UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December~~March 31, ~~2017~~2019

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number:0-25259

Bottomline Technologies (de), Inc.

(Exact name of registrant as specified in its charter)


Delaware		02-0433294
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

325 Corporate Drive Portsmouth, New Hampshire		03801-6808
(Address of principal executive offices)		(Zip Code)

(603)436-0700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of RegulationS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated Filer	☐

Non-Accelerated Filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller Reporting Company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:


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

The number of shares outstanding of the registrant’s common stock as of ~~January 31, 2018~~April 30, 2019 was ~~40,680,451.~~43,500,999.

BOTTOMLINE TECHNOLOGIES (de), INC.

FORM10-Q

FOR THE FISCAL QUARTER ENDED ~~DECEMBER~~MARCH 31, ~~2017~~2019

TABLE OF CONTENTS


PART I		Page
~~PART I~~

Item 1.	Unaudited Condensed Consolidated Financial Statements		32

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2127

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		3139

Item 4.	Controls and Procedures		3139

PART II

Item 1.	Legal Proceedings		3240

Item 1A.	Risk Factors		3240

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~		32

Item 6.	Exhibits		3341

	SIGNATURE		3442

PART I. FINANCIAL INFORMATION

~~Item 1.~~

~~Financial Statements~~

Item 1. Financial Statements

Bottomline Technologies (de), Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands)


	December 31,			June 30,			March 31,			June 30,
	2017			2017			2019			2018
ASSETS
Current assets:
Cash and cash equivalents	$	64,051		$	124,569		$	79,475		$	121,860
Cash and cash equivalents, held for customers		3,481			—
Cash held for customers								4,305			2,753
Marketable securities		10,004			1,973			8,515			10,012
Accounts receivable net of allowances for doubtful accounts of $973 at December 31, 2017 and $923 at June 30, 2017		78,073			64,244
Accounts receivable net of allowances for doubtful accounts of $1,013 at March 31, 2019 and $996 at June 30, 2018								76,240			74,305
Prepaid expenses and other current assets		18,556			16,807			32,111			19,781

Total current assets		174,165			207,593			200,646			228,711
Property and equipment, net		27,199			26,195			54,696			28,895
Goodwill		202,083			194,700			204,167			200,024
Intangible assets, net		173,266			171,280			168,819			161,785
Other assets		18,058			17,671			31,610			16,553

Total assets	$	594,771		$	617,439		$	659,938		$	635,968

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	10,268		$	9,013		$	11,530		$	10,251
Accrued expenses and other current liabilities		28,411			29,179			32,257			34,994
Customer account liabilities		3,481			—			4,305			2,753
Deferred revenue		59,835			74,113			80,082			75,356
Convertible senior notes		—			183,682

Total current liabilities		101,995			295,987			128,174			123,354
Borrowings under credit facility		150,000			—			110,000			150,000
Deferred revenue,non-current		25,172			22,047			18,722			23,371
Deferred income taxes		13,452			15,433			8,311			8,367
Other liabilities		22,202			22,016			20,398			19,944

Total liabilities		312,821			355,483			285,605			325,036
Stockholders’ equity
Preferred Stock, $.001 par value:
Authorizedshares-4,000; issued and outstanding shares-none		—			—
Authorized shares—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
Authorized shares—100,000; issued shares—46,726 at March 31, 2019 and 44,834 at June 30, 2018; outstanding shares—41,046 at March 31, 2019 and 39,028 at June 30, 2018								47			45
Additionalpaid-in-capital		660,701			624,001			711,558			678,549
Accumulated other comprehensive loss		(29,671	)		(32,325	)		(35,200	)		(30,633	)
Treasury stock: 5,878 shares at December 31, 2017 and 5,354 shares at June 30, 2017, at cost		(131,528	)		(113,071	)
Treasury stock: 5,680 shares at March 31, 2019 and 5,806 shares at June 30, 2018, at cost								(127,095	)		(129,914	)
Accumulated deficit		(217,596	)		(216,692	)		(174,977	)		(207,115	)

Total stockholders’ equity		281,950			261,956			374,333			310,932

Total liabilities and stockholders’ equity	$	594,771		$	617,439		$	659,938		$	635,968

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,						Three Months Ended March 31,						Nine Months Ended March 31,
	2017			2016			2017			2016			2019			2018			2019			2018
Revenues:
Subscriptions and transactions	$	63,187		$	55,644		$	123,901		$	107,776		$	75,502		$	67,378		$	216,558		$	191,279
Software licenses		2,620			3,492			4,985			5,613			3,802			3,134			13,979			8,119
Service and maintenance		28,433			25,920			55,775			53,593			25,856			29,476			80,047			85,251
Other		955			1,672			1,830			2,830			1,278			1,148			3,137			2,978

Total revenues		95,195			86,728			186,491			169,812			106,438			101,136			313,721			287,627
Cost of revenues:
Subscriptions and transactions		27,201			24,782			54,612			48,668			31,623			30,771			94,644			85,404
Software licenses		229			196			399			324			226			233			667			632
Service and maintenance		12,968			13,416			25,200			26,701			12,818			13,861			38,052			39,195
Other		701			1,178			1,368			2,056			1,046			930			2,461			2,298

Total cost of revenues		41,099			39,572			81,579			77,749			45,713			45,795			135,824			127,529

Gross profit		54,096			47,156			104,912			92,063			60,725			55,341			177,897			160,098
Operating expenses:
Sales and marketing		21,396			19,325			40,701			38,200			25,165			22,465			70,772			63,255
Product development and engineering		13,892			13,082			27,707			26,017			16,887			14,179			50,267			41,981
General and administrative		10,981			11,772			22,810			24,476			13,175			12,763			38,944			35,589
Amortization of acquisition-related intangible assets		5,702			6,090			10,890			12,375			5,230			5,818			15,809			16,708
Goodwill impairment charge		—			7,529			—			7,529

Total operating expenses		51,971			57,798			102,108			108,597			60,457			55,225			175,792			157,533

Income (loss) from operations		2,125			(10,642	)		2,804			(16,534	)
Income from operations														268			116			2,105			2,565
Other expense, net		(3,532	)		(4,182	)		(7,995	)		(8,117	)		(695	)		(1,111	)		(2,334	)		(8,751	)

Loss before income taxes		(1,407	)		(14,824	)		(5,191	)		(24,651	)		(427	)		(995	)		(229	)		(6,186	)
Income tax benefit		4,495			4,478			4,038			3,797
Income tax benefit (provision)														1,251			(7	)		6,104			4,031

Net income (loss)	$	3,088		$	(10,346	)	$	(1,153	)	$	(20,854	)	$	824		$	(1,002	)	$	5,875		$	(2,155	)

Net income (loss) per share:
Basic	$	0.08		$	(0.27	)	$	(0.03	)	$	(0.55	)	$	0.02		$	(0.03	)	$	0.15		$	(0.06	)

Diluted	$	0.08		$	(0.27	)	$	(0.03	)	$	(0.55	)	$	0.02		$	(0.03	)	$	0.14		$	(0.06	)

Shares used in computing net income (loss) per share:
Basic		38,087			37,769			37,908			37,854			40,911			38,348			40,412			38,055

Diluted		39,344			37,769			37,908			37,854			41,625			38,348			41,650			38,055

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			—
Unrealized gain (loss) on available for sale securities														5			(4	)		11			(7	)
Unrealized gain (loss) on interest rate hedging transactions														(841	)		1,004			(1,952	)		1,373
Minimum pension liability adjustments		38			610			142			625			18			(56	)		(38	)		86
Foreign currency translation adjustments		773			(8,402	)		2,146			(9,459	)		1,322			5,652			(2,588	)		7,798

Other comprehensive income (loss), net of tax:		1,412			(7,841	)		2,654			(8,940	)		504			6,596			(4,567	)		9,250

Comprehensive income (loss)	$	4,500		$	(18,187	)	$	1,501		$	(29,794	)
Comprehensive income													$	1,328		$	5,594		$	1,308		$	7,095

See accompanying notes.

Bottomline Technologies (de), Inc.

Unaudited Consolidated Statements of Stockholders’ Equity

(in thousands)


Three Months Ended March 31, 2019
	Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Treasury Stock						Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Shares			Amount			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2018		46,468	$	46	$	700,520	$	(35,704	)		5,730		$	(128,216	)	$	(175,801	)	$	360,845
Issuance of common stock for employees stock purchase plan and upon exercise of stock options		21		1		996					(50	)		1,121						2,118
Vesting of Restricted stock awards		237																		—
Stock compensation plan expense						10,042														10,042
Minimum pension liability adjustments, net of tax								18												18
Net income																	824			824
Unrealized gain on available for sale securities, net of tax								5												5
Unrealized loss on interest rate hedging transactions								(841	)											(841	)
Foreign currency translation adjustment								1,322												1,322

Balance at March 31, 2019		46,726	$	47	$	711,558	$	(35,200	)		5,680		$	(127,095	)	$	(174,977	)	$	374,333

Three Months Ended March 31, 2018
	Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Treasury Stock						Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Shares			Amount			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2017		44,075	$	44	$	660,701	$	(29,671	)		5,878		$	(131,528	)	$	(217,596	)	$	281,950
Issuance of common stock for employees stock purchase plan and upon exercise of stock options		24				38					(72	)		1,614						1,652
Vesting of Restricted stock awards		217																		—
Stock compensation plan expense						8,592														8,592
Minimum pension liability adjustments, net of tax								(56	)											(56	)
Net loss																	(1,002	)		(1,002	)
Unrealized loss on available for sale securities, net of tax								(4	)											(4	)
Unrealized gain on interest rate hedging transactions								1,004												1,004
Foreign currency translation adjustment								5,652												5,652

Balance at March 31, 2018		44,316	$	44	$	669,331	$	(23,075	)		5,806		$	(129,914	)	$	(218,598	)	$	297,788


Nine Months Ended March 31, 2019
	Common Stock				Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Treasury Stock						Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Shares			Amount			Accumulated Deficit			Total Stockholders’ Equity
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 employees stock purchase plan and upon exercise of stock options		40		1		1,036						(126	)		2,819						3,856
Vesting of Restricted stock awards		920																			—
Stock compensation plan expense						31,978															31,978
Warrant settlements		932		1		(5	)														(4	)
Minimum pension liability adjustments, net of tax									(38	)											(38	)
Net income																		5,875			5,875
Cumulative effect of adoption of updated revenue recognition standard																		26,263			26,263
Unrealized gain on available for sale securities, net of tax									11												11
Unrealized loss on interest rate hedging transactions									(1,952	)											(1,952	)
Foreign currency translation adjustment									(2,588	)											(2,588	)

Balance at March 31, 2019		46,726	$	47	$	711,558		$	(35,200	)		5,680		$	(127,095	)	$	(174,977	)	$	374,333

Nine Months Ended March 31, 2018
	Common Stock				Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Treasury Stock						Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Shares			Amounts			Accumulated Deficit			Total Stockholders’ Equity
Balance at June 30, 2017		42,797	$	43	$	624,001		$	(32,325	)		5,354		$	(113,071	)	$	(216,692	)	$	261,956
Issuance of common stock for employees stock purchase plan and upon exercise of stock options		53				236						(143	)		3,120						3,356
Vesting of Restricted stock awards		878																			—
Stock compensation plan expense						25,132															25,132
Settlement of conversion premium upon maturity of the Notes		588		1		(1	)														—
Settlement of note hedges						19,963						595			(19,963	)					—
Cumulative effect of adoption of updated share-based compensation standard																		249			249
Minimum pension liability adjustments, net of tax									86												86
Net loss																		(2,155	)		(2,155	)
Unrealized loss on available for sale securities, net of tax									(7	)											(7	)
Unrealized gain on interest rate hedging transactions									1,373												1,373
Foreign currency translation adjustment									7,798												7,798

Balance at March 31, 2018		44,316	$	44	$	669,331		$	(23,075	)		5,806		$	(129,914	)	$	(218,598	)	$	297,788

Bottomline Technologies (de), Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)


	Six Months Ended December 31,						Nine Months Ended March 31,
	2017			2016			2019			2018
Operating activities:
Net loss	$	(1,153	)	$	(20,854	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Net income (loss)							$	5,875		$	(2,155	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of acquisition-related intangible assets		10,890			12,375			15,809			16,708
Stock compensation expense		16,540			16,855
Stock-based compensation plan expense								31,906			25,132
Depreciation and other amortization		9,543			8,241			16,767			14,638
Goodwill impairment charge		—			7,529
Gain on sale of cost-method investment								(237	)		—
Deferred income tax benefit		(4,745	)		(5,200	)		(8,284	)		(5,458	)
Provision for allowances on accounts receivable		75			14			167			117
Amortization of debt issuance costs		711			618			311			819
Amortization of debt discount		5,574			6,208			—			5,574
Amortization of premium (discount) on investments		(5	)		148
Gain (loss) on disposal of equipment		(10	)		36
Gain on foreign exchange		(26	)		(122	)
Amortization of discount on investments								(108	)		(32	)
Loss (gain) on disposal of equipment								596			(10	)
Loss (gain) on foreign exchange								410			(160	)
Changes in operating assets and liabilities:
Accounts receivable		(12,326	)		2,519			(3,520	)		(23,030	)
Prepaid expenses and other current assets		(1,089	)		(956	)		(3,913	)		(54	)
Other assets		926			520			(1,483	)		(337	)
Accounts payable		(145	)		(209	)		1,485			(50	)
Accrued expenses		(1,932	)		305			(1,513	)		2,884
Customer account liabilities								1,562			(5,291	)
Deferred revenue		(12,443	)		(11,155	)		7,835			6,053
Other liabilities		(697	)		706			(650	)		175

Net cash provided by operating activities		9,688			17,578			63,015			35,523
Investing activities:
Acquisition of businesses, net of cash acquired		(13,747	)		—
Purchase ofavailable-for-sale securities		(9,935	)		(8,833	)
Acquisition of businesses and assets, net of cash and restricted cash acquired								(21,449	)		(5,741	)
Proceeds from sale of cost-method investment								237			—
Purchases ofavailable-for-sale securities								(7,588	)		(9,935	)
Proceeds from sales ofavailable-for-sale securities		1,903			28,178			9,200			1,903
Capital expenditures, including capitalization of software costs		(9,137	)		(15,345	)		(45,725	)		(14,865	)
Proceeds from disposal of property and equipment		10			—			—			10
Insurance proceeds received for damage to equipment								201			—

Net cash provided by (used in) investing activities		(30,906	)		4,000
Net cash used in investing activities								(65,124	)		(28,628	)
Financing activities:
Repurchase of common stock		—			(14,971	)
Repayment of convertible senior notes		(189,750	)		—
Repayment of amounts borrowed under revolving credit facility								(40,000	)		(189,750	)
Amounts borrowed under revolving credit facility		150,000			—			—			150,000
Repayment of notes payable		(2,204	)		—			(552	)		(2,394	)
Settlement of warrants								(4	)		—
Debt issuance costs related to credit facility		—			(2,137	)		(597	)		—
Proceeds from exercise of stock options and employee stock purchase plan		1,705			1,412			3,856			3,357

Net cash used in financing activities		(40,249	)		(15,696	)		(37,297	)		(38,787	)
Effect of exchange rate changes on cash		949			(3,444	)		(1,427	)		2,331

Increase (decrease) in cash and cash equivalents		(60,518	)		2,438
Cash and cash equivalents at beginning of period		124,569			97,174
Decrease in cash, cash equivalents and restricted cash								(40,833	)		(29,561	)
Cash, cash equivalents and restricted cash at beginning of period								124,613			124,569

Cash, cash equivalents and restricted cash at end of period							$	83,780		$	95,008


Cash and cash equivalents at end of period	$	64,051		$	99,612		$	79,475		$	92,101
Cash held for customers at end of period								4,305			2,907

Cash, cash equivalents and restricted cash at end of period							$	83,780		$	95,008


Supplemental disclosures ofnon-cash financing activities:
Issuance of common stock upon settlement of the warrants							$	58,451		$	—
Issuance of note payable to seller in connection with acquisition	$	1,836		$	—		$	—		$	1,836
Issuance of common stock upon conversion of convertible senior notes	$	19,736		$	—		$	—		$	19,736
Receipt of common stock upon settlement of Note Hedges	$	19,964		$	—		$	—		$	19,964

See accompanying notes.

Bottomline Technologies (de), Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

~~December~~March 31, ~~2017~~2019

Note 1—Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Bottomline Technologies (de), Inc. (referred to below as we, us, our or Bottomline) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form10-Q and Article 10 of RegulationS-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States ~~(U.S. GAAP)~~(GAAP) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair presentation of the interim financial information have been included. Operating results for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending June 30, ~~2018 (fiscal year 2018).~~2019. For further information, refer to the financial statements and footnotes included in the Annual Report on Form10-K as filed with the Securities and Exchange Commission ~~(SEC)~~ on August ~~28, 2017.~~29, 2018.

Note 2—Recent Accounting Pronouncements

Recently Adopted Pronouncements

~~Cloud Computing Arrangements:~~Revenue Recognition:In ~~April 2015,~~May 2014, the Financial Accounting ~~Standards~~Standard Board (FASB) issued an accounting standard update which provides guidance as to whether a cloud computing arrangement (e.g., software as a service, platform as a service, infrastructure as a service, and other similar arrangements) includes a software license and, based on that determination, how to account for such arrangements. We adopted this standard effective July 1, 2016 on a prospective basis. The adoption of this standard did not have a material impact on our financial statements. In December 2016, the FASB issued a technical update to this standard, clarifying that any software license within the scope of this accounting standard shall be accounted for as an intangible asset by the licensee. We adopted the technical update on July 1, 2017, and reclassified software licenses from property and equipment, net to intangible assets, net in our consolidated balance sheets for all periods presented. The total amount reclassified in our June 30, 2017 consolidated balance sheet was $29.1 million.

~~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 to~~Note 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~~prior revenue recognition guidance. The new revenue standard outlines a single comprehensive model for accounting for revenue from contracts with customers and requires more detailed revenue disclosures. The core principle of the new ~~guidance~~standard is that revenue is to ~~recognize revenue when~~be recognized in a manner that depicts the transfer of promised goods or services ~~are transferred~~ to customers ~~in an amount~~at amounts that ~~reflects~~reflect the consideration which the ~~vendor~~entity expects to ~~receive for those goods or services. The~~be entitled under the arrangement.

We adopted 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~~method of adoption applied to open contracts at that date and upon adoption recorded a $26.3 million decrease to our ~~assessment~~accumulated deficit balance. The adjustments we recorded at transition were composed of:


	(in thousands)
Decrease to accounts receivable	$	(1,914	)
Increase to contract assets		5,118
Decrease to deferred revenue		9,839
Increase to capitalized fulfillment costs		11,648
Increase to capitalized sales commissions		4,952
Tax effects		(3,380	)

Total decrease to accumulated deficit	$	26,263

The adjustment to accounts receivable relates primarily to unbilled receivables reclassified as contract assets. The increase to contract assets relates to revenue recognized in excess of the ~~impact~~amount billed to the customer and the right to payment contingent on conditions other than simply the passage of ~~this standard is not complete, we currently believe that~~time, such as the ~~most significant impacts will be in certain areas:~~

~~Under~~completion of a related performance obligation. Adjustments to deferred revenue relate primarily to the acceleration of revenue under the new standard as compared to the previous revenue recognition standard. This largely relates to transactions where, under legacy GAAP, revenue was deferred due to a lack of vendor specific objective evidence ~~(VSOE) will no longer be required to determine the~~of fair value, ~~of elements~~transactions accounted for under a combined services arrangement which resulted in ~~a software arrangement. As a result,~~revenue recognition over time, transactions that had contractually stipulated price increases that were accounted for as the ~~absence of VSOE in~~increases occurred and certain ~~software arrangements will no longer result in strict~~contingent revenue ~~deferral. Absent a change in how~~arrangements. Adjustments to capitalized fulfillment costs and capitalized sales commissions reflect the requirement to capitalize these costs under the new standard; prior to adoption, we ~~license our products, we believe that this will result in greaterup-front~~ ~~recognition of software revenue for certain~~expensed these costs as incurred. Capitalized costs are recorded as components of our ~~license arrangements.~~

~~Under the new standard, certain~~prepaid expenses ~~we incur will require deferral~~ and ~~recognition over the period~~other current assets and other assets in ~~which revenue is recognized, subject~~our consolidated balance sheet.

Please refer to certain exceptions. We believe that this will result in the deferral of certain fulfillment costs associated with our SaaS offerings which would then be recognized as expense over a multi-year period; such costs are expensed directly as incurred today.

Under the new standard, costs to obtain a contract, including sales commissions, will be capitalized and amortized on a basis that is consistent with the transfer of goods and services to its customer. We anticipate that this will result in the deferral of certain commission related costs that, today, are expensed as incurred.

Significantly enhanced financial statement disclosures related to revenue, including information related to the allocation of transaction price across undelivered performance obligations, will be required.

~~However, we are unable to quantify the impact of these outcomes at this time, nor can we ensure that our continuing analysis and interpretation~~Note 3 Revenue Recognition for discussion of the ~~standard will result in these financial reporting outcomes or additional material impacts could be identified.~~adoption of this new standard.

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~~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~~We adopted this standard effective July 1, 2018 and it did not have an impact on our financial statements upon adoption, but will impact our financial statements in the future if observable price changes occur for investments we hold that do not have readily determinable fair values.

Statement of Cash Flows:In August and November of 2016, the FASB issued updated accounting standards which address the classification and presentation of certain cash receipts, cash payments and restricted cash in the statement of cash flows. We adopted these standards retrospectively on July 1, 2018. Our consolidated balance sheets include cash held for customers and a liability for the same amount. Cash held for customers and the related customer account liabilities arise from payment transactions we process on behalf of customers where we collect and hold customer funds for a short transient period before disbursing the cash and settling the liability. Cash we hold on behalf of customers is ~~effective~~segregated from our other corporate cash accounts, is not available for use by us and is considered restricted cash. Prior to the adoption of this standard the change in cash held for customers and the corresponding liability were presented on a net basis in our consolidated statement of cash flows. As a result of adoption, the operating section of our consolidated statement of cash flows now reflects the impact on our total cash position, including the impact of changes in customer account liabilities.

During the nine months ended March 31, 2018, the retrospective adoption of this standard resulted in an increase in operating cash flows of approximately $5.3 million.

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 (for the service cost component) andnon-operating expense (for all other components of net periodic defined benefit cost). Under the revised standard, the service cost component is classified consistently with other compensation costs, while all other components are reported in other expense, net. We adopted this standard retrospectively on July 1, 2018 ~~(the first quarter~~and reclassified approximately $0.2 million and $0.5 million from income from operations to other expense, net for the three and nine months ended March 31, 2018, respectively, in our consolidated statement 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, andcomprehensive loss.

Accounting Pronouncements to ~~the extent that there are observable price changes following the date of adoption, the accounting for these investments could~~ be ~~affected.~~Adopted

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 asset for all leases with terms longer than twelve months. The pattern of recognition of lease related revenue and ~~expenses~~expense will be dependent on its classification. The updated 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~~statement disclosures. We will adopt this standard ~~is effective for us~~ on July 1, 2019 ~~(the first quarter of our fiscal year ending June 30, 2020) with early adoption permitted; adoption is on a modified retrospective basis. We~~and anticipate that the ~~adoption of this~~ standard will have a material impact to our consolidated balance sheet due to the recognition of right of use assets and lease ~~liabilities; however, we are still evaluating~~liabilities as well as additional disclosures. We expect to adopt the ~~anticipated impact~~standard using a modified retrospective method recording a cumulative effect of ~~this standard~~adoption on ~~our financial statements.~~the date of adoption (July 1, 2019).

Financial Instruments—Credit Losses: In June 2016, the FASB issued an accounting standard update that introduces a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments including trade receivables. The estimate of expected credit losses will require entities to incorporate historical information, current information and reasonable and supportable forecasts. This standard also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. This standard is effective for us on July 1, 2020, ~~(the first quarter of our fiscal year 2021)~~ with early application permitted. We are currently evaluating the anticipated impact of this standard on our financial ~~statements.~~statements as well as timing of adoption.

~~Statement 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.

Goodwill Impairment:In January 2017, the FASB issued an accounting standard update to simplify the test for goodwill impairment which removes step 2 from the goodwill impairment test. Under the revised standard, an entity will perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss should not exceed the total amount of goodwill allocated to the reporting unit. The standard is effective for us on July 1, 2020 ~~(the first quarter of our fiscal year 2021)~~ on a prospective basis, with early adoption ~~permitted for periods beginning on or after January 1, 2017.~~permitted. We ~~are~~do not currently ~~evaluating~~expect the ~~impact~~adoption of this standard to have a material impact on our financial ~~statements~~statements.

Derivatives and ~~the timing of adoption.~~

~~Defined Benefit Plan Expenses:~~Hedging:In ~~March~~August 2017, the FASB issued an accounting standard update that more closely aligns the results of cash flow and fair value hedge accounting with risk management activities through changes to both the ~~income statement~~designation and measurement guidance for qualifying hedging relationships and the presentation of ~~defined benefit plan expense~~hedge results in the financial statements. The guidance expands hedge accounting for both nonfinancial and financial risk components and refines the measurement of hedge results to better reflect an entity’s hedging strategies. In October 2018, the FASB issued an accounting standard update to expand the list of United States benchmark interest rates permitted in the application of hedge accounting. The revised standard allows the use of the Overnight Index Swap rate based on the Secured Overnight Financing Rate as a U.S. benchmark interest rate for hedge accounting purposes. These standard updates are required to be adopted concurrently and are effective for us on July 1, 2019. We do not currently expect the adoption of this standard to have a material impact on our financial statements.

Share-Based Compensation—Nonemployee Share-Based Payment Accounting:In June 2018, the FASB issued an accounting standard update to simplify the accounting for share-based payments to nonemployees by ~~requiring separation between operating expense (service cost component) andnon-operating~~ ~~expense (all other components of net periodic defined benefit cost).~~aligning it with the accounting for share-based payments to employees. Under the revised standard, ~~the operating expense component~~measurement of nonemployee awards will be ~~reported with similar compensation costs, while~~fixed at the~~non-operating~~ ~~components~~ grant date by estimating the fair value of the equity instruments to be issued. Additionally, during the vesting period, nonemployee awards that contain a performance condition that affects the quantity or other terms of the award will be ~~reported in Other Income~~measured based on the probable outcome. Upon adoption, entities must recognize a cumulative-effect adjustment to retained earnings as of the beginning of the annual period of adoption for equity-classified nonemployee awards for which a measurement date has not been established and ~~Expense. In addition, only the service cost component is eligible for capitalization as part of an asset such as property, plant and equipment.~~liability-classified nonemployee awards that have not been settled. This standard is effective for us on July 1, ~~2018 (the first quarter of our fiscal year 2019).~~2019. We do not currently ~~believe that~~expect the adoption of this standard ~~will~~to have a material impact on our financial statements.

Note 3—Revenue Recognition

Significant Accounting Policy

Effective July 1, 2018, we adopted a new accounting standard related to revenue recognition on a modified retrospective basis to all open contracts. Other than changes in our accounting policies for revenue recognition and deferred contract costs due to the adoption of this standard, there have been no significant changes to our accounting policies as described in Note 2 to the consolidated financial statements included in our Annual Report on Form10-K for the fiscal year ended June 30, 2018.

Revenue Recognition

We generate revenue from the sale of SaaS or cloud-based services inclusive of both fixed and usage-based fees, perpetual and term software licenses, professional services such as consulting and implementation services, software support and maintenance and, to a lesser extent, through the sale of hardware and supplies. We recognize revenue as we transfer goods and services to customers, at amounts we expect to receive as consideration under enforceable contractual arrangements. Revenue is recognized as we satisfy contractual performance obligations, which can occur either at a point in time or over time. For perpetual and term software licenses that do not involve significant customization and for equipment and supplies sales, we normally record revenue at a point in time. For professional services, support and maintenance, stand-ready performance obligations with respect to our hosted or SaaS solutions and for software licenses that are dependent on significant customization by us we normally record revenue over time.

We recognize revenue according to a five step model that involves:

Identifying the contract (or contracts) with a customer;

Identifying the performance obligations in the contract(s);

Determining the transaction price;

Allocating the transaction price to the contractual performance obligations, and

Recognizing revenue as we satisfy the performance obligations.

We consider a contract to exist when we have legally enforceable rights and obligations with a customer. Our contracts can take a variety of forms but are normally in writing and include all major commercial terms such as the goods or services we will be obligated to transfer under the arrangement, the amount the customer is obligated to pay us upon fulfillment of our obligations and the payment terms.

Performance obligations in a contract are accounted for separately if they are determined to be distinct. We consider a performance obligation to be distinct if that good or service is separately identified from other items in the contract and if the customer can benefit from that performance obligation on its own or together with resources that are readily available to the customer. In assessing whether a customer can benefit from a performance obligation on its own, we consider factors such as the interdependency or interrelationship of the item with other goods or services in the contract, the complexity of any required integration or customization and the ability of the customer’s personnel or other third party providers to fulfill like goods or services. If a particular good or service is not considered to be distinct, it is combined with other performance obligations in the arrangement and revenue is recognized as the combined performance obligation is transferred to the customer.

The transaction price is the amount of consideration we expect to be entitled to under a contract upon fulfillment of the performance obligations. The starting point for estimating the transaction price is the selling price stipulated in the contract, however we include in the determination of the overall transaction price an estimate of variable consideration to the extent it is probable that it will not result in a significant future reversal of revenue. Variable consideration can arise in our arrangements as a result of usage-based fees. For contracts with a long period over which usage-based fees can arise, or in contracts with customers with whom we do not have a reasonable operating history, we often constrain the amount of variable consideration included in the transaction price. We update our estimate of variable consideration at the end of each financial reporting period. We exclude from the determination of the transaction price sales and other taxes we bill to and collect from customers and remit to government authorities. Shipping and handling activities performed after the customer has obtained control of the good or service is accounted for as a fulfillment activity.

The transaction price is allocated to contractual performance obligations on a relative standalone selling price basis. We normally estimate standalone selling price using the adjusted market approach, maximizing the use of observable inputs and other factors that can include: the price we charge when we sell an item separately, our internal price lists and internal pricing guidelines, cost of delivering the item and overall gross margin expectations and information about the customer or class of customer. Revenue is recorded, either at a point in time or over time, as we satisfy the performance obligations in a contract.

Nature of Goods and Services

Subscriptions and Transactions:We generate subscriptions and transactions revenue through the provision of hosted and SaaS-based solutions which can include contractually fixed revenue amounts as well as usage-based fees. Our SaaS arrangements consist of an obligation for us to provide continuous access to a technology solution that we host, which we account for as a stand-ready performance obligation. These contracts may also be subject to variable pricing or overage fees based on customer processing, usage or volume. We recognize revenue for fixed subscription fees ratably over thenon-cancelable term of the contract, commencing on the date the customer has access to the solution. In circumstances where we meet certain requirements to allocate variable consideration to a distinct service within a series of related services, we allocate variable consideration to each distinct period of service within the series. If we do not meet those requirements, we include an estimate of variable consideration in the transaction price and recognize it ratably over thenon-cancelable term of the contract.

For certain of our hosted or SaaS solutions, customers are charged a fee for implementation services. In determining whether the implementation services are distinct from the hosting services we consider various factors, including the level of customization, complexity of the integration, the interdependency and interrelationship between the implementation services and the hosting services and the ability (or inability) of the customer’s personnel or other service providers to perform the services. We have concluded that the implementation services in our hosting arrangements with multiple performance obligations are not distinct and therefore we recognize fees for implementation services ratably over thenon-cancelable term of the hosting contract.

We license certain software on a subscription basis under contractual arrangements where customers pay a specified fee, inclusive of support and maintenance, for a time-based license right to use our software. These fees recur periodically, unless the customer opts to cancel their subscription arrangement with us. These contracts typically contain two distinct performance obligations: the software license and support and maintenance. The portion of the transaction price allocated to the license right is recognized at the point in time in which we have provided the customer access to the intellectual property and the license term has commenced. The portion of the transaction price allocated to support and maintenance is recognized ratably over thenon-cancelable contract term.

Software Licenses:Software licenses revenue reflects fees we charge to license software on a perpetual basis. For software licenses that do not include significant customization we recognize revenue at the point in time where the customer has obtained access to the intellectual property and the license period has commenced.

Certain of our software arrangements require significant customization and modification and involve extended implementation periods. In these arrangements the professional services and software license are highly interdependent and we treat the software license and professional services as a combined performance obligation. We recognize revenue for the combined performance obligation over time and measure progress to completion based on labor hours incurred as a percentage of total expected labor hours. We believe the use of labor hours as an input measure provides a faithful depiction of the transfer of goods and services under these contracts.

Support and Maintenance:Our software licenses are generally sold with post-contract support which is comprised of technical support and unspecified software upgrades. Unspecified upgrades refer to software upgrades which we make available at our discretion and fromtime-to-time, on a “when and as available” basis. We account for post-contract support as a stand-ready performance obligation and recognize revenue ratably over thenon-cancelable contract term which is typically one year.

Professional Services:Our professional services revenue is normally comprised of implementation, consulting and training services. Except for professional service performance obligations that form part of an overall, highly customized arrangement, our professional services typically represent distinct performance obligations and revenue is recognized as the services are performed.

Other:Other revenue is derived from the sale of equipment and supplies and is recognized at the point in time control transfers to the customer.

Disaggregation of Revenue

The tables below present our revenue disaggregated by major product category and the related financial statement classification of revenue for the three and nine months ended March 31, 2019.

   Three Months Ended March 31, 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 and transactions
   $ 26,373    $ 18,916    $ 17,819    $ 11,749    $ 619    $ 26    $ 75,502
Software licenses
   245    —      527    1,982    1    1,047    3,802
Service and maintenance
   5,905    —      5,557    11,402    916    2,076    25,856
Other
   —      —      —      961    —      317    1,278














Total revenues
   $ 32,523    $ 18,916    $ 23,903    $ 26,094    $ 1,536    $ 3,466    $ 106,438














   Nine Months Ended March 31, 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 and transactions
   $ 75,536    $ 56,461    $ 49,410    $ 33,363    $ 1,676    $ 112    $ 216,558
Software licenses
   1,052    —      3,953    5,635    884    2,455    13,979
Service and maintenance
   18,293    —      15,920    36,762    2,686    6,386    80,047
Other
   —      —      —      2,511    —      626    3,137














Total revenues
   $ 94,881    $ 56,461    $ 69,283    $ 78,271    $ 5,246    $ 9,579    $ 313,721














⁽¹⁾
Cloud Solutions segment
⁽²⁾
Other segment
Remaining Performance Obligations
The transaction price allocated to remaining performance obligations that are unsatisfied, or partially unsatisfied, as of March 31, 2019 represents contracted revenue that will be recognized in future periods. Our future performance obligations consist primarily of SaaS hosting/subscription obligations relating to future periods, contracted but uncompleted professional services obligations and support and maintenance obligations. The amount of revenue recognized during the three and nine months ended March 31, 2019 from performance obligations satisfied in prior periods was not significant.
Revenue allocated to remaining performance obligations was $387.3 million as of March 31, 2019 of which we expect to recognize approximately $170.4 million over the next twelve months and the remainder thereafter. We exclude from our measure of remaining performance obligations amounts related to future transactional or usage-based fees for which the value of services transferred to the customer will correspond to the amount we will invoice for those services.

Contract Assets and Liabilities

The table below presents our accounts receivable, contract assets and deferred revenue balances as of July 1, 2018 and March 31, 2019.

   March 31,    July 1,
   2019    2018    $ Change

(in thousands)

Accounts receivable
   $ 76,240    $ 72,391    $ 3,849
Contract assets
   6,129    5,118    1,011
Deferred revenue
   98,804    88,888    9,916
Accounts receivable include amounts related to our contractual right to consideration for both completed and partially completed performance obligations that may not have been invoiced. Contract assets arise when we recognize revenue in excess of the amount billed to the customer and the right to payment is contingent on conditions other than simply the passage of time, such as the completion of a related performance obligation. Contract assets are classified in our consolidated balance sheets as other current assets for those contract assets with amortization periods of one year or less and other assets for contract assets with amortization periods greater than one year. Deferred revenue consists of billings or customer payments in excess of amounts recognized as revenue.
For the three and nine months ended March 31, 2019, we recognized $14.6 million and $66.4 million, respectively, in revenue from amounts that were included in deferred revenue as of July 1, 2018.
Contract Costs
We capitalize incremental costs incurred in connection with obtaining a contract if they have a period of benefit that is greater than one year and we expect to recover the costs through future contract revenues. Incremental costs incurred to obtain a contract relate to sales commissions. We also capitalize costs incurred in fulfilling a contract when the costs relate directly to a specifically identifiable customer contract, when the costs generate or enhance resources that we will use to satisfy performance obligations in the future and when the costs are expected to be recovered through future contract revenues. Capitalized costs to obtain a contract and capitalized fulfillment costs totaled $5.5 million and $16.4 million, respectively, at March 31, 2019.
Capitalized costs are amortized on a basis consistent with the transfer of the goods or services to which the asset relates. This results in capitalized costs being recognized on a ratable basis over the estimated period of future benefit, which is generally five years. We estimate the future period of benefit considering the current contract term, the impact of estimated customer renewal terms and the estimated life of the technology solution underlying the contracts. Amortization expense associated with costs of obtaining and costs of fulfilling a contract was $0.5 million and $1.0 million, respectively, for the three months ended March 31, 2019, and were recorded as components of sales and marketing expense and cost of revenues, respectively, in our unaudited consolidated statement of comprehensive income (loss). Amortization expense associated with costs of obtaining and costs of fulfilling a contract was $1.3 million and $2.5 million, respectively, for the nine months ended March 31, 2019, and were recorded as components of sales and marketing expense and cost of revenues, respectively, in our unaudited consolidated statement of comprehensive income (loss).

The following tables summarize the impact of adopting the new revenue standard on our consolidated financial statements as of and for the three and nine months ended March 31, 2019:

Unaudited Condensed Consolidated Balance Sheet

   At March 31, 2019
(in thousands, unaudited)    As
Reported    Adjustments    Balances without
adoption of new
revenue standard
ASSETS

Current assets:

Cash and cash equivalents
   $ 79,475    $ —      $ 79,475
Cash held for customers
   4,305    —      4,305
Marketable securities
   8,515    —      8,515
Accounts receivable, net
   76,240    1,235    77,475
Prepaid expenses and other current assets
   32,111    (11,158 )    20,953






Total current assets
   200,646    (9,923 )    190,723
Property and equipment, net
   54,696    —      54,696
Goodwill
   204,167    —      204,167
Intangible assets, net
   168,819    —      168,819
Other assets
   31,610    (16,142 )    15,468






Total assets
   $ 659,938    $ (26,065 )    $ 633,873






LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable
   $ 11,530    $ —      $ 11,530
Accrued expenses and other current liabilities
   32,257    —      32,257
Customer account liabilities
   4,305    —      4,305
Deferred revenue
   80,082    4,306    84,388






Total current liabilities
   128,174    4,306    132,480
Borrowings under credit facility
   110,000    —      110,000
Deferred revenue,non-current
   18,722    5,224    23,946
Deferred income taxes
   8,311    (456 )    7,855
Other liabilities
   20,398    —      20,398






Total liabilities
   285,605    9,074    294,679
Stockholders’ equity

Preferred Stock, $.001 par value
   —      —      —
Common Stock, $.001 par value
   47    —      47
Additionalpaid-in-capital
   711,558    —      711,558
Accumulated other comprehensive loss
   (35,200 )    91    (35,109 )
Treasury stock, at cost
   (127,095 )    —      (127,095 )
Accumulated deficit
   (174,977 )    (35,230 )    (210,207 )






Total stockholders’ equity
   374,333    (35,139 )    339,194






Total liabilities and stockholders’ equity
   $ 659,938    $ (26,065 )    $ 633,873

Unaudited Condensed Consolidated Statement of Comprehensive Income (Loss)

   Three Months Ended March 31, 2019 Nine Months Ended March 31, 2019
(in thousands, unaudited)    As Reported Adjustments Balances without
adoption of new
revenue standard As Reported Adjustments Balances without
adoption of new
revenue standard
Revenues:

Subscriptions and transactions
   $ 75,502 $ (833 ) $ 74,669 $ 216,558 $ 393 $ 216,951
Software licenses
   3,802 (180 ) 3,622 13,979 (3,562 ) 10,417
Service and maintenance
   25,856 540 26,396 80,047 1,767 81,814
Other
   1,278 (18 ) 1,260 3,137 (55 ) 3,082


Total revenues
   106,438 (491 ) 105,947 313,721 (1,457 ) 312,264
Cost of revenues:

Subscriptions and transactions
   31,623 29 31,652 94,644 678 95,322
Software licenses
   226 —   226 667 2 669
Service and maintenance
   12,818 303 13,121 38,052 1,104 39,156
Other
   1,046 12 1,058 2,461 (16 ) 2,445


Total cost of revenues
   45,713 344 46,057 135,824 1,768 137,592


Gross profit
   60,725 (835 ) 59,890 177,897 (3,225 ) 174,672
Operating expenses:

Sales and marketing
   25,165 256 25,421 70,772 621 71,393
Product development and engineering
   16,887 44 16,931 50,267 222 50,489
General and administrative
   13,175 —   13,175 38,944 —   38,944
Amortization of acquisition-related intangible assets
   5,230 —   5,230 15,809 —   15,809


Total operating expenses
   60,457 300 60,757 175,792 843 176,635


Income from operations
   268 (1,135 ) (867 ) 2,105 (4,068 ) (1,963 )
Other expense, net
   (695 ) —   (695 ) (2,334 ) —   (2,334 )


Loss before income taxes
   (427 ) (1,135 ) (1,562 ) (229 ) (4,068 ) (4,297 )
Benefit (expense) from income taxes
   1,251 839 2,090 6,104 (4,899 ) 1,205


Net income (loss)
   $ 824 $ (296 ) $ 528 $ 5,875 $ (8,967 ) $ (3,092 )


Net income (loss) per share:

Basic
   $ 0.02 $ (0.01 ) $ 0.01 $ 0.15 $ (0.07 ) $ 0.08


Diluted
   $ 0.02 $ (0.01 ) $ 0.01 $ 0.14 $ (0.06 ) $ 0.08


Shares used in computing net income (loss) per share:

Basic
   40,911 —   40,911 40,412 —   40,412


Diluted
   41,625 (714 ) 40,911 41,650 (1,238 ) 40,412


Other comprehensive income (loss), net of tax:

Unrealized gain on available for sale securities
   5 —   5 11 —   11
Unrealized gain (loss) on interest rate hedging transactions
   (841 ) —   (841 ) (1,952 ) —   (1,952 )
Minimum pension liability adjustments
   18 —   18 (38 ) —   (38 )
Foreign currency translation adjustments
   1,322 (93 ) 1,229 (2,588 ) 92 (2,496 )


Other comprehensive income (loss), net of tax:
   504 (93 ) 411 (4,567 ) 92 (4,475 )


Comprehensive income (loss)
   $ 1,328 $ (389 ) $ 939 $ 1,308 $ (8,875 ) $ (7,567 )

Unaudited Condensed Consolidated Statement of Cash Flows

   Nine Months Ended March 31, 2019
(in thousands, unaudited)    As Reported    Adjustments    Balances without
adoption of new
revenue standard
Operating activities:

Net income (loss)
   $ 5,875    $ (8,967 )    $ (3,092 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Amortization of acquisition-related intangible assets
   15,809    —      15,809
Stock-based compensation plan expense
   31,906    11    31,917
Depreciation and other amortization
   16,767    —      16,767
Gain on sale of cost-method investment
   (237 )    —      (237 )
Deferred income tax benefit
   (8,284 )    4,899    (3,385 )
Provision for allowances on accounts receivable
   167    —      167
Amortization of debt issuance costs
   311    —      311
Amortization of discount on investments
   (108 )    —      (108 )
Loss (gain) on disposal of equipment
   596    —      596
Loss (gain) on foreign exchange
   410    (8 )    402
Changes in operating assets and liabilities:

Accounts receivable
   (3,520 )    663    (2,857 )
Prepaid expenses and other current assets
   (3,913 )    2,724    (1,189 )
Other assets
   (1,483 )    943    (540 )
Accounts payable
   1,485    —      1,485
Accrued expenses
   (1,513 )    —      (1,513 )
Customer account liabilities
   1,562    —      1,562
Deferred revenue
   7,835    (265 )    7,570
Other liabilities
   (650 )    —      (650 )






Net cash provided by operating activities
   $ 63,015    $ —      $ 63,015
The following summarizes the significant adjustments resulting from our adoption of the new revenue recognition standard compared to what would have been recorded in our financial statements had we continued to apply the provisions of legacy GAAP:
Consolidated Balance Sheet
Adjustments to prepaid expenses and other current assets and other assets relate to costs to fulfill and costs to obtain a customer contract which are capitalized under the new revenue standard and expensed as incurred under legacy GAAP. Adjustments to deferred revenue reflect the acceleration of revenue recognition for certain transactions that required longer term revenue deferral under legacy GAAP.
Consolidated Statement of Comprehensive Income (Loss)
Adjustments to software license revenues reflect the requirement under legacy GAAP to defer recognition of revenue when vendor specific evidence of fair value could not be established. The new revenue standard does not have a similar requirement and instead results in the recognition of software license revenue when that performance obligation has been transferred to the customer. In addition, the new revenue standard changed the methodology for allocating the transaction price between performance obligations, which had the impact of increasing software revenue. The decrease in our deferred tax benefit under legacy GAAP is driven by the overall decrease in net income and the inability to recognize certain interim tax benefits.
Consolidated Statement of Cash Flows
The adoption of the new revenue standard had no impact on our total cash flows or the net cash provided by operating activities. The adjustments reflect offsetting shifts in the components of operating cash flow driven by changes to individual balance sheet accounts and the change in our net income (loss).

Note 4—Fair Value

Fair Values of Assets and Liabilities

We measure fair value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the assumptions that market participants would use in pricing an asset or liability (the inputs) are based on a tiered fair value hierarchy consisting of three levels, as follows:

Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.

Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar instruments in active markets or for similar markets that are not active.

Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants would price the asset or liability.

Valuation techniques for assets and liabilities include methodologies such as the market approach, the income approach or the cost approach, and may use unobservable inputs such as projections, estimates and management’s interpretation of current market data. These unobservable inputs are only utilized to the extent that observable inputs are not available or cost-effective to obtain.

At ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017,~~2018, our assets and liabilities measured at fair value on a recurring basis were as follows:


	December 31, 2017								June 30, 2017								March 31, 2019								June 30, 2018
	Fair Value Measurements Using Input Types								Fair Value Measurements Using Input Types								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		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)																(in thousands)
Assets
Money market funds (cash and cash equivalents)	$	89	$	—	$	—	$	89	$	593	$	—	$	—	$	593	$	1,769	$	—	$	—	$	1,769	$	154	$	—	$	—	$	154
Available for sale securities—Debt
U.S. Corporate	$	—	$	3,475	$	—	$	3,475	$	—	$	1,906	$	—	$	1,906	$	—	$	998	$	—	$	998	$	—	$	3,467	$	—	$	3,467
Government—U.S.		—		6,461		—		6,461		—		—		—		—		—		7,455		—		7,455		—		6,480		—		6,480

Total available for sale securities	$	—	$	9,936	$	—	$	9,936	$	—	$	1,906	$	—	$	1,906	$	—	$	8,453	$	—	$	8,453	$	—	$	9,947	$	—	$	9,947
Derivative interest rate swap	$	—	$	782	$	—	$	782	$	—	$	—	$	—	$	—
Short-term derivative interest rate swap																	$	—	$	432	$	—	$	432	$	—	$	407	$	—	$	407
Long-term derivative interest rate swap																	$	—	$	249	$	—	$	249	$	—	$	2,183	$	—	$	2,183

Total assets																	$	1,769	$	9,134	$	—	$	10,903	$	154	$	12,537	$	—	$	12,691

Liabilities
Derivative interest rate swap	$	—	$	165	$	—	$	165	$	—	$	—	$	—	$	—
Long-term derivative interest rate swap																	$	—	$	43	$	—	$	43	$	—	$	—	$	—	$	—

Total liabilities																	$	—	$	43	$	—	$	43	$	—	$	—	$	—	$	—

Fair Value of Financial Instruments

We have certain financial instruments which consist of cash and cash equivalents, cash ~~and cash equivalents~~ held for customers, marketable securities, accounts receivable, accounts payable, customer account liabilities, a derivative interest rate ~~swap as more fully described in~~~~Note 11 Derivative Instruments~~swaps and debt drawn on our Credit Facility ~~as more fully described in~~(see Note ~~10 Indebtedness~~11). Fair value information for each of these instruments is as follows:

Cash and cash equivalents, cash ~~and cash equivalents~~ held for customers, accounts receivable, accounts payable and customer account liabilities fair ~~value~~values approximates their carrying values, due to the short-term nature of these instruments.

Marketable securities classified as held to maturity, all of which mature within one year, are recorded at amortized cost, which at ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017,~~2018, approximated fair value.

Marketable debt securities classified as available for sale are recorded at fair value. Unrealized gains and losses are included as a component of other accumulated ~~other~~ comprehensive ~~loss~~income (loss) in stockholders’ equity, net of tax. We use the specific identification method to determine any realized gains or losses from the sale of our marketable debt securities classified as available for sale.

The fair value of our derivative interest rate ~~swap is~~swaps are based on the present value of projected cash flows that will occur over the life of the ~~instrument,~~instruments, after considering certain contractual terms ~~of the arrangement.~~and counterparty credit risk.

The carrying value of assets related to deposits we have made to fund future requirements associated with Israeli severance arrangements was ~~$1.5~~$1.3 million and $1.4 million at ~~both December~~March 31, ~~2017~~2019 and June 30, ~~2017,~~2018, respectively, which approximated ~~their~~ fair value.

We have certain other investments ~~accounted~~ for ~~at cost.~~which there is no readily determinable fair value. The carrying value of these investments was ~~$7.7~~$4.6 million and $4.4 million at ~~both December~~March 31, ~~2017~~2019 and June 30, ~~2017~~2018, respectively, and they are reported as a component of our other assets. These investments are recorded at cost, less ~~any write-downs~~impairment (if any), plus or minus adjustments for ~~other-than-temporary impairment charges. To determine the~~observable price changes.

We have borrowings of $110 million against our Credit Facility. The fair value of these ~~investments, we use all available financial information including information based on recent or pending third-party equity investments in these entities. In certain instances,~~borrowings, which are classified as Level 2, approximates their carrying value at March 31, 2019, as the instrument carries a ~~cost method investment’s fair value may not be estimated if there are no identified events or changes in circumstances that would indicate a significant adverse effect on the fair value~~variable rate of ~~the investment and to do so would be impractical, and as a result, we have not estimated the fair value of these investments.~~interest which reflects current market rates.

•

~~We have borrowings of $150 million against our Credit Facility (refer to~~~~Note 10 Indebtedness~~ for a discussion of this credit agreement). The fair value of these borrowings, which are classified as Level 2, approximates their carrying value at December 31, 2017, as the instrument carries a variable rate of interest and reflects current market rates.

Marketable Securities

The table below presents information regarding our marketable securities by major security type as of ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017.~~2018.


	December 31, 2017						June 30, 2017						March 31, 2019						June 30, 2018
	Held to Maturity		Available for Sale		Total		Held to Maturity		Available for Sale		Total		Held to Maturity		Available for Sale		Total		Held to Maturity		Available for Sale		Total
	(in thousands)												(in thousands)
Marketable securities:
Corporate and other debt securities	$	68	$	9,936	$	10,004	$	67	$	1,906	$	1,973	$	62	$	8,453	$	8,515	$	65	$	9,947	$	10,012

Total marketable securities	$	68	$	9,936	$	10,004	$	67	$	1,906	$	1,973	$	62	$	8,453	$	8,515	$	65	$	9,947	$	10,012

The following table summarizes the estimated fair value of our investments in available for sale marketable securities classified by the contractual maturity date of the securities:


	December 31, 2017		March 31, 2019
	(in thousands)		(in thousands)
Due within 1 year	$	9,936	$	8,453
Due in 1 year through 5 years		—		—

Total	$	9,936	$	8,453

All of our available for sale marketable securities are ~~included in~~classified 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.assets.

The following table presents the aggregate fair values and gross unrealized losses for those available for sale investments that were in an unrealized loss position as of ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017,~~2018, 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					At March 31, 2019					At June 30, 2018
	Less than 12 Months										Less than 12 Months
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)										(in thousands)
U.S. Corporate	$	3,475	$	(2	)	$	1,628	$	(1	)
Government—U.S.		6,461		(4	)		—		—		$	3,488	$	(1	)	$	6,480	$	(6	)

Total	$	9,936	$	(6	)	$	1,628	$	(1	)	$	3,488	$	(1	)	$	6,480	$	(6	)

Note ~~4—Acquisitions~~5—Business and ~~Other Investments~~Asset Acquisitions

Fiscal Year 2019

During the nine months ended March 31, 2019, we completed two business acquisitions and an asset acquisition for aggregate purchase consideration of $42.4 million.

Experian Limited

On March 6, 2019, we acquired certain technology assets and customer related assets from Experian Limited for 9.5 million British Pound Sterling (approximately $12.6 million based on the exchange rate in effect at the acquisition date), funded with existing cash on hand. These assets will complement our existing UK payment products.

In the preliminary allocation of the purchase price, we recorded $2.7 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 $12.6 million, consisting primarily of customer related assets, are being amortized over a weighted average estimated useful lives of eleven years. Experian’s operating results are included in our Payments and Transactional Documents segment from the date of the acquisition forward and did not have a material impact on our revenue or net income (loss).

Microgen Banking Systems Limited

On July 2, 2018, we acquired Microgen Banking Systems Limited (Microgen),a UK-based BACS payment company, for 6.9 million British Pound Sterling (approximately $9.1 million based on the exchange rate in effect at the acquisition date). Microgen provides BACS payment products and supporting services to a wide rangeof UK-based customers and is expected to expand our customer base.

In the preliminary allocation of the purchase price, we recorded $2.7 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 $8.4 million, consisting primarily of customer related assets, are being amortized over a weighted average estimated useful life of thirteen years. Microgen’s operating results are included in our Payments and Transactional Documents segment from the date of the acquisition forward and did not have a material impact on our revenue or net income (loss).

Acquisition expenses of approximately $1.4 million were recognized during the nine months ended March 31, 2019 related to the Experian and Microgen acquisitions, principally as a component of general and administrative expense.

EMEA Headquarters

In January 2019, we purchased a building in Reading, UK for a base purchase price of 16 million British Pound Sterling (approximately $20.7 million based on the exchange rate in effect at the acquisition date), funded with existing cash on hand. When it is ready for its intended use, the building will ultimately replace our current Reading, UK building as our European headquarters.

Fiscal Year 2018

During the fiscal year ended June 30, 2018, we completed two business acquisitions for an aggregate purchase consideration of $18.5 million.

First Capital Cashflow Ltd.

On October 4, 2017, we acquired First Capital Cashflow Ltd. (FCC) for 10.5 million British Pound Sterling (approximately $13.9 million based on the exchange rate in effect at the acquisition date) in cash and 42,080 shares of our common stock. The shares, which were issued to the selling stockholders of FCC who became employees of Bottomline, have vesting conditions tied to continued employment; as such the shares are compensatory and we will record share-based payment expense over the underlying stock vesting period of five years. FCC is headquartered and operates in the United Kingdom and is a provider 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 changes in the business payments environment.

For the period ended December 31, 2017, our consolidated balance sheet reflects $3.5 million of cash and cash equivalents held for customers and a corresponding $3.5 million of customer account liabilities. Cash and cash equivalents held for customers and customer account liabilities arise as a~~by-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.

In the allocation of the purchase price, which is preliminary at December 31, 2017, we recorded $4.7 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 $10.5 million, consisting of customer related and other intangible assets, are being amortized over a weighted average estimated useful life of eleven years. FCC’s operating results are included in ~~the~~our Payments and Transactional Documents segment from the date of the acquisition forward and did not have a material impact on our revenue or ~~earnings.~~net income (loss).

Decillion

On August 14, 2017, we acquired Singapore-based Decillion Group (Decillion) for total consideration of 6.2 million Singapore Dollars (approximately $4.6 million based on the exchange rate in effect at the acquisition date), consisting of ~~cash of~~ $2.8 million in cash 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 operating results have been included in our Cloud Solutions segment from the date of the acquisition forward and did not have a material impact on our revenue or ~~earnings.~~net income (loss).

Acquisition expenses of approximately $0.8 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 Investments~~

In December 2015, we made a $3.5 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 or~~in-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 of December 31, 2017 and is located within other assets on our consolidated balance sheet. There were no indicators of impairment identified 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.

Note 5—6—Net Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share:

   Three Months Ended
December 31,    Six Months Ended
December 31,
   2017    2016    2017    2016
   (in thousands, except per share amounts)
Numerator—basic and diluted:

Net income (loss)
   $ 3,088    $ (10,346 )    $ (1,153 )    $ (20,854 )








Denominator:

Shares used in computing basic net income (loss) per share attributable to common stockholders
   38,087    37,769    37,908    37,854








Impact of dilutive securities
   1,257    —      —      —








Shares used in computing diluted net income (loss) per share attributable to common stockholders
   39,344    37,769    37,908    37,854








Basic net income (loss) per share attributable to common stockholders
   $ 0.08    $ (0.27 )    $ (0.03 )    $ (0.55 )








Diluted net income (loss) per share attributable to common stockholders
   $ 0.08    $ (0.27 )    $ (0.03 )    $ (0.55 )








For the six months ended December 31, 2017, approximately 2.8 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.
   Three Months Ended
March 31,    Nine Months Ended
March 31,
   2019    2018    2019    2018
   (in thousands, except per share amounts)
Numerator—basic and diluted:

Net income (loss)
   $ 824    $ (1,002 )    $ 5,875    $ (2,155 )








Denominator:

Shares used in computing basic net income (loss) per share attributable to common stockholders
   40,911    38,348    40,412    38,055








Impact of dilutive securities
   714    —      1,238    —








Shares used in computing diluted net income (loss) per share attributable to common stockholders
   41,625    38,348    41,650    38,055








Basic net income (loss) per share attributable to common stockholders
   $ 0.02    $ (0.03 )    $ 0.15    $ (0.06 )








Diluted net income (loss) per share attributable to common stockholders
   $ 0.02    $ (0.03 )    $ 0.14    $ (0.06 )








For the three and ~~six~~nine months ended ~~December~~March 31, ~~2016,~~2018, approximately ~~3.0~~2.5 million and ~~3.1~~2.7 million shares, respectively, of unvested restricted stock and stock options and warrants for up to 6.3 million 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.
Note 6—7—Operations by Segments and Geographic Areas
Segment Information
Operating segments are the components of our business for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our chief executive officer. Our operating segments are generally organized ~~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.
Similar operating segments have been aggregated into four reportable segments as follows:
Cloud Solutions. Our Cloud Solutions segment provides customers ~~predominately~~primarily with SaaS technology offerings that facilitate electronic payment, electronic invoicing, and spend management. Our legal spend management solutions, which enable customers to create more efficient processes for managing invoices generated by outside law firms while offering insight into important legal spend factors such as expense monitoring and outside counsel performance, are included within this segment. This segment also incorporates our settlement network solutions (financial messagingandPaymode-X). Our ~~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.~~contract term.
Banking Solutions. Our Banking Solutions segment provides solutions that are specifically designed for banking and financial institution customers. Our Banking ~~Solution~~Solutions products are now sold predominantly on a ~~subscription~~hosted basis, ~~which~~with 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 delays~~results in revenue recognition over a longer ~~period.~~period than a traditionalon-premise software license transaction.
Payments and Transactional Documents. Our Payments and Transactional Documents segment ~~is a supplier of software products that provide a range of~~supplies financial business process management software solutions, including making and collecting payments, sending
and receiving invoices, and generating and storing business documents. This segment also provides a range of standard professional services and equipment and supplies that complement and enhance our core software products. ~~Revenue associated with the aforementioned products and services~~When licensed foron-premise deployment, software license revenue is typically recorded upon ~~delivery. However, if~~delivery 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 ~~typically~~normally 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.~~support period.
Other. Our Other segment consists of our healthcare and cyber fraud and risk management operating segments. ~~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 a perpetual license basis, revenue for our~~Our cyber fraud and risk managementsolutions non-invasively monitor, replay and ~~healthcare products~~analyze user behavior to flag and even stop suspicious activity in real time. When licensed foron-premise deployment, software revenue for these operating segments is typically recorded upon delivery ~~with~~of the ~~exception~~software 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 normally recorded as we perform the work and software support and maintenance revenue is recorded ratably over the ~~subscription~~support period.

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

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

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

Segment information for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 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)
Segment revenue:

Cloud Solutions⁽¹⁾
   $ 44,518    $ 38,032    $ 86,962    $ 73,589
Banking Solutions
   20,954    19,464    42,275    37,650
Payments and Transactional Documents
   25,343    24,815    48,392    49,661
Other
   4,380    4,417    8,862    8,912








Total segment revenue
   $ 95,195    $ 86,728    $ 186,491    $ 169,812








Segment measure of profit (loss):

Cloud Solutions
   $ 9,650    $ 6,778    $ 19,034    $ 12,231
Banking Solutions
   1,148    1,043    3,309    1,068
Payments and Transactional Documents
   7,734    7,617    14,094    15,193
Other
   (903 )    (913 )    (1,387 )    (1,358 )








Total measure of segment profit
   $ 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
March 31,    Nine Months Ended
March 31,
   2019    2018    2019    2018
   (in thousands)
Segment revenue:

Cloud Solutions
   $ 51,439    $ 46,486    $ 151,342    $ 133,448
Banking Solutions
   23,903    22,900    69,283    65,175
Payments and Transactional Documents
   26,094    27,124    78,271    75,516
Other
   5,002    4,626    14,825    13,488








Total segment revenue
   $ 106,438    $ 101,136    $ 313,721    $ 287,627








Segment measure of profit (loss):

Cloud Solutions
   $ 11,463    $ 9,308    $ 32,497    $ 28,342
Banking Solutions
   2,082    1,630    6,097    4,939
Payments and Transactional Documents
   6,933    7,661    22,799    21,755
Other
   (1,545 )    (627 )    (3,019 )    (2,014 )








Total measure of segment profit
   $ 18,933    $ 17,972    $ 58,374    $ 53,022








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

   Three Months Ended
December 31,    Six Months Ended
December 31,    Three Months Ended
March 31,    Nine Months Ended
March 31,
   2017    2016    2017    2016    2019    2018    2019    2018
   (in thousands)    (in thousands)
Total measure of segment profit
   $ 17,629    $ 14,525    $ 35,050    $ 27,134    $ 18,933    $ 17,972    $ 58,374    $ 53,022
Less:

Amortization of acquisition-related intangible assets
   (5,702 )    (6,090 )    (10,890 )    (12,375 )    (5,230 )    (5,818 )    (15,809 )    (16,708 )
Goodwill impairment charge
   —      (7,529 )    —      (7,529 )
Stock-based compensation expense
   (8,080 )    (8,656 )    (16,540 )    (16,855 )
Stock-based compensation plan expense
   (10,015 )    (8,592 )    (31,906 )    (25,132 )
Acquisition and integration-related expenses
   (380 )    (522 )    (1,372 )    (1,771 )    (1,373 )    (224 )    (2,966 )    (1,596 )
Restructuring benefit
   —      —      9    —
Restructuring expense
   (1,332 )    (1,485 )    (1,963 )    (1,476 )
Minimum pension liability adjustments
   (3 )    (264 )    (38 )    (541 )    93    3    248    (35 )
Global ERP system implementation and other costs
   (1,339 )    (2,106 )    (3,415 )    (4,597 )    (557 )    (1,558 )    (3,110 )    (4,973 )
Other expense, net
   (3,532 )    (4,182 )    (7,995 )    (8,117 )
Other expense, net⁽¹⁾
   (946 )    (1,293 )    (3,097 )    (9,288 )
















Loss before income taxes
   $ (1,407 )    $ (14,824 )    $ (5,191 )    $ (24,651 )    $ (427 )    $ (995 )    $ (229 )    $ (6,186 )
















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

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


	Three Months Ended December 31,				Six Months Ended December 31,				Three Months Ended March 31,				Nine Months Ended March 31,
	2017		2016		2017		2016		2019		2018		2019		2018
	(in thousands)								(in thousands)
Depreciation and other amortization expense:
Cloud Solutions	$	2,535	$	1,860	$	4,978	$	3,700	$	2,854	$	2,671	$	8,663	$	7,649
Banking Solutions		1,537		1,436		3,029		2,806		1,919		1,605		5,634		4,634
Payments and Transactional Documents		705		749		1,344		1,554		719		722		2,202		2,066
Other		98		109		192		181		84		97		268		289

Total depreciation and other amortization expense	$	4,875	$	4,154	$	9,543	$	8,241	$	5,576	$	5,095	$	16,767	$	14,638

Geographic Information

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

   Three Months Ended
December 31,    Six Months Ended
December 31,
   2017    2016    2017    2016
   (in thousands)
North America
   $ 59,036    $ 56,190    $ 116,606    $ 106,712
United Kingdom
   22,468    19,313    42,539    40,144
Continental Europe
   10,120    9,182    20,531    18,534
Asia-Pacific and Middle East
   3,571    2,043    6,815    4,422








Total revenues from unaffiliated customers
   $ 95,195    $ 86,728    $ 186,491    $ 169,812








   Three Months Ended
March 31,    Nine Months Ended
March 31,
   2019    2018    2019    2018
   (in thousands)
Revenues from unaffiliated customers:

United States
   $ 66,227    $ 60,984    $ 194,132    $ 176,783
United Kingdom
   24,942    24,388    73,313    66,927
Switzerland
   9,682    10,613    29,289    29,146
Other
   5,587    5,151    16,987    14,771








Total revenues from unaffiliated customers
   $ 106,438    $ 101,136    $ 313,721    $ 287,627








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

   At December 31,    At June 30,    At
March 31,    At
June 30,
   2017    2017    2019    2018
   (in thousands)    (in thousands)
Long-lived assets:

North America
   $ 36,211    $ 35,569
United States
   $ 47,516    $ 36,374
United Kingdom
   5,767    5,188    31,982    5,586
Continental Europe
   921    1,208
Asia-Pacific and Middle East
   2,357    1,901
Other
   4,814    3,488








Total long-lived assets
   $ 45,256    $ 43,866    $ 84,312    $ 45,448








Note 7—8—Income Taxes
The income tax expense we record in any interim period is based on our estimated effective tax rate for the fiscal year for those tax jurisdictions in which we can reliably estimate ~~our effective tax~~that 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, ~~this~~our 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 of income tax changes, including a reduction to the federal corporate income tax rate from 35% to 21%, a repeal of the corporate alternative minimum tax, a~~one-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 and an acceleration of tax deductions~~

Provision 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, upon~~re-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 a~~non-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 of~~un-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. Our~~on-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.~~Income Taxes

We recorded an income tax benefit of ~~$4.5~~$1.3 million and income tax expense of $7,000 for ~~each of~~ the three months ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018, respectively. In the three months ended March 31, 2019, the income tax benefit we recorded was driven largely by discrete tax benefits of $0.8 million relating to stock-based compensation. The income tax expense for the three months ended March 31, 2018 was principally associated with our UK operations, offset by an income tax benefit principally associated with our Swiss, Israeli and U.S. operations.

We recorded an income tax benefit of $6.1 million and $4.0 million for the nine months ended March 31, 2019 and 2018, respectively. In the nine months ended March 31, 2019, the income tax benefit we recorded was driven largely by discrete tax benefits of $5.4 million relating to stock-based compensation and a discrete tax benefit of $0.5 million arising from a reduction to deferred tax liabilities related to state tax consequences of repatriated foreign earnings. The income tax benefit for the ~~three~~nine months ended ~~December~~March 31, ~~2017 includes the~~2018 was principally due to a discrete tax benefit of $4.4 million relating to the consequences of the Tax Act ~~as discussed above. Additionally, we recorded an income~~(discussed below) and a tax benefit associated with our Swiss and Israeli operations, offset in part by income tax expense principally associated with our U.S. and UK 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.

We currently anticipate that our unrecognized tax benefits will decrease within the next twelve months by approximately $0.4 million as a result of the expiration of certain statutes of limitations associated with intercompany transactions subject to tax in multiple jurisdictions.

We record a deferred tax asset if we believe that it is more likely than not that we will realize a future tax benefit. Ultimate realization of any deferred tax asset is dependent on our ability to generate sufficient future taxable income in the appropriate tax jurisdiction before the expiration of carryforward periods, if any. Our assessment of deferred tax asset recoverability considers many different factors including historical and projected operating results, the reversal of existing deferred tax liabilities that provide a source of future taxable income, the impact of current tax planning strategies and the availability of future tax planning strategies. We establish a valuation allowance against any deferred tax asset for which we are unable to conclude that recoverability is more likely than not.

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)
Increase to deferred tax assets for excess tax benefits
   $ 17,393
Increase to deferred tax asset valuation allowance
   (17,144 )


Net increase to deferred tax assets
   $ 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~~At March 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.
~~At December 31, 2017,~~2019, we had a total valuation allowance of ~~$39.8~~$33.0 million against our deferred tax assets given the uncertainty of recoverability of these amounts. The change in our valuation allowance during the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 includes ~~the~~a reduction in our valuation allowance ~~provided against excess~~as a result of the adoption of the new accounting standard for revenue recognition.
U.S. Tax Cuts and Jobs Act
The U.S. Tax Cuts and Jobs Act (the Tax Act) was signed into U.S. law on December 22, 2017 and made broad and complex changes to the U.S. tax ~~benefits associated with share-based payment arrangements and the preliminary~~code. This legislation contained a variety of income tax changes, including a reduction to ~~valuation allowance due~~ the ~~change in the U.S.~~ federal corporate income tax rate from 35% to 21%, a repeal of the corporate alternative minimum tax, aone-time transition tax on accumulated foreign earnings, a move to a territorial tax system, a limitation on the tax deductibility of interest expense and an acceleration of tax deductions for qualifying capital expenditures.
The Tax Act resulted in four consequences to us in our prior fiscal year, as ~~discussed above.~~
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. We did not incur any transition tax liability due to our accumulated deficit position with respect to our foreign subsidiaries.
~~In November 2016, the Internal Revenue Service commenced an audit on~~
•
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. During the fiscal year ended June 30, 2018 we reduced the carrying value of our net deferred tax liabilities to reflect the impact of lower future income tax rates and recognized anon-recurring income tax benefit of $3.7 million.
•
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. We expect to receive a tax refund of $0.7 million and recognized anon-recurring income tax benefit in this amount in the fiscal year ended June 30, 2018.
•
Reversal of indefinite-lived deferred tax liabilities as a source of future taxable income when assessing the realizability of indefinite-lived net operating loss carryforwards. Under the Tax Act, net operating loss carryforwards arising in tax years beginning after December 31, 2017 are limited to 80% of taxable income in any year, and net operating losses generated in tax years ending after December 31, 2017 can be carried forward indefinitely. Based on the projection of future reversals of our deferred tax differences as of June 30, 2018 we determined that a portion of our indefinite-lived deferred tax liabilities could be used as a source of taxable income when assessing the realizability of future indefinite-lived net operating loss carryforwards. Accordingly, we recognized an income tax benefit of $4.1 million through a reduction to our valuation allowance in the fiscal year ended June 30, 2018.

All of our accounting calculations and financial reporting positions for consequences arising from the Tax Act were final as of December 31, 2018.

A provision of the Tax Act subjects a U.S. shareholder to current tax on “global intangiblelow-taxed income” (GILTI) of its controlled foreign corporations. We have elected to treat any tax related to GILTI as current tax expense in the period the tax is incurred.

The Tax Act also provides that the repatriation to the U.S. of foreign earnings can be done without federal tax ~~return for the~~consequence. During fiscal year ~~ended June 30, 2015.~~2018, as a result of the Tax Act provisions, we reassessed and changed our assertion that cumulative earnings by our UK and Switzerland subsidiaries were indefinitely reinvested. We continue to permanently reinvest the earnings, if any, of our international subsidiaries other than the UK and Switzerland and therefore we do not ~~expect this audit~~provide for U.S. income taxes or withholding taxes that could result from the distribution of those earnings to ~~have a material impact~~the U.S. parent. If any such earnings were ultimately distributed to the U.S. in the form of dividends or otherwise, or if the shares of our international subsidiaries were sold or transferred, we would likely be subject to additional U.S. state income taxes. It is not practicable to estimate the amount of unrecognized deferred U.S. taxes on ~~our financial statements.~~these undistributed earnings.

Note 8—9—Goodwill and Other Intangible Assets

Goodwill and acquired intangible assets are initially recorded at fair value and tested periodically for impairment. We perform an impairment test of goodwill during the fourth quarter of each fiscal year or sooner, if indicators of potential impairment arise.

At ~~December~~March 31, ~~2017,~~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.$204.2 million.

The following tables set forth the information for intangible assets subject to amortization and for intangible assets not subject to amortization.

   As of December 31, 2017
   Gross Carrying
Amount    Accumulated
Amortization    Net Carrying
Value    Weighted Average
Remaining Life
   (in thousands)    (in years)
Amortized intangible assets:

Customer related
   $ 203,379    $ (129,527 )    $ 73,852    8.8
Core technology
   130,777    (78,954 )    51,823    8.5
Other intangible assets
   22,098    (16,442 )    5,656    5.5
Capitalized software development costs
   17,693    (4,765 )    12,928    4.5
Software⁽¹⁾
   58,501    (29,494 )    29,007    4.6







Total
   $ 432,448    $ (259,182 )    $ 173,266





Unamortized intangible assets:

Goodwill
         202,083



Total intangible assets
         $ 375,349



   As of June 30, 2017    As of March 31, 2019
   Gross Carrying
Amount    Accumulated
Amortization    Net Carrying
Value    Weighted Average
Remaining Life    Gross Carrying
Amount    Accumulated
Amortization    Net Carrying
Value    Weighted Average
Remaining Life
   (in thousands)    (in years)    (in thousands)    (in years)
Amortized intangible assets:

Customer related
   $ 190,965    $ (122,698 )    $ 68,267    8.7    $ 220,669    $ (142,270 )    $ 78,399    8.9
Core technology
   130,572    (74,452 )    56,120    8.8    130,233    (88,264 )    41,969    7.6
Other intangible assets
   20,591    (15,691 )    4,900    6.6    21,933    (18,529 )    3,404    5.1
Capitalized software development costs
   16,304    (3,423 )    12,881    5.0    22,241    (8,840 )    13,401    3.3
Software⁽¹⁾
   54,489    (25,377 )    29,112    3.5    71,393    (39,747 )    31,646    4.3













Total
   $ 412,921    $ (241,641 )    $ 171,280       $ 466,469    $ (297,650 )    $ 168,819









Unamortized intangible assets:

Goodwill
         194,700             204,167





Total intangible assets
         $ 365,980             $ 372,986





   As of June 30, 2018
   Gross Carrying
Amount    Accumulated
Amortization    Net Carrying
Value    Weighted Average
Remaining Life
   (in thousands)    (in years)
Amortized intangible assets:

Customer related
   $ 201,214    $ (134,133 )    $ 67,081    8.4
Core technology
   130,257    (82,815 )    47,442    8.1
Other intangible assets
   21,983    (17,299 )    4,684    5.3
Capitalized software development costs
   19,527    (6,265 )    13,262    4.0
Software⁽¹⁾
   62,711    (33,395 )    29,316    4.6







Total
   $ 435,692    $ (273,907 )    $ 161,785





Unamortized intangible assets:

Goodwill
         200,024



Total intangible assets
         $ 361,809




⁽¹⁾
Software includes purchased software and software developed for internal use.

Estimated amortization expense for the remainder of fiscal year ~~2018~~2019 and subsequent fiscal years for acquired intangible assets, capitalized software development costs and software, in each case that have been placed in service as of March 31, 2019, is as follows:


	Acquired Intangible Assets		Capitalized Software Development Costs		Software		Acquired Intangible Assets		Capitalized Software Development Costs		Software
	(in thousands)						(in thousands)
Remaining 2018	$	11,481	$	1,434		4,329
2019		20,439		2,868		7,687
Remaining 2019							$	5,483	$	898	$	2,340
2020		18,100		2,868		5,990		19,713		3,593		8,410
2021		16,358		2,869		3,740		18,444		3,593		6,115
2022		14,187		2,869		2,476		16,596		3,593		4,493
2023 and thereafter		50,766		—		3,400
2023								15,272		679		2,816
2024 and thereafter								48,264		117		2,975

Each period, for capitalized software development costs, we evaluate whether amortization expense using a ratio of revenue in the period to total expected revenue over the product’s expected useful life would result in greater amortization than as calculated under a straight-line methodology and, if that were to occur, amortization in that period would be accelerated accordingly.

The following table represents a rollforward of our goodwill balances, by reportable ~~segment, as follows:~~segment:


	Cloud Solutions		Banking Solutions		Payments and Transactional Documents		Other		Total		Cloud Solutions			Banking Solutions		Payments and Transactional Documents			Other		Total
	(in thousands)										(in thousands)
Balance at June 30, 2017⁽¹⁾	$	90,069	$	35,880	$	60,557	$	8,194	$	194,700
Balance at June 30, 2018⁽¹⁾											$	90,270		$	35,880	$	65,680		$	8,194	$	200,024
Goodwill acquired during the period		1,377		—		4,739		—		6,116		—			—		5,344			—		5,344
Impact of foreign currency translation		447		—		820		—		1,267		(463	)		—		(738	)		—		(1,201	)

Balance at December 31, 2017⁽¹⁾	$	91,893	$	35,880	$	66,116	$	8,194	$	202,083
Balance at March 31, 2019⁽¹⁾											$	89,807		$	35,880	$	70,286		$	8,194	$	204,167

⁽¹⁾	Other goodwill balance is net of $7.5 million accumulated impairment ~~losses.~~losses, recorded previously.

There can be no assurance that there will not be impairment charges in future periods as a result of future impairment reviews. To the extent that future impairment charges occur, it would likely have a material impact on our financial results.

Note 9—10—Commitments and Contingencies

Legal Matters

In May 2017, we received notification from a customer alleging a warranty claim associated with software we licensed to them in September 2013. Their claim seeks recovery of $1.269 million in software, professional services and support fees, inclusive of related sales tax. On September 22, 2017, the customer commenced arbitration proceedings in connection with the claim and an arbitration date has been set for May 2018. We believe the claim is without merit and intend to vigorously defend ourselves. At December 31, 2017 we had not accrued for any losses associated with this matter as we do not believe a loss is probable.

We are, from time to time, a party to legal proceedings and claims that arise out of the ordinary course of our business. We are not currently a party to any material legal proceedings.

Note ~~10—~~11—Indebtedness

Credit Agreement

~~On December 9, 2016, we (as borrower) and certain of our existing and future domestic material restricted subsidiaries (the Guarantors) entered into~~We are party to a credit agreement (the Credit Agreement) ~~with Bank of America, N.A. and certain other lenders (the Lenders)~~ that provides for a five-year revolving credit facility in the amount of up to $300 million (the Credit Facility).

~~Under the Credit Agreement, we~~, which was amended on July 16, 2018. We also 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~~expires in July 2023. At March 31, 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.

The Credit Agreement contains customary representations, warranties and covenants, including, but not limited to, material adverse events, specified restrictions on indebtedness, liens, investments, acquisitions, sales of assets, dividends and other restricted payments, and transactions with affiliates. We are required to comply with (a) a maximum consolidated net leverage ratio of 3.75 to 1.00, stepping down to 3.50 to 1.00 for the quarter ending June 30, ~~2018;~~2020; and (b) a minimum consolidated interest coverage ratio of 3.00 to 1.00; and (c) a minimum liquidity requirement at all times that the Notes are outstanding, where the outstanding principal amount of the Notes must not exceed the sum of the unutilized availability under the Credit Agreement plus our domestic cash and marketable securities.

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~~March 31, ~~2017,~~2019, we were in compliance with the covenants associated with the Credit Facility.

~~Convertible Senior Notes~~Warrants

On December 1, 2017, we repaid the aggregate principal balance of $189.8 million of our convertible senior notes which were issued on December 12, 2012. We borrowed $150 million under our Credit Facility and used $39.8 million of cash on hand to fund the settlement of the Notes.

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 loss on the settlement of 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


   $ 2,951 $ 4,140 $ 7,262 $ 8,224


Effective interest rate of the liability component
   8.54 % 8.10 % 8.45 % 8.04 %


~~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~~warrants were exercisable in equal tranches over a period of 150 days beginning on March 1, 2018 and ending on October ~~18,~~2, 2018.
~~The Warrants are transactions that are separate from~~ Each warrant was exercisable into one share of our common stock. During the ~~terms~~nine months ended March 31, 2019, we issued approximately 932 thousand shares of ~~the Notes and the Note Hedges, and holders of the Notes and Note Hedges have no rights with respect~~common stock related to the ~~Warrants.~~warrants exercised by the holders and all warrant exercises were net settled. There were no warrants outstanding as of March 31, 2019.
Note Payable
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 ten quarters, ~~starting during~~with the ~~three months ended September 30, 2017. Please refer to~~~~Note 4 Acquisitions and Other Investments~~ ~~for additional discussion of our Decillion acquisition.~~
~~Note 11—Derivative Instruments~~
~~Note Hedges, Conversion Feature and Warrants~~
~~During~~final installment due in the ~~three months~~quarter ended December 31, ~~2017, in connection with the maturity of the Notes, we settled the~~ 2019.
Note ~~Hedges and Conversion Feature as discussed in~~~~Note 10 Indebtedness~~~~. The remaining derivative instruments related to the Notes at December 31, 2017 consist of the Warrants, also discussed in~~~~Note 10 Indebtedness~~~~. The Warrants continue to meet the classification requirements for inclusion within stockholders’ equity and as such they were not subject to fair valuere-measurement.~~ We are required to assess whether we continue to meet the stockholders’ equity classification requirements. If in any future period we failed to satisfy those requirements, we would be required to reclassify the derivative instruments out of stockholders’ equity, to either assets or liabilities depending on their nature, and record those instruments at fair value with changes in fair value reflected in earnings.12—Derivative Instruments
Cash Flow Hedges
Interest Rate Swap Agreements
~~On July 10, 2017, we entered into an~~We utilize interest rate swap agreements to hedge our exposure to interest rate risk. At March 31, 2019, we had two outstanding interest rate swap agreements which were entered into in July 2017 and March 2019 with notional values of $100 million and $80 million, respectively.
The ~~agreement has a~~ notional value of ~~$100.0 million, was effective as of December 1, 2017 and expires on December 1, 2021. The notional amount of the~~each interest rate swap ~~matches~~agreement is expected to match the corresponding principal amount of a portion of our borrowings under the Credit ~~Agreement with the Lenders.~~Facility.
The $100 million notional value agreement is effective as of December 1, 2017 and expires on December 1, 2021. During ~~the term of the agreement,~~this period, we have a fixed interest rate of 1.9275 percent on the notional amount and Citizens Bank, National Association, as counterparty to the agreement, will pay us interest at a floating rate based on the 1 monthUSD-LIBOR-BBA swap rate on the notional amount. Interest payments are made quarterly on a net settlement basis.
The $80 million notional value agreement is effective as of December 1, 2021 and expires on July 16, 2023. During this period, we have a fixed interest rate of 2.125 percent on the notional amount and Bank of America, N.A., as counterparty to the agreement, will pay us interest at a floating rate based on the 1 monthUSD-LIBOR-BBA swap rate on the notional amount. Interest payments will be made monthly on a net settlement basis.
We designated the interest rate swap agreements as a hedging ~~instrument~~instruments and itthey qualified for hedge accounting upon inception and at ~~December~~March 31, ~~2017.~~2019. To continue to qualify for hedge accounting, the ~~instrument~~instruments must retain a “highly effective” ability to hedge interest rate risk for borrowings under the Credit ~~Agreement.~~Facility. We are required to test hedge effectiveness at the end of each financial reporting period. If a derivative qualifies for hedge accounting, changes in fair value of the hedge instrument ~~will be~~are recognized in accumulated other comprehensive income (loss) (AOCI) and subsequently reclassified into earnings in the period that the hedged transaction affects earnings. The reclassification into earnings ~~will be~~is recorded as a component of our interest expense within other expense, net. If the instrument were to lose some or all of its hedge effectiveness, changes in fair value for the “ineffective” portion of the instrument would be recorded immediately in earnings.
The fair values of the ~~gross asset and gross liability of our~~ interest rate ~~swap~~swaps and their respective locations in our consolidated balance ~~sheet~~sheets at ~~December~~March 31, ~~2017~~2019 and June 30, 2018 were as follows:

Description

Balance Sheet Location
   December 31, 2017    Balance Sheet Location    March 31,
2019    June 30,
2018
      (in thousands)
Derivative interest rate swap
            (in thousands)
Derivative asset
   Other assets    $ 782
Derivative liability
   Accrued expenses and other current liabilities    $ 165
Short-term derivative asset
   Prepaid expenses and other current assets    $ 432    $ 407
Long-term derivative asset
   Other assets    $ 249    $ 2,183
Long-term derivative liability
   Other liabilities    $ 43    $ —
The following tables ~~presents~~present the effect of ~~the~~our derivative interest rate ~~swap~~swaps and related tax effects in ~~our consolidated statement of comprehensive income (loss)~~AOCI for the ~~three and six~~nine months ended ~~December~~March 31, ~~2017.~~2019 and 2018.

   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 Income (Loss)
(Effective Portion) ⁽¹⁾ Income Tax Benefit
(Provision) in OCI on
Derivative Instruments Gain (Loss) in
AOCI
March 31, 2019
   (in thousands)
Derivative interest rate swap
   $ 2,590    $ (1,671 ) $ (281 ) $ —   $ 638




   Gain (Loss) in
AOCI
June 30, 2017    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) ⁽¹⁾ Income Tax Benefit
(Provision) in OCI on
Derivative Instruments Gain (Loss) in
AOCI
March 31, 2018
   (in thousands)
Derivative interest rate swap
   $ —      $ 1,869 $ 130 $ (626 ) $ 1,373




   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 )    $ —
⁽¹⁾
Recorded as interest income (expense) within other expense, net in our unaudited consolidated statements of comprehensive income (loss).
During the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, we concluded that no portion of the ~~hedge~~hedges was ineffective.
As of ~~December~~March 31, ~~2017,~~2019, there was $0.6 million of unrealized gain in ~~accumulated other comprehensive loss.~~AOCI. We ~~do not~~ expect to reclassify ~~any~~approximately $0.5 million of this unrealized gain from ~~accumulated other comprehensive loss~~AOCI to earnings over the next twelve months.
Note ~~12—~~13—Postretirement and Other Employee Benefits
Defined Benefit Pension Plan
We sponsor a ~~retirement~~defined benefit pension plan for our Swiss-based employees (the Swiss pension plan) that is governed by local regulatory requirements. This plan includes certain minimum benefit guarantees that, under U.S. GAAP, require defined benefit plan accounting.
Net periodic pension costs for the Swiss pension plan included the following components:

   Three Months Ended
December 31,    Six Months Ended
December 31,    Three Months Ended
March 31,    Nine Months Ended
March 31,
   2017    2016    2017    2016    2019    2018    2019    2018
   (in thousands)    (in thousands)
Components of net periodic cost

Service cost
   $ 624    $ 732    $ 1,264    $ 1,482    $ 625    $ 650    $ 1,900    $ 1,914
Interest cost
   87    31    176    63    113    91    343    267
Prior service credit
   (22 )    (22 )    (45 )    (45 )    (76 )    (23 )    (231 )    (68 )
Net actuarial loss
   54    161    109    326    54    56    164    165
Expected return on plan assets
   (294 )    (219 )    (595 )    (443 )    (342 )    (306 )    (1,040 )    (901 )
















Net periodic cost
   $ 449    $ 683    $ 909    $ 1,383    $ 374    $ 468    $ 1,136    $ 1,377
















The components of net periodic pension cost other than current service cost are presented within other expense, net in our unaudited consolidated statements of comprehensive income (loss).

Note 14—Subsequent Events

In April 2019, we received cash proceeds of $7.7 million and recorded a gain of $7.3 million in connection with the sale of an entity in which we held a small equity investment.

In May 2019, we signed an agreement to acquire the outstanding capital stock of BankSight Software Systems, Inc. (BankSight) for $2.8 million in cash and 40,000 shares of our common stock which have vesting conditions tied to the continued employment of certain BankSight employees. We currently hold a minority investment in preferred stock of BankSight. The transaction is subject to the satisfaction or waiver of customary closing conditions, which we expect to occur by May 31, 2019. BankSight is an early-stage technology company that develops and markets a SaaS-based customer engagement and growth platform for banks and credit unions.

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form10-Q contains forward-looking statements that involve risks and uncertainties. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Without limiting the foregoing, the words may, will, should, could, expects, plans, intends, anticipates, believes, estimates, predicts, potential and similar expressions are intended to identify forward-looking statements. All forward-looking statements included in this Quarterly Report on Form10-Q are based on information available to us up to and including the date of this report, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below under Management’s Discussion and Analysis of Financial Condition and Results of Operations and Part II. Item 1A. Risk Factors and elsewhere in this Quarterly Report on Form10-Q. You should carefully review those factors and also carefully review the risks outlined in other documents that we file from time to time with the Securities and Exchange Commission (SEC), including Part II. Item 1A. Risk Factors in our Annual Report on Form10-K for the fiscal year ended June 30, ~~2017.~~2018.

In the management discussion that follows, we have highlighted those changes and operating ~~factors~~events that were the primary factors affecting period to period fluctuations. The remainder of the change in period to period fluctuations from that which is specifically ~~disclosed~~discussed arises from various individually insignificant items.

Overview

We help make complex business payments simple, smart and secure. Corporations and banks rely on us for domestic and international payments, efficient cash management, automated workflows for payment processing and bill review, and ~~state of the art~~ fraud detection, behavioral analytics and regulatory compliance solutions. ~~The majority of our revenues are derived from offerings sold as SaaS-based solutions and paid for on a subscription and transaction basis.~~

We operate cloud-based settlement networks that facilitate electronic payments and transaction settlement between businesses, their vendors and banks. We offercloud andon-premise solutions that banks use to provide payment, cash management and treasury capabilities to their business customers, as well as solutions that ~~banks and credit unions~~financial institutions use to facilitate customer ~~acquisition and growth. We offer~~acquisition. Our cloud-based legal spend management solutions ~~that~~ help manage and determine the right amount to pay for legal services and claims vendor expenditures for insurance companies and other large ~~corporate~~ consumers of outside legal services. ~~Our corporate~~Corporate customers rely on our solutions to automate ~~their~~ payment and accounts payable processes and to streamline and manage the production and retention of electronic documents. Our healthcare customers use our solutions to streamline financial processes, particularly the patient enrollment process. We also offer ~~comprehensive~~ cyber fraud and risk management solutions that are designedtonon-invasively monitor and analyze user behavior and payment transactions to flag behavioral and data anomalies and other suspicious activity.

Our solutions are designed to complement, leverage and extend our customers’ existing information systems, accounting applications and banking relationships so that they can be deployed quickly and efficiently. To help our customers realize the maximum value from our products and meet their specific business requirements, we also provide professional services for installation, training, consulting and product enhancement.

Financial Highlights

The discussion that follows compares our operating results for the three and nine months ended March 31, 2019 to the three and nine months ended March 31, 2018. We adopted the new revenue recognition standard on July 1, 2018 and, in accordance with the method of adoption, did not recast prior period information. The new revenue standard has generally resulted in a modest reduction of subscription and transaction and services and maintenance revenue, while increasing software license revenue, for the nine months ended March 31, 2019 as compared to the respective prior period. The new revenue standard requires the capitalization of certain costs incurred to fulfill or obtain contracts, which prior to adoption were expensed as incurred. Accordingly, this has resulted in a modest reduction to cost of revenues and operating expenses for the three and nine month periods ended March 31, 2019 as compared to the respective prior periods. Please refer toNote 3 Revenue Recognition to our unaudited consolidated financial statements included in this Form10-Q for a detailed reconciliation of the impact of the adoption of this standard on our operating results.

For the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, our revenue increased to ~~$186.5~~$313.7 million from ~~$169.8~~$287.6 million in the same period of the prior fiscal year. ~~This~~Our revenue for the nine months ended March 31, 2019 was unfavorably impacted by $3.5 million due to the impact of foreign currency exchange rates primarily related to the Swiss Franc and British Pound Sterling, both of which depreciated against the U.S. Dollar as compared to the same period of the prior fiscal year. The revenue increase was attributable to revenue increases in our Cloud Solutions segment of ~~$13.4~~$17.9 million, ~~and~~our Banking Solutions segment of ~~$4.6~~$4.1 million ~~offset in part by decreased revenue in~~and our Payments and Transactional Documents segment of ~~$1.3~~$2.8 million. Increased revenue from our legal spend management and our

Paymode-X and financial messaging settlement network solutions accounted for the revenue increase in our Cloud Solutions segment. The ~~Banking Solutions segment’s~~ revenue increase ~~was primarily due to increased services revenue and increased subscription and transaction revenue from our cloud based solutions. The revenue decrease~~ in our Payments and Transactional Documents segment was related to ~~lower~~higher European ~~software license revenue~~subscriptions and ~~service and maintenance~~transactions revenue in our payment ~~and document automation~~ products. ~~Our~~The Banking Solutions segment’s revenue ~~for the six months ended December 31, 2017~~increase was ~~favorably impacted by $1.8 million~~primarily due to ~~the impact of foreign currency exchange rates primarily related~~new customer engagements and platformgo-lives, as customers continued to ~~the British Pound Sterling which appreciated against the U.S. Dollar as compared to the same period of the prior fiscal year.~~deploy our solutions.

~~We incurred a net loss of $1.2~~Net income was $5.9 million in the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 compared to a net loss of ~~$20.9~~$2.2 million in the same period of the prior fiscal year. Our net ~~loss~~income for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 was ~~reduced~~favorably impacted by gross profit expansion of $17.8 million, a reduction in other expense, net of $6.4 million, due to decreases in the ~~impact~~amortization of ~~increased gross margins~~debt discount costs and an increase in income tax benefit of ~~$12.8 million and decreased~~$2.1 million. These improvements were partially offset by an increase in operating expenses of ~~$6.5 million.~~$18.3 million as we continued to grow our business. The increase in gross margins was ~~primarily~~ driven by increases in revenue in our Cloud Solutions, Payments and Transactional Documents and Banking Solutions segments. The ~~decrease~~increase in ~~our~~ operating expenses was ~~due~~ primarily to the absence of a goodwill impairment charge of $7.5 million we incurred during the three months ended December 31, 2016, a decrease in amortization of acquisition-related intangible assets of $1.5 million and decreased global enterprise resource planning (ERP) implementation and other costs of $1.2 million, partially offsetdriven by ~~an increase in sales and~~

~~marketing costs of $2.5 million and~~increased product development and engineering costs of ~~$1.7~~$8.3 million as we continued to invest in new product innovation, increased sales and marketing costs of $7.5 million and increased general and administrative costs of $3.4 million. Our operating expenses for the six months ended December 31, 2017 were unfavorably impacted by $0.6 million due to the impact of foreign currency exchange rates primarily related to the British Pound Sterling which appreciated against the U.S. Dollar as compared to the same period of the prior fiscal year.

In the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, we derived approximately 38% of our revenue from customers located outside of North America, principally in the United Kingdom, continental Europe and the Asia-Pacific region.

We expect future revenue growth to be driven primarily by our banking ~~legal spend management~~ and ~~settlement network~~cloud solutions.

Over the past several years we have made strategic investments in innovative new technology offerings that we believe will enhance our competitive position, help us win new business, drive subscription revenue growth and expand our operating margins. We ~~believe~~expect to continue to make investments in our suite of products so that ~~these initiatives have positioned us effectively for revenue growth in future years.~~we can continue to offer innovative, feature-rich technology solutions to our customers.

Critical Accounting Policies and Significant Judgments and Estimates

We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as critical because ~~these specific~~they involve areas ~~generally~~of financial reporting that require us to make judgments and estimates about matters that are uncertain at the time we make the estimate and different estimates—which also would have been reasonable—could have been used.

The critical accounting policies and estimates we identified in our most recent Annual Report on Form10-K for the fiscal year ended June 30, ~~2017~~2018 related to revenue recognition, the valuation of goodwill and intangible assets, the valuation of acquired deferred revenue and income taxes. ~~There~~With the exception of revenue recognition, which is discussed further below, there have been no material changes to the critical accounting policies from those we disclosed in Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form10-K for the fiscal year ended June 30, ~~2017.~~ 2018.

Effective July 1, 2018 we adopted a new accounting standard related to revenue recognition on a modified retrospective basis. The cumulative effect of initially applying the new revenue recognition standard was recorded as an adjustment to our accumulated deficit balance as of July 1, 2018. Our consolidated balance sheet, consolidated statement of comprehensive income (loss), our consolidated statement of stockholders’ equity and our consolidated statement of cash flows reflect the adoption of the new standard for all periods subsequent to the adoption date, however financial statements for periods prior to the adoption date have not been revised. The notes to our financial statements include a reconciliation of the adjustments recorded to our current period financial statements to comply with the new standard and the amounts that would have been reflected in our financial statements under the prior revenue recognition framework.

Revenue Recognition Framework

The new revenue standard applies to all customer contracts and requires that revenue be recognized upon the transfer of control of the product or service to the customer at an amount that reflects an appropriate allocation of the total transaction price. Broadly, revenues are recognized according to the following five step model:

Identifying the contract (or contracts) with a customer;

Identifying the performance obligations in the contract;

Determining the transaction price;

Allocating the transaction price to the contractual performance obligations; and

Recognizing revenue as performance obligations are satisfied.

Our customer contracts can take a variety of forms but normally are in writing and include all major commercial terms, promised goods and services and the selling price. Our contracts often include multiple promised goods or services that we evaluate to determine if they represent distinct performance obligations. Our performance obligations vary based on the nature of the promised goods or services but commonly consist of:

Software licensed on either a perpetual or term-license basis;

Professional services;

Support and maintenance services; and

“Stand-ready” obligations to perform in respect of technology solutions we provide under a hosted or SaaS contract.

The transaction price represents the amount of consideration that we expect to be entitled to receive under the contract. It includes the impact of variable consideration such as refunds, penalties, usage-based fees or similar items. We estimate and include variable consideration in the transaction price if we conclude that a significant future reversal of revenue under the contract will not occur. Estimating the amount of variable consideration to include in the transaction price involves significant estimation and is discussed further below.

The transaction price is allocated to the individual performance obligations in a contract. If a contract only has one performance obligation (for example, a professional services only engagement) the entire transaction price is allocated to that performance obligation. For contracts with multiple performance obligations, the transaction price is allocated to each performance obligation based on the proportionate relationship of that performance obligation’s standalone selling price to the total transaction price. Determining standalone selling price involves significant judgment and estimation. In most cases we use an adjusted market assessment approach to estimate standalone selling price and consider the following:

The price we charge when we sell that item separately;

Internal price lists and internal pricing guidelines;

Cost of delivering the item and overall gross margin expectations; and

Information about the customer or class of customer.

Revenue is recognized for each performance obligation as we satisfy the obligation. Performance obligations are satisfied either over time or at a point in time. Our perpetual license and term license obligations that do not include significant customization are normally satisfied at a point in time. Our professional services, support and maintenance, stand-ready performance obligations with respect to our hosted or SaaS solutions and software licenses dependent on significant customization by us are normally satisfied over time.

Deferred Costs

Under the new revenue standard, certain costs that we historically expensed as incurred are now required to be capitalized. Costs capitalized can relate to either costs to fulfill a contract or costs to obtain a contract.

We capitalize costs incurred to fulfill a contract when the costs relate directly to a specifically identifiable customer contract, when the costs generate or enhance the resources that we will use to satisfy performance obligations in the future and when we estimate that we will recover the costs through future revenues under the contract.

Costs incurred to obtain a contract are those incremental costs that would not have been incurred if the contract had not been obtained, such as sales commissions. We capitalize sales commissions when we estimate that the capitalized amounts will be recovered through future revenues under the contract and the period of benefit is longer than twelve months.

Any costs that we capitalize are amortized to expense over the period during which we expect to transfer the specific goods or services to the customer, including the impact of any estimated renewal periods.

Significant Judgments

There are several aspects of the revenue recognition standard that require us to exercise significant judgment or estimation.

Standalone selling price. The determination of standalone selling price considers several factors. In establishing standalone selling price, we maximize the use of observable inputs such as the price actually charged when we sell the good or service separately, internal pricing policies or pricing goals, information specific to the customer or class of customer and overall market conditions. Maximizing the use of observable inputs helps ensure that our estimation process considers all relevant data points necessary to obtain a reasonable outcome.

Identifying performance obligations. Identifying the performance obligations in a contract may require significant judgment. An individual good or service is accounted for as a separate performance obligation if it is distinct. A performance obligation is considered to be distinct if it is separately identifiable from other items in the contract and a customer can benefit from the good or service on its own. In determining whether a customer can benefit from a good or service on its own, we consider the complexity of any required integration or customization, the interdependency and interrelationship of the particular good or service to other items in the contract and the ability (or inability) of the customer’s personnel or other third party providers to successfully fulfill like goods or services. If we are unable to conclude that a promised good or service meets the criteria for a separate performance obligation it is combined with other items in the contract and treated as a combined performance obligation. Revenue is then recognized in the amount of the transaction price allocated to the combined performance obligation as the combined performance obligation is transferred to the customer.

Estimating variable consideration. As part of estimating the total transaction price, we estimate the total consideration we expect to be entitled to under the contract. In circumstances where the transaction price is confined to a fixed overall contract price, the estimate of the total transaction price is normally straightforward. However, we have contracts where the estimate of total contract price can vary, particularly due to the impact of variable consideration such as usage based fees. Unless we meet certain exceptions, we are required to estimate the amount of variable consideration we expect to receive under the contract. In formulating this estimate, we consider the specific customer’s operating history with us, current usage data and the length of time over which the variable fees are expected to be incurred. We include an estimate of variable consideration in the transaction price if we conclude that a significant future reversal of revenue under the contract will not occur.

Amortization of capitalized costs. Costs incurred to fulfill a contract and costs incurred to obtain a contract are capitalized according to the framework discussed above. These costs are amortized on a straight-line basis over the estimated future period during which we expect to derive benefit from the contract. Estimating the future period of benefit involves judgment. We estimate the future period of benefit after considering a number of factors including the current contract term, the impact of estimated customer renewal terms and the estimated life of the technology solution underlying the contract. We estimate our future period of benefits for capitalized costs to be approximately five years.

It is important that the discussion of our operating results that follows be read in conjunction with the critical accounting policies disclosed in Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report onForm10-K, as filed with the SEC on August ~~28, 2017.~~29, 2018, as updated above.

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, please refer toNote 2 Recent Accounting Pronouncements to our unaudited consolidated financial statements included in Part I. Item 1 of this Quarterly Report onForm10-Q.

Results of Operations

Three and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2017~~2019 Compared to the Three and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2016~~2018

Segment Information

Operating segments are components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our chief executive officer.

Our operating segments are organized principally by the type of product or service offered and by geography. Similar operating segments have been aggregated into four reportable segments: Cloud Solutions, Banking Solutions, Payments and Transactional Documents and Other.

The following tables represent our segment revenues and our segment measure of profit (loss):


	Three Months Ended December 31,						Increase (Decrease) Between Periods						Six Months Ended December 31,						Increase (Decrease) Between Periods						Three Months Ended March 31,						Increase (Decrease) Between Periods						Nine Months Ended March 31,						Increase (Decrease) Between Periods
	2017			2016			$ Change Inc (Dec)			% Change Inc (Dec)			2017			2016			$ Change Inc (Dec)			% Change Inc (Dec)			2019			2018			$ Change Inc (Dec)			% Change Inc (Dec)			2019			2018			$ Change Inc (Dec)			% Change Inc (Dec)
	(Dollars in thousands)																								(Dollars in thousands)
Segment revenue:
Cloud Solutions	$	44,518		$	38,032		$	6,486			17.1	%	$	86,962		$	73,589		$	13,373			18.2	%	$	51,439		$	46,486		$	4,953			10.7	%	$	151,342		$	133,448		$	17,894			13.4	%
Banking Solutions		20,954			19,464			1,490			7.7	%		42,275			37,650			4,625			12.3	%		23,903			22,900			1,003			4.4	%		69,283			65,175			4,108			6.3	%
Payments and Transactional Documents		25,343			24,815			528			2.1	%		48,392			49,661			(1,269	)		(2.6	)%		26,094			27,124			(1,030	)		(3.8	)%		78,271			75,516			2,755			3.6	%
Other		4,380			4,417			(37	)		(0.8	)%		8,862			8,912			(50	)		(0.6	)%		5,002			4,626			376			8.1	%		14,825			13,488			1,337			9.9	%

Total revenues	$	95,195		$	86,728		$	8,467			9.8	%	$	186,491		$	169,812		$	16,679			9.8	%
Total segment revenue																									$	106,438		$	101,136		$	5,302			5.2	%	$	313,721		$	287,627		$	26,094			9.1	%

Segment measure of profit (loss):
Cloud Solutions	$	9,650		$	6,778		$	2,872			42.4	%	$	19,034		$	12,231		$	6,803			55.6	%	$	11,463		$	9,308		$	2,155			23.2	%	$	32,497		$	28,342		$	4,155			14.7	%
Banking Solutions		1,148			1,043			105			10.1	%		3,309			1,068			2,241			209.8	%		2,082			1,630			452			27.7	%		6,097			4,939			1,158			23.4	%
Payments and Transactional Documents		7,734			7,617			117			1.5	%		14,094			15,193			(1,099	)		(7.2	)%		6,933			7,661			(728	)		(9.5	)%		22,799			21,755			1,044			4.8	%
Other		(903	)		(913	)		10			1.1	%		(1,387	)		(1,358	)		(29	)		(2.1	)%		(1,545	)		(627	)		(918	)		(146.4	)%		(3,019	)		(2,014	)		(1,005	)		(49.9	)%

Total measure of segment profit	$	17,629		$	14,525		$	3,104			21.4	%	$	35,050		$	27,134		$	7,916			29.2	%	$	18,933		$	17,972		$	961			5.3	%	$	58,374		$	53,022		$	5,352			10.1	%

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


	Three Months Ended December 31,						Six Months Ended December 31,						Three Months Ended March 31,						Nine Months Ended March 31,
	2017			2016			2017			2016			2019			2018			2019			2018
	(in thousands)												(in thousands)
Total measure of segment profit	$	17,629		$	14,525		$	35,050		$	27,134		$	18,933		$	17,972		$	58,374		$	53,022
Less:
Amortization of acquisition-related intangible assets		(5,702	)		(6,090	)		(10,890	)		(12,375	)		(5,230	)		(5,818	)		(15,809	)		(16,708	)
Goodwill impairment charge		—			(7,529	)		—			(7,529	)
Stock-based compensation expense		(8,080	)		(8,656	)		(16,540	)		(16,855	)
Stock-based compensation plan expense														(10,015	)		(8,592	)		(31,906	)		(25,132	)
Acquisition and integration-related expenses		(380	)		(522	)		(1,372	)		(1,771	)		(1,373	)		(224	)		(2,966	)		(1,596	)
Restructuring benefit		—			—			9			—
Restructuring expense														(1,332	)		(1,485	)		(1,963	)		(1,476	)
Minimum pension liability adjustments		(3	)		(264	)		(38	)		(541	)		93			3			248			(35	)
Global ERP system implementation and other costs		(1,339	)		(2,106	)		(3,415	)		(4,597	)		(557	)		(1,558	)		(3,110	)		(4,973	)
Other expense, net		(3,532	)		(4,182	)		(7,995	)		(8,117	)		(946	)		(1,293	)		(3,097	)		(9,288	)

Loss before income taxes	$	(1,407	)	$	(14,824	)	$	(5,191	)	$	(24,651	)	$	(427	)	$	(995	)	$	(229	)	$	(6,186	)

Cloud Solutions

Revenues from our Cloud Solutions segment increased ~~$6.5~~$5.0 million for the three months ended ~~December~~March 31, ~~2017~~2019 as compared to the same period in the prior fiscal year, ~~inclusive of a favorable impact of foreign currency exchange rates of $0.5 million,~~ due ~~primarily~~ to increased revenue of ~~$5.1 million from our settlement network solutions and $1.4~~$2.8 million from our legal spend management solutions and $2.1 million from our settlement network solutions. Segment profit increased ~~$2.9~~$2.2 million for the three months ended ~~December~~March 31, ~~2017~~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 ~~$2.4~~$0.8 million and increased operating expenses of ~~$1.2~~$2.0 million ~~primarily~~ related to increased sales and marketing and product development and engineering costs.

Revenues from our Cloud Solutions segment increased ~~$13.4~~$17.9 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 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~~$9.1 million from our settlement network solutions and ~~$3.9~~$8.8 million from our legal spend management solutions. Segment profit increased ~~$6.8~~$4.2 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~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 ~~$4.4~~$6.0 million and increased operating expenses of ~~$2.2 million.~~$7.8 million primarily related to increased sales and marketing and product development and engineering costs. We expect revenue and profit for the Cloud Solutions segment to increase in fiscal year ~~2018~~2019 as compared to the prior fiscal year as a result of increased revenue from our legal spend management ~~solutions~~ and ourPaymode-X and financial messaging settlement network solutions.

Banking Solutions

Revenues from our Banking Solutions segment increased ~~$1.5~~$1.0 million for the three months ended ~~December~~March 31, ~~2017~~2019 as compared to the same period in the prior fiscal year, due to increased subscriptions and transactions revenue of $2.1 million and software licenses revenue of $0.4 million, partially offset by decreased service and maintenance revenue of $1.5 million. The increase in subscriptions and transactions revenue was primarily related to customers going live on our hosted platform and the increase in software license revenue was related, in part, to the impact of the new revenue standard we adopted on July 1, 2018. Segment profit increased $0.5 million for the three months ended March 31, 2019 as compared to the same period in the prior fiscal year, due to the revenue increase described above.

Revenues from our Banking Solutions segment increased $4.1 million for the nine months ended March 31, 2019 as compared to the same period in the prior fiscal year, due to increased software license revenue of $3.8 million and subscriptions and transactions revenue of $3.0 million, partially offset by decreased service and maintenance revenue of $2.7 million. The increase in software license revenue was related, in part, to the impact of the new revenue standard we adopted on July 1, 2018. Segment profit increased $1.2 million for the nine months ended March 31, 2019 as compared to the same period in the prior fiscal year, due primarily to the increased revenue described above, partially offset by increased product development and engineering costs. We expect revenue to continue to increase and profit to remain consistent for the Banking Solutions segment in fiscal year 2019 as compared to the prior fiscal year as new customers go live with our hosted platform.

Payments and Transactional Documents

Revenues from our Payments and Transactional Documents segment decreased $1.0 million for the three months ended March 31, 2019 as compared to the same period in the prior fiscal year, due primarily to decreased service and maintenance revenue of $2.8 million and decreased software license revenue of $0.4 million, partially offset by increased subscriptions and transactions revenue of $2.1 million from our European payments and transactional documents solutions, due in part to the impact of recent acquisitions. The decrease in maintenance revenue was driven by the continued migration of customers to our hosted payment products rather than deployed,on-premise solutions. Segment profit decreased $0.7 million for the three months ended March 31, 2019, as compared to the same period in the prior fiscal year, due primarily to the revenue decreases described above.

Revenues from our Payments and Transactional Documents segment increased $2.8 million for the nine months ended March 31, 2019 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~~$8.3 million from our European payments and transactional documents solutions, due in part to the impact of recent acquisitions, partially offset by decreased service and maintenance revenue of $4.9 million and decreased software license revenue of $0.6 million. The decrease in maintenance revenue was driven by the continued migration of customers to our hosted payment products rather than deployed,on-premise solutions. Segment profit increased ~~$0.1~~$1.0 million for the ~~three~~nine months ended ~~December~~March 31, ~~2017~~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 and increased sales and marketing~~operating expenses of ~~$0.7 million.~~

~~Revenues from our Banking Solutions segment increased $4.6~~$1.8 million ~~for the six months ended December 31, 2017 as compared~~primarily related to the same period in the prior fiscal year, due primarily to increased services revenue of $3.6 million, software license revenue of $0.7 million and subscriptions and transactions revenue of $0.4 million. Segment profit increased $2.2 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 $2.0 million and increased sales and marketing expenses of $0.5 million. We expect revenue for the Banking Solutions segment to increase, and profit for the Banking Solutions segment to remain relatively consistent, in fiscal year 2018 as compared to the prior fiscal year, as a result of our continued deployment of our newer banking solutions.

~~Payments and Transactional Documents~~

Revenues from our Payments and Transactional Documents segment increased $0.5 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 $1.1 million, due primarily to increased subscription and transactions revenue of $2.4 million from our European payments and transactional documents solutions, partially offset by decreased software licenses revenue of $1.0 million, decreased service and maintenance revenue of $0.4 million and decreased other revenue of $0.4 million. The segment profit increase of $0.1 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 $0.4 million, was primarily attributable to the revenue increase described above, as well as decreased cost of revenues of $0.7 million, partially offset by increased sales and marketing expenses of $0.8 million and increased product development and engineering ~~expenses of $0.3 million.~~

Revenues from our Payments and Transactional Documents segment decreased $1.3 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 $1.1 million, due primarily to decreased service and maintenance revenue of $2.0 million, decreased software license revenue of $1.6 million and decreased other revenue of $0.7 million, partially offset by increased subscriptions and transactions revenue of $3.1 million. The segment profit decrease of $1.1 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 $0.5 million, was primarily attributable to the revenue decrease described above, as well as increased sales and marketing expenses of $1.2 million, partially offset by decreased cost of revenues of $1.6 million.costs. We expect revenue and profit for the Payments and Transactional Documents segment to increase ~~and profit to increase slightly~~ in fiscal year ~~2018~~2019 as compared to the prior fiscal year, as a result of increased sales of our subscription-based payment and document automation solutions.

Other

Revenues ~~and profit~~ from our Other segment ~~remained relatively consistent~~increased $0.4 million and $1.3 million for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019, respectively, as compared to the same ~~period~~periods in the prior fiscal year, due primarily to increased software license revenue. Segment profit decreased $1.0 million for both the three and nine months ended March 31, 2019, as compared to the same periods in the prior fiscal year. We expect Other segment revenue to increase slightly and profit to ~~increase~~decrease slightly in fiscal year ~~2018~~2019 as compared to the prior fiscal year, principally as the result of increased sales of our cyber fraud and risk management ~~products.~~products, offset in part by increased operating expenses.

Revenues by category


	Three Months Ended December 31,						Increase (Decrease) Between Periods						Six Months Ended December 31,						Increase (Decrease) Between Periods						Three Months Ended March 31,						Increase (Decrease) Between Periods						Nine Months Ended March 31,						Increase (Decrease) Between Periods
	2017			2016			$ Change Inc (Dec)			% Change Inc (Dec)			2017			2016			$ Change Inc (Dec)			% Change Inc (Dec)			2019			2018			$ Change Inc (Dec)			% Change Inc (Dec)			2019			2018			$ Change Inc (Dec)			% Change Inc (Dec)
	(Dollars in thousands)																								(Dollars in thousands)
Revenues:
Subscriptions and transactions	$	63,187		$	55,644		$	7,543			13.6	%	$	123,901		$	107,776		$	16,125			15.0	%	$	75,502		$	67,378		$	8,124			12.1	%	$	216,558		$	191,279		$	25,279			13.2	%
Software licenses		2,620			3,492			(872	)		(25.0	)%		4,985			5,613			(628	)		(11.2	)%		3,802			3,134			668			21.3	%		13,979			8,119			5,860			72.2	%
Service and maintenance		28,433			25,920			2,513			9.7	%		55,775			53,593			2,182			4.1	%		25,856			29,476			(3,620	)		(12.3	)%		80,047			85,251			(5,204	)		(6.1	)%
Other		955			1,672			(717	)		(42.9	)%		1,830			2,830			(1,000	)		(35.3	)%		1,278			1,148			130			11.3	%		3,137			2,978			159			5.3	%

Total revenues	$	95,195		$	86,728		$	8,467			9.8	%	$	186,491		$	169,812		$	16,679			9.8	%	$	106,438		$	101,136		$	5,302			5.2	%	$	313,721		$	287,627		$	26,094			9.1	%

*As % of total revenues:*
Subscriptions and transactions		66.4	%		64.2	%								66.4	%		63.5	%								70.9	%		66.7	%								69.0	%		66.6	%
Software licenses		2.8	%		4.0	%								2.7	%		3.3	%								3.6	%		3.1	%								4.5	%		2.8	%
Service and maintenance		29.9	%		29.9	%								29.9	%		31.6	%								24.3	%		29.1	%								25.5	%		29.6	%
Other		0.9	%		1.9	%								1.0	%		1.6	%								1.2	%		1.1	%								1.0	%		1.0	%

Total revenues		100.0	%		100.0	%								100.0	%		100.0	%								100.0	%		100.0	%								100.0	%		100.0	%

Subscriptions and Transactions

Revenues from subscriptions and transactions increased ~~$7.5~~$8.1 million for the three months ended ~~December~~March 31, ~~2017~~2019 as compared to the same period in the prior fiscal ~~year, inclusive~~year. The overall revenue increase was due principally to increases in revenue from our Cloud Solutions segment, Payments and Transactional Documents segment and Banking Solutions segment of ~~a favorable~~$4.1 million, $2.3 million and $2.1 million, respectively, due to the impact of ~~foreign currency exchange rates~~customers going live on our hosted platforms and, to a lesser degree, the impact of ~~$0.8 million.~~recent acquisitions.

Revenues from subscriptions and transactions increased $25.3 million for the nine months ended March 31, 2019 as compared to the same period in the prior fiscal year. The overall revenue increase was due principally to increases in revenue from our Cloud Solutions segment and Payments and Transactional Documents segment of ~~$5.9~~$14.9 million and ~~$2.4~~$8.5 million, respectively, ~~partially offset by a decrease in revenue from our Banking Solutions segment of $0.7 million.~~

~~Revenues from subscriptions and transactions increased $16.1 million for the six months ended December 31, 2017 as compared~~due to the ~~same period in the prior fiscal year, inclusive of a favorable~~ impact of ~~foreign currency exchange rates~~customers going live on our hosted platforms and, to a lesser degree, the impact of $0.8 million. The overall revenue increase was due principally to increases in revenue from our Cloud Solutions segment and Payments and Transactional Documents segment of $12.6 million and $3.1 million, respectively.recent acquisitions. We expect subscriptions and transactions revenues to continue to increase in fiscal year ~~2018~~2019 as compared to the prior fiscal year, primarily as a result of the revenue contribution from our legal spend management solutions, ourPaymode-Xand financial messaging settlement network solutions and continued revenue increases in our Banking Solutions segment.

Software Licenses

Revenues from software licenses ~~decreased $0.9~~increased $0.7 million for the three months ended ~~December~~March 31, ~~2017~~2019 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~~increased revenue from our ~~Payments~~Other segment and ~~Transactional Documents~~Banking Solutions segment of ~~$1.0 million.~~$0.5 million and $0.4 million, respectively. The increase in revenue is due in part from our adoption of the new revenue standard on July 1, 2018 which results in revenue recognition sooner for certain arrangements for which revenue recognition was delayed under legacy GAAP, such as when vendor specific evidence of fair value could not be established. In addition, the change in methodology for allocation of the transaction price between performance obligations had the impact of increasing software revenue under the new standard.

Revenues from software licenses ~~decreased $0.6~~increased $5.9 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 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 segment and Other segment of ~~$0.7~~$3.8 million and ~~$0.3~~$1.6 million, respectively. The increase in revenue is due in part from our adoption of the new revenue standard on July 1, 2018 which results in revenue recognition sooner for certain arrangements for which revenue recognition was delayed under legacy GAAP, such as when vendor specific evidence of fair value could not be established. In addition, the change in methodology for allocation of the transaction price between performance obligations had the impact of increasing software revenue under the new standard. We expect software license revenues to ~~decrease slightly~~increase in fiscal year ~~2018~~2019 as compared to the prior fiscal ~~year.~~year, primarily as a result of revenue contribution from our Banking Solutions, Payments and Transactional Documents and Other segments.

Service and Maintenance

Revenues from service and maintenance ~~increased $2.5~~decreased $3.6 million for the three months ended ~~December~~March 31, ~~2017~~2019 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.~~year. The overall revenue ~~increase~~decrease was ~~primarily~~due principally to decreases in revenue from our Payments and Transactional Documents segment of $2.8 million and Banking Solutions segment of $1.5 million, in each case reflecting the ~~result~~continued migration of customers to our hosted solutions rather than deployed,on-premise solutions. These decreases were partially offset by increased revenue from our ~~Banking~~Cloud Solutions segment of ~~$2.2~~$0.7 million.

Revenues from service and maintenance ~~increased $2.2~~decreased $5.2 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 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.~~year. The overall revenue ~~increase~~decrease 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~~due principally to decreases in revenue from our Payments and Transactional Documents segment of $4.9 million and Banking Solutions segment of $2.7 million, in each case reflecting the continued migration of customers to our hosted solutions rather than deployed,on-premise solutions. These decreases were partially offset by increased revenue from our Cloud Solutions segment and Other segment of $2.0 ~~million.~~million and $0.3 million, respectively. We expect ~~that~~ service and maintenance revenues will ~~increase~~decrease slightly in fiscal year ~~2018~~2019 as compared to the prior fiscal ~~year.~~year, as a result of decreased services revenue from our Banking Solutions segment, primarily due to the continued impact of customers transitioning fromon-premise to SaaS-based solutions.

Other

Our other revenues consist principally of equipment and supplies sales, which remained minor components of our overall revenue. We expect that other revenues will decrease ~~slightly~~ in fiscal year ~~2018~~2019 as compared to the prior fiscal ~~year.~~year, due to the absence of aone-time revenue transaction recorded in the fourth quarter of fiscal year 2018.

Cost of revenues by category


	Three Months Ended December 31,						Increase (Decrease) Between Periods						Six Months Ended December 31,						Increase (Decrease) Between Periods						Three Months Ended March 31,						Increase (Decrease) Between Periods						Nine Months Ended March 31,						Increase (Decrease) Between Periods
	2017			2016			$ Change Inc (Dec)			% Change Inc (Dec)			2017			2016			$ Change Inc (Dec)			% Change Inc (Dec)			2019			2018			$ Change Inc (Dec)			% Change Inc (Dec)			2019			2018			$ Change Inc (Dec)			% Change Inc (Dec)
	(Dollars in thousands)																								(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	%	$	31,623		$	30,771		$	852			2.8	%	$	94,644		$	85,404		$	9,240			10.8	%
Software licenses		229			196			33			16.8	%		399			324			75			23.1	%		226			233			(7	)		(3.0	)%		667			632			35			5.5	%
Service and maintenance		12,968			13,416			(448	)		(3.3	)%		25,200			26,701			(1,501	)		(5.6	)%		12,818			13,861			(1,043	)		(7.5	)%		38,052			39,195			(1,143	)		(2.9	)%
Other		701			1,178			(477	)		(40.5	)%		1,368			2,056			(688	)		(33.5	)%		1,046			930			116			12.5	%		2,461			2,298			163			7.1	%

Total cost of revenues	$	41,099		$	39,572		$	1,527			3.9	%	$	81,579		$	77,749		$	3,830			4.9	%	$	45,713		$	45,795		$	(82	)		(0.2	)%	$	135,824		$	127,529		$	8,295			6.5	%

Gross Profit ($)	$	54,096		$	47,156		$	6,940			14.7	%	$	104,912		$	92,063		$	12,849			14.0	%	$	60,725		$	55,341		$	5,384			9.7	%	$	177,897		$	160,098		$	17,799			11.1	%

Gross Profit (%)		56.8	%		54.4	%								56.3	%		54.2	%								57.1	%		54.7	%								56.7	%		55.7	%
*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	%

Total cost of revenues		43.2	%		45.6	%								43.7	%		45.8	%

Subscriptions and Transactions

Subscriptions and transactions costs include salaries and other related costs for our professional services teams as well as costs related to our hosting infrastructure such as depreciation and facilities related expenses. Subscriptions and transactions costs decreased ~~slightly~~ to ~~43%~~42% of ~~subscription~~subscriptions and transactions revenues in the three months ended ~~December~~March 31, ~~2017~~2019 as compared to 46% of subscriptions and transactions revenues in the three months ended March 31, 2018 due to the continued revenue expansion from our hosted solutions.

Subscriptions and transactions costs were relatively consistent at 44% of subscription and transactions revenues in the nine months ended March 31, 2019 as compared to 45% of subscriptions and transactions revenues in the ~~three~~nine months ended ~~December~~March 31, ~~2016.~~

Subscriptions and transactions costs decreased slightly 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, 2016.2018. We expect ~~that~~ subscriptions and transactions costs as a percentage of subscriptions and transactions revenues will ~~remain relatively consistent~~decrease slightly in fiscal year ~~2018~~2019 as ~~compared to the prior fiscal year.~~a result of increased revenue contribution from our cloud-based banking and legal spend management.

Software Licenses

Software license costs consist of expenses incurred by us to ~~manufacture, package and~~ distribute our software products and related documentation and costs of licensing third party software that is incorporated into or sold with certain of our products. Software license costs ~~increased slightly to 9% of software license revenues in the three months ended December 31, 2017 as compared to~~remained consistent at 6% of software license revenues in the three months ended ~~December~~March 31, ~~2016.~~ 2019 as compared to 7% of software license revenues in the three months ended March 31, 2018.

Software license costs ~~increased slightly~~decreased to 5% of software license revenues in the nine months ended March 31, 2019 as compared to 8% of software license revenues in the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2018. Costs decreased as ~~compared~~a percentage of revenue due to ~~6% of~~increased software license revenues in the six months ended December 31, 2016. The increase in software license costs as a percent of software license revenues for the three and six months ended December 31, 2017 as compared to the same periods in the prior fiscal year was due primarily to a reduction in revenues from our European payments and transactional documents solutions and relatively unchanged cost of revenues.sales which contained minimal third party costs. We expect that software license costs as a percentage of software license revenues will ~~remain relatively consistent~~decrease in fiscal year ~~2018~~2019 as compared to the prior fiscal ~~year.~~year primarily due to increased revenue in our Banking Solutions segment.

Service and Maintenance

Service and maintenance costs include salaries and other related costs for our customer service, maintenance and help desk support staffs, as well as third party contractor expenses used to complement our professional services team. Service and maintenance costs ~~decreased~~increased slightly to ~~46%~~50% of service and maintenance revenues in the three months ended ~~December~~March 31, ~~2017~~2019 as compared to ~~52%~~47% of service and maintenance revenues in the three months ended ~~December~~March 31, ~~2016.~~ 2018 due primarily to increased service and maintenance costs as a percentage of revenue from our European payments and transactional documents solutions.

Service and maintenance

costs ~~decreased~~increased slightly to ~~45%~~48% of service and maintenance revenues in the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 as compared to ~~50%~~46% of service and maintenance revenues in the ~~six~~nine months ended ~~December~~March 31, ~~2016. The decrease in~~2018 due primarily to increased service and maintenance costs as a ~~percent~~percentage of ~~service~~revenue from our European payments 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.transactional documents solutions. We expect that service and maintenance costs as a percentage of service and maintenance revenues will ~~decrease~~continue to increase slightly ~~as customersgo-live~~ ~~on the banking solutions platforms~~ in fiscal year ~~2018~~2019 as compared to the prior fiscal ~~year.~~year, as we continue the implementation phases of certain customers in our Banking Solutions segment.

Other

Other costs include the costs associated with equipment and supplies that we resell, as well as freight, shipping and postage costs associated with the delivery of our ~~products and~~products. These remain minor components of our business. We expect that other costs as a percentage of other revenues will ~~remain consistent~~increase in fiscal year ~~2018~~2019 as compared to the prior fiscal ~~year.~~year, due to the absence of aone-time revenue transaction recorded in the fourth quarter of fiscal year 2018.

Operating Expenses


	Three Months Ended December 31,						Increase (Decrease) Between Periods						Six Months Ended December 31,						Increase (Decrease) Between Periods						Three Months Ended March 31,						Increase (Decrease) Between Periods						Nine Months Ended March 31,						Increase (Decrease) Between Periods
	2017			2016			$ Change Inc (Dec)			% Change Inc (Dec)			2017			2016			$ Change Inc (Dec)			% Change Inc (Dec)			2019			2018			$ Change Inc (Dec)			% Change Inc (Dec)			2019			2018			$ Change Inc (Dec)			% Change Inc (Dec)
	(Dollars in thousands)																								(Dollars in thousands)
Operating expenses:
Sales and marketing	$	21,396		$	19,325		$	2,071			10.7	%	$	40,701		$	38,200		$	2,501			6.5	%	$	25,165		$	22,465		$	2,700			12.0	%	$	70,772		$	63,255		$	7,517			11.9	%
Product development and engineering		13,892			13,082			810			6.2	%		27,707			26,017			1,690			6.5	%		16,887			14,179			2,708			19.1	%		50,267			41,981			8,286			19.7	%
General and administrative		10,981			11,772			(791	)		(6.7	)%		22,810			24,476			(1,666	)		(6.8	)%		13,175			12,763			412			3.2	%		38,944			35,589			3,355			9.4	%
Amortization of acquisition-related intangible assets		5,702			6,090			(388	)		(6.4	)%		10,890			12,375			(1,485	)		(12.0	)%		5,230			5,818			(588	)		(10.1	)%		15,809			16,708			(899	)		(5.4	)%
Goodwill impairment charge		—			7,529			(7,529	)		(100.0	)%		—			7,529			(7,529	)		(100.0	)%

Total operating expenses	$	51,971		$	57,798		$	(5,827	)		(10.1	)%	$	102,108		$	108,597		$	(6,489	)		(6.0	)%	$	60,457		$	55,225		$	5,232			9.5	%	$	175,792		$	157,533		$	18,259			11.6	%

*As % of total revenues:*
Sales and marketing		22.5	%		22.3	%								21.8	%		22.5	%								23.6	%		22.2	%								22.6	%		22.0	%
Product development and engineering		14.6	%		15.1	%								14.9	%		15.3	%								15.9	%		14.0	%								16.0	%		14.6	%
General and administrative		11.5	%		13.6	%								12.2	%		14.4	%								12.4	%		12.6	%								12.4	%		12.4	%
Amortization of acquisition-related intangible assets		6.0	%		7.0	%								5.8	%		7.3	%								4.9	%		5.8	%								5.0	%		5.8	%
Goodwill impairment charge		—	%		8.7	%								—	%		4.4	%

Total operating expenses		54.6	%		66.7	%								54.7	%		63.9	%								56.8	%		54.6	%								56.0	%		54.8	%

Sales and Marketing

Sales and marketing expenses consist primarily of salaries and other related costs for sales and marketing personnel, sales commissions, travel, public relations and marketing materials and trade show participation. Sales and marketing expenses increased in the three months ended ~~December~~March 31, ~~2017~~2019 as compared to the three months ended ~~December~~March 31, ~~2016~~2018 due primarily to an increase in employee related costs of ~~$1.7~~$2.2 million, ~~due in part~~incurred to ~~the impact of~~support our ~~recent acquisitions.~~continued revenue growth.

Sales and marketing expenses increased in the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 as compared to the ~~six~~nine months ended ~~December~~March 31, ~~2016~~2018 due primarily to an increase in employee related costs of ~~$2.1~~$6.5 million, ~~due in part~~incurred to ~~the impact of~~support our ~~recent acquisitions.~~continued revenue growth. We expect sales and marketing expenses as a percentage of total revenue will remain relatively consistent in fiscal year ~~2018~~2019 as compared to the prior fiscal year.

Product Development and Engineering

Product development and engineering expenses consist primarily of personnel costs to support product development, which consists of enhancements and revisions to our products based on customer feedback and general marketplace demands. Product development and engineering expenses in the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 as compared to the three and ~~six~~nine months ended ~~December~~March 31, ~~2016~~2018 increased principally as a result of an increase in headcount related ~~costs.~~costs as we continued to invest in the deployment of innovative, feature-rich products. We expect product development and engineering expenses as a percentage of total revenues will ~~remain relatively consistent~~increase slightly in fiscal year ~~2018~~2019 as compared to the prior fiscal year.

General and Administrative

General and administrative expenses consist primarily of salaries and other related costs for operations and finance employees and legal and accounting services. General and administrative expenses ~~decreased~~increased in the three months ended ~~December~~March 31, ~~2017~~2019 as compared to the three months ended ~~December~~March 31, ~~2016~~2018 due primarily to ~~a decrease in~~increased employee related costs ~~associated with our global internal system implementations~~ of $0.8 million.

General and administrative expenses ~~decreased~~increased in the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 as compared to the ~~six~~nine months ended ~~December~~March 31, ~~2016~~2018 due primarily to ~~a decrease in~~increased employee related costs ~~associated with our global internal system implementations~~ of ~~$1.2~~$3.8 million and restructuring costs related to a ~~decrease in acquisition~~facility exit of $0.3 million, partially offset by decreased global enterprise resource planning (ERP) implementation and ~~integration-related expenses~~other costs of ~~$0.4~~$1.9 million. We expect general and administrative expenses as a percentage of total revenues will ~~decrease slightly~~remain relatively consistent in fiscal year ~~2018~~2019 as compared to the prior fiscal ~~year, primarily as a result of decreased global internal system implementation costs.~~year.

Amortization of Acquisition-related Intangible Assets

We amortize our acquired intangible assets in proportion to the estimated rate at which the asset provides economic benefit to us. Accordingly, amortization expense rates are often higher in the earlier periods of an asset’s estimated life. The decrease in amortization expense in the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 as compared to the three and ~~six~~nine months ended ~~December~~March 31, ~~2016~~2018 occurred as a result of the impact of amortization ~~rates decreasing over~~of intangible assets from our business acquisitions during fiscal year 2018 and the ~~underlying asset lives.~~three and nine months ended March 31, 2019. We expect that total amortization expense for acquired intangible assets for the remainder of fiscal year ~~2018~~2019 will be approximately ~~$11.5~~$5.5 million.

~~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.~~

Other Expense, Net


	Three Months Ended December 31,						Increase (Decrease) Between Periods						Six Months Ended December 31,						Increase (Decrease) Between Periods						Three Months Ended March 31,						Increase (Decrease) Between Periods						Nine Months Ended March 31,						Increase (Decrease) Between Periods
	2017			2016			$ Change Inc (Dec)			% Change Inc (Dec)			2017			2016			$ Change Inc (Dec)			% Change Inc (Dec)			2019			2018			$ Change Inc (Dec)			% Change Inc (Dec)			2019			2018			$ Change Inc (Dec)			% Change Inc (Dec)
	(Dollars in thousands)																								(Dollars in thousands)
Interest income	$	63		$	129		$	(66	)		(51.2	)%	$	117		$	283		$	(166	)		(58.7	)%	$	174		$	67		$	107			159.7	%	$	452		$	184		$	268			145.7	%
Interest expense		(3,668	)		(4,143	)		475			11.5	%		(8,257	)		(8,183	)		(74	)		(0.9	)%		(903	)		(1,467	)		564			38.4	%		(2,958	)		(9,724	)		6,766			69.6	%
Other income (expense), net		73			(168	)		241			143.5	%		145			(217	)		362			166.8	%
Other (expense) income, net																										34			289			(255	)		(88.2	)%		172			789			(617	)		(78.2	)%

Other expense, net	$	(3,532	)	$	(4,182	)	$	650			15.5	%	$	(7,995	)	$	(8,117	)	$	122			1.5	%	$	(695	)	$	(1,111	)	$	416			37.4	%	$	(2,334	)	$	(8,751	)	$	6,417			73.3	%

Other expense, net decreased ~~$0.7~~$0.4 million for the three months ended ~~December~~March 31, ~~2017~~2019 and ~~$0.1~~$6.4 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 as compared to the same periods in the prior fiscal year, ~~respectively,~~respectively. The decrease for the nine months ended March 31, 2019 as compared to the same period in the prior fiscal year is primarily due to decreases in the amortization of debt discount costs upon the maturity of our ~~Notes during the quarter ended~~convertible senior notes in December ~~31,~~ 2017.

Provision for Income Taxes

We recorded an income tax benefit of ~~$4.5~~$1.3 million ~~for each of the three months ended December 31, 2017~~ and ~~2016. The~~an income tax ~~benefit~~expense of $7 thousand for the three months ended ~~December~~March 31, 2017 includes a provisional discrete tax benefit of $4.4 million relating to the enactment of the Tax Act in the United States. The income tax benefit for the three months ended December 31, 2016 includes a discrete tax benefit in Switzerland of $4.5 million related to the impairment of its investment in Intellinx Ltd. (a wholly owned subsidiary).2019 and 2018, respectively. We recorded an income tax benefit of ~~$4.0~~$6.1 million and ~~$3.8~~$4.0 million for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively. Please refer toNote 78 Income Taxes to our unaudited consolidated financial statements included in Part I. Item 1 of this Quarterly Report on Form10-Q for further discussion.

Liquidity and Capital Resources

~~On December 9, 2016, we (as borrower) and certain of our domestic subsidiaries (as guarantors) entered into~~We are party to a credit agreement ~~with Bank of America, N.A. and certain other lenders,~~ which provides for a five-year revolving credit facility in the amount of up to $300 million (the Credit Facility). ~~On December 1, 2017, we repaid~~We also have the right to request an increase to the aggregate ~~principal balance~~commitments to the Credit Facility of ~~$189.8~~up to $150 million, ~~of our Notes which were issued on December 12, 2012. We financed~~subject to specified conditions. The Credit Facility expires in July 2023. During the ~~repayment of the principal balance of the Notes through a combination~~nine months ended March 31, 2019, we used $40.0 million of cash on hand to pay down a portion of the borrowings under our Credit Facility. At March 31, 2019, borrowings were $110 million and we were in compliance with ~~borrowings of $150 million under~~all covenants associated with the Credit Facility. ~~In connection with~~

During the ~~maturity of the Notes, we issued to the Note~~nine months ended March 31, 2019, warrant holders exercised warrants for approximately ~~0.6 million~~932 thousand shares of our common stock ~~to satisfy~~and we issued shares of common stock in the ~~Notes’ conversion premium. Simultaneously, we redeemed a portion~~same amount. All of the ~~Note Hedges~~warrant exercises were net settled and ~~received from the Note Hedge counterparties approximately 0.6 million shares~~there were no warrants outstanding as of ~~our common stock. Please refer to~~~~Note 10 Indebtedness~~ ~~to our unaudited consolidated financial statements included in Item 1 of this Quarterly Report on Form10-Q~~ ~~for further discussion.~~March 31, 2019.

We have financed our operations primarily from cash provided by operating activities, the sale of our common stock ~~the issuance of the Notes in December 2012~~ and ~~borrowings under the Credit Facility.~~debt proceeds. We have historically generated positive operating cash flows. Accordingly, we believe that the cash generated from our operations and the cash and cash equivalents we have on hand will be sufficient to meet our operating requirements for the foreseeable future. If our existing cash resources along with cash generated from operations is insufficient to satisfy our ~~funding~~operating requirements, we may need to sell additional equity or debt securities or seek other financing arrangements.

~~As of December 31, 2017, we were in compliance with the covenants associated with the Credit Facility.~~

One of our financial goals is to maintain and improve our capital structure. The key metrics we focus on in assessing the strength of our liquidity and a summary of our cash activity for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 are summarized in the tables below:


	December 31,		June 30,		March 31,		June 30,
	2017		2017		2019		2018
	(in thousands)				(in thousands)
Cash and cash equivalents	$	64,051	$	124,569	$	79,475	$	121,860
Marketable securities		10,004		1,973		8,515		10,012
Borrowings under credit facility		150,000		—		110,000		150,000
Convertible senior notes⁽¹⁾		—		183,682

⁽¹⁾	~~The Notes are shown on our Consolidated Balance Sheets at their carrying value, which represents the principal balance of $189.8 million less unamortized discount and debt issuance costs.~~


	Six Months Ended December 31,						Nine Months Ended March 31,
	2017			2016			2019			2018
	(in thousands)						(in thousands)
Cash provided by operating activities	$	9,688		$	17,578		$	63,015		$	35,523
Cash provided by (used in) investing activities		(30,906	)		4,000
Cash used in investing activities								(65,124	)		(28,628	)
Cash used in financing activities		(40,249	)		(15,696	)		(37,297	)		(38,787	)
Effect of exchange rates on cash		949			(3,444	)		(1,427	)		2,331

Cash, cash equivalents and marketable securities.At ~~December~~March 31, ~~2017,~~2019, our cash and cash equivalents of ~~$64.1~~$79.5 million consisted primarily of cash deposits held at major banks and money market funds. The ~~$60.5~~$42.4 million decrease in cash and cash equivalents at ~~December~~March 31, ~~2017~~2019 from June 30, ~~2017~~2018 was primarily due to cash used for the repayment of ~~the Notes of $189.8 million, offset by $150.0 million~~amounts borrowed under ~~our~~the Credit ~~Facility;~~Facility of $40.0 million, cash used to fund business acquisitions, net of cash acquired, of ~~$13.7 million; purchases ofavailable-for-sale~~ ~~securities of $9.9 million;~~$21.4 million and capital expenditures, including capitalization of software costs of ~~$9.1~~$45.7 million, partially offset by cash generated from operations of ~~$9.7~~$63.0 million.

Cash, cash equivalents and marketable securities included approximately ~~$43.0~~$57.9 million held by our foreign subsidiaries as of ~~December~~March 31, ~~2017. Our current intention is~~2019. During the three months ended September 30, 2018, we repatriated $20.8 million from our UK subsidiary. We continue to permanently reinvest ~~these amounts in~~ the ~~growth~~earnings, if any, of our international subsidiaries other than the UK and Switzerland and therefore we do not provide for U.S. income taxes that could result from the distribution of foreign ~~operations.~~earnings from our international subsidiaries other than the UK and Switzerland. If our reinvestment plans change based on future events and we decide to repatriate ~~these~~ amounts from our international subsidiaries other than the UK and Switzerland to fund our domestic operations, ~~we could be~~those amounts would generally become subject to state tax in the U.S. to the extent there were cumulative profits in the foreign ~~withholding taxes.~~subsidiary from which the distribution to the U.S. was made.

Cash and cash equivalents held by our foreign subsidiaries are denominated in currencies other than U.S. Dollars. ~~Increases~~Decreases primarily in the foreign currency exchange rate of the British Pound Sterling to the U.S. Dollar decreased our overall cash balances by approximately $1.4 million for the nine months ended March 31, 2019. Further changes in the foreign currency exchange rates of the British Pound and Euro to the U.S. Dollar increased our overall cash balances by approximately $0.9 million for the six months ended December 31, 2017. Further changes in the foreign currency exchange rates of theseSterling and other currencies could have a significant effect on our overall cash balances. However, we continue to believe that our existing cash balances, even in light of the foreign currency volatility we ~~frequently~~periodically experience, are adequate to meet our operating requirements for the foreseeable future.

Operating Activities. Operating cash flow is derived by adjusting our net income or loss fornon-cash operating items, such as depreciation and amortization, stock-based compensation plan expense, deferred income tax benefits or expenses, and impairment ~~charges;~~charges and changes in operating assets and liabilities which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our results of operations. Cash generated from operations ~~decreased~~

increased by ~~$7.9~~$27.5 million in the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 versus the same period in the prior fiscal year. The ~~decrease~~increase was primarily related to ~~a decrease~~an increase in cash flows from accounts ~~receivable~~receivables of ~~$14.8~~$19.5 million ~~accrued expenses of $2.2 million, other liabilities of $1.4 million, deferred revenue of $1.3 million~~ and~~non-cash~~ ~~adjustments to~~ an increase in cash generated from our net ~~loss~~income of ~~$8.2 million, partially offset by a decrease in our net loss of $19.7~~$8.0 million.

At ~~December~~March 31, 2017, we had U.S. net operating loss carryforwards of $105.6 million, which expire at various times through fiscal year 2038, Switzerland net operating losses of $19.8 million, which expire in fiscal year 2024, and other foreign net operating loss carryforwards of $26.8 million, primarily in Europe and Israel, which have no statutory expiration date. We also have approximately $6.2 million of research and development tax credit carryforwards available, which expire at various points through fiscal year 2038. Our operating losses and tax credit carryforwards may be subject to limitations under provisions of the Internal Revenue Code.

~~At December 31, 2017,~~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.

Investing Activities. Investing cash flows consist primarily of capital expenditures, inclusive of capitalized software costs, investment purchases and sales and cash used for the acquisition of businesses and assets. The ~~$34.9~~$36.5 million ~~decrease~~increase in net cash ~~provided by~~used in investing activities for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 versus the same period in the prior fiscal year was primarily due to ~~a decrease~~an increase in ~~proceeds from sale ofavailable-for-sale~~ ~~securities of $26.3 million and~~ cash used to fund business acquisitions, net of cash acquired, of ~~$13.7~~$15.7 million and an increase in capital expenditures of $30.9 million, partially offset by a decrease in the purchase of available for sale securities of $2.3 million and an increase in proceeds from sales of available for sale securities of $7.3 million. The increase in capital expenditures was primarily related to the purchase of ~~$6.2~~a building in Reading, UK in January 2019 for approximately $20.7 million. When it is ready for its intended use, the building will ultimately replace our current Reading, UK building as our European headquarters.

Financing Activities. Financing cash flows consist primarily of repurchases of common stock, issuance and repayment of debt, and proceeds from the sale of shares of common stock through employee equity incentive plans. The $24.6 million increase in cash used in financing activities for the six months ended December 31, 2017 as compared to the same period in the prior fiscal year was primarily due to the repayment of the Notes of $189.8 million, net of $150.0 million borrowed under our Credit Facility, and further offset by a decrease in cash used to repurchase our common stock of $15.0 million.

Contractual Obligations

Following is a summary of future payments that we are required to make under existing contractual obligations as of ~~December~~March 31, ~~2017:~~2019:


	Payment Due by Fiscal Year										Payment Due by Fiscal Year
	2018		2019-2020		2021-2022		Thereafter		Total		2019		2020-2021		2022-2023		Thereafter		Total
	(in thousands)										(in thousands)
Credit Facility
Principal payment	$	—	$	—	$	150,000	$	—	$	150,000	$	—	$	—	$	—	$	110,000	$	110,000
Interest payments⁽¹⁾		2,590		10,424		7,501		—		20,515		852		6,816		7,267		141		15,076
Commitment fee⁽²⁾		188		750		541		—		1,479		83		665		665		13		1,426
Note payable		374		1,122		—		—		1,496		184		369		—		—		553
Operating leases		2,938		9,795		6,968		6,476		26,177		1,481		10,593		7,143		10,617		29,834
Purchase commitments		4,398		6,053		92		—		10,543		3,097		9,134		1,177		7		13,415

Total contractual obligations	$	10,488	$	28,144	$	165,102	$	6,476	$	210,210	$	5,697	$	27,577	$	16,252	$	120,778	$	170,304

⁽¹⁾	The Credit Facility carries a variable rate of interest. Interest payments were estimated using the applicable interest rate as of ~~December~~March 31, ~~2017~~2019, net of the impact of the interest rate ~~swap~~swaps we entered into onin July ~~10, 2017.~~2017 and March 2019.

⁽²⁾	The Credit Facility agreement includes a commitment fee, which we have included in the table above, based on the applicable interest rate as of ~~December~~March 31, ~~2017~~2019 and our current unborrowed capacity of ~~$150~~$190 million.

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.

Our estimate of unrecognized tax benefits for which cash settlement may be required, in the amount of ~~$1.4~~$1.5 million, has been excluded from the table above. These amounts have been excluded because, as of ~~December~~March 31, ~~2017,~~2019, we are unable to estimate the timing of future cash outflows, if any, associated with these liabilities as we do not currently anticipate settling any of these tax positions with cash payment in the foreseeable future.

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,~~2019, which is ~~$1.6~~$1.7 million based on foreign exchange rates in effect on ~~December~~March 31, ~~2017.~~2019. We have not disclosed contributions for periods after fiscal year ~~2018,~~2019, as those amounts are subject to future changes.

Off-Balance Sheet Arrangements

We did not have anyoff-balance sheet arrangements during the three months ended ~~December~~March 31, ~~2017.~~2019.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures about Market Risk~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to a variety of risks, including interest rate changes, foreign currency exchange rate fluctuations, and derivative instruments classification. We have not entered into any foreign currency hedging transactions or other instruments to minimize our exposure to foreign currency exchange rate fluctuations nor do we presently plan to in the future. On August 14, 2017, we acquired Decillion Solutions Pte Ltd, which is headquartered in Singapore and also has operations in Indonesia, Australia, China, Malaysia and Thailand. The foreign currency exchange rate risk posed in these regions is not material to our consolidated financial statements, given the limited operations in these countries.

We are a party to an interest rate swap agreements which we designated as a hedge ~~instrument~~instruments to minimize our exposure to interest rate fluctuations under our Credit Facility.

There has been no material change to our exposure to market risk from that which was disclosed in our Annual Report on Form10-K for the fiscal year ended June 30, ~~2017~~2018 as filed with the SEC on August ~~28, 2017,~~29, 2018, which is incorporated herein by reference.

~~Item 4.~~

~~Controls and Procedures~~

Item 4. Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~December~~March 31, ~~2017.~~2019. The term disclosure controls and procedures, as defined in Rules13a-15(e) and15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of ~~December~~March 31, ~~2017,~~2019, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

In fiscal year 2018, we implemented the first phase of a company-wide enterprise resource planning (ERP) system. We have assessed and continued to monitor the impact of this implementation on our processes and procedures, as well as the impact on our internal controls over financial reporting. Where appropriate, we have made changes to our internal controls to address system changes and to help ensure that we maintained effective internal controls over financial reporting as of December 31, 2017.

~~With the exception of the implementation of our ERP solution, no~~No change in our internal control over financial reporting occurred during the fiscal quarter ended ~~December~~March 31, ~~2017~~2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~PART~~ ~~II. OTHER INFORMATION~~

PART II. OTHER INFORMATION

~~Item 1.~~

~~Legal Proceedings~~

Item 1. Legal Proceedings

We are, from time to time, a party to legal proceedings and claims that arise in the ordinary course of our business. We do not believe that there are claims or proceedings pending against us for which the ultimate resolution would have a material effect on, or require further disclosure in, our financial statements.

~~Item 1A.~~

~~Risk Factors~~

Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the risk factors identified in Part I. Item 1A. “Risk Factors” in our Annual Report onForm 10-K for the fiscal year ended June 30, ~~2017~~2018 before making an investment decision involving our common stock. These risk factors could materially affect our business, financial condition or results of operations and could cause our actual business and financial results to differ materially from those contained in forward-looking statements made in this Quarterly Report on Form10-Q or elsewhere by management from time to time. These risks and uncertainties are not the only ones facing us. Additional risks and uncertainties may also impact our business operations. ~~With~~Except for the ~~exception of the~~following additional risk ~~factor discussed below,~~factors, there have been no material changes to the risk factors disclosed in Part I. Item 1A. “Risk Factors” in our Annual Report onForm 10-K for the fiscal year ended June 30, ~~2017.~~2018.

~~Risks Related To Our Business~~

~~Failure to comply with the regulations provided~~The formal notification by the ~~Financial Conduct Authority (FCA) for certain~~UK of ~~our U.K. operations~~its intention to withdraw from the European Union (EU) (referred to as Brexit), could ~~adversely impact~~create disruption and uncertainty to our business,

~~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 material~~an adverse effect on our business, ~~operating~~financial results and ~~financial condition.~~operations

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

In connection with Brexit, the British government is negotiating the future terms of the UK’s relationship with the EU, including the terms of trade between the UK and the EU. The ~~following table provides information about purchases by us~~ultimate effects of ~~our common stock~~Brexit will depend on any agreements the UK makes to retain access to EU markets, either during a transitional period or more permanently, and could potentially disrupt the ~~quarter ended December 31, 2017:~~

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

Total
595,216 $ —   —

⁽¹⁾ ~~On July 8, 2016 our board of directors authorized a repurchase program of our common stock~~markets we serve and the tax jurisdictions in which we operate. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to replace or replicate. Remaining EU member countries may also seek to make it more difficult for ~~an aggregate repurchase price not to exceed $60 million. This program expires on July 8, 2018.~~
⁽²⁾ 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 595,216 shares of our common stock. The counterparties to the Note Hedge transactions may be deemed to be an “affiliated purchaser” and may have purchased the shares of our common stock deliverable to us upon the exercise of the options.
~~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~~trade effectively or competitively in those regions.
The UK had a period of a maximum of two years from the date of its formal notification to negotiate the terms of its withdrawal from, and future relationship with, the EU. If no formal withdrawal agreement can be reached between the UK and the EU, then the UK’s membership of the ~~selling stockholders~~EU will automatically terminate on the deadline, which was initially March 29, 2019. That deadline has been extended to October 31, 2019 to provide additional time for the parties to negotiate a withdrawal agreement. However, based on the limited progress to date in these negotiations, there is a possibility that the UK will leave the EU without a withdrawal agreement and associated transition period in place, which is likely to cause significant market and economic disruption.
The lack of ~~First Capital Cashflow Ltd. (FCC),~~a formalized and orderly process for the UK’s exit from the EU, to the extent occurring, could create uncertainty and challenges (particularly in ~~connection~~the near term) with respect to trading relationships between our ~~purchase~~UK subsidiary and other EU nations. Further, following the UK’s exit from the EU, there could be divergent or unreconciled positions in respect of ~~all~~other regulatory areas such as employment law or data privacy, which could create additional uncertainty and challenges for us.
Risks Related to our Indebtedness
Changes to and replacement of the ~~outstanding equity~~LIBOR benchmark interest rate could adversely affect our business, financial results and operation
In July 2017, the Financial Conduct Authority (the regulatory authority over LIBOR) stated they will plan for a phase out of ~~FCC. These shares were issued in reliance upon~~regulatory oversight of LIBOR interest rate indices after 2021 to allow for an orderly transition to an alternate reference rate. The Alternative Reference Rates Committee (ARRC) has proposed that the ~~exemption~~Secured Overnight Financing Rate (SOFR) is the rate that represents the best alternative to LIBOR for derivatives and other financial contracts that are currently indexed to LIBOR. The ARRC has proposed a market transition plan to SOFR from LIBOR. We are evaluating the ~~registration requirements~~potential impact of the ~~Securities Act provided by Section 4(a)(2)~~eventual replacement of the ~~Securities Act. No underwriters were involved~~LIBOR benchmark interest rate, including the possibility of SOFR as the dominant replacement. The market transition away from LIBOR towards SOFR is expected to be complicated. There can be no guarantee that SOFR will become a widely accepted benchmark in ~~any such issuances.~~place of LIBOR. Borrowings under our Credit Facility, as hedged by our interest swap, are indexed to LIBOR. It is uncertain at this time, what the impact of a possible transition to SOFR may be on our business, financial results and operations.

Item 6. Exhibits

~~Item 6.~~

~~Exhibits~~

Incorporated by Reference

Exhibit
Number

Description

Form

File No.

Exhibit

Filing
Date

Filed
Herewith

31.1

Rule13a-14(a)/15d-14(a) Certification of Principal Executive Officer

31.2

Rule13a-14(a)/15d-14(a) Certification of Principal Financial Officer

32.1

Section 1350 Certification of Principal Executive Officer

32.2

Section 1350 Certification of Principal Financial Officer

101.INS**

XBRL Instance Document

101.SCH**

XBRL Taxonomy Extension Schema Document

101.CAL**

XBRL Taxonomy Calculation Linkbase Document

101.DEF**

XBRL Taxonomy Definition Linkbase Document

101.LAB**

XBRL Taxonomy Label Linkbase Document

101.PRE**

XBRL Taxonomy Presentation Linkbase Document

      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
Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Unaudited Condensed Consolidated Balance Sheets as of ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017,~~2018, (ii) Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, (iii) Unaudited Consolidated Statements of Stockholders’ Equity for the three and nine months ended March 31, 2019 and 2018, (iv) Unaudited Condensed Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 and ~~(iv)~~(v) Notes to Unaudited Condensed Consolidated Financial Statements.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Bottomline Technologies (de), Inc.

Date: ~~February 8, 2018~~May 10, 2019	By:	/s/ RICHARD D. BOOTH
		Richard D. Booth
		Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)

3442


	Three Months Ended March 31, 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 and transactions	$	26,373	$	18,916	$	17,819	$	11,749	$	619	$	26	$	75,502
Software licenses		245		—		527		1,982		1		1,047		3,802
Service and maintenance		5,905		—		5,557		11,402		916		2,076		25,856
Other		—		—		—		961		—		317		1,278

Total revenues	$	32,523	$	18,916	$	23,903	$	26,094	$	1,536	$	3,466	$	106,438


	March 31,		July 1,
	2019		2018		$ Change
	(in thousands)
Accounts receivable	$	76,240	$	72,391	$	3,849
Contract assets		6,129		5,118		1,011
Deferred revenue		98,804		88,888		9,916


	At March 31, 2019
(in thousands, unaudited)	As Reported			Adjustments			Balances without adoption of new revenue standard
ASSETS
Current assets:
Cash and cash equivalents	$	79,475		$	—		$	79,475
Cash held for customers		4,305			—			4,305
Marketable securities		8,515			—			8,515
Accounts receivable, net		76,240			1,235			77,475
Prepaid expenses and other current assets		32,111			(11,158	)		20,953

Total current assets		200,646			(9,923	)		190,723
Property and equipment, net		54,696			—			54,696
Goodwill		204,167			—			204,167
Intangible assets, net		168,819			—			168,819
Other assets		31,610			(16,142	)		15,468

Total assets	$	659,938		$	(26,065	)	$	633,873

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11,530		$	—		$	11,530
Accrued expenses and other current liabilities		32,257			—			32,257
Customer account liabilities		4,305			—			4,305
Deferred revenue		80,082			4,306			84,388

Total current liabilities		128,174			4,306			132,480
Borrowings under credit facility		110,000			—			110,000
Deferred revenue,non-current		18,722			5,224			23,946
Deferred income taxes		8,311			(456	)		7,855
Other liabilities		20,398			—			20,398

Total liabilities		285,605			9,074			294,679
Stockholders’ equity
Preferred Stock, $.001 par value		—			—			—
Common Stock, $.001 par value		47			—			47
Additionalpaid-in-capital		711,558			—			711,558
Accumulated other comprehensive loss		(35,200	)		91			(35,109	)
Treasury stock, at cost		(127,095	)		—			(127,095	)
Accumulated deficit		(174,977	)		(35,230	)		(210,207	)

Total stockholders’ equity		374,333			(35,139	)		339,194

Total liabilities and stockholders’ equity	$	659,938		$	(26,065	)	$	633,873


	Nine Months Ended March 31, 2019
(in thousands, unaudited)	As Reported			Adjustments			Balances without adoption of new revenue standard
Operating activities:
Net income (loss)	$	5,875		$	(8,967	)	$	(3,092	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of acquisition-related intangible assets		15,809			—			15,809
Stock-based compensation plan expense		31,906			11			31,917
Depreciation and other amortization		16,767			—			16,767
Gain on sale of cost-method investment		(237	)		—			(237	)
Deferred income tax benefit		(8,284	)		4,899			(3,385	)
Provision for allowances on accounts receivable		167			—			167
Amortization of debt issuance costs		311			—			311
Amortization of discount on investments		(108	)		—			(108	)
Loss (gain) on disposal of equipment		596			—			596
Loss (gain) on foreign exchange		410			(8	)		402
Changes in operating assets and liabilities:
Accounts receivable		(3,520	)		663			(2,857	)
Prepaid expenses and other current assets		(3,913	)		2,724			(1,189	)
Other assets		(1,483	)		943			(540	)
Accounts payable		1,485			—			1,485
Accrued expenses		(1,513	)		—			(1,513	)
Customer account liabilities		1,562			—			1,562
Deferred revenue		7,835			(265	)		7,570
Other liabilities		(650	)		—			(650	)

Net cash provided by operating activities	$	63,015		$	—		$	63,015


	At December 31,		At June 30,		At March 31,		At June 30,
	2017		2017		2019		2018
	(in thousands)				(in thousands)
Long-lived assets:
North America	$	36,211	$	35,569
United States					$	47,516	$	36,374
United Kingdom		5,767		5,188		31,982		5,586
Continental Europe		921		1,208
Asia-Pacific and Middle East		2,357		1,901
Other						4,814		3,488

Total long-lived assets	$	45,256	$	43,866	$	84,312	$	45,448


	(in thousands)
Increase to deferred tax assets for excess tax benefits	$	17,393
Increase to deferred tax asset valuation allowance		(17,144	)

Net increase to deferred tax assets	$	249


	As of December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Value		Weighted Average Remaining Life
	(in thousands)							(in years)
Amortized intangible assets:
Customer related	$	203,379	$	(129,527	)	$	73,852		8.8
Core technology		130,777		(78,954	)		51,823		8.5
Other intangible assets		22,098		(16,442	)		5,656		5.5
Capitalized software development costs		17,693		(4,765	)		12,928		4.5
Software⁽¹⁾		58,501		(29,494	)		29,007		4.6

Total	$	432,448	$	(259,182	)	$	173,266

Unamortized intangible assets:
Goodwill							202,083

Total intangible assets						$	375,349


	As of June 30, 2017									As of March 31, 2019
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Value		Weighted Average Remaining Life		Gross Carrying Amount		Accumulated Amortization			Net Carrying Value		Weighted Average Remaining Life
	(in thousands)							(in years)		(in thousands)							(in years)
Amortized intangible assets:
Customer related	$	190,965	$	(122,698	)	$	68,267		8.7	$	220,669	$	(142,270	)	$	78,399		8.9
Core technology		130,572		(74,452	)		56,120		8.8		130,233		(88,264	)		41,969		7.6
Other intangible assets		20,591		(15,691	)		4,900		6.6		21,933		(18,529	)		3,404		5.1
Capitalized software development costs		16,304		(3,423	)		12,881		5.0		22,241		(8,840	)		13,401		3.3
Software⁽¹⁾		54,489		(25,377	)		29,112		3.5		71,393		(39,747	)		31,646		4.3

Total	$	412,921	$	(241,641	)	$	171,280			$	466,469	$	(297,650	)	$	168,819

Unamortized intangible assets:
Goodwill							194,700									204,167

Total intangible assets						$	365,980								$	372,986


										As of June 30, 2018
										Gross Carrying Amount		Accumulated Amortization			Net Carrying Value		Weighted Average Remaining Life
										(in thousands)							(in years)
Amortized intangible assets:
Customer related										$	201,214	$	(134,133	)	$	67,081		8.4
Core technology											130,257		(82,815	)		47,442		8.1
Other intangible assets											21,983		(17,299	)		4,684		5.3
Capitalized software development costs											19,527		(6,265	)		13,262		4.0
Software⁽¹⁾											62,711		(33,395	)		29,316		4.6

Total										$	435,692	$	(273,907	)	$	161,785

Unamortized intangible assets:
Goodwill																200,024

Total intangible assets															$	361,809


Description	Balance Sheet Location	December 31, 2017		Balance Sheet Location		March 31, 2019		June 30, 2018
		(in thousands)
Derivative interest rate swap						(in thousands)
Derivative asset	Other assets	$	782
Derivative liability	Accrued expenses and other current liabilities	$	165
Short-term derivative asset					Prepaid expenses and other current assets	$	432	$	407
Long-term derivative asset					Other assets	$	249	$	2,183
Long-term derivative liability					Other liabilities	$	43	$	—


	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 Income (Loss) (Effective Portion) ⁽¹⁾			Income Tax Benefit (Provision) in OCI on Derivative Instruments			Gain (Loss) in AOCI March 31, 2019
	(in thousands)
Derivative interest rate swap	$	2,590	$	(1,671	)	$	(281	)	$	—		$	638


	Gain (Loss) in AOCI June 30, 2017		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) ⁽¹⁾			Income Tax Benefit (Provision) in OCI on Derivative Instruments			Gain (Loss) in AOCI March 31, 2018
	(in thousands)
Derivative interest rate swap	$	—	$	1,869		$	130		$	(626	)	$	1,373


	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	)	$	—


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

Total		595,216	$	—		—