EPAY - Earnings call transcript Q2 2018 | Bottomline Technologies Inc

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Bottomline Technologies Second Quarter 2018 Earnings Conference Call. Statements made on today's call will include forward-looking statements about Bottomline's future expectations, plans and prospects. All such forward-looking statements are subject to risks and uncertainties. Please refer to the cautionary language in today's earnings release on Bottomline's most recent periodic reports filed with the SEC for discussion of the risks and uncertainties that could cause the company's actual results to be materially different from those contemplated in these forward-looking statements. Bottomline does not assume any obligation to update any forward-looking statements.

financial presented Bottomline's basis. a call, this results on are non-GAAP During per non-GAAP constant EBITDA, operating earnings others, include, net growth and These among margins, currency results rates, gross income, share. income, financial measures reconciliation GAAP is the in available these of A Investor section website, to measures Resource of the Bottomline most directly the comparable non-GAAP www.bottomline.com. be providing guidance the on forward-looking will Bottomline call. during from the A available summary is of the the call guidance upon request. provided company the turn conference to to like Mr. now would I our over host, Eberle. Rob ahead. go Please

Robert Eberle

Technologies. Thanks It and I'm fiscal both will very questions then pleasure Officer, Earnings on Chief Booth, our a for you Rick your our going results who the provide afternoon. Call for as report here remarks. will Bottomline his forward. any at in Good welcome my interest and the Bottomline. good And for review be available Rick quarter of I a to always, detailed Financial guidance second XXXX following with what quarter was the financial quarter's and

quarter The financial execution. was both strong strong quarter, results and featuring sales second very good a

with the targets exceeded and subscription pleased strong sales of quarter, subs we're of against meet Paymode-X all $XXX all, of We pleased strong goals. plan our execution months quarter, the profitability in in We've a quarter trans we track XX in second clearly first our QX target The and to targets. exceed gives our XXXX a execution. those demonstrate deals. had million in revenue we're We the and new XXXX in committed FY in which EBITDA. $XXX strategic million for our We're transaction or to second new $XX results with certain execution record FY confidence an and with revenue and EBITDA. bookings, on million During very had in strong us six

leadership are offerings product resonating markets key in demonstrating with customers. We’re our and our

on was revenue up tracking EBITDA million. we're was retirement set. Financial the strength the after With well and annualized for focus, are path leadership, target. and convertible in $XXX saw and will but $XX.X million, focus million, ahead year. Revenue $XXX XX% time, overall million $XX markets was of highlights FY over products we prior of XXXX transaction and $XXX first quarter. on of ended at grew EPS and the transaction target in up XX% XX% the and But a a and us using importantly product traditionally of results the subscription and implications the overall for was success EBITDA fully $X.XX, course to customers subscription product continue at as goal. senior well run our our the going of debt with demonstrates XX%, and cash with financial transaction tell and prior are a from the million important head the key FY in Subscription bookings for our million Subscription be we XXXX target. our million, was the expectations, same converted new winning rate and the remarks growth $XX we future the business to forward. against debt. in $XX.X my true million, and the results strong. I'll second year in quarter financial strong on a Our our million quarter $XX.X the up quarter $XX.X have a and sold and cash we of products revenue revenue Subscription transaction

with and will remainder drivers focus my the product Paymode-X. behind XX subscription in in growth remarks target We of bookings. The our key million are the start I'll leadership new well-position in driving our profitable, on predictable markets. and transaction

aspiration to be progress, get goal for With achievable. Our paid. pay the Paymode-X becomes and more quarter's way that businesses each is

of past a record, and evident major leadership payer Paymode-X health overall and Paymode-X The universities, XX sign-ons major we for sign sizes, and quarter. continued That's of signings on contributor signings growth. organizations a well-positioned a insurer, and technology is care a also record We new and bookings. payers revenue all number types two this a providers were they XX quarter, importantly included several new new to With have companies. for are market this a from from record the is those expected

the drive right leader compelling to new revenue to companies allows in key benefiting the the streams that not competitive organizations opportunity. businesses other that and Recently way innovation PartnerSelect to PartnerSelect. of and the our the been been and against area and executing We’ve for large this executing. organizations our space. opportunity launch been intelligently be legal leadership to a have to and management insurance efficiencies spend and choice reviews, select of market extend offering We spend legal we've element as it able and growing objective we’re from lawyers on want is only our success the and management. we’re is Paymode-X pay get That’s lawyers allows based group to clear long on the insurers and Bottomline each case merits in market performance drive the platform. new insights to for their services well. paid

added customers wins. we important two PartnerSelect including six QX During new

expected is that But not revenue stopping planned. innovation product in additional extend create paying as position off. competitive investment play here. When sources. Today and we we’re launch Our to our out seeing PartnerSelect we

existing in have We product the bring new customers. the securing pipeline innovations will our a of delighting for market

true We It’s innovation platform growth. example great will success. competitive revenue there a new our driving of partner advantage increasing and extending time same at the be

and new more attractive just their having level platform we’ve to and But a choosing can our defend wins. we’re is Banks been and a be bank. the success consistently who of match targeted part the the or banking commercial grow technology won. markets customers today of franchise will business this One future in No and we’ve business with sales of relationship than big success A with Bottomline. provider capabilities. seeing want

great It’s in enjoy a a We’re and leadership addressable large we advantages. opportunity establishing a sustainable position which market. in well-defined

I’ll touch is of why think on provider choice. compelling I this such would market clear a and why

off, primary it's in corporate with providers. new and relationships understand revenue. compete continued interaction these with is mission-critical and to new This base, other for the winning element as are important increasingly, commercial applications. Fintech capabilities it’s its This key bank's customer and each First banks and a growing demand

well-established vast process these and We’re more. platforms there years typically while even or revenue highly spend complex of is addressable segment and advantage. we significant to and replacement in delayed have of implementation seven which And the the are the concentrated targeting market we’re cycles majority as XX are

streams. revenue So these extraordinarily engagements sticky customer relationships and result in long-term

entry win experience. and payments much a strategic expertise a be considerable which truly more It's a the capabilities, expertise, our true a or innovation. unique banking Finally, and increasingly the result business position deliver because the deep match is offering required occupying space. market. We’ve and time long-term or one The of can driving are expertise, else well vital inherent and barriers include the a lot domain we’re in investment corporate vision experience and We investment No the capability. than a the partner. to to strategically extensive the banking unified significant commercial in digital and enabling complexity and customer with interface positions a our applied us true

a to platform and commercial enable payments is to banking. platform grow relationships in in acquire compete that and anchored Our engagement We management. cash and customer empowers are profitable banks corporate deepen banks that

merits digital customers new The added our overall experience and of Financial the We plan our against and plan. payments our impressive and results trust So this future wins UX to evidence breadth drive and market-leading million our the implemented. services being Bottomline annual of eight depth who product responding revenue choosing the past second but have for thing the revenue buying many significant execution is in very perhaps a our strong will subscription and strategic banks that new the value combining engagement and with We’re quarter proposition. UI, are are with backlog and quarter Customers profit strategic in was the cash work uniquely most management as to built process exciting for set. Technologies currently we quarter. we compelling offerings. XX and of platform Bottomline at innovation customer position of is conclusion, growth, This two and

XX establishing million are income of product clear our sign bookings. posted franchise XX% on EBITDA value. We We leadership long-term with new in strong we and up over enhancing operating numbers

drivers, the plan in for have and capability We further place. success execution

XXXX subscription million We’re XXX of fully XXX and committed targets revenue and a transaction FY EBITDA. to million

our in shareholders. that we will confidence those high so a have doing reward targets We and achieve

us of over So to with then for And will available of both it questions. turn Rick. be that, course I’ll

Richard Booth

to you, strong on Thank another very pleased Rob. report I'm quarter.

topics four today. Our on focus

I’ll our QX review First, results.

XXX preliminary and our the for [ph] in Second, XXX and million XXXX results of of fiscal subs trans adjusted context EBITDA. million revenue our

and subscription, I’ll I’ll capital brought we we to to from XX% update XX% equivalence With EBITDA. U.S. website. million XX% income, $XX.X to sign well year-over-year was and million the our quarter XX.X core ahead guidance subs my growth second and revenue, plan. trans quarter of product overall. with third of and trans the This which of and convert now and also earnings and in offerings, strong. plan income that trans for Overall bookings I’ll subs tax And With our in in results. reform provide up the million, year our percentage XX.X excellent material give basis. we convenient addition core quarter. Third, full trans into each XXX for structure. and remarks upcoming our We is at grew from and key turn two is revenue revenue the of including detail and our this growth million operating and total us of recurring, share on address subs up visibility per a supplementary new an X% revenue, provide in on above revenue area updated subs finally, fully Beginning adjusted points overall annualized revenue, Sales drove in post an recorded metrics maybe total XXXX. performance revenue XX% your well

digital win included signed insurers insurers and banking record and time the joined in insurers new bill five revenue to full of trans management, payers subscription, with automation growth. our full network production, spend with legal now PartnerSelect. XX joint on The and very In are two yet in While and of over the payment million eight selecting new X XX the revenue, Paymode thousand set. takes recognized of more network, offerings. but our product and and validating and network which ramp brand partnership. our a implementation subs value Those yet material A almost implement momentum strength proposition, This future and provide this customers to to PartnerSelect clear are our on banks visibility channel is being total bookings to promising. newest on not of P&L. along now effectiveness estimates us have our We annual figure new new the XX driving our signed review not further our signed is

of Turning EBITDA million, to million adjusted which to provides an annualized profitability. model. We this XX equivalent and of XX% of our leverage evidence on this good the up year-over-year, scalability revenue basis, drive to business $XX.X

of $XX.X operating million XX% core revenue, income. year-over-year earnings-per-share delivered point were margin year-over-year and $X.XX XX% two We by products Overall of percentage operating core core of established XX% which operating up drove respectively. over which XX% was up also driven and

margins competitive track results XX% deliver XXX overall XXX million from fiscal and $XX.X $XX.X reviewed expense them of million and million trans From million to gross context point million percentage and business XXXX. $XXX at put was to products, well. of model expense XX% EBITDA an results on by of revenue of our was million and and Subs Having reinforce year. provide well or and in already $XXX the our is with subs operating and quarterly million, $XXX operating our quarter ability confidence the of at fiscal revenue as revenue like the of I’d reinforces also revenue. million, standpoint margin current next scalability percentages $XX prior in development and Annualized trans trans the year. years-over-year a subs our Our XX% on expansion two, XX.X trans up goals was in A revenue Annualized four the the pipeline, the for to XX% or was our already next margin well of clear and point sales strong different to year or gross of $XX subs reached million to one EBITDA marketing for of gross of model. our in combined expense and track and

reform efficient in to I’ll established the operations is structure tax that tax Turning very we’ve legislation. will it first briefly and from even to more today, and efficient structure. the note tax capital new future, thanks be the

We expect important benefits law. from tax two new the

million will of with off First, We've convertible our on results U.S. will convertible second facility. and physical source cash income which approximately million million our million draw an this hand. improve held to we cash swap previously a of cash the fixed locks a fixed the we leverages with our ratio bonds provided fixed executed for XX% the one of through in minimizes We cash. floating years. and $XX.X from below fall shareholders our overhang using drawing in longer tax the of combination retired two-thirds XXXX. third-floating-rate the rate of opportunity first perspective, of on $XXX on dilution to from capital sheet core ended four XX% and our After the just And by credit our capital, bond rate structure face a overseas XXX This maturity structure. million effective quarter interest And rate dilution. this successfully of of the a approach balance near paying convert an tax capital hand repayment without repatriation $XX low-cost next of on our no $XX to in shareholder debt. eliminates no From X% a barriers to

to core trans adjusted earnings our revenue, subs million million deliver raise overall we million $XX for turning to operating XXXX. EBITDA, income Finally, $XX guidance, core pleased and full-year QX per guidance and for to fiscal share. In $XX.X $X.XX detailed guidance I’m provide expect to million revenue, QX, $XX of and

fiscal year million $XX $XXX adjusted $XX $X.XX million full to in the $XXX our revenue, to and million trans million million For XXXX core to million $XXX core overall earnings-per-share. to $XX to to $XX $XXX operating revenue, increase income subs and guidance $X.XX EBITDA, were million million

bookings, EBITDA with And So can revenue fiscal to excellent in our and with conclusion, our strong open the in million questions. visibility next and trans for and can product financial path call $XXX subs results, confident very leadership, $XXX we million in we’re we clear year. the of that

Operator

Instructions] Craig-Hallum. will George [Operator first the Our from come question of line Sutton, Please go ahead.

George Sutton

the results In Nice address was you new I Rob, channel customers. maturing Thank channel you. you guys. wondering and partners. if growth those occurring context of mode could have partner this pay XX obviously

those? important define of are additional customer. it give network initial You’ve would sense got of makes kind I a assume to drivers pay I of what And which of easier you’ve then us Can what vendor to you an little bit sell then most and a as got effect a partnerships.

Robert Eberle

think most for Bank the our effective effective channel. channels I that us. has America certainly of very been So have been

we of seeing because we’re X, other through TD get card across joint deals was coming of line Paymode in exciting of our think momentum big of Bank, seen to really that that highlights a payer channels. saw a I the XX sale visa so joint on. was Probably first number in come our finish was one growth

selling and well together coming story payables consolidated the truly So for us.

Richard Booth

was quarter, that a so see signed that very the partner drive there. last engagement channel was And to Yes. and pleased the just

George Sutton

Yes.

give great. the be your to math Now name. trans you’ve the rate forward it you're of appear sense subs and what bookings to us at I’m at TD a to trans revenues, you bookings obviously to relative new that is than your relative appear subs more and can does curious relative filling of growing funnel Rick, point a to a That's you your growth, accelerating go the us? suggested

Richard Booth

Let’s to of at see. funnel point the in one it clear understand more? Trying does question, the become filling

Robert Eberle

churn churn is flip. up us it's bookings report so the a concern would just question and platform that some that's place indication that a of as the bookings the whatever the a we work just than time are or that in number, experience but revenue $XXX where the is us hopping XX time is is a confidence, much a FY model the plan. quarter's thing the like EBITDA where some three-year banking the like question. It have in wait reference live, process base, trans XXX most one, could some then any us it but digital subscription banking all a we of of quarter that that today, still subs over the it’s there's for numbers, growth it at to the to the couple it's only would and the important as that. those get of but for gives number that ramp in is growth cases there’s confidence estimate, rate and us to into on to some against of piece we be cases these tremendous We in think are place base those doesn't there, XXXX. turn go step In million giving The anything million definitely bookings remember into over we out of one some see will – subscriptions to I off following customers Well, basically coming probably And a on number we cases number other take me I and do that that’s implementation the Its kind that ramp bigger a growth digital we in things Let an look at in The existing component only against to customers. that's backlog. when bookings when have subscription.

George Sutton

Perfect.

you thought sense give dollars? can around lastly, of or proceeds repatriation to repatriated us Just process your

Richard Booth

Yes, certainly.

funds We’re very like won’t allocation, it subs picking change and in focus on to new improve just approach opportunities of capital maybe our capital we available our our its trans that the these and structure with appropriate but discipline we’re to advantage our revenue news growing did organically convert.

George Sutton

guys. Thanks,

Robert Eberle

Thank you.

Operator

comes line ahead. Next Barrington Gary from Prestopino Please of Research. question with the go

Gary Prestopino

right? everybody all Hi. Has doing

Robert Eberle

Very Gary. well, thanks

Gary Prestopino

you did Good. Rick, free cash and the numbers flow quarter? cash for flow

Richard Booth

give I right those here. did that, not but Gary, I’ve No, got

and cash the million outflow cash was flow was So the investing therefore $XX.X negativeX.X. operating flow $X.X the a outflow million, $XX free cash financing was cash was million, our

also from invoicing the unusual timing had for our remainder quarter we by recall that the history, is than us year cash normal of the during that’s collections QX. QX invoicing than you end an so at lower driven more actually of As quarter, in increase going to of and resulted the normal a

Gary Prestopino

then, And Okay. debt, the X%, of debt what your you the now? I or you’re a you that think getting $XXX million fixed floating on is said rate remainder

Richard Booth

today. X.X about That’s

Gary Prestopino

I explain that a then, down time but have were it, XX missed description Could just to implement function revenues you your about And of is transitioning transaction million implementation, why you may that have happened? Okay. on that but I that see X%. an whatever? and product, just or

Richard Booth

It's there so by then really now. we and increases year of a off course terminations, a some year of that function ago a had ago

function there. of really the that's So a timing

Gary Prestopino

Okay.

Robert Eberle

into all it Yes. And that’s related.

Gary Prestopino

in All related. it to

Okay. Thank you.

Operator

the Mayank Tandon from line ahead. comes of & with Needham Company. Please question go Next

Mayank Tandon

higher, of target, conservative XXXX half million margins $XXX mentioned million for in I be guidance and call EBITDA the at does goal quite Thank as you're but second a you. to already to adjusted it that ask wanted you Rick, be seems some XQ, given $XX Good to be for we that think to evening. specifically about to you especially the declining be for investments would factor incremental on margins tend be down. in that Are you? seasonally there revenue need just some and those quarters Maybe that in perspective that will helpful. stronger I ramping be half second to

Robert Eberle

QX, Year, some do investments. social some that the as everything We operating as to in restart welfare product expenses the New well have that hit tend taxes for from

revenue delivering and and grow as differentiation very growth So able to for know, continue and product to aim product maintain balance growth. to you our we satisfying our expect Mayank, between we profitability, EBITDA still while be a

great very rate about a million. $XXX feel million about $XX we run current So as and strong

Mayank Tandon

out profile fiscal Right. of the company out over Good and to let’s two, hear. And in just long-term for look target time. is key terms then, that levers the investors beyond laid us can $XXX margin the what I mean three like XXXX? million the the margin you’ve remind for you years

Robert Eberle

think Yes. beyond My little in the a that crystal subs delivered I gross three saw from quarter software ball growth we coming our this quite a coming and trans fuzzy were once we margin, I’ll down over -- margin had lot scaling that we operating gets note primarily year last get years, strong we on and last and profitability. still bit of -- from revenue we that actually very but

not look So those and look appropriate our margin from very at to expand is that that to product customers start would will currently revenue. differentiation we’re trans of benefits gross would I and as we we marketing and to development subs products, And sales forward to XX% some for cost and as which the continue take go of based going competitive scale importantly on but differentiation live.

Mayank Tandon

it. Got

modeling number also seemed terms of related was going revenue of Rick, one-time than to little you And and that if in that, and should any a be we also seen questions, and we've guidance, that higher just more Okay. maintenance how two recently, the one then could stream the there that benefit FX, quantify what how then much service forward? quarter, effect

Richard Booth

certainly. Yes,

quarter in in So, $X.XX a our It $X.XX. is for came We initiate FX, – us versus nominal initiate our guidance at days. at that we working it’s effect had for average in QX nice guidance pound these that and the favorably QX actually QX.

didn’t a year-over-year. do you had when -- it than big it X% versus It less a guide. impact it have was impact So

Mayank Tandon

going the service in terms revenue and stream modeling And Okay. of maintenance forward?

Robert Eberle

some and people expectations of things; the I advise the to or quarters allowed slower And our the decline recognizing it revenue due our model then maintenance within we ago one continue to there. two strength to Yes. continually about has customer which two longer that second is related maintenance are to one, us pricing That banking. services is continue and to a optimize outperform three a booking services for base digital

Mayank Tandon

Got for of competition, changed, upstarts competitors several if in the last it seem the I I’m cloud has there there so and could historically? different you’ve seen wondering Rob. on out than if I one terms competing the it. seeing SaaS be in that or squeeze Rob, mean, more you're One just to on are competition if platform.

Robert Eberle

the Well, markets continuing evolving.

And so one of and digital the things time we one do see while frankly and the bigger same noise at as building solutions reputation. bigger a we we’re around a see brand banking better

when story launch digital that markets. We’ve target a that, it momentum real of RFPs on So banking platform process we first new launching got getting was in our X.X, out. newest our

while because really on. were things of banks, the well there went around. exciting we’re the players Europe more customers and other In threatened see So pieces different our doing Fintechs other actually that to

evolving a to that Fintech to PSDX as banks and environment the can allows open also in API see plays customers and that allows platforms, the environments. continually a solutions that them those need access more an compete provide give us provide opportunity to but well to because requiring to which come right really picture to our so with of banks an a platform banking open what’s technologies providers for changes they consolidated Our to it us cash for those single

market. from like a but where standpoint, it's competitive sit we definitely So a we moving

Mayank Tandon

so Thank It’s Great. you helpful. much.

Operator

line Brett from Huff ahead. next with Stephens. question the of comes Our Please Instructions] [Operator go

Unidentified Analyst

Blake in for recent quarters. digital Can is Hi, just up guys. more banking bit a nicely good talk [ph] the quarter, from Brett. This you were the wins? about at on Those eight little

out commentary as you did can those said the Any more of more on you anything or of significant you eight. maybe sell I well? had get of out customers think give or contracts two size the those you cross

Robert Eberle

Yes.

of capability, situation. payments which competitive was are And highly it so and management cyber competitive dynamics those cash our was banks, so Texas-based included one our in So the CFRM those fraud there, capabilities. then

before significance ago a of of market was chosen the actually with on second had reference the kind situation actually a where years in couple banking The solution minutes canceled we a that competitor was digital five as momentum another bank ago really project. a competing a X.X and had

the platforms. quickly, big that of these of multiple the the I digital are solutions banking but is of integrating things reference in it barriers offerings one very competitive we One have with complexity

files with of and for our of tens thing That’s happen has of hard, this and to taking to simply seamlessly thousands all payments customers. do. You’re a securely hard

actually, I’m who it the to was, on going that second not the plug program a in actually situation. So we replaced and pulled they name but

evidence not getting momentum wins in. about big us exciting of for what's clear two So back area that just from the in as impact the having that we’re of we’re our Stepping remarks my wasn't but financial is really yet. business

everything's happen have – bookings. the have what What is if is every we if I to going next then we cylinders as So think what’s next well, as CEO, sit firing, about, year, here and year.

XX on. and to in space. a have going continuing big to that be see contributor is We come we profit can million ourselves it's going win We to subscription know of our this to strategically

it make at star get look next Super the of right now, – I'll on kind it's say that's player back week. when in I with the a like we that's but a reserve subscriptions. field impact injured Bowl So, big, its going just big to

Unidentified Analyst

of digital to banking, to improve better the Rick, or could getting transitioning It when you wondering with upside digital was we start revenue banking longer-term profile kind that income if you’re just on margin? see operating specifically provide I margin you was expenses, digital Was for know, don’t that just implementations that really or the you the there the year. expect something on in on nice commentary now do margin going any positive territory see this earlier. I banking? your know for on, touched Then, I'm lower

Richard Booth

Yes.

efficient and I more getting of been rollout coming some from see at think customers which that. I’ve these has more And the we’re helpful. profitability pleased to been

also large signing we’re course, doing we’re – also contracts. Of large

fiscal into it a like of guide XXXX And profitability. profile that that see more to we rest hope fiscal will business. end the you’ll So, the Certainly XXXX of it moving modestly by profitability begin on ramp has we I upward. continue as the

Unidentified Analyst

you in with getting you that. you’re implementation the Are of process said still terms better

You said last next time those are in the year. some on call Are online you that larger had coming track? still banks

Robert Eberle

are. they Yes,

Unidentified Analyst

Okay.

Robert Eberle

Yes. one each focus. key of implementation week, We the areas executive review each it’s of of the

Unidentified Analyst

lastly driver And quarter? X think the Paymode bookings I biggest the quarter, was case Great. the then last again that was this of

Robert Eberle

biggest with Actually Paymode-X bookings quarter. banking real bank real, strong was was this solutions our institutions contributor to [Indiscernible].

Unidentified Analyst

Thanks a lot.

Robert Eberle

give so credit. to I all the have They to them call, listen

Operator

And we queue. no have in further questions

Robert Eberle

Well, subs Thank been EBITDA. for our in are. you and clear and thank million XXX everyone. on what interest. We've you trans your million XXX goals very

I those think is continuing QX, clear, making that across. against on reporting look and we’re forward goals we the to progress and

Operator

Okay, does for ladies participation. call. Thank your you and conclude today's gentlemen, it

You may disconnect. now

Bottomline (EPAY) 1 Feb 182018 Q2 Earnings call transcript