Segment Information

12 Months Ended

Dec. 31, 2018

10. Segment Information

The Company reports financial performance based on its segments, ACI On Premise and ACI On Demand, and analyzes Segment Adjusted EBITDA as a measure of segment profitability.

The Company’s Chief Executive Officer is also the chief operating decision maker, or CODM. The CODM, together with other senior management personnel, focus their review on consolidated financial information and the allocation of resources based on operating results, including revenues and Segment Adjusted EBITDA, for each segment, separate from Corporate operations.

ACI On Premise serves customers who manage their software on site. These on-premise customers use the Company’s software to develop sophisticated solutions, which are often part of a larger system located and managed at the customer specified site. These customers require a level of control and flexibility that ACI On Premise solutions can offer, and they have the resources and expertise to take a lead role in managing these solutions.

ACI On Demand serves the needs of banks and merchants and corporates who use payments to facilitate their core business. These on-demand solutions are maintained and delivered through the cloud via our global data centers and are available in either a single-tenant environment, SaaS offerings, or in a multi-tenant environment, PaaS offerings.

Revenue is attributed to the reportable segments based upon the product sold and mechanism for delivery to the customer. Expenses are attributed to the reportable segments in one of three methods, (1) direct costs of the segment, (2) labor costs that can be attributed based upon time tracking for individual products, or (3) costs that are allocated. Allocated costs are generally marketing and sales related activities as well as information technology and facilities related expense for which multiple segments benefit. The Company also allocates certain depreciation costs to the segments.

Segment Adjusted EBITDA is the measure reported to the CODM for purposes of making decisions on allocating resources and assessing the performance of the Company’s segments and, therefore, Segment Adjusted EBITDA is presented in conformity with ASC 280,

Segment Reporting

. Segment Adjusted EBITDA is defined as earnings (loss) from operations before interest, income tax expense (benefit), depreciation and amortization (“EBITDA”) adjusted to exclude stock-based compensation, and net other income (expense). During the first quarter of 2018, the Company changed the presentation of its segment measure of profit and loss. As a result, the 2017 and 2016 segment disclosures have been recast to conform with the 2018 presentation.

Corporate and unallocated expenses consists of the corporate overhead costs that are not allocated to reportable segments. These overhead costs relate to human resources, finance, legal, accounting, merger and acquisition activity, and other costs that are not considered when management evaluates segment performance. For the year ended December 31, 2017, Corporate and unallocated expenses

included $46.7

million of general and administrative expense for the legal judgment discussed in Note 14. For the year ended December 31, 2016, Corporate and unallocated expenses includes revenue and operating income from the operations and sale of CFS related assets and liabilities

of $15.4

million and $151.7

million, respectively.

The following is selected financial data for the Company’s reportable segments for the periods indicated (in thousands):

	Years Ended December 31 ,
	2018			2017			2016
Revenues
ACI On Premise	$	576,755		$	598,590		$	591,252
ACI On Demand		433,025			425,601			399,033
Corporate and other		—			—			15,416
Total revenue	$	1,009,780		$	1,024,191		$	1,005,701
Segment Adjusted EBITDA
ACI On Premise	$	323,902		$	347,094		$	312,188
ACI On Demand		12,015			(1,832	)		(2,624	)
Depreciation and amortization		(97,350	)		(102,224	)		(103,454	)
Stock-based compensation expense		(20,360	)		(13,683	)		(43,613	)
Corporate and unallocated expenses		(92,296	)		(144,715	)		58,633
Interest, net		(30,388	)		(38,449	)		(39,654	)
Other, net		(3,724	)		(2,619	)		4,105
Income before income taxes	$	91,799		$	43,572		$	185,581
Depreciation and amortization
ACI On Premise	$	11,634		$	13,094		$	14,581
ACI On Demand		31,541			34,171			29,385
Corporate		54,175			54,959			59,488
Total depreciation and amortization	$	97,350		$	102,224		$	103,454
Stock-based compensation expense
ACI On Premise	$	4,348		$	2,234		$	6,894
ACI On Demand		4,338			2,230			6,876
Corporate		11,674			9,219			29,843
Total stock-based compensation expense	$	20,360		$	13,683		$	43,613

Assets are not allocated to segments, and the Company’s

CODM does not evaluate operating segments using discrete asset information.

The following is revenue by primary geographic market and primary solution category for the Company’s reportable segments for the periods indicated (in thousands):

	Year Ended December 31, 2018						Year Ended December 31, 2017
	ACI On Premise		ACI On Demand		Total		ACI On Premise		ACI On Demand		Total
Primary Geographic Markets
Americas - United States	$	131,382	$	369,097	$	500,479	$	175,682	$	365,553	$	541,235
Americas - Other		61,969		9,577		71,546		72,802		9,429		82,231
EMEA		296,157		48,889		345,046		270,388		47,872		318,260
Asia Pacific		87,247		5,462		92,709		79,718		2,747		82,465
Total	$	576,755	$	433,025	$	1,009,780	$	598,590	$	425,601	$	1,024,191
Primary Solution Categories
Bill Payments	$	—	$	275,526	$	275,526	$	—	$	271,421	$	271,421
Digital Channels		35,231		40,342		75,573		47,973		46,063		94,036
Merchant Payments		30,153		59,789		89,942		26,430		50,523		76,953
Payments Intelligence		42,647		46,497		89,144		33,203		47,123		80,326
Real-Time Payments		92,068		2,193		94,261		70,087		2,785		72,872
Retail Payments		376,656		8,678		385,334		420,897		7,686		428,583
Total	$	576,755	$	433,025	$	1,009,780	$	598,590	$	425,601	$	1,024,191

	Year Ended December 31, 2016
	ACI On Premise		ACI On Demand		Other Corporate		Total
Primary Geographic Markets
Americas - United States	$	164,058	$	347,957	$	15,416	$	527,431
Americas - Other		110,463		6,255		—		116,718
EMEA		217,576		43,584		—		261,160
Asia Pacific		99,155		1,237		—		100,392
Total	$	591,252	$	399,033	$	15,416	$	1,005,701
Primary Solution Categories
Bill Payments	$	—	$	255,540	$	—	$	255,540
Digital Channels		49,617		59,597		15,416		124,630
Merchant Payments		29,311		35,315		—		64,626
Payments Intelligence		24,665		42,984		—		67,649
Real-Time Payments		70,289		705		—		70,994
Retail Payments		417,370		4,892		—		422,262
Total	$	591,252	$	399,033	$	15,416	$	1,005,701

Digital Channels revenue includes $15.4 million from CFS-related assets for the year ended December 31, 2016.

The following is the Company’s long-lived assets by geographic location for the periods indicated (in thousands):

	December 31 ,
	2018		2017
Long lived assets
United States	$	811,435	$	759,513
Other		717,495		613,556
	$	1,528,930	$	1,373,069

No single customer accounted for more than 10% of the Company’s consolidated revenues during the years ended December 31, 2018, 2017, and 2016.

No other country outside the United States accounted for more than 10% of the Company’s consolidated revenues during the years ended December 31, 2018, 2017, and 2016.