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Significant Accounting Policies

12 Months Ended

Jun. 30, 2020

Principles of Consolidation

The consolidated financial statements include our accounts and the accounts of our subsidiaries, all of which are wholly owned. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates include, but are not limited to, revenue recognition, allowances for doubtful accounts, recoverability of deferred tax assets, determining the fair value associated with acquired assets and liabilities including acquired performance obligations, intangible asset and goodwill impairment, pension benefit obligations, accruals for uncertain tax positions and certain other of our accrued liabilities. Actual results could differ from those estimates.

Foreign Currency Translation

We have international subsidiaries in Europe, the Asia-Pacific region and Canada, whose functional currencies are typically the local currencies. Assets and liabilities of all of our international subsidiaries have been translated into U.S. dollars at year-end exchange rates, and results of operations and cash flows have been translated at the average exchange rates in effect during the year. Gains or losses resulting from foreign currency translation where the local currency is the functional currency are included as a component of accumulated other comprehensive income (loss). Foreign currency transaction gains and losses are included in results of operations as incurred and are not significant to our overall operations.

Cash and Cash Equivalents

We consider all highly liquid instruments with an original maturity of three months or less to be cash equivalents. The carrying value of these instruments approximates their fair value. At June 30, 2020, our cash equivalents consisted of demand deposit accounts and money market funds.

Cash Held for Customers and Customer Account Liabilities

At June 30, 2020 and 2019, our consolidated balance sheets included $6.3 million and $5.6 million, respectively, of cash held for customers and a corresponding liability in the same amount. Cash held for customers and customer account liabilities arise from a portion of our UK operations where we collect client funds and hold them for a short transient period before ultimately disbursing the amounts and settling the corresponding liability. Cash we hold on behalf of clients is segregated from our other corporate cash accounts and is not available for use by us other than to settle the corresponding client liability.

Marketable Securities

All marketable securities must be classified as one of the following: held to maturity, available for sale, or trading. At June 30, 2020, we held $10.2 million of marketable securities which consisted of U.S. corporate and government debt securities.

Our held to maturity investments, all of which mature within one year, are recorded at amortized cost and interest income is recognized in earnings when earned. The cost of securities sold is determined based on the specific identification method. At June 30, 2020 and 2019, the amortized cost of our held-to-maturity investments approximated their fair value.

Our securities classified as available for sale are recorded at fair value, with all unrealized gains or losses recorded as a component of accumulated other comprehensive income (loss). At June 30, 2020 and 2019, all of our available for sale securities had

maturities of less than one year. The cost of securities sold is determined based on the specific identification method. At June 30, 2020 and 2019, the net unrealized gain associated with securities classified as available for sale was not significant.

The table below presents information regarding our marketable securities by major security type as of June 30, 2020 and 2019.


	June 30, 2020										June 30, 2019
	Held to Maturity		Available for Sale		Total		Held to Maturity		Available for Sale		Total
	(in thousands)
Marketable securities:
Corporate and other debt securities	$	61	$	10,148	$	10,209	$	62	$	7,479	$	7,541
Total marketable securities	$	61	$	10,148	$	10,209	$	62	$	7,479	$	7,541

All of our available for sale marketable securities are classified as current assets.

The following table presents the aggregate fair values and gross unrealized losses for those available for sale investments that were in an unrealized loss position as of June 30, 2020 and June 30, 2019, respectively, aggregated by investment category and the length of time that individual securities have been in a continuous loss position:


	At June 30, 2020						At June 30, 2019
	Less than 12 Months
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(in thousands)
Government—U.S.	2,012		(1)		800		(1)
Total	$	2,012	$	(1)	$	800	$	(1)

Other Investments

We have certain other investments recorded at fair value. In circumstances where there is no readily determinable fair value, these investments are recorded at cost, less impairment (if any) plus or minus adjustments for observable price changes. The aggregate carrying value of these investments was $1.0 million and $0.7 million at June 30, 2020 and 2019, respectively, and they are reported as a component of our other assets. At June 30, 2020, we reviewed the carrying value of these investments and concluded that they were not impaired. We are unable to exercise significant influence or control over the investees underlying any of these investments.

Sales of Investments

During fiscal year 2019, we liquidated a $0.4 million investment, received cash proceeds of $7.7 million and recorded a gain on sale of $7.3 million as a component of other income in our consolidated statement of comprehensive income (loss).

During fiscal year 2018, we liquidated a $3.0 million investment and recorded, as a component of other income, a gain on the sale of this investment of $2.4 million. In addition, in the overall liquidation of this investment in fiscal year 2018 we received a payment of $2.6 million which represented the buyout of a revenue share arrangement that we had with the predecessor company and a payment of $3.7 million in exchange for our release of certain market exclusivity and distribution rights. These amounts were recorded as components of other revenue and other income, respectively, in our consolidated statement of comprehensive income (loss) for the fiscal year ended June 30, 2018.

Concentration of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist of cash and cash equivalents and accounts receivable. We had approximately $185.5 million of cash and cash equivalents invested with six financial institutions at June 30, 2020. Balances of cash and cash equivalents are typically in excess of any insurance, such as FDIC coverage, that may protect our deposits.

Our accounts receivable are reported in our consolidated balance sheets net of allowances for uncollectible accounts. We believe that the concentration of credit risk with respect to accounts receivable is limited due to the large number of companies and diverse industries comprising our customer base. On-going credit evaluations are performed, generally with a focus on new customers or customers with whom we have had no prior collections history, and collateral is generally not required. We maintain reserves for potential losses based on customer specific situations as well as our historic experience and such losses, in the aggregate, have not historically exceeded our expectations. There were no customers that, individually, accounted for more than 10% of our consolidated accounts receivable balance at June 30, 2020 or 2019. For the fiscal years ended June 30, 2020, 2019 and 2018, we had no customer that accounted for 10% or greater of our consolidated revenues.

Financial Instruments

The fair value of our financial instruments, which includes cash and cash equivalents, cash held for customers, marketable securities, accounts receivable, accounts payable, customer account liabilities, derivative interest rate swaps and debt drawn under our Credit Facility, as defined in Note 11 Indebtedness, are based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of perceived risk. Please refer to Note 5 Fair Value for further details on the fair value of these financial instruments.

Accounts Receivable

Accounts receivable includes unbilled receivables of approximately $6.5 million and $6.9 million at June 30, 2020 and 2019, respectively. Unbilled receivables include revenues recognized for which billings have not yet been presented to the customers.

Property and Equipment

Property and equipment are stated at cost, net of depreciation. Depreciation is recorded on a straight-line basis over the estimated useful lives of the assets as follows:


Property, equipment, furniture, fixtures and vehicles						3-7 years
Technical equipment						3-5 years
Building (Theale, Reading, England)						40 years
Leasehold improvements						Lower of estimated life or remaining lease term

Periodically, we may assign a life outside of the general range of useful lives noted here if a particular asset’s estimated period of use falls outside of the normal range.

Goodwill and Other Intangible Assets

We initially record other acquired intangible assets at their estimated fair values and we review these assets periodically for impairment. Goodwill represents the excess of the purchase price over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed in a business combination and is tested at least annually for impairment; historically during our fourth quarter.

Our specifically identifiable intangible assets, which consist principally of customer related assets and core technology, are reported net of accumulated amortization and are amortized over their estimated useful lives at amortization rates that are proportional to each asset’s estimated economic benefit. We review the carrying value of these intangible assets annually, or more frequently if indicators of impairment are present.

In performing our review of the recoverability of goodwill and other intangible assets we consider several factors, including whether there have been significant changes in legal factors or the overall business climate that could affect the underlying value of an asset. We also consider whether there is an expectation that the asset will be sold or disposed of before the end of its originally estimated useful life. In the case of goodwill, we must estimate the fair value of the reporting unit to which the goodwill is assigned. If as a result of examining any of these factors we conclude that the carrying value of goodwill or any other intangible asset exceeds its estimated fair value or undiscounted cash flows, respectively, we will recognize an impairment charge.

Purchased software is classified as an intangible asset and is amortized on a straight-line basis over its estimated useful life, typically ranging from 3 to 5 years.

Advertising Costs

We expense advertising costs as incurred. Advertising costs were $4.1 million, $2.9 million and $2.0 million for the fiscal years ended June 30, 2020, 2019 and 2018, respectively.

Shipping and Handling Costs

We expense all shipping, handling and delivery costs in the period incurred, generally as a component of other cost of revenues.

Commissions Expense

Excluding certain arrangements within our Banking Solutions segment, for which software commissions are earned as revenue is recorded over the period of project performance, substantially all software commissions are earned in the month in which a customer order is received. Commissions associated with professional services are typically earned in the month that services are rendered. Commissions associated with post-contract customer support arrangements and subscription-based arrangements are typically earned when the customer is billed for the underlying contractual period or in the period the order is received. Commissions are normally paid within thirty days of the month in which they are earned. Prior to the adoption of the new revenue standard, commissions were expensed as incurred. Under the new revenue standard, we capitalize commission costs in connection with obtaining a contract if the period of benefit is greater than a year and we expect to recover the costs through future contract revenues. We expense any capitalized costs ratably over the estimated period of benefit. Commission costs are recorded as a component of sales and marketing expense.

Research and Development Expenditures

Research and development costs incurred prior to the establishment of technological feasibility (for software to be sold, leased or otherwise marketed), or prior to application development (for internal-use software), are expensed as incurred and are reported as product development and engineering operating expenses in our statements of comprehensive income (loss).

Debt Issuance Costs

We incurred certain third party costs in connection with the Credit Facility, principally related to underwriting and legal fees. These costs are included in other assets on our consolidated balance sheets and are being amortized to interest expense ratably over the term of the Credit Facility.

Income Taxes and Income Tax Uncertainties

We recognize deferred tax assets and deferred tax liabilities based on the difference between the financial reporting and tax basis of the asset or liability, measured at tax rates that are expected to be in effect when the differences reverse. A valuation allowance to reduce the carrying value of deferred tax assets is recorded if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

In respect of income tax uncertainties, we perform a two-step analysis for all tax positions. The first step involves an evaluation of the underlying tax position based solely on technical merits (such as tax law) and the second step involves measuring the tax position based on the probability of it being sustained in the event of a tax examination. We recognize tax benefits at the largest amount that we deem more likely than not will be realized upon ultimate settlement of any tax uncertainty. Tax positions that fail to qualify for recognition are recognized in the period in which the more-likely-than-not standard has been reached, when the tax positions are resolved with the respective taxing authority or when the statute of limitations for tax examination has expired.

We record any interest or penalties accruing in respect of uncertain tax positions as a component of income tax expense.

Share-Based Compensation

We recognize expense for the estimated fair value of our share-based compensation arrangements, net of estimated award forfeitures. The expense associated with share-based payment awards is generally recognized on a straight-line basis over the award’s vesting period.

Capitalized Software Costs

Capitalization of software development costs for software that is to be sold, leased or otherwise marketed begins upon the establishment of technological feasibility. The establishment of technological feasibility and the ongoing assessment of recoverability of capitalized software development costs requires considerable judgment by us with respect to certain factors including, but not limited to, determining which projects and development activities within those projects qualify for capitalization, anticipated future revenues, estimated economic life, and changes in software and hardware technologies. Amortization of capitalized costs commence on the date of general release of the software using the greater of the straight-line method over the estimated useful life or the ratio of revenue in the period to total expected revenues over the product’s expected useful life. Capitalized software development costs are normally amortized over an estimated useful life of 5 years once the product has been released for customer use. For the fiscal years ended June 30, 2020, 2019 and 2018, we capitalized $3.0 million, $3.7 million and $3.2 million, respectively, and recorded amortization expense of $4.0 million, $3.8 million and $2.8 million, respectively, of software development costs, excluding software developed for internal use. At June 30, 2020 and 2019, the net carrying value of capitalized software excluding software developed for internal use, which is included in intangible assets, net on our consolidated balance sheets, was $12.2 million and $13.2 million, respectively.

We capitalize certain development costs associated with internal use software incurred during the application development stage. We expense costs associated with preliminary project phase activities, training, maintenance and any post-implementation costs as incurred. For the fiscal years ended June 30, 2020, 2019 and 2018, we capitalized $11.9 million, $10.4 million and $6.3 million,

respectively, of internal use software development costs associated with our SaaS-based technology platforms. Capitalized internal use software costs are normally amortized over estimated useful lives ranging from 3 to 5 years once the related project has been completed and deployed for use. For the fiscal years ended June 30, 2020, 2019 and 2018, we recorded amortization expense of $7.2 million, $6.1 million and $5.2 million, respectively, of capitalized internal use software costs associated with our SaaS-based technology platforms. At June 30, 2020 and 2019, the net carrying value of capitalized internal use software associated with our SaaS-based technology platforms, which is included in intangible assets, net on our consolidated balance sheets, was $25.7 million and $21.1 million, respectively.

Earnings per Share

We report both basic and diluted earnings per share. Basic earnings per share is calculated based on the weighted average number of shares of common stock outstanding and excludes the dilutive effect of warrants, stock options or any other type of convertible securities. Diluted earnings per share is calculated based on the weighted average number of shares of common stock outstanding and the dilutive effect of stock options, warrants and other types of convertible securities are included in the calculation. Dilutive securities are excluded from the diluted earnings per share calculation if their effect is anti-dilutive, such as in periods where we report a net loss.

Comprehensive Income or Loss

Comprehensive income or loss includes all changes in equity during a period from non-owner sources, such as net income or loss, foreign currency translation adjustments, certain pension adjustments, unrealized gains and losses on available for sale securities and unrealized gains and losses on our interest rate hedging transactions.