UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

——————

FORM 10-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, ~~2021~~2022

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

(603) 436-0700

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

——————

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

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-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 Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	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 Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock as of ~~February~~April 130, 2022 was 4445,~~977~~386,~~553~~591.

Table of Contents

BOTTOMLINE TECHNOLOGIES, INC.
FORM 10-Q
FOR THE FISCAL QUARTER ENDED DECEMBER 31, 2021
FOR THE FISCAL QUARTER ENDED MARCH 31, 2022
TABLE OF CONTENTS
PART I		Page
Item 1.	Unaudited Condensed Consolidated Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2324
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3233
Item 4.	Controls and Procedures	3233
PART II
Item 1.	Legal Proceedings	3334
Item 1A.	Risk Factors	3334
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 6.	Exhibits	36
Item 6.	Exhibits	35
	SIGNATURE	37
	SIGNATURE	36

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Bottomline Technologies, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
	December 31,		June 30,
	March 31,		June 30,
	2021		2021
	2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	83117,~~726~~605	$	133,932
Cash held for customers	116,~~993~~807		9,836
Marketable securities	~~2,967~~964		10,216
Accounts receivable net of allowances for doubtful accounts of $808 at December 31, 2021 and $1,304 at June 30, 2021	73,201		72,978
Accounts receivable net of allowances for doubtful accounts of $747 at March 31, 2022 and $1,304 at June 30, 2021	81,027		72,978
Prepaid expenses and other current assets	36,~~035~~511		34,653
Total current assets	~~207~~242,~~922~~914		261,615
Property and equipment, net	6665,~~185~~340		68,471
Operating lease right-of-use assets, net	28,~~868~~440		27,570
Goodwill	~~252~~249,~~061~~219		246,698
Intangible assets, net	~~164~~157,~~545~~873		162,691
Other assets	4851,~~115~~442		48,683
Total assets	$	~~767~~795,~~696~~228	$	815,728
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1116,~~151~~514	$	11,428
Accrued expenses and other current liabilities	5554,~~167~~655		45,925
Customer account liabilities	116,~~993~~807		9,836
Deferred revenue	75102,~~550~~372		88,679
Total current liabilities	~~153~~180,~~861~~348		155,868
Borrowings under credit facility	130,000		130,000
Deferred revenue, non-current	1110,~~051~~213		12,559
Operating lease liabilities, non-current	2726,~~986~~861		26,629
Deferred income taxes	1312,~~709~~027		14,574
Other liabilities	19,~~961~~196		19,864
Total liabilities	$	~~356~~378,~~568~~645	$	359,494
Stockholders' equity
Preferred Stock, $.001 par value:
Authorized shares- 4,000; issued and outstanding shares- none	—		—
Common Stock, $.001 par value:
Authorized shares-100,000; issued shares- 49,809 at December 31, 2021 and 49,294 at June 30, 2021; outstanding shares- 42,667 at December 31, 2021 and 43,237 at June 30, 2021	50		49
Authorized shares-100,000; issued shares- 50,003 at March 31, 2022 and 49,294 at June 30, 2021; outstanding shares- 42,943 at March 31, 2022 and 43,237 at June 30, 2021	50		49
Additional paid-in-capital	~~847~~861,~~195~~617		819,392
Accumulated other comprehensive loss	(1923,~~485~~197)		(16,081)
Treasury stock: 7,142 shares at December 31, 2021 and 6,057 shares at June 30, 2021, at cost	(198,247)		(150,282)
Treasury stock: 7,060 shares at March 31, 2022 and 6,057 shares at June 30, 2021, at cost	(195,978)		(150,282)
Accumulated deficit	(~~218~~225,~~385~~909)		(196,844)
Total stockholders' equity	$	~~411~~416,~~128~~583	$	456,234
Total liabilities and stockholders' equity	$	~~767~~795,~~696~~228	$	815,728

See accompanying notes.

Table of Contents

Bottomline Technologies, 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,

2021

2020

2021

2020

2022

2021

2022

2021

Revenues:

Subscriptions

~~108~~112,~~482~~135

9399,~~398~~939

~~211~~324,~~978~~113

~~183~~283,~~782~~721

Software licenses

1,~~153~~006

1,~~802~~092

23,~~080~~086

23,~~779~~871

Service and maintenance

18,~~632~~138

2019,~~022~~292

3755,~~340~~478

4059,~~586~~878

Other

~~520~~557

~~802~~562

~~994~~1,551

1,~~242~~804

Total revenues

~~128~~131,~~787~~836

~~116~~120,~~024~~885

~~252~~384,~~392~~228

~~228~~349,~~389~~274

Cost of revenues:

Subscriptions

4645,~~030~~792

3739,~~195~~194

88134,~~723~~515

72111,~~413~~607

Software licenses

60142

~~126~~116

~~141~~283

~~216~~332

Service and maintenance

9,~~242~~362

10,~~386~~450

1827,~~494~~856

2131,~~302~~752

Other

~~330~~364

~~551~~375

~~625~~989

~~860~~1,235

Total cost of revenues

55,~~662~~660

4850,~~258~~135

~~107~~163,~~983~~643

94144,~~791~~926

Gross profit

7376,~~125~~176

6770,~~766~~750

~~144~~220,~~409~~585

~~133~~204,~~598~~348

Operating expenses:

Sales and marketing

3437,~~655~~346

2931,~~237~~525

68105,~~469~~815

5486,~~980~~505

Product development and engineering

2123,~~752~~095

1920,~~183~~224

4366,~~217~~312

3757,~~682~~906

General and administrative

2119,~~617~~925

1615,~~658~~678

3959,~~366~~291

3045,~~284~~962

Amortization of acquisition-related intangible assets

5,~~180~~255

5,~~142~~443

1015,~~251~~506

1015,~~171~~614

Total operating expenses

8385,~~204~~621

7072,~~220~~870

~~161~~246,~~303~~924

~~133~~205,~~117~~987

(Loss) income from operations

(10,079)

(2,454)

(16,894)

481

Loss from operations

(9,445)

(2,120)

(26,339)

(1,639)

Other expense, net

(840)

(888)

(1,737)

(1,668)

Other income ( expense), net

2,064

(1,314)

327

(2,982)

Loss before income taxes

(107,~~919~~381)

(3,~~342~~434)

(1826,~~631~~012)

(14,~~187~~621)

Income tax provision

(~~5,715~~143)

(1,~~273~~335)

(23,~~910~~053)

(34,~~037~~372)

Net loss

(167,~~634~~524)

(4,~~615~~769)

(2129,~~541~~065)

(48,~~224~~993)

Basic and diluted net loss per share

(0.3918)

(0.11)

(0.5068)

(0.1021)

Shares used in computing net loss per share:

Basic and diluted

42,~~759~~778

42,~~751~~838

4342,~~016~~937

42,~~604~~682

Other comprehensive income (loss), net of tax:

Other comprehensive (loss) income, net of tax:

Unrealized (loss) gain on available for sale securities

—(1)

~~(10)~~4

1—

(3531)

Change in fair value on interest rate hedging instruments

~~907~~1,705

~~466~~614

13,~~323~~028

~~912~~1,526

Minimum pension liability adjustments

(70142)

~~(331)~~453

(~~212~~354)

(~~564~~111)

Foreign currency translation adjustments

1(5,~~054~~274)

13(3,~~643~~721)

(49,~~516~~790)

2219,~~749~~028

Other comprehensive income (loss), net of tax:

1,891

13,768

(3,404)

23,062

Other comprehensive (loss) income, net of tax:

(3,712)

(2,650)

(7,116)

20,412

Comprehensive (loss) income

(1411,~~743~~236)

9(7,~~153~~419)

(2436,~~945~~181)

1811,~~838~~419

See accompanying notes.

Table of Contents

Bottomline Technologies, Inc.
Unaudited Condensed Consolidated Statements of Stockholders' Equity
(in thousands)
Three Months Ended December 31, 2021
Three Months Ended March 31, 2022
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount						Shares	Amount
Balance at September 30, 2021	49,586	$	49	$	833,563	$	(21,376)	6,496	$	(169,746)	$	(201,751)	$	440,739
Vesting of restricted stock awards	223	1		—		—		—	—		—		1
Repurchase of common stock to be held in treasury	—	—		—		—		646	(28,501)		—		(28,501)
Stock compensation plan expense	—	—		13,632		—		—	—		—		13,632
Minimum pension liability adjustments, net of tax	—	—		—		(70)		—	—		—		(70)
Net loss	—	—		—		—		—	—		(16,634)		(16,634)
Change in fair value on interest rate hedging instruments	—	—		—		907		—	—		—		907
Foreign currency translation adjustment	—	—		—		1,054		—	—		—		1,054
Balance at December 31, 2021	49,809	$	50	$	847,195	$	(19,485)	7,142	$	(198,247)	$	(218,385)	$	411,128
Issuance of common stock for employee stock purchase plan and upon exercise of stock options	—	—		178		—		(82)	2,269		—		2,447
Vesting of restricted stock awards	194	—		—		—		—	—		—		—
Stock compensation plan expense	—	—		14,244		—		—	—		—		14,244
Minimum pension liability adjustments, net of tax	—	—		—		(142)		—	—		—		(142)
Net loss	—	—		—		—		—	—		(7,524)		(7,524)
Unrealized loss on available for sale securities, net of tax	—	—		—		(1)		—	—		—		(1)
Change in fair value on interest rate hedging instruments	—	—		—		1,705		—	—		—		1,705
Foreign currency translation adjustment	—	—		—		(5,274)		—	—		—		(5,274)
Balance at March 31, 2022	50,003	$	50	$	861,617	$	(23,197)	7,060	$	(195,978)	$	(225,909)	$	416,583

Three Months Ended December 31, 2020
Three Months Ended March 31, 2021
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount						Shares	Amount
Balance at September 30, 2020	48,560	$	49	$	783,457	$	(39,381)	5,900	$	(141,544)	$	(180,165)	$	422,416
Vesting of restricted stock awards	296	—		—		—		—	—		—		—
Repurchase of common stock to be held in treasury	—	—		—		—		238	(10,755)		—		(10,755)
Stock compensation plan expense	—	—		12,173		—		—	—		—		12,173
Minimum pension liability adjustments, net of tax	—	—		—		(331)		—	—		—		(331)
Net loss	—	—		—		—		—	—		(4,615)		(4,615)
Unrealized loss on available for sale securities, net of tax	—	—		—		(10)		—	—		—		(10)
Change in fair value on interest rate hedging instruments	—	—		—		466		—	—		—		466
Foreign currency translation adjustment	—	—		—		13,643		—	—		—		13,643
Balance at December 31, 2020	48,856	$	49	$	795,630	$	(25,613)	6,138	$	(152,299)	$	(184,780)	$	432,987
Issuance of common stock for employee stock purchase plan and upon exercise of stock options	—	—		404		—		(81)	2,017		—		2,421
Vesting of restricted stock awards	185	—		—		—		—	—		—		—
Stock compensation plan expense	—	—		11,493		—		—	—		—		11,493
Minimum pension liability adjustments, net of tax	—	—		—		453		—	—		—		453
Net loss	—	—		—		—		—	—		(4,769)		(4,769)
Unrealized gain on available for sale securities, net of tax	—	—		—		4		—	—		—		4
Change in fair value on interest rate hedging instruments	—	—		—		614		—	—		—		614
Foreign currency translation adjustment	—	—		—		(3,721)		—	—		—		(3,721)
Balance at March 31, 2021	49,041	$	49	$	807,527	$	(28,263)	6,057	$	(150,282)	$	(189,549)	$	439,482

Table of Contents

Bottomline Technologies, Inc.
Unaudited Condensed Consolidated Statements of Stockholders' Equity
(in thousands)
Six Months Ended December 31, 2021
Nine Months Ended March 31, 2022
	Common Stock		Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Treasury Stock		Accumulated Deficit	Total Stockholders' Equity
	Shares	Amount			Shares	Amount
Balance at June 30, 2021	49,294	$49	$819,392	$(16,081)	6,057	$(150,282)	$(196,844)	$456,234
Issuance of common stock for employee stock purchase plan and upon exercise of stock options	—	—	~~278~~456	—	(78160)	24,~~035~~304	—	24,~~313~~760
Vesting of restricted stock awards	~~515~~709	1	—	—	—	—	—	1
Repurchase of common stock to be held in treasury	—	—	—	—	1,163	(50,000)	—	(50,000)
Stock compensation plan expense	—	—	2741,~~525~~769	—	—	—	—	2741,~~525~~769
Minimum pension liability adjustments, net of tax	—	—	—	(~~212~~354)	—	—	—	(~~212~~354)
Net loss	—	—	—	—	—	—	(2129,~~541~~065)	(2129,~~541~~065)
Unrealized loss on available for sale securities, net of tax	—	—	—	1	—	—	—	1
Change in fair value on interest rate hedging instruments	—	—	—	3,028	—	—	—	3,028
Change in fair value on interest rate hedging instruments	—	—	—	1,323	—	—	—	1,323
Foreign currency translation adjustment	—	—	—	(9,790)	—	—	—	(9,790)
Foreign currency translation adjustment	—	—	—	(4,516)	—	—	—	(4,516)
Balance at March 31, 2022	50,003	$50	$861,617	$(23,197)	7,060	$(195,978)	$(225,909)	$416,583
Balance at December 31, 2021	49,809	$50	$847,195	$(19,485)	7,142	$(198,247)	$(218,385)	$411,128

Six Months Ended December 31, 2020
Nine Months Ended March 31, 2021
	Common Stock		Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Treasury Stock		Accumulated Deficit	Total Stockholders' Equity
	Shares	Amount			Shares	Amount
Balance at June 30, 2020	48,147	$48	$764,906	$(48,675)	5,975	$(143,333)	$(180,612)	$392,334
Issuance of common stock for employee stock purchase plan and upon exercise of stock options	—	—	~~379~~783	—	(75156)	13,~~789~~806	—	24,~~168~~589
Vesting of restricted stock awards	~~543~~728	1	—	—	—	—	—	1
Issuance of common stock in connection with acquisition	166	—	8,183	—	—	—	—	8,183
Repurchase of common stock to be held in treasury	—	—	—	—	238	(10,755)	—	(10,755)
Stock compensation plan expense	—	—	2233,~~162~~655	—	—	—	—	2233,~~162~~655
Minimum pension liability adjustments, net of tax	—	—	—	(~~564~~111)	—	—	—	(~~564~~111)
Net loss	—	—	—	—	—	—	(48,~~224~~993)	(48,~~224~~993)
Cumulative effect of adoption of current expected credit loss of accounting standard	—	—	—	—	—	—	56	56
Unrealized loss on available for sale securities, net of tax	—	—	—	(3531)	—	—	—	(3531)
Change in fair value on interest rate hedging instruments	—	—	—	~~912~~1,526	—	—	—	~~912~~1,526
Foreign currency translation adjustment	—	—	—	2219,~~749~~028	—	—	—	2219,~~749~~028
Balance at December 31, 2020	48,856	$49	$795,630	$(25,613)	6,138	$(152,299)	$(184,780)	$432,987
Balance at March 31, 2021	49,041	$49	$807,527	$(28,263)	6,057	$(150,282)	$(189,549)	$439,482

Table of Contents

Bottomline Technologies, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

Six Months Ended December 31,

Nine Months Ended March 31,

2021

2020

2022

2021

Operating activities:

Net loss

(2129,~~541~~065)

(48,~~224~~993)

Adjustments to reconcile net loss to net cash provided by operating activities:

Amortization of acquisition-related intangible assets

1015,~~251~~506

1015,~~171~~614

Stock-based compensation plan expense

2741,~~569~~848

2233,~~146~~644

Depreciation and other amortization

1928,~~075~~955

1624,~~032~~290

Gain on sale of cost-method investment

(80)

—

Deferred income tax benefit

(~~643~~1,900)

(~~125~~92)

Change in provision for allowances on accounts receivable

(~~273~~293)

~~165~~218

Amortization of debt issuance costs

~~228~~332

~~206~~310

Amortization of premium on investments

4852

2558

Fair value adjustment on other investments

(522,576)

—

Gain on other investments

—

(~~174~~166)

Loss on disposal of equipment

2338

Gain on foreign exchange

(449)

(34)

(Gain) loss on foreign exchange

(370)

292

Changes in operating assets and liabilities:

Accounts receivable

(~~364~~8,732)

(~~139~~5,942)

Prepaid expenses and other current assets

(12,~~569~~279)

(24,~~935~~612)

Operating lease right-of-use asset, net

(~~1,324~~972)

2(5,~~438~~055)

Other assets

~~213~~(808)

(25,~~950~~160)

Accounts payable

394,338

~~(1,041)~~808

Accrued expenses

7,~~337~~129

~~(1,~~707)

Operating lease liabilities

21,~~022~~170

(15,~~383)~~734

Customer account liabilities

(2,~~333~~621)

21,~~599~~391

Deferred revenue

~~(14~~12,~~065)~~918

~~(14~~8,~~842)~~924

Other liabilities

~~(329)~~694

(74611)

Net cash provided by operating activities

2863,~~430~~250

2461,~~177~~397

Investing activities:

Acquisition of businesses and assets, net of cash acquired

(15,115)

(941,~~892~~331)

Investment distributions received

161

—

Purchases of other investments

(35125)

(7,150)

Issuance of note receivable

—

(2,600)

Purchases of available-for-sale securities

(900)

(810,~~203~~224)

Proceeds from sales of available-for-sale securities

810,100

Capital expenditures, including capitalization of software costs

(2029,~~052~~209)

(1424,~~980~~267)

Net cash used in investing activities

(2735,~~841~~088)

(3475,~~725~~472)

Financing activities:

Repurchase of common stock

(50,000)

(10,755)

Repayment of amounts borrowed under revolving credit facility

—

(50,000)

Proceeds from exercise of stock options and employee stock purchase plan

24,~~313~~760

24,~~169~~589

Net cash used in financing activities

(4745,~~687~~240)

(5856,~~586~~166)

Effect of exchange rate changes on cash

(~~951~~2,278)

75,~~774~~849

Decrease in cash, cash equivalents and restricted cash

(4819,~~049~~356)

(6164,~~360~~392)

Cash, cash equivalents and restricted cash at beginning of period

143,768

201,136

Cash, cash equivalents and restricted cash at end of period

95124,~~719~~412

~~139~~136,~~776~~744

Cash and cash equivalents at end of period

83117,~~726~~605

~~130~~128,~~096~~188

Cash held for customers at end of period

116,~~993~~807

98,~~680~~556

Cash, cash equivalents and restricted cash at end of period

95124,~~719~~412

~~139~~136,~~776~~744

Supplemental disclosures of non-cash investing activities:

Issuance of common stock in connection with acquisition

—

8,183

See accompanying notes.

Table of Contents

Bottomline Technologies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

~~December~~March 31, ~~2021~~2022

Note 1—Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Bottomline Technologies, 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 Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (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, ~~2021~~2022 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending June 30, 2022. For further information, refer to the consolidated financial statements and footnotes included in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission on August 30, 2021.

Note 2—Pending Merger

On December 16, 2021, we entered into an Agreement and Plan of Merger (as it may be amended from time to time, the Merger Agreement), with Bottomline Intermediate Holdings III, LLC (formerly known as Project RB Parent, LLC), a Delaware limited liability company (Parent), and Project RB Merger Sub, Inc., a Delaware corporation (Merger Sub). Parent and Merger Sub are affiliates of Thoma Bravo Fund XV, L.P. (the Thoma Bravo Fund), a private equity fund managed by Thoma Bravo, L.P. (Thoma Bravo). Capitalized terms not otherwise defined have the meaning set forth in the Merger Agreement.

Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into Bottomline (the Merger), and we will become a wholly owned subsidiary of Parent. At the Effective Time of the Merger, each outstanding share of our common stock (other than shares owned by (1) Parent or Merger Sub; (2) any subsidiary of ours; and (3) stockholders who are entitled to and who properly exercise appraisal rights under the General Corporation Law of the State of Delaware) will be converted into the right to receive $57.00 per share, less any applicable withholding taxes without interest (the Per Share Merger Consideration). All shares converted into the right to receive the Per Share Merger Consideration will no longer be outstanding and will automatically be cancelled at the Effective Time of the Merger and the holders of such shares will cease to have any rights thereto, except for the right to receive the Per Share Merger Consideration.

In connection with the Merger, on December 16, 2021, Parent entered into an equity commitment letter with the Thoma Bravo Fund (the Equity Commitment Letter), pursuant to which the Thoma Bravo Fund has committed to purchase, or cause the purchase of, an amount of equity securities of Parent at or immediately prior to the Effective Time of the Merger equal to the estimated amount of aggregate consideration that will be due and payable at closing. The Equity Commitment Letter provides, among other things, that we are an express third party beneficiary thereof in connection with our exercise of the rights related to specific performance under the Merger Agreement. The Equity Commitment Letter may not be amended, revoked, modified or terminated, and no provision thereunder may be waived, except by an instrument in writing signed by Parent, us and the Thoma Bravo Fund.

Consummation of the Merger is subject to customary closing conditions, including, without limitation, the absence of certain legal impediments, no Company Material Adverse Effect having occurred since the signing of the Merger Agreement, the expiration or termination of the required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act), approval of the change in control over Bottomline Payment Services Limited by the Financial Conduct Authority in the United Kingdom (the FCA), and approval by Bottomline’s stockholders. Our stockholders approved the transaction at a special meeting of stockholders held on March 8,2022. The transaction is not subject to a financing condition. We and Parent made the necessary filings with the Federal Trade Commission and the Antitrust Division of the Department of Justice on December 30, 2021, and Parent submitted a change in control application with the FCA on January 20, 2022. The required waiting period under the HSR Act with respect to the Merger expired at 11:59 p.m., Eastern Time on January 31, 2022.

We have made customary representations and warranties in the Merger Agreement and have agreed to customary covenants regarding the operation of our business prior to the Effective Time of the Merger. We are also subject to customary restrictions on the ability to solicit alternative acquisition proposals from third parties and to provide non-public information to, and participate in discussions and engage in negotiations with, third parties regarding alternative acquisition proposals, with customary exceptions to allow our Board of Directors to exercise its fiduciary duties.

The Merger Agreement contains certain termination rights for us and Parent. Upon termination of the Merger Agreement under specified circumstances, we will be required to pay Parent a termination fee of $78 million. Such circumstances include where the Merger Agreement is terminated in connection with our acceptance of a Superior Proposal or due to our Board of Directors changing or withdrawing its recommendation of the Merger. This termination fee will also be payable if the Merger ~~Agreement~~ is ~~terminated because our stockholders did~~ not ~~vote to adopt the Merger Agreement, the Merger is not~~ consummated before December 16, 2022, or we breach our representations, warranties or covenants in a manner that would cause the related closing conditions to not be met, and prior to any such termination, a proposal to acquire at least 50% of our stock or assets is publicly known or announced and we enter into an agreement for a transaction contemplated by such proposal within one year of termination and such transaction is subsequently consummated. In addition, we will be required to reimburse Parent for up to $5 million of its expenses associated with the transaction if the Merger Agreement is terminated because ~~our stockholders did not vote to adopt~~ the Merger ~~Agreement, the Merger~~ is not consummated before December 16, 2022, or we breach our representations, warranties or covenants in a manner that would cause the related closing conditions to not be

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~~related closing conditions to not be~~ met, in each case where the termination fee is not then payable but could potentially become payable in the future under certain circumstances.

Note 3—Recent Accounting Pronouncements

Accounting Pronouncements to be Adopted

Interest Rate Reform: In March 2020, the Financial Accounting Standards Board (FASB) issued an accounting standard update to address financial reporting related to the transition from the London Interbank Offered Rate (LIBOR) to alternative reference rates. The standard provides optional expedients and exceptions to existing guidance for the accounting of contracts and hedging relationship modified as a result of reference rate reform. We may elect to apply the standard prospectively to contracts modified on or before December 31, 2022. We do not expect the adoption of this standard to have a material impact on our financial statements.

Accounting Pronouncements Adopted

Business Combinations - Acquired Contract Assets and Contract Liabilities: In October 2021, the FASB issued an accounting standard update requiring contract assets and contract liabilities acquired in a business combination to be recognized and measured in accordance with ASC 606, Revenue from Contracts with Customers. Per the update, at the acquisition date, an acquirer should account for the related revenue contracts in accordance with ASC 606, as if it had originated the contracts. The update is effective for us on July 1, 2023, with early adoption permitted. We adopted this standard during the quarter ended December 31, 2021 and it did not have a material impact on our financial statements.

Note 4—Revenue Recognition

Remaining Performance Obligations

The transaction price we allocate to remaining performance obligations that are unsatisfied, or partially unsatisfied, as of ~~December~~March 31, ~~2021~~2022 represents contracted revenue that will be recognized in future periods. Our future performance obligations consist primarily of SaaS / stand-ready performance obligations relating to future periods, contracted but uncompleted professional services obligations and support and maintenance obligations. During the three and ~~six~~nine months ended ~~December~~ March 31, ~~2021~~2022 and ~~2020~~2021, the amount of revenue recognized from performance obligations satisfied in prior periods was not significant.

The transaction price allocated to unsatisfied performance obligations was $~~424~~444 million as of ~~December~~March 31, ~~2021~~2022 of which we expect to recognize approximately $~~165~~192.17 million over the next twelve months and the remainder thereafter. The timing of the amounts we estimate recognizing in revenue is based primarily on the estimated go-live dates of our SaaS arrangements, or the date the customer has been provided access to the solution. These estimated dates can change for a variety of reasons and the timing of our recognition of revenue is affected by these changes. Once the implementation services for our SaaS solutions have concluded, we generally anticipate that the amount of revenue that will be recognized after the next twelve months will be recognized in a relatively consistent amount over the following two to five year periods. 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 contract assets and deferred revenue balances as of ~~December~~March 31, ~~2021~~2022 and June 30, 2021.

December 31,

June 30,

March 31,

June 30,

2021

$ Change

2022

2021

$ Change

(in thousands)

Contract assets

65,~~410~~348

6,627

(~~217~~1,279)

Deferred revenue

86112,~~601~~585

101,238

~~(14~~11,~~637)~~347

Contract assets arise when we recognize revenue in excess of amounts billed to the customer and the right to payment is contingent on conditions other than simply the passage of time, such as the future completion of a related performance obligation. Contract assets are classified in our consolidated balance sheets as other current assets for those contract assets with recognition periods of one year or less and other assets for contract assets with recognition periods greater than one year. We assess outstanding accounts receivable and contract assets for credit loss on an ongoing basis. In estimating credit losses, we pool accounts with similar risk characteristics. Accounts that do not share the same risk characteristics are assessed for credit loss on an individual basis. The allowance for credit losses is based on historical loss data, customer specific information and current market conditions. Historically, our bad debt expense has not been significant.

Deferred revenue consists of billings or customer payments in excess of amounts recognized as revenue. The ~~decrease~~increase in deferred revenue at ~~December~~March 31, ~~2021~~2022 as compared to June 30, 2021 reflects ~~our~~the ~~recognition~~deferral of revenue from maintenance contracts, a significant portion of which are billed on a calendar year basis.

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For the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022, we recognized $3111.7 million and $7789.63 million, respectively, in revenue from amounts that were included in deferred revenue as of June 30, 2021. For the three and ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021, we recognized $2812.46 million and $6881.62 million, respectively, in revenue from amounts that were included in deferred revenue as of June 30, 2020.

Note 5—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 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, ~~2021~~2022 and June 30, 2021, our assets and liabilities measured at fair value on a recurring basis were as follows:

	December 31, 2021								June 30, 2021
	March 31, 2022								June 30, 2021
	Fair Value Measurements Using Input Types								Fair Value Measurements Using Input Types
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Money market funds (cash and cash equivalents)	$	79,~~597~~603	$	—	$	—	$	79,~~597~~603	$	340	$	—	$	—	$	340
Available for sale securities - Debt	—		898		—		898		—		10,150		—		10,150
Government - U.S. treasury securities	—		2,903		—		2,903		—		10,150		—		10,150
Other investments (long-term)	—		792		1,380		2,172		—		966		1,014		1,980
Total available for sale securities	$	—	$	2,903	$	—	$	2,903	$	—	$	10,150	$	—	$	10,150
Interest rate swap (long-term)	—		230		—		230		—		—		—		—
Other investments (long-term)	—		939		1,245		2,184		—		966		1,014		1,980
Total assets	$	9,603	$	1,920	$	1,380	$	12,903	$	340	$	11,116	$	1,014	$	12,470
Total assets	$	7,597	$	3,842	$	1,245	$	12,684	$	340	$	11,116	$	1,014	$	12,470
Liabilities
Interest rate swap (short-term)	$	—	$	~~1,255~~316	$	—	$	~~1,255~~316	$	—	$	1,564	$	—	$	1,564
Interest rate swap (long-term)	$—	—	$—	~~536~~	$—	—	$—	~~536~~	$—	—	$1,550	~~1,550~~	$—	—	$1,550	~~1,550~~
Total liabilities	$	—	$	~~1,791~~316	$	—	$	~~1,791~~316	$	—	$	3,114	$	—	$	3,114

Fair Value of Financial Instruments

We have certain financial instruments which consist of cash and cash equivalents, cash held for customers, marketable securities, accounts receivable, contract assets, equity securities, accounts payable, customer account liabilities, certain derivative instruments, assets related to deposits made to fund future requirements associated with Israeli severance arrangements and debt drawn on our Credit Facility (as defined in Note 12). Fair value information for each of these instruments is as follows:

• Cash and cash equivalents, cash held for customers, accounts receivable, contract assets, accounts payable and customer account liabilities fair values approximate their carrying values, due to the expected duration 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, ~~2021~~2022 and June 30, 2021, approximated fair value.

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• Marketable debt securities classified as available for sale, which are comprised of U.S. treasury securities, are recorded at fair value. Unrealized gains and losses are included as a component of accumulated other comprehensive 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. We assess securities with an amortized cost basis in excess of estimated fair value for credit loss. As of ~~December~~March 31, ~~2021~~2022 and June 30, 2021, the unrealized losses associated with available for sale securities were not material. No credit loss has been recorded as we do not intend to sell the investments prior to recovering their amortized costs basis.

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

• We hold certain other investments accounted for at fair value. The estimated fair value of these investments, which are in a private equity fund, are Level 3 measurements as they rely on significant unobservable inputs and depending on the specific nature of the investment, consider such factors as pricing models that consider a comparative analysis of acquisitions and pricing multiples from market participants as well as discounted cash flow analyses. We also have investments for which there is no readily determinable fair value. The carrying value of these investments was $14.4 million and $12.0 million at ~~December~~March 31, ~~2021~~2022 and June 30, 2021, respectively, and are reported as a component of other assets. The increase in the carrying value of investments was due to a fair value adjustment recorded on an investment during the three months ended March 31, 2022. The fair value adjustment was based on an observable price change arising from a recent financing transaction by the investee. Investments for which we cannot readily determine fair value are recorded at cost, less impairment (if any), plus or minus adjustments for observable price changes.

• We have borrowings of $130 million against our Credit Facility. The fair value of these borrowings, which are classified as Level 2, approximates their carrying value at ~~December~~March 31, ~~2021~~2022 as the instrument carries a variable rate of interest which reflects current market rates.

Marketable Securities

The table below presents information regarding our marketable securities by major security type as of ~~December~~March 31, ~~2021~~2022 and June 30, 2021.

	December 31, 2021						June 30, 2021
	March 31, 2022						June 30, 2021
	Held to Maturity		Available for Sale		Total		Held to Maturity		Available for Sale		Total
	(in thousands)
Marketable securities:
Government and other debt securities	$	6466	$	~~2,903~~898	$	~~2,967~~964	$	66	$	10,150	$	10,216
Total marketable securities	$	6466	$	~~2,903~~898	$	~~2,967~~964	$	66	$	10,150	$	10,216

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, 2021
	March 31, 2022
	(in thousands)
Due within 1 year	$	~~2,903~~898
Due in 1 year through 5 years	—
Total	$	~~2,903~~898

All of our ~~available for sale marketable~~ securities are classified as current 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, ~~2021~~2022 and June 30, 2021, respectively, aggregated by investment category and the length of time that individual securities have been in a continuous loss position:

	At December 31, 2021				At June 30, 2021
	At March 31, 2022				At June 30, 2021
	Less than 12 Months
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(in thousands)
Government - U.S. treasury securities	$	~~2,903~~898	$	(12)	$	5,930	$	(1)
Total	$	~~2,903~~898	$	(12)	$	5,930	$	(1)

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Note 6—Business and Asset Acquisitions

Current Year Acquisitions

Bora Payment Systems, LLC

In October 2021 we acquired substantially all of the assets and assumed certain liabilities of Bora Payment Systems, LLC (Bora), a provider of electronic payment solutions for businesses, for a purchase price of $15 million in cash.

We are still obtaining fair value estimates for the intangible assets acquired. In the preliminary allocation of the purchase price at ~~December~~March 31, ~~2021~~2022, we recorded $8.1 million of goodwill. The goodwill is deductible for tax purposes and arose principally due to the anticipated future benefits arising from the acquisition. Identifiable intangible assets of $6.9 million, consisting of customer and technology related assets, are being amortized on a weighted average estimated useful life of 11 years.

Through the Bora acquisition, we acquired technology that will be used predominantly in our Paymode-X solution to facilitate straight through processing of payments made via virtual card. This provides a significant benefit to suppliers who process a high volume of business to business virtual card transactions. The operating results of Bora ~~will~~are be included as a component of our Payments Platform segment from the acquisition date forward. Bora's operating results did not have a material impact on our revenue or net loss. Acquisition related costs were recorded as a component of general and administrative expenses and were not material.

Prior Year Acquisitions

TreasuryXpress

In January 2021 we acquired French-headquartered TreasuryXpress Holding SAS (TX) for a total purchase price of $31.9 million in cash. Additionally, we issued 66,403 shares of our common stock to certain selling stockholders of TX with vesting conditions tied to continued employment with us. These shares are compensatory and we will record share-based payment expense over their vesting period of five years.

We recorded $20.4 million of goodwill and $17.3 million of identifiable intangible assets in connection with the acquisition. The goodwill is not deductible for tax purposes and arose principally due to the anticipated future benefits arising from the acquisition. Identifiable intangible assets, consisting of acquired technology, customer related assets and a trade name, are being amortized over a weighted average estimated useful life of 10 years.

Our acquisition of TX, a leading provider of cloud-based treasury management solutions for corporations and banks around the world, extended our geographic presence in France, the United States and the Middle-East. The operating results of TX are an immaterial component of our Payment Platforms operating segment. TX operating results did not have a material impact on our revenue or net loss, and acquisition related costs of approximately $1.7 million were recorded as a component of general and administrative expenses.

AnaSys AG

In July 2020 we acquired Switzerland-based AnaSys AG (AnaSys) for a total purchase price of $13.9 million. The purchase price consisted of a cash payment of 5.2 million Swiss Francs (approximately $5.7 million based on the foreign exchange rate in effect at the acquisition date) and 166,393 shares of our common stock valued at $8.2 million on the closing date of the transaction. Additionally, we issued 28,000 shares of our common stock to certain selling stockholders of AnaSys with vesting conditions tied to continued employment with us. These shares are compensatory and we are recording share-based payment expense over their vesting period of five years.

We recorded $10.7 million of goodwill, $6.3 million of identifiable intangible assets and a $2.8 million post retirement liability in connection with the acquisition. 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, consisting of customer and technology related assets, are being amortized over a weighted average estimated useful life of 13 years.

Our acquisition of AnaSys, a provider of financial messaging solutions, extended our geographic presence in Switzerland and Germany and expanded our customer base. The operating results of AnaSys are a component of our Banking Solutions segment. AnaSys operating results did not have a material impact on our revenue or net loss, and acquisition related costs of approximately $0.3 million were recorded as a component of general and administrative expenses.

FMR Systems, Inc.

In July 2020, we acquired customer assets and intellectual property from FMR Systems, Inc (FMR), a small corporate and commercial onboarding software provider, for an up-front cash payment of $2.0 million and deferred cash payments of $0.3 million.

We recorded $1.0 million of goodwill in connection with the acquisition. The goodwill is deductible for income tax purposes and arose principally due to the anticipated future benefits arising from the acquisition. Identifiable intangible assets of $1.7 million, consisting primarily of technology related assets, are being amortized over a weighted average estimated useful life of 9 years. FMR's operating results are included in our Banking Solutions segment from the acquisition date forward and all goodwill was allocated to

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this segment. FMR's operating results did not have a material impact on our revenue or net loss, and acquisition related costs were not material.

Note 7—Net Loss Per Share

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

	Three Months Ended December 31,				Six Months Ended December 31,
	Three Months Ended March 31,				Nine Months Ended March 31,
	2021		2020		2021		2020
	2022		2021		2022		2021
	(in thousands, except per share amounts)
Numerator - basic and diluted:
Net loss	$	(167,~~634~~524)	$	(4,~~615~~769)	$	(2129,~~541~~065)	$	(48,~~224~~993)
Denominator:
Shares used in computing basic and diluted loss per share attributable to common stockholders	42,~~759~~778		42,~~751~~838		4342,~~016~~937		42,~~604~~682
Basic and diluted net loss per share attributable to common stockholders	$	(0.3918)	$	(0.11)	$	(0.5068)	$	(0.1021)

For the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022, approximately 2.~~5 million and 2.~~6 million shares, ~~respectively,~~ of unvested restricted stock and shares underlying stock options were excluded from the calculation of diluted earnings per share as their effect on the calculation would have been anti-dilutive. For the three and ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021, approximately 2.4 3 million and 2.5 4 million shares, respectively, of unvested restricted stock and shares underlying stock options were excluded from the calculation of diluted earnings per share as their effect on the calculation would have been anti-dilutive.

Note 8—Operations by Segments and Geographic Areas

Segment Information

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

During the quarter ended September 30, 2021 we realigned our internal financial reporting to provide for more specific visibility into key product lines, which resulted in a change to our externally reportable segments. Specifically, our prior Cloud Solutions segment was renamed Payment Platforms and includes the revenue and operating results of our Paymode-X and PTX payment platforms. Our Legal Spend Management Solutions ~~have~~is ~~been~~ presented as a stand-alone operating segment, having previously been a component of our Cloud Solutions segment. Finally, our Financial Messaging solutions, previously a component of our Cloud Solutions segment, ~~has~~is ~~been~~ included as a component of our Banking Solutions segment. Our prior Payments and Documents segment has been renamed to Traditional Solutions, with no change to the composition of the revenue and operating activity included in this segment. These changes are reflected for all financial periods presented.

Similar operating segments have been aggregated into the following five reportable segments:

Payment Platforms. Our Payment Platforms segment includes our Paymode-X and PTX solutions, our largest and fastest growing payment platforms. These solutions are SaaS technology offerings through which businesses can streamline the invoice-to-pay process, automate workflows, accelerate approvals and enhance efficiency and security. Each solution supports a variety of payment options including virtual card, ACH, check, wire and others. These solutions are highly scalable, easy to implement, secure and cost effective. Revenue within this segment is generally recognized on a subscription or transaction basis.

Banking Solutions. Our Banking Solutions segment provides solutions that are specifically designed for banking and financial institution customers. Our Banking Solutions products are sold predominantly on a hosted basis, with revenue recognized on a subscription or transaction basis.

Legal Spend Management. Our legal spend management solutions 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. Revenue within this segment is generally recognized on a subscription or transaction basis.

Traditional Solutions. Our Traditional Solutions segment supplies financial business process management software solutions, including making and collecting payments, sending and receiving invoices, and generating and storing business documents. When licensed for on-premise deployment, software license revenue is typically recorded upon delivery of the software and commencement of the license term. If the solution is hosted by us, we typically record revenue over time. Professional services revenue is normally recorded as we perform the work and software support and maintenance revenue is recorded ratably over the support period.

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Other. Our Other segment consists of our fraud and financial crime solutions and our healthcare solutions. The Other segment loss reported below is attributable to the operating results of our fraud and financial crime solutions, which reflects the revenue contribution from a legacy sales channel we acquired and the burden of certain other centralized costs; however, our fraud solutions are sold by several of our operating segments. Our healthcare solutions focus on eliminating paper intensive processes and providing electronic signature and mobile document capabilities to allow healthcare organizations to improve efficiency and reduce costs. Software revenue for perpetual licenses of our fraud and financial crime and healthcare products is typically recorded upon delivery of the software and commencement of the license term. Professional services revenue is recorded as we perform the work and software support and maintenance revenue is recorded ratably over the support period which is normally twelve months.

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

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

Segment information for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021 according to the segment descriptions above, is as follows:

Three Months Ended December 31,

Six Months Ended December 31,

Three Months Ended March 31,

Nine Months Ended March 31,

2021

2020

2021

2020

2022

2021

2022

2021

(in thousands)

Segment revenue:

Payment Platforms

3537,~~972~~994

2729,~~542~~163

69107,~~779~~773

5282,~~909~~072

Banking Solutions

4951,~~959~~181

4447,~~249~~211

97148,~~640~~821

89136,~~478~~689

Legal Spend Management

2221,~~456~~957

2122,~~849~~147

4466,~~519~~476

4264,~~399~~546

Traditional Solutions

1516,~~684~~444

1718,~~178~~810

3148,~~876~~320

3453,~~574~~384

Other

4,~~716~~260

53,~~206~~554

812,~~578~~838

912,~~029~~583

Total segment revenue

~~128~~131,~~787~~836

~~116~~120,~~024~~885

~~252~~384,~~392~~228

~~228~~349,~~389~~274

Segment measure of profit (loss):

Payment Platforms

53,~~822~~986

64,~~015~~267

1115,~~646~~632

1116,~~770~~037

Banking Solutions

34,~~697~~787

34,~~891~~641

712,~~450~~237

1115,~~103~~744

Legal Spend Management

43,~~468~~820

5,~~656~~550

913,~~676~~496

1015,~~242~~792

Traditional Solutions

34,~~571~~828

45,~~087~~213

611,~~685~~513

813,~~187~~400

Other

(34,~~548~~101)

(13,~~945~~842)

(711,~~524~~625)

(58,~~052~~894)

Total measure of segment profit

1413,~~010~~320

1715,~~704~~829

2741,~~933~~253

3652,~~250~~079

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A reconciliation of the total measure of segment profit to our 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,
	2021		2020		2021		2020
	2022		2021		2022		2021
	(in thousands)
Total measure of segment profit	$	1413,~~010~~320	$	1715,~~704~~829	$	2741,~~933~~253	$	3652,~~250~~079
Less:
Amortization of acquisition-related intangible assets	(5,~~180~~255)		(5,~~142~~443)		(1015,~~251~~506)		(1015,~~171~~614)
Stock-based compensation plan expense	(1314,~~657~~279)		(1211,~~173~~498)		(2741,~~569~~848)		(2233,~~146~~644)
Acquisition and integration-related expenses	(~~142~~24)		(~~1,095~~738)		(~~343~~367)		(12,~~340~~078)
Restructuring expense	28		(921)		(358)		(991)
Restructuring income (expense)	70		4		(288)		(987)
Excess depreciation, including associated with restructuring events	~~(357)~~—		~~(528)~~—		(357)		(528)
Other non-core expense	(~~281~~217)		(4852)		(~~391~~608)		(96148)
Shareholder engagement fees	~~(832)~~—		—		(1,779)		—
Asset write-off	~~(71)~~—		—		(71)		—
Costs associated with pending Merger	(32,~~507~~990)		—		(36,~~507~~497)		—
Other expense, net of pension adjustments	(930)		(1,139)		(1,938)		(2,165)
Other income (expense), net of pension adjustments	1,994		(1,536)		56		(3,701)
Loss before income taxes	$	(107,~~919~~381)	$	(3,~~342~~434)	$	(1826,~~631~~012)	$	(14,~~187~~621)

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

Three Months Ended December 31,

Six Months Ended December 31,

Three Months Ended March 31,

Nine Months Ended March 31,

2021

2020

2021

2020

2022

2021

2022

2021

(in thousands)

Depreciation and other amortization expense:

Payment Platforms

2,~~727~~964

2,~~456~~550

58,~~558~~522

47,~~843~~393

Banking Solutions

4,~~040~~255

3,~~294~~558

712,~~975~~230

610,~~458~~016

Legal Spend Management

1,~~709~~834

1,~~497~~544

35,~~390~~224

34,~~099~~643

Traditional Solutions

~~692~~410

~~270~~290

1,~~054~~464

~~540~~830

Other

~~355~~417

~~288~~316

~~741~~1,158

~~564~~880

Total depreciation and other amortization expense

9,~~523~~880

78,~~805~~258

1828,~~718~~598

1523,~~504~~762

Disaggregation of Revenue

The tables below present our subscriptions revenue and total revenue disaggregated by major product classification for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021.

Three Months Ended December 31, 2021

Six Months Ended December 31, 2021

Three Months Ended March 31, 2022

Nine Months Ended March 31, 2022

Subscription

Software

Professional Services, Maintenance and Other

Total

Subscription

Software

Professional Services, Maintenance and Other

Total

(in thousands)

Payment Platforms

3537,~~721~~616

—

~~251~~378

3537,~~972~~994

69106,~~225~~841

—

~~554~~932

69107,~~779~~773

Banking Solutions

4344,~~094~~351

281

6,~~837~~829

4951,~~959~~181

84128,~~029~~380

~~105~~106

1320,~~506~~335

97148,~~640~~821

Legal Spend Management

2221,~~449~~947

—

710

2221,~~456~~957

4466,~~509~~456

—

1020

4466,~~519~~476

Traditional Solutions

67,~~076~~006

~~437~~525

98,~~171~~913

1516,~~684~~444

1219,~~102~~108

~~876~~1,401

1827,~~898~~811

3148,~~876~~320

Other

1,~~142~~215

~~688~~480

2,~~886~~565

4,~~716~~260

23,~~113~~328

1,~~099~~579

57,~~366~~931

812,~~578~~838

Total revenues

~~108~~112,~~482~~135

1,~~153~~006

1918,~~152~~695

~~128~~131,~~787~~836

~~211~~324,~~978~~113

23,~~080~~086

3857,~~334~~029

~~252~~384,~~392~~228

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Three Months Ended December 31, 2020

Six Months Ended December 31, 2020

Three Months Ended March 31, 2021

Nine Months Ended March 31, 2021

Subscription

Software

Professional Services, Maintenance and Other

Total

Subscription

Software

Professional Services, Maintenance and Other

Total

(in thousands)

Payment Platforms

2728,~~432~~950

—

~~110~~213

2729,~~542~~163

5281,~~712~~662

—

~~197~~410

5282,~~909~~072

Banking Solutions

3740,~~298~~436

1166

6,~~940~~709

4447,~~249~~211

75115,~~251~~687

~~115~~181

1420,~~112~~821

89136,~~478~~689

Legal Spend Management

2122,~~846~~144

—

2122,~~849~~147

4264,~~396~~540

—

4264,~~399~~546

Traditional Solutions

57,~~615~~582

~~638~~740

10,~~925~~488

1718,~~178~~810

1118,~~296~~878

12,~~386~~127

2132,~~892~~379

3453,~~574~~384

Other

~~1,207~~827

~~1,153~~286

2,~~846~~441

53,~~206~~554

2,~~127~~954

1,~~278~~563

58,~~624~~066

912,~~029~~583

Total revenues

9399,~~398~~939

1,~~802~~092

2019,~~824~~854

~~116~~120,~~024~~885

~~183~~283,~~782~~721

23,~~779~~871

4161,~~828~~682

~~228~~349,~~389~~274

For the three and ~~six~~ nine months ended ~~December~~March 31, ~~2021~~2022, we derived 85% and 84%, respectively of our revenue from subscription-based arrangements. The majority of our non-subscription revenue is derived from software support and maintenance fees and from professional services, with the largest concentration of this revenue being derived from our legacy business payments and documents products in our Traditional Solutions segment.

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.

Three Months Ended December 31,

Six Months Ended December 31,

Three Months Ended March 31,

Nine Months Ended March 31,

2021

2020

2021

2020

2022

2021

2022

2021

(in thousands)

Revenues from unaffiliated customers:

United States

7980,~~045~~423

7071,~~244~~780

~~154~~234,~~039~~462

~~139~~211,~~225~~005

United Kingdom

3031,~~370~~844

2831,~~335~~325

6192,~~000~~844

5687,~~029~~354

Switzerland

1213,~~967~~441

12,~~009~~527

2538,~~362~~803

2235,~~876~~403

Other

6,~~405~~128

5,~~436~~253

1118,~~991~~119

1015,~~259~~512

Total revenues from unaffiliated customers

~~128~~131,~~787~~836

~~116~~120,~~024~~885

~~252~~384,~~392~~228

~~228~~349,~~389~~274

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,
	2021		2021
	2022		2021
	(in thousands)
Long-lived assets:
United States	$	7879,~~762~~253	$	82,816
United Kingdom	42,~~893~~244		44,455
Other	2123,~~513~~725		17,453
Total long-lived assets	$	~~143~~145,~~168~~222	$	144,724

Note 9—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 that rate. The calculation of our estimated effective tax rate requires an estimate of pre-tax income by tax jurisdiction as well as total tax expense for the fiscal year. Accordingly, our annual estimated effective tax rate is subject to adjustment if there are changes to our initial estimates of total tax expense or pre-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 the year-to-date period.

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Provision for Income Taxes

We recorded an income tax provision of $50.71 million and $1.3 million for the three months ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021, respectively. In the three months ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021, the income tax provision was primarily attributable to our U.S., United Kingdom (UK) and Switzerland operations.

We recorded an income tax provision of $23.91 million and $34.04 million for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021, respectively. In the ~~six~~nine months ended ~~December~~March 31, 2022 and 2021, the income tax provision was primarily attributable to our U.S., UK and Switzerland operations. In the six months ended December 31, 2020, the income tax provision was driven by a tax benefit recorded against operating losses in the U.S. offset by tax expense recorded against operating income generated in our UK and Switzerland operations. In addition, in the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021, we recorded discrete tax expense of $0.7 million as a result of tax legislation enacted in the UK that increased the statutory UK tax rate from 17 percent to 19 percent, which required us to re-value our net UK deferred tax liability balance to reflect this higher rate.

We currently anticipate that our unrecognized tax benefits will decrease within the next twelve months by approximately $0.98 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.

At ~~December~~March 31, ~~2021~~2022, we had a total valuation allowance of $4547.30 million against our deferred tax assets given the uncertainty of recoverability of these amounts.

Note 10—Goodwill and Other Intangible Assets

Acquired intangible assets are initially recorded at fair value and tested periodically for impairment. Goodwill represents the excess of the purchase price over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed in a business combination and is tested at least annually 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, ~~2021~~2022, the carrying value of goodwill for all of our reporting units was $~~252~~249.12 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, 2021

As of March 31, 2022

Gross Carrying Amount

Accumulated Amortization

Net Carrying Value

Weighted Average Remaining Life

(in thousands)

(in years)

Amortized intangible assets:

Customer related

~~234~~231,~~200~~430

(~~180~~181,~~890~~974)

5349,~~310~~456

6.86

Core technology

~~161~~160,~~419~~545

(~~110~~112,~~757~~263)

5048,~~662~~282

7.20

Other intangible assets

23,~~381~~236

(21,~~307~~353)

21,~~074~~883

4.21

Capitalized software development costs

30,~~343~~854

(2122,~~452~~807)

8,~~891~~047

2.89

Software (1)

~~115~~121,~~910~~146

(6670,~~302~~941)

4950,~~608~~205

3.6

Total

~~565~~567,~~253~~211

(~~400~~409,~~708~~338)

~~164~~157,~~545~~873

Unamortized intangible assets:

Goodwill

~~252~~249,~~061~~219

Total intangible assets

~~416~~407,~~606~~092

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	As of June 30, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		Weighted Average Remaining Life
	(in thousands)						(in years)
Amortized intangible assets:
Customer related	$	235,366	$	(175,841)	$	59,525	7.2
Core technology	154,254		(107,008)		47,246		7.5
Other intangible assets	23,504		(20,984)		2,520		4.8
Capitalized software development costs	29,217		(18,843)		10,374		2.6
Software (1)	101,898		(58,872)		43,026		4.0
Total	$	544,239	$	(381,548)	$	162,691
Unamortized intangible assets:
Goodwill					246,698
Total intangible assets					$	409,389

——————

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

Estimated amortization expense for the remainder of fiscal year 2022 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 ~~December~~March 31, ~~2021~~2022, is as follows:

Acquired Intangible Assets

Capitalized Software Development Costs

Software

(in thousands)

Remaining 2022

105,~~562~~226

21,~~664~~363

94,~~068~~607

2023

19,~~551~~351

2,~~484~~609

1213,~~667~~533

2024

17,~~690~~508

1,~~728~~853

1011,~~248~~046

2025

15,~~205~~044

1,~~056~~181

67,~~889~~652

2026

14,~~249~~103

~~472~~597

34,~~523~~389

2027 and thereafter

28,~~789~~389

49120

~~587~~1,117

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 roll forward of our goodwill balances, by reportable segment:

	Payment Platforms		Banking Solutions		Legal Spend Management		Traditional Solutions		Other (1)		Total
	(in thousands)
Balance at June 30, 2021	$	151,765	$	40,534	$	—	$	46,205	$	8,194	$	246,698
Goodwill reclassified as a result of segment reorganization	(88,767)		61,310		27,457						—
Measurement period adjustment	(859)		—		—		—		—		(859)
Goodwill acquired during the period	8,078		—		—		—		—		8,078
Impact of foreign currency translation	(~~540~~1,940)		—		—		(12,~~316~~758)		—		(14,~~856~~698)
Balance as of December 31, 2021	$	69,677	$	101,844	$	27,457	$	44,889	$	8,194	$	252,061
Balance as of March 31, 2022	$	68,277	$	101,844	$	27,457	$	43,447	$	8,194	$	249,219

——————

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

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Note 11—Commitments and Contingencies

Leases

We determine if any arrangement is, or contains, a lease at its inception based on whether or not we have the right to control the asset during the contract period. We are a lessee in any lease contract when we obtain the right to control the asset.

We determine the lease term by assuming the exercise of options that are reasonably certain. Leases with a lease term of 12 months or less at inception are not reflected in our balance sheet and those lease costs are expensed on a straight-line basis over the respective term. Leases with a term greater than 12 months are reflected as non-current right-of-use (ROU) assets and current and non-current lease liabilities in our consolidated balance sheets. Current lease liabilities are classified as a component of accrued expenses and other current liabilities.

As the implicit interest rate in our leases is generally not known, we use our incremental borrowing rate as the discount rate for purposes of determining the present value of our lease liabilities. Our determination of the incremental borrowing rate takes into consideration the expected term of the lease, the effect of the currency in which the lease is denominated and the rate of interest we would expect to incur on a collateralized debt instrument. At ~~December~~March 31, ~~2021~~2022, our weighted average discount rate utilized for our leases was 6.10%.

When our contracts contain lease and non-lease elements, we account for both as a single lease component.

We lease office space in cities worldwide under facility leases that expire at various dates. We are typically required to pay certain incremental operating costs above the base rent for our facility leases. Our leases may include periodic payment adjustments based on changes in applicable price indexes. To the extent the adjustment is considered a fixed payment it is included in the measurement of the ROU asset and lease liability, otherwise it is recognized in the period incurred. We also have a variety of data center locations and, to a lesser extent, vehicle and equipment leases. Our facility leases represent the substantial majority of our operating leases and often include renewal options that we can exercise unilaterally. At ~~December~~March 31, ~~2021~~2022, renewal options ranged from 3 months to 10 years.

At ~~December~~March 31, ~~2021~~2022, our operating leases had a weighted average remaining lease term of 8.10 years and we had no material finance leases.

Additional information of our lease activity, as of and for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 is as follows:

Three Months Ended December 31,

Six Months Ended December 31,

Three Months Ended March 31,

Nine Months Ended March 31,

Operating leases:

~~2021~~2022

(in thousands)

Operating lease cost

1,~~820~~899

35,~~664~~563

Short-term lease cost

~~100~~51

~~198~~249

Variable lease cost

~~340~~551

~~845~~1,396

Sublease income

~~(34)~~—

(97)

Total lease cost

2,~~226~~501

47,~~610~~111

December 31, 2021

March 31, 2022

(in thousands)

Right-of-use assets, net

28,~~868~~440

Operating lease liabilities, current (1)

6,~~663~~857

Operating lease liabilities, non-current

2726,~~986~~861

Total operating lease liabilities

3433,~~649~~718

——————

(1) Included as a component of accrued expenses and other current liabilities.

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Six Months Ended December 31,

Nine Months Ended March 31,

2021

(in thousands)

Cash paid for amounts included in the measurement of lease liabilities

36,~~934~~171

Right-of-use assets obtained in exchange for lease obligations

45,~~810~~743

The increase in our ROU assets and lease liabilities during the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 is primarily due to a new facility ~~lease~~leases in India and renewed data center leases in the U.K., U.S, Switzerland and Singapore.

Remaining maturities of lease liabilities at ~~December~~March 31, ~~2021~~2022 were as follows:

For the year ending June 30,	Operating Leases
	(in thousands)
2022	$	42,~~566~~552
2023	78,~~589~~010
2024	45,~~901~~097
2025	4,~~286~~287
2026	4,~~321~~293
Thereafter	19,~~361~~328
Total lease payments	4543,~~024~~567
Less imputed interest	(109,~~375~~849)
Total lease liabilities	$	3433,~~649~~718

As of ~~December~~March 31, ~~2021~~2022, we had additional operating leases that had not yet commenced of $2.6 million. These operating leases will commence in fiscal year 2022 and have a lease term between 3 to 13 years.

Legal Matters

On January 19, 2022, a purported stockholder of Bottomline filed a lawsuit in the United States District Court for the Southern District of New York against us and our directors, captioned Shiva Stein v. Bottomline Technologies, Inc., et al., Case No. 1:22-cv-00481 (the Stein Complaint). On January 21, 2022, a purported stockholder of Bottomline filed a lawsuit in the United States District Court for the Southern District of New York against us and our directors, captioned Jeffrey D. Justice, II v. Bottomline Technologies, Inc., et al., Case No. 1:22-cv-00586 (the Justice Complaint). On January 26, 2022, a purported stockholder of Bottomline filed a lawsuit in the United States District Court for the Southern District of New York against us and our directors, captioned Chau Le v. Bottomline Technologies, Inc., et al., Case No. 1:22-cv-00670 (the Le Complaint).

~~All~~The ofStein complaint, the ~~complaints~~Justice complaint, and the Le complaint all allege that the preliminary proxy statement issued in connection with the Merger omits material information or contains misleading disclosures and that, as a result, (i) all of the defendants violated Section 14(a) of the Securities Exchange Act of 1934 (the Exchange Act) and (ii) all of our directors violated section 20(a) of the Exchange Act. The Le Complaint also alleges that our directors breached their fiduciary duties of care, loyalty and good faith by, among other things, causing us to enter into the transactions contemplated by the Merger Agreement as a result of an inadequate sale process, agreeing to preclusive deal mechanisms and filing a materially misleading and incomplete preliminary proxy statement. The Le Complaint also alleges that we aided and abetted these purported breaches of fiduciary duties.

~~All~~The ofStein complaint, the ~~complaints~~Justice complaint, and the Le complaint all seek, among other things, (i) injunctive relief preventing the consummation of the transactions contemplated by the Merger Agreement; (ii) rescission or rescissory damages in the event the transactions contemplated by the Merger Agreement have been implemented; (iii) dissemination of a proxy statement that does not omit material information or contain any misleading disclosures; (iv) a declaration that defendants violated Sections 14(a) and/or 20(a) of the Exchange Act (except the Stein Complaint and the Le Complaint) or that our directors violated their fiduciary duties (except the Stein Complaint and the Justice Complaint); (v) to direct the defendants to account to plaintiff for all damages suffered (except the Justice Complaint); and (vi) an award of plaintiff’s expenses, including attorneys’ and experts’ fees.

InOn ~~addition~~February 7, 2022, a purported stockholder of Bottomline ~~has~~also made a demand pursuant to Section 220 of the DGCL (the Initial 220 Demand) to inspect certain books and records of ours relating to the transactions contemplated by the Merger Agreement.

WeThe ~~believe~~Initial 220 Demand, the ~~claims~~Stein ~~asserted~~Complaint, inthe ~~each~~Justice ofComplaint, and the ~~complaints~~Le ~~are~~Complaint ~~without~~were ~~merit.~~resolved ~~However,~~by ~~given~~our ~~the~~filing ~~inherently~~on ~~unpredictable~~February ~~nature~~25, 2022 of ~~litigation,~~a wesupplement ~~are~~to ~~unable~~our definitive proxy statement. The supplement to ~~predict~~our proxy statement included certain informational disclosures requested by the ~~possible~~plaintiffs ~~range~~and ofthe ~~outcomes~~Initial of220 Demand, and the parties are attempting to negotiate a resolution to these ~~complaints~~claims.

~~Additional~~In ~~lawsuits~~addition, ~~may~~on beFebruary ~~filed~~28, ~~against us~~2022, ~~our~~another purported ~~Board~~stockholder of ~~Directors,~~Bottomline ~~Parent~~made a demand pursuant to Section 220 of the DGCL to inspect certain books and~~/or~~ ~~Merger~~records ~~Sub~~of inours ~~connection~~relating ~~with~~to the transactions contemplated by the Merger Agreement. On March

We are, from time to time, a party to other legal proceedings and claims that arise out of the ordinary course of our business.

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23, 2022, that purported stockholder filed a complaint pursuant to Section 220 of the DGCL in the Court of Chancery of the State of Delaware against us, captioned Teamsters Local 237 Additional Security Benefit Fund v. Bottomline Technologies, Inc., Case No. 2022-0275. The complaint seeks (i) to inspect certain books and records of ours relating to the transactions contemplated by the Merger Agreement in order to investigate the process leading to the Merger Agreement and the independence of our directors and officers and to value our shares and (ii) an award of plaintiff’s expenses, including attorneys’ fees. The parties are in the process of attempting to negotiate a resolution to these claims and must provide a status update to the Court on or before June 3, 2022.

We believe the claims asserted in each of the complaints are without merit. However, given the inherently unpredictable nature of litigation, we are unable to predict the possible range of outcomes of these complaints.

Additional lawsuits may be filed against us, our Board of Directors, Parent and/or Merger Sub in connection with the transactions contemplated by the Merger Agreement.

We are, from time to time, a party to other legal proceedings and claims that arise in the ordinary course of our business.

We are not currently a party to any legal proceedings we believe would have a material impact on our financial position or operating results.

Note 12—Indebtedness

Credit Agreement

We are party to a credit agreement with Bank of America, N.A. and certain other lenders (the Credit Agreement) that provides for a revolving credit facility in the amount of up to $300 million (the Credit Facility) and that expires in July 2023. We have the right to request an increase of the aggregate commitments under the Credit Facility by up to an additional $150 million, subject to specified conditions. At ~~December~~March 31, ~~2021~~2022, we owed $130.0 million under the Credit Facility.

Borrowings under the Credit Facility may be used for lawful corporate purposes of Bottomline and its subsidiaries, including acquisitions, share repurchases, capital expenditures, the repayment or refinancing of indebtedness and general corporate purposes. The Credit Facility is available for the issuance of up to $20 million of letters of credit and up to $20 million of swing line loans.

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 3.50 to 1.00; and (b) a minimum consolidated interest coverage ratio of 3.00 to 1.00. The Credit Agreement also contains customary events of default and related cure provisions. As of ~~December~~March 31, ~~2021~~2022, we were in compliance with all covenants.

The Credit Agreement is guaranteed by us (as borrower) and certain of our existing and future domestic material restricted subsidiaries (the Guarantors) and is secured by substantially all of our domestic assets and those of the Guarantors, including a pledge of all 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.

Note 13—Derivative Instruments

Cash Flow Hedges

Interest Rate Swap Agreements

We utilize an interest rate swap ~~agreements~~ to hedge our exposure to interest rate risk. At ~~December~~March 31, ~~2021~~2022, we had one outstanding interest rate swap ~~agreement~~ with a notional value of $80 million. The notional value of our interest rate swap ~~agreement~~ is expected to match the corresponding principal amount of a portion of our borrowings under the Credit Facility.

The $80 million notional value agreement was effective as of December 1, 2021 and expires on July 16, 2023. During this period, the notional amount will have a fixed interest rate of 2.125% and Bank of America, N.A., as counterparty to the agreement, will pay us interest at a floating rate based on the 1 month USD-LIBOR-BBA swap rate on the notional amount. Interest payments will be made monthly on a net settlement basis.

We had a $100 million notional value agreement which expired on December 1, 2021. From December 1, 2017 through December 1, 2021, the notional amount had a fixed interest rate of 1.9275% and Citizens Bank, National Association, as counterparty to the agreement, paid us interest at a floating rate based on the 1 month USD-LIBOR-BBA swap rate on the notional amount. Interest payments were made quarterly on a net settlement basis.

We designated the interest rate swaps as hedging instruments and they qualified for hedge accounting upon inception and at ~~December~~March 31, ~~2021~~2022. To continue to qualify for hedge accounting, the instruments must retain a “highly effective” ability to hedge interest rate risk for borrowings under the Credit 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 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 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 interest rate swaps and their respective locations in our consolidated balance sheets at December 31, 2021 and June 30, 2021 were as follows:

Description	Balance Sheet Location	December 31, 2021		June 30, 2021
Derivative interest rate swaps		(in thousands)
Short-term derivative liability	Accrued expenses and other current liabilities	$	1,255	$	1,564
Long-term derivative liability	Other liabilities	$	536	$	1,550

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~~The~~instrument ~~following~~were ~~table~~to ~~presents~~lose ~~the~~some ~~effect~~or all of ~~the~~its ~~derivative~~hedge ~~interest~~effectiveness, ~~rate~~changes ~~swaps~~ in ~~our~~fair ~~consolidated~~value ~~statement~~for ofthe ~~comprehensive~~“ineffective” ~~loss~~portion ~~for~~of the ~~six~~instrument ~~months~~would ~~ended~~be ~~December~~recorded ~~31,~~immediately ~~2021~~in ~~and 2020~~earnings.

	Gain (Loss) in AOCI June 30, 2021		Amount of Gain (Loss) Recognized in OCI on Derivative Instruments (Effective Portion)		Amount of (Gain) Loss Reclassified from AOCI into Net Loss (Effective Portion) (1)		Gain (Loss) in AOCI December 31, 2021
	(in thousands)
Derivative interest rate swap	$	(3,114)	$	403	$	920	$	(1,791)
	Gain (Loss) in AOCI June 30, 2020		Amount of Gain (Loss) Recognized in OCI on Derivative Instruments (Effective Portion)		Amount of (Gain) Loss Reclassified from AOCI into Net Loss (Effective Portion) (1)		Gain (Loss) in AOCI December 31, 2020
	(in thousands)
Derivative interest rate swap	$	(5,079)	$	7	$	905	$	(4,167)

The fair values of the interest rate swaps and their respective locations in our consolidated balance sheets at March 31, 2022 and June 30, 2021 were as follows:


Description	Balance Sheet Location	March 31, 2022		June 30, 2021
Derivative interest rate swaps		(in thousands)

Long-term derivative asset	Other assets	$	230	$	—
Short-term derivative liability	Accrued expenses and other current liabilities	$	316	$	1,564
Long-term derivative liability	Other liabilities	$	—	$	1,550

The following table presents the effect of the derivative interest rate swaps in our consolidated statement of comprehensive loss for the nine months ended March 31, 2022 and 2021.


	Gain (Loss) in AOCI June 30, 2021		Amount of Gain (Loss) Recognized in OCI on Derivative Instruments (Effective Portion)		Amount of (Gain) Loss Reclassified from AOCI into Net Loss (Effective Portion) (1)		Gain (Loss) in AOCI March 31, 2022
	(in thousands)
Derivative interest rate swap	$	(3,114)	$	1,712	$	1,316	$	(86)

	Gain (Loss) in AOCI June 30, 2020		Amount of Gain (Loss) Recognized in OCI on Derivative Instruments (Effective Portion)		Amount of (Gain) Loss Reclassified from AOCI into Net Loss (Effective Portion) (1)		Gain (Loss) in AOCI March 31, 2021
	(in thousands)
Derivative interest rate swap	$	(5,079)	$	171	$	1,355	$	(3,553)

——————

(1) Recorded as interest income (expense) within other expense, net in our unaudited condensed consolidated statements of comprehensive income (loss).

During the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022, we concluded that no portion of the hedges was ineffective.

We expect to reclassify approximately $10.3 million of this unrealized loss from AOCI to earnings over the next twelve months.

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Note 14—Postretirement and Other Employee Benefits

Defined Benefit Pension Plan

We sponsor defined benefit pension plans for our Swiss-based employees (the Swiss pension plans) that are governed by local regulatory requirements. The Swiss pension plans include certain minimum benefit guarantees that, under U.S. GAAP, require defined benefit plan accounting.

Net periodic pension costs for the Swiss pension plans included the following components:

	Three Months Ended December 31,				Six Months Ended December 31,
	Three Months Ended March 31,				Nine Months Ended March 31,
	2021		2020		2021		2020
	2022		2021		2022		2021
	(in thousands)
Components of net periodic cost
Service cost	$	~~704~~703	$	793	$	12,~~411~~114	$	12,~~558~~351
Interest cost	49		38		98147		75113
Prior service credit	(118)		(84)		(~~237~~355)		(~~167~~251)
Net actuarial loss	—		62		—		~~123~~185
Expected return on plan assets	(~~359~~358)		(~~301~~302)		(~~718~~1,076)		(~~586~~888)
Net periodic cost	$	276	$	~~508~~507	$	~~554~~830	$	1,~~003~~510

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

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

This Quarterly Report on Form 10-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 Form 10-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 Form 10-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 Form 10-K for the fiscal year ended June 30, 2021, as filed with the SEC on August 30, 2021.

In the management discussion that follows, we have highlighted those changes and operating 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 discussed arises from various individually insignificant items.

Pending Merger

On December 16, 2021, we entered into a Merger Agreement (See Note 2 to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q) to be acquired by the private equity investment firm Thoma Bravo for $57.00 in cash per outstanding common share. Consummation of the Merger is subject to customary closing conditions, including, without limitation, the absence of certain legal impediments ~~and approval by our stockholders~~.

Overview

We help make complex business payments simple, smart and secure. We provide solutions that are helping to accelerate the digital transformation of business payments. Corporations and banks rely on us for domestic and international payments, efficient cash management, automated workflows for payment processing and bill review, and fraud detection, behavioral analytics and regulatory compliance solutions.

We operate payment platforms that facilitate electronic payment and transaction settlement between businesses and their vendors. We offer solutions that banks use to provide payment, cash management and treasury capabilities to their business customers, as well as solutions that financial institutions use to engage intelligently with customers and acquire, deepen and grow profitable relationships. Our legal spend management solutions help determine the right amount to pay for legal services and claims for insurance companies and other large consumers of outside legal services and provide related tools and analytics for law firms themselves. Corporate customers rely on our solutions to automate payment and accounts payable processes and to streamline and manage the production and retention of electronic documents. Our fraud and risk management solutions are designed to non-invasively monitor and analyze user behavior and payment transactions to flag behavioral and data anomalies and other suspicious activity to gain protection from internal fraud and external financial crime.

Our solutions are designed to complement, leverage and extend our customers’ existing information systems, accounting applications and banking relationships so that the solutions 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 training, consulting and product enhancement.

Financial Highlights

For the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022, our revenue increased to $~~252~~384.42 million from $~~228~~349.43 million in the same period of the prior fiscal year. Our revenue for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 was favorably impacted by $21.43 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. The overall revenue increase was attributable to revenue increases in our Payment Platforms, Banking Solutions and Legal Spend Management segments of $1625.97 million, $812.21 million, and $2.1.9 million, respectively, partially offset by a $25.71 million revenue decrease in our Traditional Solutions segment. The increase in revenue in our Payment Platforms and Legal Spend Management segments was driven by increased subscription revenue driven by increased transactional volumes and the impact of new customers using these solutions. The increased revenue in our Banking Solutions segment was primarily due to new customer engagements and platform go-lives, as customers continue to transition to our hosted solutions. The decrease in revenue in our Traditional Solutions segment was due to decreased professional services, maintenance revenue and software revenue, as customers transitioned to our newer hosted and subscription based solutions.

We incurred a net loss of $2129.51 million in the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 compared to net loss of $49.20 million in the same period of the prior fiscal year. Our net loss for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 was driven by an increase in costs of subscription revenue of $1622.39 million attributable to our Payment ~~Platform~~Platforms, Banking Solutions and Legal Spend Management segments and an increase in operating expenses of $2840.29 million. The increase in operating expenses was driven by an increase in ~~sales and~~

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sales and marketing costs of $1319.53 million and product development and engineering costs of $58.54 million, as we continued to invest in our sales channel and new product innovation. General and administrative costs increased by $913.03 million, of which $58.3 million was related to our pending Merger and shareholder engagement initiatives. The increase in costs were partially offset by the $2435.0 million revenue increase discussed above and a $23.89 million reduction in cost of professional services and maintenance revenues.

In the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022, we derived approximately 39% of our revenue from customers located outside of North America, principally in the United Kingdom (UK), continental Europe and the Asia-Pacific region.

On anperiodic ~~increasing~~ basis, we continue to make 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 expect to continue to make investments in our suite of products so that we can continue to offer innovative, feature-rich technology solutions to our customers.

COVID-19

The United States and the global communities in which we operate continue to face challenges posed by the COVID-19 pandemic. ~~Recently~~Earlier in the fiscal year, restrictions ~~have~~were ~~been~~ re-implemented by government bodies and private businesses as disease variants became more prevalent, most ~~recently~~notably the omicron variant. There remains significant uncertainty over the duration of the pandemic itself, particularly as the virus continues to evolve. Since March 2020 we have continued to suspend virtually all travel for employees, our offices generally remain closed and our employees have continued to work remotely in most geographies.

While we continue to operate effectively during this challenging period, the full impact of the COVID-19 pandemic on our business and the global economy remains uncertain. The ultimate consequences will depend on many factors outside of our control, including the availability and effectiveness of vaccines and therapeutics and the ultimate duration and severity of the pandemic itself;, including the impact of the COVID variants that have emerged or that may emerge in the future.

Certain of our transactional revenue streams, specifically those arising through Paymode-X and Legal Spend Management, were the most significantly impacted during the prior fiscal year. We have continued to observe that transaction volumes for Paymode-X have continued to return to more normalized levels. Legal Spend Management transaction volumes remained constrained during the prior fiscal year but we saw some modest improvement during the fourth quarter of the past fiscal year and we recorded a revenue increase in Legal Spend Management for the three and six month periods ended December 31, 2021 as compared to December 31, 2020. We are encouraged by these trends and are hopeful that it supports a conclusion that a sustained recovery of volumes is underway.

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 they involve areas 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 Form 10-K for the fiscal year ended June 30, 2021 related to revenue recognition, the valuation of goodwill and intangible assets, the valuation of acquired deferred revenue, capitalized software costs and income taxes. There have been no changes to the critical accounting policies and estimates 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 Form 10-K for the fiscal year ended June 30, 2021, as filed with the SEC on August 30, 2021.

It is important that the discussion of our operating results that follows be read in conjunction with the critical accounting policies and estimates disclosed in Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, as filed with the SEC on August 30, 2021.

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, please refer to Note 3 Recent Accounting Pronouncements to our unaudited consolidated financial statements included in Part I. Item 1 of this Quarterly Report on Form 10-Q.

Results of Operations

Three and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2021~~2022 Compared to the Three and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2020~~2021

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.

24During the quarter ended September 30, 2021 we realigned our internal financial reporting to provide for more specific visibility into key product lines which resulted in a change to our externally reportable segments. Specifically, our prior Cloud Solutions segment was renamed Payment Platforms and includes the revenue and operating results of our Paymode-X and PTX payment platforms. Our Legal Spend Management Solutions is presented as a stand-alone operating segment, having previously been a component of our Cloud Solutions segment. Finally, our Financial Messaging solutions, previously a component of our Cloud

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During the quarter ended September 30, 2021 we realigned our internal financial reporting to provide for more specific visibility into key product lines which resulted in a change to our externally reportable segments. Specifically, our prior Cloud Solutions segment was renamed Payment Platforms and includes the revenue and operating results of our Paymode-X and PTX payment platforms. Our Legal Spend Management Solutions have been presented as a stand-alone operating segment, ~~having~~is ~~previously been a component of our Cloud Solutions segment. Finally, our Financial Messaging solutions, previously a component of our Cloud Solutions segment, has been~~ included as a component of our Banking Solutions segment. Our prior Payments and Documents segment has been renamed to Traditional Solutions, with no change to the composition of the revenue and operating activity included in this segment. These changes are reflected for all financial periods presented.

The following tables represent our segment revenues and our measure of segment 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
	2021		2020		$ Change Inc (Dec)		% Change Inc (Dec)		2021		2020		$ Change Inc (Dec)		% Change Inc (Dec)
	2022		2021		$ Change Inc (Dec)		% Change Inc (Dec)		2022		2021		$ Change Inc (Dec)		% Change Inc (Dec)
	(in thousands)
Segment revenue:
Payment Platforms	$	3537,~~972~~994	$	2729,~~542~~163	$	8,~~430~~831	30.63	%	$	69107,~~779~~773	$	5282,~~909~~072	$	1625,~~870~~701	31.93	%
Banking Solutions	4951,~~959~~181		4447,~~249~~211		53,~~710~~970		128.94	%	97148,~~640~~821		89136,~~478~~689		812,~~162~~132		98.19	%
Legal Spend Management	2221,~~456~~957		2122,~~849~~147		~~607~~(190)		2(0.89)	%	4466,~~519~~476		4264,~~399~~546		21,~~120~~930		53.0	%
Traditional Solutions	1516,~~684~~444		1718,~~178~~810		(12,~~494~~366)		(812.76)	%	3148,~~876~~320		3453,~~574~~384		(25,~~698~~064)		(79.85)	%
Other	4,~~716~~260		53,~~206~~554		~~(490)~~706		(919.4)9	%	812,~~578~~838		912,~~029~~583		~~(451)~~255		(52.0)	%
Total segment revenue	$	~~128~~131,~~787~~836	$	~~116~~120,~~024~~885	$	1210,~~763~~951	119.01	%	$	~~252~~384,~~392~~228	$	~~228~~349,~~389~~274	$	2434,~~003~~954	10.50	%
Segment measure of profit (loss):
Payment Platforms	$	53,~~822~~986	$	64,~~015~~267	$	(~~193~~281)	(36.26)	%	$	1115,~~646~~632	$	1116,~~770~~037	$	(~~124~~405)	(12.15)	%
Banking Solutions	34,~~697~~787		34,~~891~~641		~~(194)~~146		(53.0)1	%	712,~~450~~237		1115,~~103~~744		(3,~~653~~507)		(3222.93)	%
Legal Spend Management	43,~~468~~820		5,~~656~~550		(1,~~188~~730)		(2131.02)	%	913,~~676~~496		1015,~~242~~792		(~~566~~2,296)		(514.5)	%
Traditional Solutions	34,~~571~~828		45,~~087~~213		(~~516~~385)		(127.64)	%	611,~~685~~513		813,~~187~~400		(1,~~502~~887)		(1814.31)	%
Other	(34,~~548~~101)		(13,~~945~~842)		(~~1,603~~259)		(826.47)	%	(711,~~524~~625)		(58,~~052~~894)		(2,~~472~~731)		(4830.97)	%
Total measure of segment profit	$	1413,~~010~~320	$	1715,~~704~~829	$	(32,~~694~~509)	(2015.9)	%	$	2741,~~933~~253	$	3652,~~250~~079	$	(810,~~317~~826)	(2220.98)	%

A reconciliation of the total measure of segment profit to our 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,
	2021		2020		2021		2020
	2022		2021		2022		2021
	(in thousands)
Total measure of segment profit	$	1413,~~010~~320	$	1715,~~704~~829	$	2741,~~933~~253	$	3652,~~250~~079
Less:
Amortization of acquisition-related intangible assets	(5,~~180~~255)		(5,~~142~~443)		(1015,~~251~~506)		(1015,~~171~~614)
Stock-based compensation plan expense	(1314,~~657~~279)		(1211,~~173~~498)		(2741,~~569~~848)		(2233,~~146~~644)
Acquisition and integration-related expenses	(~~142~~24)		(~~1,095~~738)		(~~343~~367)		(12,~~340~~078)
Restructuring expense	28		(921)		(358)		(991)
Restructuring income (expense)	70		4		(288)		(987)
Excess depreciation, including associated with restructuring events	~~(357)~~—		~~(528)~~—		(357)		(528)
Other non-core expense	(~~281~~217)		(4852)		(~~391~~608)		(96148)
Shareholder engagement fees	~~(832)~~—		—		(1,779)		—
Asset write-off	~~(71)~~—		—		(71)		—
Costs associated with pending Merger	(32,~~507~~990)		—		(36,~~507~~497)		—
Other expense, net of pension adjustments	(930)		(1,139)		(1,938)		(2,165)
Other income (expense), net of pension adjustments	1,994		(1,536)		56		(3,701)
Loss before income taxes	$	(107,~~919~~381)	$	(3,~~342~~434)	$	(1826,~~631~~012)	$	(14,~~187~~621)

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Payment Platforms

Revenue from our Payment Platforms segment increased $8.48 million for the three months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year due to increased subscription revenue of $8.37 million driven by both increased transactional volumes and the impact of new customers that ~~have~~ adopted our platforms since the corresponding quarter of the prior fiscal year. Segment profit decreased $0.2 million for the three months ended December 31, 2021 as compared to the same period in the prior fiscal year as the revenue increases described above were offset by increased cost of subscription revenue of $3.1 million and operating expenses of $5.6 million related primarily to increased sales and marketing expenses and product development expenses of $3.6 million and $1.4 million, respectively.

Revenues from our Payment Platforms segment increased $16.9 million for the six months ended December 31, 2021 as compared to the same period in the prior fiscal year, primarily due to increased subscription revenue of $16.5 million driven by both increased transactional volumes and the impact of new customers that have adopted our platform since the corresponding period of the prior fiscal year. Segment profit decreased $0.1 million for the six months ended December 31, 2021 as compared to the same period in the prior fiscal year, as the increase in revenue described above was offset in part by an increase in operating expenses of $11.2 million primarily related to sales and marketing expenses of $7.3 million, product development expenses of $2.9 million, and general and administrative expenses of $1.0 million and increased cost of revenues of $5.8 million primarily related to subscriptions costs. 26

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profit decreased $0.3 million for the three months ended March 31, 2022 as compared to the same period in the prior fiscal year as the revenue increases described above were offset by increased cost of subscription revenue of $3.3 million and operating expenses of $5.9 million which related primarily to increased sales and marketing expenses and product development expenses of $4.4 million and $1.3 million, respectively.

Revenues from our Payment Platforms segment increased $25.7 million for the nine months ended March 31, 2022 as compared to the same period in the prior fiscal year, primarily due to increased subscription revenue of $25.2 million driven by both increased transactional volumes and the impact of new customers that have adopted our platform since the corresponding period of the prior fiscal year. Segment profit decreased $0.4 million for the nine months ended March 31, 2022 as compared to the same period in the prior fiscal year, as the increase in revenue described above was offset in part by an increase in operating expenses of $17.1 million primarily related to sales and marketing expenses of $11.6 million, product development expenses of $4.2 million, and general and administrative expenses of $1.3 million and increased cost of revenues of $9.0 million primarily related to subscriptions costs.

Banking Solutions

Revenues from our Banking Solutions segment increased $54.70 million for the three months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year, primarily due to increased subscriptions revenue ~~and service revenue~~ of $53.89 million ~~and $0~~.7 ~~million, respectively, partially offset by decreased maintenance revenue of $0.8 million.~~ The increase in subscriptions revenue was primarily related to our existing customer base expanding on or converting to our newer, more technologically advanced SaaS platforms and as a result of ~~our~~the continued deployment of our newer banking solutions to new and existing customers. The increase in revenue described above was partially offset by increased cost of revenues of $31.2 million, primarily related to subscription costs, and operating expenses of $2.7 million. The increase in operating expenses was primarily due to increased sales and marketing expenses, product development expenses, and general and administrative expenses of $1.54 million, $0.8 million and $0.95 million, respectively. Segment profit ~~decreased~~increased $0.21 million for the three months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year due to the increases in revenue and expenses described above.

Revenues from our Banking Solutions segment increased $812.21 million for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year, primarily due to increased subscriptions revenue and service revenue of $812.87 million and $12.43 million, respectively, partially offset by decreased maintenance revenue of $2.08 million. The increase in subscriptions revenue was primarily related to our existing customer base expanding on or converting to our newer, more technologically advanced SaaS platforms and as a result of ~~our~~the continued deployment of our newer banking solutions to new and existing customers. The increase in revenue described above was offset by increased cost of revenues of $56.45 million, primarily related to subscription costs, and operating expenses of $69.41 million. The increase in operating expenses was primarily due to increased sales and marketing expenses of $3.4.8 million, product development and engineering costs of $12.53 million and general and administrative expenses of $12.51 million. Segment profit decreased $3.75 million for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year due to the increases in revenue and expenses described above.

Legal Spend Management

Revenues from our Legal Spend Management segment ~~increased~~decreased $0.62 million for the three months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year, due to ~~increased~~a decreased in subscription revenue driven by ~~increased~~lower transactional volumes during ~~and~~ the ~~impact of new customers using these solutions since the corresponding~~ quarter ~~of the prior fiscal year~~. Segment profit decreased $1.27 million for the three months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year asdue ~~the~~to ~~increase in subscription revenue discussed above was offset by~~ an increase in cost of revenues of $01.80 million, primarily related to ~~subscriptions,~~subscription costs and an increase in operating expenses of $1.0.6 million, primarily due to ~~product~~$0.2 ~~development~~million ~~expenses~~in ~~and~~product ~~general~~development and ~~administrative~~engineering ~~expenses~~costs ofand $0.52 million ~~and~~in ~~$0.5~~general ~~million,~~and ~~respectively~~administrative expenses.

Revenues from our Legal Spend Management segment increased $2.1.9 million for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year, due to increased subscription revenue driven by increased transactional volumes and the impact of new customers using these solutions since the corresponding period of the prior fiscal year. Segment profit decreased $02.63 million for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year, as the increase in revenue discussed above was offset by an increase in cost of revenues of $12.4 million, primarily related to subscriptions, and operating expenses of $1.38 million, primarily related to sales and marketing expenses of $0.24 million, product development expenses of $0.24 million and general and administrative expense of $01.80 million.

Traditional Solutions

Revenues from our Traditional Solutions segment decreased $12.54 million for the three months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year, primarily due to decreased professional service and maintenance revenue of $1.6 million and ~~software revenue of $0.2 million, partially offset by increased~~ subscriptions revenue of $0.56 million. The decrease in professional service and maintenance revenue ~~and software revenue~~ was driven by the continued conversion of our customers to our hosted and subscription based solutions rather than deployed, perpetual license solutions. The decrease in subscription revenue was due to lower transactional volume in the quarter. Segment profit decreased $0.54 million for the three months ended March 31, 2022 as compared to the same period in the prior fiscal year, as the decrease in revenues discussed above was partially offset by a decrease in cost of revenue of $0.8 million related primarily to subscription and professional service and maintenance costs, and a decrease in operating costs of $1.2 million, primarily related to sales and marketing expenses.

26Revenues from our Traditional Solutions segment decreased $5.1 million for the nine months ended March 31, 2022 as compared to the same period in the prior fiscal year, primarily due to decreased professional service and maintenance revenue of $4.4

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million and software revenue of $0.7 million, partially offset by increased subscriptions revenue of $0.2 million. The decrease in professional service and maintenance revenue and software revenue was driven by the ~~three~~continued conversion of our customers to our hosted and subscription based solutions rather than deployed, perpetual license solutions. Segment profit decreased $1.9 million for the nine months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year, as the decrease in revenues discussed above ~~was~~were partially offset by a decrease in ~~cost~~costs of revenue of $02.93 million ~~related~~ primarily toassociated ~~subscription~~with ~~and~~ professional service and maintenance costs, and a decrease in operating expenses of $0. 8 million, primarily related to sales and marketing expenses.

Revenues from our Traditional Solutions segment decreased $2.7 million for the six months ended December 31, 2021 as compared to the same period in the prior fiscal year, primarily due to decreased professional service and maintenance revenue of $2.9 million and software revenue of $0.5 million, partially offset by increased subscriptions revenue of $0.8 million. The decrease in professional service and maintenance revenue and software revenue was driven by the continued conversion of our customers to our hosted and subscription based solutions rather than deployed, perpetual license solutions. Segment profit decreased $1.5 million for the six months ended December 31, 2021 as compared to the same period in the prior fiscal year, as the decrease in revenues discussed above were partially offset by a decrease in costs of revenue of $1.6 million primarily associated with professional service and maintenance costs.

Other

Revenues from our Other segment ~~decreased~~increased $0.57 million for the three months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year, primarily due to ~~decreased~~increased subscription revenue and software revenue of $0.54 and $0.2 million, respectively. Segment profit decreased $10.63 million for the three months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year primarily due ~~the~~to ~~decrease in revenue discussed above and~~ an increase in cost of revenue of $0.5 million primarily related to professional services and maintenance costs, and increased operating expenses of $0.5 million primarily related to product development expenses, partially offset by the increase in revenue discussed above.

Revenues from our Other segment ~~decreased~~increased $0.53 million for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year, primarily due to ~~decreased~~an ~~maintenance~~increase ~~revenue~~in ofsubscription $0revenue.4 ~~million.~~ Segment profit decreased $2.57 million for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year primarily due to ~~the decrease in revenues discussed above and~~ an increase in cost of revenue of $01.93 million primarily related to subscriptions, professional service and maintenance costs, and increased operating expenses of $1.27 million primarily related to sales and marketing and product development. expenses, partially offset by the increase in revenue discussed above.

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
	2021			2020			$ Change Inc (Dec)		% Change Inc (Dec)		2021			2020			$ Change Inc (Dec)		% Change Inc (Dec)
	2022			2021			$ Change Inc (Dec)		% Change Inc (Dec)		2022			2021			$ Change Inc (Dec)		% Change Inc (Dec)
	(in thousands)
Revenues:
Subscriptions	$	~~108~~112,~~482~~135		$	9399,~~398~~939		$	1512,~~084~~196	1612.2	%	$	~~211~~324,~~978~~113		$	~~183~~283,~~782~~721		$	2840,~~196~~392	1514.32	%
Software licenses	1,~~153~~006			1,~~802~~092			(~~649~~86)		(367.09)	%	23,~~080~~086			23,~~779~~871			(~~699~~785)		(2520.23)	%
Service and maintenance	18,~~632~~138			2019,~~022~~292			(1,~~390~~154)		(6.90)	%	3755,~~340~~478			4059,~~586~~878			(34,~~246~~400)		(87.03)	%
Other	~~520~~557			~~802~~562			(~~282~~5)		(350.29)	%	~~994~~1,551			1,~~242~~804			(~~248~~253)		(2014.0)	%
Total revenues	$	~~128~~131,~~787~~836		$	~~116~~120,~~024~~885		$	1210,~~763~~951	119.01	%	$	~~252~~384,~~392~~228		$	~~228~~349,~~389~~274		$	2434,~~003~~954	10.50	%
As % of total revenues:
Subscriptions	8485.21		%	8082.57		%					84.04		%	8081.52		%
Software licenses	0.97		%	10.69		%					0.8		%	1.21		%
Service and maintenance	1413.58		%	1716.30		%					14.84		%	17.81		%
Other	0.4		%	0.64		%					0.4		%	0.56		%
Total revenues	100.0		%	100.0		%					100.0		%	100.0		%

Subscriptions

Revenues from subscriptions increased $1512.12 million for the three months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year. The overall revenue increase was driven by an increase in subscriptions revenue from our Payment Platforms, and Banking Solutions ~~and Legal Spend Management~~ segments of $8.37 million, ~~$5.8 million,~~ and $03.69 million, respectively, due to the impact of customers going live on or expanding their use of our hosted solutions and the continued impact of customers converting to our newer, subscription based solutions.

Revenues from subscriptions increased $2840.24 million for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year. The overall revenue increase was driven by an increase in subscriptions revenue from our Payment Platforms, Banking Solutions and Legal Spend Management segments of $1625.52 million, $812.87 million, and $2.1.9 million, respectively, due to the impact of customers going live on or expanding their use of our hosted solutions and the continued impact of customers converting to our newer subscription based solutions.

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Software Licenses

Revenues from software licenses ~~slightly~~remained ~~decreased~~relatively consistent for the three months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year~~, primarily due to decreased revenue from our Traditional Solutions segment of $0~~.2 ~~million~~We ~~and~~anticipate ~~our~~that ~~Other~~software ~~segment~~license ofarrangements ~~$0.5~~will ~~million.~~continue ~~The~~to ~~decrease~~be de-emphasized in ~~software~~order ~~license~~to ~~revenue~~focus ~~was~~on ~~driven by~~ the continued conversion of our customers to our hosted and subscription based solutions ~~and our continued de-emphasis of deployed, perpetual license solutions~~.

Revenues from software licenses slightly decreased for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year, primarily due to decreased revenue from our Traditional Solutions segment of $0.57 million ~~and our Other segment of $0~~.2 ~~million.~~ The decrease in software license revenue was driven by the continued conversion of our customers to our hosted and subscription based solutions and our continued de-emphasis of deployed, perpetual license solutions.

Service and Maintenance

Revenues from service and maintenance decreased $1.42 million for the three months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year, primarily due to decreased revenue from our Traditional Solutions segment of $1.6 million driven by the continued conversion of our customers to our hosted and subscription based solutions rather than deployed, perpetual license solutions~~, partially offset by an increase in our Other segment of $0~~.~~2 million.~~

Revenues from service and maintenance decreased $34.24 million for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year, primarily due to decreased revenue from our Traditional Solutions and Banking Solutions segments of $24.94 million and $0.65 million, respectively, driven by the continued conversion of our customers to our hosted and subscription based solutions rather than deployed, perpetual license solutions, partially offset by an increase in revenue in our Payment Platforms segment of $0.45 million.

Other

Our other revenues consist principally of equipment and supplies sales, which remained and are expected to remain minor components of our overall revenue.

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
	2021			2020			$ Change Inc (Dec)		% Change Inc (Dec)		2021			2020			$ Change Inc (Dec)		% Change Inc (Dec)
	2022			2021			$ Change Inc (Dec)		% Change Inc (Dec)		2022			2021			$ Change Inc (Dec)		% Change Inc (Dec)
	(in thousands)
Cost of revenues:
Subscriptions	$	4645,~~030~~792		$	3739,~~195~~194		$	86,~~835~~598	2316.8	%	$	88134,~~723~~515		$	72111,~~413~~607		$	1622,~~310~~908	2220.5	%
Software licenses	60142			~~126~~116			~~(66)~~26		~~(52~~22.4)	%	~~141~~283			~~216~~332			(7549)		(3414.78)	%
Service and maintenance	9,~~242~~362			10,~~386~~450			(1,~~144~~088)		(1110.04)	%	1827,~~494~~856			2131,~~302~~752			(23,~~808~~896)		(1312.23)	%
Other	~~330~~364			~~551~~375			(~~221~~11)		(402.19)	%	~~625~~989			~~860~~1,235			(~~235~~246)		(2719.39)	%
Total cost of revenues	$	55,~~662~~660		$	4850,~~258~~135		$	75,~~404~~525	1511.30	%	$	~~107~~163,~~983~~643		$	94144,~~791~~926		$	1318,~~192~~717	1312.9	%
Gross Profit ($)	$	7376,~~125~~176		$	6770,~~766~~750		$	5,~~359~~426	7.97	%	$	~~144~~220,~~409~~585		$	~~133~~204,~~598~~348		$	1016,~~811~~237	87.19	%
Gross Profit (%)	5657.8		%	58.45		%					57.24		%	58.5		%

Subscriptions

Subscriptions 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 costs increased slightly to 4241% as a percentage of subscriptions revenues in the three months ended ~~December~~March 31, ~~2021~~2022 as compared to 4039% in the three months ended ~~December~~March 31, ~~2020~~2021 due to year-over-year cost of revenue increases as we continued to grow our subscription revenue streams.

Subscriptions costs increased to 42% as a percentage of subscriptions revenues in the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 as compared to 39% in the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021 due to year-over-year cost of revenue increases as we continued to grow our subscription revenue streams.

Software Licenses

Software license costs consist of expenses incurred to 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 asremained a ~~percentage~~minor component of ~~software~~our ~~license~~overall ~~revenues~~cost ~~decreased~~of ~~slightly~~revenue ~~and~~for ~~inconsequentially~~both ~~to 5% in~~ the three ~~months~~and ~~ended~~nine ~~December 31, 2021 as compared to 7% in the three~~ months ~~ended~~ending ~~December~~March 31, ~~2020~~2022 and 2021.

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Software license costs as a percentage of software license revenues decreased slightly and inconsequentially to 7% of software license revenue in the six months ended December 31, 2021 as compared to 8% in the six months ended December 31, 2020.

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 as a percentage of service and maintenance revenues decreased to 50% in the three months ended December 31, 2021 as compared to 52% in the three months ended December 31, 2020, reflecting a shift in resources to our hosted and subscription based products, the costs of which are included in subscriptions costs of revenues.

Service and maintenance costs as a percentage of service and maintenance revenues decreased to 50% in the six months ended December 31, 2021 as compared to 52% in the six months ended December 31, 2020, reflecting a shift in resources to our hosted and subscription based products, the costs of which are included in subscriptions costs of revenue. 29

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costs as a percentage of service and maintenance revenues decreased to 52% in the three months ended March 31, 2022 as compared to 54% in the three months ended March 31, 2021, reflecting a shift in resources to our hosted and subscription based products, the costs of which are included in subscriptions costs of revenues.

Service and maintenance costs as a percentage of service and maintenance revenues decreased to 50% in the nine months ended March 31, 2022 as compared to 53% in the nine months ended March 31, 2021, reflecting a shift in resources to our hosted and subscription based products, the costs of which are included in subscriptions costs of revenue.

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. These remain minor cost components of our business.

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
	2021			2020			$ Change Inc (Dec)		% Change Inc (Dec)		2021			2020			$ Change Inc (Dec)		% Change Inc (Dec)
	2022			2021			$ Change Inc (Dec)		% Change Inc (Dec)		2022			2021			$ Change Inc (Dec)		% Change Inc (Dec)
	(in thousands)
Operating expenses:
Sales and marketing	$	3437,~~655~~346		$	2931,~~237~~525		$	5,~~418~~821	18.5	%	$	68105,~~469~~815		$	5486,~~980~~505		$	1319,~~489~~310	2422.53	%
Product development and engineering	2123,~~752~~095			1920,~~183~~224			2,~~569~~871		1314.42	%	4366,~~217~~312			3757,~~682~~906			58,~~535~~406		14.75	%
General and administrative	2119,~~617~~925			1615,~~658~~678			4,~~959~~247		2927.81	%	3959,~~366~~291			3045,~~284~~962			913,~~082~~329		3029.0	%
Amortization of acquisition-related intangible assets	5,~~180~~255			5,~~142~~443			38(188)		0(3.75)	%	1015,~~251~~506			1015,~~171~~614			80(108)		(0.87)	%
Total operating expenses	$	8385,~~204~~621		$	7072,~~220~~870		$	12,~~984~~751	1817.5	%	$	~~161~~246,~~303~~924		$	~~133~~205,~~117~~987		$	2840,~~186~~937	2119.29	%
As % of total revenues:
Sales and marketing	2628.93		%	2526.21		%					27.15		%	24.18		%
Product development and engineering	1617.95		%	16.57		%					17.13		%	16.56		%
General and administrative	1615.81		%	1413.40		%					15.64		%	13.32		%
Amortization of acquisition-related intangible assets	4.0		%	4.45		%					4.10		%	4.5		%
Total operating expenses	64.69		%	60.53		%					6364.92		%	5859.31		%

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 $5.48 million in the three months ended ~~December~~March 31, ~~2021~~2022 as compared to the three months ended ~~December~~March 31, ~~2020~~2021, primarily due to an increase in employee related costs of $4.04 million, marketing expense of $0.59 million and travel costs of $0.32 million.

Sales and marketing expenses increased $1319.53 million in the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 as compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021, primarily due to an increase in employee related costs of $1014.48 million, marketing expense of $12.3 million, equipment related costs of $0.4 million, third party services of $0.4 million and travel costs of $0.45 million.

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 as well as initiatives related to new product development. Product development and engineering expenses increased $2.69 million in the three months ended ~~December~~March 31, ~~2021~~2022 as compared to the three months ended ~~December~~March 31, ~~2020~~2021, primarily due to an increase in headcount related costs of $2.13 million.

Product development and engineering expenses increased $58.54 million in the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 as compared to the ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021, primarily due to an increase in headcount related costs of $4.6.9 million and an increase in third party technology costs and depreciation expense of $0.4 million.

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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 increased $54.02 million in the three months ended ~~December~~March 31, ~~2021~~2022 as compared to the three months ended ~~December~~March 31, ~~2020~~2021, primarily due to Merger related costs ~~and costs associated with shareholder engagement initiatives~~ of $4.3.0 million and, to a lesser extent, employee related costs.

General and administrative expenses increased $9.1 million in the six months ended December 31, 2021 as compared to the six months ended December 31, 2020, primarily due to Merger related costs and costs associated with shareholder engagement initiatives of $5.3 million and, to a lesser extent, employee related costs. 30

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General and administrative expenses increased $13.3 million in the nine months ended March 31, 2022 as compared to the nine months ended March 31, 2021, primarily due to Merger related costs of $6.5 million, costs associated with shareholder engagement initiatives of $1.8 million and to a lesser extent, employee related costs.

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
	2021		2020		$ Change Inc (Dec)		% Change Inc (Dec)		2021		2020		$ Change Inc (Dec)		% Change Inc (Dec)
	2022		2021		$ Change Inc (Dec)		% Change Inc (Dec)		2022		2021		$ Change Inc (Dec)		% Change Inc (Dec)
	(Dollars in thousands)
Interest income	$	2233	$	9537	$	(734)	(7610.8)	%	$	4578	$	~~195~~232	$	(~~150~~154)	(7666.94)	%
Interest expense	(~~1,021~~941)		(~~1,323~~993)		~~302~~52		225.82	%	(23,~~087~~028)		(23,~~581~~574)		~~494~~546		1915.13	%
Other income (expense), net	~~159~~2,972		~~340~~(358)		~~(181)~~3,330		~~(53~~930.2)	%	~~305~~3,277		~~718~~360		~~(413)~~2,917		~~(57~~810.5)3	%
Other expense, net	$	~~(840)~~2,064	$	(~~888~~1,314)	$	483,378	(5257.4)1	%	$	~~(1,737)~~327	$	(12,~~668~~982)	$	~~(69)~~3,309	(4111.1)0	%

The components of other expense, net are as depicted above ~~and remain minimal overall components of our operations~~. The slight decrease in interest expense in the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 as compared to the three and ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021, respectively, is a result of a decrease in borrowings under our line of credit arrangement during the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 as compared to the three and ~~six~~nine months ended ~~December~~March 31, ~~2020~~2021. The increase in other income in the three and nine month period ended March 31, 2022 is due to a $2.5 million unrealized gain on an equity investment we hold.

Provision for Income Taxes

We recorded an income tax provision of $50.71 million and $1.3 million for the three months ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021, respectively. We recorded an income tax provision of $23.91 million and $34.04 million for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021, respectively. Please refer to Note 9 Income Taxes to our unaudited condensed consolidated financial statements included in Part I. Item 1 of this Quarterly Report on Form 10-Q for further discussion.

Liquidity and Capital Resources

We are party to a credit agreement with Bank of America, N.A. and certain other lenders that provides for a credit facility in the amount of up to $300 million (the Credit Facility). We have the right to request an increase to the aggregate commitments to the Credit Facility of up to an additional $150 million, subject to specified conditions. The Credit Facility expires in July 2023. At ~~December~~March 31, ~~2021~~2022, borrowings were $130 million and we were in compliance with all covenants.

We have financed our operations primarily from cash provided by operating activities, the sale of our common stock and debt proceeds. We have consistently generated positive operating cash flows. 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 operating requirements, we may need to sell additional equity or debt securities or seek other financing arrangements.

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 for the periods ended ~~December~~March 31, ~~2021~~2022 and June 30, 2021 and a summary of our cash activity for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021 are summarized in the tables below:

	December 31,		June 30,
	March 31,		June 30,
	2021		2021
	2022		2021
	(in thousands)
Cash and cash equivalents	$	83117,~~726~~605	$	133,932
Marketable securities	~~2,967~~964		10,216
Borrowings under credit facility	130,000		130,000

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Six Months Ended December 31,

Nine Months Ended March 31,

2021

2020

2022

2021

(in thousands)

Cash provided by operating activities

2863,~~430~~250

2461,~~177~~397

Cash used in investing activities

(2735,~~841~~088)

(3475,~~725~~472)

Cash used in financing activities

(4745,~~687~~240)

(5856,~~586~~166)

Effect of exchange rates on cash

(~~951~~2,278)

75,~~774~~849

Cash, cash equivalents and marketable securities. At ~~December~~March 31, ~~2021~~2022, our cash and cash equivalents of $83117.76 million consisted primarily of cash deposits held at major banks and money market funds. The $5016.23 million decrease in cash and cash equivalents at ~~December~~March 31, ~~2021~~2022 from June 30, 2021 was primarily due to cash used to repurchase common stock of $50.0 million, to fund capital expenditures, including capitalization of software costs of $2029.12 million, to fund business and asset acquisitions, net of cash acquired of $15.1 million, partially offset by cash generated from operations of $2863.43 million, ~~and~~ proceeds from the sale of available for sale securities of $810.1 million and proceeds from our employee stock purchase plan of $4.8 million.

Cash, cash equivalents and marketable securities included approximately $4072.23 million held by our foreign subsidiaries as of ~~December~~March 31, ~~2021~~2022. We continue to permanently reinvest the earnings, if any, of our international subsidiaries other than the UK, Switzerland and India; therefore we do not provide for U.S. income taxes that could result from the distribution of foreign earnings from our international subsidiaries other than the aforementioned. If our reinvestment plans were to change based on future events and we decided to repatriate amounts from other international subsidiaries, those amounts would generally become subject to state tax in the U.S. to the extent there were cumulative profits in the foreign subsidiary from which the distribution to the U.S. was made and we could be further subject to withholding tax.

Cash and cash equivalents held by our foreign subsidiaries are denominated in currencies other than U.S. Dollars. 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 $12.03 million for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022. Further changes in the foreign currency exchange rates of the British Pound Sterling 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 experience, are adequate to meet our operating requirements for the foreseeable future.

At ~~December~~March 31, ~~2021~~2022, our deferred tax assets have been fully reserved since, given the available evidence, it was deemed more likely than not that these deferred tax assets would not be realized.

Operating Activities. Operating cash flow is derived by adjusting our net income or loss for non-cash operating items, such as depreciation and amortization, stock-based compensation plan expense, deferred income tax benefits or expenses 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 increased by $41.39 million in the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year, primarily due to an increase in cash provided by changes in accounts payable and accrued expenses of $910.0 million, prepaid and current assets of $12.43 million and other assets of $34.24 million, deferred revenue of $4.0 million, partially offset by the increase in our net loss for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 of $1720.31 million.

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 $640.94 million decrease in net cash used in investing activities for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 as compared to the same period in the prior fiscal year was primarily due to a decrease in cash used to fund business and asset acquisitions, net of cash acquired, of $26.2 million and notes receivable of $2.6 million, a decrease in cash used to purchase available for sale securities of $79.3 million and to purchase other investments of $7.10 million, partially offset by an increase in cash used to fund ~~business~~capital ~~and asset acquisitions~~expenditures, ~~net~~inclusive of ~~cash~~software ~~acquired,~~costs of $54.29 million ~~and capital expenditures of $5~~.1 ~~million.~~

Financing Activities. Financing cash flows consist primarily of cash inflows as a result of borrowings under our revolving credit facility and proceeds from the sale of shares of common stock through employee equity incentive plans, offset by repurchases of our common stock. The decrease in cash used in financing activities of $10.9 million was due to a decrease in cash used to repay debt of $50.0 million, offset by an increase in cash used to repurchase common stock of $39.2 million during the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022.

Contractual Obligations

During the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022, we entered into new facility leases in India and renewed leases for data centers in the US, UK and Switzerland, increasing our contractual obligations by $56.12 million. Other than these new leases, there have been no other material changes to the contractual obligations from that which was disclosed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, as filed with the SEC on August 30, 2021.

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Our estimate of unrecognized tax benefits for which cash settlement may be required is $2.4 million. As of ~~December~~March 31, ~~2021~~2022, 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.

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 and fair value changes. 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.

We are a party to an interest rate swap agreement which we designated as a hedge instrument 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 Item 7A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 as filed with the SEC on August 30, 2021, which is incorporated herein by reference.

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, ~~2021~~2022. The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-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, ~~2021~~2022, 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.

No changes in our internal control over financial reporting occurred during the fiscal quarter ended ~~December~~March 31, ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

~~All~~The ofStein complaint, the ~~complaints~~Justice ~~seek~~complaint, and the Le complaint all seek among other things, (i) injunctive relief preventing the consummation of the transactions contemplated by the Merger Agreement; (ii) rescission or rescissory damages in the event the transactions contemplated by the Merger Agreement have been implemented; (iii) dissemination of a proxy statement that does not omit material information or contain any misleading disclosures; (iv) a declaration that defendants violated Sections 14(a) and/or 20(a) of the Exchange Act (except the Stein Complaint and the Le Complaint) or that our directors violated their fiduciary duties (except the Stein Complaint and the Justice Complaint); (v) to direct the defendants to account to plaintiff for all damages suffered (except the Justice Complaint); and (vi) an award of plaintiff’s expenses, including attorneys’ and experts’ fees.

WeThe ~~believe~~Initial 220 Demand, the ~~claims~~Stein ~~asserted~~Complaint, inthe ~~each~~Justice Complaint, and the Le Complaint were resolved by our filing on February 25, 2022 of a supplement to our definitive proxy statement. The supplement to our proxy statement included certain informational disclosures requested by the ~~complaints~~plaintiffs and the Initial 220 Demand, and the parties are ~~without~~attempting ~~merit.~~to negotiate a resolution to these claims.

In addition, on February 28, 2022, another purported stockholder of Bottomline made a demand pursuant to Section 220 of the DGCL to inspect certain books and records of ours relating to the transactions contemplated by the Merger Agreement. On March 23, 2022, that purported stockholder filed a complaint pursuant to Section 220 of the DGCL in the Court of Chancery of the State of Delaware against us, captioned Teamsters Local 237 Additional Security Benefit Fund v. Bottomline Technologies, Inc., Case No. 2022-0275. The complaint seeks (i) to inspect certain books and records of ours relating to the transactions contemplated by the Merger Agreement in order to investigate the process leading to the Merger Agreement and the independence of our directors and officers and to value our shares and (ii) an award of plaintiff’s expenses, including attorneys’ fees. The parties are in the process of

attempting to negotiate a resolution to these claims and must provide a status update to the Court on or before June 3, 2022.

Additional lawsuits may be filed against us, our Board of Directors, Parent and/or Merger Sub in connection with the transactions contemplated by the Merger Agreement.

Capitalized terms used but not otherwise defined herein have the meaning set forth in Note 2 to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for defined terms.

We are, from time to time, a party to other 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

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 on Form 10-K for the fiscal year ended June 30, 2021 before making an investment decision involving our common stock. These risk factors and the risk factors below related to the pending Merger, 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 Form 10-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.

If the Merger does not occur, it could have a material adverse effect on our business, results of operations, financial condition and stock price.

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On December 16, 2021, we entered into the Merger Agreement. Upon completion of the Merger, we will become a wholly owned subsidiary of Parent and will cease to be publicly owned and traded. There are, however, many contingencies which may cause the Merger not to occur.

Completion of the Merger is subject to the satisfaction of various conditions, including but not limited to, the absence of certain legal impediments ~~and approval by our stockholders~~. There is no assurance that all of the various conditions will be satisfied, or that the Merger will be completed on the proposed terms, within the expected timeframe, or at all.

The Merger gives rise to inherent risks that include:

•the price of our common stock will change if the Merger is not completed to the extent that the current market price of our stock reflects an assumption that the Merger will be completed;

•the amount of cash to be paid under the Merger Agreement is fixed and will not be adjusted for changes in our business, assets, liabilities, prospects, outlook, financial condition or results of operations or in the event of any change in the market price of, analyst estimates of, or projections relating to, our common stock;

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•legal or regulatory proceedings, including regulatory approvals from domestic and foreign governmental entities (including any conditions, limitations or restrictions placed on these approvals) and the risk that such governmental entities may delay or deny approval, or other matters that affect the timing or ability to complete the transaction as contemplated;

•pending stockholder litigation that could prevent or delay the Merger or otherwise negatively impact our business and operations;

•the possibility of disruption to our business, including increased costs and diversion of management time and resources;

•difficulties maintaining business and operational relationships, including relationships with customers, suppliers, and other business partners;

•the inability to attract and retain key personnel pending consummation of the Merger;

•the inability to pursue alternative business opportunities or make changes to our business pending the completion of the Merger;

•the requirement that we pay a termination fee of $78 million to Parent if the Merger Agreement is terminated under certain circumstances;

•developments beyond our control including, but not limited to, changes in domestic or global economic conditions that may affect the timing or success of the Merger; and

•the risk that if the Merger is not completed, the market price of our common stock could decline, investor confidence could decline, shareholder litigation could be brought against us or our directors, relationships with customers, suppliers and other business partners may be adversely impacted, we may be unable to retain key personnel, and profitability may be adversely impacted due to costs incurred in connection with the proposed Merger.

~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds~~35

The following table provides information about purchases by us of our common stock during the quarter ended December 31, 2021:

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
October 1, 2021 - October 31, 2021	351,597	$	41.77	351,597	$	13,816,000
November 1, 2021 - November 30, 2021	294,017	46.99		294,017	—
December 1, 2021 - December 31, 2021	—	—		—	—
Total	645,614	$	44.15	645,614

——————

(1)On August 16, 2021, our board of directors authorized a repurchase program of our common stock for an aggregate repurchase price not to exceed $50 million. This program was completed during the quarter ended December 31, 2021.

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Item 6. Exhibits

Incorporated by Reference

Exhibit Number

Description

Form

File No.

Exhibit

Filing Date

Filed Herewith

2.1

Agreement and Plan of Merger, dated as of December 16, 2021, by and among Project RB Parent, LLC, and Project RB Merger Sub, Inc. and Bottomline Technologies, Inc.

8-K

000-25259

2.1

12/17/2021

10.1

Voting Agreement, dated December 16, 2021 by and among Project RB Parent, LLC, Bottomline Technologies, Inc. and the parties thereto

8-K

000-25259

10.1

12/17/2021

10.2

Letter Agreement, dated as of October 20, 2021, between Bottomline Technologies, Inc., Clearfield Capital Management LP and Sachem Head Capital Management LP

8-K

000-25259

10.1

10/20/2021

31.1

Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer

31.2

Rule 13a-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

Inline XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH**

Inline XBRL Taxonomy Extension Schema Document

101.CAL**

Inline XBRL Taxonomy Calculation Linkbase Document

101.DEF**

Inline XBRL Taxonomy Definition Linkbase Document

101.LAB**

Inline XBRL Taxonomy Label Linkbase Document

101.PRE**

Inline XBRL Taxonomy Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

** submitted electronically herewith

Attached as Exhibit 101 to this report are the following formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Unaudited Condensed Consolidated Balance Sheets as of ~~December~~March 31, ~~2021~~2022 and June 30, 2021, (ii) Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021, (iii) Unaudited Condensed Consolidated Statements of Stockholders' Equity for the three and ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021, (iv) Unaudited Condensed Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~December~~March 31, ~~2021~~2022 and ~~2020~~2021 and (v) Notes to Unaudited Condensed Consolidated Financial Statements.

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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, Inc.

Date:	~~February~~May 910, 2022	By:	/s/ A. BRUCE BOWDEN
			A. Bruce Bowden
			Chief Financial Officer and Treasurer
			(Principal Financial and Accounting Officer)

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