In “that’s not a bad way of putting it,” putting it means “phrasing it” or “expressing it.” So the speaker is saying the wording is decent, maybe slightly understated or indirect.

A natural paraphrase would be:

  • “That’s a reasonable way to say it.”
  • “That’s a fair description.”
  • “That’s one way to phrase it.”

In practice, the phrase can sound mildly polite, slightly ironic, or approving depending on context. For example, if someone describes a messy situation politely, the listener might use it to acknowledge the wording without fully agreeing with how soft it sounds.

So the whole sentence means: “Your wording is acceptable, and maybe a little too gentle, but it works.”