price allocation as of September 30, 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 nine months ended September 30, 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. The Company's review of the purchase price allocation has been completed.

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.

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Certain pro forma adjustments have been made to net income for the three and nine months ended September 30, 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 been excluded. The three and nine months ended September 30, 2020, are not presented, as Speedpay is included in the Company's consolidated results for the entire periods.

The following is the unaudited summarized pro forma financial information (in thousands, except per share data):
Three Months Ended September 30, 2019Nine Months Ended September 30, 2019
Pro forma revenue$354,901 $983,037 
Pro forma net income$32,513 $26,517 
Pro forma income per share:
Basic$0.28 $0.23 
Diluted$0.27 $0.22 

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 September 30, 2020, the Company had $160.0 million, $726.8 million, and $400.0 million outstanding under its Revolving Credit Facility, Term Loan, and Senior Notes, respectively, with up to $338.5 million of unused borrowings under the Revolving Credit Facility portion of the Credit Agreement, as amended, and up to $1.5 million of unused borrowings under the Letter of Credit agreement. The amount of unused borrowings actually available varies in accordance with the terms of the agreement.

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 September 30, 2020, was 2.40%.

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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 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.

Letter of Credit
On August 12, 2020, the Company entered into a standby letter of credit (the “Letter of Credit”), under the terms of the Credit Agreement, for $1.5 million. The Letter of Credit expires on July 31, 2021, with automatic renewals for twelve month periods thereafter. The Letter of Credit reduces the maximum available borrowings under the Revolving Credit Facility to $498.5 million. Upon expiration of the Letter of Credit, maximum borrowings will return to $500.0 million.

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.
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Maturities on debt outstanding as of September 30, 2020, are as follows (in thousands):
Fiscal Year Ending December 31,
Remainder of 2020$9,738 
202138,950 
202250,431 
202369,906 
2024717,823 
Thereafter400,000 
Total$1,286,848 

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 September 30, 2020, and at all times during the period, the Company was in compliance with its financial debt covenants.

Total debt is comprised of the following (in thousands):
September 30, 2020December 31, 2019
Term loans$726,848 $756,060 
Revolving credit facility160,000 239,000 
5.750% Senior notes, due August 2026
400,000 400,000 
Debt issuance costs(18,293)(21,905)
Total debt1,268,555 1,373,155 
Less: current portion of term loans38,950 38,950 
Less: current portion of debt issuance costs(4,714)(4,802)
Total long-term debt$1,234,319 $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 September 30, 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
The Company finances certain multi-year license agreements for internal-use software. 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. As of September 30, 2020, $10.0 million was outstanding, of which $7.8 million and $2.2 million is included in other current liabilities and other noncurrent liabilities, respectively, in the condensed consolidated balance sheet. As of December 31, 2019, $13.8 million was outstanding, 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 sheet.
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5. Stock-Based Compensation Plans
Employee Stock Purchase Plan
Shares issued under the 2017 Employee Stock Purchase Plan during the nine months ended September 30, 2020 and 2019, totaled 114,709 and 92,765, respectively.

2020 Equity and Incentive Compensation Plan
On June 9, 2020, upon recommendation of the Company’s board of directors (the “board”), stockholders approved the ACI Worldwide, Inc. 2020 Equity and Incentive Compensation Plan (the “2020 Plan”). The 2020 Plan authorizes the board to provide for equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, dividend equivalents, and certain other awards, including those denominated or payable in, or otherwise based on, the Company’s common stock ("awards"). The purpose of the 2020 Plan is to provide incentives and rewards for service and/or performance by providing awards to non-employee directors, officers, other employees, and certain consultants and other service providers of the Company and its subsidiaries. Following the approval of the 2020 Plan, the 2016 Equity and Performance Incentive Plan (the “2016 Incentive Plan”) was terminated. Termination of the 2016 Incentive Plan did not affect any equity awards outstanding under the 2016 Incentive Plan.

Subject to adjustment and share counting rules as described in the 2020 Plan, a total of 6,658,754 shares of common stock are available for awards granted under the 2020 Plan. Shares underlying certain awards under the 2020 Plan, the Company’s 2005 Equity and Performance Incentive Plan (the "2005 Incentive Plan"), and the 2016 Incentive Plan (each including as amended or amended and restated) that are cancelled or forfeited, expire, are settled for cash, or are unearned after June 9, 2020, will again be available under the 2020 Plan.

The board generally will be able to amend the 2020 Plan, subject to stockholder approval in certain circumstances, as described in the 2020 Plan.

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(1,428,829)19.00 
Forfeited(57,744)19.08 
Expired(6,090)18.44 
Outstanding as of September 30, 20202,514,153 $17.70 4.17$21,206,451 
Exercisable as of September 30, 20202,366,917 $17.55 4.34$20,304,026 

The total intrinsic value of stock options exercised during the nine months ended September 30, 2020 and 2019, was $14.3 million and $6.9 million, respectively. There were no stock options granted during the nine months ended September 30, 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 September 30, 2020 $ 

During the nine months ended September 30, 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 September 30, 2020 $ 

During the nine months ended September 30, 2020, a total of 88,913 RSAs vested. The Company withheld