BOTTOMLINE TECHNOLOGIES, INC. This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Without limiting the foregoing, the words may, will, should, could, expects, plans, intends, anticipates, believes, estimates, predicts, potential and similar expressions are intended to identify forward-looking statements. All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available to us up to and including the date of this report, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below under Management's Discussion and Analysis of Financial Condition and Results of Operations and Part II. Item 1A. Risk Factors and elsewhere in this Quarterly Report on Form 10-Q. You should carefully review those factors and also carefully review the risks outlined in other documents that we file from time to time with theSecurities and Exchange Commission (SEC), including Part II. Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, as filed with the SEC on August 30 2021. In the management discussion that follows, we have highlighted those changes and operating events that were the primary factors affecting period to period fluctuations. The remainder of the change in period to period fluctuations from that which is specifically discussed arises from various individually insignificant items. Overview We help make complex business payments simple, smart and secure. We provide solutions that are helping to accelerate the digital transformation of business payments. Corporations and banks rely on us for domestic and international payments, efficient cash management, automated workflows for payment processing and bill review, and fraud detection, behavioral analytics and regulatory compliance solutions. We operate payment platforms that facilitate electronic payment and transaction settlement between businesses and their vendors. We offer solutions that banks use to provide payment, cash management and treasury capabilities to their business customers, as well as solutions that financial institutions use to engage intelligently with customers and acquire, deepen and grow profitable relationships. Our legal spend management solutions help determine the right amount to pay for legal services and claims for insurance companies and other large consumers of outside legal services and provide related tools and analytics for law firms themselves. Corporate customers rely on our solutions to automate payment and accounts payable processes and to streamline and manage the production and retention of electronic documents. Our fraud and risk management solutions are designed to non-invasively monitor and analyze user behavior and payment transactions to flag behavioral and data anomalies and other suspicious activity to gain protection from internal fraud and external financial crime. Our solutions are designed to complement, leverage and extend our customers' existing information systems, accounting applications and banking relationships so that the solutions can be deployed quickly and efficiently. To help our customers realize the maximum value from our products and meet their specific business requirements, we also provide professional services for training, consulting and product enhancement. Financial Highlights For the three months endedSeptember 30, 2021 , our revenue increased to$123.6 million from$112.4 million in the same period of the prior fiscal year. Our revenue for the three months endedSeptember 30, 2021 was favorably impacted by$2.0 million due to the impact of foreign currency exchange rates primarily related to the British Pound Sterling, which appreciated against theU.S. Dollar as compared to the same period of the prior fiscal year. The overall revenue increase was attributable to revenue increases in our Payment Platforms, Banking Solutions and Legal Segment Management segments of$8.4 million ,$2.5 million , and$1.5 million , respectively, partially offset by a$1.2 million revenue decrease in our Traditional Solutions segment. The increase in revenue in our Payment Platforms and Legal Spend Management segments was driven by increased subscription revenue. The increased revenue in our Banking Solutions segment was primarily due to new customer engagements and platform go-lives, as customers continued to deploy our hosted solutions. We incurred a net loss of$4.9 million in the three months endedSeptember 30, 2021 compared to net income of$0.4 million in the same period of the prior fiscal year. Our net loss for the three months endedSeptember 30, 2021 , was favorably impacted by gross profit expansion of$5.5 million and a reduction in our provision for income taxes of$4.6 million , offset by an increase in operating expenses of$15.2 million . In the three months endedSeptember 30, 2021 , we derived approximately 39% of our revenue from customers located outside ofNorth America , principally in theUnited Kingdom (UK ), continentalEurope and theAsia-Pacific region . On an increasing basis, we continue to make strategic investments in innovative new technology offerings that we believe will enhance our competitive position, help us win new business, drive subscription revenue growth and expand our operating margins. We expect to continue to make investments in our suite of products so that we can continue to offer innovative, feature-rich technology solutions to our customers. 21 -------------------------------------------------------------------------------- Table of Contents COVID-19The United States and the global communities in which we operate continue to face challenges posed by the COVID-19 pandemic. Recently, restrictions have been re-implemented by government bodies and private businesses as disease variants became more prevalent. Like many companies we have been encouraged by the increased availability of vaccines, however there remains significant uncertainty over the duration of the pandemic itself; particularly as the virus continues to evolve. SinceMarch 2020 we have continued to suspend virtually all travel for employees, our offices generally remain closed and our employees have continued to work remotely in most geographies. While we continue to operate effectively during this challenging period, the full impact of the COVID-19 pandemic on our business and the global economy remains uncertain. The ultimate consequences will depend on many factors outside of our control, including the availability and effectiveness of vaccines and therapeutics and the ultimate duration and severity of the pandemic itself; including the impact of the emerging COVID variants. Certain of our transactional revenue streams, specifically those arising through Paymode-X and Legal Spend Management, were the most significantly impacted during the prior fiscal year. We have continued to observe that transaction volumes for Paymode-X have continued to return to more normalized levels. Legal Spend Management transaction volumes remained constrained during the prior fiscal year but we saw some modest improvement during the fourth quarter of the past fiscal year and we recorded a revenue increase in Legal Spend Management for the quarter endedSeptember 30, 2021 as compared toSeptember 30, 2020 . We are encouraged by these trends and are hopeful that it supports a conclusion that a sustained recovery of volumes is underway. Critical Accounting Policies and Significant Judgments and Estimates We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as critical because they involve areas of financial reporting that require us to make judgments and estimates about matters that are uncertain at the time we make the estimate and different estimates - which also would have been reasonable - could have been used. The critical accounting policies and estimates we identified in our most recent Annual Report on Form 10-K for the fiscal year endedJune 30, 2021 related to revenue recognition, the valuation of goodwill and intangible assets, the valuation of acquired deferred revenue, capitalized software costs and income taxes. There have been no changes to the critical accounting policies from those we disclosed in Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year endedJune 30, 2021 . It is important that the discussion of our operating results that follows be read in conjunction with the critical accounting policies disclosed in Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year endedJune 30, 2021 , as filed with theSEC onAugust 30, 2021 . Recent Accounting Pronouncements For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, please refer to Note 2 Recent Accounting Pronouncements to our unaudited consolidated financial statements included in Part I. Item 1 of this Quarterly Report on Form 10-Q. Results of Operations Three Months EndedSeptember 30, 2021 Compared to the Three Months EndedSeptember 30, 2020 Segment Information Operating segments are components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our chief executive officer. During the quarter endedSeptember 30, 2021 we realigned our internal financial reporting to provide for more specific visibility into key product lines which resulted in a change to our externally reportable segments. Specifically, our prior Cloud Solutions segment was renamed Payment Platforms and includes the revenue and operating results of our Paymode-X and PTX payment platforms. Our Legal Spend Management Solutions have been presented as a stand-alone operating segment, having previously been a component of our Cloud Solutions segment. Finally, our Financial Messaging solutions, previously a component of our Cloud Solutions segment, has been included as a component of our Banking Solutions segment. Our prior Payments and Documents segment has been renamed to Traditional Solutions, with no change to the composition of the revenue and operating activity included in this segment. These changes are reflected for all financial periods presented. 22 -------------------------------------------------------------------------------- Table of Contents The following tables represent our segment revenues and our measure of segment profit (loss): Increase (Decrease) Three Months Ended September 30, Between Periods $ Change Inc % Change Inc 2021 2020 (Dec) (Dec) (Dollars in thousands) Segment revenue: Payment Platforms$ 33,807 $ 25,367 $ 8,440 33.3 % Banking Solutions 47,681 45,229 2,452 5.4 % Legal Spend Management 22,063 20,550 1,513 7.4 % Traditional Solutions 16,192 17,396 (1,204) (6.9) % Other 3,862 3,823 39 1.0 % Total segment revenue$ 123,605 $ 112,365 $ 11,240 10.0 % Segment measure of profit (loss): Payment Platforms $ 5,824$ 5,755 $ 69 1.2 % Banking Solutions 3,753 7,212 (3,459) (48.0) % Legal Spend Management 5,208 4,586 622 13.6 % Traditional Solutions 3,114 4,100 (986) (24.0) % Other (3,976) (3,107) (869) (28.0) % Total measure of segment profit$ 13,923 $ 18,546 $ (4,623) (24.9) %
A reconciliation of the total measure of segment profit to our GAAP (loss) income before income taxes is as follows:
Three Months Ended September 30,
2021 2020
(in thousands)
Total measure of segment profit $ 13,923 $ 18,546
Less:
Amortization of acquisition-related intangible
assets (5,071) (5,029)
Stock-based compensation plan expense (13,912)
(9,973)
Acquisition and integration-related expenses (201) (245) Restructuring expense (386) (70) Other non-core expense (110) (48) Shareholder engagement fees (947) - Other expense, net of pension adjustments (1,008)
(1,026)
(Loss) income before income taxes $ (7,712)
Payment Platforms Revenue from our Payment Platforms segment increased$8.4 million for the three months endedSeptember 30, 2021 as compared to the same period in the prior fiscal year due to increased subscription revenue of$8.2 million driven by both increased transactional volumes and the impact of new customers that have adopted our platforms since the corresponding quarter of the prior fiscal year. Segment profit increased$0.1 million for the three months endedSeptember 30, 2021 as compared to the same period in the prior fiscal year as the revenue increases described above were offset in part by increased cost of subscription revenue of$2.9 million and operating expenses of$5.6 million related primarily to increased sales and marketing expenses and product development expenses of$3.7 million and$1.5 million , respectively. We expect revenue and profit for the Payment Platforms segment to continue to increase in fiscal year 2022 as compared to fiscal year 2021. Banking Solutions Revenues from our Banking Solutions segment increased$2.5 million for the three months endedSeptember 30, 2021 as compared to the same period in the prior fiscal year, primarily due to increased subscriptions revenue of$3.0 million , partially offset 23 -------------------------------------------------------------------------------- Table of Contents by decreased professional service and maintenance revenue of$0.5 million . The increase in subscriptions revenue was primarily related to our existing customer base expanding on or converting to our more technologically advanced SaaS platforms and as a result of our continued deployment of our newer banking solutions to new and existing customers. The decrease in professional services revenue was primarily driven by our business strategy, which remains focused on a subscription revenue model rather than one-time license events, which frequently require distinct professional services. The increase in revenue described above was offset by increased cost of revenues of$2.2 million , primarily related to subscription costs, and operating expenses of$3.7 million . The increase in operating expenses was primarily due to increased sales and marketing expenses and product development expenses of$1.9 million and$1.1 million , respectively. Segment profit decreased$3.5 million for the three months endedSeptember 30, 2021 as compared to the same period in the prior fiscal year due to the increases in revenue and expenses described above. We expect revenue to continue to increase and profit to remain relatively consistent for the Banking Solutions segment in fiscal year 2022 as compared to fiscal year 2021. Legal Spend Management Revenues from our Legal Spend Management segment increased$1.5 million for the three months endedSeptember 30, 2021 as compared to the same period in the prior fiscal year, due to increased subscription revenue driven by increased transactional volumes and the impact of new customers using these solutions since the corresponding quarter of the prior fiscal year. Segment profit increased$0.6 million for the three months endedSeptember 30, 2021 as compared to the same period in the prior fiscal year, due to the increase in subscription revenue discussed above and a decrease in product development expenses of$0.3 million , partially offset by an increase in cost of revenues of$0.6 million and operating expenses related primarily to sales and marketing expense and general and administrative expense of$0.2 million and$0.4 million , respectively. We expect revenue and profit to continue to increase for the Legal Spend Management segment in fiscal year 2022 as compared to fiscal year 2021. Traditional Solutions Revenues from our Traditional Solutions segment decreased$1.2 million for the three months endedSeptember 30, 2021 as compared to the same period in the prior fiscal year, primarily due to decreased professional service and maintenance revenue of$1.3 million and software revenue of$0.3 million , partially offset by increased subscriptions revenue of$0.3 million . The decrease in professional service and maintenance revenue and software revenue was driven by the continued conversion of our customers to our hosted and subscription based solutions rather than deployed, perpetual license solutions. Segment profit decreased$1.0 million for the three months endedSeptember 30, 2021 as compared to the same period in the prior fiscal year, primarily due to the decrease in revenues discussed above and an increase in subscription costs of$0.1 million , product development expense of$0.2 million and general and administrative expense of$0.2 million , partially offset by a decrease in costs of revenue associated with professional service and maintenance of$0.8 million . We expect revenue and profit to decrease slightly for the Traditional Solutions segment in fiscal year 2022, primarily due to decreased service, maintenance and software licenses. Other Revenues from our Other segment remained at relatively consistent levels for the three months endedSeptember 30, 2021 as compared to the same period in the prior fiscal year. Segment profit decreased$0.9 million for the three months endedSeptember 30, 2021 as compared to the same period in the prior fiscal year primarily due to increased cost of revenue of$0.3 million primarily related to subscriptions and increased operating expenses of$0.6 million primarily related to sales and marketing. We expect Other segment revenue to continue to decrease in fiscal year 2022 as compared to fiscal year 2021 as our fraud solutions are increasingly sold by other segments while certain centralized costs continue to be borne by the Other segment. 24 --------------------------------------------------------------------------------
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Revenues by category
Increase (Decrease)
Three Months Ended September 30, Between Periods
% Change
2021 2020 $ Change Inc (Dec) Inc (Dec)
(Dollars in thousands)
Revenues:
Subscriptions $ 103,496 $ 90,384 $ 13,112 14.5 %
Software licenses 927 977 (50) (5.1) % Service and maintenance 18,708 20,564 (1,856) (9.0) % Other 474 440 34 7.7 % Total revenues $ 123,605$ 112,365 $ 11,240 10.0 %
As % of total revenues: Subscriptions 83.7 % 80.4 % Software licenses 0.8 % 0.9 % Service and maintenance 15.1 % 18.3 % Other 0.4 % 0.4 % Total revenues 100.0 % 100.0 % Subscriptions Revenues from subscriptions increased$13.1 million for the three months endedSeptember 30, 2021 as compared to the same period in the prior fiscal year. The overall revenue increase was driven by an increase in subscriptions revenue from our Payment Platforms, Banking Solutions, and Legal Spend Management segments of$8.2 million ,$2.5 million , and$1.5 million , respectively, due to the impact of customers going live on our hosted solutions and the continued impact of customers converting to our subscription based solutions. We expect subscriptions revenues to continue to increase in fiscal year 2022 due to the continued adoption of our subscription based offerings. Software Licenses Revenues from software licenses slightly decreased for the three months endedSeptember 30, 2021 as compared to the same period in the prior fiscal year, primarily due to decreased revenue from our Traditional Solutions segment of$0.3 million , offset by an increase in revenue in our Other segment of$0.3 million . The decrease in software license revenue was driven by the continued conversion of our customers to our hosted and subscription based solutions and our continued de-emphasis of deployed, perpetual license solutions. We expect software license revenues to continue to decrease in fiscal year 2022, as we continue to emphasize our subscription based solutions rather than on-premise software deployments. Service and Maintenance Revenues from service and maintenance decreased$1.9 million for the three months endedSeptember 30, 2021 as compared to the same period in the prior fiscal year, primarily due to decreased revenue from our Traditional Solution and Banking Solutions segments of$1.3 million and$0.5 million , respectively, driven by the continued conversion of our customers to our hosted and subscription based solutions rather than deployed, perpetual license solutions. We expect service and maintenance revenues will continue to decrease in fiscal year 2022, primarily due to our continued emphasis on our hosted solutions. Other Our other revenues consist principally of equipment and supplies sales, which remained and are expected to remain minor components of our overall revenue. 25 --------------------------------------------------------------------------------
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Cost of revenues by category
Three Months Ended September 30, Increase (Decrease)
Between Periods
$ Change Inc % Change Inc
2021 2020 (Dec) (Dec)
(Dollars in thousands)
Cost of revenues:
Subscriptions $ 42,693$ 35,218 $ 7,475 21.2 % Software licenses 81 90
(9) (10.0) %
Service and maintenance 9,252 10,916
(1,664) (15.2) %
Other 295 309
(14) (4.5) %
Total cost of revenues $ 52,321$ 46,533 $ 5,788 12.4 % Gross Profit ($) $ 71,284$ 65,832 $ 5,452 8.3 % Gross Profit (%) 57.7 % 58.6 % Subscriptions Subscriptions costs include salaries and other related costs for our professional services teams as well as costs related to our hosting infrastructure such as depreciation and facilities related expenses. Subscriptions costs increased to 41% as a percentage of subscriptions revenues in the three months endedSeptember 30, 2021 as compared to 39% in the three months endedSeptember 30, 2020 due to year-over-year cost of revenue increases as we continued to grow our subscription revenue streams. We expect subscriptions costs as a percentage of subscriptions revenues will decrease slightly in fiscal year 2022 as a result of increased revenue contribution from our cloud-based banking, legal spend management and Paymode-X solutions. Software Licenses Software license costs consist of expenses incurred to distribute our software products and related documentation and costs of licensing third party software that is incorporated into or sold with certain of our products. Software license costs as a percentage of software license revenues remained at 9% of software license revenue in the three months endedSeptember 30, 2021 and 2020. Overall, software license costs remain and are expected to remain inconsequential. Service and Maintenance Service and maintenance costs include salaries and other related costs for our customer service, maintenance and help desk support staffs, as well as third party contractor expenses used to complement our professional services team. Service and maintenance costs as a percentage of service and maintenance revenues decreased to 49% in the three months endedSeptember 30, 2021 as compared to 53% in the three months endedSeptember 30, 2020 , reflecting a shift in resources to our hosted and subscription based products. We expect that service and maintenance costs will remain relatively consistent in fiscal year 2022. Other Other costs include the costs associated with equipment and supplies that we resell, as well as freight, shipping and postage costs associated with the delivery of our products. These remain minor components of our business. We expect other costs as a percentage of other revenues will remain consistent in fiscal year 2022. 26 -------------------------------------------------------------------------------- Table of Contents Operating Expenses Three Months Ended September 30, Increase (Decrease) Between Periods $ Change Inc % Change 2021 2020 (Dec) Inc (Dec) (Dollars in thousands) Operating expenses: Sales and marketing $ 33,814$ 25,743 $ 8,071 31.4 % Product development and engineering 21,465 18,499 2,966 16.0 % General and administrative 17,749 13,626 4,123 30.3 % Amortization of acquisition-related intangible assets 5,071 5,029 42 0.8 % Total operating expenses $ 78,099$ 62,897 $ 15,202 24.2 % As % of total revenues: Sales and marketing 27.4 % 22.9 % Product development and engineering 17.4 % 16.5 % General and administrative 14.4 % 12.1 % Amortization of acquisition-related intangible assets 4.1 % 4.5 % Total operating expenses 63.3 % 56.0 % 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$8.1 million in the three months endedSeptember 30, 2021 as compared to the three months endedSeptember 30, 2020 primarily due to an increase in employee related costs of$6.3 million and marketing expense of$0.9 million . We expect sales and marketing expenses as a percentage of total revenues will increase slightly in fiscal year 2022. Product Development and Engineering Product development and engineering expenses consist primarily of personnel costs to support product development, which consists of enhancements and revisions to our products as well as initiatives related to new product development. Product development and engineering expenses increased$3.0 million in the three months endedSeptember 30, 2021 , as compared to the three months endedSeptember 30, 2020 primarily due to an increase in headcount related costs of$2.5 million . We expect product development and engineering expenses as a percentage of total revenues will remain relatively consistent in fiscal year 2022. General and Administrative General and administrative expenses consist primarily of salaries and other related costs for operations and finance employees and legal and accounting services. General and administrative expenses increased$4.1 million in the three months endedSeptember 30, 2021 as compared to the three months endedSeptember 30, 2020 primarily due to an increase in employee related costs of$2.7 million , depreciation expense of$0.4 million , restructuring expense of$0.3 million and facility costs of$0.2 million . We expect general and administrative expenses as a percentage of total revenues will remain relatively consistent in fiscal year 2022. Other Expense, Net Increase (Decrease) Three Months Ended September 30, Between Periods % Change Inc 2021 2020 $ Change Inc (Dec) (Dec) (Dollars in thousands) Interest income $ 23$ 100 $ (77) (77.0) % Interest expense (1,066) (1,258) 192 15.3 % Other income (expense), net 146 378 (232) (61.4) % Other expense, net$ (897) $ (780) $ (117) (15.0) % 27
-------------------------------------------------------------------------------- Table of Contents The components of other expense, net are as depicted above and remain minimal overall components of our operations. The slight decrease in interest expense in the three months endedSeptember 30, 2021 as compared to the three months endedSeptember 30, 2020 is a result of a decrease in borrowings under our line of credit arrangement during the three month period endingSeptember 2021 as compared toSeptember 2020 . Provision for Income Taxes We recorded income tax benefit of$2.8 million and income tax expense of$1.8 million for the three months endedSeptember 30, 2021 and 2020, respectively. Please refer to Note 8 Income Taxes to our unaudited consolidated financial statements included in Part I. Item 1 of this Quarterly Report on Form 10-Q for further discussion. Liquidity and Capital Resources We are party to a credit agreement withBank of America, N.A . and certain other lenders that provides for a credit facility in the amount of up to$300 million (the Credit Facility). We have the right to request an increase to the aggregate commitments to the Credit Facility of up to an additional$150 million , subject to specified conditions. The Credit Facility expires inJuly 2023 . AtSeptember 30, 2021 , borrowings were$130 million and we were in compliance with all covenants. We have financed our operations primarily from cash provided by operating activities, the sale of our common stock and debt proceeds. We have consistently generated positive operating cash flows. We believe that the cash generated from our operations and the cash and cash equivalents we have on hand will be sufficient to meet our operating requirements for the foreseeable future. If our existing cash resources along with cash generated from operations is insufficient to satisfy our operating requirements, we may need to sell additional equity or debt securities or seek other financing arrangements. One of our financial goals is to maintain and improve our capital structure. The key metrics we focus on in assessing the strength of our liquidity for the periods endedSeptember 30, 2021 andJune 30, 2021 and a summary of our cash activity for the three months endedSeptember 30, 2021 and 2020 are summarized in the tables below: September 30, June 30, 2021 2021 (in thousands) Cash and cash equivalents$ 117,200 $ 133,932 Marketable securities 8,185 10,216 Borrowings under credit facility 130,000 130,000 Three Months Ended September 30, 2021 2020 (in
thousands)
Cash provided by operating activities $ 10,246
Cash used in investing activities (9,786)
(20,149)
Cash (used in) provided by financing
activities (18,489)
2,168
Effect of exchange rates on cash (1,108)
3,294
Cash, cash equivalents and marketable securities. AtSeptember 30, 2021 , our cash and cash equivalents of$117.2 million consisted primarily of cash deposits held at major banks and money market funds. The$16.7 million decrease in cash and cash equivalents atSeptember 30, 2021 fromJune 30, 2021 was primarily due to cash used to repurchase common stock of$20.8 million , to fund capital expenditures, including capitalization of software costs of$3.1 million , and the negative effect of foreign exchange rates on cash of$4.4 million , partially offset by an increase in cash generated from operations of$2.3 million , a decrease in cash used in business and asset acquisitions, net of cash acquired of$9.8 million , a decrease in funds used to issue notes receivable of$1.6 million and the purchase of available for sale securities of$2.0 million . Cash, cash equivalents and marketable securities included approximately$35.9 million held by our foreign subsidiaries as ofSeptember 30, 2021 . We continue to permanently reinvest the earnings, if any, of our international subsidiaries other than theUK ,Switzerland ,India and one of our Australian subsidiaries; therefore we do not provide forU.S. income taxes that could result from the distribution of foreign earnings from our international subsidiaries other than the aforementioned. If our reinvestment plans were to change based on future events and we decided to repatriate amounts from other international subsidiaries, those amounts would generally become subject to state tax in theU.S. to the extent there were cumulative profits in the foreign subsidiary from which the distribution to theU.S. was made and we could be further subject to withholding tax. Cash and cash equivalents held by our foreign subsidiaries are denominated in currencies other thanU.S. Dollars. Decreases primarily in the foreign currency exchange rate of the British Pound Sterling to theU.S. Dollar decreased our overall cash balances by 28 -------------------------------------------------------------------------------- Table of Contents approximately$1.1 million for the three months endedSeptember 30, 2021 . Further changes in the foreign currency exchange rates of the British Pound Sterling and other currencies could have a significant effect on our overall cash balances, however, we continue to believe that our existing cash balances, even in light of the foreign currency volatility we frequently experience, are adequate to meet our operating requirements for the foreseeable future. AtSeptember 30, 2021 , our deferred tax assets have been fully reserved since, given the available evidence, it was deemed more likely than not that these deferred tax assets would not be realized. Operating Activities. Operating cash flow is derived by adjusting our net income or loss for non-cash operating items, such as depreciation and amortization, stock-based compensation plan expense, deferred income tax benefits or expenses and changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our results of operations. Cash generated from operations increased by$2.3 million in the three months endedSeptember 30, 2021 as compared to the same period in the prior fiscal year, primarily due to an increase in cash provided by accounts receivable of$3.0 and accrued expenses of$7.3 million , partially offset by the increase in our net loss for the three months endedSeptember 30, 2021 of$5.3 million and cash used in customer liabilities of$2.8 million . Investing Activities. Investing cash flows consist primarily of capital expenditures, inclusive of capitalized software costs, investment purchases and sales and cash used for the acquisition of businesses and assets. The$10.4 million decrease in net cash used in investing activities for the three months endedSeptember 30, 2021 as compared to the same period in the prior fiscal year was primarily due to a decrease in cash used to fund business and asset acquisitions, net of cash acquired, of$9.8 million , a decrease in cash used to fund notes receivable of$1.6 million and to purchase available for sale securities of$2.0 million , partially offset by an increase in cash used for capital expenditures of$3.1 million . Financing Activities. Financing cash flows consist primarily of cash inflows as a result of borrowings under our revolving credit facility and proceeds from the sale of shares of common stock through employee equity incentive plans, offset by repurchases of our common stock. The increase in cash used in financing activities of$20.7 million was due to an increase in cash used to repurchase common stock of$20.8 million during the three months endedSeptember 30, 2021 . Contractual Obligations During the three months endedSeptember 30, 2021 , we entered into a new facility lease inIndia , increasing our contractual obligations by$2.7 million . Other than the new facility lease, there have been no other material changes to the contractual obligations from that which was disclosed in Item 7 of our Annual Report on Form 10-K for the fiscal year endedJune 30, 2021 . Our estimate of unrecognized tax benefits for which cash settlement may be required is$2.3 million . As ofSeptember 30, 2021 , 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. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements during the three months endedSeptember 30, 2021 . Item 3. Quantitative and Qualitative Disclosures about Market Risk We are exposed to a variety of risks, including interest rate changes, foreign currency exchange rate fluctuations, and derivative instruments classification and fair value changes. We have not entered into any foreign currency hedging transactions or other instruments to minimize our exposure to foreign currency exchange rate fluctuations nor do we presently plan to in the future. We are a party to interest rate swap agreements which we designated as hedge instruments to minimize our exposure to interest rate fluctuations under our Credit Facility. There has been no material change to our exposure to market risk from that which was disclosed in Item 7A of our Annual Report on Form 10-K for the fiscal year endedJune 30, 2021 as filed with theSEC onAugust 30, 2021 , which is incorporated herein by reference. Item 4. Controls and Procedures Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as ofSeptember 30, 2021 . 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 theSEC'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 29 -------------------------------------------------------------------------------- Table of Contents 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 ofSeptember 30, 2021 , our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. No changes in our internal control over financial reporting occurred during the fiscal quarter endedSeptember 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 30
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