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Safe Harbor This document contains forwardlooking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including financial projections subject to risks, uncertainties and other factors that could materially affect our actual results. Actual results may differ materially from those indicated by such forwardlooking statements as a result of various important factors including, among others, competition, market demand, technological change, strategic relationships, recent acquisitions, international operations and general economic conditions. Any forwardlooking statements or financial projections represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. We do not assume any obligation to update any forwardlooking statements or financial projections. Further, our financial projections do not consider the impact of any pending or future changes to accounting pronouncements under US Generally Accepted Accounting Principles. For additional discussion of factors that could impact our operational and financial results, please refer to our Form 10K for the fiscal year ended June 30, 2017 and subsequently filed Form 10Qs and Form 8Ks or amendments thereto. NonGAAP Financial Information The financial results and projections in this document are presented on both a GAAP and a nongaap basis. NonGAAP projections include core operating income, adjusted EBITDA, adjusted EBITDA margin, core operating margin, core earnings per share and constant currency growth. Reconciliations of our nongaap results and guidance to the most directly comparable GAAP results and guidance are included at the end of this document. 2 2
Q3 Core Results Strategic Plan Subscription and Transaction Revenue Growth 24% Well above 1520% target Drive subscription and transaction revenue growth of 1520% per year Established Products Subscription and Transaction Revenue Total Revenue Core Operating Income 51.6M 78.2M 16.3M Attractive economic model with expanding margins Invest in market leading cloud payment solutions Core Operating Margin 21% Sell key product sets in subscription and transaction revenue model Transitioning Products Subscription and Transaction Revenue Growth 11% Subscription and Transaction Revenue 15.7M Total Revenue 22.9M 19 million of annual subscriptions currently in implementation and not yet live Expand operating and EBITDA margins Allocate capital with discipline Core Operating Income 1.6M Core Operating Margin 7% Subscription and Transaction Revenue Growth 21% Margins will expand as new subscriptions go live Consolidated Bottomline Subscription and Transaction Revenue 67.4M Total Revenue 101.1M Core Operating Income 18.0M Core Operating Margin 18% 92 million annualized EBITDA is up 21% yearoveryear, reflecting attractive business model Adjusted EBITDA 23.1M Adjusted EBITDA Margin 23% Increased 28% year over year Core EPS 0.30 Core operating income, adjusted EBITDA, adjusted EBITDA margin, core operating margin and core EPS are nongaap measures. Definitions and reconciliations to the most directly comparable GAAP measures are included at the end of this document. Growth rates expressed in constant currency. 3 3
Revenue Mix Evolution 67% of revenue is subscription and transaction, growing at 1520% per year (up from 65% a year ago) 85% of overall revenue is recurring Strategically, we provide services only as necessary to ensure our customers success We offer software license only in select market circumstances 85% of Revenue is Recurring Maintenance 19% Fiscal Years 30 25 20 15 10 5 Software License Revenue 11 12 13 14 15 16 17 Subs & Trans 67% Services 11% Software 3% 4 Fiscal Years Fiscal Years 4 4
Q4 18 Core Guidance (in millions, except for per share amounts and margin percentages) Established Transitioning Total Bottomline Subscription & transaction revenue 52.5 15.5 68 Total Revenue 79 22 101 Core operating income (1) 16 2 17.5 Core operating margin % (1) 20% 10% 17% Adjusted EBITDA (1) 22 Adjusted EBITDA as a % of Revenue (1) 22% EPS 0.29 1) Core operating income, adjusted EBITDA, core operating margin and core EPS are non GAAP measures. Definitions and reconciliations to the most directly comparable GAAP measures are included at the end of this document. 2) Transitioning product represents our Digital Banking Segment as defined in our SEC filings. 5
FY19 Core Guidance (in millions, except for per share amounts and margin percentages) Established Transitioning Total Bottomline Subscription & transaction revenue 230 235 65 70 300 Total Revenue 335 340 85 90 420 425 Core operating income (1) 70 75 5 10 80 82 Core operating margin % (1) 21 22% 6 12% 18 20% Adjusted EBITDA (1) 100 102 Adjusted EBITDA as a % of Revenue (1) 23 24% EPS 1.41 1.45 1) Core operating income, adjusted EBITDA, core operating margin and core EPS are non GAAP measures. Definitions and reconciliations to the most directly comparable GAAP measures are included at the end of this document. 2) Transitioning product represents our Digital Banking Segment as defined in our SEC filings. 6
Reconciliations to the Most Directly Comparable GAAP Results and Guidance and Definitions of NonGAAP Financial Measures 7 5
Q4 18 GAAP Reconciliation (in millions, except for per share amounts and margin percentages) Established Transitioning Total Bottomline Subscription & transaction revenue 52.5 15.5 68 Total Revenue 79 22 101 GAAP Operating income 1 GAAP Operating income % 1% GAAP Net Income 0 GAAP EPS 0.00 1) Transitioning product represents our Digital Banking Segment as defined in our SEC filings. 8
Q4 18 Guidance Reconciliation (in millions, except for per share amounts) Operating Income Operating Margin Total Bottomline Q4 18 Q4 18 GAAP Operating Income / GAAP Operating Margin 1.4 1% Adjustments: Amortization of Intangible Assets 5.8 6% Equity Based Compensation 8.7 9% Global ERP system implementation and other costs 1.6 2% Minimum pension liability adjustments 0% Core Operating Income / Core Operating Margin 17.5 17% GAAP earnings per share 0.00 Adjustments: Amortization of Intangible Assets 0.15 Equity Based Compensation 0.22 Global ERP system implementation costs 0.04 Minimum pension liability adjustments Amortization of debt issuance and debt discount costs 0.00 Non recurring tax benefit Tax effect on non GAAP income (0.12) Core earnings per share 0.29 1) Core operating income, adjusted EBITDA, adjusted EBITDA margin, core operating margin and core EPS are non GAAP measures. Definitions are included at the end of this document. 2) The table above presents a reconciliation of our Core guidance to our GAAP guidance. It is impracticable to separately reconcile GAAP guidance to Core guidance for the Established Products and Transitioning Product components of our business, because the non GAAP adjustments affecting such a reconciliation are excluded from our operating segment measures of profit or loss and therefore these amounts are not tracked in or allocated to any individual operating component of our business and are not available without unreasonable efforts. 3) We have assumed a Core tax rate of 25%. For Other Income (expense) we have assumed consistent draw on our revolver and consistent interest rates. 9
Q4 18 Guidance Reconciliation (continued) Reconciliation of Reconciliation of Adjusted EBITDA Adjusted EBITDA Margin Q4 18 Q4 18 GAAP Net income / GAAP Net income margin 0 0% Adjustments: Other expense, net 1.3 1% Provision for (benefit from) income taxes (0.2) (0%) Depreciation and amortization 4.5 4% Amortization of acquired intangible assets 5.8 6% Stock based compensation expense 8.7 9% Acquisition and integration related expenses 0% Restructuring expenses 0% Minimum pension liability adjustments 0% Global ERP system implementation and other costs 1.6 2% Adjusted EBITDA / Adjusted EBITDA margin 22 22% 1) The table above presents a reconciliation of our Core guidance to our GAAP guidance. Adjusted EBITDA and Adjusted EBITDA margin are non GAAP measures. Definitions are included at the end of this document. 2) We have assumed a Core tax rate of 25%. For Other Income (expense) we have assumed consistent draw on our revolver and consistent interest rates. 10
FY19 GAAP Reconciliation (in millions, except for per share amounts and margin percentages) Established Transitioning Total Bottomline Subscription & transaction revenue 230 235 65 70 300 Total Revenue 335 340 85 90 420 425 GAAP Operating income 22 GAAP Operating margin % 5% GAAP Net income 13 GAAP EPS 0.33 1) Transitioning product represents our Digital Banking Segment as defined in our SEC filings. 11
FY19 Guidance Reconciliation (in millions, except for per share amounts) Operating Income Operating Margin Total Bottomline FY19 FY19 GAAP Operating Income / GAAP Operating Margin 22 5% Adjustments: Amortization of Intangible Assets 20.7 5% Equity Based Compensation 35.4 8% Global ERP system implementation and other costs 3.2 1% Acquisition and integration related expenses 0% Restructuring benefit 0% Minimum pension liability adjustments 0% Core Operating Income / Core Operating Margin 81 19% GAAP earnings per share 0.33 Adjustments: Amortization of Intangible Assets 0.52 Equity Based Compensation 0.89 Global ERP system implementation and other costs 0.08 Acquisition and integration related expenses Restructuring benefit Minimum pension liability adjustments Amortization of debt issuance and debt discount costs 0.01 Tax effect on non GAAP income (0.40) Core earnings per share 1.43 1) Core operating income, adjusted EBITDA, adjusted EBITDA margin, core operating margin and core EPS are non GAAP measures. Definitions are included at the end of this document. 2) The table above presents a reconciliation of our Core guidance to our GAAP guidance. It is impracticable to separately reconcile GAAP guidance to Core guidance for the Established Products and Transitioning Product components of our business, because the non GAAP adjustments affecting such a reconciliation are excluded from our operating segment measures of profit or loss and therefore these amounts are not tracked in or allocated to any individual operating component of our business and are not available without unreasonable efforts. 3) We have assumed a Core tax rate of 25%. For Other Income (expense) we have assumed consistent draw on our revolver and consistent interest rates. 12
FY19 Guidance Reconciliation (continued) Reconciliation of Adjusted EBITDA FY19 Reconciliation of Adjusted EBITDA Margin FY19 GAAP Net income / GAAP Net income margin 13 3% Adjustments: Other expense, net 5.2 1% Provision for (benefit from) income taxes 3.1 1% Depreciation and amortization 20.0 5% Amortization of acquired intangible assets 20.7 5% Stock based compensation expense 35.4 8% Acquisition and integration related expenses 0% Restructuring expenses 0% Minimum pension liability adjustments 0% Global ERP system implementation and other costs 3.2 1% Adjusted EBITDA / Adjusted EBITDA margin 101 24% 1) The table above presents a reconciliation of our Core guidance to our GAAP guidance. Adjusted EBITDA and Adjusted EBITDA margin are non GAAP measures. Definitions are included at the end of this document. 2) We have assumed a Core tax rate of 25%. For Other Income (expense) we have assumed consistent draw on our revolver and consistent interest rates. 13
Bottomline Technologies Reconciliation of NonGAAP Measures Three Months Ended March 31, 2018 Amortization of AcquisitionRelated Intangible Assets GAAP Revenues: Subscriptions and transactions Software licenses Service and maintenance Other Total revenues 67,378 3,134 29,476 1,148 Stockbased Compensation Acquisition and IntegrationRelated Expenses Restructuring Expenses 101,136 Cost of revenues: Subscriptions and transactions Software licenses Service and maintenance Other 30,760 233 13,793 930 (724) (619) (102) (196) (138) Total cost of revenues 45,716 (1,343) (102) (334) Gross profit 55,420 1,343 102 334 Operating expenses: Sales and marketing Product development and engineering General and administrative Amortization of acquisitionrelated intangible assets 22,418 14,131 12,755 5,818 (5,818) (3,441) (1,311) (2,497) (19) (103) (476) (129) (546) Total operating expenses 55,122 (5,818) (7,249) (122) 5,818 8,592 224 Income (loss) from operations 298 Other expense, net (1,293) Income (loss) before income taxes Provision for income taxes Net Income (loss) (995) 7 (1) Basic net income (loss) per share Diluted net income (loss) per share (1) Shares used in computing net income (loss) per share: Basic Diluted (1,002) (0.03) (0.03) Minimum Pension Liability Adjustments Amortization of Debt Issuance and Debt Discount costs Global ERP System Implementation and Other Costs Tax Effect on NonGAAP Income NonGAAP 67,378 3,134 29,476 1,148 % of Revenue 67% 3% 29% 1% 101,136 100% 29,738 233 13,037 930 Margins 56% 93% 56% 19% 1 43,938 (1) 57,198 57% 1 1 1 (1,558) 18,502 12,673 8,051 % of Revenue 18% 13% 8% 0% (1,151) 2 (1,558) 39,226 39% 1,485 (3) 1,558 17,972 18% 108 (1,185) 1% 108 1,558 4,916 16,787 4,923 17% 5% 108 0.1% 1,558 1.5% (4,916) 4.9% 11,864 12% 5,818 8,592 224 1,485 5,818 5.8% 8,592 8.5% 224 0.2% 1,485 1.5% (3) (3) 0.0% 38,348 38,348 0.30 39,334 (1) Core net income and core earnings per share are nongaap measures and exclude certain items, specifically amortization of acquired intangible assets, goodwill impairment charges, stockbased compensation, acquisition and integrationrelated expenses, restructuring related costs, minimum pension liability adjustments, noncore charges associated with our convertible notes and revolving credit facility, global enterprise resource planning (ERP) system implementation costs, and other noncore or nonrecurring gains or losses that arise from time to time. In computing diluted core earnings per share, we exclude the weighted average dilutive effect of shares issuable under our convertible senior notes to the extent that any such dilution would be offset by our note hedges; the note hedges would be considered an antidilutive security under GAAP. 14
Bottomline Technologies Reconciliation of NonGAAP Measures Three Months Ended March 31, 2017 GAAP Revenues: Subscriptions and transactions Software licenses Service and maintenance Other Total revenues 55,851 2,735 26,344 1,169 86,099 Amortization of AcquisitionRelated Intangible Assets Stockbased Compensation Acquisition and IntegrationRelated Expenses Restructuring Expenses Minimum Pension Liability Adjustments Amortization of Debt Issuance and Debt Discount costs Global ERP System Implementation and Other Costs Tax Effect on NonGAAP Income 86,099 100% 25,076 265 11,708 835 Margins 55% 90% 56% 29% 37,884 48,215 56% Cost of revenues: Subscriptions and transactions Software licenses Service and maintenance Other 25,867 265 12,607 835 (392) (725) (149) (235) (75) (15) (99) Total cost of revenues 39,574 (1,117) (149) (310) (114) Gross profit 46,525 1,117 149 310 114 NonGAAP % of Revenue 65% 3% 31% 1% 55,851 2,735 26,344 1,169 Operating expenses: Sales and marketing Product development and engineering General and administrative Amortization of acquisitionrelated intangible assets 18,976 13,057 10,863 6,006 (6,006) (3,013) (1,265) (1,959) (2) (350) (219) (19) (13) (69) (71) (10) (2,076) 15,675 11,700 6,455 % of Revenue 18% 14% 7% 0% Total operating expenses 48,902 (6,006) (6,237) (352) (251) (150) (2,076) 33,830 39% Income (loss) from operations (2,377) 6,006 7,354 501 561 264 2,076 14,385 17% Other expense, net (4,479) 3,592 Income (loss) before income taxes Provision for (benefit from) income taxes (6,856) (232) 6,006 7,354 501 561 264 3,592 2,076 4,726 13,498 4,494 16% 5% Net Income (loss) (1) (6,624) 6,006 7.0% 7,354 8.5% 501 0.6% 561 0.7% 264 0.3% 3,592 4.2% 2,076 2.4% (4,726) 5.5% 9,004 10% Basic net loss per share (0.17) Diluted net income (loss) per share (1) (0.17) Shares used in computing net income (loss) per share: Basic Diluted 37,965 37,965 (887) 1% 0.23 38,344 (1) Core net income and core earnings per share are nongaap measures and exclude certain items, specifically amortization of acquisitionrelated intangible assets, goodwill impairment charges, stockbased compensation, acquisition and integrationrelated expenses, restructuring related costs, minimum pension liability adjustments, noncore charges associated with our convertible notes and revolving credit facility, global enterprise resource planning (ERP) system implementation costs, and other noncore or nonrecurring gains or losses that arise from time to time. In computing diluted core earnings per share, we exclude the weighted average dilutive effect of shares issuable under our convertible senior notes to the extent that any such dilution would be offset by our note hedges; the note hedges would be considered an antidilutive security under GAAP. 15
Bottomline Technologies Reconciliation of NonGAAP Measures Nine Months Ended March 31, 2018 GAAP Revenues: Subscriptions and transactions Software licenses Service and maintenance Other Total revenues 191,279 8,119 85,251 2,978 287,627 Cost of revenues: Subscriptions and transactions Software licenses Service and maintenance Other Amortization of AcquisitionRelated Intangible Assets Stockbased Compensation Acquisition and IntegrationRelated Expenses Restructuring Expenses Minimum Pension Liability Adjustments Amortization of Debt Issuance and Debt Discount costs Global ERP System Implementation and Other Costs Nonrecurring Tax Benefit (2) Tax Effect on NonGAAP Income NonGAAP 191,279 8,119 85,251 2,978 % of Revenue 66% 3% 30% 1% 287,627 100% Margins 57% 92% 57% 23% 85,372 632 38,993 2,298 (2,082) (1,815) (131) (194) (138) (2) (14) 82,963 632 37,026 2,298 Total cost of revenues 127,295 (3,897) (131) (332) (16) 122,919 Gross profit 160,332 3,897 131 332 16 164,708 57% Operating expenses: Sales and marketing Product development and engineering General and administrative Amortization of acquisitionrelated intangible assets (8) (9) (2) (4,973) 52,373 37,342 21,971 % of Revenue 18% 13% 8% 0% (1,144) (19) (4,973) 111,686 39% 1,476 35 4,973 53,022 18% 6,393 (2,895) 1% 35 6,393 4,973 4,402 14,035 50,127 14,406 17% 5% 35 0.0% 6,393 2.2% 4,973 1.7% (4,402) 1.5% (14,035) 4.9% 35,721 12% 63,119 41,838 35,565 16,708 (16,708) (10,213) (4,094) (6,928) (50) (269) (1,146) (475) (124) (545) 157,230 (16,708) (21,235) (1,465) 3,102 16,708 25,132 1,596 Other expense, net (9,288) Income (loss) before income taxes Provision for (benefit from) income taxes (6,186) (4,031) 16,708 25,132 1,596 1,476 (2,155) 16,708 5.8% 25,132 8.7% 1,596 0.6% 1,476 0.5% Total operating expenses Income (loss) from operations Net Income (loss) (1) Basic net income (loss) per share Diluted net income (loss) per share (1) Shares used in computing net income (loss) per share: Basic Diluted (0.06) (0.06) 38,055 38,055 0.92 38,851 (1) Core net income and core earnings per share are nongaap measures and exclude certain items, specifically amortization of acquisitionrelated intangible assets, goodwill impairment charges, stockbased compensation, acquisition and integrationrelated expenses, restructuring related costs, minimum pension liability adjustments, noncore charges associated with our convertible notes and revolving credit facility, global enterprise resource planning (ERP) system implementation costs, and other noncore or nonrecurring gains or losses that arise from time to time. In computing diluted core earnings per share, we exclude the weighted average dilutive effect of shares issuable under our convertible senior notes to the extent that any such dilution would be offset by our note hedges; the note hedges would be considered an antidilutive security under GAAP. (2) The nonrecurring tax benefit in the nine months ended March 31, 2018 represents a benefit arising from the revaluation of certain deferred tax liabilities as a result of the U.S. Tax Cuts and Jobs Act. 16
Bottomline Technologies Reconciliation of NonGAAP Measures Nine Months Ended March 31, 2017 GAAP Revenues: Subscriptions and transactions Software licenses Service and maintenance Other 163,627 8,348 79,937 3,999 Total revenues 255,911 Cost of revenues: Subscriptions and transactions Software licenses Service and maintenance Other Amortization of AcquisitionRelated Intangible Assets Goodwill Impairment Charge Stockbased Compensation Acquisition and IntegrationRelated Expenses Restructuring Expenses Minimum Pension Liability Adjustments Amortization of Debt Issuance and Debt Discount costs Global ERP System Implementation and Other Costs Nonrecurring Tax Benefit (2) Tax Effect on NonGAAP Income NonGAAP % of Revenue 64% 3% 31% 2% 163,627 8,348 79,937 3,999 255,911 100% Margins 56% 93% 55% 28% 74,535 589 39,308 2,891 (1,174) (2,809) (442) (235) (75) (43) (301) 72,641 589 36,123 2,891 Total cost of revenues 117,323 (3,983) (442) (310) (344) 112,244 Gross profit 138,588 3,983 442 310 344 143,667 56% Operating expenses: Sales and marketing Product development and engineering General and administrative Amortization of acquisitionrelated intangible assets Goodwill impairment charge 57,176 39,074 35,339 18,381 7,529 (18,381) (7,529) (9,416) (3,970) (6,840) (22) (14) (1,794) (219) (19) (13) (214) (214) (33) (6,673) 47,305 34,857 19,986 % of Revenue 18% 14% 8% 0% 0% Total operating expenses 157,499 (18,381) (7,529) (20,226) (1,830) (251) (461) (6,673) 102,148 40% Income (loss) from operations (18,911) 18,381 7,529 24,209 2,272 561 805 6,673 41,519 16% Other expense, net (12,596) 10,418 (2,178) 1% Income (loss) before income taxes Provision for (benefit from) income taxes (31,507) (4,029) 18,381 7,529 24,209 2,272 561 805 10,418 6,673 4,461 11,856 39,341 12,288 15% 5% (27,478) 18,381 7.2% 7,529 2.9% 24,209 9.5% 2,272 0.9% 561 0.2% 805 0.3% 10,418 4.1% 6,673 2.6% (4,461) 1.7% (11,856) 4.6% 27,053 11% Net Income (loss) (1) Basic net loss per share (0.73) Diluted net income (loss) per share (1) (0.73) Shares used in computing net income (loss) per share: Basic Diluted 37,891 37,891 0.71 38,078 (1) Core net income and core earnings per share are nongaap measures and exclude certain items, specifically amortization of acquisitionrelated intangible assets, goodwill impairment charges, stockbased compensation, acquisition and integrationrelated expenses, restructuring related costs, minimum pension liability adjustments, noncore charges associated with our convertible notes and revolving credit facility, global enterprise resource planning (ERP) system implementation costs, and other noncore or nonrecurring gains or losses that arise from time to time. In computing diluted core earnings per share, we exclude the weighted average dilutive effect of shares issuable under our convertible senior notes to the extent that any such dilution would be offset by our note hedges; the note hedges would be considered an antidilutive security under GAAP. (2) The nonrecurring tax benefit in the nine months ended March 31, 2017 represents a tax benefit in Switzerland related to the impairment of their investment in Intellinx, Ltd. 17
Reconciliation of Adjusted EBITDA and Adjusted EBITDA margin Reconciliation of Adjusted EBITDA Reconciliation of Adjusted EBITDA Margin Three Months Ended Three Months Ended 3/31/18 3/31/17 3/31/18 3/31/17 GAAP Net loss / GAAP Net loss margin (1,002) (6,624) (1%) (8%) Adjustments: Other expense, net 1,293 4,479 1% 5% Provision for (benefit from) income taxes 7 (232) 0% (0%) Depreciation and amortization 5,095 4,684 5% 5% Amortization of acquisitionrelated intangible assets 5,818 6,006 6% 7% Stockbased compensation expense 8,592 7,354 9% 9% Acquisition and integrationrelated expenses 224 501 0% 1% Restructuring expenses 1,485 561 1% 1% Minimum pension liability adjustments (3) 264 0% 0% Global ERP system implementation and other costs 1,558 2,076 2% 2% Adjusted EBITDA / Adjusted EBITDA margin 23,067 19,069 23% 22% (1) The table above presents reconciliations of adjusted EBITDA to GAAP Net loss and Adjusted EBITDA margin to GAAP Net loss margin. Adjusted EBITDA and Adjusted EBITDA margin are nongaap measures. Adjusted EBITDA represents our GAAP net income or loss, adjusted for charges related to interest expense, income taxes, depreciation and amortization, and other charges. Adjusted EBITDA margin represents Adjusted EBITDA divided by revenue. 18
Reconciliation of Adjusted EBITDA and Adjusted EBITDA margin Reconciliation of Adjusted EBITDA Reconciliation of Adjusted EBITDA Margin Nine Months Ended Nine Months Ended 3/31/18 3/31/17 3/31/18 3/31/17 GAAP Net loss / GAAP Net loss margin (2,155) (27,478) (1%) (11%) Adjustments: Other expense, net 9,288 12,596 3% 5% Benefit from income taxes (4,031) (4,029) (1%) (2%) Depreciation and amortization 14,638 12,925 5% 5% Amortization of acquisitionrelated intangible assets 16,708 18,381 6% 7% Goodwill impairment charge 7,529 0% 3% Stockbased compensation expense 25,132 24,209 8% 10% Acquisition and integrationrelated expenses 1,596 2,272 1% 1% Restructuring expenses 1,476 561 1% 0% Minimum pension liability adjustments 35 805 0% 0% Global ERP system implementation and other costs 4,973 6,673 2% 3% Adjusted EBITDA / Adjusted EBITDA margin 67,660 54,444 24% 21% (1) The table above presents reconciliations of adjusted EBITDA to GAAP Net loss and Adjusted EBITDA margin to GAAP Net loss margin. Adjusted EBITDA and Adjusted EBITDA margin are nongaap measures. Adjusted EBITDA represents our GAAP net income or loss, adjusted for charges related to interest expense, income taxes, depreciation and amortization, and other charges. Adjusted EBITDA margin represents Adjusted EBITDA divided by revenue. 19
Reconciliation of Diluted Core Earnings Per Share Three Months Ended Nine Months Ended 3/31/18 3/31/17 3/31/18 3/31/17 GAAP basic and diluted net loss per share (0.03) (0.17) (0.06) (0.73) Plus: Amortization of acquisitionrelated intangible assets 0.15 0.16 0.43 0.48 Goodwill impairment charge 0.20 Stockbased compensation expense 0.21 0.19 0.65 0.64 Acquisition and integrationrelated expenses 0.01 0.01 0.04 0.06 Restructuring expenses 0.04 0.01 0.04 0.01 Global ERP system implementation and other costs 0.04 0.05 0.13 0.18 Minimum pension liability adjustments (0.00) 0.01 0.00 0.02 Amortization of debt issuance and debt discount costs 0.00 0.09 0.16 0.27 Nonrecurring tax benefit (0.11) (0.12) Tax effects on nongaap income (0.12) (0.12) (0.36) (0.30) Diluted core earnings per share 0.30 0.23 0.92 0.71 Numerator: Three Months Ended Nine Months Ended 3/31/18 3/31/17 3/31/18 3/31/17 Core net income 11,864 9,004 35,721 27,053 Denominator: Weighted average shares used in computing basic and diluted net loss per share for GAAP 38,348 37,965 38,055 37,891 Impact of dilutive securities (shares related to conversion feature on convertible senior notes, stock options, restricted stock awards and employee stock purchase plan) (1) 986 379 941 187 GAAP diluted shares 39,334 38,344 38,996 38,078 Impact of note hedges (2) (145) Weighted average shares used in computing diluted core earnings per share 39,334 38,344 38,851 38,078 (1) These securities are antidilutive on a GAAP basis as a result of our net loss, but are considered dilutive on a nongaap basis in periods where we report nongaap net income. (2) In computing diluted core earnings per share, we exclude the weighted average dilutive effect of shares issuable under our convertible senior notes to the extent that any such dilution would be offset by our note hedges; the note hedges would be considered an antidilutive security under GAAP. 20
NonGAAP Financial Measures We have presented supplemental nongaap financial measures as part of this earnings release. The presentation of this nongaap financial information should not be considered in isolation from, or as a substitute for, our financial results presented in accordance with GAAP. Core net income, core earnings per share, adjusted EBITDA and adjusted EBITDA as a percent of revenue are nongaap financial measures. Core net income and core earnings per share exclude certain items, specifically amortization of acquisition related intangible assets, goodwill impairment charges, stockbased compensation, acquisition and integrationrelated expenses, restructuring related costs, minimum pension liability adjustments, noncore charges associated with our convertible notes and revolving credit facility, global enterprise resource planning (ERP) system implementation and other costs, and other noncore or nonrecurring gains or losses that arise from time to time. Noncore charges associated with our convertible notes and revolving credit facility consist of the amortization of debt issuance and debt discount costs. Acquisition and integrationrelated expenses include legal and professional fees and other direct transaction costs associated with business and asset acquisitions, costs associated with integrating acquired businesses, including costs for transitional employees or services, integration related professional services costs and other incremental charges we incur as a direct result of acquisition and integration efforts. Global ERP system implementation and other costs relate to direct and incremental costs incurred in connection with our multiphase implementation of a new, global ERP solution, the related technology infrastructure and costs related to our implementation of the new revenue recognition standard under US GAAP. In computing diluted core earnings per share, we exclude the weighted average dilutive effect of shares issuable under our convertible notes to the extent that any such dilution would be offset by our note hedges; the note hedges would be considered an antidilutive security under GAAP. Periodically, such as in periods that include significant foreign currency volatility, we may present certain metrics on a constant currency basis, to show the impact of period to period results normalized for the impact of foreign currency rate changes. We calculate constant currency information by translating prior period financial results using current period foreign exchange rates. Adjusted EBITDA and adjusted EBITDA as a percent of revenue represent our GAAP net income or loss, adjusted for charges related to interest expense, income taxes, depreciation and amortization and other charges, as noted in the reconciliation that follows. We believe that these supplemental nongaap financial measures are useful to investors because they allow for an evaluation of the company with a focus on the performance of its core operations, including more meaningful comparisons of financial results to historical periods and to the financial results of less acquisitive peer and competitor companies. Our executive management team uses these same nongaap financial measures internally to assess the ongoing performance of the company. Additionally, the same nongaap information is used for planning purposes, including the preparation of operating budgets and in communications with our board of directors with respect to our core financial performance. Since this information is not a GAAP measurement of financial performance, there are material limitations to its usefulness on a standalone basis, including the lack of comparability of this presentation to the GAAP financial results of other companies. 21