10. Segment Information

In January 2017, the Company announced a change in organizational structure to align with its strategic direction. As a result, beginning January 1, 2017, the Company reports financial performance based on its segments, ACI On Premise and ACI On Demand, and analyzes operating income as a measure of segment profitability.

The Company’s chief operating decision maker (“CODM”), which is also our Chief Executive Officer focuses his review of consolidated financial information and the allocation of resources based upon the operating results, including revenues and operating income, for the segments ACI On Premise and ACI On Demand, separate from the 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, custom solutions, which are often part of a larger system located and managed at the customer site. These customers require a level of control, customization, 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, financial intermediaries, merchants, and corporates who use payments to facilitate their core business. The Company sees an increasing number of customers opting for software as a service and platform as a service offerings, which offer reduced complexity and cost as well as the ability to rapidly implement and scale.

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.

Corporate and other 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, amortization of acquisition-related intangibles, and other costs that are not considered when management evaluates segment performance. For the year-ended December 31, 2017, Corporate and other includes $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 other also 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,
	2017			2016
Revenues:
ACI On Premise	$	598,590		$	591,252
ACI On Demand		425,601			399,033
Corporate and other		—			15,416

	$	1,024,191		$	1,005,701

Depreciation and amortization expense:
ACI On Premise	$	13,094		$	14,581
ACI On Demand		34,171			29,385
Corporate and other		54,959			59,488

	$102,224			$103,454

Stock-based compensation expense:
ACI On Premise	$	2,234		$	6,894
ACI On Demand		2,230			6,876
Corporate and other		9,219			29,843

	$	13,683		$	43,613

Operating income (loss):
ACI On Premise	$	331,766		$	290,713
ACI On Demand		(38,233	)		(38,885	)
Corporate and other		(208,893	)		(30,698	)

	$	84,640		$	221,130

As a result of the significant changes associated with the reorganization, which were implemented on a prospective basis only, as well as the changes in the Company through the PAY.ON acquisition that occurred late in 2015 and the CFS divestiture in 2016, ACI does not have all of the information that would be necessary to present segment data for 2015 under the new operating segments structure for operating expenses and results. The Company, likewise, does not have the necessary information to present the 2017 results under the prior segment view. This information is not available to management of the Company for its own internal use and it is impractical to obtain or generate the information. The Corporate and other segment includes revenue from the operations of CFS. Revenue for the year-ended December 31, 2015 under the new operating segments is as follows (in thousands):


	Year Ended
	December 31, 2015
Revenue:
ACI On Premise	$	589,006
ACI On Demand		362,368
Corporate and other		94,603

	$	1,045,977

Prior to the reorganization, the Company’s CODM, together with other senior management personnel, focused their review of consolidated financial information and the allocation of resources based on reporting of operating results, including revenues and operating income for the geographic regions of the Americas, Europe/Middle East/Africa (“

EMEA”), and Asia/Pacific. The Company’s products were sold and supported through distribution networks covering these three geographic regions, with each distribution network having its own sales force. The Company supplemented its distribution networks with independent reseller and/or distributor arrangements. All administrative costs not directly attributable or reasonably allocable to a geographic segment were tracked in Corporate.

The Company allocated segment support expenses such as global product development, business operations, and product management based upon percentage of revenue per segment. Depreciation and amortization and other facility related costs were allocated as a percentage of the headcount by segment. The Corporate line item consisted of the corporate overhead costs that were not allocated to operating segments. Corporate overhead costs related to human resources, finance, legal, accounting, merger and acquisition activity, and amortization of acquisition-related intangibles and software as well as other costs that were not considered when management evaluates segment performance.

The following is selected segment financial data under the previous operating segments for the periods indicated (in thousands):


	Years Ended December 31,
	2016			2015
Revenues:
Americas - United States	$	527,431		$	628,013
Americas - Other		116,718			82,548
EMEA		261,160			250,568
Asia/Pacific		100,392			84,848

	$	1,005,701		$	1,045,977

Depreciation and amortization expense:
Americas	$	27,951		$	24,966
EMEA		3,830			3,670
Asia/Pacific		1,820			1,751
Corporate		69,853			67,044

	$	103,454		$	97,431

Stock-based compensation expense:
Americas	$	5,005		$	1,638
EMEA		6,476			1,223
Asia/Pacific		605			36
Corporate		31,527			15,483

	$	43,613		$	18,380

Income (loss) before income taxes:
Americas	$	206,689		$	111,382
EMEA		176,958			132,518
Asia/Pacific		62,422			41,658
Corporate		(260,488	)		(172,185	)

	$	185,581		$	113,373

Assets are not allocated to segments and the Company’s CODM does not evaluate operating segments using discrete asset information.

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


	Years Ended December 31,
	2017		2016		2015
Revenues:
United States	$	541,235	$	527,431	$	628,013
Other		482,956		478,270		417,964

	$	1,024,191	$	1,005,701	$	1,045,977


	As of December 31,
	2017		2016
Long lived assets
United States	$	759,513	$	752,442
Other		613,556		664,383

	$	1,373,069	$	1,416,825

Additionally, the Company offers six primary solution categories that are sold in each of the geographic regions listed above. Following are revenues, by product and services (in thousands):


	Years Ended December 31,
	2017		2016		2015
Retail payments	$	428,583	$	422,262	$	416,998
Bill payments		271,421		255,540		241,949
Digital channels		94,036		124,630		219,698
Payments risk management		80,326		67,649		66,386
Merchant payments		76,953		64,626		49,064
Real time payments		72,872		70,994		51,882

Total	$	1,024,191	$	1,005,701	$	1,045,977

During the years ended December 31, 2017, 2016, and 2015, approximately 19%, 22%, and 21%, respectively, of the Company’s total revenues were derived from licensing the BASE24 product line, which does not include the BASE24-eps product, and providing related services and maintenance. Digital Channels revenue includes $15.3 million and $94.5 million from CFS-related assets for the years-ended December 31, 2016 and 2015, respectively.

No single customer accounted for more than 10% of the Company’s consolidated revenues during the years ended December 31, 2017, 2016, and 2015. No other country outside the United States accounted for more than 10% of the Company’s consolidated revenues during the years ended December 31, 2017, 2016, and 2015.