Segment Information

3 Months Ended

Mar. 31, 2019

11. 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 (“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, 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 for SaaS offerings, or in a multi-tenant environment for 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).

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.

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

	Three Months Ended March 31,
	2019			2018
Revenue
ACI On Premise	$	96,007		$	105,030
ACI On Demand		109,848			104,280
Total revenue	$	205,855		$	209,310
Segment Adjusted EBITDA
ACI On Premise	$	28,268		$	38,898
ACI On Demand		(262	)		(4,233	)
Depreciation and amortization		(24,852	)		(24,993	)
Stock-based compensation expense		(6,585	)		(6,362	)
Corporate and unallocated expenses		(24,662	)		(20,014	)
Interest, net		(8,581	)		(6,621	)
Other, net		(1,912	)		(55	)
Loss before income taxes	$	(38,586	)	$	(23,380	)
Depreciation and amortization
ACI On Premise	$	3,030		$	2,975
ACI On Demand		7,562			7,736
Corporate		14,260			14,282
Total depreciation and amortization	$	24,852		$	24,993
Stock-based compensation expense
ACI On Premise	$	1,956		$	1,467
ACI On Demand		1,951			1,463
Corporate		2,678			3,432
Total stock-based compensation expense	$	6,585		$	6,362

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 (in thousands):

	Three Months Ended March 31, 2019						Three Months Ended March 31, 2018
	ACI On Premise		ACI On Demand		Total		ACI On Premise		ACI On Demand		Total
Primary Geographic Markets
Americas - United States	$	26,422	$	93,036	$	119,458	$	30,864	$	88,946	$	119,810
Americas - Other		10,945		2,743		13,688		16,784		2,319		19,103
EMEA		42,451		12,068		54,519		38,686		12,009		50,695
Asia Pacific		16,189		2,001		18,190		18,696		1,006		19,702
Total	$	96,007	$	109,848	$	205,855	$	105,030	$	104,280	$	209,310
Primary Solution Categories
Bill Payments	$	—	$	68,967	$	68,967	$	—	$	66,168	$	66,168
Digital Channels		8,725		9,788		18,513		11,363		10,644		22,007
Merchant Payments		5,022		19,339		24,361		5,010		12,371		17,381
Payments Intelligence		7,037		8,981		16,018		10,420		11,798		22,218
Real-Time Payments		14,715		618		15,333		13,641		450		14,091
Retail Payments		60,508		2,155		62,663		64,596		2,849		67,445
Total	$	96,007	$	109,848	$	205,855	$	105,030	$	104,280	$	209,310

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

	March 31, 2019		December 31, 2018
Long-lived assets
United States	$	829,953	$	811,435
Other		731,564		717,495
	$	1,561,517	$	1,528,930

No single customer accounted for more than 10% of the Company’s consolidated revenues during the three months ended March 31, 2019 and 2018. No other country outside the United States accounted for more than 10% of the Company’s consolidated revenues during the three months ended March 31, 2019 and 2018.