Note 7—Operations by Segments and Geographic Areas

Segment Information

Operating segments are the components of our business for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our chief executive officer. Our operating segments are generally organized by the type of product or service offered and by geography.

Similar operating segments have been aggregated into four reportable segments as follows:

Cloud Solutions. Our Cloud Solutions segment provides customers primarily with SaaS technology offerings that facilitate electronic payment, electronic invoicing, and spend management. Our legal spend management solutions, which enable customers to create more efficient processes for managing invoices generated by outside law firms while offering insight into important legal spend factors such as expense monitoring and outside counsel performance, are included within this segment. This segment also incorporates our settlement network solutions (financial messaging and Paymode-X). Our settlement network solutions are highly scalable, secure and cost effective and facilitate cash payment and transaction settlement between businesses, their vendors and banks. Revenue within this segment is generally recognized on a subscription or transaction basis or ratably over the contract term.

Banking Solutions. Our Banking Solutions segment provides solutions that are specifically designed for banking and financial institution customers. Our Banking Solutions products are now sold predominantly on a hosted basis, with revenue recorded over time. This has the effect of contributing to recurring revenue and the revenue predictability of future periods, but results in revenue recognition over a longer period than a traditional on-premise software license transaction.

Payments and Transactional Documents. Our Payments and Transactional Documents segment supplies financial business process management software solutions, including making and collecting payments, sending and receiving invoices, and generating and storing business documents. This segment also provides a range of standard professional services and equipment and supplies that complement and enhance our core software products. When licensed for on-premise deployment, software license revenue is typically recorded upon delivery of the software and commencement of the license term. In hosted arrangements, we typically record revenue over time. Professional services revenue is normally recorded as we perform the work and software support and maintenance revenue is recorded ratably over the support period.

Other. Our Other segment consists of our healthcare and cyber fraud and risk management operating segments. Our healthcare solutions for patient registration, electronic signature, mobile document and payments allow healthcare organizations to improve business efficiencies, reduce costs and improve care quality. Our cyber fraud and risk management solutions non-invasively monitor, replay and analyze user behavior to flag and even stop suspicious activity in real time. When licensed for on-premise deployment, software revenue for these operating segments is typically recorded upon delivery of the software and commencement of the license term. Professional services revenue is normally recorded as we perform the work and software support and maintenance revenue is recorded ratably over the support period.

Periodically a sales person in one operating segment will sell products and services that are typically sold within a different operating segment. In such cases, the transaction is generally recorded by the operating segment to which the sales person is assigned. Accordingly, segment results can include the results of transactions that have been allocated to a specific segment based on the contributing sales resources, rather than the nature of the product or service. Conversely, a transaction can be recorded by the operating segment primarily responsible for delivery to the customer, even if the sales person is assigned to a different operating segment.

Our chief operating decision maker assesses segment performance based on a variety of factors that normally include segment revenue and a segment measure of profit or loss. Each segment’s measure of profit or loss is on a pre-tax basis and excludes certain items as presented in our reconciliation of the measure of total segment profit to GAAP income (loss) before income taxes that follows. There are no inter-segment sales; accordingly, the measure of segment revenue and profit or loss reflects only revenues from external customers. The costs of certain corporate level expenses, primarily general and administrative expenses, are allocated to our operating segments based on a percentage of the segment’s revenues.

We do not track or assign our assets by operating segment.

Segment information for the three and six months ended December 31, 2018 and 2017 according to the segment descriptions above, is as follows:


	Three Months Ended December 31,						Six Months Ended December 31,
	2018			2017			2018			2017
	(in thousands)
Segment revenue:
Cloud Solutions	$	50,328		$	44,518		$	99,903		$	86,962
Banking Solutions		23,128			20,954			45,380			42,275
Payments and Transactional Documents		25,943			25,343			52,177			48,392
Other		5,447			4,380			9,823			8,862

Total segment revenue	$	104,846		$	95,195		$	207,283		$	186,491

Segment measure of profit (loss):
Cloud Solutions	$	10,742		$	9,650		$	21,034		$	19,034
Banking Solutions		1,953			1,148			4,015			3,309
Payments and Transactional Documents		7,785			7,734			15,866			14,094
Other		(461	)		(903	)		(1,474	)		(1,387	)

Total measure of segment profit	$	20,019		$	17,629		$	39,441		$	35,050

A reconciliation of the measure of total segment profit to GAAP income (loss) before income taxes is as follows:


	Three Months Ended December 31,						Six Months Ended December 31,
	2018			2017			2018			2017
	(in thousands)
Total measure of segment profit	$	20,019		$	17,629		$	39,441		$	35,050
Less:
Amortization of acquisition-related intangible assets		(5,253	)		(5,702	)		(10,579	)		(10,890	)
Stock-based compensation plan expense		(9,549	)		(8,080	)		(21,891	)		(16,540	)
Acquisition and integration-related expenses		(710	)		(380	)		(1,593	)		(1,372	)
Restructuring benefit (expense)		(54	)		—			(631	)		9
Minimum pension liability adjustments		80			(3	)		155			(38	)
Global ERP system implementation and other costs		(972	)		(1,339	)		(2,553	)		(3,415	)
Other expense, net ⁽¹⁾		(1,111	)		(3,532	)		(2,151	)		(7,995	)

Income (loss) before income taxes	$	2,450		$	(1,407	)	$	198		$	(5,191	)

⁽¹⁾	On July 1, 2018, we adopted an accounting standard update that changes the classification of certain pension related items. For purposes of this reconciliation of segment profit, we have presented pension related adjustments discretely, not as a component of other expense, net.

The following depreciation and other amortization expense amounts are included in the measure of segment profit:


	Three Months Ended December 31,				Six Months Ended December 31,
	2018		2017		2018		2017
	(in thousands)
Depreciation and other amortization expense:
Cloud Solutions	$	2,880	$	2,535	$	5,809	$	4,978
Banking Solutions		1,859		1,537		3,715		3,029
Payments and Transactional Documents		725		705		1,483		1,344
Other		87		98		184		192

Total depreciation and other amortization expense	$	5,551	$	4,875	$	11,191	$	9,543

Geographic Information

We have presented geographic information about our revenues below. This presentation allocates revenue based on the point of sale, not the location of the customer. Accordingly, we derive revenues from geographic locations based on the location of the customer that would vary from the geographic areas listed here; particularly in respect of financial institution customers located in Australia for which the point of sale was the United States.


	Three Months Ended December 31,				Six Months Ended December 31,
	2018		2017		2018		2017
	(in thousands)
Revenues from unaffiliated customers:
United States	$	65,024	$	58,589	$	127,905	$	115,799
United Kingdom		24,004		22,468		48,371		42,539
Switzerland		9,614		9,148		19,607		18,533
Other		6,204		4,990		11,400		9,620

Total revenues from unaffiliated customers	$	104,846	$	95,195	$	207,283	$	186,491

Long-lived assets based on geographical location, excluding deferred tax assets and intangible assets, were as follows:


	At December 31,		At June 30,
	2018		2018
	(in thousands)
Long-lived assets:
United States	$	46,505	$	36,374
United Kingdom		10,023		5,586
Other		4,867		3,488

Total long-lived assets	$	61,395	$	45,448