Segment Information

12 Months Ended

Dec. 31, 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 interim 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 or through a third-party cloud service provider. 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 billers 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. 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 15, Commitments and Contingencies.

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



	Years Ended December 31,
	2019			2018			2017
Revenues
ACI On Premise	$	579,334		$	576,755		$	598,590
ACI On Demand	678,960			433,025			425,601
Total revenue	$	1,258,294		$	1,009,780		$	1,024,191
Segment Adjusted EBITDA
ACI On Premise	$	321,305		$	323,902		$	347,094
ACI On Demand	66,501			12,015			(1,832		)
Depreciation and amortization	(122,569		)	(97,350		)	(102,224		)
Stock-based compensation expense	(36,763		)	(20,360		)	(13,683		)
Corporate and unallocated expenses	(104,718		)	(92,296		)	(144,715		)
Interest, net	(52,066		)	(30,388		)	(38,449		)
Other, net	520			(3,724		)	(2,619		)
Income before income taxes	$	72,210		$	91,799		$	43,572
Depreciation and amortization
ACI On Premise	$	11,992		$	11,634		$	13,094
ACI On Demand	34,395			31,541			34,171
Corporate	76,182			54,175			54,959
Total depreciation and amortization	$	122,569		$	97,350		$	102,224
Stock-based compensation expense
ACI On Premise	$	7,651		$	4,348		$	2,234
ACI On Demand	7,995			4,338			2,230
Corporate	21,117			11,674			9,219
Total stock-based compensation expense	$	36,763		$	20,360		$	13,683

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, 2019						Year Ended December 31, 2018
	ACI On Premise		ACI On Demand		Total		ACI On Premise		ACI On Demand		Total
Primary Geographic Markets
Americas - United States	$	172,660	$	609,160	$	781,820	$	131,382	$	369,097	$	500,479
Americas - Other	68,020		9,350		77,370		61,969		9,577		71,546
EMEA	251,035		50,629		301,664		296,157		48,889		345,046
Asia Pacific	87,619		9,821		97,440		87,247		5,462		92,709
Total	$	579,334	$	678,960	$	1,258,294	$	576,755	$	433,025	$	1,009,780
Primary Solution Categories
Bill Payments	$	—	$	510,300	$	510,300	$	—	$	275,526	$	275,526
Digital Channels	32,980		44,731		77,711		35,231		40,342		75,573
Merchant Payments	25,693		77,204		102,897		30,447		64,956		95,403
Payments Intelligence	33,790		36,019		69,809		42,353		41,330		83,683
Real-Time Payments	97,153		3,456		100,609		92,068		2,193		94,261
Retail Payments	389,718		7,250		396,968		376,656		8,678		385,334
Total	$	579,334	$	678,960	$	1,258,294	$	576,755	$	433,025	$	1,009,780



	Year Ended December 31, 2017
	ACI On Premise		ACI On Demand		Total
Primary Geographic Markets
Americas - United States	$	175,682	$	365,553	$	541,235
Americas - Other	72,802		9,429		82,231
EMEA	270,388		47,872		318,260
Asia Pacific	79,718		2,747		82,465
Total	$	598,590	$	425,601	$	1,024,191
Primary Solution Categories
Bill Payments	$	—	$	271,421	$	271,421
Digital Channels	47,973		46,063		94,036
Merchant Payments	27,155		56,018		83,173
Payments Intelligence	32,478		41,628		74,106
Real-Time Payments	70,087		2,785		72,872
Retail Payments	420,897		7,686		428,583
Total	$	598,590	$	425,601	$	1,024,191

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



	December 31,
	2019		2018
Long-lived Assets
United States	$	1,526,046	$	811,435
Other	759,501		717,495
Total	$	2,285,547	$	1,528,930

No single customer accounted for more than 10% of the Company’s consolidated revenues during the years ended December 31, 2019, 2018, and 2017. No other country outside the United States accounted for more than 10% of the Company’s consolidated revenues during the years ended December 31, 2019, 2018, and 2017.