Segment Information

9 Months Ended

Sep. 30, 2019

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 consist 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 September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenue
ACI On Premise	$	161,949		$	141,006		$	383,075		$	367,431
ACI On Demand	192,952			104,519			475,299			322,399
Total revenue	$	354,901		$	245,525		$	858,374		$	689,830
Segment Adjusted EBITDA
ACI On Premise	$	99,553		$	77,819		$	184,890		$	171,477
ACI On Demand	18,561			3,270			35,639			(4,327		)
Depreciation and amortization	(33,913		)	(23,545		)	(88,543		)	(72,889		)
Stock-based compensation expense	(9,371		)	(6,575		)	(30,328		)	(20,642		)
Corporate and unallocated expenses	(19,512		)	(22,610		)	(80,315		)	(64,122		)
Interest, net	(15,999		)	(9,810		)	(36,906		)	(23,406		)
Other, net	(2,369		)	(1,304		)	(2,879		)	(3,036		)
Income (loss) before income taxes	$	36,950		$	17,245		$	(18,442	)	$	(16,945	)
Depreciation and amortization
ACI On Premise	$	2,963		$	2,772		$	9,012		$	8,596
ACI On Demand	9,059			7,906			25,110			23,468
Corporate	21,891			12,867			54,421			40,825
Total depreciation and amortization	$	33,913		$	23,545		$	88,543		$	72,889
Stock-based compensation expense
ACI On Premise	$	2,227		$	1,806		$	6,234		$	5,111
ACI On Demand	2,389			1,802			6,554			5,099
Corporate	4,755			2,967			17,540			10,432
Total stock-based compensation expense	$	9,371		$	6,575		$	30,328		$	20,642

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 September 30, 2019						Three Months Ended September 30, 2018
	ACI On Premise		ACI On Demand		Total		ACI On Premise		ACI On Demand		Total
Primary Geographic Markets
Americas - United States	$	53,986	$	176,172	$	230,158	$	26,022	$	88,401	$	114,423
Americas - Other	22,879		2,268		25,147		16,709		2,409		19,118
EMEA	72,662		12,191		84,853		80,738		12,385		93,123
Asia Pacific	12,422		2,321		14,743		17,537		1,324		18,861
Total	$	161,949	$	192,952	$	354,901	$	141,006	$	104,519	$	245,525
Primary Solution Categories
Bill Payments	$	—	$	154,285	$	154,285	$	—	$	64,134	$	64,134
Digital Channels	6,791		8,480		15,271		7,499		9,327		16,826
Merchant Payments	4,739		18,534		23,273		6,272		19,481		25,753
Payments Intelligence	13,623		8,759		22,382		7,203		9,639		16,842
Real-Time Payments	19,191		1,032		20,223		23,704		540		24,244
Retail Payments	117,605		1,862		119,467		96,328		1,398		97,726
Total	$	161,949	$	192,952	$	354,901	$	141,006	$	104,519	$	245,525



	Nine Months Ended September 30, 2019						Nine Months Ended September 30, 2018
	ACI On Premise		ACI On Demand		Total		ACI On Premise		ACI On Demand		Total
Primary Geographic Markets
Americas - United States	$	116,104	$	425,033	$	541,137	$	82,280	$	275,171	$	357,451
Americas - Other	46,237		7,118		53,355		45,269		7,077		52,346
EMEA	167,268		36,751		204,019		181,913		36,819		218,732
Asia Pacific	53,466		6,397		59,863		57,969		3,332		61,301
Total	$	383,075	$	475,299	$	858,374	$	367,431	$	322,399	$	689,830
Primary Solution Categories
Bill Payments	$	—	$	348,592	$	348,592	$	—	$	204,673	$	204,673
Digital Channels	24,960		36,280		61,240		27,779		30,281		58,060
Merchant Payments	17,398		55,815		73,213		16,655		48,439		65,094
Payments Intelligence	27,164		26,614		53,778		25,532		30,508		56,040
Real-Time Payments	55,714		2,557		58,271		53,086		1,474		54,560
Retail Payments	257,839		5,441		263,280		244,379		7,024		251,403
Total	$	383,075	$	475,299	$	858,374	$	367,431	$	322,399	$	689,830

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



	September 30, 2019		December 31, 2018
Long-lived Assets
United States	$	1,527,747	$	811,435
Other	745,149		717,495
Total	$	2,272,896	$	1,528,930

No single customer accounted for more than 10% of the Company’s consolidated revenues during the three and nine months ended September 30, 2019 and 2018. Aggregate revenues attributable to our customers in Canada accounted for 11.8% of the Company's consolidated revenues during the three months ended September 30, 2018. No other country outside the United States and Canada accounted for more than 10% of the Company’s consolidated revenues during the three months ended September 30, 2019 and 2018. No other country outside the United States accounted for more than 10% of the Company's consolidated revenues during the nine months ended September 30, 2019 and 2018.