Item 2. Managements Discussion
and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form
10-Q
contains forward-looking statements that involve risks and uncertainties. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Without limiting the foregoing, the words may, will, should, could, expects, plans, intends,
anticipates, believes, estimates, predicts, potential and similar expressions are intended to identify forward-looking statements. All forward-looking statements included in this Quarterly Report on Form
10-Q
are based on information available to us up to and including the date of this report, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set forth below under Managements Discussion and Analysis of Financial Condition and Results of Operations and Part II. Item 1A. Risk Factors and elsewhere in this
Quarterly Report on Form
10-Q.
You should carefully review those factors and also carefully review the risks outlined in other documents that we file from time to time with the Securities and Exchange
Commission (SEC), including Part II. Item 1A. Risk Factors in our Annual Report on Form
10-K
for the fiscal year ended June 30, 2018.
In the management discussion that follows, we have highlighted those changes and operating events that were the primary factors affecting
period to period fluctuations. The remainder of the change in period to period fluctuations from that which is specifically discussed arises from various individually insignificant items.
Overview
We help make complex business
payments simple, smart and secure. Corporations and banks rely on us for domestic and international payments, efficient cash management, automated workflows for payment processing and bill review, and fraud detection, behavioral analytics and
regulatory compliance solutions.
We operate cloud-based settlement networks that facilitate electronic payments and transaction
settlement between businesses, their vendors and banks. We offer
cloud and on-premise solutions that
banks use to provide payment, cash management and treasury capabilities to their
business customers, as well as solutions that financial institutions use to facilitate customer acquisition. Our cloud-based legal spend management solutions help manage and determine the right amount to pay for legal services and claims vendor
expenditures for insurance companies and other large consumers of outside legal services. Corporate customers rely on our solutions to automate payment and accounts payable processes and to streamline and manage the production and retention of
electronic documents. Our healthcare customers use our solutions to streamline financial processes, particularly the patient enrollment process. We also offer cyber fraud and risk management solutions that are designed
to non-invasively monitor and
analyze user behavior and payment transactions to flag behavioral and data anomalies and other suspicious activity.
Our solutions are designed to complement, leverage and extend our customers existing information systems, accounting applications and
banking relationships so that they can be deployed quickly and efficiently. To help our customers realize the maximum value from our products and meet their specific business requirements, we also provide professional services for installation,
training, consulting and product enhancement.
Financial Highlights
The discussion that follows compares our operating results for the three and nine months ended March 31, 2019 to the three and nine months
ended March 31, 2018. We adopted the new revenue recognition standard on July 1, 2018 and, in accordance with the method of adoption, did not recast prior period information. The new revenue standard has generally resulted in a modest
reduction of subscription and transaction and services and maintenance revenue, while increasing software license revenue, for the nine months ended March 31, 2019 as compared to the respective prior period. The new revenue standard requires
the capitalization of certain costs incurred to fulfill or obtain contracts, which prior to adoption were expensed as incurred. Accordingly, this has resulted in a modest reduction to cost of revenues and operating expenses for the three and nine
month periods ended March 31, 2019 as compared to the respective prior periods. Please refer to
Note 3 Revenue Recognition
to our unaudited consolidated financial statements included in this Form
10-Q
for a detailed reconciliation of the impact of the adoption of this standard on our operating results.
For the nine months ended March 31, 2019, our revenue increased to $313.7 million from $287.6 million in the same period of the
prior fiscal year. Our revenue for the nine months ended March 31, 2019 was unfavorably impacted by $3.5 million due to the impact of foreign currency exchange rates primarily related to the Swiss Franc and British Pound Sterling,
both of which depreciated against the U.S. Dollar as compared to the same period of the prior fiscal year. The revenue increase was attributable to revenue increases in our Cloud Solutions segment of $17.9 million, our Banking Solutions
segment of $4.1 million and our Payments and Transactional Documents segment of $2.8 million. Increased revenue from our legal spend management and our
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