q2fy0910q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-Q
(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended December 31, 2008
OR
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from
to
Commission
file number: 0-25259
Bottomline
Technologies (de), Inc.
(Exact
name of registrant as specified in its charter)
|
|
Delaware
|
02-0433294
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
|
|
325
Corporate Drive
Portsmouth,
New Hampshire
|
03801-6808
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(603)
436-0700
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act (Check one):
Large Accelerated Filer
|
|
¨
|
|
Accelerated Filer
|
|
x
|
|
|
|
|
Non-Accelerated
Filer
|
|
¨ (Do
not check if a smaller reporting company)
|
|
Smaller Reporting Company
|
|
¨
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No x
The
number of shares outstanding of the registrant’s common stock as of
January 30, 2009 was 25,062,306.
INDEX
|
|
|
Page
No.
|
PART
I. FINANCIAL INFORMATION
|
|
|
|
Item 1.
Financial Statements
|
|
|
|
Unaudited
Condensed Consolidated Balance Sheets as of December 31, 2008 and
June 30, 2008
|
3
|
|
|
Unaudited
Condensed Consolidated Statements of Operations for the three months ended
December 31, 2008 and 2007
|
4
|
|
|
Unaudited
Condensed Consolidated Statements of Operations for the six months ended
December 31, 2008 and 2007
|
5
|
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows for the six months ended
December 31, 2008 and 2007
|
6
|
|
|
Notes
to Unaudited Condensed Consolidated Financial Statements
|
7
|
|
|
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
|
13
|
|
|
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
|
25
|
|
|
Item 4.
Controls and Procedures
|
25
|
|
|
PART
II. OTHER INFORMATION
|
|
|
|
Item 1.
Legal Proceedings
|
26
|
|
|
Item 1A.
Risk Factors
|
26
|
|
|
Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
|
32
|
|
|
Item 4. Submission
of Matters to a Vote of Security Holders
|
33
|
|
|
Item 6.
Exhibits
|
33
|
|
|
|
|
SIGNATURE
|
34
|
PART
I. FINANCIAL INFORMATION
Item 1.
Financial Statements
Bottomline
Technologies (de), Inc.
Unaudited
Condensed Consolidated Balance Sheets
(in
thousands)
|
|
|
|
|
|
|
|
|
December
31,
2008
|
|
|
June 30,
2008
|
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
34,717 |
|
|
$ |
35,316 |
|
Marketable
securities
|
|
|
42 |
|
|
|
57 |
|
Accounts
receivable, net of allowance for doubtful accounts and returns of $929 at
December 31, 2008 and $1,433 at June 30, 2008
|
|
|
26,798 |
|
|
|
28,747 |
|
Other
current assets
|
|
|
4,501 |
|
|
|
6,157 |
|
Total
current assets
|
|
|
66,058 |
|
|
|
70,277 |
|
Property
and equipment, net
|
|
|
10,721 |
|
|
|
11,840 |
|
Intangible
assets, net
|
|
|
93,752 |
|
|
|
115,414 |
|
Other
assets
|
|
|
2,757 |
|
|
|
1,235 |
|
Total
assets
|
|
$ |
173,288 |
|
|
$ |
198,766 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and stockholders’ equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
6,095 |
|
|
$ |
8,856 |
|
Accrued
expenses
|
|
|
9,040 |
|
|
|
10,997 |
|
Deferred
revenue
|
|
|
31,520 |
|
|
|
30,621 |
|
Total
current liabilities
|
|
|
46,655 |
|
|
|
50,474 |
|
Deferred
revenue, non-current
|
|
|
7,281 |
|
|
|
3,856 |
|
Deferred
income taxes
|
|
|
2,386 |
|
|
|
4,179 |
|
Other
liabilities
|
|
|
1,606 |
|
|
|
1,992 |
|
Total
liabilities
|
|
|
57,928 |
|
|
|
60,501 |
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Preferred
Stock, $.001 par value:
|
|
|
|
|
|
|
|
|
Authorized
shares—4,000; issued and outstanding shares—none
|
|
|
--- |
|
|
|
--- |
|
Common
Stock, $.001 par value:
|
|
|
|
|
|
|
|
|
Authorized
shares—50,000; issued shares—25,854 at June 30, 2008, and 26,213 at
December 31, 2008; outstanding shares—23,939 at June 30, 2008,
and 24,058 at December 31, 2008
|
|
|
26 |
|
|
|
26 |
|
Additional
paid-in capital
|
|
|
282,405 |
|
|
|
277,660 |
|
Accumulated
other comprehensive (loss) income
|
|
|
(11,143 |
) |
|
|
7,766 |
|
Treasury
stock: 1,915 shares at June 30, 2008, and 2,155 shares at December
31, 2008, at cost
|
|
|
(24,218 |
) |
|
|
(22,195 |
) |
Accumulated
deficit
|
|
|
(131,710 |
) |
|
|
(124,992 |
) |
Total
stockholders’ equity
|
|
|
115,360 |
|
|
|
138,265 |
|
Total
liabilities and stockholders’ equity
|
|
$ |
173,288 |
|
|
$ |
198,766 |
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
Bottomline
Technologies (de), Inc.
Unaudited
Condensed Consolidated Statements of Operations
(in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
Three Months Ended
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
Revenues:
|
|
|
|
|
|
|
Software
licenses
|
|
$ |
3,597 |
|
|
$ |
3,393 |
|
Subscriptions
and transactions
|
|
|
7,744 |
|
|
|
7,342 |
|
Service
and maintenance
|
|
|
20,527 |
|
|
|
18,083 |
|
Equipment
and supplies
|
|
|
2,466 |
|
|
|
3,014 |
|
Total
revenues
|
|
|
34,334 |
|
|
|
31,832 |
|
Cost
of revenues:
|
|
|
|
|
|
|
|
|
Software
licenses
|
|
|
207 |
|
|
|
237 |
|
Subscriptions
and transactions
|
|
|
3,743 |
|
|
|
3,913 |
|
Service
and maintenance (1)
|
|
|
9,562 |
|
|
|
7,556 |
|
Equipment
and supplies
|
|
|
1,824 |
|
|
|
2,091 |
|
Total
cost of revenues
|
|
|
15,336 |
|
|
|
13,797 |
|
Gross
profit
|
|
|
18,998 |
|
|
|
18,035 |
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Sales
and marketing (1)
|
|
|
8,150 |
|
|
|
7,847 |
|
Product
development and engineering (1)
|
|
|
5,238 |
|
|
|
4,226 |
|
General
and administrative (1)
|
|
|
4,619 |
|
|
|
4,727 |
|
Amortization
of intangible assets
|
|
|
3,948 |
|
|
|
2,682 |
|
Total
operating expenses
|
|
|
21,955 |
|
|
|
19,482 |
|
Loss
from operations
|
|
|
(2,957 |
) |
|
|
(1,447 |
) |
Other
income, net
|
|
|
615 |
|
|
|
896 |
|
Loss
before income taxes
|
|
|
(2,342 |
) |
|
|
(551 |
) |
Provision
for income taxes
|
|
|
527 |
|
|
|
123 |
|
Net
loss
|
|
|
(2,869 |
) |
|
|
(674 |
) |
Basic
and diluted net loss per share:
|
|
$ |
(0.12 |
) |
|
$ |
(0.03 |
) |
Shares
used in computing basic and diluted net loss per share:
|
|
|
24,033 |
|
|
|
23,887 |
|
|
|
|
|
|
|
|
|
|
(1)
|
Stock
based compensation is allocated as
follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
Cost
of revenues: service and maintenance
|
|
$ |
261 |
|
|
$ |
236 |
|
Sales
and marketing
|
|
|
648 |
|
|
|
686 |
|
Product
development and engineering
|
|
|
197 |
|
|
|
200 |
|
General
and administrative
|
|
|
1,097 |
|
|
|
980 |
|
|
|
$ |
2,203 |
|
|
$ |
2,102 |
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
Bottomline
Technologies (de), Inc.
Unaudited
Condensed Consolidated Statements of Operations
(in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
Six
Months Ended
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
Revenues:
|
|
|
|
|
|
|
Software
licenses
|
|
$ |
7,203 |
|
|
$ |
6,758 |
|
Subscriptions
and transactions
|
|
|
15,973 |
|
|
|
14,184 |
|
Service
and maintenance
|
|
|
41,676 |
|
|
|
35,768 |
|
Equipment
and supplies
|
|
|
4,988 |
|
|
|
6,484 |
|
Total
revenues
|
|
|
69,840 |
|
|
|
63,194 |
|
Cost
of revenues:
|
|
|
|
|
|
|
|
|
Software
licenses
|
|
|
407 |
|
|
|
425 |
|
Subscriptions
and transactions
|
|
|
7,860 |
|
|
|
7,884 |
|
Service
and maintenance (1)
|
|
|
19,434 |
|
|
|
15,388 |
|
Equipment
and supplies
|
|
|
3,679 |
|
|
|
4,614 |
|
Total
cost of revenues
|
|
|
31,380 |
|
|
|
28,311 |
|
Gross
profit
|
|
|
38,460 |
|
|
|
34,883 |
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Sales
and marketing (1)
|
|
|
16,788 |
|
|
|
15,366 |
|
Product
development and engineering (1)
|
|
|
10,660 |
|
|
|
8,452 |
|
General
and administrative (1)
|
|
|
9,792 |
|
|
|
9,185 |
|
Amortization
of intangible assets
|
|
|
8,384 |
|
|
|
5,330 |
|
Total
operating expenses
|
|
|
45,624 |
|
|
|
38,333 |
|
Loss
from operations
|
|
|
(7,164 |
) |
|
|
(3,450 |
) |
Other
income, net
|
|
|
763 |
|
|
|
1,793 |
|
Loss
before income taxes
|
|
|
(6,401 |
) |
|
|
(1,657 |
) |
Provision
(benefit) for income taxes
|
|
|
317 |
|
|
|
(182 |
) |
Net
loss
|
|
|
(6,718 |
) |
|
$ |
(1,475 |
) |
Basic
and diluted net loss per share
|
|
$ |
(0.28 |
) |
|
$ |
(0.06 |
) |
Shares
used in computing basic and diluted net loss per share:
|
|
|
23,958 |
|
|
|
23,745 |
|
|
|
|
|
|
|
|
|
|
(1)
|
Stock
based compensation is allocated as
follows:
|
|
|
|
|
|
|
|
|
|
Six Months Ended
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
Cost
of revenues: service and maintenance
|
|
$ |
521 |
|
|
$ |
468 |
|
Sales
and marketing
|
|
|
1,343 |
|
|
|
1,297 |
|
Product
development and engineering
|
|
|
400 |
|
|
|
383 |
|
General
and administrative
|
|
|
2,149 |
|
|
|
1,880 |
|
|
|
$ |
4,413 |
|
|
$ |
4,028 |
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
Bottomline
Technologies (de), Inc.
Unaudited
Condensed Consolidated Statements of Cash Flows
(in
thousands)
|
|
|
|
|
|
|
|
|
Six Months Ended
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
Operating
activities:
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(6,718 |
) |
|
$ |
(1,475 |
) |
Adjustments
to reconcile net loss to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Stock
compensation expense
|
|
|
4,413 |
|
|
|
4,028 |
|
Amortization
of intangible assets
|
|
|
8,384 |
|
|
|
5,330 |
|
Depreciation
and amortization of property and equipment
|
|
|
1,995 |
|
|
|
1,610 |
|
Deferred
income tax benefit
|
|
|
(179 |
) |
|
|
(408 |
) |
Excess
tax benefits associated with stock compensation
|
|
|
(10 |
) |
|
|
(108 |
) |
Provision
for allowances on accounts receivable
|
|
|
11 |
|
|
|
--- |
|
Provision
for obsolete inventory
|
|
|
7 |
|
|
|
10 |
|
Gain
on foreign exchange
|
|
|
(222 |
) |
|
|
(112 |
) |
Loss
on disposal of equipment
|
|
|
12 |
|
|
|
--- |
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(820 |
) |
|
|
(231 |
) |
Inventory,
prepaid expenses and other current assets
|
|
|
(810 |
) |
|
|
1,160 |
|
Accounts
payable, accrued expenses and deferred revenue
|
|
|
4,371 |
|
|
|
(1,343 |
) |
Net
cash provided by operating activities
|
|
|
10,434 |
|
|
|
8,461 |
|
Investing
activities:
|
|
|
|
|
|
|
|
|
Purchases
of available-for-sale securities
|
|
|
--- |
|
|
|
(225 |
) |
Proceeds
from sales of available-for-sale securities
|
|
|
--- |
|
|
|
26,050 |
|
Purchases
of held-to-maturity securities
|
|
|
(53 |
) |
|
|
(51 |
) |
Proceeds
from sales of held-to-maturity securities
|
|
|
53 |
|
|
|
51 |
|
Purchases
of property, plant and equipment, net
|
|
|
(2,060 |
) |
|
|
(1,270 |
) |
Net
cash (used in) provided by investing activities
|
|
|
(2,060 |
) |
|
|
24,555 |
|
Financing
activities:
|
|
|
|
|
|
|
|
|
Repurchase
of common stock
|
|
|
(2,603 |
) |
|
|
(6,708 |
) |
Proceeds
from employee stock purchase plan and exercise of stock
optionsoceeds
|
|
|
961 |
|
|
|
4,988 |
|
Excess
tax benefits associated with stock compensation
|
|
|
10 |
|
|
|
108 |
|
Payment
of bank financing fees
|
|
|
(20 |
) |
|
|
(20 |
) |
Capital
lease payments
|
|
|
(65 |
) |
|
|
(15 |
) |
Net
cash used in financing activities
|
|
|
(1,717 |
) |
|
|
(1,647 |
) |
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
(7,256 |
) |
|
|
(206 |
) |
(Decrease)
increase in cash and cash equivalents
|
|
|
(599 |
) |
|
|
31,163 |
|
Cash
and cash equivalents at beginning of period
|
|
|
35,316 |
|
|
|
38,997 |
|
Cash
and cash equivalents at end of period
|
|
$ |
34,717 |
|
|
$ |
70,160 |
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
Bottomline
Technologies (de), Inc.
Notes
to Unaudited Condensed Consolidated Financial Statements
December
31, 2008
Note
1—Basis of Presentation
The
accompanying unaudited condensed consolidated financial statements 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 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 month periods ended December 31, 2008 are not necessarily indicative of the
results that may be expected for any other interim period or for the fiscal year
ending June 30, 2009. For further information, refer to the financial
statements and footnotes included in the Company’s Annual Report on Form 10-K as
filed with the Securities and Exchange Commission (SEC) on September 12,
2008.
Certain
prior period amounts have been reclassified to conform to the current year
presentation.
Note
2—Fair Values of Assets and Liabilities
In
September 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements,” or
SFAS 157, effective for financial statements issued for fiscal years beginning
after November 15, 2007. Accordingly, the Company adopted SFAS 157
effective July 1, 2008. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. The Statement applies only to fair value measurements that already
are required or permitted by other accounting standards and does not require any
new fair value measurements. In February 2008, the FASB issued FASB
Staff Position (FSP) No. 157-2, which defers the effective date of SFAS 157 to
fiscal years beginning after November 15, 2008 (July 1, 2009 for the Company)
for nonfinancial assets and liabilities that are not recognized or disclosed at
fair value in the financial statements on a recurring basis.
The
adoption of SFAS No. 157 did not have an impact on the Company’s financial
position or results of operations. The Company’s nonfinancial assets and
liabilities that meet the deferral criteria set forth in FSP No. 157-2 include
goodwill, intangible assets, and property, plant and equipment. The
Company does not expect that the adoption of SFAS No. 157 for these nonfinancial
assets and liabilities will have a material impact on its financial position or
results of operations.
In
accordance with the provisions of SFAS No. 157, the Company measures 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. SFAS 157 prioritizes the assumptions that market
participants would use in pricing the asset or liability (the “inputs”) into a
three-tier fair value hierarchy, as follows:
Level
1: Observable inputs such as quoted prices for identical assets or
liabilities in active markets.
Level
2: Other inputs that are observable directly or indirectly, such as
quoted prices for similar instruments in active markets or for similar markets
that are not active.
Level
3: Unobservable inputs for which there is little or no market data
and which require the Company to develop its own assumptions about how market
participants would price the asset or liability.
Valuation techniques for assets and
liabilities may 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 31, 2008, assets and
liabilities of the Company measured at fair value on a recurring basis included
marketable securities of $42,000. These were valued based on
reference to quoted prices in active markets (Level 1 inputs).
Note
3 – Business Acquisitions
Optio
Software, Inc.
On April
21, 2008, the Company acquired Optio Software, Inc. (Optio). Optio is a US based
company with operations in the United States, the United Kingdom, Germany and
France that provides software solutions dedicated to automating, managing and
controlling the entire lifecycle of document intensive processes. The
purchase consideration and acquisition-related costs for Optio were
approximately $46.5 million, consisting of approximately $44.7 million in cash
and $1.8 million in acquisition-related costs. Optio operating
results are included in the Company’s operating results from the date of
acquisition forward, as a component of the Payments and Transactional Documents
operating segment.
In
connection with the acquisition, the Company recorded costs associated with the
involuntary termination of certain Optio employees and costs associated with
Optio facility exit activities. At December 31, 2008, certain estimated costs
were still being finalized. Accordingly, the preliminary estimate of
these costs might require adjustment in a subsequent quarter. The Company
expects to finalize these estimates no later than March 31, 2009, with any
required adjustment resulting in a corresponding adjustment to goodwill. A
summary of the severance and facility exit accrual activity through December 31,
2008 is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility Exit Costs
|
|
|
Severance Costs
|
|
|
|
(in
thousands)
|
|
Initial
estimate, included in preliminary purchase price allocation for
Optio
|
|
$ |
1,220 |
|
|
$ |
1,415 |
|
Adjustments
to original estimate, recorded through goodwill
|
|
|
(11 |
) |
|
|
103 |
|
Payments
charged against the accrual
|
|
|
(389 |
) |
|
|
(931 |
) |
Impact
of changes in foreign currency exchange rates
|
|
|
(26 |
) |
|
|
(114 |
) |
Remaining
accrual at December 31, 2008
|
|
$ |
794 |
|
|
$ |
473 |
|
|
|
|
|
|
|
|
|
|
Pro-forma
Information
The
following unaudited pro-forma financial information presents the combined
results of operations of the Company and Optio as if the acquisition had
occurred as of July 1, 2007, after giving effect to certain adjustments
such as increased amortization expense of acquired intangible assets, purchase
accounting reductions to acquired deferred revenue based on the Company’s
estimates of fair value, and a decrease in interest income as a result of the
net cash paid for the acquisition. This pro-forma financial information does not
necessarily reflect the results of operations that would have actually occurred
had the Company and Optio been a single entity during these
periods.
|
|
|
|
|
|
|
|
|
Pro
Forma
Three
Months Ended
December 31,
2007
|
|
|
Pro
Forma
Six
Months Ended
December 31,
2007
|
|
|
|
(unaudited)
(in
thousands)
|
|
|
(unaudited)
(in
thousands)
|
|
Revenues
|
|
$ |
37,173 |
|
|
$ |
73,283 |
|
Net
loss
|
|
$ |
(4,475 |
) |
|
$ |
(10,442 |
) |
Net
loss per basic and diluted share
|
|
$ |
(0.19 |
) |
|
$ |
(0.44 |
) |
Note 4—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,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
thousands, except per share amounts)
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(2,869 |
) |
|
$ |
(674 |
) |
|
$ |
(6,718 |
) |
|
$ |
(1,475 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: Weighted
average shares outstanding used in computing basic and diluted net loss
per share:
|
|
|
24,033 |
|
|
|
23,887 |
|
|
|
23,958 |
|
|
|
23,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net loss per share
|
|
$ |
(0.12 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.28 |
) |
|
$ |
(0.06 |
) |
Note
5—Comprehensive Income or Loss
Comprehensive
income or loss represents the Company’s net loss plus the results of certain
stockholders’ equity changes not reflected in the unaudited condensed
consolidated statements of operations. The components of comprehensive income or
loss are as follows:
|
|
Three Months Ended
December 31,
|
|
|
Six
Months Ended
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
thousands)
|
|
Net
loss
|
|
$ |
(2,869 |
) |
|
$ |
(674 |
) |
|
$ |
(6,718 |
) |
|
$ |
(1,475 |
) |
Other
comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustments
|
|
|
(10,884 |
) |
|
|
(1,814 |
) |
|
|
(18,909 |
) |
|
|
(743 |
) |
Comprehensive
loss
|
|
$ |
(13,753 |
) |
|
$ |
(2,488 |
) |
|
$ |
(25,627 |
) |
|
$ |
(2,218 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
6—Operations by Segments and Geographic Areas
Segment
Information
SFAS
No. 131, “Disclosures about Segments of an Enterprise and Related
Information”, establishes standards for reporting information about operating
segments in financial statements. Operating segments are defined as components
of an enterprise for which separate financial information is available that is
evaluated regularly by the chief operating decision maker, or decision making
group, in deciding how to allocate resources and in assessing
performance.
The
Company’s operating segments are organized principally by the type of product or
services offered and by geography. In accordance with SFAS 131, the
Company has aggregated similar operating segments into three reportable segments
as follows:
Payments and Transactional
Documents. The Company’s Payments and Transactional Documents segment is
a supplier of software products that provide a range of financial business
process management solutions including making and collecting payments, sending
and receiving invoices, and generating and storing business documents. This
segment also provides a range of standard professional services and equipment
and supplies that complement and enhance the Company’s core software products.
Revenue associated with this segment is typically recorded upon delivery or, if
extended payment terms have been granted to the customer, as payments become
contractually due. This segment incorporates the Company’s check
printing solutions in the UK, revenue for which is typically recorded on a per
transaction basis or ratably over the expected life of the customer
relationship, as well as certain solutions that are licensed on a subscription
basis, revenue for which is typically recorded ratably over the contractual
term.
Banking Solutions. The
Banking Solutions segment provides solutions that are specifically designed for
banking and financial institution customers. These solutions typically involve
longer implementation periods and a significant level of professional resources.
Due to the customized nature of these products, revenue is generally recognized
over the period of project performance, on a percentage of completion
basis.
Outsourced Solutions. The
Outsourced Solutions segment provides customers with outsourced and hosted
solution offerings that facilitate invoice receipt and presentment and spend
management. The Company’s Legal eXchange solution, which provides the
opportunity to create more efficient processes for managing invoices generated
by outside law firms, while offering access to important legal spend factors
such as budgeting, expense monitoring and outside counsel performance, is
included within this segment. This segment also incorporates the Company’s
hosted and outsourced accounts payable automation solutions. Revenue within this
segment is generally recognized on a subscription or transaction basis or
proportionately over the estimated life of the customer
relationship.
Each
operating segment has separate sales forces and, periodically, a sales person in
one operating segment will sell products and services that are typically sold
within a different operating segment. In such cases, the transaction is
generally recorded by the operating segment to which the sales person is
assigned. Accordingly, segment results can include the results of transactions
that have been allocated to a specific segment based on the contributing sales
resources, rather than the nature of the product or service. Conversely, a
transaction can be recorded by the operating segment primarily responsible for
delivery to the customer, even if the sales person is assigned to a different
operating segment.
The
Company’s chief operating decision maker assesses segment performance based on a
variety of factors that can 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 stock compensation expense, acquisition-related expenses,
amortization of intangible assets and charges related to acquired in-process
research and development. 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 the Company’s operating
segments at predetermined rates that approximate cost.
The
Company does not track or assign its assets by operating segment.
The
following represents a summary of the Company’s reportable
segments:
|
|
Three
Months Ended
December 31,
|
|
|
Six
Months Ended
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
thousands)
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments
and Transactional Documents
|
|
$ |
22,955 |
|
|
$ |
21,073 |
|
|
$ |
46,331 |
|
|
$ |
41,220 |
|
Banking
Solutions
|
|
|
5,433 |
|
|
|
4,782 |
|
|
|
11,106 |
|
|
|
10,408 |
|
Outsourced
Solutions
|
|
|
5,946 |
|
|
|
5,977 |
|
|
|
12,403 |
|
|
|
11,566 |
|
Total
revenues
|
|
$ |
34,334 |
|
|
$ |
31,832 |
|
|
$ |
69,840 |
|
|
|
63,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
measure of profit (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments
and Transactional Documents
|
|
$ |
3,737 |
|
|
$ |
4,290 |
|
|
$ |
6,406 |
|
|
$ |
8,215 |
|
Banking
Solutions
|
|
|
(1,046 |
) |
|
|
(64 |
) |
|
|
(2,027 |
) |
|
|
504 |
|
Outsourced
Solutions
|
|
|
503 |
|
|
|
(889 |
) |
|
|
1,289 |
|
|
|
(2,811 |
) |
Total
measure of segment profit
|
|
$ |
3,194 |
|
|
$ |
3,337 |
|
|
$ |
5,668 |
|
|
$ |
5,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
reconciliation of the measure of segment profit to GAAP operating income before
income taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
|
Six
Months Ended
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
thousands)
|
|
Segment
measure of profit
|
|
$ |
3,194 |
|
|
$ |
3,337 |
|
|
$ |
5,668 |
|
|
$ |
5,908 |
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of intangible assets
|
|
|
(3,948 |
) |
|
|
(2,682 |
) |
|
|
(8,384 |
) |
|
|
(5,330 |
) |
Stock
compensation expense
|
|
|
(2,203 |
) |
|
|
(2,102 |
) |
|
|
(4,413 |
) |
|
|
(4,028 |
) |
Acquisition
related expenses
|
|
|
--- |
|
|
|
--- |
|
|
|
(35 |
) |
|
|
--- |
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income, net
|
|
|
615 |
|
|
|
896 |
|
|
|
763 |
|
|
|
1,793 |
|
Loss
before income taxes
|
|
$ |
(2,342 |
) |
|
$ |
(551 |
) |
|
$ |
(6,401 |
) |
|
$ |
(1,657 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following depreciation expense amounts are included in the segment measure of
profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
|
Six
Months Ended
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
thousands)
|
|
Depreciation
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments
and Transactional Documents
|
|
$ |
416 |
|
|
$ |
339 |
|
|
$ |
871 |
|
|
$ |
704 |
|
Banking
Solutions
|
|
|
177 |
|
|
|
121 |
|
|
|
352 |
|
|
|
245 |
|
Outsourced
Solutions
|
|
|
376 |
|
|
|
335 |
|
|
|
772 |
|
|
|
661 |
|
Total
depreciation expense
|
|
$ |
969 |
|
|
$ |
795 |
|
|
$ |
1,995 |
|
|
$ |
1,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company has presented geographic information about its revenues below. This
presentation allocates revenue based on the point of sale, not the location of
the customer. Accordingly, the Company derives revenues from geographic
locations, based on the location of the customer, that would vary from the
geographic areas listed here; particularly in respect of several financial
institution customers located in Australia, for which the point of sale was the
United States.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
December 31,
|
|
|
Six
Months Ended
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
thousands)
|
|
Revenues
from unaffiliated customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$ |
20,789 |
|
|
$ |
17,423 |
|
|
$ |
42,407 |
|
|
$ |
35,162 |
|
Europe
|
|
|
13,196 |
|
|
|
13,996 |
|
|
|
26,666 |
|
|
|
27,247 |
|
Australia
|
|
|
349 |
|
|
|
413 |
|
|
|
767 |
|
|
|
785 |
|
Total
revenues from unaffiliated customers
|
|
|
34,334 |
|
|
|
31,832 |
|
|
|
69,840 |
|
|
|
63,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived
assets, which are based on geographical location, were as follows:
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
|
(in
thousands)
|
|
Long-lived
assets, net
|
|
|
|
|
|
|
United
States
|
|
$ |
10,960 |
|
|
$ |
9,194 |
|
Europe
|
|
|
2,387 |
|
|
|
3,706 |
|
Australia
|
|
|
131 |
|
|
|
175 |
|
Total
long-lived assets, net
|
|
$ |
13,478 |
|
|
$ |
13,075 |
|
|
|
|
|
|
|
|
|
|
Note
7—Income Taxes
The Company recorded income tax expense
of $0.5 million and $0.1 million for the three months ended December 31, 2008
and 2007, respectively. The income tax expense recorded for the
quarter ended December 31, 2008 was due to tax expense associated with the
Company’s UK, German, and Australian operations, as well as tax expense in the
US. The net income tax expense for the three months ended December
31, 2007 was largely due to tax expense in the US and Australia, and was
partially offset by an income tax benefit associated with the Company’s UK
operations. In each of the quarters
ended
December 31, 2008 and 2007, the income tax expense recorded in the US was
principally attributable to an increase in deferred tax liabilities associated
with goodwill that is deductible for US tax purposes but not amortized for
financial reporting purposes. The US tax expense also consisted of a
small amount of state income tax expense which will be incurred irrespective of
the Company’s net operating loss carryforwards.
The
Company recorded income tax expense of $0.3 million for the six months ended
December 31, 2008 and an income tax benefit of $0.2 million for the six months
ended December 31, 2007. The income tax expense for the six months
ended December 31, 2008 was net of approximately $0.4 million of one-time,
non-recurring tax benefits arising from a reduction in the Company’s
unrecognized tax benefits upon the expiration of certain statutes of
limitations, from the enactment of legislation during fiscal year 2009 that
allowed the Company to claim a tax refund for a portion of its unused research
and development credit carryforwards in the US, and from a decrease in the
Company’s German tax rate as a result of a restructuring of the Company’s German
operations. The Company’s net income tax expense also reflected
expense associated with the Company’s German, French, and Australian operations,
as well as income tax expense in the US. In the six months ended
December 31, 2007, the net income tax benefit was due to the Company’s European
operations and the one-time impact of a tax benefit arising from the enactment
of legislation that decreased the Company’s tax rates in the UK and Germany,
partially offset by income tax expense in the US and
Australia.
Note
8—Goodwill and Other Intangible Assets
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, 2008
|
|
|
|
Gross Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying
Value
|
|
|
|
(in
thousands)
|
|
Amortized
intangible assets:
|
|
|
|
|
|
|
|
|
|
Core
technology
|
|
$ |
26,862 |
|
|
$ |
(21,843 |
) |
|
$ |
5,019 |
|
Customer
related
|
|
|
48,392 |
|
|
|
(23,157 |
) |
|
|
25,235 |
|
Patent
|
|
|
953 |
|
|
|
(207 |
) |
|
|
746 |
|
Other
intangible assets
|
|
|
1,044 |
|
|
|
(437 |
) |
|
|
607 |
|
Total
|
|
$ |
77,251 |
|
|
$ |
(45,644 |
) |
|
$ |
31,607 |
|
Unamortized
intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
62,145 |
|
Total
intangible assets, net
|
|
|
|
|
|
|
|
|
|
$ |
93,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30,
2008
|
|
|
|
Gross Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying
Value
|
|
|
|
(in
thousands)
|
|
Amortized
intangible assets:
|
|
|
|
|
|
|
|
|
|
Customer
related
|
|
$ |
54,081 |
|
|
$ |
(20,402 |
) |
|
$ |
33,679 |
|
Core
technology
|
|
|
30,408 |
|
|
|
(22,492 |
) |
|
|
7,916 |
|
Patent
|
|
|
953 |
|
|
|
(172 |
) |
|
|
781 |
|
Other
intangible assets
|
|
|
1,051 |
|
|
|
(200 |
) |
|
|
851 |
|
Total
|
|
$ |
86,493 |
|
|
$ |
(43,266 |
) |
|
$ |
43,227 |
|
Unamortized
intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
72,187 |
|
Total
intangible assets
|
|
|
|
|
|
|
|
|
|
$ |
115,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
decrease in the Company’s goodwill balance at December 31, 2008 as compared to
June 30, 2008 was due to the impact of changes in foreign currency exchange
rates.
Estimated
amortization expense for fiscal year 2009 and subsequent fiscal years is as
follows:
|
|
|
|
|
|
(in thousands)
|
|
2009
|
|
$ |
15,552 |
|
2010
|
|
|
11,468 |
|
2011
|
|
|
7,880 |
|
2012
|
|
|
3,111 |
|
2013
|
|
|
1,541 |
|
2014
and thereafter
|
|
|
439 |
|
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 and Section 21E of the
Securities Exchange Act of 1934. 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 “Item 1A. Risk Factors” and elsewhere in this 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).
We
provide electronic payment, invoice and document management solutions to
corporations, financial institutions and banks around the world. Our solutions
are used to streamline, automate and manage processes and transactions involving
global payments, invoice receipt and approval, collections, cash management,
risk mitigation, document management, reporting and document archive. We offer
software designed to run on-site at the customer’s location as well as hosted
solutions. Historically, our software has been sold predominantly on a perpetual
license basis. Today, however, certain of our newer offerings are being sold on
a subscription and transaction basis.
Our
corporate customers rely on our solutions to automate their payment and accounts
payable processes and to streamline and manage the production and retention of
electronic documents. We also provide Legal eXchange®, a
Software as a Service (SaaS) offering that receives, manages and controls legal
invoices and the related spend management for insurance companies and other
large consumers of outside legal services. Our offerings also include software
solutions that banks use to provide web-based payment and reporting capabilities
to their corporate customers.
Our
solutions complement and leverage our customers’ existing information systems,
accounting applications and banking relationships. As a result, our solutions
can be deployed quickly and efficiently. To help our customers receive the
maximum value from our products and meet their own particular needs, we also
provide professional services for installation, training, consulting and product
enhancement.
For the
first six months of fiscal year 2009, our revenue increased to $69.8 million
from $63.2 million in the same period of fiscal year 2008. This revenue increase
was primarily attributable to the revenue contribution from Optio Software, Inc.
(Optio), which we acquired in April 2008, and increased revenues from our Legal
eXchange product offering as a result of continued customer adoption of that
product. These increases were offset in part by a decrease of $4.1
million as a result of declining foreign exchange rates associated with the
British Pound Sterling and the European Euro, which depreciated against the
US Dollar during the six months ended December 31, 2008.
We had a
net loss of $6.7 million in the six months ended December 31, 2008 compared to
net loss of $1.5 million in the same period of the prior year. The net loss in
the six months ended December 31, 2008 reflected $12.8 million of expense
associated with the amortization of intangible assets and stock compensation.
The increase of approximately $3.1 million in intangible asset amortization
during the first six months of fiscal year 2009 as compared to the first six
months of fiscal year 2008 reflects the expense impact of our acquisition of
Optio in April 2008. Increases in our cost of revenue and operating expense
categories during the first six months of fiscal year 2009 as compared to the
first six months of fiscal year 2008 largely reflect our overall increased
operating costs as a result of our Optio acquisition and our general business
growth, offset in part by a decrease of approximately $3.7 million due to a
decline in foreign exchange rates associated with the British Pound Sterling and
European Euro.
In the
first six months of fiscal 2009, we derived approximately 46% of our revenue
from customers located outside of North America, principally in Europe and
Australia. We expect future revenue growth to be driven by increased
purchases of our products by new and existing bank and financial institution
customers in both North America and international markets, the continued market
adoption of our Legal eXchange product in the US, increased sales of our
payments and transactional documents products, and the contribution of revenue
from our newer subscription and transaction based products. However,
we anticipate that the British Pound Sterling and European Euro currencies may
continue to weaken against the US Dollar. To the extent that this
occurs, or to the extent that the already weakened European currencies do not
return to pre-fiscal 2009 levels, we expect that the translation of our 2009
European revenues to US Dollars will continue to be negatively impacted as
compared to the corresponding periods of fiscal year 2008.
While we continue to grow our business,
the economic environment we are operating in has grown increasingly more
challenging over the past year. While we have not experienced any decline in our
expected volume of customer orders we are observing that, in some cases, closing
new business is taking somewhat longer. Our customers operate in many different
industries; a diversification that we believe helps us in this economic climate.
Additionally, we believe that our recurring and subscription revenue base helps
position us defensively against any short term economic downturn. While we
believe that we continue to compete favorably in all of the markets we serve,
ongoing or worsening economic stresses could impact our business more
significantly in the future.
Critical
Accounting Policies
We
believe that several accounting policies are important to understanding our
historical and future performance. We refer to these policies as “critical”
because these specific areas generally 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,
which would have resulted in different financial results.
The
critical accounting policies we identified in our most recent Annual Report on
Form 10-K for the fiscal year ended June 30, 2008 related to stock-based
compensation, revenue recognition, goodwill and intangible assets and the
valuation of acquired intangible assets and acquired deferred revenue. It is
important that the discussion of our operating results that follows be read in
conjunction with the critical accounting policies disclosed in our Annual Report
on Form 10-K, as filed with the SEC on September 12, 2008. There have been
no changes to our critical accounting policies during the six months ended
December 31, 2008.
Recent
Accounting Pronouncements
Determination
of the Useful Life of Intangible Assets
In April
2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position
(FSP) FAS 142-3, “Determination of the Useful Life of Intangible Assets.”
FSP FAS 142-3 amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under FASB Statement No. 142, “Goodwill and
Other Intangible Assets.” FSP FAS 142-3 is effective for fiscal years
beginning after December 15, 2008 (July 1, 2009 for us) and early adoption
is prohibited. We are currently evaluating the impact of this pronouncement on
our consolidated financial statements.
Business
Combinations
In
December 2007, the FASB issued Statement No. 141(R), “Business Combinations”
(SFAS 141(R)) which will significantly change the accounting for and reporting
of business combination transactions. The most significant changes in the
accounting for business combinations under SFAS 141(R) include:
·
|
Valuation
of any acquirer shares issued as purchase consideration will be measured
at fair value as of the acquisition
date;
|
·
|
Contingent
purchase consideration, if any, will generally be measured and recorded at
the acquisition date, at fair value, with any subsequent change in fair
value reflected in earnings rather than through an adjustment to the
purchase price allocation;
|
·
|
Acquired
in-process research and development costs, which have historically been
expensed immediately upon acquisition, will now be capitalized at their
acquisition date fair values, measured for impairment (without
recurring
|
amortization) over the remaining development period and, upon completion of a
successful development project, amortized to expense over the asset’s estimated
useful life;
·
|
Acquisition
related costs will be expensed as incurred rather than capitalized as part
of the purchase price allocation;
|
·
|
Acquisition
related restructuring cost accruals will be reflected within the
acquisition accounting only if certain specific criteria are met as of the
acquisition date. The prior accounting convention, which permitted an
acquirer to record restructuring accruals within the purchase price
allocation as long as certain, broad criteria had been met, generally
around formulating, finalizing and communicating certain exit activities,
will no longer be permitted.
|
SFAS 141(R) is effective for the first
annual reporting period beginning on or after December 15, 2008 and earlier
adoption is not permitted. Accordingly, we will adopt SFAS 141(R) on July 1,
2009. We expect that the adoption of this pronouncement will significantly
affect how we account for business combination transactions consummated after
the adoption date, in the areas noted above.
Accounting
and Reporting of Noncontrolling Interests
In December 2007, the FASB issued SFAS
No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an
Amendment of ARB No. 51” (SFAS 160). SFAS 160 clarifies the accounting for
noncontrolling interests and establishes accounting and reporting standards for
the noncontrolling interest in a subsidiary, including the requirement that the
noncontrolling interest be classified as a component of equity. SFAS 160 is
required to be adopted simultaneously with SFAS 141(R). We are not presently a
party to any transaction in which we have a noncontrolling interest and,
accordingly, do not currently believe that this pronouncement will have a
significant impact on our financial condition, results of operations or cash
flows.
Fair
Value Measurements
In September 2006, the FASB issued
Statement No. 157, “Fair Value Measurements” (SFAS 157). The statement
defines fair value, establishes a framework for measuring fair value, and
expands disclosures about fair value measurements. In February 2008,
the FASB issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB
Statement No. 157” (FSP 157-2). FSP 157-2 delayed the effective
date of SFAS 157 to fiscal years beginning after November 15, 2008 for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). SFAS 157 became effective for us on July
1, 2008, excluding the items deferred by FSP 157-2 which will become effective
for us on July 1, 2009. SFAS 157 has resulted in additional
disclosures within our consolidated financial statements, as further described
in Note 2 to our financial statements.
Fair
Value Option for Financial Assets and Financial Liabilities
In
February 2007, the FASB issued Statement No. 159, “The Fair Value Option
for Financial Assets and Financial Liabilities, including an amendment of FASB
Statement No. 115” (SFAS 159). The statement permits all entities to
choose, at specified election dates, to measure eligible items at fair value.
Additionally, the statement requires that entities report unrealized gains and
losses on items for which the fair value option has been elected in earnings.
The statement also establishes additional presentation and disclosure
requirements. SFAS 159 is effective for fiscal years beginning after
November 15, 2007, with early adoption permitted, provided that the entity
also adopts Statement 157. SFAS 159 became effective for us on July 1,
2008; however, as we did not elect to measure any items at fair value, its
adoption did not have an impact on our consolidated financial
statements.
Three
Months Ended December 31, 2008 Compared to the Three Months Ended December 31,
2007
Revenues by
segment
We have
aggregated similar operating segments into three reportable segments: Payments
and Transactional Documents, Banking Solutions and Outsourced
Solutions. The following table represents our revenues by
segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended December 31,
|
|
|
Increase
(Decrease)
Between Periods
2008 Compared to 2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(in thousands)
|
|
|
As % of total
Revenues
|
|
|
(in thousands)
|
|
|
As % of total
Revenues
|
|
|
(in thousands)
|
|
|
%
|
|
Payments
and Transactional Documents
|
|
$ |
22,955 |
|
|
|
66.9 |
|
|
$ |
21,073 |
|
|
|
66.2 |
|
|
$ |
1,882 |
|
|
|
8.9 |
|
Banking
Solutions
|
|
|
5,433 |
|
|
|
15.8 |
|
|
|
4,782 |
|
|
|
15.0 |
|
|
|
651 |
|
|
|
13.6 |
|
Outsourced
Solutions
|
|
|
5,946 |
|
|
|
17.3 |
|
|
|
5,977 |
|
|
|
18.8 |
|
|
|
(31 |
) |
|
|
(0.5 |
) |
|
|
$ |
34,334 |
|
|
|
100.0 |
|
|
$ |
31,832 |
|
|
|
100.0 |
|
|
$ |
2,502 |
|
|
|
7.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments and Transactional
Documents. The revenue increase for the three months ended December 31,
2008 was primarily attributable to the revenue contribution from Optio, which we
acquired in April 2008. This increase was offset in part by a decrease of $2.8
million as a result of declining foreign exchange rates associated with the
British Pound Sterling and European Euro. We expect revenue for the
Payments and Transactional Documents segment to increase during the remainder of
fiscal 2009 as a result of the continued revenue contribution from Optio and
from increased sales of our payment and document management solutions. However,
we currently expect that the translation of our European based revenues to US
Dollars will continue to be negatively impacted as compared to the same periods
in fiscal year 2008, due to declining European foreign exchange
rates.
Banking Solutions. Revenues
from our Banking Solutions segment increased as compared to the comparable
quarter of fiscal 2008, as we continued to generate revenue from our continued
expansion into the European markets and several large ongoing banking projects,
one of which was completed during the quarter. We expect revenues for the
Banking Solutions segment to increase during the remainder of the fiscal year as
a result of the contribution of revenue from ongoing projects and from
additional purchases by new and existing bank and financial institution
customers in both North America and international markets.
Outsourced Solutions. The
slight revenue decrease for the three months ended December 31, 2008 was due to
a decrease in European foreign currency exchange rates and a decrease in revenue
from certain of our legacy outsourced accounts payable automation products in
Europe. These decreases were offset in part by revenue increases
related to our Legal eXchange product offering. We expect revenue for
the Outsourced Solutions segment to increase during the remainder of the fiscal
year as current customers of Legal eXchange move from the implementation phase
(during which no revenue is recorded) into live production and as new customers
purchase this solution.
Revenues by
category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended December 31,
|
|
|
Increase
(Decrease)
Between
Periods
2008 Compared to 2007
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in thousands)
|
|
|
As % of total
Revenues
|
|
|
(in thousands)
|
|
|
As % of total
Revenues
|
|
|
(in thousands)
|
|
|
%
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
licenses
|
|
$ |
3,597 |
|
|
|
10.5 |
|
|
$ |
3,393 |
|
|
|
10.7 |
|
|
$ |
204 |
|
|
|
6.0 |
|
Subscriptions
and transactions
|
|
|
7,744 |
|
|
|
22.5 |
|
|
|
7,342 |
|
|
|
23.0 |
|
|
|
402 |
|
|
|
5.5 |
|
Service
and maintenance
|
|
|
20,527 |
|
|
|
59.8 |
|
|
|
18,083 |
|
|
|
56.8 |
|
|
|
2,444 |
|
|
|
13.5 |
|
Equipment
and supplies
|
|
|
2,466 |
|
|
|
7.2 |
|
|
|
3,014 |
|
|
|
9.5 |
|
|
|
(548 |
) |
|
|
(18.2 |
) |
Total
revenues
|
|
$ |
34,334 |
|
|
|
100.0 |
|
|
$ |
31,832 |
|
|
|
100.0 |
|
|
$ |
2,502 |
|
|
|
7.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software Licenses. The
increase in software license revenues was due principally to the revenue
contribution from Optio, and an increase in revenue due to an increase in demand
for certain of our European payment products, offset in part by a decrease of
approximately $0.4 million as a result of declining foreign exchange rates
associated with the British Pound Sterling and the European Euro and a small
decrease in certain of our domestic payments software license
revenues. We expect software license revenues to increase during the
remainder of fiscal year 2009, principally as a result of the continued revenue
contribution from Optio and as a result of increased software license revenue
from our US and European operations as well as our Banking Solutions
segment.
Subscriptions and Transactions.
The increase in subscription and transaction revenues was due principally
to the revenue contribution from new Legal eXchange customers and the revenue
contribution from certain Optio products that are sold on a subscription basis.
These increases were offset in part by a decrease of $0.8 million as a result of
declining foreign exchange rates associated with the British
Pound Sterling. We expect subscription and transaction revenues to
increase
during the remainder of the fiscal year as a result of
orders for our newer subscription and transaction based product offerings, the
revenue contribution from new Legal eXchange customers and the continued revenue
contribution from Optio.
Service and Maintenance. The
increase in service and maintenance revenues was primarily the result of the
revenue contribution from Optio and an increase in professional services
revenues associated with several large banking projects. These increases were
offset by a decrease of $1.5 million as a result of declining foreign exchange
rates associated with the British Pound Sterling and European Euro. We
expect that service and maintenance revenues will increase during the remainder
of the fiscal year as a result of the increased revenue contribution from Optio
and from new and existing projects within our Banking Solutions
segment.
Equipment and Supplies. The
decrease in equipment and supplies revenues was principally due to a decrease of
approximately $0.5 million as a result of declining foreign exchange rates
associated with the British Pound Sterling, and our continued de-emphasis of
lower margin transactions within this aspect of our business. We expect that
equipment and supplies revenues will remain relatively consistent during the
remainder of 2009.
Cost of revenues by
category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended December 31,
|
|
|
Increase
(Decrease)
Between
Periods
2008 Compared to 2007
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in thousands)
|
|
|
As % of total
Revenues
|
|
|
(in thousands)
|
|
|
As % of total
Revenues
|
|
|
(in thousands)
|
|
|
%
|
|
Cost
of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
licenses
|
|
$ |
207 |
|
|
|
0.6 |
|
|
$ |
237 |
|
|
|
0.7 |
|
|
$ |
(30 |
) |
|
|
(12.7 |
) |
Subscriptions
and transactions
|
|
|
3,743 |
|
|
|
10.9 |
|
|
|
3,913 |
|
|
|
12.3 |
|
|
|
(170 |
) |
|
|
(4.3 |
) |
Service
and maintenance
|
|
|
9,301 |
|
|
|
27.1 |
|
|
|
7,320 |
|
|
|
23.0 |
|
|
|
1,981 |
|
|
|
27.1 |
|
Stock
compensation expense
|
|
|
261 |
|
|
|
0.8 |
|
|
|
236 |
|
|
|
0.7 |
|
|
|
25 |
|
|
|
10.6 |
|
Equipment
and supplies
|
|
|
1,824 |
|
|
|
5.3 |
|
|
|
2,091 |
|
|
|
6.6 |
|
|
|
(267 |
) |
|
|
(12.8 |
) |
Total
cost of revenues
|
|
$ |
15,336 |
|
|
|
44.7 |
|
|
$ |
13,797 |
|
|
|
43.3 |
|
|
$ |
1,539 |
|
|
|
11.2 |
|
Gross
profit
|
|
$ |
18,998 |
|
|
|
55.3 |
|
|
$ |
18,035 |
|
|
|
56.7 |
|
|
$ |
963 |
|
|
|
5.3 |
|
Software Licenses. Software
license costs consist of expenses incurred by us to manufacture, package and
distribute our software products and related documentation and costs of
licensing third party software that is incorporated into or sold with certain of
our products. Software license costs remained consistent at 6% of software
license revenues in the three months ended December 31, 2008 as compared to 7%
for the three months ended December 31, 2007. We expect that software
license costs will remain relatively consistent, as a percentage of software
license revenues, during the remainder of the fiscal year.
Subscriptions and Transactions.
Subscriptions and transaction costs include salaries and other related
costs for our professional services teams as well as costs related to our
hosting infrastructure such as depreciation and facilities related expenses.
Subscriptions and transactions costs decreased to 48% of subscription and
transaction revenues in the three months ended December 31, 2008 from 53% in the
three months ended December 31, 2007. The decrease in subscription
and transaction costs as a percentage of revenue was due principally to the
overall increase in our subscription and transaction revenue streams, some of
which is related to our acquisition of Optio, improved margins for our
transactional revenue streams in Europe, improved Legal eXchange margins in the
US and the shift of certain expenses from the subscriptions and transactions
cost of sales category to the service and maintenance costs of sales category
based on changes in where internal resources were deployed. We expect that
subscription and transaction costs will remain relatively consistent as a
percentage of subscription and transaction revenue during the remainder of the
fiscal year.
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 increased as a percentage of service and
maintenance revenues to 45% in the three months ended December 31, 2008 as
compared to 40% in the three months ended December 31, 2007. The increase in
service and maintenance costs as a percentage of service and maintenance
revenues was due to lower margins in our Banking Solutions segment, as we
continued to expand our professional service and support teams for new
customers, the impact of the fair value discount applied to acquired software
maintenance contracts in the Optio acquisition, and the shift of certain
expenses from the subscriptions and transactions cost of sales category to the
service and maintenance costs of sales
category based on changes in where internal resources were
deployed. We expect that service and maintenance costs will remain
relatively consistent, as a percentage of service and maintenance revenues,
during the remainder of the fiscal year.
Equipment and Supplies.
Equipment and supplies 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. Equipment and supplies costs
increased to 74% of equipment and supplies revenues in the three months ended
December 31, 2008 compared to 69% of equipment and supplies revenues in the
three months ended December 31, 2007. The increase in equipment and supplies
costs as a percentage of equipment and supplies revenues was due to an
unfavorable mix of lower margin revenue transactions and due to higher costs of
certain supplies in the three months ended December 31, 2008. We
expect that equipment and supplies costs will remain relatively consistent as a
percentage of equipment and supplies revenues for the remainder of the fiscal
year.
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended December 31,
|
|
|
Increase (Decrease)
Between Periods
2008
Compared
to 2007
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in thousands)
|
|
|
As % of total
revenues
|
|
|
(in thousands)
|
|
|
As % of total
revenues
|
|
|
(in thousands)
|
|
|
%
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
$ |
7,502 |
|
|
|
21.8 |
|
|
$ |
7,161 |
|
|
|
22.5 |
|
|
$ |
341 |
|
|
|
4.8 |
|
Stock
compensation expense
|
|
|
648 |
|
|
|
1.9 |
|
|
|
686 |
|
|
|
2.2 |
|
|
|
(38 |
) |
|
|
(5.5 |
) |
Product
development and engineering
|
|
|
5,041 |
|
|
|
14.7 |
|
|
|
4,026 |
|
|
|
12.6 |
|
|
|
1,015 |
|
|
|
25.2 |
|
Stock
compensation expense
|
|
|
197 |
|
|
|
0.6 |
|
|
|
200 |
|
|
|
0.6 |
|
|
|
(3 |
) |
|
|
(1.5 |
) |
General
and administrative
|
|
|
3,522 |
|
|
|
10.2 |
|
|
|
3,747 |
|
|
|
11.8 |
|
|
|
(225 |
) |
|
|
(6.0 |
) |
Stock
compensation expense
|
|
|
1,097 |
|
|
|
3.2 |
|
|
|
980 |
|
|
|
3.1 |
|
|
|
117 |
|
|
|
11.9 |
|
Amortization
of intangible assets
|
|
|
3,948 |
|
|
|
11.5 |
|
|
|
2,682 |
|
|
|
8.4 |
|
|
|
1,266 |
|
|
|
47.2 |
|
Total
operating expenses
|
|
$ |
21,955 |
|
|
|
63.9 |
|
|
$ |
19,482 |
|
|
|
61.2 |
|
|
$ |
2,473 |
|
|
|
12.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and Marketing. Sales
and marketing expenses consist primarily of salaries and other related costs for
sales and marketing personnel, sales commissions, travel, public relations and
marketing materials and trade show participation. Sales and marketing expenses
increased in the three months ended December 31, 2008 as compared to the three
months ended December 31, 2007 due to higher operating costs, largely as a
result of headcount-related cost increases from our Optio acquisition. These
increases were offset by a decrease of $0.8 million as a result of declining
foreign exchange rates associated with the British Pound Sterling and the
European Euro. We expect that sales and marketing expenses will increase
slightly over the remainder of the fiscal year as we continue to focus on our
marketing initiatives to support our new and existing products.
Product Development and Engineering.
Product development and engineering expenses consist primarily of
personnel costs to support product development, which consists of enhancements
and revisions to our products based on customer feedback and general marketplace
demands, as well as development of our newer accounts payable automation
products. The increase in product development and engineering expenses was
primarily attributable to expenses associated with the activities of Optio, and
to a decrease in the use of development resources in revenue-generating roles
during the period, the cost of which, to the extent occurring, is recorded as a
cost of revenue. These increases were offset by a decrease of $0.2
million as a result of declining foreign exchange rates associated with the
British Pound Sterling and the European Euro. We expect that product
development and engineering expenses will increase slightly during the remainder
of the fiscal year as we invest in new products and initiatives.
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. The decrease in general and administrative expenses was
principally attributable to a decrease of $0.3 million due to a decline in
European foreign currency exchange rates and a decrease in the use of third
party contractors, offset in part by increases in telecommunications costs and
depreciation expense. We expect that general and administrative
expenses will remain relatively consistent during the remainder of the fiscal
year.
Stock Compensation Expense.
During the three months ended December 31, 2008, stock compensation expense
remained relatively consistent at $2.2 million as compared to $2.1 million for
the three months ended December 31, 2007. The expense associated with share
based payments is recorded as expense within the same functional expense
category in
which cash compensation for the applicable employee is recorded. For
the three months ended December 31, 2008 and 2007, stock compensation expense
was allocated as follows:
|
|
|
|
|
|
|
|
|
Three Months Ended
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
thousands)
|
|
Cost
of revenues, service and maintenance
|
|
$ |
261 |
|
|
$ |
236 |
|
Sales
and marketing
|
|
|
648 |
|
|
|
686 |
|
Product
development and engineering
|
|
|
197 |
|
|
|
200 |
|
General
and administrative
|
|
|
1,097 |
|
|
|
980 |
|
|
|
$ |
2,203 |
|
|
$ |
2,102 |
|
|
|
|
|
|
|
|
|
|
For the
remainder of fiscal 2009, we expect stock compensation costs to increase
slightly compared to the level of expense recorded in our second
quarter.
Amortization of Intangible Assets.
Amortization expense increased as a result of the amortization of
intangible assets arising from our acquisition of Optio. Based on current
exchange rates, we expect that total amortization expense for fiscal 2009 will
approximate $15.6 million.
Other
Income, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December
31,
|
|
|
Increase (Decrease)
Between Periods
|
|
|
|
2008
|
|
|
2007
|
|
|
2008 Compared
to
2007
|
|
|
|
(in
thousands)
|
|
|
%
|
|
Interest
income
|
|
$ |
189 |
|
|
$ |
800 |
|
|
$ |
(611 |
) |
|
|
(76.4 |
) |
Interest
expense
|
|
|
(3 |
) |
|
|
(2 |
) |
|
|
1 |
|
|
|
50.0 |
|
Other
income, net
|
|
|
429 |
|
|
|
98 |
|
|
|
331 |
|
|
|
337.8 |
|
Other
income, net
|
|
$ |
615 |
|
|
$ |
896 |
|
|
$ |
(281 |
) |
|
|
(31.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income,
Net. In the three months ended December 31, 2008 as compared
to the three months ended December 31, 2007, interest income decreased as a
result of the overall decrease in our cash and investments balances, which
occurred principally due to our use of cash to acquire Optio in April 2008 and
as a result of declining yields on our short-term cash
instruments. We expect interest income to remain below fiscal 2008
levels during the remainder of fiscal 2009, reflecting the impact of lower cash
and investment balances as well as lower marketplace interest
yields. Other income, net increased as a result of certain foreign
exchange gains occurring as a result of the devaluation of the British
Pound Sterling as compared to the European Euro. Excluding the anticipated
decline in interest income, we expect that the individual components of other
income and expense will continue to represent insignificant components of our
overall operations for the remainder of 2009.
Provision
for Income Taxes. We recorded income tax expense of $0.5
million and $0.1 million for the three months ended December 31, 2008 and 2007,
respectively. The income tax expense recorded for the quarter ended
December 31, 2008 was due to tax expense associated with our UK, German, and
Australian operations, as well as tax expense in the US. The net
income tax expense for the three months ended December 31, 2007 was largely due
to tax expense in the US and Australia, partially offset by an income tax
benefit associated with our UK operations. In each of the quarters
ended December 31, 2008 and 2007, the income tax expense recorded in the US was
principally attributable to an increase in deferred tax liabilities associated
with goodwill that is deductible for US tax purposes but not amortized for
financial reporting purposes. The US tax expense also consisted of a
small amount of state income tax expense which will be incurred irrespective of
our net operating loss carryforwards.
Six
Months Ended December 31, 2008 Compared to the Six Months Ended
December 31, 2007
Revenues
by segment
We
have aggregated similar operating segments into three reportable segments:
Payments and Transactional Documents, Banking Solutions and Outsourced
Solutions. The following table represents our revenues by
segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended December 31,
|
|
|
Increase
(Decrease)
Between Periods 2008
Compared to
2007
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in thousands)
|
|
|
As % of
total
Revenues
|
|
|
(in thousands)
|
|
|
As % of
total
Revenues
|
|
|
(in thousands)
|
|
|
%
|
|
Payments
and Transactional Documents
|
|
$ |
46,331 |
|
|
|
66.3 |
|
|
$ |
41,220 |
|
|
|
65.2 |
|
|
$ |
5,111 |
|
|
|
12.4 |
|
Banking
Solutions
|
|
|
11,106 |
|
|
|
15.9 |
|
|
|
10,408 |
|
|
|
16.5 |
|
|
|
698 |
|
|
|
6.7 |
|
Outsourced
Solutions
|
|
|
12,403 |
|
|
|
17.8 |
|
|
|
11,566 |
|
|
|
18.3 |
|
|
|
837 |
|
|
|
7.2 |
|
|
|
$ |
69,840 |
|
|
|
100.0 |
|
|
$ |
63,194 |
|
|
|
100.0 |
|
|
$ |
6,646 |
|
|
|
10.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments and Transactional
Documents. The revenue increase for the six months ended December 31,
2008 was primarily attributable to the revenue contribution from Optio, which we
acquired in April 2008. This increase was offset in part by a decrease of $3.5
million as a result of declining foreign exchange rates associated with the
British Pound Sterling and European Euro.
Banking Solutions. Revenues
from our Banking Solutions segment increased slightly as compared to the
comparable prior period, as we continued to generate revenue from several large
ongoing banking projects.
Outsourced Solutions. The
revenue increase for the six months ended December 31, 2008 was due to an
increase in revenue from our Legal eXchange offering as a result of new
customers, offset in part by a decrease of $0.6 million in European foreign
currency exchange rates and by a decrease in revenues from certain of our legacy
outsourced accounts payable automation products in Europe.
Revenues
by category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended December 31,
|
|
|
Increase
(Decrease)
Between
Periods 2008
Compared to
2007
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in thousands)
|
|
|
As % of
total
Revenues
|
|
|
(in thousands)
|
|
|
As % of
total
Revenues
|
|
|
(in thousands)
|
|
|
%
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
licenses
|
|
$ |
7,203 |
|
|
|
10.3 |
|
|
$ |
6,758 |
|
|
|
10.7 |
|
|
$ |
445 |
|
|
|
6.6 |
|
Subscriptions
and transactions
|
|
|
15,973 |
|
|
|
22.9 |
|
|
|
14,184 |
|
|
|
22.4 |
|
|
|
1,789 |
|
|
|
12.6 |
|
Service
and maintenance
|
|
|
41,676 |
|
|
|
59.7 |
|
|
|
35,768 |
|
|
|
56.6 |
|
|
|
5,908 |
|
|
|
16.5 |
|
Equipment
and supplies
|
|
|
4,988 |
|
|
|
7.1 |
|
|
|
6,484 |
|
|
|
10.3 |
|
|
|
(1,496 |
) |
|
|
(23.1 |
) |
Total
revenues
|
|
|
69,840 |
|
|
|
100.0 |
|
|
|
63,194 |
|
|
|
100.0 |
|
|
|
6,646 |
|
|
|
10.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software Licenses. The
increase in software license revenues was due principally to the revenue
contribution from Optio, which we acquired in April 2008, and an increase in
revenue due to an increase in demand for certain of our European payment
products, offset in part by a decrease in software license revenue from our
Banking Solutions segment due to the timing of project completion of a large
banking project and a decrease of approximately $0.4 million as a result of
declining foreign exchange rates associated with the British Pound Sterling and
the European Euro.
Subscriptions and Transactions.
The increase in subscription and transaction revenues was due principally
to the revenue contribution from new Legal eXchange customers and the revenue
contribution from certain Optio products that are sold on a subscription basis.
These increases were offset in part by a decrease of $1.1 million as a result of
declining foreign exchange rates associated with the British
Pound Sterling.
Service and Maintenance. The
increase in service and maintenance revenues was primarily the result of the
revenue contribution from Optio and an increase in professional services
revenues associated with several large banking projects. These increases were
offset by a decrease of $1.9 million as a result of declining foreign exchange
rates associated with the British Pound Sterling and European
Euro.
Equipment and Supplies. The
decrease in equipment and supplies revenues was principally due to a decrease in
demand for certain of our paper based products, a decrease of approximately $0.7
million as a result of declining foreign exchange
rates associated with the British Pound Sterling, and our continued
de-emphasis of lower margin transactions within this aspect of our
business.
Cost
of revenues by category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended December 31,
|
|
|
Increase
(Decrease)
Between
Periods 2008
Compared to
2007
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in thousands)
|
|
|
As % of
total
Revenues
|
|
|
(in thousands)
|
|
|
As % of
total
Revenues
|
|
|
(in thousands)
|
|
|
%
|
|
Cost
of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
licenses
|
|
$ |
407 |
|
|
|
0.6 |
|
|
$ |
425 |
|
|
|
0.7 |
|
|
$ |
(18 |
) |
|
|
(4.2 |
) |
Subscriptions
and transactions
|
|
|
7,860 |
|
|
|
11.2 |
|
|
|
7,884 |
|
|
|
12.5 |
|
|
|
(24 |
) |
|
|
(0.3 |
) |
Service
and maintenance
|
|
|
18,913 |
|
|
|
27.1 |
|
|
|
14,920 |
|
|
|
23.6 |
|
|
|
3,993 |
|
|
|
26.8 |
|
Stock
compensation expense
|
|
|
521 |
|
|
|
0.7 |
|
|
|
468 |
|
|
|
0.7 |
|
|
|
53 |
|
|
|
11.3 |
|
Equipment
and supplies
|
|
|
3,679 |
|
|
|
5.3 |
|
|
|
4,614 |
|
|
|
7.3 |
|
|
|
(935 |
) |
|
|
(20.3 |
) |
Total
cost of revenues
|
|
$ |
31,380 |
|
|
|
44.9 |
|
|
$ |
28,311 |
|
|
|
44.8 |
|
|
$ |
3,069 |
|
|
|
10.8 |
|
Gross
profit
|
|
$ |
38,460 |
|
|
|
55.1 |
|
|
$ |
34,883 |
|
|
|
55.2 |
|
|
$ |
3,577 |
|
|
|
10.3 |
|
Software Licenses. Software
license costs remained consistent at 6% of software license revenues in the six
months ended December 31, 2008 as compared to the six months ended December 31,
2007.
Subscriptions and Transactions.
Subscriptions and transactions costs decreased to 49% of subscription and
transaction revenues in the six months ended December 31, 2008 from 56% in the
six months ended December 31, 2007. The decrease in subscription and
transaction costs as a percentage of revenue was due principally to the overall
increase in our subscription and transaction revenue streams, and the shift of
certain expenses from the subscriptions and transactions cost of sales category
to the service and maintenance costs of sales category based on changes in where
internal resources were deployed.
Service and Maintenance.
Service and maintenance costs increased as a percentage of service and
maintenance revenues to 45% in the six months ended December 31, 2008 as
compared to 42% in the six months ended December 31, 2007. The increase in
service and maintenance costs as a percentage of service and maintenance
revenues was due to lower margins in our Banking Solutions segment, as we
continued to expand our professional service and support teams for new
customers, the impact of the fair value discount applied to acquired software
maintenance contracts in the Optio acquisition, and the shift of certain
expenses from the subscriptions and transactions cost of sales category to the
service and maintenance costs of sales category based on changes in where
internal resources were deployed.
Equipment and Supplies.
Equipment and supplies costs increased slightly to 74% of equipment and supplies
revenues in the six months ended December 31, 2008 compared to 71% of equipment
and supplies revenues in the six months ended December 31, 2007. The increase in
equipment and supplies costs as a percentage of equipment and supplies revenues
was due to a slightly higher mix of lower margin transactions (supplies versus
equipment) for the six months ended December 31, 2008.
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended December 31,
|
|
|
Increase
(Decrease)
Between
Periods 2008
Compared to
2007
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in thousands)
|
|
|
As % of
total
revenues
|
|
|
(in thousands)
|
|
|
As % of
total
revenues
|
|
|
(in thousands)
|
|
|
%
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
$ |
15,445 |
|
|
|
22.1 |
|
|
$ |
14,069 |
|
|
|
22.3 |
|
|
$ |
1,376 |
|
|
|
9.8 |
|
Stock
compensation expense
|
|
|
1,343 |
|
|
|
1.9 |
|
|
|
1,297 |
|
|
|
2.0 |
|
|
|
46 |
|
|
|
3.5 |
|
Product
development and engineering
|
|
|
10,260 |
|
|
|
14.7 |
|
|
|
8,069 |
|
|
|
12.8 |
|
|
|
2,191 |
|
|
|
27.2 |
|
Stock
compensation expense
|
|
|
400 |
|
|
|
0.6 |
|
|
|
383 |
|
|
|
0.6 |
|
|
|
17 |
|
|
|
4.4 |
|
General
and administrative
|
|
|
7,643 |
|
|
|
10.9 |
|
|
|
7,305 |
|
|
|
11.6 |
|
|
|
338 |
|
|
|
4.6 |
|
Stock
compensation expense
|
|
|
2,149 |
|
|
|
3.1 |
|
|
|
1,880 |
|
|
|
3.0 |
|
|
|
269 |
|
|
|
14.3 |
|
Amortization
of intangible assets
|
|
|
8,384 |
|
|
|
12.0 |
|
|
|
5,330 |
|
|
|
8.4 |
|
|
|
3,054 |
|
|
|
57.3 |
|
Total
operating expenses
|
|
$ |
45,624 |
|
|
|
65.3 |
|
|
$ |
38,333 |
|
|
|
60.7 |
|
|
$ |
7,291 |
|
|
|
19.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and Marketing. Sales
and marketing expenses increased in the six months ended December 31, 2008 as
compared to the six months ended December 31, 2007 due to higher operating
costs, largely as a result of headcount related cost increases from our Optio
acquisition. These increases were offset by a decrease of $1.0 million as a
result of declining foreign exchange rates associated with the British
Pound Sterling and the European Euro.
Product Development and Engineering.
The increase in product development and engineering expenses was
primarily attributable to expenses associated with the operating costs of Optio,
which we acquired in April 2008, and by a decrease in the use of development
resources in revenue-generating roles during the period, the cost of which, to
the extent occurring, is recorded as a cost of revenue. These
increases were offset by a reduction of $0.3 million related to declining
foreign exchange rates associated with the British Pound Sterling and the
European Euro.
General and Administrative.
The increase in general and administrative expenses was principally
attributable to expenses associated with the activities of Optio offset in part
by a decrease of $0.4 million related to a decline in European foreign currency
exchange rates.
Stock Compensation Expense.
During the six months ended December 31, 2008, stock compensation expense
increased slightly to $4.4 million as compared to $4.0 million for the six
months ended December 31, 2007. The expense associated with share based payments
is recorded as expense within the same functional expense category in which cash
compensation for the applicable employee is recorded. For the six months ended
December 31, 2008 and 2007, stock compensation expense was allocated as
follows:
|
|
|
|
|
|
|
|
|
Six
Months Ended
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
thousands)
|
|
Cost
of revenues, service and maintenance
|
|
$ |
521 |
|
|
$ |
468 |
|
Sales
and marketing
|
|
|
1,343 |
|
|
|
1,297 |
|
Product
development and engineering
|
|
|
400 |
|
|
|
383 |
|
General
and administrative
|
|
|
2,149 |
|
|
|
1,880 |
|
|
|
$ |
4,413 |
|
|
$ |
4,028 |
|
|
|
|
|
|
|
|
|
|
Amortization of Intangible Assets.
Amortization expense increased as a result of the amortization of
intangible assets arising from our acquisition of Optio.
Other
Income, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
December
31,
|
|
|
Increase (Decrease)
Between Periods
|
|
|
|
2008
|
|
|
2007
|
|
|
2008 Compared
to
2007
|
|
|
|
(in
thousands)
|
|
|
%
|
|
Interest
income
|
|
$ |
454 |
|
|
$ |
1,630 |
|
|
$ |
(1,176 |
) |
|
|
(72.1 |
) |
Interest
expense
|
|
|
(27 |
) |
|
|
(12 |
) |
|
|
15 |
|
|
|
125.0 |
|
Other
income, net
|
|
|
336 |
|
|
|
175 |
|
|
|
161 |
|
|
|
92.0 |
|
Other
income, net
|
|
$ |
763 |
|
|
$ |
1,793 |
|
|
$ |
(1,030 |
) |
|
|
(57.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income,
Net. For the six months ended December 31, 2008 as compared to
the six months ended December 31, 2007, interest income decreased as a result of
the overall decrease in our cash and investments balances, which occurred
principally as a result of our use of cash to acquire Optio in April 2008 and as
a result of declining yields on our short-term
cash investments. Other income, net increased as a result of
foreign exchange gains occurring as a result of the devaluation of the British
Pound Sterling as compared to the European Euro.
Provision for Income
Taxes. We recorded income tax expense of $0.3 million for the
six months ended December 31, 2008 and an income tax benefit of $0.2 million for
the six months ended December 31, 2007. The income tax expense
for the six months ended December 31, 2008 was net of approximately $0.4 million
of one-time, non-recurring tax benefits arising from a reduction in our
unrecognized tax benefits upon the expiration of certain statutes of
limitations, from the enactment of legislation during the quarter ended
September 30, 2008 that allowed us to claim a tax refund for a portion of our
unused research and development credit carryforwards in the US, and from a
decrease in our German tax rate as a result of a restructuring of our German
operations during fiscal year 2009. Our net income tax expense also
reflected expense associated with our German, French, and Australian operations,
as well as income tax expense in the US. In the six months ended
December 31, 2007, the net income tax benefit was due to our European operations
and the one-time impact of a tax benefit arising from the enactment of
legislation that decreased our tax rates in the UK and Germany, partially offset
by income tax expense in the US and Australia.
Liquidity
and Capital Resources
One of
our goals is to maintain and improve our capital structure. The key metrics we
focus on in assessing the strength of our liquidity are summarized in the table
below:
|
|
|
|
|
|
|
|
|
Six Months Ended
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
thousands)
|
|
Cash
provided by operating activities
|
|
$ |
10,434 |
|
|
$ |
8,461 |
|
|
|
December
31,
|
|
|
June
30,
|
|
|
|
2008
|
|
|
2008
|
|
|
|
(in
thousands)
|
|
Cash,
cash equivalents and marketable securities
|
|
$ |
34,759 |
|
|
$ |
35,373 |
|
Working
capital
|
|
|
19,403 |
|
|
|
19,803 |
|
We have
financed our operations primarily from cash provided by operating activities and
the sale of our common stock. We have generated positive operating cash flows in
each of our last seven completed fiscal years. We believe that cash generated
from our operations and the cash, cash equivalents and marketable securities on
hand will be sufficient to meet our working capital and capital expenditure
requirements for the foreseeable future. We also may receive additional
investments from, and make investments in, customers or other companies.
However, any such transactions would require the approval of our board of
directors and, in some cases, stockholders and potentially bank or regulatory
approval. We also may undertake additional business or asset acquisitions or
divestitures.
During
the six months ended December 31, 2008, our cash balances decreased by
approximately $7.3 million as a result of a decline in the foreign currency
exchange rates of the British Pound, European Euro, and Australian Dollar to the
US Dollar. To the extent that exchange rates associated with these
foreign currencies decline further, we could be subject to further decreases in
our cash balances upon translation to US Dollars. However, we
continue to believe that our existing cash balances, even in light of the
foreign currency volatility we are experiencing, are adequate to meet our
liquidity and working capital requirements for the foreseeable
future.
Operating
Activities
|
|
|
|
|
|
|
|
|
Six Months Ended
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
thousands)
|
|
Net
loss
|
|
$ |
(6,718 |
) |
|
$ |
(1,475 |
) |
Non-cash
adjustments
|
|
|
14,411 |
|
|
|
10,350 |
|
Changes
in working capital
|
|
|
2,741 |
|
|
|
(414 |
) |
Net
cash provided by operating activities
|
|
$ |
10,434 |
|
|
$ |
8,461 |
|
|
|
|
|
|
|
|
|
|
Net cash
provided by operating activities for the six months ended December 31, 2008 was
due to our net loss, affected by favorable non-cash adjustments and an increase
in deferred revenue, offset by decreases in our accounts payable, accrued
expenses and an increase in accounts receivable. Net cash provided by
operating activities for the six months ended December 31, 2007 was due to our
net loss, affected by favorable non-cash adjustments, offset in part by
decreases in accrued expenses and deferred revenue and an increase in accounts
receivable. Non-cash adjustments are transactions that result in the recognition
of financial statement expense but not a corresponding cash receipt or
disbursement in the period, such as stock compensation expense, amortization of
intangible assets, depreciation and amortization of property and equipment and
provision for allowances of accounts receivable.
Investing
Activities
|
|
|
|
|
|
|
|
|
Six
Months Ended
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
thousands)
|
|
Purchases
of available-for-sale securities
|
|
$ |
--- |
|
|
$ |
(225 |
) |
Proceeds
from sale of available-for-sale securities
|
|
|
--- |
|
|
|
26,050 |
|
Purchases
of held-to-maturity securities
|
|
|
(53 |
) |
|
|
(51 |
) |
Proceeds
from sales of held-to-maturity securities
|
|
|
53 |
|
|
|
51 |
|
Purchases
of property and equipment
|
|
|
(2,060 |
) |
|
|
(1,270 |
) |
Net
cash (used in) provided by investing activities
|
|
$ |
(2,060 |
) |
|
$ |
24,555 |
|
|
|
|
|
|
|
|
|
|
In the
six months ended December 31, 2008, cash was used to acquire property and
equipment. For the six months ended December 31, 2007, cash was primarily
provided through the sale of marketable securities and, to a lesser extent, was
used to acquire property and equipment. We expect to incur quarterly capital
expenditures during the remainder of fiscal 2009 that, on average, will be
consistent with the level of capital expenditures incurred in our first six
months of the year, as we continue to invest in our IT and hosted
infrastructure.
Financing
Activities
|
|
|
|
|
|
|
|
|
Six Months Ended
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(in
thousands)
|
|
Repurchase
of common stock
|
|
$ |
(2,603 |
) |
|
$ |
(6,708 |
) |
Proceeds
from employee stock purchase plan and exercise of stock
optionsproceeds
|
|
|
961 |
|
|
|
4,988 |
|
Excess
tax benefits associated with stock compensation
|
|
|
10 |
|
|
|
108 |
|
Payment
of bank financing fees
|
|
|
(20 |
) |
|
|
(20 |
) |
Capital
lease payments
|
|
|
(65 |
) |
|
|
(15 |
) |
Net
cash used in financing activities
|
|
$ |
(1,717 |
) |
|
$ |
(1,647 |
) |
|
|
|
|
|
|
|
|
|
Net cash
used in financing activities for the six months ended December 31, 2008 and
December 31, 2007 was primarily the result of the repurchase of our common
stock, offset in part by proceeds received from the exercise of stock options
and contributions to our employee stock purchase plan.
Off-Balance
Sheet Arrangements
During
the six months ended December 31, 2008, we did not engage in material
off-balance sheet activities, including the use of structured finance, special
purpose or variable interest entities, material trading activities in
non-exchange traded commodity contracts or transactions with persons or entities
that benefit from their non-independent relationship with us.
Contractual
Obligations
Following is a summary of future payments that we are required to
make under existing contractual obligations as of December 31, 2008:
|
|
Payments Due
by Period *
|
|
|
|
Total
|
|
|
Less Than 1
Year
|
|
|
1-3 Years
|
|
|
4-5 Years
|
|
|
More Than 5
Years
|
|
|
|
(in
thousands)
|
|
Operating
lease obligations
|
|
$ |
14,813 |
|
|
$ |
1,922 |
|
|
$ |
9,597 |
|
|
$ |
2,973 |
|
|
$ |
321 |
|
Capital
lease obligations
|
|
|
329 |
|
|
|
74 |
|
|
|
252 |
|
|
|
3 |
|
|
|
--- |
|
Total
|
|
$ |
15,142 |
|
|
$ |
1,996 |
|
|
$ |
9,849 |
|
|
$ |
2,976 |
|
|
$ |
321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Payment due dates are calculated from
our most recent fiscal year end of June 30, 2008
Purchase
orders are not included in the table above. Our purchase orders represent
authorizations to purchase rather than binding agreements. The contractual
obligation amounts in the table above are associated with agreements that are
enforceable and legally binding and that specify all significant terms,
including: fixed or minimum services to be used; fixed, minimum or variable
price provisions; and the approximate timing of the transaction. Obligations
under contract that we can cancel without a significant penalty are not included
in the table above. Also excluded from the table is our
estimate of unrecognized tax benefits as of December 31, 2008 in the amount of
$0.4 million. These amounts have been excluded because as of December
31, 2008 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 foreign currency exchange rate
fluctuations and changes in the market value of our investments in marketable
securities primarily due to changes in interest rates. 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. Also, we have not entered into any interest rate swap
agreements, or other instruments to minimize our exposure to interest rate
fluctuations. There has been no material change to our exposure to market risk
from that which was disclosed in our Annual Report on Form 10-K as filed with
the SEC on September 12, 2008; however, given the recent volatility in
foreign currency exchange rates, particularly the British Pound Sterling, we
have provided a sensitivity analysis below that illustrates the potential impact
to our cash and cash equivalents balances of on-going exchange rate
fluctuations.
Foreign
currency translation risk
Based on
our cash and cash equivalents balances denominated in non-US currencies as of
December 31, 2008, a 10% increase or decrease in the exchange rate between the
British Pound Sterling and the US Dollar would result in an increase or decrease
to our cash and cash equivalents of approximately $1.8 million. A 10% increase
or decrease in the exchange rate between the European Euro and the US Dollar
would result in an increase or decrease to our cash and cash equivalents of
approximately $0.4 million. A 10% increase or decrease in the exchange rate
between the Australian Dollar and the US Dollar would result in an increase or
decrease to our cash and cash equivalents of approximately $0.2
million.
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 31, 2008. 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 31, 2008, 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 change
in our internal control over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended
December 31, 2008 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
PART
II. OTHER INFORMATION
Item 1.
|
Legal
Proceedings
|
On October
10, 2008, the plaintiffs in the initial public offering securities class action
litigation against Bottomline and Optio, which is described in our Annual Report
on Form 10-K for the fiscal year ended June 30, 2008, or our Annual Report,
withdrew a motion for class certification in certain designated “focus cases” in
the United States District Court for the Southern District of New York. Neither
Bottomline nor Optio’s cases are part of the designated focus case group. For
additional information regarding this litigation, please refer to our Annual
Report.
Investing
in our common stock involves a high degree of risk. You should carefully
consider the risks and uncertainties described below before making an investment
decision involving our common stock. The risks and uncertainties described below
are not the only ones facing our company. Additional risks and uncertainties may
also impair our business operations.
If
any of the following risks actually occur, our business, financial condition or
results of operations would likely suffer. In that case, the trading price of
our common stock could fall, and you may lose all or part of the money you paid
to buy our common stock.
The following risk factor related to
the overall economic environment represents a material addition to our risk
factors, and should be considered in addition to the other risk factors that
follow, which do not reflect any material changes from the risk factors
initially disclosed in Part I, Item 1A. “Risk Factors” in our Annual
Report on Form 10-K for the year ended June 30,
2008.
Ongoing
financial market volatility and adverse changes in the domestic and global
economic environment could have a significant adverse impact on our business,
financial condition and operating results
Our
business and operating results could be significantly impacted by general
economic conditions. In recent months, the US and global economies have
experienced an unprecedented series of events due to the effects of the credit
market crisis, slowing global economic activity, a decrease in consumer and
business confidence and severe liquidity concerns. A prolonged economic downturn
could result in a variety of risks to our business, including:
|
•
|
increased
volatility in our stock price;
|
|
•
|
increased
volatility in foreign currency exchange
rates;
|
|
•
|
delays
in, or curtailment of, purchasing decisions by our customers or potential
customers either as a result of continuing economic uncertainty or
anxiety, or as a result of their inability to access the liquidity
necessary to engage in purchasing
initiatives;
|
|
•
|
increased
credit risk associated with our customers or potential customers,
particularly those that may operate in industries most affected by the
economic downturn, such as financial services;
and
|
|
•
|
impairment
of our goodwill or other assets.
|
Over the
last several months, including the three months ended December 31, 2008, we have
experienced a decline in the foreign currency exchange rates associated with the
British Pound Sterling and European Euro, which has negatively impacted our
overall revenue growth. Additionally, we have recently experienced a higher than
anticipated level of volatility in our common stock price, which we believe has
been a result of the general financial market turmoil rather than the result of
anything specific to our business. To date, we have not experienced order
cancellations or disruption with our existing customers, but we have noticed
that, in some cases, closing new business is taking somewhat
longer. However, to date we have not experienced any decline in what
we would consider to be a normal volume of customer orders. To the extent that
the current economic downturn worsens or persists, or any of the above risks
occur, our business and operating results could be significantly and adversely
affected.
Our
common stock has experienced and may continue to undergo extreme market price
and volume fluctuations
The
NASDAQ Global Market has recently experienced extreme price and volume
fluctuations. Broad market fluctuations of this type may adversely affect the
market price of our common stock. The stock prices for many companies in the
technology sector have experienced wide fluctuations that often have been
unrelated to their operating performance. The
market price of our common stock has experienced and may continue to
undergo extreme fluctuations due to a variety of factors, including:
|
•
|
general
and industry-specific business, economic and market
conditions;
|
|
•
|
changes
in or our failure to meet analysts’ or investors’ estimates or
expectations;
|
|
•
|
actual
or anticipated fluctuations in operating results, including those arising
as a result of any impairment of goodwill or other intangible assets
related to past or future
acquisitions;
|
|
•
|
public
announcements concerning us, including announcements of litigation, our
competitors or our industry;
|
|
•
|
introductions
of new products or services or announcements of significant contracts by
us or our competitors;
|
|
•
|
acquisitions,
divestitures, strategic partnerships, joint ventures, or capital
commitments by us or our
competitors;
|
|
•
|
adverse
developments in patent or other proprietary rights;
and
|
|
•
|
announcements
of technological innovations by our
competitors.
|
Our
business and operating results are subject to fluctuations in foreign currency
exchange rates
We conduct a substantial portion of our
operations outside of the US, principally in Europe and Australia. In
the first six months of fiscal 2009, approximately 46% of our revenues were
attributable to customers located outside of North America and approximately 33%
of our operating expenses were attributable to our operations outside of the
US. In recent months, the foreign currency exchange rates of the
British Pound, European Euro and Australian Dollar to the US Dollar have
declined significantly, and we anticipate that foreign currency exchange rates
will continue to fluctuate in the near term. As we experienced in the
first six months of fiscal 2009, continued appreciation of the US Dollar against
foreign currencies will have the impact of reducing both our revenues and
operating expenses.
Our
future financial results will be impacted by our success in selling new products
in a subscription and transaction based revenue model
A
substantial portion of our revenues and profitability were historically
generated from software license revenues. We are currently offering certain of
our newer product sets under a subscription and transaction based revenue model,
which we believe has certain advantages over a perpetual license model,
including better predictability of revenue.
A
subscription and transaction based revenue model typically results in no
up-front revenue. Additionally, there can be no assurance that our customers, or
the markets in which we compete, will respond favorably to the approach we have
taken with our newer offerings. To the extent that our new subscription and
transaction based offerings do not receive general marketplace acceptance, our
financial results could be materially and adversely affected.
An
increasing number of large and more complex customer contracts, or contracts
that involve the delivery of services over contractually committed periods,
generally delay the timing of our revenue recognition and in the short-term may
adversely affect our operating results, financial condition and the market price
of our stock
Due to an
increasing number of large and more complex customer contracts, particularly in
our Banking Solutions segment, we have experienced, and will likely continue to
experience, delays in the timing of our revenue recognition. These large and
complex customer contracts generally require significant implementation work,
product customization and modification and user acceptance and systems
integration testing, resulting in the recognition of revenue over the period of
project completion, which normally spans several quarters. Delays in revenue
recognition on these contracts, including delays that result from customer
decisions to halt or otherwise slow down a long-term project due to their own
staffing or other challenges, could affect our operating results, financial
condition and the market price of our common stock. Similarly, if we are unable
to continue to generate new large orders on a regular basis, our business
operating results and financial condition could be adversely
affected.
We
make significant investments in existing products and new product offerings that
can adversely affect our operating results and may not be
successful
We
operate in a highly competitive and rapidly evolving technology environment and
believe that it is important to enhance existing product offerings and develop
new product offerings to meet strategic opportunities as they evolve.
Investments in existing products and new product offerings can have a negative
impact on our operating results, and any existing product enhancements or new
product offerings may not be accepted in the marketplace or generate material
revenues. For example, our operating results have recently been affected by
increases in product development expenses as we continued to make investments in
our hosted, banking and accounts payable automation products.
Integration
of acquisitions could interrupt our business and our financial condition could
be harmed
Part of
our operating strategy is to identify and pursue strategic acquisitions that can
expand our geographical footprint or complement our existing product
functionality. We acquired Optio Software in April 2008 and may in
the future continue to acquire, or make investments in, other businesses,
products or technologies. Any acquisition or strategic investment we have made
in the past or may make in the future may entail numerous risks, including the
following:
|
•
|
difficulties
integrating acquired operations, personnel, technologies or
products;
|
|
•
|
inadequacy
of existing operating, financial and management information systems to
support the combined organization or new
operations;
|
|
•
|
write-offs
related to impairment of goodwill and other intangible
assets;
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|
•
|
entrance
into markets in which we have no or limited prior experience or
knowledge;
|
|
•
|
diversion
of management’s focus from our core business
concerns;
|
|
•
|
dilution
to existing stockholders and earnings per
share;
|
|
•
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incurrence
of substantial debt; and
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|
•
|
exposure
to litigation from third parties, including claims related to intellectual
property or other assets acquired or liabilities
assumed.
|
Any such
difficulties encountered as a result of any merger, acquisition or strategic
investment could have a material adverse effect on our business, operating
results and financial condition.
As
a result of our acquisitions, we could be subject to significant future
write-offs with respect to intangible assets, or expenses related to acquired
in-process research and development costs, which may adversely affect our future
operating results
We review
our intangible assets, including goodwill, periodically for impairment. At
December 31, 2008, the carrying value of our goodwill and our other intangible
assets was approximately $62.1 million and $31.6 million, respectively. While we
reviewed our goodwill and intangible assets during the fourth quarter of fiscal
year 2008 and concluded that there was no impairment, we could be subject to
future impairment charges with respect to these intangible assets, or intangible
assets arising as a result of acquisitions in future periods. Further, to the
extent we acquire projects related to in-process research and development
activities, such amounts require immediate, rather than ratable, expense
recognition. Any such charges, to the extent occurring, would likely
have a material adverse effect on our operating results.
Our
fixed costs may lead to operating results below analyst or investor expectations
if our revenues are below anticipated levels, which could adversely affect the
market price of our common stock
A
significant percentage of our expenses, particularly personnel and facilities
costs, are relatively fixed and based in part on anticipated revenue levels. In
recent years, we experienced slowing growth rates with certain of our licensed
software products. In the six months ended December 31, 2008, we experienced a
decline in the foreign currency exchange rates of our European based revenues,
which negatively impacted our revenue growth. A decline in revenues
without a corresponding and timely slowdown in expense growth could negatively
affect our business. Significant revenue shortfalls in any quarter may cause
significant declines in operating results since we may be unable to reduce
spending in a timely manner.
Quarterly
or annual operating results that are below the expectations of public market
analysts could adversely affect the market price of our common stock. Factors
that could cause fluctuations in our operating results include the
following:
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•
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economic
conditions, which may affect our customers’ and potential customers’
budgets for information technology
expenditures;
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|
•
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the
timing of orders and longer sales
cycles;
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|
•
|
the
timing of product implementations, which are highly dependent on
customers’ resources and
discretion;
|
|
•
|
the
incurrence of costs relating to the integration of software products and
operations in connection with acquisitions of technologies or businesses;
and
|
|
•
|
the
timing and market acceptance of new products or product enhancements by
either us or our competitors.
|
Because
of these factors, we believe that period-to-period comparisons of our results of
operations are not necessarily meaningful.
Our
mix of products and services could have a significant effect on our financial
condition, results of operations and the market price of our common
stock
The gross
margins for our products and services vary considerably. Our software revenues
generally yield significantly higher gross margins than do our subscription and
transaction, service and maintenance and equipment and supplies revenue streams.
In fiscal 2008, we experienced a slight decrease in our software license fees.
If software license fees were to significantly decline in any future period, or
if the mix of our products and services in any given period did not match our
expectations, our results of operations and the market price of our common stock
could be significantly adversely affected.
We
face risks associated with our international operations that could harm our
financial condition and results of operations
A
significant percentage of our revenues have been generated by our international
operations, and our future growth rates and success are in part dependent on our
continued growth and success in international markets. We have operations in the
US, UK, Australia, France and Germany. As is the case with most international
operations, the success and profitability of these operations are subject to
numerous risks and uncertainties that include, in addition to the risks our
business as a whole faces, the following:
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•
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currency
exchange rate fluctuations;
|
|
•
|
difficulties
and costs of staffing and managing foreign
operations;
|
|
•
|
differing
regulatory and industry standards and certification
requirements;
|
|
•
|
the
complexities of foreign tax
jurisdictions;
|
|
•
|
reduced
protection for intellectual property rights in some countries;
and
|
|
•
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import
or export licensing requirements.
|
A
significant percentage of our revenues to date have come from our payment and
document management offerings and our future performance will depend on
continued market acceptance of these solutions
A
significant percentage of our revenues to date have come from the license and
maintenance of our payment and document management offerings and sales of
associated products and services. Any significant reduction in demand for our
payment and document management offerings could have a material adverse effect
on our business, operating results and financial condition. Our future
performance could depend on the following factors:
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•
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continued
market acceptance of our payment and document management
offerings;
|
|
•
|
our
ability to introduce enhancements to meet the market’s evolving needs for
secure payments and cash management solutions;
and
|
|
•
|
acceptance
of software solutions offered on a hosted
basis.
|
A
growing number of our customer arrangements involve selling our products and
services on a hosted basis, which may have the effect of delaying revenue
recognition and increasing development or start-up expenses
An
increasing number of our customer arrangements involve offering certain of our
products and services on a hosted basis. These arrangements typically include a
contractually defined service period as well as performance criteria that our
products or services are required to meet over the duration of the service
period. Arrangements entered into on a hosted basis generally delay the timing
of revenue recognition and often require the incurrence of up-front costs, which
can be significant. We are continuing to make investments in certain of our
hosted offerings, such as our accounts payable automation products, and there
can be no assurance that these products will ultimately gain broad market
acceptance. Additionally, there is a risk that we might be unable to
consistently maintain the performance requirements, or service levels, called
for under any such hosted arrangements. Such events, to the extent occurring,
could have a material and adverse effect on our operating results.
Our
future financial results will depend on our ability to manage growth
effectively
Our
ability to manage growth effectively will depend in part on our ability to
continue to enhance our operating, financial and management information systems.
If we are unable to manage growth effectively, the quality of our services, our
ability to retain key personnel and our business, operating results and
financial condition could be materially adversely affected.
We
face significant competition in our targeted markets, including competition from
companies with significantly greater resources
In recent
years, we have encountered increasing competition in our targeted markets. We
compete with a wide range of companies, ranging from small start-up enterprises
with limited resources, which compete principally on the basis of technology
features or specific customer relationships, to large companies, which can
leverage significant customer bases and financial resources. Given the size and
nature of the markets we target, the implementation of our growth strategy and
our success in competing for market share is dependent on our ability to grow
our sales and marketing capabilities and maintain an appropriate level of
financial resources.
We
depend on key employees who are skilled in e-commerce, payment, cash and
document management and invoice presentment methodology and Internet and other
technologies
Our
success depends upon the efforts and abilities of our executive officers and key
technical employees who are skilled in e-commerce, payment methodology and
regulation, and Internet, database and network technologies. Our key employees
are in high demand within the marketplace and many competitors, customers and
industry organizations are able to offer considerably higher compensation
packages than we currently provide. The loss of one or more of these individuals
could have a material adverse effect on our business. In addition, we currently
do not maintain “key man” life insurance policies on any of our employees. While
some of our executive officers have employment or retention agreements with us,
the loss of the services of any of our executive officers or other key employees
could have a material adverse effect on our business, operating results and
financial condition.
We
must attract and retain highly skilled personnel with knowledge in e-commerce,
payment, cash and document management and invoice presentment methodology and
Internet and other technologies
We
believe that our success is in part dependent upon our ability to attract, hire,
train and retain highly skilled technical, sales and marketing, and support
personnel, particularly with expertise in e-commerce, payment, cash management
and invoice methodology and Internet and other technologies. Competition for
qualified personnel is intense. As a result, we may experience increased
compensation costs that may not be offset through either improved productivity
or higher sales prices. There can be no assurance that we will be successful in
attracting, recruiting or retaining existing personnel. Based on our experience,
it takes an average of nine months for a new salesperson to become fully
productive. We cannot assure you that we will be successful in increasing the
productivity of our sales personnel, and the failure to do so could have a
material adverse effect on our business, operating results and financial
condition.
Increased
competition may result in price reductions and decreased demand for our product
solutions
The
markets in which we compete are intensely competitive and characterized by rapid
technological change. Some competitors in our targeted markets have longer
operating histories, significantly greater financial, technical, and marketing
resources, greater brand recognition and a larger installed customer base than
we do. We expect to face additional competition as other established and
emerging companies enter the markets we address. In addition, current and
potential competitors may make strategic acquisitions or establish cooperative
relationships to expand their product offerings and to offer more comprehensive
solutions. This growing competition may result in price reductions of our
products and services, reduced revenues and gross margins and loss of market
share, any one of which could have a material adverse effect on our business,
operating results and financial condition.
Our
success depends on our ability to develop new and enhanced products, services
and strategic partner relationships
The
markets in which we compete are subject to rapid technological change and our
success is dependent on our ability to develop new and enhanced products,
services and strategic partner relationships that meet evolving market needs.
Trends that could have a critical impact on us include:
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•
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evolving
industry standards, mandates and laws, such as those mandated by the
National Automated Clearing House Association and the Association for
Payment Clearing Services;
|
|
•
|
rapidly
changing technology, which could cause our software to become suddenly
outdated or could require us to make our products compatible with new
database or network systems;
|
|
•
|
developments
and changes relating to the Internet that we must address as we maintain
existing products and introduce any new products;
and
|
|
•
|
the
loss of any of our key strategic partners who serve as a valuable network
from which we can leverage industry expertise and respond to changing
marketplace demands.
|
There can
be no assurance that technological advances will not cause our products to
become obsolete or uneconomical. If we are unable to develop and introduce new
products or enhancements to existing products in a timely and
successful manner, our business, operating results and financial condition
could be materially adversely affected. Similarly, if our new products did not
receive general marketplace acceptance, or if the sales cycle of any of our new
products significantly delayed the timing of revenue recognition, our results
could be negatively affected.
Our
products could be subject to future legal or regulatory actions, which could
have a material adverse effect on our operating results
Our
software products and hosted services offerings facilitate the transmission of
business documents and information including, in some cases, confidential
financial data related to payments, invoices and cash management. Our web-based
software products, and certain of our hosted services offerings, transmit this
data electronically. While we believe that all of our product and service
offerings comply with current regulatory and security requirements, there can be
no assurance that future legal or regulatory actions will not impact our product
and service offerings. To the extent that regulatory or legal developments
mandate a change in any of our products or services, or alter the demand for or
the competitive environment of our products and services, we might not be able
to respond to such requirements in a timely or successful manner. If this were
to occur, our business, operating results and financial condition could be
materially adversely affected.
Any
unanticipated performance problems or bugs in our product offerings could have a
material adverse effect on our future financial results
If the
products that we offer and continue to introduce do not sustain marketplace
acceptance, our future financial results could be adversely affected. Since
certain of our offerings are still in early stages of adoption and since most of
our products are continually being enhanced or further developed in response to
general marketplace demands, any unanticipated performance problems or bugs that
we have not been able to detect could result in additional development costs,
diversion of technical and other resources from our other development efforts,
negative publicity regarding us and our products, harm to our customer
relationships and exposure to potential liability claims. In addition, if our
products do not enjoy wide commercial success, our long-term business strategy
will be adversely affected, which could have a material adverse effect on our
business, operating results and financial condition.
We
could incur substantial costs resulting from warranty claims or product
liability claims
Our
software license agreements typically contain provisions that afford customers a
degree of warranty protection in the event that our software fails to conform to
its written specifications. These agreements typically contain provisions
intended to limit the nature and extent of our risk of warranty and product
liability claims. There is a risk, however, that a court might interpret these
terms in a limited way or could hold part or all of these terms to be
unenforceable. Furthermore, some of our licenses with our customers are governed
by non-US law, and there is a risk that foreign law might provide us less or
different protection. While we maintain general liability insurance, including
coverage for errors and omissions, we cannot be sure that our existing coverage
will continue to be available on reasonable terms or will be available in
amounts sufficient to cover one or more large claims. Although we have not
experienced any material warranty or product liability claims to date, a
warranty or product liability claim, whether or not meritorious, could result in
substantial costs and a diversion of management’s attention and our resources,
which could have an adverse effect on our business, operating results and
financial condition.
We
could be adversely affected if we are unable to protect our proprietary
technology and could be subject to litigation regarding our intellectual
property rights, causing serious harm to our business
We rely
upon a combination of patent, copyright and trademark laws and non-disclosure
and other intellectual property contractual arrangements to protect our
proprietary rights. However, we cannot assure you that our patents, pending
applications for patents that may issue in the future, or other intellectual
property will be of sufficient scope and strength to provide meaningful
protection to our technology or any commercial advantage to us, or that the
patents will not be challenged, invalidated or circumvented. We enter into
agreements with our employees and customers that seek to limit and protect the
distribution of proprietary information. Despite our efforts to safeguard and
maintain our proprietary rights, there can be no assurance that such rights will
remain protected or that we will be able to detect unauthorized use and take
appropriate steps to enforce our intellectual property rights.
In recent
years, there has been significant litigation in the United States involving
patents and other intellectual property rights. We may be a party to litigation
in the future to protect our intellectual property rights or as a result of an
alleged infringement of the intellectual property rights of others. Any such
claims, whether or not meritorious, could require us to spend significant sums
in litigation, pay damages, delay product implementations, develop
non-infringing intellectual property or acquire licenses to intellectual
property that is the subject of the infringement claim. These claims could have
a material adverse effect on our business, operating results and financial
condition.
We
engage off-shore development resources which may not be successful and which may
put our intellectual property at risk
In order
to optimize our research and development capabilities and to meet development
timeframes, we contract with off-shore third party vendors in India and
elsewhere for certain development activities. While our experience to date with
these resources has been positive, there are a number of risks associated with
off-shore development activities that include, but are not limited to, the
following:
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•
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less
efficient and less accurate communication and information flow as a
consequence of time, distance and language barriers between our primary
development organization and the off-shore resources, resulting in delays
or deficiencies in development
efforts;
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|
•
|
disruption
due to political or military conflicts around the
world;
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•
|
misappropriation
of intellectual property from departing personnel, which we may not
readily detect; and
|
|
•
|
currency
exchange rate fluctuations that could adversely impact the cost advantages
intended from these agreements.
|
To the
extent that these or unforeseen risks occur, our operating results and financial
condition could be adversely impacted.
Some
anti-takeover provisions contained in our charter and under Delaware law could
hinder a takeover attempt
We are
subject to the provisions of Section 203 of the General Corporation Law of
the State of Delaware prohibiting, under some circumstances, publicly-held
Delaware corporations from engaging in business combinations with some
stockholders for a specified period of time without the approval of the holders
of substantially all of our outstanding voting stock. Such provisions could
delay or impede the removal of incumbent directors and could make more difficult
a merger, tender offer or proxy contest involving us, even if such events could
be beneficial, in the short-term, to the interests of our stockholders. In
addition, such provisions could limit the price that some investors might be
willing to pay in the future for shares of our common stock. Our certificate of
incorporation and bylaws contain provisions relating to the limitations of
liability and indemnification of our directors and officers, dividing our board
of directors into three classes of directors serving three-year terms and
providing that our stockholders can take action only at a duly called annual or
special meeting of stockholders.
We
may incur significant costs from class action litigation as a result of expected
volatility in our common stock
In the
past, companies that have experienced market price volatility of their stock
have been the targets of securities class action litigation. In August 2001, we
were named as a party in one of the so-called “laddering” securities class
action suits relating to the underwriting of our initial public offering. In
April 2008, we acquired Optio Software, which is also a party in a “laddering”
securities class action suit. We could incur substantial costs and
experience a diversion of our management’s attention and resources in connection
with any such litigation, which could have a material adverse effect on our
business, financial condition and results of operations.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
The
following table provides information about purchases by us of our common stock
during the three months ended December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Total Number of
Shares Purchased
|
|
|
Average Price Paid
Per
Share
|
|
|
Total Number of
Shares Purchased
as Part of Publicly
Announced
Plans
or
Programs
|
|
|
Approximate
Dollar Value of
Shares That May
Yet be Purchased
Under
The Plans
or Programs
(1)
|
|
October 1,
2008 — October 31, 2008
|
|
|
44,000 |
|
|
$ |
7.47 |
|
|
|
44,000 |
|
|
$ |
5,994,000 |
|
November 1,
2008 — November 30, 2008
|
|
|
107,000 |
|
|
$ |
6.79 |
|
|
|
107,000 |
|
|
$ |
5,267,000 |
|
December 1,
2008 — December 31, 2008
|
|
|
--- |
|
|
|
--- |
|
|
|
--- |
|
|
$ |
5,267,000 |
|
Total
|
|
|
151,000 |
|
|
$ |
6.99 |
|
|
|
151,000 |
|
|
$ |
5,267,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
In
April 2008, our board of directors authorized a repurchase program for the
repurchase of up to $10.0 million of our common
stock.
|
Pursuant
to the terms of our existing Loan and Security Agreement with Silicon Valley
Bank, any decision to pay dividends on our common stock would be subject to the
bank’s approval.
Item 4. Submission
of Matters to a Vote of Security Holders
We held
our 2008 Annual Meeting of Stockholders on November 18, 2008. The
following matters were voted upon at the Annual Meeting.
1.
|
Election of
Directors. Holders of 18,521,067 shares of our common stock voted
to elect Joseph L. Barry, Jr. to serve for a term of three years as a
Class I Director. Holders of 4,418,998 shares of our common
stock withheld votes from such director. Holders of 22,838,965
shares of our common stock voted to elect Robert A. Eberle to serve for a
term of three years as a Class I Director. Holders of 101,100
shares of our common stock withheld votes from such
director. Holders of 22,876,901 shares of our common stock
voted to elect Jeffrey C. Leathe to serve for a term of three years as a
Class I Director. Holders of 63,164 shares of our common stock
withheld votes from such director.
|
2.
|
Ratification of
Independent Registered Public Accounting Firm. Holders of
22,904,709 shares of our common stock voted to ratify the appointment of
Ernst & Young LLP as our independent registered public accounting firm
for the current fiscal year. Holders of 29,973 shares of our
common stock voted against ratifying such appointment, holders of 5,383
shares abstained from voting and no shares were broker
non-votes.
|
Item 6.
Exhibits
See the
Exhibit Index on page 35 for a list of exhibits filed as part of this Quarterly
Report on Form 10-Q, which Exhibit Index is incorporated herein by
reference.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
Bottomline Technologies (de),
Inc. |
|
|
|
|
|
|
By:
|
/s/ KEVIN M. DONOVAN
|
|
|
|
Kevin
M. Donovan
|
|
|
|
Chief
Financial Officer and Treasurer
|
|
|
|
(Principal
Financial and Accounting Officer)
|
|
EXHIBIT
INDEX
|
|
|
Exhibit
Number
|
|
Description
|
|
|
|
|
10.1
|
|
Form
of Executive Officer Bonus Plan for 2009 with respect to Robert A. Eberle
and Peter S. Fortune, as amended
|
|
|
|
|
|
10.2
|
|
Letter
Agreement dated as of December 23, 2008 between Bottomline Technologies
(de), Inc. and Robert A. Eberle
|
|
|
|
|
|
10.3
|
|
Letter
Agreement dated as of December 23, 2008 between Bottomline Technologies
(de), Inc. and Kevin M. Donovan
|
|
|
|
|
|
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
|