Segment Information

6 Months Ended

Jun. 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 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 June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenue
ACI On Premise	$	125,119		$	121,395		$	221,126		$	226,425
ACI On Demand	172,499			113,600			282,347			217,880
Total revenue	$	297,618		$	234,995		$	503,473		$	444,305
Segment Adjusted EBITDA
ACI On Premise	$	57,069		$	54,760		$	85,337		$	93,658
ACI On Demand	17,340			(3,364		)	17,078			(7,597		)
Depreciation and amortization	(29,778		)	(24,351		)	(54,630		)	(49,344		)
Stock-based compensation expense	(14,372		)	(7,705		)	(20,957		)	(14,067		)
Corporate and unallocated expenses	(36,141		)	(21,498		)	(60,803		)	(41,512		)
Interest, net	(12,326		)	(6,975		)	(20,907		)	(13,596		)
Other, net	1,402			(1,677		)	(510		)	(1,732		)
Loss before income taxes	$	(16,806	)	$	(10,810	)	$	(55,392	)	$	(34,190	)
Depreciation and amortization
ACI On Premise	$	3,019		$	2,849		$	6,049		$	5,824
ACI On Demand	8,489			7,826			16,051			15,562
Corporate	18,270			13,676			32,530			27,958
Total depreciation and amortization	$	29,778		$	24,351		$	54,630		$	49,344
Stock-based compensation expense
ACI On Premise	$	2,051		$	1,838		$	4,007		$	3,305
ACI On Demand	2,214			1,834			4,165			3,297
Corporate	10,107			4,033			12,785			7,465
Total stock-based compensation expense	$	14,372		$	7,705		$	20,957		$	14,067

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 June 30, 2019						Three Months Ended June 30, 2018
	ACI On Premise		ACI On Demand		Total		ACI On Premise		ACI On Demand		Total
Primary Geographic Markets
Americas - United States	$	35,696	$	155,825	$	191,521	$	25,394	$	97,825	$	123,219
Americas - Other	12,413		2,107		14,520		11,776		2,348		14,124
EMEA	52,155		12,492		64,647		62,489		12,425		74,914
Asia Pacific	24,855		2,075		26,930		21,736		1,002		22,738
Total	$	125,119	$	172,499	$	297,618	$	121,395	$	113,600	$	234,995
Primary Solution Categories
Bill Payments	$	—	$	125,339	$	125,339	$	—	$	74,371	$	74,371
Digital Channels	9,444		18,011		27,455		8,917		10,310		19,227
Merchant Payments	7,637		17,942		25,579		5,308		15,411		20,719
Payments Intelligence	6,504		8,874		15,378		7,974		10,247		18,221
Real-Time Payments	21,809		907		22,716		15,741		484		16,225
Retail Payments	79,725		1,426		81,151		83,455		2,777		86,232
Total	$	125,119	$	172,499	$	297,618	$	121,395	$	113,600	$	234,995



	Six Months Ended June 30, 2019						Six Months Ended June 30, 2018
	ACI On Premise		ACI On Demand		Total		ACI On Premise		ACI On Demand		Total
Primary Geographic Markets
Americas - United States	$	62,118	$	248,861	$	310,979	$	56,258	$	186,770	$	243,028
Americas - Other	23,358		4,850		28,208		28,560		4,668		33,228
EMEA	94,606		24,560		119,166		101,175		24,434		125,609
Asia Pacific	41,044		4,076		45,120		40,432		2,008		42,440
Total	$	221,126	$	282,347	$	503,473	$	226,425	$	217,880	$	444,305
Primary Solution Categories
Bill Payments	$	—	$	194,306	$	194,306	$	—	$	140,539	$	140,539
Digital Channels	18,169		27,799		45,968		20,280		20,954		41,234
Merchant Payments	12,659		37,281		49,940		10,383		28,957		39,340
Payments Intelligence	13,541		17,855		31,396		18,329		20,870		39,199
Real-Time Payments	36,524		1,525		38,049		29,382		934		30,316
Retail Payments	140,233		3,581		143,814		148,051		5,626		153,677
Total	$	221,126	$	282,347	$	503,473	$	226,425	$	217,880	$	444,305

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



	June 30, 2019		December 31, 2018
Long-lived Assets
United States	$	1,538,730	$	811,435
Other	726,038		717,495
Total	$	2,264,768	$	1,528,930

No single customer accounted for more than 10% of the Company’s consolidated revenues during the three and six months ended June 30, 2019 and 2018. No other country outside the United States accounted for more than 10% of the Company’s consolidated revenues during the three and six months ended June 30, 2019 and 2018.