Bottomline Technologies (EPAY) Acquires Intellinx in Cash, Stock Deal

On January 12, 2015, Bottomline Technologies (de), Inc. (Nasdaq: EPAY), a Delaware corporation (“Bottomline”), and its wholly owned subsidiary Bottomline Technologies Sarl, entered into a Securities Purchase Agreement (the “Agreement”) with Intellinx Ltd., an Israeli corporation, (“Intellinx”), certain equity holders of Intellinx named therein and Shareholder Representative Services LLC as the Representative of the Intellinx equity holders. Intellinx is a leading provider of cyber fraud and risk management solutions.

Headquartered in Israel, Intellinx customers include some of the world’s leading banks and government agencies. The fraud detection and prevention market is estimated at $17 billion annually and is projected to grow to $35 billion by 2019, representing a compound annual growth rate of 20%, according to research conducted by Gartner Consulting.

The Intellinx solutions are trusted by some of the largest organizations in the world because of their unique ability to non-invasively monitor, replay, and analyze user behavior across multiple channels and instantly flag and stop suspicious activity. The solutions create accountability by recording and analyzing each keystroke and screen view, reducing the risk of theft, information leakage, internal fraud and payments fraud, as well as decreasing the cost of regulatory compliance. Case management capabilities centralize risk management, speed investigations, and facilitate compliance with regulations pertaining to Anti Money Laundering (AML), the Health Insurance Portability and Accountability Act (HIPAA), and Know Your Customer (KYC).

Pursuant to the Agreement, Bottomline acquired all of the outstanding share capital of Intellinx for aggregate purchase consideration of approximately $66.7 million in cash ($6.8 million of which will be held in escrow as a source for the satisfaction of indemnification obligations owed to Bottomline) and 774,000 shares of Bottomline common stock. The common stock component of the purchase consideration will be issued to certain equity holders of Intellinx who are becoming employees of Bottomline and will be subject to a vesting schedule tied to continued employment. Absent indemnification claims, the portion of the cash purchase consideration held in escrow will be reduced by 50% nine months from the acquisition date, with any remaining escrow balance released to the selling stockholders of Intellinx fifteen months from the acquisition date.

The acquisition is expected to be accretive to Bottomline’s calendar year 2016 core net income. The revenue contribution from the transaction is expected to be $10 million in calendar 2015. Bottomline expects the cyber fraud and risk management offering to grow at a 50% compounded annual growth rate over the next five years and achieve $50 million of revenue, principally on a subscription and transaction basis, by calendar 2019. From a quarterly perspective, Bottomline expects revenue of $2.1 million in the quarter ended March 31, 2015 and $2.2 million in the quarter ended June 30, 2015. The transaction is expected to have a short term dilutive impact on earnings per share, principally as a result of the write-down of acquired deferred revenue, of three cents in each of the quarters ended March 31, 2015 and June 30, 2015 and one cent in the quarter ended September 30, 2015. Bottomline anticipates that the transaction will be break even by the quarter ended December 31, 2015 and accretive thereafter. Additional financial details of the transaction will be provided on Bottomline’s second quarter Fiscal 2015 earnings conference call.

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