Delaware | 02-0433294 | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||
| |||
325 Corporate Drive | 03801-6808 | ||
Portsmouth, | New Hampshire | ||
(Address of principal executive offices) | (Zip Code) |
(603)
Title of each class: | Trading Symbol(s): | Name of each exchange on which registered: |
Common Stock, $.001 par value per share | EPAY | The Nasdaq Global Select Market |
☒ | Accelerated filer | ☐ | |||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||
Emerging growth company | ☐ |
BOTTOMLINE TECHNOLOGIES (de), INC.
FORM10-Q
FOR THE FISCAL QUARTER ENDED DECEMBER 31, 2017
BOTTOMLINE TECHNOLOGIES (de), INC. | ||||||||
FORM 10-Q | ||||||||
FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 2019 | ||||||||
TABLE OF CONTENTS | ||||||||
PART I | Page | |||||||
Item 1. | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
PART II | ||||||||
Item 1. | ||||||||
Item 1A. | ||||||||
Item 2. | ||||||||
Item 6. | ||||||||
Bottomline Technologies (de), Inc. | ||||||||
Unaudited Condensed Consolidated Balance Sheets | ||||||||
(in thousands) | ||||||||
September 30, | June 30, | |||||||
2019 | 2019 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 84,751 | $ | 92,164 | ||||
Cash held for customers | 7,069 | 5,637 | ||||||
Marketable securities | 10,137 | 7,541 | ||||||
Accounts receivable net of allowances for doubtful accounts of $850 at September 30, 2019 and $824 at June 30, 2019 | 65,409 | 77,285 | ||||||
Prepaid expenses and other current assets | 33,043 | 30,434 | ||||||
Total current assets | 200,409 | 213,061 | ||||||
Property and equipment, net | 60,528 | 54,541 | ||||||
Operating lease right-of-use assets, net | 25,224 | — | ||||||
Goodwill | 204,396 | 206,101 | ||||||
Intangible assets, net | 160,749 | 168,349 | ||||||
Other assets | 28,090 | 27,177 | ||||||
Total assets | $ | 679,396 | $ | 669,229 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 11,569 | $ | 10,947 | ||||
Accrued expenses and other current liabilities | 41,336 | 33,945 | ||||||
Customer account liabilities | 7,069 | 5,637 | ||||||
Deferred revenue | 63,213 | 75,097 | ||||||
Total current liabilities | 123,187 | 125,626 | ||||||
Borrowings under credit facility | 110,000 | 110,000 | ||||||
Deferred revenue, non-current | 15,870 | 17,062 | ||||||
Operating lease liabilities, non-current | 21,993 | — | ||||||
Deferred income taxes | 8,652 | 10,345 | ||||||
Other liabilities | 24,758 | 26,819 | ||||||
Total liabilities | 304,460 | 289,852 | ||||||
Stockholders' equity | ||||||||
Preferred Stock, $.001 par value: | ||||||||
Authorized shares-4,000; issued and outstanding shares-none | — | — | ||||||
Common Stock, $.001 par value: | ||||||||
Authorized shares-100,000; issued shares-47,385 at September 30, 2019 and 46,995 at June 30, 2019; outstanding shares-41,532 at September 30, 2019 and 41,315 at June 30, 2019 | 47 | 47 | ||||||
Additional paid-in-capital | 733,312 | 721,438 | ||||||
Accumulated other comprehensive loss | (49,972 | ) | (43,593 | ) | ||||
Treasury stock: 5,853 shares at September 30, 2019 and 5,680 shares at June 30, 2019, at cost | (135,701 | ) | (127,095 | ) | ||||
Accumulated deficit | (172,750 | ) | (171,420 | ) | ||||
Total stockholders' equity | 374,936 | 379,377 | ||||||
Total liabilities and stockholders' equity | $ | 679,396 | $ | 669,229 |
Bottomline Technologies (de), Inc. | ||||||||
Unaudited Condensed Consolidated Statements of Comprehensive Loss | ||||||||
(in thousands, except per share amounts) | ||||||||
Three Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
Revenues: | ||||||||
Subscriptions | $ | 80,066 | $ | 69,768 | ||||
Software licenses | 2,576 | 4,512 | ||||||
Service and maintenance | 24,825 | 27,405 | ||||||
Other | 709 | 752 | ||||||
Total revenues | 108,176 | 102,437 | ||||||
Cost of revenues: | ||||||||
Subscriptions | 32,765 | 31,669 | ||||||
Software licenses | 161 | 231 | ||||||
Service and maintenance | 13,053 | 12,706 | ||||||
Other | 516 | 524 | ||||||
Total cost of revenues | 46,495 | 45,130 | ||||||
Gross profit | 61,681 | 57,307 | ||||||
Operating expenses: | ||||||||
Sales and marketing | 25,688 | 23,022 | ||||||
Product development and engineering | 18,349 | 16,565 | ||||||
General and administrative | 13,345 | 13,865 | ||||||
Amortization of acquisition-related intangible assets | 4,950 | 5,326 | ||||||
Total operating expenses | 62,332 | 58,778 | ||||||
Loss from operations | (651 | ) | (1,471 | ) | ||||
Other expense, net | (713 | ) | (781 | ) | ||||
Loss before income taxes | (1,364 | ) | (2,252 | ) | ||||
(Provision for) benefit from income taxes | (3 | ) | 1,334 | |||||
Net loss | $ | (1,367 | ) | $ | (918 | ) | ||
Basic and diluted net loss per share: | $ | (0.03 | ) | $ | (0.02 | ) | ||
Shares used in computing basic and diluted net loss per share: | 41,487 | 39,689 | ||||||
Other comprehensive loss, net of tax: | ||||||||
Unrealized loss on available for sale securities | (3 | ) | (2 | ) | ||||
Change in fair value on interest rate hedging instruments | (677 | ) | 327 | |||||
Minimum pension liability adjustments | 180 | (46 | ) | |||||
Foreign currency translation adjustments | (5,879 | ) | (1,367 | ) | ||||
Other comprehensive loss, net of tax: | (6,379 | ) | (1,088 | ) | ||||
Comprehensive loss | $ | (7,746 | ) | $ | (2,006 | ) |
Bottomline Technologies (de), Inc. | |||||||||||||||
Unaudited Condensed Consolidated Statements of Stockholders' Equity | |||||||||||||||
(in thousands) | |||||||||||||||
Three Months Ended September 30, 2019 | |||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Accumulated Deficit | Total Stockholders' Equity | ||||||||||
Shares | Amount | Shares | Amount | ||||||||||||
Balance at June 30, 2019 | 46,995 | $47 | $721,438 | $(43,593) | 5,680 | $(127,095) | $(171,420) | $379,377 | |||||||
Issuance of common stock for employee stock purchase plan and upon exercise of stock options | 13 | — | 775 | — | (60) | 1,399 | — | 2,174 | |||||||
Vesting of restricted stock awards | 377 | — | — | — | — | — | — | — | |||||||
Repurchase of common stock to be held in treasury | — | — | — | — | 233 | (10,005) | — | (10,005) | |||||||
Stock compensation plan expense | — | — | 11,099 | — | — | — | — | 11,099 | |||||||
Minimum pension liability adjustments, net of tax | — | — | — | 180 | — | — | — | 180 | |||||||
Net loss | — | — | — | — | — | — | (1,367) | (1,367) | |||||||
Cumulative effect of adoption of updated lease standard | — | — | — | — | — | — | 37 | 37 | |||||||
Unrealized loss on available for sale securities, net of tax | — | — | — | (3) | — | — | — | (3) | |||||||
Change in fair value on interest rate hedging instruments | — | — | — | (677) | — | — | — | (677) | |||||||
Foreign currency translation adjustment | — | — | — | (5,879) | — | — | — | (5,879) | |||||||
Balance at September 30, 2019 | 47,385 | $47 | $733,312 | $(49,972) | 5,853 | $(135,701) | $(172,750) | $374,936 |
Three Months Ended September 30, 2018 | |||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Accumulated Deficit | Total Stockholders' Equity | ||||||||||
Shares | Amount | Shares | Amount | ||||||||||||
Balance at June 30, 2018 | 44,834 | $45 | $678,549 | $(30,633) | 5,806 | $(129,914) | $(207,115) | $310,932 | |||||||
Issuance of common stock for employee stock purchase plan and upon exercise of stock options | 17 | — | 20 | — | (76) | 1,698 | — | 1,718 | |||||||
Vesting of restricted stock awards | 390 | — | — | — | — | — | — | — | |||||||
Stock compensation plan expense | — | — | 12,361 | — | — | — | — | 12,361 | |||||||
Warrant settlements | 895 | 1 | (5) | — | — | — | — | (4) | |||||||
Minimum pension liability adjustments, net of tax | — | — | — | (46) | — | — | — | (46) | |||||||
Net loss | — | — | — | — | — | — | (918) | (918) | |||||||
Cumulative effect of adoption of updated revenue recognition standard | — | — | — | — | — | — | 26,263 | 26,263 | |||||||
Unrealized loss on available for sale securities | — | — | — | (2) | — | — | — | (2) | |||||||
Change in fair value on interest rate hedging instruments | — | — | — | 327 | — | — | — | 327 | |||||||
Foreign currency translation adjustment | — | — | — | $(1,367) | — | — | — | $(1,367) | |||||||
Balance at September 30, 2018 | 46,136 | $46 | $690,925 | $(31,721) | 5,730 | $(128,216) | $(181,770) | $349,264 |
Bottomline Technologies (de), Inc. | ||||||||
Unaudited Condensed Consolidated Statements of Cash Flows | ||||||||
(in thousands) | ||||||||
Three Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
Operating activities: | ||||||||
Net loss | $ | (1,367 | ) | $ | (918 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Amortization of acquisition-related intangible assets | 4,950 | 5,326 | ||||||
Stock-based compensation plan expense | 11,044 | 12,342 | ||||||
Depreciation and other amortization | 6,092 | 5,640 | ||||||
Gain on sale of cost-method investment | — | (237 | ) | |||||
Deferred income tax benefit | (368 | ) | (1,794 | ) | ||||
Provision for allowances on accounts receivable | 67 | 44 | ||||||
Amortization of debt issuance costs | 103 | 104 | ||||||
Amortization of discount on investments | (28 | ) | (37 | ) | ||||
Loss on disposal of equipment | 35 | 592 | ||||||
Loss on foreign exchange | 259 | 126 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 11,025 | 5,239 | ||||||
Prepaid expenses and other current assets | (3,268 | ) | (2,031 | ) | ||||
Operating lease right-of-use asset, net | 975 | — | ||||||
Other assets | (1,077 | ) | (955 | ) | ||||
Accounts payable | 1,214 | 246 | ||||||
Accrued expenses | (571 | ) | (2,828 | ) | ||||
Operating lease liabilities | (823 | ) | — | |||||
Customer account liabilities | 1,609 | 496 | ||||||
Deferred revenue | (11,969 | ) | (9,086 | ) | ||||
Other liabilities | 210 | (287 | ) | |||||
Net cash provided by operating activities | 18,112 | 11,982 | ||||||
Investing activities: | ||||||||
Acquisition of businesses and assets, net of cash and restricted cash acquired | — | (8,895 | ) | |||||
Purchases of other investments | (87 | ) | — | |||||
Proceeds from sale of cost-method investment | — | 237 | ||||||
Purchases of available-for-sale securities | (6,274 | ) | (2,665 | ) | ||||
Proceeds from sales of available-for-sale securities | 3,700 | 2,700 | ||||||
Capital expenditures, including capitalization of software costs | (11,449 | ) | (8,378 | ) | ||||
Net cash used in investing activities | (14,110 | ) | (17,001 | ) | ||||
Financing activities: | ||||||||
Repurchase of common stock | (10,005 | ) | — | |||||
Repayment of amounts borrowed under revolving credit facility | — | (40,000 | ) | |||||
Repayment of notes payable | (182 | ) | (183 | ) | ||||
Settlement of warrants | — | (4 | ) | |||||
Debt issuance costs related to credit facility | — | (597 | ) | |||||
Proceeds from exercise of stock options and employee stock purchase plan | 2,174 | 1,718 | ||||||
Net cash used in financing activities | (8,013 | ) | (39,066 | ) | ||||
Effect of exchange rate changes on cash | (1,970 | ) | (946 | ) | ||||
Decrease in cash, cash equivalents and restricted cash | (5,981 | ) | (45,031 | ) | ||||
Cash, cash equivalents and restricted cash at beginning of period | 97,801 | 124,613 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 91,820 | $ | 79,582 | ||||
Cash and cash equivalents at end of period | $ | 84,751 | $ | 76,371 |
Cash held for customers at end of period | 7,069 | 3,211 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 91,820 | $ | 79,582 | ||||
Supplemental disclosures of non-cash financing activities: | ||||||||
Issuance of common stock upon settlement of the warrants | $ | — | $ | 55,796 |
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
December 31, | June 30, | |||||||
2017 | 2017 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 64,051 | $ | 124,569 | ||||
Cash and cash equivalents, held for customers | 3,481 | — | ||||||
Marketable securities | 10,004 | 1,973 | ||||||
Accounts receivable net of allowances for doubtful accounts of $973 at December 31, 2017 and $923 at June 30, 2017 | 78,073 | 64,244 | ||||||
Prepaid expenses and other current assets | 18,556 | 16,807 | ||||||
|
|
|
| |||||
Total current assets | 174,165 | 207,593 | ||||||
Property and equipment, net | 27,199 | 26,195 | ||||||
Goodwill | 202,083 | 194,700 | ||||||
Intangible assets, net | 173,266 | 171,280 | ||||||
Other assets | 18,058 | 17,671 | ||||||
|
|
|
| |||||
Total assets | $ | 594,771 | $ | 617,439 | ||||
|
|
|
| |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 10,268 | $ | 9,013 | ||||
Accrued expenses and other current liabilities | 28,411 | 29,179 | ||||||
Customer account liabilities | 3,481 | — | ||||||
Deferred revenue | 59,835 | 74,113 | ||||||
Convertible senior notes | — | 183,682 | ||||||
|
|
|
| |||||
Total current liabilities | 101,995 | 295,987 | ||||||
Borrowings under credit facility | 150,000 | — | ||||||
Deferred revenue,non-current | 25,172 | 22,047 | ||||||
Deferred income taxes | 13,452 | 15,433 | ||||||
Other liabilities | 22,202 | 22,016 | ||||||
|
|
|
| |||||
Total liabilities | 312,821 | 355,483 | ||||||
Stockholders’ equity | ||||||||
Preferred Stock, $.001 par value: | ||||||||
Authorizedshares-4,000; issued and outstanding shares-none | — | — | ||||||
Common Stock, $.001 par value: | ||||||||
Authorizedshares-100,000; issuedshares-44,075 at December 31, 2017 and 42,797 at June 30, 2017; outstandingshares-38,197 at December 31, 2017 and 37,443 at June 30, 2017 | 44 | 43 | ||||||
Additionalpaid-in-capital | 660,701 | 624,001 | ||||||
Accumulated other comprehensive loss | (29,671 | ) | (32,325 | ) | ||||
Treasury stock: 5,878 shares at December 31, 2017 and 5,354 shares at June 30, 2017, at cost | (131,528 | ) | (113,071 | ) | ||||
Accumulated deficit | (217,596 | ) | (216,692 | ) | ||||
|
|
|
| |||||
Total stockholders’ equity | 281,950 | 261,956 | ||||||
|
|
|
| |||||
Total liabilities and stockholders’ equity | $ | 594,771 | $ | 617,439 | ||||
|
|
|
|
See accompanying notes.
Bottomline Technologies (de), Inc.
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands, except per share amounts)
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Subscriptions and transactions | $ | 63,187 | $ | 55,644 | $ | 123,901 | $ | 107,776 | ||||||||
Software licenses | 2,620 | 3,492 | 4,985 | 5,613 | ||||||||||||
Service and maintenance | 28,433 | 25,920 | 55,775 | 53,593 | ||||||||||||
Other | 955 | 1,672 | 1,830 | 2,830 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues | 95,195 | 86,728 | 186,491 | 169,812 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Subscriptions and transactions | 27,201 | 24,782 | 54,612 | 48,668 | ||||||||||||
Software licenses | 229 | 196 | 399 | 324 | ||||||||||||
Service and maintenance | 12,968 | 13,416 | 25,200 | 26,701 | ||||||||||||
Other | 701 | 1,178 | 1,368 | 2,056 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total cost of revenues | 41,099 | 39,572 | 81,579 | 77,749 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit | 54,096 | 47,156 | 104,912 | 92,063 | ||||||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing | 21,396 | 19,325 | 40,701 | 38,200 | ||||||||||||
Product development and engineering | 13,892 | 13,082 | 27,707 | 26,017 | ||||||||||||
General and administrative | 10,981 | 11,772 | 22,810 | 24,476 | ||||||||||||
Amortization of acquisition-related intangible assets | 5,702 | 6,090 | 10,890 | 12,375 | ||||||||||||
Goodwill impairment charge | — | 7,529 | — | 7,529 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total operating expenses | 51,971 | 57,798 | 102,108 | 108,597 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Income (loss) from operations | 2,125 | (10,642 | ) | 2,804 | (16,534 | ) | ||||||||||
Other expense, net | (3,532 | ) | (4,182 | ) | (7,995 | ) | (8,117 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Loss before income taxes | (1,407 | ) | (14,824 | ) | (5,191 | ) | (24,651 | ) | ||||||||
Income tax benefit | 4,495 | 4,478 | 4,038 | 3,797 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) | $ | 3,088 | $ | (10,346 | ) | $ | (1,153 | ) | $ | (20,854 | ) | |||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) per share: | ||||||||||||||||
Basic | $ | 0.08 | $ | (0.27 | ) | $ | (0.03 | ) | $ | (0.55 | ) | |||||
|
|
|
|
|
|
|
| |||||||||
Diluted | $ | 0.08 | $ | (0.27 | ) | $ | (0.03 | ) | $ | (0.55 | ) | |||||
|
|
|
|
|
|
|
| |||||||||
Shares used in computing net income (loss) per share: | ||||||||||||||||
Basic | 38,087 | 37,769 | 37,908 | 37,854 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Diluted | 39,344 | 37,769 | 37,908 | 37,854 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Unrealized loss on available for sale securities | (3 | ) | (49 | ) | (3 | ) | (106 | ) | ||||||||
Unrealized gain on interest rate hedging transactions (net of income tax provision of $248 for the three and six months ended December 31, 2017) | 604 | — | 369 | — | ||||||||||||
Minimum pension liability adjustments | 38 | 610 | 142 | 625 | ||||||||||||
Foreign currency translation adjustments | 773 | (8,402 | ) | 2,146 | (9,459 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Other comprehensive income (loss), net of tax: | 1,412 | (7,841 | ) | 2,654 | (8,940 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Comprehensive income (loss) | $ | 4,500 | $ | (18,187 | ) | $ | 1,501 | $ | (29,794 | ) | ||||||
|
|
|
|
|
|
|
|
See accompanying notes.
Bottomline Technologies (de), Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Six Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
Operating activities: | ||||||||
Net loss | $ | (1,153 | ) | $ | (20,854 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Amortization of acquisition-related intangible assets | 10,890 | 12,375 | ||||||
Stock compensation expense | 16,540 | 16,855 | ||||||
Depreciation and other amortization | 9,543 | 8,241 | ||||||
Goodwill impairment charge | — | 7,529 | ||||||
Deferred income tax benefit | (4,745 | ) | (5,200 | ) | ||||
Provision for allowances on accounts receivable | 75 | 14 | ||||||
Amortization of debt issuance costs | 711 | 618 | ||||||
Amortization of debt discount | 5,574 | 6,208 | ||||||
Amortization of premium (discount) on investments | (5 | ) | 148 | |||||
Gain (loss) on disposal of equipment | (10 | ) | 36 | |||||
Gain on foreign exchange | (26 | ) | (122 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (12,326 | ) | 2,519 | |||||
Prepaid expenses and other current assets | (1,089 | ) | (956 | ) | ||||
Other assets | 926 | 520 | ||||||
Accounts payable | (145 | ) | (209 | ) | ||||
Accrued expenses | (1,932 | ) | 305 | |||||
Deferred revenue | (12,443 | ) | (11,155 | ) | ||||
Other liabilities | (697 | ) | 706 | |||||
|
|
|
| |||||
Net cash provided by operating activities | 9,688 | 17,578 | ||||||
Investing activities: | ||||||||
Acquisition of businesses, net of cash acquired | (13,747 | ) | — | |||||
Purchase ofavailable-for-sale securities | (9,935 | ) | (8,833 | ) | ||||
Proceeds from sales ofavailable-for-sale securities | 1,903 | 28,178 | ||||||
Capital expenditures, including capitalization of software costs | (9,137 | ) | (15,345 | ) | ||||
Proceeds from disposal of property and equipment | 10 | — | ||||||
|
|
|
| |||||
Net cash provided by (used in) investing activities | (30,906 | ) | 4,000 | |||||
Financing activities: | ||||||||
Repurchase of common stock | — | (14,971 | ) | |||||
Repayment of convertible senior notes | (189,750 | ) | — | |||||
Amounts borrowed under revolving credit facility | 150,000 | — | ||||||
Repayment of notes payable | (2,204 | ) | — | |||||
Debt issuance costs related to credit facility | — | (2,137 | ) | |||||
Proceeds from exercise of stock options and employee stock purchase plan | 1,705 | 1,412 | ||||||
|
|
|
| |||||
Net cash used in financing activities | (40,249 | ) | (15,696 | ) | ||||
Effect of exchange rate changes on cash | 949 | (3,444 | ) | |||||
|
|
|
| |||||
Increase (decrease) in cash and cash equivalents | (60,518 | ) | 2,438 | |||||
Cash and cash equivalents at beginning of period | 124,569 | 97,174 | ||||||
|
|
|
| |||||
Cash and cash equivalents at end of period | $ | 64,051 | $ | 99,612 | ||||
|
|
|
| |||||
Supplemental disclosures ofnon-cash financing activities: | ||||||||
Issuance of note payable to seller in connection with acquisition | $ | 1,836 | $ | — | ||||
Issuance of common stock upon conversion of convertible senior notes | $ | 19,736 | $ | — | ||||
Receipt of common stock upon settlement of Note Hedges | $ | 19,964 | $ | — |
See accompanying notes.
Bottomline Technologies (de), Inc.
December 31, 2017
29, 2019.
Cloud Computing Arrangements:
Share-Based Compensation: In March 2016, the FASB issued an accounting standard update intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact of excess tax benefits and tax deficiencies, accounting for forfeitures, statutory tax withholding requirements and the presentation of excess tax benefits in the statement of cash flows. We adopted this standard on July 1, 2017 (the first quarter of our fiscal year 2018). Upon adoption of this standard, excess tax benefits of $0.2 million were recognized as a component of our net deferred tax assets, with an offsetting cumulative effect adjustment recorded as a reduction to our accumulated deficit in our consolidated balance sheet. Please refer toNote 7 Income Taxes for additional discussion of the recognition of excess tax benefits.
We adopted the cash flow presentation of excess tax benefits retrospectively, which resulted in the reclassification of excess tax benefits associated with stock compensation of $0.06 million from financing activities to operating activities for the six months ended December 31, 2016 in our consolidated statement of cash flows.
The new standard also allows companies to make an accounting policy election to either estimate expected forfeitures or account for them as they occur, and we have elected to continue to estimate forfeitures.
Consolidation:In October 2016, the FASB issued an accounting standard update to remove the requirement that a single decision maker consider, in its assessment of primary beneficiary, its indirect interest held through related parties under common control to be the equivalent of a direct interest in a variable interest entity (VIE). Instead, indirect interest held through related parties under common control will be included in the primary beneficiary assessment based on proportionate basis, consistent with the indirect interest held through other parties. We adopted this standard effective July 1, 2017. The adoption of this standard did not have an impact on our financial statements.
Accounting Pronouncements to be Adopted
Revenue Recognition: In May 2014, the FASB issued an accounting standard update which provides for new revenue recognition guidance, superseding nearly all existing revenue recognition guidance. The core principle of the new guidance is to recognize revenue when promised goods or services are transferred to customers, in an amount that reflects the consideration which the vendor expects to receive for those goods or services. The new standard is expected to require significantly more judgment and estimation within the revenue recognition process than required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to separate performance obligations. The new standard is also expected to significantly increase the financial statement disclosure related to revenue recognition. This standard is currently effective for us on July 1, 2018 (the first quarter of our fiscal year ending June 30, 2019) using one of two methods of adoption, subject to the election of certain practical expedients: (i) retrospective to each prior reporting period presented, with the option to elect certain practical expedients as defined within the standard; or (ii) modified retrospective with the cumulative effect of initially applying the standard recognized at the date of initial application inclusive of certain additional disclosures.
We are continuing to evaluate the expected impact of this standard on our consolidated financial statements and currently plan to adopt the standard using the modified retrospective method. While our assessment of the impact of this standard is not complete, we currently believe that the most significant impacts will be in certain areas:
However, we are unable to quantify the impact of these outcomes at this time, nor can we ensure that our continuing analysis and interpretation of the standard will result in these financial reporting outcomes or additional material impacts could be identified.
Financial Instruments—Classification and Measurement:In January 2016, the FASB issued an accounting standard update which requires, among other things, that entities measure equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) at fair value, with changes in fair value recognized in earnings. Under the standard, entities will no longer be able to recognize unrealized holding gains and losses on equity securities classified as available for sale as a component of other comprehensive income (OCI). Subject to certain exceptions, entities will be able to elect to record equity investments without readily determinable fair values at cost, less impairment, plus or minus adjustments for observable price changes, with all such changes recognized in earnings. This new standard does not change the guidance for classifying and measuring investments in debt securities and loans. The standard is effective for us on July 1, 2018 (the first quarter of our fiscal year 2019) on a prospective basis. We are currently evaluating the anticipated impact of this standard on our financial statements. We have certain cost method investments of $7.7 million at December 31, 2017, and to the extent that there are observable price changes following the date of adoption, the accounting for these investments could be affected.
Leases:In February 2016, the FASB issued an accounting standard update which requires balance sheet recognition of a lease liability and a correspondingright-of-use (ROU) asset for all leases with terms longer than twelve months.unless, as a policy election, a lessee elects not to apply the standard to short-term leases. The pattern of recognition of lease related revenue and expenses will be dependent on its classification. The updatedWe adopted the standard requires additional disclosures to enable users of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This standard is effective for us on July 1, 2019 (the first quarterand elected the package of practical expedients which permitted us not to reassess prior conclusions regarding lease identification, lease classification and treatment of initial direct costs. For all asset classes, we adopted the lessee practical expedient to combine lease and non-lease components and made a policy election not to recognize a ROU asset or lease liability for leases with a term less than twelve months. We also availed ourselves of the adoption expedient not to adjust our fiscal year ending June 30, 2020) with earlycomparative period financial statements for the effects of the new standard or make additional disclosures for periods prior to the effective date.
Statementstatements as well as timing of Cash Flows:In August and November of 2016, the FASB issued updates to the accounting standard which addresses the classification and presentation of certain cash receipts, cash payments and restricted cash in the statement of cash flows. The standard is effective for us on July 1, 2018 (the first quarter of our fiscal year 2019) and requires a retrospective approach. Early adoption is permitted, including adoption in an interim period. We are currently evaluating the anticipated impact of this standard on our financial statements.
adoption.
Defined Benefit Plan Expenses:In March 2017, the FASB issued an accounting standard update that changes the income statement presentation of defined benefit plan expense by requiring separation between operating expense (service cost component) andnon-operating expense (all other components of net periodic defined benefit cost). Under the revised standard, the operating expense component will be reported with similar compensation costs, while thenon-operating components will be reported in Other Income and Expense. In addition, only the service cost component is eligible for capitalization as part of an asset such as property, plant and equipment. This standard is effective for us on July 1, 2018 (the first quarter of our fiscal year 2019).permitted. We do not currently believe thatexpect the adoption of this standard willto have a material impact on our financial statements.
statements and we do not expect to early adopt the standard.
Three Months Ended September 30, 2019 | ||||||||||||||||||||||||||||
Settlement Network Solutions (1) | Legal Spend Management Solutions (1) | Banking Solutions | Payments and Transactional Documents | Healthcare (2) | Other (2) | Total | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Financial statement classification: | ||||||||||||||||||||||||||||
Subscriptions | $ | 27,247 | $ | 20,574 | $ | 18,373 | $ | 12,880 | $ | 844 | $ | 148 | $ | 80,066 | ||||||||||||||
Software licenses | 187 | — | 516 | 1,327 | 195 | 351 | 2,576 | |||||||||||||||||||||
Service and maintenance | 4,821 | — | 5,280 | 11,871 | 829 | 2,024 | 24,825 | |||||||||||||||||||||
Other | — | — | — | 693 | 16 | — | 709 | |||||||||||||||||||||
Total revenues | $ | 32,255 | $ | 20,574 | $ | 24,169 | $ | 26,771 | $ | 1,884 | $ | 2,523 | $ | 108,176 |
Three Months Ended September 30, 2018 | ||||||||||||||||||||||||||||
Settlement Network Solutions (1) | Legal Spend Management Solutions (1) | Banking Solutions | Payments and Transactional Documents | Healthcare (2) | Other (2) | Total | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Financial statement classification: | ||||||||||||||||||||||||||||
Subscriptions | $ | 24,282 | $ | 18,396 | $ | 15,666 | $ | 10,569 | $ | 826 | $ | 29 | $ | 69,768 | ||||||||||||||
Software licenses | 572 | — | 1,326 | 2,154 | 419 | 41 | 4,512 | |||||||||||||||||||||
Service and maintenance | 6,325 | — | 5,260 | 12,759 | 898 | 2,163 | 27,405 | |||||||||||||||||||||
Other | — | — | — | 752 | — | — | 752 | |||||||||||||||||||||
Total revenues | $ | 31,179 | $ | 18,396 | $ | 22,252 | $ | 26,234 | $ | 2,143 | $ | 2,233 | $ | 102,437 |
September 30, | June 30, | |||||||||||
2019 | 2019 | $ Change | ||||||||||
(in thousands) | ||||||||||||
Accounts receivable | $ | 65,409 | $ | 77,285 | $ | (11,876 | ) | |||||
Contract assets | 5,747 | 5,135 | 612 | |||||||||
Deferred revenue | 79,083 | 92,159 | (13,076 | ) |
December 31, 2017 | June 30, 2017 | |||||||||||||||||||||||||||||||
Fair Value Measurements Using Input Types | Fair Value Measurements Using Input Types | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Money market funds (cash and cash equivalents) | $ | 89 | $ | — | $ | — | $ | 89 | $ | 593 | $ | — | $ | — | $ | 593 | ||||||||||||||||
Available for sale securities—Debt | ||||||||||||||||||||||||||||||||
U.S. Corporate | $ | — | $ | 3,475 | $ | — | $ | 3,475 | $ | — | $ | 1,906 | $ | — | $ | 1,906 | ||||||||||||||||
Government—U.S. | — | 6,461 | — | 6,461 | — | — | — | — | ||||||||||||||||||||||||
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Total available for sale securities | $ | — | $ | 9,936 | $ | — | $ | 9,936 | $ | — | $ | 1,906 | $ | — | $ | 1,906 | ||||||||||||||||
Derivative interest rate swap | $ | — | $ | 782 | $ | — | $ | 782 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Derivative interest rate swap | $ | — | $ | 165 | $ | — | $ | 165 | $ | — | $ | — | $ | — | $ | — |
September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||||||||||
Fair Value Measurements Using Input Types | Fair Value Measurements Using Input Types | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Money market funds (cash and cash equivalents) | $ | 263 | $ | — | $ | — | $ | 263 | $ | 2,807 | $ | — | $ | — | $ | 2,807 | ||||||||||||||||
Available for sale securities - Debt | ||||||||||||||||||||||||||||||||
Government - U.S. | — | 10,077 | — | 10,077 | — | 7,479 | — | 7,479 | ||||||||||||||||||||||||
Total assets | $ | 263 | $ | 10,077 | $ | — | $ | 10,340 | $ | 2,807 | $ | 7,479 | $ | — | $ | 10,286 | ||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Short-term derivative interest rate swap | $ | — | $ | 233 | $ | — | $ | 233 | $ | — | $ | 37 | $ | — | $ | 37 | ||||||||||||||||
Long-term derivative interest rate swap | $ | — | $ | 1,729 | $ | — | $ | 1,729 | $ | — | $ | 1,248 | $ | — | $ | 1,248 | ||||||||||||||||
Total liabilities | $ | — | $ | 1,962 | $ | — | $ | 1,962 | $ | — | $ | 1,285 | $ | — | $ | 1,285 |
Marketable securities: Corporate and other debt securities Total marketable securities 2019. Due within 1 year Due in 1 year through 5 years Total assets. U.S. Corporate Government—U.S. Total Asset Acquisitions intangible assets acquired. In the preliminary allocation of the purchase price net income (loss). our European headquarters. Numerator—basic and diluted: Net income (loss) Denominator: Shares used in computing basic net income (loss) per share attributable to common stockholders Impact of dilutive securities Shares used in computing diluted net income (loss) per share attributable to common stockholders Basic net income (loss) per share attributable to common stockholders Diluted net income (loss) per share attributable to common stockholders contract term. period than a traditional on-premise software license transaction. 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. support period. support period which is normally twelve months. Segment revenue: Cloud Solutions (1) Banking Solutions Payments and Transactional Documents Other Total segment revenue Segment measure of profit (loss): Cloud Solutions Banking Solutions Payments and Transactional Documents Other Total measure of segment profit Total measure of segment profit Less: Amortization of acquisition-related intangible assets Goodwill impairment charge Stock-based compensation expense Acquisition and integration-related expenses Restructuring benefit Minimum pension liability adjustments Global ERP system implementation and other costs Other expense, net Loss before income taxes Depreciation and other amortization expense: Cloud Solutions Banking Solutions Payments and Transactional Documents Other Total depreciation and other amortization expense profit: North America United Kingdom Continental Europe Asia-Pacific and Middle East Total revenues from unaffiliated customers United States. Long-lived assets: North America United Kingdom Continental Europe Asia-Pacific and Middle East Total long-lived assets Increase to deferred tax assets for excess tax benefits Increase to deferred tax asset valuation allowance Net increase to deferred tax assets $204.4 million. Amortized intangible assets: Customer related Core technology Other intangible assets Capitalized software development costs Software(1) Total Unamortized intangible assets: Goodwill Total intangible assets Amortized intangible assets: Customer related Core technology Other intangible assets Capitalized software development costs Software(1) Total Unamortized intangible assets: Goodwill Total intangible assets December 31, 2017September 30, 2019 and June 30, 2017. December 31, 2017 June 30, 2017 Held to
Maturity Available
for Sale Total Held to
Maturity Available
for Sale Total (in thousands) $ 68 $ 9,936 $ 10,004 $ 67 $ 1,906 $ 1,973 $ 68 $ 9,936 $ 10,004 $ 67 $ 1,906 $ 1,973 September 30, 2019 June 30, 2019 Held to Maturity Available for Sale Total Held to Maturity Available for Sale Total (in thousands) Marketable securities: Corporate and other debt securities $ 60 $ 10,077 $ 10,137 $ 62 $ 7,479 $ 7,541 Total marketable securities $ 60 $ 10,077 $ 10,137 $ 62 $ 7,479 $ 7,541 December 31, 2017 (in thousands) $ 9,936 — $ 9,936 September 30, 2019 (in thousands) Due within 1 year $ 10,077 Due in 1 year through 5 years — Total $ 10,077 included inclassified as current assets as we do not have the positive intent to hold these investments until maturity and view these investments as available to fund current operations. At December 31, 2017, the difference between the fair value of our available for sale securities and their amortized cost was not significant.December 31, 2017September 30, 2019 and June 30, 2017,2019, respectively, aggregated by investment category and the length of time that individual securities have been in a continuous loss position: At December 31, 2017 At June 30, 2017 Less than 12 Months Fair Value Unrealized Loss Fair Value Unrealized Loss (in thousands) $ 3,475 $ (2 ) $ 1,628 $ (1 ) 6,461 (4 ) — — $ 9,936 $ (6 ) $ 1,628 $ (1 ) At September 30, 2019 At June 30, 2019 Less than 12 Months Fair Value Unrealized Loss Fair Value Unrealized Loss (in thousands) Government—U.S. $ 1,991 $ (1 ) $ 800 $ (1 ) Total $ 1,991 $ (1 ) $ 800 $ (1 ) 4—Acquisitions5—Business and Other InvestmentsFirst Capital Cashflow Ltd.October 4, 2017,June 3, 2019, we acquired First Capital Cashflow Ltd. (FCC)the remaining capital stock of BankSight Software Systems, Inc. (BankSight) for 10.5$2.8 million British Pound Sterling (approximately $13.9 million based on the exchange rate in effect at the acquisition date) in cash and 42,080the issuance of 40,000 shares of our common stock. The shares, which were issued to the selling stockholders of FCC who became employees of Bottomline, havecommon stock had vesting conditions tied to the continued employment; as suchemployment of a prior stockholder of BankSight and was therefore excluded from the shares are compensatory andpurchase price allocation. Prior to the acquisition, we will record share-based payment expense over the underlying stock vesting period of five years. FCC is headquartered and operateshad a pre-existing relationship with BankSight in the United Kingdom and isform of a providerminority investment in preferred stock of transaction settlement solutions. The acquisition is expected to strengthen our payment solution capabilities and further enhance our ability to provide secure, scalable technology solutions that enable customers to adapt to and leverage changesBankSight in the business payments environment.Foramount of $3.5 million. The carrying value of our prior investment approximated its fair value at the period ended December 31, 2017,time of our consolidated balance sheet reflects $3.5acquisition and the total fair value we paid to acquire the outstanding capital stock of BankSight, $6.3 million, was allocated to assets acquired and liabilities assumed. BankSight’s operating results are included in our Banking Solutions segment from the date of cashthe acquisition forward and cash equivalents helddid not have a material impact on our revenue or net income (loss).customers and a corresponding $3.5 million of customer account liabilities. Cash and cash equivalents held for customers and customer account liabilities arise as aby-product of FCC’s operations as it is customary to collect client funds and hold them for a short transient period before ultimately disbursing the amounts and settling the corresponding liability. Cash we hold on behalf of clients is segregated from our other corporate cash accounts and is not available for use by us other than to settle the corresponding client liability.which is preliminary at December 31, 2017,September 30, 2019, we recorded $4.7 million of goodwill. The goodwill is not deductible for income tax purposes and arose principally due to the anticipated future benefits arising from the acquisition. Identifiable intangible assets of $10.5$1.7 million, consisting primarily of customertechnology related and other intangible assets, are being amortized over a weighted average estimated useful life of eleven11 years. FCC’stheour Payments and Transactional Documents segment from the date of the acquisition forward and did not have a material impact on our revenue or earnings.DecillionAugust 14, 2017,July 2, 2018, we acquired Singapore-based Decillion Group (Decillion)Microgen Banking Systems Limited (Microgen), a UK-based BACS payment company, for total consideration of 6.26.9 million Singapore DollarsBritish Pound Sterling (approximately $4.6$9.1 million based on the exchange rate in effect at the acquisition date), consisting of cash of $2.8 million and a note payable of $1.8 million. The note is payable in equal installments over ten quarters starting during the three months ended September 30, 2017. Decillion is a financial messaging solution provider in the Asia Pacific region. Headquartered in Singapore, Decillion has offices in Australia, China, Indonesia, Malaysia and Thailand and they operate a SWIFT service bureau which connects more than 130 financial institutions and corporations to the SWIFT community. This acquisition expands the depth and breadth of our financial messaging solutions, particularly in the Asia Pacific region.In the allocation of the purchase price, which is preliminary at December 31, 2017, we recorded $1.4 million of goodwill. The goodwill is not deductible for income tax purposes and arose principally due to anticipated future benefits arising from the acquisition. Identifiable intangible assets of $2.4 million, consisting of customer related intangible assets, are being amortized over their estimated useful life of twelve years. Decillion’s. Microgen’s operating results have beenare included in our Cloud SolutionsPayments and Transactional Documents segment from the date of the acquisition forward and did not have a material impact on our revenue or earnings.Acquisition expensesnet income (loss).approximately $0.816 million were expensed during the six months ended December 31, 2017 related to the Decillion and FCC acquisitions, principally as a component of general and administrative expense.Other InvestmentsIn December 2015, we made a $3.5British Pound Sterling (approximately $20.7 million investment in preferred stock of a privately held, early-stage technology company. We have the ability to exercise significant influence over this company; however, we have no ability to exercise control. Investments in common stock orin-substance common stock, through which an investor has the ability to exercise significant influence over the operating or financial policies of the investee, are accounted for under the equity method of accounting.In-substance common stock is an investment that has risk and reward characteristics that are substantially similar to an entity’s common stock. The preferred stock underlying our investment is notin-substance common stock as its terms include a substantive liquidation preference not available to common stockholders. Accordingly, we account for this investment under the cost method of accounting, subject to periodic review for impairment. Impairment losses, to the extent occurring, would be recorded as an operating expense in the period incurred. Our maximum investment exposure, which is determined based on the cost of our investment, was $3.5 million as ofexchange rate in effect at the acquisition date), funded with existing cash on hand. When it is ready for its intended use, which we expect will be during the quarter ending December 31, 2017 and is located within other assets on2019, the building will ultimately replace our consolidated balance sheet. There were no indicators of impairment identifiedcurrent Reading, UK building as of December 31, 2017.We concluded that this company is a VIE as it lacks sufficient equity to finance its activities. However, we also concluded that we are not the primary beneficiary of the VIE as we do not have the power to exert control or direct the activities that most significantly impact the VIE’s economic performance. As we have determined we are not the primary beneficiary, consolidation of the VIE is not required.5—6—Net Income (Loss)Loss Per Shareincome (loss)loss per share: Three Months Ended
December 31, Six Months Ended
December 31, 2017 2016 2017 2016 (in thousands, except per share amounts) $ 3,088 $ (10,346 ) $ (1,153 ) $ (20,854 ) 38,087 37,769 37,908 37,854 1,257 — — — 39,344 37,769 37,908 37,854 $ 0.08 $ (0.27 ) $ (0.03 ) $ (0.55 ) $ 0.08 $ (0.27 ) $ (0.03 ) $ (0.55 ) Three Months Ended September 30, 2019 2018 (in thousands, except per share amounts) Numerator - basic and diluted: Net loss $ (1,367 ) $ (918 ) Denominator: Shares used in computing basic and diluted net loss per share attributable to common stockholders 41,487 39,689 Basic and diluted net loss per share attributable to common stockholders $ (0.03 ) $ (0.02 ) sixthree months ended December 31, 2017,September 30, 2019, approximately 2.82.3 million shares of unvested restricted stock and stock options were excluded from the calculation of diluted earnings per share as their effect on the calculation would have been anti-dilutive.and six months ended December 31, 2016,September 30, 2018, approximately 3.02.8 million and 3.1 million shares respectively, of unvested restricted stock and stock options and warrants for up to 85 thousand shares of our common stock were excluded from the calculation of diluted earnings per share as their effect on the calculation would have been anti-dilutive.6—7—Operations by Segments and Geographic Areas principally by the type of product or service offered and by geography. During the quarter ended December 31, 2017 we changed the name of one of our reportable segments to Banking Solutions from Digital Banking, and that name change is reflected in the discussion that follows.four4 reportable segments as follows: predominately 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 andPaymode-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 estimated life of the customer relationship.SolutionSolutions products are now sold predominantly on a subscriptionhosted basis, whichwith revenue recorded over time. This has the effect of contributing to recurring subscription and transaction revenue and the revenue predictability of future periods, but which also delaysresults in revenue recognition over a longer period.is a supplier of software products that provide a range ofsupplies financial business process management software solutions, including making and collecting payments, sendingRevenue associated with the aforementioned products and servicesWhen licensed for on-premise deployment, software license revenue is typically recorded upon delivery. However, ifdelivery of the software and commencement of the license term. In hosted arrangements, we license products on a subscription basis,typically record revenue over time. Professional services revenue is typicallynormally recorded as we perform the work and software support and maintenance revenue is recorded ratably over the subscription period or the expected life of the customer relationship.operating segments.solutions. Our cyber fraud and risk management solutionsnon-invasively monitor, replay and analyze user behavior to flag and even stop suspicious activity in real time. 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. When licensed on aSoftware revenue for perpetual license basis, revenue forlicenses of our cyber fraud and risk management and healthcare products is typically recorded upon delivery withof the exceptionsoftware and commencement of software maintenance which is normally recorded ratably over a twelve-month period. When products are licensed on a subscription basis,the license term. Professional services revenue is normallyrecorded as we perform the work and software support and maintenance revenue is recorded ratably over the subscription period.lossincome (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.and six months ended December 31, 2017September 30, 2019 and 20162018 according to the segment descriptions above, is as follows: Three Months Ended
December 31, Six Months Ended
December 31, 2017 2016 2017 2016 (in thousands) $ 44,518 $ 38,032 $ 86,962 $ 73,589 20,954 19,464 42,275 37,650 25,343 24,815 48,392 49,661 4,380 4,417 8,862 8,912 $ 95,195 $ 86,728 $ 186,491 $ 169,812 $ 9,650 $ 6,778 $ 19,034 $ 12,231 1,148 1,043 3,309 1,068 7,734 7,617 14,094 15,193 (903 ) (913 ) (1,387 ) (1,358 ) $ 17,629 $ 14,525 $ 35,050 $ 27,134 (1)Revenues from our legal spend management solutions were $16.1 million and $14.7 million for the three months ended December 31, 2017 and 2016, respectively. Revenues from our settlement network solutions were $28.4 million and $23.3 million for the three months ended December 31, 2017 and 2016, respectively. Revenues from our legal spend management solutions were $31.6 million and $27.7 million for the six months ended December 31, 2017 and 2016, respectively. Revenues from our settlement network solutions were $55.4 million and $45.9 million for the six months ended December 31, 2017 and 2016, respectively. Three Months Ended September 30, 2019 2018 (in thousands) Segment revenue: $ 52,829 $ 49,575 Banking Solutions 24,169 22,252 Payments and Transactional Documents 26,771 26,234 Other 4,407 4,376 Total segment revenue $ 108,176 $ 102,437 Segment measure of profit (loss): Cloud Solutions $ 11,107 $ 10,292 Banking Solutions 535 2,062 Payments and Transactional Documents 7,701 8,081 Other (1,866 ) (1,013 ) Total measure of segment profit $ 17,477 $ 19,422 Three Months Ended
December 31, Six Months Ended
December 31, 2017 2016 2017 2016 (in thousands) $ 17,629 $ 14,525 $ 35,050 $ 27,134 (5,702 ) (6,090 ) (10,890 ) (12,375 ) — (7,529 ) — (7,529 ) (8,080 ) (8,656 ) (16,540 ) (16,855 ) (380 ) (522 ) (1,372 ) (1,771 ) — — 9 — (3 ) (264 ) (38 ) (541 ) (1,339 ) (2,106 ) (3,415 ) (4,597 ) (3,532 ) (4,182 ) (7,995 ) (8,117 ) $ (1,407 ) $ (14,824 ) $ (5,191 ) $ (24,651 ) Three Months Ended September 30, 2019 2018 (in thousands) Total measure of segment profit $ 17,477 $ 19,422 Less: Amortization of acquisition-related intangible assets (4,950 ) (5,326 ) Stock-based compensation plan expense (11,044 ) (12,342 ) Acquisition and integration-related expenses (1,697 ) (883 ) Restructuring benefit (expense) 25 (577 ) Other non-core benefit 14 — Global ERP system implementation and other costs (224 ) (1,581 ) Other expense, net of pension adjustments (965 ) (965 ) Loss before income taxes $ (1,364 ) $ (2,252 ) profit (loss): Three Months Ended
December 31, Six Months Ended
December 31, 2017 2016 2017 2016 (in thousands) $ 2,535 $ 1,860 $ 4,978 $ 3,700 1,537 1,436 3,029 2,806 705 749 1,344 1,554 98 109 192 181 $ 4,875 $ 4,154 $ 9,543 $ 8,241 Three Months Ended September 30, 2019 2018 (in thousands) Depreciation and other amortization expense: Cloud Solutions $ 3,155 $ 2,929 Banking Solutions 2,095 1,856 Payments and Transactional Documents 659 758 Other 183 97 Total depreciation and other amortization expense $ 6,092 $ 5,640 North America and customers located in Africa for which the point of sale was the Middle East. Three Months Ended
December 31, Six Months Ended
December 31, 2017 2016 2017 2016 (in thousands) $ 59,036 $ 56,190 $ 116,606 $ 106,712 22,468 19,313 42,539 40,144 10,120 9,182 20,531 18,534 3,571 2,043 6,815 4,422 $ 95,195 $ 86,728 $ 186,491 $ 169,812 Three Months Ended September 30, 2019 2018 (in thousands) Revenues from unaffiliated customers: United States $ 69,020 $ 62,881 United Kingdom 24,967 24,367 Switzerland 9,760 9,993 Other 4,429 5,196 Total revenues from unaffiliated customers $ 108,176 $ 102,437 At December 31, At June 30, 2017 2017 (in thousands) $ 36,211 $ 35,569 5,767 5,188 921 1,208 2,357 1,901 $ 45,256 $ 43,866 At September 30, At June 30, 2019 2019 (in thousands) Long-lived assets: United States $ 62,476 $ 44,357 United Kingdom 39,020 32,035 Other 12,325 5,326 Total long-lived assets $ 113,821 $ 81,718 7—8—Income Taxesour effective taxthat rate. The calculation of our estimated effective tax rate requires an estimate ofpre-tax income by tax jurisdiction as well as total tax expense for the fiscal year. Accordingly, thisour annual estimated effective tax rate is subject to adjustment if in subsequent interim periods, there are changes to our initial estimates of total tax expense orpre-tax income, including the mix of income by jurisdiction. For those tax jurisdictions for which we are unable to reliably estimate an overall effective tax rate, we calculate income tax expense based upon the actual effective tax rate for theyear-to-date period.The Tax Cuts and Jobs Act (the “Tax Act”) was signed into U.S. law on December 22, 2017 and makes broad and complex changes to the U.S. tax code. This legislation contains a variety ofchanges, including a reduction to the federal corporate income tax rate from 35% to 21%, a repealexpense of the corporate alternative minimum tax, aone-time transition tax on accumulated foreign earnings (if any), a move to a territorial tax system, a limitation on the tax deductibility of interest expense$3,000 and an acceleration of tax deductions for qualifying capital expenditures. As discussed in more detail below, at December 31, 2017, we have not completed our accounting for the tax effects of enactment of the Tax Act.The Tax Act resulted in three immediate consequences to us, as follows:•Assessing whether we would incur any tax liability under theone-time transition tax. Under the Tax Act,un-repatriated foreign earnings post-1986 are subject to aone-time transition tax, at rates that vary depending on the composition of foreign assets. Based on our calculations and estimates to date, we do not expect to incur any transition tax liability as we believe we are in an accumulated deficit position with respect to our foreign subsidiaries. Accordingly, we have not provided for any such tax liability as of December 31, 2017.•Re-valuing our U.S. deferred tax balances to reflect lower income tax rates. Deferred tax assets and deferred tax liabilities are recorded based on the income tax rates expected to be in effect when book and tax basis differences reverse. We are in a net U.S. deferred tax liability position. As such, uponre-valuation to lower projected future income tax rates, we wrote down the carrying value of our net deferred tax liabilities and recognized anon-recurring income tax benefit of $3.7 million in the quarter ended December 31, 2017.•Recognizing the ability to recover amounts paid for alternative minimum tax. The Tax Act eliminated the alternative minimum tax calculation and provided for the ability to recover certain amounts previously paid for such tax. Based on our preliminary calculations, we expect to receive a tax refund of $0.7 million and we recognized anon-recurring income tax benefit for this amount in the quarter ended December 31, 2017.All of our accounting calculations, estimates and financial reporting positions for consequences arising from the Tax Act are incomplete and preliminary as of December 31, 2017. In particular, we are completing our assessment ofun-repatriated foreign earnings, our calculation of refundable alternative minimum tax, our permanent reinvestment assertions and our assessment of the required valuation allowance against our U.S. deferred tax assets in light of the changes under the Tax Act and the indefinite nature of net operating losses arising after January 1, 2018. Ouron-going analysis could result in subsequent period adjustments to the preliminary amounts recordedto-date. In addition, our financial reporting conclusions may also be affected as we gain a more thorough understanding of the tax law. Any required future adjustment would be recorded in the subsequent period in which we determine that an adjustment is required.We have not changed our permanent reinvestment assertions as of the period ended December 31, 2017.We recorded an income tax benefit of $4.5$1.3 million for each of the three months ended December 31, 2017September 30, 2019 and 2016.2018, respectively. In the three months ended September 30, 2019, the income tax expense recorded was principally associated with the U.S. deferred tax consequences arising from our acquisition of BankSight, offset by an income tax benefit attributable to our loss before income tax for the three months ended September 30, 2019. The income tax benefit for the threeDecember 31, 2017 includes the discrete tax benefit of $4.4 million relating to the consequences of the Tax Act as discussed above. Additionally, we recorded an income tax benefitSeptember 30, 2018 was principally associated with our SwissU.S. and Israeli operations, offset in part by income tax expense principally associated with our U.S.UK and UKSwiss operations. Tax expense associated with our U.S. operations arose primarily as a result of deferred tax expense for goodwill that is deductible for tax purposes but not amortized for financial reporting purposes. The income tax benefit for the three months ended December 31, 2016 was due to a discrete tax benefit in Switzerland of $4.5 million related to the impairment of its investment in Intellinx Ltd. (a wholly owned subsidiary). We also recorded tax expense associated with our U.S. and UK operations, offset by a tax benefit associated with our Swiss and Israeli operations.We recorded an income tax benefit of $4.0 million and $3.8 million for the six months ended December 31, 2017 and 2016, respectively. The income tax benefit for the six months ended December 31, 2017 includes the discrete tax benefit of $4.4 million relating to the consequences of the Tax Act as discussed above. Additionally, we recorded income tax expense principally associated with our U.S. and UK operations, offset in part by a tax benefit associated with our Swiss and Israeli operations. Tax expense associated with our U.S. operations arose primarily as a result of deferred tax expense for goodwill that is deductible for tax purposes but not amortized for financial reporting purposes. The income tax benefit for the six months ended December 31, 2016 was due to a discrete tax benefit in Switzerland of $4.5 million related to the impairment of its investment in Intellinx Ltd. We also recorded tax expense associated with our U.S. and UK operations, offset by a tax benefit associated with our Swiss and Israeli operations.Effective July 1, 2017, we adopted a new accounting standard intended to simplify certain aspects of accounting for share-based compensation arrangements, including the associated income tax consequences. Upon adoption, excess tax benefits associated with share-based compensation arrangements that previously were only recognized for financial reporting purposes when they actually reduced currently payable income taxes were recognized as deferred tax assets, net of any required valuation allowance. Accordingly, after adoption, we recognized the following:�� (in thousands) $ 17,393 (17,144 ) $ 249 This net increase to our deferred tax assets was recorded as a cumulative effect adjustment, reducing the accumulated deficit in our consolidated balance sheet.During the quarter ended December 31, 2017 we reduced the carrying value of our U.S. deferred tax assets (including the corresponding impact to the valuation allowance) and our U.S. deferred tax liabilities to reflect the impact of lower income tax rates under the Tax Act.December 31, 2017,September 30, 2019, we had a total valuation allowance of $39.8$33.4 million against our deferred tax assets given the uncertainty of recoverability of these amounts. The change in our valuation allowance during the six months ended December 31, 2017 includes the valuation allowance provided against excess tax benefits associated with share-based payment arrangements and the preliminary reduction to valuation allowance due the change in the U.S. federal corporate income tax rate, as discussed above.In November 2016, the Internal Revenue Service commenced an audit on our U.S. federal tax return for the fiscal year ended June 30, 2015. We do not expect this audit to have a material impact on our financial statements.8—9—Goodwill and Other Intangible AssetsDecember 31, 2017,September 30, 2019, the carrying value of goodwill for all of our reporting units was $202.1 million, and the carrying value of goodwill in our Intellinx reporting unit was $4.4 million, which we believe to be at a heightened risk of impairment. Please refer to Note 7. Goodwill and Other Intangible Assets to our consolidated financial statements included in Item 8 of our Annual Report in Form10-K for the fiscal year ended June 30, 2017 for more information regarding our accumulated impairment losses and goodwill balances.Effective July 1, 2017, we adopted an accounting standard update requiring that software be classified as an intangible asset rather than an element of property and equipment. Intangible asset information as of June 30, 2017 has been recast in the table that follows, to reflect this change. As of December 31, 2017 Gross Carrying
Amount Accumulated
Amortization Net Carrying
Value Weighted Average
Remaining Life (in thousands) (in years) $ 203,379 $ (129,527 ) $ 73,852 8.8 130,777 (78,954 ) 51,823 8.5 22,098 (16,442 ) 5,656 5.5 17,693 (4,765 ) 12,928 4.5 58,501 (29,494 ) 29,007 4.6 $ 432,448 $ (259,182 ) $ 173,266 202,083 $ 375,349 As of June 30, 2017 Gross Carrying
Amount Accumulated
Amortization Net Carrying
Value Weighted Average
Remaining Life (in thousands) (in years) $ 190,965 $ (122,698 ) $ 68,267 8.7 130,572 (74,452 ) 56,120 8.8 20,591 (15,691 ) 4,900 6.6 16,304 (3,423 ) 12,881 5.0 54,489 (25,377 ) 29,112 3.5 $ 412,921 $ (241,641 ) $ 171,280 194,700 $ 365,980 As of September 30, 2019 Gross Carrying Amount Accumulated Amortization Net Carrying Value Weighted Average Remaining Life (in thousands) (in years) Amortized intangible assets: Customer related $ 216,921 $ (146,367 ) $ 70,554 8.1 Core technology 130,977 (91,160 ) 39,817 7.3 Other intangible assets 21,827 (19,084 ) 2,743 4.9 Capitalized software development costs 24,065 (10,971 ) 13,094 2.8 71,954 (37,413 ) 34,541 4.0 Total $ 465,744 $ (304,995 ) $ 160,749 Unamortized intangible assets: Goodwill 204,396 Total intangible assets $ 365,145 As of June 30, 2019 Gross Carrying Amount Accumulated Amortization Net Carrying Value Weighted Average Remaining Life (in thousands) (in years) Amortized intangible assets: Customer related $ 219,893 $ (145,144 ) $ 74,749 8.5 Core technology 130,226 (90,017 ) 40,209 7.4 Other intangible assets 25,712 (19,030 ) 6,682 5.0 Capitalized software development costs 23,213 (10,006 ) 13,207 3.0 72,018 (38,516 ) 33,502 4.2 Total $ 471,062 $ (302,713 ) $ 168,349 Unamortized intangible assets: Goodwill 206,101 Total intangible assets $ 374,450 Software includes purchased software and software developed for internal use.
Acquired Intangible Assets | Capitalized Software Development Costs | Software | ||||||||||
(in thousands) | ||||||||||||
Remaining 2018 | $ | 11,481 | $ | 1,434 | 4,329 | |||||||
2019 | 20,439 | 2,868 | 7,687 | |||||||||
2020 | 18,100 | 2,868 | 5,990 | |||||||||
2021 | 16,358 | 2,869 | 3,740 | |||||||||
2022 | 14,187 | 2,869 | 2,476 | |||||||||
2023 and thereafter | 50,766 | — | 3,400 |
Acquired Intangible Assets | Capitalized Software Development Costs | Software | ||||||||||
(in thousands) | ||||||||||||
Remaining 2020 | $ | 14,862 | $ | 2,915 | $ | 8,111 | ||||||
2021 | 18,493 | 3,887 | 7,568 | |||||||||
2022 | 16,588 | 3,887 | 5,755 | |||||||||
2023 | 15,179 | 1,033 | 3,875 | |||||||||
2024 | 13,521 | 376 | 2,413 | |||||||||
2025 and thereafter | 34,471 | — | 1,548 |
Cloud Solutions | Banking Solutions | Payments and Transactional Documents | Other | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Balance at June 30, 2017(1) | $ | 90,069 | $ | 35,880 | $ | 60,557 | $ | 8,194 | $ | 194,700 | ||||||||||
Goodwill acquired during the period | 1,377 | — | 4,739 | — | 6,116 | |||||||||||||||
Impact of foreign currency translation | 447 | — | 820 | — | 1,267 | |||||||||||||||
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Balance at December 31, 2017(1) | $ | 91,893 | $ | 35,880 | $ | 66,116 | $ | 8,194 | $ | 202,083 | ||||||||||
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Cloud Solutions | Banking Solutions | Payments and Transactional Documents | Other | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Balance at June 30, 2019 (1) | $ | 90,307 | $ | 39,451 | $ | 68,149 | $ | 8,194 | $ | 206,101 | ||||||||||
Measurement period adjustment (2) | — | 1,136 | — | — | 1,136 | |||||||||||||||
Impact of foreign currency translation | (1,296 | ) | — | (1,545 | ) | — | (2,841 | ) | ||||||||||||
Balance at September 30, 2019 (1) | $ | 89,011 | $ | 40,587 | $ | 66,604 | $ | 8,194 | $ | 204,396 |
(1) | Other goodwill balance is net of $7.5 million accumulated impairment |
(2) | The measurement period adjustment during the three months ended September 30, 2019 relates to our BankSight acquisition. See Note 5 Business and Asset Acquisitions. |
Legal Matters
In May 2017,
Operating leases: | Three Months Ended September 30, 2019 | |||
(in thousands) | ||||
Operating lease cost | $ | 1,916 | ||
Short-term lease cost | 212 | |||
Variable lease cost | 495 | |||
Sublease income | (124 | ) | ||
Total lease cost | $ | 2,499 |
Three Months Ended September 30, 2019 | ||||
(in thousands) | ||||
Right-of-use assets, net | $ | 25,224 | ||
Operating lease liabilities, current (1) | $ | 6,045 | ||
Operating lease liabilities, non-current | 21,993 | |||
Total operating lease liabilities | $ | 28,038 |
(1) | Included as a component of accrued expenses and other current liabilities. |
Three Months Ended September 30, 2019 | ||||
(in thousands) | ||||
Cash paid for amounts included in the measurement of lease liabilities | $ | 1,764 | ||
Right-of-use assets obtained in exchange for lease obligations | $ | 262 |
For the year ending June 30, | Operating Leases | |||
(in thousands) | ||||
2020 | $ | 5,437 | ||
2021 | 7,015 | |||
2022 | 4,992 | |||
2023 | 3,528 | |||
2024 | 2,671 | |||
Thereafter | 9,632 | |||
Total lease payments | 33,275 | |||
Less imputed interest | (5,237 | ) | ||
Total lease liabilities | $ | 28,038 |
yet commenced of $2.7 million. These operating leases will commence by fiscal year 2021 and have lease terms of 3 years to 12 years.
On December 9, 2016, we (as borrower) and certain of our existing and future domestic material restricted subsidiaries (the Guarantors) entered into
Under the Credit Agreement, we also and that expires in July 2023. We have the right to request an increase of the aggregate commitments under the Credit Facility by up to $150 million, without the consent of any Lenders not participating in such increase, subject to specified conditions.
The proceeds of the Credit Facility may be used for lawful corporate purposes of Bottomline and its subsidiaries, including acquisitions, share buybacks, capital expenditures, the repayment or refinancing of indebtedness, redemption of our 1.5% Convertible Senior Notes that matured on December 1, 2017 (the Notes) and general corporate purposes. The Credit Facility is available for the issuance of up to $20 At September 30, 2019, we owed $110 million of letters of credit and up to $20 million of swing line loans. The Credit Facility will terminate on December 8, 2021.
Loans outstanding under the Credit Facility will bear interest, at our option, at either (i) a Eurodollar rate plus a margin of between 1.50% and 2.25% (which is initially 1.75%) based on the Consolidated Net Leverage Ratio (as defined in the Credit Agreement), or (ii) a base rate plus a margin of between 0.50% and 1.25% (which is initially 0.75%) based on the Consolidated Net Leverage Ratio. Loans under the Credit Agreement may be prepaid at par and commitments under the Credit Agreement may be reduced at any time, in whole or in part, without premium or penalty (except for LIBOR breakage costs).
The Credit Facility is guaranteed by the Guarantors and is secured by substantially all of our domestic assets and those of the Guarantors, including a pledge of all of the shares of capital stock of the Guarantors and 65% of the shares of the capital stock of our first-tier foreign subsidiaries or those of any Guarantor, in each case subject to certain exceptions as set forth in the Credit Agreement. The collateral does not include, among other things, any real property or the capital stock or any assets of any unrestricted subsidiary.
Facility.
1.00. The Credit Agreement also contains customary events of default and related cure provisions. In the case of a continuing event of default, the administrative agent would be entitled to exercise various remedies on behalf of the Lenders, including the acceleration of any outstanding loans.
During the three months ended December 31, 2017, we borrowed $150 million against the Credit Facility to finance the repayment of a portion of the principal balance of the Notes.
As of December 31, 2017,September 30, 2019, we were in compliance with the covenants associated with the Credit Facility.
Convertible Senior Notes
all covenants.
The principal balance of the Notes was required to be settled in cash. However, we were permitted at our election to settle any conversion obligation in excess of the principal portion in cash, shares of our common stock, or a combination of cash and shares of our common stock. Upon the maturity of the Notes, we elected to settle the conversion premium with shares of our common stock and, accordingly, issued approximately 0.6 million shares with a fair value of $33.54 per share. The impact of the share issuance was recorded entirely within stockholder’s equity in our consolidated balance sheet and we recorded no gain or lossbased on the settlement ofexchange rate in effect at the Notes.
The following table sets forth total interest expense related to the Notes:
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(in thousands) | ||||||||||||||||
Contractual interest expense (cash) | $ | 482 | $ | 712 | $ | 1,194 | $ | 1,424 | ||||||||
Amortization of debt discount(non-cash) | 2,271 | 3,132 | 5,574 | 6,208 | ||||||||||||
Amortization of debt issue costs(non-cash) | 198 | 296 | 494 | 592 | ||||||||||||
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$ | 2,951 | $ | 4,140 | $ | 7,262 | $ | 8,224 | |||||||||
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Effective interest rate of the liability component | 8.54 | % | 8.10 | % | 8.45 | % | 8.04 | % | ||||||||
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Note Hedges
In December 2012, we entered into privately negotiated transactions to purchase hedge instruments (the Note Hedges), covering approximately 6.3 million shares of our common stock. The Note Hedges, subject to anti-dilution provisions substantially similar to those of the Notes, had a strike price that corresponds to the conversion price of the Notes, were exercisable by us upon any conversion under the Notes and expired on December 1, 2017. On December 1, 2017, in connection with the maturity of the Notes, we redeemed a portion of the Note Hedges and received from the Note Hedge counterparties approximately 0.6 million shares of our common stock with a fair value $33.54 per share. The impact of the share redemption was recorded as treasury stock in our consolidated balance sheet and we recorded no gain or loss on the redemption of these shares. The redemption of these shares offset the dilution that otherwise would have occurred as a result of the common stock we issued upon the settlement of the Notes.
Warrants
In December 2012, we received aggregate proceeds of $25.8 million, net of issue costs, from the sale of warrants (the Warrants), for the purchase of up to 6.3 million shares of our common stock, subject to antidilution adjustments, at a strike price of $40.04 per share. The Warrants are exercisable in equal tranches over a period of 150 days beginning on March 1, 2018, and ending on October 18, 2018.
The Warrants are transactions that are separate from the terms of the Notes and the Note Hedges, and holders of the Notes and Note Hedges have no rights with respect to the Warrants.
Note Payable
acquisition date). We financed a portion of the Decillion purchase price for our acquisition of Decillion by entering into a note payable for 2.5 million Singapore Dollars (approximately $1.8 million based on the exchange rate in effect at the acquisition date). The note is payable in equal installments over ten10 quarters, starting duringwith the three months ended September 30, 2017. Please refer toNote 4 Acquisitions and Other Investments for additional discussion of our Decillion acquisition.
Note 11—Derivative Instruments
Note Hedges, Conversion Feature and Warrants
Duringfinal installment due in the three monthsquarter ended December 31, 2017, in connection with the maturity of the Notes, we settled the 2019.
12—Derivative Instruments
On July 10, 2017, we entered into an Agreements
Description | Balance Sheet Location | December 31, 2017 | ||||
(in thousands) | ||||||
Derivative interest rate swap | ||||||
Derivative asset | Other assets | $ | 782 | |||
Derivative liability | Accrued expenses and other current liabilities | $ | 165 |
Description | Balance Sheet Location | September 30, 2019 | June 30, 2019 | ||||||
Derivative interest rate swaps | (in thousands) | ||||||||
Short-term derivative liability | Accrued expenses and other current liabilities | $ | 233 | $ | 37 | ||||
Long-term derivative liability | Other liabilities | $ | 1,729 | $ | 1,248 |
Amount of Gain (Loss) Recognized in OCI on Derivative Instruments (Effective Portion) | Amount of Gain (Loss) Reclassified from AOCI into Net Income (Loss) (Effective Portion) | |||||||||||||||
Three Months Ended December 31, | Three Months Ended December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(in thousands) | ||||||||||||||||
Derivative interest rate swap | $ | 804 | $ | — | $ | (48 | ) | $ | — |
Amount of Gain (Loss) Recognized in OCI on Derivative Instruments (Effective Portion) | Amount of Gain (Loss) Reclassified from AOCI into Net Income (Loss) (Effective Portion) | |||||||||||||||
Six Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(in thousands) | ||||||||||||||||
Derivative interest rate swap | $ | 569 | $ | — | $ | (48 | ) | $ | — |
September 30, 2019 and 2018.
Gain (Loss) in AOCI June 30, 2019 | Amount of Gain (Loss) Recognized in OCI on Derivative Instruments (Effective Portion) | Amount of (Gain) Loss Reclassified from AOCI into Net Loss (Effective Portion) (1) | Gain (Loss) in AOCI September 30, 2019 | ||||||||||||
(in thousands) | |||||||||||||||
Derivative interest rate swap | $ | (1,285 | ) | $ | (595 | ) | $ | (82 | ) | $ | (1,962 | ) | |||
Gain (Loss) in AOCI June 30, 2018 | Amount of Gain (Loss) Recognized in OCI on Derivative Instruments (Effective Portion) | Amount of (Gain) Loss Reclassified from AOCI into Net Loss (Effective Portion) (1) | Gain (Loss) in AOCI September 30, 2018 | ||||||||||||
(in thousands) | |||||||||||||||
Derivative interest rate swap | $ | 2,590 | $ | 368 | $ | (41 | ) | $ | 2,917 |
(1) | Recorded as interest income (expense) within other expense, net in our unaudited consolidated statements of comprehensive income (loss). |
As of December 31, 2017, there was $0.6 million of unrealized gain in accumulated other comprehensive loss.
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(in thousands) | ||||||||||||||||
Components of net periodic cost | ||||||||||||||||
Service cost | $ | 624 | $ | 732 | $ | 1,264 | $ | 1,482 | ||||||||
Interest cost | 87 | 31 | 176 | 63 | ||||||||||||
Prior service credit | (22 | ) | (22 | ) | (45 | ) | (45 | ) | ||||||||
Net actuarial loss | 54 | 161 | 109 | 326 | ||||||||||||
Expected return on plan assets | (294 | ) | (219 | ) | (595 | ) | (443 | ) | ||||||||
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Net periodic cost | $ | 449 | $ | 683 | $ | 909 | $ | 1,383 | ||||||||
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Three Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Components of net periodic cost | ||||||||
Service cost | $ | 724 | $ | 645 | ||||
Interest cost | 56 | 116 | ||||||
Prior service credit | (77 | ) | (78 | ) | ||||
Net actuarial loss | 118 | 56 | ||||||
Expected return on plan assets | (307 | ) | (353 | ) | ||||
Net periodic cost | $ | 514 | $ | 386 |
2019.
The revenue increase was attributable to revenue increases in our Cloud Solutions segment of $3.3 million and our Banking Solutions segment of $1.9 million. Increased revenue from our legal spend management and Paymode-X settlement network solutions accounted for the revenue increase in our Cloud Solutions segment. The Banking Solutions segment's revenue increase was primarily due to new customer engagements and platform go-lives, as customers continued to deploy our solutions.
marketing costs of $2.5$2.7 million and increased product development and engineering costs of $1.7 million. Our operating expenses for$1.8 million as we continued to invest in new product innovation.
In the six months ended December 31, 2017,September 30, 2019, we derived approximately 38%36% of our revenue from customers located outside of North America, principally in the United Kingdom (UK), continental Europe and the Asia-Pacific region.
we can continue to offer innovative, feature-rich technology solutions to our customers.
29, 2019, as updated above.
September 30, 2018
Three Months Ended December 31, | Increase (Decrease) Between Periods | Six Months Ended December 31, | Increase (Decrease) Between Periods | |||||||||||||||||||||||||||||
2017 | 2016 | $ Change Inc (Dec) | % Change Inc (Dec) | 2017 | 2016 | $ Change Inc (Dec) | % Change Inc (Dec) | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Segment revenue: | ||||||||||||||||||||||||||||||||
Cloud Solutions | $ | 44,518 | $ | 38,032 | $ | 6,486 | 17.1 | % | $ | 86,962 | $ | 73,589 | $ | 13,373 | 18.2 | % | ||||||||||||||||
Banking Solutions | 20,954 | 19,464 | 1,490 | 7.7 | % | 42,275 | 37,650 | 4,625 | 12.3 | % | ||||||||||||||||||||||
Payments and Transactional Documents | 25,343 | 24,815 | 528 | 2.1 | % | 48,392 | 49,661 | (1,269 | ) | (2.6 | )% | |||||||||||||||||||||
Other | 4,380 | 4,417 | (37 | ) | (0.8 | )% | 8,862 | 8,912 | (50 | ) | (0.6 | )% | ||||||||||||||||||||
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Total revenues | $ | 95,195 | $ | 86,728 | $ | 8,467 | 9.8 | % | $ | 186,491 | $ | 169,812 | $ | 16,679 | 9.8 | % | ||||||||||||||||
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Segment measure of profit (loss): | ||||||||||||||||||||||||||||||||
Cloud Solutions | $ | 9,650 | $ | 6,778 | $ | 2,872 | 42.4 | % | $ | 19,034 | $ | 12,231 | $ | 6,803 | 55.6 | % | ||||||||||||||||
Banking Solutions | 1,148 | 1,043 | 105 | 10.1 | % | 3,309 | 1,068 | 2,241 | 209.8 | % | ||||||||||||||||||||||
Payments and Transactional Documents | 7,734 | 7,617 | 117 | 1.5 | % | 14,094 | 15,193 | (1,099 | ) | (7.2 | )% | |||||||||||||||||||||
Other | (903 | ) | (913 | ) | 10 | 1.1 | % | (1,387 | ) | (1,358 | ) | (29 | ) | (2.1 | )% | |||||||||||||||||
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Total measure of segment profit | $ | 17,629 | $ | 14,525 | $ | 3,104 | 21.4 | % | $ | 35,050 | $ | 27,134 | $ | 7,916 | 29.2 | % | ||||||||||||||||
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Three Months Ended September 30, | Increase (Decrease) Between Periods | ||||||||||||||
2019 | 2018 | $ Change Inc (Dec) | % Change Inc (Dec) | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Segment revenue: | |||||||||||||||
Cloud Solutions | $ | 52,829 | $ | 49,575 | $ | 3,254 | 6.6 | % | |||||||
Banking Solutions | 24,169 | 22,252 | 1,917 | 8.6 | % | ||||||||||
Payments and Transactional Documents | 26,771 | 26,234 | 537 | 2.0 | % | ||||||||||
Other | 4,407 | 4,376 | 31 | 0.7 | % | ||||||||||
Total segment revenue | $ | 108,176 | $ | 102,437 | $ | 5,739 | 5.6 | % | |||||||
Segment measure of profit (loss): | |||||||||||||||
Cloud Solutions | $ | 11,107 | $ | 10,292 | $ | 815 | 7.9 | % | |||||||
Banking Solutions | 535 | 2,062 | (1,527 | ) | (74.1 | )% | |||||||||
Payments and Transactional Documents | 7,701 | 8,081 | (380 | ) | (4.7 | )% | |||||||||
Other | (1,866 | ) | (1,013 | ) | (853 | ) | (84.2 | )% | |||||||
Total measure of segment profit | $ | 17,477 | $ | 19,422 | $ | (1,945 | ) | (10.0 | )% |
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(in thousands) | ||||||||||||||||
Total measure of segment profit | $ | 17,629 | $ | 14,525 | $ | 35,050 | $ | 27,134 | ||||||||
Less: | ||||||||||||||||
Amortization of acquisition-related intangible assets | (5,702 | ) | (6,090 | ) | (10,890 | ) | (12,375 | ) | ||||||||
Goodwill impairment charge | — | (7,529 | ) | — | (7,529 | ) | ||||||||||
Stock-based compensation expense | (8,080 | ) | (8,656 | ) | (16,540 | ) | (16,855 | ) | ||||||||
Acquisition and integration-related expenses | (380 | ) | (522 | ) | (1,372 | ) | (1,771 | ) | ||||||||
Restructuring benefit | — | — | 9 | — | ||||||||||||
Minimum pension liability adjustments | (3 | ) | (264 | ) | (38 | ) | (541 | ) | ||||||||
Global ERP system implementation and other costs | (1,339 | ) | (2,106 | ) | (3,415 | ) | (4,597 | ) | ||||||||
Other expense, net | (3,532 | ) | (4,182 | ) | (7,995 | ) | (8,117 | ) | ||||||||
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Loss before income taxes | $ | (1,407 | ) | $ | (14,824 | ) | $ | (5,191 | ) | $ | (24,651 | ) | ||||
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Three Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Total measure of segment profit | $ | 17,477 | $ | 19,422 | ||||
Less: | ||||||||
Amortization of acquisition-related intangible assets | (4,950 | ) | (5,326 | ) | ||||
Stock-based compensation plan expense | (11,044 | ) | (12,342 | ) | ||||
Acquisition and integration-related expenses | (1,697 | ) | (883 | ) | ||||
Restructuring benefit (expense) | 25 | (577 | ) | |||||
Other non-core benefit | 14 | — | ||||||
Global ERP system implementation and other costs | (224 | ) | (1,581 | ) | ||||
Other expense, net of pension adjustments | (965 | ) | (965 | ) | ||||
Loss before income taxes | $ | (1,364 | ) | $ | (2,252 | ) |
Revenues from our Cloud Solutions segment increased $13.4 million for the six months ended December 31, 2017 as compared to the same period in the prior fiscal year, inclusive of a favorable impact of foreign currency exchange rates of $0.7 million, due primarily to increased revenue of $9.5$2.2 million from our settlement network solutions and $3.9 million from our legal spend management solutions. Segment profit increased $6.8 million for the six months ended December 31, 2017 as compared to
the same period in the prior fiscal year, due primarily to the revenue increase described above, partially offset by increased cost of revenues of $4.4 million and increased operating expenses of $2.2 million. We expect revenue and profit for the Cloud Solutions segment to increase in fiscal year 2018 as compared to the prior fiscal year, as a result of increased revenue from our legal spend management solutions and $1.1 million from our settlement network solutions.
Banking Solutions
Revenues from our Banking Solutions segment Segment profit increased $1.5$0.8 million for the three months ended December 31, 2017 as compared to the same period in the prior fiscal year, due primarily to increased services revenue of $2.2 million, partially offset by decreased subscriptions and transactions revenue of $0.7 million. Segment profit increased $0.1 million for the three months ended December 31, 2017September 30, 2019 as compared to the same period in the prior fiscal year, due primarily to the revenue increase described above, partially offset by increased cost of revenues of $0.7 million primarily related to subscriptions costs and increased operating expenses of $1.7 million related to increased sales and marketing expensescosts. We expect revenue and profit for the Cloud Solutions segment to increase in fiscal year 2020 as a result of $0.7 million.
increased revenue from our legal spend management and our Paymode-X and financial messaging settlement network solutions.
we continue to invest in product development.
Revenues from ourand sales and marketing costs. We expect revenue to increase and profit to remain consistent for the Payments and Transactional Documents segment in fiscal year 2020.
Three Months Ended September 30, | Increase (Decrease) Between Periods | ||||||||||||||
2019 | 2018 | $ Change Inc (Dec) | % Change Inc (Dec) | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Revenues: | |||||||||||||||
Subscriptions | $ | 80,066 | $ | 69,768 | $ | 10,298 | 14.8 | % | |||||||
Software licenses | 2,576 | 4,512 | (1,936 | ) | (42.9 | )% | |||||||||
Service and maintenance | 24,825 | 27,405 | (2,580 | ) | (9.4 | )% | |||||||||
Other | 709 | 752 | (43 | ) | (5.7 | )% | |||||||||
Total revenues | $ | 108,176 | $ | 102,437 | $ | 5,739 | 5.6 | % | |||||||
As % of total revenues: | |||||||||||||||
Subscriptions | 74.0 | % | 68.1 | % | |||||||||||
Software licenses | 2.4 | % | 4.4 | % | |||||||||||
Service and maintenance | 22.9 | % | 26.8 | % | |||||||||||
Other | 0.7 | % | 0.7 | % | |||||||||||
Total revenues | 100.0 | % | 100.0 | % |
Other
Revenues and profit from our Other segment remained relatively consistent for the three and six months ended December 31, 2017September 30, 2019 as compared to the same period in the prior fiscal year. The overall revenue increase was driven by increases in revenue from our Cloud Solutions, Banking Solutions and Payments and Transactional Documents segments of $5.1 million, $2.7 million and $2.3 million, respectively, due to the impact of customers going live on our hosted platforms and the impact of customers converting to subscription based solutions. We expect Other segment revenue and profitsubscriptions revenues to increase slightly, in fiscal year 20182020 as compared to the prior fiscal year principally as the result of increased sales ofdue to revenue increases in our cyber fraudlegal spend management solutions, our Paymode-X and risk management products.
Revenues by category
Three Months Ended December 31, | Increase (Decrease) Between Periods | Six Months Ended December 31, | Increase (Decrease) Between Periods | |||||||||||||||||||||||||||||
2017 | 2016 | $ Change Inc (Dec) | % Change Inc (Dec) | 2017 | 2016 | $ Change Inc (Dec) | % Change Inc (Dec) | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||
Subscriptions and transactions | $ | 63,187 | $ | 55,644 | $ | 7,543 | 13.6 | % | $ | 123,901 | $ | 107,776 | $ | 16,125 | 15.0 | % | ||||||||||||||||
Software licenses | 2,620 | 3,492 | (872 | ) | (25.0 | )% | 4,985 | 5,613 | (628 | ) | (11.2 | )% | ||||||||||||||||||||
Service and maintenance | 28,433 | 25,920 | 2,513 | 9.7 | % | 55,775 | 53,593 | 2,182 | 4.1 | % | ||||||||||||||||||||||
Other | 955 | 1,672 | (717 | ) | (42.9 | )% | 1,830 | 2,830 | (1,000 | ) | (35.3 | )% | ||||||||||||||||||||
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Total revenues | $ | 95,195 | $ | 86,728 | $ | 8,467 | 9.8 | % | $ | 186,491 | $ | 169,812 | $ | 16,679 | 9.8 | % | ||||||||||||||||
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As % of total revenues: | ||||||||||||||||||||||||||||||||
Subscriptions and transactions | 66.4 | % | 64.2 | % | 66.4 | % | 63.5 | % | ||||||||||||||||||||||||
Software licenses | 2.8 | % | 4.0 | % | 2.7 | % | 3.3 | % | ||||||||||||||||||||||||
Service and maintenance | 29.9 | % | 29.9 | % | 29.9 | % | 31.6 | % | ||||||||||||||||||||||||
Other | 0.9 | % | 1.9 | % | 1.0 | % | 1.6 | % | ||||||||||||||||||||||||
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| |||||||||||||||||||||||||
Total revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||||||||
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Subscriptionsfinancial messaging settlement network solutions and Transactions
our banking solutions platforms.
We expect
Software Licenses
Revenues from software licenses decreased $0.9 million for the three months ended December 31, 2017 as compared to the same period in the prior fiscal year, inclusive of a favorable impact of foreign currency exchange rates of $0.1 million, primarily as a result of decreasedservices revenue from our Payments and Transactional Documents segment of $1.0 million.
Revenues from software licenses decreased $0.6 million for the six months ended December 31, 2017 as compared to the same period in the prior fiscal year, inclusive of a favorable impact of foreign currency exchange rates of $0.1 million, primarily as a result of decreased revenue from our European payments and transactional documents solutions of $1.5 million, partially offset by increased revenue from our Banking Solutions segmentsegments and Other segment of $0.7 millionfinancial messaging solutions, primarily due to our continued emphasis on subscription and $0.3 million, respectively. We expect software license revenues to decrease slightly in fiscal year 2018 as compared to the prior fiscal year.
Service and Maintenance
Revenues from service and maintenance increased $2.5 million for the three months ended December 31, 2017 as compared to the same period in the prior fiscal year, inclusive of a favorable impact of foreign currency exchange rates of $0.7 million. The overall revenue increase was primarily the result of increased revenue from our Banking Solutions segment of $2.2 million.
Revenues from service and maintenance increased $2.2 million for the six months ended December 31, 2017 as compared to the same period in the prior fiscal year, inclusive of a favorable impact of foreign currency exchange rates of $0.9 million. The overall revenue increase was primarily the result of increased revenue from our Banking Solutions and Cloud Solutions segment of $3.5 million and $0.7 million, respectively, partially offset by decreased revenue from our Payments and Transactional Documents segment of $2.0 million. We expect that service and maintenance revenues will increase slightly in fiscal year 2018 as compared to the prior fiscal year.
cloud based solutions.
2020.
Three Months Ended December 31, | Increase (Decrease) Between Periods | Six Months Ended December 31, | Increase (Decrease) Between Periods | |||||||||||||||||||||||||||||
2017 | 2016 | $ Change Inc (Dec) | % Change Inc (Dec) | 2017 | 2016 | $ Change Inc (Dec) | % Change Inc (Dec) | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Cost of revenues: | ||||||||||||||||||||||||||||||||
Subscriptions and transactions | $ | 27,201 | $ | 24,782 | $ | 2,419 | 9.8 | % | $ | 54,612 | $ | 48,668 | $ | 5,944 | 12.2 | % | ||||||||||||||||
Software licenses | 229 | 196 | 33 | 16.8 | % | 399 | 324 | 75 | 23.1 | % | ||||||||||||||||||||||
Service and maintenance | 12,968 | 13,416 | (448 | ) | (3.3 | )% | 25,200 | 26,701 | (1,501 | ) | (5.6 | )% | ||||||||||||||||||||
Other | 701 | 1,178 | (477 | ) | (40.5 | )% | 1,368 | 2,056 | (688 | ) | (33.5 | )% | ||||||||||||||||||||
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Total cost of revenues | $ | 41,099 | $ | 39,572 | $ | 1,527 | 3.9 | % | $ | 81,579 | $ | 77,749 | $ | 3,830 | 4.9 | % | ||||||||||||||||
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Gross Profit ($) | $ | 54,096 | $ | 47,156 | $ | 6,940 | 14.7 | % | $ | 104,912 | $ | 92,063 | $ | 12,849 | 14.0 | % | ||||||||||||||||
Gross Profit (%) | 56.8 | % | 54.4 | % | 56.3 | % | 54.2 | % | ||||||||||||||||||||||||
As % of total revenues: | ||||||||||||||||||||||||||||||||
Subscriptions and transactions | 28.6 | % | 28.6 | % | 29.3 | % | 28.7 | % | ||||||||||||||||||||||||
Software licenses | 0.2 | % | 0.2 | % | 0.2 | % | 0.2 | % | ||||||||||||||||||||||||
Service and maintenance | 13.6 | % | 15.5 | % | 13.5 | % | 15.7 | % | ||||||||||||||||||||||||
Other | 0.8 | % | 1.3 | % | 0.7 | % | 1.2 | % | ||||||||||||||||||||||||
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Total cost of revenues | 43.2 | % | 45.6 | % | 43.7 | % | 45.8 | % | ||||||||||||||||||||||||
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Three Months Ended September 30, | Increase (Decrease) Between Periods | ||||||||||||||
2019 | 2018 | $ Change Inc (Dec) | % Change Inc (Dec) | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Cost of revenues: | |||||||||||||||
Subscriptions | $ | 32,765 | $ | 31,669 | $ | 1,096 | 3.5 | % | |||||||
Software licenses | 161 | 231 | (70 | ) | (30.3 | )% | |||||||||
Service and maintenance | 13,053 | 12,706 | 347 | 2.7 | % | ||||||||||
Other | 516 | 524 | (8 | ) | (1.5 | )% | |||||||||
Total cost of revenues | $ | 46,495 | $ | 45,130 | $ | 1,365 | 3.0 | % | |||||||
Gross Profit ($) | $ | 61,681 | $ | 57,307 | $ | 4,374 | 7.6 | % | |||||||
Gross Profit (%) | 57.0 | % | 55.9 | % |
Subscriptions and transactions costs decreased slightlySeptember 30, 2018 due to 44% of subscription and transactions revenues in the six months ended December 31, 2017 compared to 45% of subscriptions and transactions revenues in the six months ended December 31, 2016.continued revenue expansion from our hosted solutions. We expect that subscriptions and transactions costs as a percentage of subscriptions and transactions revenues will remain relatively consistentcontinue to decrease in fiscal year 20182020 as compared to the prior fiscal year.
a result of increased revenue contribution from our cloud-based banking, legal spend management and Paymode-X solutions and payments and transactional document solutions.
2020.
costs decreased to 45% of service and maintenance revenues in the six months ended December 31, 2017 as compared to 50% of service and maintenance revenues in the six months ended December 31, 2016. The decrease in service and maintenance costs as a percent of service and maintenance revenues for the three and six months ended December 31, 2017 as compared to the same periods in the prior fiscal year was driven principally by gross margin improvement in our Banking Solutions segment. We expect thatincreased service and maintenance costs as a percentage of service and maintenance revenuesrevenue from our European payments and transactional documents solutions. We expect that service and maintenance costs will decrease slightly as customersgo-live on the banking solutions platformsremain relatively consistent in fiscal year 2018 as compared to the prior fiscal year.
2020.
2020.
Three Months Ended December 31, | Increase (Decrease) Between Periods | Six Months Ended December 31, | Increase (Decrease) Between Periods | |||||||||||||||||||||||||||||
2017 | 2016 | $ Change Inc (Dec) | % Change Inc (Dec) | 2017 | 2016 | $ Change Inc (Dec) | % Change Inc (Dec) | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Sales and marketing | $ | 21,396 | $ | 19,325 | $ | 2,071 | 10.7 | % | $ | 40,701 | $ | 38,200 | $ | 2,501 | 6.5 | % | ||||||||||||||||
Product development and engineering | 13,892 | 13,082 | 810 | 6.2 | % | 27,707 | 26,017 | 1,690 | 6.5 | % | ||||||||||||||||||||||
General and administrative | 10,981 | 11,772 | (791 | ) | (6.7 | )% | 22,810 | 24,476 | (1,666 | ) | (6.8 | )% | ||||||||||||||||||||
Amortization of acquisition-related intangible assets | 5,702 | 6,090 | (388 | ) | (6.4 | )% | 10,890 | 12,375 | (1,485 | ) | (12.0 | )% | ||||||||||||||||||||
Goodwill impairment charge | — | 7,529 | (7,529 | ) | (100.0 | )% | — | 7,529 | (7,529 | ) | (100.0 | )% | ||||||||||||||||||||
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Total operating expenses | $ | 51,971 | $ | 57,798 | $ | (5,827 | ) | (10.1 | )% | $ | 102,108 | $ | 108,597 | $ | (6,489 | ) | (6.0 | )% | ||||||||||||||
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As % of total revenues: | ||||||||||||||||||||||||||||||||
Sales and marketing | 22.5 | % | 22.3 | % | 21.8 | % | 22.5 | % | ||||||||||||||||||||||||
Product development and engineering | 14.6 | % | 15.1 | % | 14.9 | % | 15.3 | % | ||||||||||||||||||||||||
General and administrative | 11.5 | % | 13.6 | % | 12.2 | % | 14.4 | % | ||||||||||||||||||||||||
Amortization of acquisition-related intangible assets | 6.0 | % | 7.0 | % | 5.8 | % | 7.3 | % | ||||||||||||||||||||||||
Goodwill impairment charge | — | % | 8.7 | % | — | % | 4.4 | % | ||||||||||||||||||||||||
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Total operating expenses | 54.6 | % | 66.7 | % | 54.7 | % | 63.9 | % | ||||||||||||||||||||||||
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Three Months Ended September 30, | Increase (Decrease) Between Periods | ||||||||||||||
2019 | 2018 | $ Change Inc (Dec) | % Change Inc (Dec) | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Operating expenses: | |||||||||||||||
Sales and marketing | $ | 25,688 | $ | 23,022 | $ | 2,666 | 11.6 | % | |||||||
Product development and engineering | 18,349 | 16,565 | 1,784 | 10.8 | % | ||||||||||
General and administrative | 13,345 | 13,865 | (520 | ) | (3.8 | )% | |||||||||
Amortization of acquisition-related intangible assets | 4,950 | 5,326 | (376 | ) | (7.1 | )% | |||||||||
Total operating expenses | $ | 62,332 | $ | 58,778 | $ | 3,554 | 6.0 | % | |||||||
As % of total revenues: | |||||||||||||||
Sales and marketing | 23.7 | % | 22.5 | % | |||||||||||
Product development and engineering | 17.0 | % | 16.2 | % | |||||||||||
General and administrative | 12.3 | % | 13.5 | % | |||||||||||
Amortization of acquisition-related intangible assets | 4.6 | % | 5.2 | % | |||||||||||
Total operating expenses | 57.6 | % | 57.4 | % |
Sales and marketing expenses increased in the six months ended December 31, 2017 as compared to the six months ended December 31, 2016 due primarily to an increase in employeemarketing related costs of $2.1 million due in part to the impact of our recent acquisitions.$0.6 million. We expect sales and marketing expenses as a percentage of total revenue will remain relatively consistentincrease in fiscal year 2018 as compared to the prior fiscal year.
2020.
2020.
General and administrative expenses decreased in the six months ended December 31, 2017 as compared to the six months ended December 31, 2016 due primarily to a decrease in costs associated with our global internal system implementations of $1.2$1.4 million and a decrease in acquisition and integration-relatedrestructuring expenses of $0.4$0.6 million, partially offset by an increase in acquisition related costs of $1.4 million and an increase in facilities related costs of $0.5 million. We expect general and administrative expenses as a percentage of total revenues will decrease slightlyremain consistent in fiscal year 2018 as compared to the prior fiscal year, primarily as a result of decreased global internal system implementation costs.
2020.
Goodwill Impairment Charge
In the six months ended December 31, 2016, we recorded a $7.5 million goodwill impairment charge as a result of an impairment test conducted for one of our reporting units. Please refer to Note 7. Goodwill and Other Intangible Assets to our consolidated financial statements included in Item 8 of our Annual Report in Form10-K for the fiscal year ended June 30, 2017 for more information regarding our accumulated impairment losses and goodwill balances.
Three Months Ended December 31, | Increase (Decrease) Between Periods | Six Months Ended December 31, | Increase (Decrease) Between Periods | |||||||||||||||||||||||||||||
2017 | 2016 | $ Change Inc (Dec) | % Change Inc (Dec) | 2017 | 2016 | $ Change Inc (Dec) | % Change Inc (Dec) | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Interest income | $ | 63 | $ | 129 | $ | (66 | ) | (51.2 | )% | $ | 117 | $ | 283 | $ | (166 | ) | (58.7 | )% | ||||||||||||||
Interest expense | (3,668 | ) | (4,143 | ) | 475 | 11.5 | % | (8,257 | ) | (8,183 | ) | (74 | ) | (0.9 | )% | |||||||||||||||||
Other income (expense), net | 73 | (168 | ) | 241 | 143.5 | % | 145 | (217 | ) | 362 | 166.8 | % | ||||||||||||||||||||
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Other expense, net | $ | (3,532 | ) | $ | (4,182 | ) | $ | 650 | 15.5 | % | $ | (7,995 | ) | $ | (8,117 | ) | $ | 122 | 1.5 | % | ||||||||||||
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Three Months Ended September 30, | Increase (Decrease) Between Periods | ||||||||||||||
2019 | 2018 | $ Change Inc (Dec) | % Change Inc (Dec) | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Interest income | $ | 223 | $ | 134 | $ | 89 | 66.4 | % | |||||||
Interest expense | (750 | ) | (1,121 | ) | 371 | 33.1 | % | ||||||||
Other (expense) income, net | (186 | ) | 206 | (392 | ) | (190.3 | )% | ||||||||
Other expense, net | $ | (713 | ) | $ | (781 | ) | $ | 68 | 8.7 | % |
year.
On December 9, 2016, we (as borrower) and certain of our domestic subsidiaries (as guarantors) entered into
As of December 31, 2017, we were in compliance with the covenants associated with the Credit Facility.
December 31, | June 30, | |||||||
2017 | 2017 | |||||||
(in thousands) | ||||||||
Cash and cash equivalents | $ | 64,051 | $ | 124,569 | ||||
Marketable securities | 10,004 | 1,973 | ||||||
Borrowings under credit facility | 150,000 | — | ||||||
Convertible senior notes(1) | — | 183,682 |
Six Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
(in thousands) | ||||||||
Cash provided by operating activities | $ | 9,688 | $ | 17,578 | ||||
Cash provided by (used in) investing activities | (30,906 | ) | 4,000 | |||||
Cash used in financing activities | (40,249 | ) | (15,696 | ) | ||||
Effect of exchange rates on cash | 949 | (3,444 | ) |
September 30, | June 30, | |||||||
2019 | 2019 | |||||||
(in thousands) | ||||||||
Cash and cash equivalents | $ | 84,751 | $ | 92,164 | ||||
Marketable securities | 10,137 | 7,541 | ||||||
Borrowings under credit facility | 110,000 | 110,000 |
Three Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Cash provided by operating activities | $ | 18,112 | $ | 11,982 | ||||
Cash used in investing activities | (14,110 | ) | (17,001 | ) | ||||
Cash used in financing activities | (8,013 | ) | (39,066 | ) | ||||
Effect of exchange rates on cash | (1,970 | ) | (946 | ) |
subsidiary from which the distribution to the U.S. was made.
increased by $7.9$6.1 million in the sixthree months ended December 31, 2017 versusSeptember 30, 2019 as compared to the same period in the prior fiscal year. The decreaseincrease was primarily related to a decreasean increase in cash flows from accounts receivablereceivables of $14.8 million, accrued expenses of $2.2 million, other liabilities of $1.4 million, deferred revenue of $1.3 million andnon-cash adjustments to our net loss of $8.2 million, partially offset by a decrease in our net loss of $19.7$5.8 million.
At December 31, 2017,September 30, 2019, a substantial portion of our deferred tax assets have been reserved since, given the available evidence, it was deemed more likely than not that these deferred tax assets would not be realized.
Contractual Obligations
Following is a summary of future payments that we are required to make under existing contractual obligations as of December 31, 2017:
Payment Due by Fiscal Year | ||||||||||||||||||||
2018 | 2019-2020 | 2021-2022 | Thereafter | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Credit Facility | ||||||||||||||||||||
Principal payment | $ | — | $ | — | $ | 150,000 | $ | — | $ | 150,000 | ||||||||||
Interest payments(1) | 2,590 | 10,424 | 7,501 | — | 20,515 | |||||||||||||||
Commitment fee(2) | 188 | 750 | 541 | — | 1,479 | |||||||||||||||
Note payable | 374 | 1,122 | — | — | 1,496 | |||||||||||||||
Operating leases | 2,938 | 9,795 | 6,968 | 6,476 | 26,177 | |||||||||||||||
Purchase commitments | 4,398 | 6,053 | 92 | — | 10,543 | |||||||||||||||
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Total contractual obligations | $ | 10,488 | $ | 28,144 | $ | 165,102 | $ | 6,476 | $ | 210,210 | ||||||||||
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Purchase orders are not included in the table above. Our purchase orders represent authorizations to purchase rather than binding agreements. The contractual obligation amounts in the table above are associated with agreements that are enforceable and legally binding and that specify all significant terms, including: fixed or minimum services to be used; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Obligations under contract that we can cancel without a significant penalty are not included in the table above.
ended June 30, 2019.
The contractual obligations table above also excludes our estimate of the contributions we will make to our Swiss defined benefit pension plan in fiscal year 2018, which is $1.6 million based on foreign exchange rates in effect on December 31, 2017. We have not disclosed contributions for periods after fiscal year 2018, as those amounts are subject to future changes.
In fiscal year 2018,
With the exception of the implementation of our ERP solution,September 30, 2019.
Risks Related To Our Business
Failure to comply with the regulations provided2019.
First Capital Cashflow Ltd., including our relationships with our existing and future customers, suppliers and employees, which we acquired in October 2017, is subject to the regulatory framework of the FCA. This component of our operations involves holding and disbursing client funds. The FCA has significant enforcement authority, which includes but is not limited to, withdrawing an organization’s authorization, issuing fines and suspending firms from carrying out regulated activities. While we believe we have appropriate controls and procedures around these operations, any failure to comply with FCA requirements may result in disciplinary actions that could have a materialan adverse effect on our business, operatingfinancial results and financial condition.
Period | Total Number of Shares Purchased (1)(2) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs | ||||||||||||
October 1, 2017—October 31, 2017 | — | $ | — | — | $ | 20,140,000 | ||||||||||
November 1, 2017—November 30, 2017 | — | — | — | 20,140,000 | ||||||||||||
December 1, 2017—December 31, 2017 | 595,216 | 33.54 | — | 20,140,000 | ||||||||||||
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Total | 595,216 | $ | — | — | ||||||||||||
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Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs | ||||||||||
July 1, 2019 - July 31, 2019 | — | $ | — | — | $ | — | ||||||||
August 1, 2019 - August 31, 2019 | 188,731 | 43.24 | 188,731 | 41,839,000 | ||||||||||
September 1, 2019 - September 30, 2019 | 44,664 | 41.18 | 44,664 | 40,000,000 | ||||||||||
Total | 233,395 | $ | 42.85 | 233,395 |
(1) | On |
Recent Sales of Unregistered Securities
On October 4, 2017, we issued 42,080 shares of our common stock, all of which were subject to vesting conditions tied toon-going employment with us, to certain of the selling stockholders of First Capital Cashflow Ltd. (FCC), in connection with our purchase of all of the outstanding equity of FCC. These shares were issued in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) of the Securities Act. No underwriters were involved in any such issuances.
Incorporated by Reference | ||||||||||||||||||||||
Exhibit Number | Description | Form | File No. | Exhibit | Filing Date | Filed Herewith | ||||||||||||||||
10.1 | 2009 Stock Incentive Plan, as amended | 8-K | 000-25259 | 99.2 | 11/20/17 | |||||||||||||||||
31.1 | Rule13a-14(a)/15d-14(a) Certification of Principal Executive Officer | X | ||||||||||||||||||||
31.2 | Rule13a-14(a)/15d-14(a) Certification of Principal Financial Officer | X | ||||||||||||||||||||
32.1 | Section 1350 Certification of Principal Executive Officer | X | ||||||||||||||||||||
32.2 | Section 1350 Certification of Principal Financial Officer | X | ||||||||||||||||||||
101.INS** | XBRL Instance Document | X | ||||||||||||||||||||
101.SCH** | XBRL Taxonomy Extension Schema Document | X | ||||||||||||||||||||
101.CAL** | XBRL Taxonomy Calculation Linkbase Document | X | ||||||||||||||||||||
101.DEF** | XBRL Taxonomy Definition Linkbase Document | X | ||||||||||||||||||||
101.LAB** | XBRL Taxonomy Label Linkbase Document | X | ||||||||||||||||||||
101.PRE** | XBRL Taxonomy Presentation Linkbase Document | X |
** | submitted electronically herewith |
Bottomline Technologies (de), Inc.
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