Bottomline Technologies Reports Third Quarter Results

21% Growth in Subscription and Transaction Revenue Highlights Third Quarter


PORTSMOUTH, N.H., May 03, 2018 (GLOBE NEWSWIRE) -- Bottomline Technologies (NASDAQ:EPAY), a leading provider of financial technology that helps make business payments simple, smart and secure, today reported financial results for the third quarter ended March 31, 2018.

Subscription and transaction revenues, which are primarily related to the company’s cloud platforms, were $67.4 million for the third quarter, up 21% as compared to the third quarter of last year.  Revenues overall for the third quarter were $101.1 million, up 17% as compared to the third quarter of last year. 

GAAP net loss for the third quarter was $1.0 million compared to GAAP net loss of $6.6 million for the third quarter of last year. GAAP net loss per share was $0.03 in the third quarter compared to GAAP net loss per share of $0.17 in the third quarter of last year.

Adjusted EBITDA for the third quarter was $23.1 million compared to $19.1 million for the third quarter of last year, an increase of 21%.  Adjusted EBITDA for the third quarter was 23% of overall revenue compared to 22% of overall revenue for the third quarter of last year. Adjusted EBITDA is calculated as discussed in the “Non-GAAP Financial Measures” section that follows.

Core net income for the third quarter was $11.9 million compared to $9.0 million for the third quarter of last year and core earnings per share was $0.30 for the third quarter compared to $0.23 for the third quarter of last year. Core net income and core earnings per share exclude certain items as discussed in the “Non-GAAP Financial Measures” section that follows.

“The strong results in the third quarter evidence the execution against our strategic plan,” said Rob Eberle, President and CEO of Bottomline Technologies.  “We drove 21% subscription and transaction growth and 17% overall revenue growth while continuing to invest in product innovation, sales and marketing and new customer acquisition.  The market opportunity we are addressing is significant and we see many years of strong growth ahead.  Looking to the fourth quarter and FY19, we have a high degree of confidence in our ability to execute against the financial targets we’ve established and drive increased shareholder value.”

Third Quarter Customer Highlights             

  • 24 institutions selected Paymode-X, Bottomline’s leading payments platform to automate their payments processes, increase productivity, reduce costs and earn cash rebates.
     
  • 7 organizations, including Falls Lake Insurance and Petco, chose Bottomline's cloud-based legal spend management solutions to automate, manage and control their legal spend.  
     
  • 4 banks selected Bottomline’s banking solutions platforms to help them compete and grow their corporate and business banking franchises by deploying innovative digital capabilities.
     
  • Companies such as ABN AMRO Private Banking selected Bottomline’s Financial Messaging solution to improve operating efficiencies and optimize the effectiveness of their financial transactions.
     
  • Organizations such as International Financial Data Services (IFDS) and BT Pension Management Limited chose Bottomline’s corporate payment automation solutions to expand their payments capabilities and improve efficiencies.             

Third Quarter Strategic Corporate Highlights

  • Awarded “Best Payments Processing Award” for the Bottomline Technologies Universal Aggregator® by the Card and Payments Awards, the U.K.’s largest payments industry awards event.  Bottomline's role in accelerating the access to non-card payment rails with the Universal Aggregator® offering was highlighted as what set the company apart. 
     
  • Recognized as a Market Leader in the Accounts Payable category for the Winter 2018 Customer Success Report published by FeaturedCustomers.
     
  • Announced the release of a new set of application programming interfaces (APIs) to enable easy, secure connectivity for banks, corporate clients, and other third-parties to the Paymode-X platform.  The enhanced set of APIs will enable flexible, frictionless access to the Paymode-X member network and all of its integrated B2B payment processing capabilities including card, ACH, check and wire payments.
     
  • Recognized with two awards at the annual Killer Content Awards hosted by the Demand Gen Report at its annual B2B Marketing Exchange. Bottomline won in both the Nurture Campaign category and the Agency Partnership category for its partnership with Content4Demand.
     
  • Awarded 2018 Silver Stevie award for “Best Contact Center of the Year”.             

Non-GAAP Financial Measures

We have presented supplemental non-GAAP financial measures as part of this earnings release. The presentation of this non-GAAP 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 non-GAAP financial measures.

Core net income and core earnings per share exclude certain items, specifically amortization of acquisition related intangible assets, goodwill impairment charges, stock-based compensation, acquisition and integration-related expenses, restructuring related costs, minimum pension liability adjustments, non-core charges associated with our convertible notes and revolving credit facility, global enterprise resource planning (ERP) system implementation and other costs, and other non-core or non-recurring gains or losses that arise from time to time.

Non-core charges associated with our convertible notes and revolving credit facility consist of the amortization of debt issuance and debt discount costs. Acquisition and integration-related 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 multi-phase 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 anti-dilutive 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 non-GAAP 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 non-GAAP financial measures internally to assess the ongoing performance of the company. Additionally, the same non-GAAP 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 stand-alone basis, including the lack of comparability of this presentation to the GAAP financial results of other companies.

Non-GAAP Financial Measures (Continued)

Reconciliation of Core Net Income
A reconciliation of core net income to GAAP net loss for the three and nine months ended March 31, 2018 and 2017 is as follows:

    
 Three Months Ended
March 31,
 Nine Months Ended
March 31,
 2018 2017 2018 2017
 (in thousands)
GAAP net loss$(1,002) $(6,624) $(2,155) $(27,478)
Amortization of acquisition-related intangible assets5,818  6,006  16,708  18,381 
Goodwill impairment charge      7,529 
Stock-based compensation expense8,592  7,354  25,132  24,209 
Acquisition and integration-related expenses224  501  1,596  2,272 
Restructuring expenses1,485  561  1,476  561 
Global ERP system implementation and other costs1,558  2,076  4,973  6,673 
Minimum pension liability adjustments(3) 264  35  805 
Amortization of debt issuance and debt discount costs108  3,592  6,393  10,418 
Non-recurring tax benefit (1)    (4,402) (4,461)
Tax effects on non-GAAP income(4,916) (4,726) (14,035) (11,856)
Core net income$11,864  $9,004  $35,721  $27,053 
 

(1)   The non-recurring 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. The non-recurring 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.

Reconciliation of Diluted Core Earnings per Share
A reconciliation of our diluted core earnings per share to our GAAP basic and diluted net loss per share for the three and nine months ended March 31, 2018 and 2017 is as follows:

    
 Three Months Ended
March 31,
 Nine Months Ended
March 31,
 2018 2017 2018 2017
        
GAAP basic and diluted net loss per share$(0.03) $(0.17) $(0.06) $(0.73)
        
Plus:       
Amortization of acquisition-related intangible assets0.15  0.16  0.43  0.48 
Goodwill impairment charge      0.20 
Stock-based compensation expense0.21  0.19  0.65  0.64 
Acquisition and integration-related expenses0.01  0.01  0.04  0.06 
Restructuring expenses0.04  0.01  0.04  0.01 
Global ERP system implementation and other costs0.04  0.05  0.13  0.18 
Minimum pension liability adjustments  0.01    0.02 
Amortization of debt issuance and debt discount costs  0.09  0.16  0.27 
Non-recurring tax benefit    (0.11) (0.12)
Tax effects on non-GAAP income(0.12) (0.12) (0.36) (0.30)
        
Diluted core earnings per share$0.30  $0.23  $0.92  $0.71 
 

Non-GAAP Financial Measures (Continued)

A reconciliation of our non-GAAP weighted average shares used in computing diluted core earnings per share to our GAAP weighted average shares used in computing basic and diluted net loss per share for the three and nine months ended March 31, 2018 and 2017 is as follows:

    
 Three Months Ended
March 31,
 Nine Months Ended
March 31,
 2018 2017 2018 2017
 (in thousands)
Numerator:       
        
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 shares39,334  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 dilutive on a GAAP basis in periods where we report GAAP net income. These securities are anti-dilutive on a GAAP basis in periods where we report GAAP net loss.

(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 anti-dilutive security under GAAP.

Non-GAAP Financial Measures (Continued)

Reconciliation of Adjusted EBITDA
A reconciliation of our adjusted EBITDA to GAAP net loss for the three and nine months ended March 31, 2018 and 2017 is as follows:

    
 Three Months Ended
March 31,
 Nine Months Ended
March 31,
 2018 2017 2018 2017
 (in thousands)
GAAP net loss$(1,002) $(6,624) $(2,155) $(27,478)
        
Adjustments:       
Other expense, net1,293  4,479  9,288  12,596 
Provision for (benefit from) income taxes7  (232) (4,031) (4,029)
Depreciation and amortization5,095  4,684  14,638  12,925 
Amortization of acquisition-related intangible assets5,818  6,006  16,708  18,381 
Goodwill impairment charge      7,529 
Stock-based compensation expense8,592  7,354  25,132  24,209 
Acquisition and integration-related expenses224  501  1,596  2,272 
Restructuring expenses1,485  561  1,476  561 
Minimum pension liability adjustments(3) 264  35  805 
Global ERP system implementation and other costs1,558  2,076  4,973  6,673 
        
Adjusted EBITDA$23,067  $19,069  $67,660  $54,444 
 

Reconciliation of Adjusted EBITDA as a percent of Revenue
A reconciliation of adjusted EBITDA as a percent of revenue to GAAP net loss as a percent of revenue for the three and nine months ended March 31, 2018 and 2017 is as follows:

    
 Three Months Ended
March 31,
 Nine Months Ended
March 31,
 2018 2017 2018 2017
        
GAAP net loss as a percent of revenue(1%) (8%) (1%) (11%)
        
Adjustments:       
Other expense, net1% 5% 3% 5%
Provision for (benefit from) income taxes0% 0% (1%) (2%)
Depreciation and amortization5% 5% 5% 5%
Amortization of acquisition-related intangible assets6% 7% 6% 7%
Goodwill impairment charge0% 0% 0% 3%
Stock-based compensation expense9% 9% 8% 10%
Acquisition and integration-related expenses0% 1% 1% 1%
Restructuring expenses1% 1% 1% 0%
Minimum pension liability adjustments0% 0% 0% 0%
Global ERP system implementation and other costs2% 2% 2% 3%
        
Adjusted EBITDA as a percent of revenue23% 22% 24% 21%
 

About Bottomline Technologies:
Bottomline Technologies (NASDAQ:EPAY) helps make complex business payments simple, smart, and secure. Corporations and banks rely on Bottomline for domestic and international payments, efficient cash management, automated workflows for payment processing and bill review, and state of the art fraud detection, behavioral analytics and regulatory compliance solutions. Thousands of corporations around the world benefit from Bottomline solutions. Headquartered in Portsmouth, NH, Bottomline delights customers through offices across the U.S., Europe, and Asia-Pacific. For more information visit www.bottomline.com.

Bottomline Technologies, Paymode-X and the BT logo are trademarks of Bottomline Technologies (de), Inc. which are registered in certain jurisdictions. All other brand/product names are trademarks of their respective holders.

In connection with this earning’s release and our associated conference call, we will be posting additional material financial information (such as financial results, non-GAAP financial projections and non-GAAP to GAAP reconciliations) within the “Investors” section of our website at www.bottomline.com/us/about/investors.

Cautionary Language
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements reflecting our expectations about our ability to execute on our strategic plans, achieve future growth and profitability, achieve financial targets, expand margins and increase shareholder value.  Any statements that are not statements of historical fact (including but not limited to statements containing the words “believes,” “plans,” “anticipates,” “expects,” “look forward”, “confident”, “estimates,” “see” and similar expressions) should be considered to be forward-looking statements.  Actual results may differ materially from those indicated by such forward-looking 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. For additional discussion of factors that could impact Bottomline Technologies' operational and financial results, refer to our Form 10-K for the fiscal year ended June 30, 2017 and the subsequently filed Form 10-Q’s and Form 8-K’s or amendments thereto. Any forward-looking statements 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 forward-looking statements.

Media Contact:
Rick Booth
Bottomline Technologies
603.501.6270
rbooth@bottomline.com

 
Bottomline Technologies
Unaudited Condensed Consolidated Statement of Operations
(in thousands, except per share amounts)
        
 Three Months Ended
March 31,
 Nine Months Ended
March 31,
 2018 2017 2018 2017
Revenues:       
Subscriptions and transactions$67,378  $55,851  $191,279  $163,627 
Software licenses3,134  2,735  8,119  8,348 
Service and maintenance29,476  26,344  85,251  79,937 
Other1,148  1,169  2,978  3,999 
        
Total revenues101,136  86,099  287,627  255,911 
        
Cost of revenues:       
Subscriptions and transactions30,760  25,867  85,372  74,535 
Software licenses233  265  632  589 
Service and maintenance13,793  12,607  38,993  39,308 
Other930  835  2,298  2,891 
Total cost of revenues45,716  39,574  127,295  117,323 
        
Gross profit55,420  46,525  160,332  138,588 
        
Operating expenses:       
Sales and marketing22,418  18,976  63,119  57,176 
Product development and engineering14,131  13,057  41,838  39,074 
General and administrative12,755  10,863  35,565  35,339 
Amortization of acquisition-related intangible assets5,818  6,006  16,708  18,381 
Goodwill impairment charge      7,529 
Total operating expenses55,122  48,902  157,230  157,499 
        
Income (loss) from operations298  (2,377) 3,102  (18,911)
        
Other expense, net1,293  4,479  9,288  12,596 
        
Loss before income taxes(995) (6,856) (6,186) (31,507)
Income tax provision (benefit)7  (232) (4,031) (4,029)
        
Net loss$(1,002) $(6,624) $(2,155) $(27,478)
        
Basic and diluted net loss per share:$(0.03) $(0.17) $(0.06) $(0.73)
        
Shares used in computing basic and diluted net loss per share:38,348  37,965  38,055  37,891 
 


 
Bottomline Technologies
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
 March 31, June 30,
 2018 2017
ASSETS   
Current assets:   
Cash, cash equivalents and marketable securities$102,126  $126,542 
Cash and cash equivalents, held for customers2,907   
Accounts receivable89,806  64,244 
Other current assets17,887  16,807 
    
Total current assets212,726  207,593 
    
Property and equipment, net27,682  26,195 
Goodwill and intangible assets, net375,216  365,980 
Other assets19,546  17,671 
    
Total assets$635,170  $617,439 
    
LIABILITIES AND STOCKHOLDERS' EQUITY   
Current liabilities:   
Accounts payable$10,643  $9,013 
Accrued expenses and other current liabilities33,414  29,179 
Customer account liabilities2,907   
Deferred revenue80,611  74,113 
Convertible senior notes  183,682 
    
Total current liabilities127,575  295,987 
    
Borrowings under credit facility150,000   
Deferred revenue, non-current23,766  22,047 
Deferred income taxes13,546  15,433 
Other liabilities22,495  22,016 
    
Total liabilities337,382  355,483 
    
Stockholders' equity   
Common stock44  43 
Additional paid-in-capital669,331  624,001 
Accumulated other comprehensive loss(23,075) (32,325)
Treasury stock(129,914) (113,071)
Accumulated deficit(218,598) (216,692)
    
Total stockholders' equity297,788  261,956 
    
Total liabilities and stockholders' equity$635,170  $617,439 
 

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