aciw-20240331

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, 2024


☐			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)

___________________________

Delaware

47-0772104

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

6060 Coventry Drive

Elkhorn,

Nebraska

68022

(Address of principal executive offices)

(Zip code)

(402) 390-7600

(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 filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller 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 April 26, 2024, there were 105,439,792 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 class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.005 par value

ACIW

Nasdaq Global Select Market

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	TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION

Item 1	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of March 31, 2024, and December 31, 2023	3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2024 and 2023	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023	6
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023	7
	Notes to Condensed Consolidated Financial Statements	8

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4	Controls and Procedures	31

PART II – OTHER INFORMATION

Item 1	Legal Proceedings	32
Item 1A	Risk Factors	32
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3	Defaults Upon Senior Securities	32
Item 4	Mine Safety Disclosures	32
Item 5	Other Information	33
Item 6	Exhibits	33

Signature		34

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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, 2024		December 31, 2023
ASSETS
Current assets
Cash and cash equivalents	$	183,393	$	164,239
Receivables, net of allowances of $2,581 and $4,295, respectively	345,125		452,337
Settlement assets	700,733		723,039
Prepaid expenses	34,416		31,479
Other current assets	34,935		35,551
Total current assets	1,298,602		1,406,645
Noncurrent assets
Accrued receivables, net	290,186		313,983
Property and equipment, net	36,924		37,856
Operating lease right-of-use assets	33,153		34,338
Software, net	112,368		108,418
Goodwill	1,226,026		1,226,026
Intangible assets, net	186,782		195,646
Deferred income taxes, net	56,017		58,499
Other noncurrent assets	60,143		63,328
TOTAL ASSETS	$	3,300,201	$	3,444,739
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	44,292	$	45,964
Settlement liabilities	699,804		721,164
Employee compensation	26,938		53,892
Current portion of long-term debt	34,875		74,405
Deferred revenue	77,147		59,580
Other current liabilities	65,764		82,244
Total current liabilities	948,820		1,037,249
Noncurrent liabilities
Deferred revenue	20,117		24,780
Long-term debt	981,851		963,599
Deferred income taxes, net	39,465		40,735
Operating lease liabilities	27,378		29,074
Other noncurrent liabilities	25,517		25,005
Total liabilities	2,043,148		2,120,442
Commitments and contingencies
Stockholders’ equity
Preferred stock; $0.01 par value; 5,000,000 shares authorized; no shares issued at March 31, 2024, and December 31, 2023	—		—
Common stock; $0.005 par value; 280,000,000 shares authorized; 140,525,055 shares issued at March 31, 2024, and December 31, 2023	702		702
Additional paid-in capital	714,936		712,994
Retained earnings	1,387,216		1,394,967
Treasury stock, at cost, 34,267,073 and 32,447,317 shares at March 31, 2024, and December 31, 2023, respectively	(733,927)		(674,896)
Accumulated other comprehensive loss	(111,874)		(109,470)
Total stockholders’ equity	1,257,053		1,324,297
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,300,201	$	3,444,739

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 OPERATIONS

(unaudited and in thousands, except per share amounts)


	Three Months Ended March 31,
		2024		2023
Revenues
Software as a service and platform as a service		$	215,732	$	204,930
License		29,973		18,331
Maintenance		47,754		50,103
Services		22,560		16,312
Total revenues		316,019		289,676
Operating expenses
Cost of revenue (1)		191,107		178,554
Research and development		34,993		37,118
Selling and marketing		26,750		35,435
General and administrative		26,000		31,382
Depreciation and amortization		27,609		31,539
Total operating expenses		306,459		314,028
Operating income (loss)		9,560		(24,352)
Other income (expense)
Interest expense		(19,010)		(18,892)
Interest income		4,009		3,505
Other, net		(2,025)		(3,395)
Total other income (expense)		(17,026)		(18,782)
Loss before income taxes		(7,466)		(43,134)
Income tax expense (benefit)		285		(10,826)
Net loss		$	(7,751)	$	(32,308)
Loss per common share
Basic		$	(0.07)	$	(0.30)
Diluted		$	(0.07)	$	(0.30)
Weighted average common shares outstanding
Basic		106,799		108,156
Diluted		106,799		108,156

(1) The cost of revenue excludes charges for depreciation and amortization.

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 March 31,
		2024		2023
Net loss		$	(7,751)	$	(32,308)
Other comprehensive income (loss):
Foreign currency translation adjustments		(2,404)		3,618
Total other comprehensive income (loss)		(2,404)		3,618
Comprehensive loss		$	(10,155)	$	(28,690)

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, 2024
	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance as of December 31, 2023	$	702	$	712,994	$	1,394,967	$	(674,896)	$	(109,470)	$	1,324,297
Net loss	—		—		(7,751)		—		—		(7,751)
Other comprehensive loss	—		—		—		—		(2,404)		(2,404)
Stock-based compensation	—		8,099		—		—		—		8,099
Shares issued and forfeited, net, under stock plans	—		(6,157)		—		7,336		—		1,179
Repurchase of 2,060,433 shares of common stock	—		—		—		(63,065)		—		(63,065)
Repurchase of stock-based compensation awards for tax withholdings	—		—		—		(3,302)		—		(3,302)
Balance as of March 31, 2024	$	702	$	714,936	$	1,387,216	$	(733,927)	$	(111,874)	$	1,257,053


	Three Months Ended March 31, 2023
	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance as of December 31, 2022	$	702	$	702,458	$	1,273,458	$	(665,771)	$	(117,660)	$	1,193,187
Net loss	—		—		(32,308)		—		—		(32,308)
Other comprehensive income	—		—		—		—		3,618		3,618
Stock-based compensation	—		5,301		—		—		—		5,301
Shares issued and forfeited, net, under stock plans	—		(6,719)		—		7,549		—		830

Repurchase of stock-based compensation awards for tax withholdings	—		—		—		(3,001)		—		(3,001)
Balance as of March 31, 2023	$	702	$	701,040	$	1,241,150	$	(661,223)	$	(114,042)	$	1,167,627

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,
	2024		2023
Cash flows from operating activities:
Net loss	$	(7,751)	$	(32,308)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation	3,631		6,131
Amortization	23,978		25,408
Amortization of operating lease right-of-use assets	2,568		2,767
Amortization of deferred debt issuance costs	936		1,115
Deferred income taxes	1,006		(10,382)
Stock-based compensation expense	8,099		5,301
Other	(1,311)		(290)
Changes in operating assets and liabilities:
Receivables	127,269		88,960
Accounts payable	(448)		(1,308)
Accrued employee compensation	(26,453)		(15,593)
Deferred revenue	13,907		10,202
Other current and noncurrent assets and liabilities	(22,190)		(39,935)
Net cash flows from operating activities	123,241		40,068
Cash flows from investing activities:
Purchases of property and equipment	(3,208)		(2,258)
Purchases of software and distribution rights	(14,582)		(6,481)


Net cash flows from investing activities	(17,790)		(8,739)
Cash flows from financing activities:
Proceeds from issuance of common stock	693		707
Proceeds from exercises of stock options	475		78
Repurchase of stock-based compensation awards for tax withholdings	(3,302)		(3,001)
Repurchases of common stock	(62,515)		—
Proceeds from revolving credit facility	164,000		50,000
Repayment of revolving credit facility	(152,000)		(45,000)
Proceeds from term portion of credit agreement	500,000		—
Repayment of term portion of credit agreement	(529,073)		(14,606)
Payments for debt issuance costs	(5,141)		—
Payments on or proceeds from other debt, net	(2,694)		(5,670)
Net decrease in settlement assets and liabilities	(18,933)		(2,834)
Net cash flows from financing activities	(108,490)		(20,326)
Effect of exchange rate fluctuations on cash	2,314		2,557
Net increase (decrease) in cash and cash equivalents	(725)		13,560
Cash and cash equivalents, including settlement deposits, beginning of period	238,821		214,672
Cash and cash equivalents, including settlement deposits, end of period	$	238,096	$	228,232
Reconciliation of cash and cash equivalents to the Consolidated Balance Sheets
Cash and cash equivalents	$	183,393	$	142,412
Settlement deposits	54,703		85,820
Total cash and cash equivalents, including settlement deposits	$	238,096	$	228,232
Supplemental cash flow information
Income taxes paid	$	2,524	$	17,268
Interest paid	$	24,081	$	23,403

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, 2024, and for the three months ended March 31, 2024 and 2023, 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, 2023, 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, 2023, filed on February 29, 2024. Results for the three months ended March 31, 2024, 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. These estimates and assumptions are affected by management’s application of accounting policies, as well as uncertainty in the current economic environment. Actual results could differ from those estimates.

Other Current Liabilities

The components of other current liabilities are included in the following table (in thousands):


	March 31, 2024		December 31, 2023
Vendor financed licenses	$	13,698	$	12,702
Operating lease liabilities	9,538		9,348
Accrued interest	3,337		9,172
Other	39,191		51,022
Total other current liabilities	$	65,764	$	82,244

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

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Company. The amount of settlement funds as of March 31, 2024, and December 31, 2023, was $173.4 million and $273.2 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 $394.0 million and $398.5 million as of March 31, 2024, and December 31, 2023, 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 operating segments, Banks, Merchants, and Billers, as the reporting units. As of March 31, 2024, the Company's goodwill balance of $1.2 billion was allocated $671.7 million to Banks, $137.3 million to Merchants, and $417.0 million to Billers.

Recoverability of goodwill is measured using a discounted cash flow 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, 2023, annual impairment test and there have been no indications of impairment in the subsequent periods.

Equity Method Investment

In July 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 $18.3 million and $18.5 million, which is included in other noncurrent assets in the condensed consolidated balance sheet as of March 31, 2024, and December 31, 2023, respectively.

Recently Issued Accounting Standards Not Yet Effective

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024, and early application is permitted. The Company is currently assessing the impact the adoption of ASU 2023-07 will have on its segment reporting disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this update will require disclosure of more disaggregated information about a reporting entity's effective tax rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, and early application is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is currently assessing the impact the adoption of ASU 2023-09 will have on its income tax disclosures.

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 be entitled to 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 9, Segment Information, for additional information, including disaggregation of revenue based on primary solution category.

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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, 2024		December 31, 2023
Billed receivables	$	143,851	$	250,423
Allowance for doubtful accounts	(2,581)		(4,295)
Billed receivables, net	141,270		246,128
Current accrued receivables, net	203,855		206,209
Long-term accrued receivables, net	290,186		313,983
Total accrued receivables, net	494,041		520,192
Total receivables, net	$	635,311	$	766,320

No customer accounted for more than 10% of the Company’s consolidated receivables balance as of March 31, 2024 and December 31, 2023.

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, 2023	$	84,360
Deferral of revenue	40,479
Recognition of deferred revenue	(26,683)
Foreign currency translation	(892)
Balance, March 31, 2024	$	97,264

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 or meets the allocation objective.

Revenue allocated to remaining performance obligations was $672.8 million as of March 31, 2024, of which the Company expects to recognize approximately 49% over the next 12 months and the remainder thereafter.

During the three months ended March 31, 2024 and 2023, revenue recognized by the Company from performance obligations satisfied in previous periods was not significant.

3. Debt

As of March 31, 2024, the Company had $136.0 million, $490.6 million, and $400.0 million outstanding under its Revolving Credit Facility, Term Loans, and Senior Notes, respectively, with up to $461.9 million of unused borrowings under the Revolving Credit Facility portion of the Credit Agreement, as amended, and up to $2.1 million of unused borrowings under Letter of Credit agreements. The amount of unused borrowings actually available varies in accordance with the terms of the agreement.

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Credit Agreement

On February 26, 2024, ACI Worldwide, Inc. (the “Company”) entered into a Refinance Amendment (the “Amendment”) to the Second Amended and Restated Credit Agreement, dated as of April 5, 2019 (as amended, restated, supplemented or otherwise modified from time to time, including by the Amendment, the “Credit Agreement”) among the Company, the subsidiary borrowers from time to time party thereto, the lenders from time to time party thereto, Bank of America, N.A., as administrative agent and a lender, BofA Securities, Inc., PNC Capital Markets LLC, Wells Fargo Securities, LLC, and TD Securities (USA) LLC, as Joint Lead Arrangers and Joint Bookrunners, and the other financial institutions party thereto.

The Amendment (i) provides a senior secured term loan facility (the “Term Loan Facility”) in an aggregate principal amount of $500 million, (ii) provides a senior secured revolving credit facility (the “Revolving Loan Facility” and together with the Term Loan Facility, the “Credit Facilities”) of up to $600 million, and (iii) extends the maturity date of the Facilities to February 26, 2029 (the “Maturity Date”), provided that if any of the Company’s 5.750% Senior Notes due 2026 are outstanding on the date that is 91 days before the maturity thereof (the “Springing Maturity Date”), and the Company does not have sufficient liquidity as of such date, the Maturity Date will be the Springing Maturity Date. The Revolving Loan Facility includes a $35 million sublimit for the issuance of standby letters of credit and a $20 million sublimit for swingline loans. Amounts repaid under the Revolving Facility may be reborrowed.

Borrowings under the Credit Facilities bear interest at a rate equal to, at borrower's option, either (A) a base rate determined by reference to the highest of (1) the rate of interest per annum publicly announced by Bank of America as its prime rate, (2) the federal funds effective rate plus 0.5%, (3) term SOFR plus 1%, and (4) 1% or (B) term SOFR for applicable interest period relevant to such borrowing, in each case plus an applicable margin. The applicable margin for borrowings under the Credit Facilities is, based on the calculation of the applicable consolidated total leverage ratio, between 0.5% to 1.5% with respect to base rate borrowings and between 1.5% and 2.5% with respect to term SOFR rate borrowings. Interest is due and payable monthly. The interest rate in effect for the Credit Facility as of March 31, 2024, was 7.43%.

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 SOFR 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 subsidiaries, ACI Worldwide Corp. and ACI Payments, Inc. are co-borrowers under the Credit Agreement. The obligations of the borrowers under the Credit Facilities and the obligations of the Company and its subsidiaries under cash management arrangements entered into with lenders under the Credit Facilities (or affiliates thereof) are jointly and severally guaranteed by the Company and all of its existing and future material domestic subsidiaries, subject to certain exclusions. The obligations of the borrowers in respect of the Credit Facilities are secured by first-priority security interests in substantially all assets of the borrowers, including 100% of the capital stock of each domestic subsidiary of the borrower and 65% of the voting capital stock of each foreign subsidiary that is directly owned by a borrower, in each case subject to certain exclusions set forth in the Credit Agreement.

The Credit Agreement contains customary negative covenants that, among other things, restrict the Company’s ability to incur additional indebtedness, grant additional liens, and make certain acquisitions, investments, asset dispositions, and restricted payments. In addition, the Credit Agreement contains financial covenants that require the Company to maintain, as of the end of any fiscal quarter, (i) a consolidated total net leverage ratio of less than or equal to 4.25 to 1.00, (ii) a consolidated senior secured net leverage ratio of less than or equal to 3.75 to 1.00, and (iii) a minimum consolidated interest coverage ratio of greater than or equal to 3.00 to 1.00, in each case subject to certain exclusions as set forth in the Credit Agreement.

The Credit Agreement also contains certain customary affirmative covenants and events of default. If an event of default, as specified in the Credit Agreement, shall occur and be continuing, the Company may be required to repay all amounts outstanding under the Credit Facilities.

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 March 31, 2024, are as follows (in thousands):


Fiscal Year Ending December 31,
Remainder of 2024	$	28,125
2025	37,500
2026	437,500
2027	37,500
2028	37,500
Thereafter	448,500
Total	$	1,026,625

As of March 31, 2024, 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):


	March 31, 2024		December 31, 2023
Term loans	$	490,625	$	519,698
Revolving credit facility	136,000		124,000
5.750% Senior notes, due August 2026	400,000		400,000
Debt issuance costs	(9,899)		(5,694)
Total debt	1,016,726		1,038,004
Less: current portion of term loans	37,500		77,900
Less: current portion of debt issuance costs	(2,625)		(3,495)
Total long-term debt	$	981,851	$	963,599

Overdraft Facility

In 2019, the Company and ACI Payments, Inc. entered in to an uncommitted overdraft facility with Bank of America, N.A. The overdraft facility bears interest at the federal funds effective rate plus 2.25% 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, 2024, there was $75.0 million available and no amount outstanding on the overdraft facility. As of December 31, 2023, there was no amount outstanding on the overdraft facility.

Other

The Company finances certain multi-year license agreements for internal-use software. Upon execution, these arrangements are treated as a non-cash investing and financing activity for purposes of the condensed consolidated statements of cash flows. As of March 31, 2024 and December 31, 2023, $3.6 million was outstanding on these agreements, all of which is included in other current liabilities in the condensed consolidated balance sheet.

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4. Software and Other Intangible Assets

The carrying amount and accumulated amortization of the Company's software assets subject to amortization at each balance sheet date are as follows (in thousands):


	March 31, 2024						December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Balance		Gross Carrying Amount		Accumulated Amortization		Net Balance
Software for internal use	$	481,471	$	(369,103)	$	112,368	$	469,325	$	(360,907)	$	108,418

Amortization of software for internal use is computed using the straight-line method over an estimated useful life of generally three to eight years. Software for internal use amortization expense recorded during the three months ended March 31, 2024 and 2023, totaled $15.5 million and $17.0 million, respectively. These software amortization expense amounts are reflected in depreciation and amortization in the condensed consolidated statements of operations.

The carrying amount and accumulated amortization of the Company’s other intangible assets subject to amortization at each balance sheet date are as follows (in thousands):


	March 31, 2024						December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Balance		Gross Carrying Amount		Accumulated Amortization		Net Balance
Customer relationships	$	446,207	$	(259,698)	$	186,509	$	447,654	$	(252,828)	$	194,826
Trademarks and trade names	21,810		(21,537)		273		21,899		(21,079)		820
Total other intangible assets	$	468,017	$	(

SEC Form 10-Q filed by ACI Worldwide Inc.