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| 8-K - FORM 8-K - BOTTOMLINE TECHNOLOGIES INC | d573620d8k.htm |
Exhibit 99.1
Bottomline Technologies Reports Third Quarter Results
21% Growth in Subscription and Transaction Revenue Highlights Third Quarter
PORTSMOUTH, N.H. – May 3, 2018 – 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, |
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| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| (in thousands) | ||||||||||||||||
| GAAP net loss |
$ | (1,002 | ) | $ | (6,624 | ) | $ | (2,155 | ) | $ | (27,478 | ) | ||||
| Amortization of acquisition-related intangible assets |
5,818 | 6,006 | 16,708 | 18,381 | ||||||||||||
| Goodwill impairment charge |
— | — | — | 7,529 | ||||||||||||
| Stock-based compensation expense |
8,592 | 7,354 | 25,132 | 24,209 | ||||||||||||
| Acquisition and integration-related expenses |
224 | 501 | 1,596 | 2,272 | ||||||||||||
| Restructuring expenses |
1,485 | 561 | 1,476 | 561 | ||||||||||||
| Global ERP system implementation and other costs |
1,558 | 2,076 | 4,973 | 6,673 | ||||||||||||
| Minimum pension liability adjustments |
(3 | ) | 264 | 35 | 805 | |||||||||||
| Amortization of debt issuance and debt discount costs |
108 | 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 | ) | ||||||||
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| Core net income |
$ | 11,864 | $ | 9,004 | $ | 35,721 | $ | 27,053 | ||||||||
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| (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, |
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| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| GAAP basic and diluted net loss per share |
$ | (0.03 | ) | $ | (0.17 | ) | $ | (0.06 | ) | $ | (0.73 | ) | ||||
| Plus: |
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| Amortization of acquisition-related intangible assets |
0.15 | 0.16 | 0.43 | 0.48 | ||||||||||||
| Goodwill impairment charge |
— | — | — | 0.20 | ||||||||||||
| Stock-based compensation expense |
0.21 | 0.19 | 0.65 | 0.64 | ||||||||||||
| Acquisition and integration-related 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 |
— | 0.01 | — | 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 | ) | ||||||||
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| Diluted core earnings per share |
$ | 0.30 | $ | 0.23 | $ | 0.92 | $ | 0.71 | ||||||||
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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, |
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| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| (in thousands) | ||||||||||||||||
| Numerator: |
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| Core net income |
$ | 11,864 | $ | 9,004 | $ | 35,721 | $ | 27,053 | ||||||||
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| Denominator: |
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| 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 | ||||||||||||
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| GAAP diluted shares |
39,334 | 38,344 | 38,996 | 38,078 | ||||||||||||
| Impact of note hedges (2) |
— | — | (145 | ) | — | |||||||||||
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| Weighted average shares used in computing diluted core earnings per share |
39,334 | 38,344 | 38,851 | 38,078 | ||||||||||||
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| (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, |
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| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| (in thousands) | ||||||||||||||||
| GAAP net loss |
$ | (1,002 | ) | $ | (6,624 | ) | $ | (2,155 | ) | $ | (27,478 | ) | ||||
| Adjustments: |
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| Other expense, net |
1,293 | 4,479 | 9,288 | 12,596 | ||||||||||||
| Provision for (benefit from) income taxes |
7 | (232 | ) | (4,031 | ) | (4,029 | ) | |||||||||
| Depreciation and amortization |
5,095 | 4,684 | 14,638 | 12,925 | ||||||||||||
| Amortization of acquisition-related intangible assets |
5,818 | 6,006 | 16,708 | 18,381 | ||||||||||||
| Goodwill impairment charge |
— | — | — | 7,529 | ||||||||||||
| Stock-based compensation expense |
8,592 | 7,354 | 25,132 | 24,209 | ||||||||||||
| Acquisition and integration-related expenses |
224 | 501 | 1,596 | 2,272 | ||||||||||||
| Restructuring expenses |
1,485 | 561 | 1,476 | 561 | ||||||||||||
| Minimum pension liability adjustments |
(3 | ) | 264 | 35 | 805 | |||||||||||
| Global ERP system implementation and other costs |
1,558 | 2,076 | 4,973 | 6,673 | ||||||||||||
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| Adjusted EBITDA |
$ | 23,067 | $ | 19,069 | $ | 67,660 | $ | 54,444 | ||||||||
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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, |
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| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| GAAP net loss as a percent of revenue |
(1 | %) | (8 | %) | (1 | %) | (11 | %) | ||||||||
| Adjustments: |
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| Other expense, net |
1 | % | 5 | % | 3 | % | 5 | % | ||||||||
| Provision for (benefit from) income taxes |
0 | % | 0 | % | (1 | %) | (2 | %) | ||||||||
| Depreciation and amortization |
5 | % | 5 | % | 5 | % | 5 | % | ||||||||
| Amortization of acquisition-related intangible assets |
6 | % | 7 | % | 6 | % | 7 | % | ||||||||
| Goodwill impairment charge |
0 | % | 0 | % | 0 | % | 3 | % | ||||||||
| Stock-based compensation expense |
9 | % | 9 | % | 8 | % | 10 | % | ||||||||
| Acquisition and integration-related expenses |
0 | % | 1 | % | 1 | % | 1 | % | ||||||||
| Restructuring expenses |
1 | % | 1 | % | 1 | % | 0 | % | ||||||||
| Minimum pension liability adjustments |
0 | % | 0 | % | 0 | % | 0 | % | ||||||||
| Global ERP system implementation and other costs |
2 | % | 2 | % | 2 | % | 3 | % | ||||||||
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| Adjusted EBITDA as a percent of revenue |
23 | % | 22 | % | 24 | % | 21 | % | ||||||||
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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, |
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| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Revenues: |
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| Subscriptions and transactions |
$ | 67,378 | $ | 55,851 | $ | 191,279 | $ | 163,627 | ||||||||
| Software licenses |
3,134 | 2,735 | 8,119 | 8,348 | ||||||||||||
| Service and maintenance |
29,476 | 26,344 | 85,251 | 79,937 | ||||||||||||
| Other |
1,148 | 1,169 | 2,978 | 3,999 | ||||||||||||
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| Total revenues |
101,136 | 86,099 | 287,627 | 255,911 | ||||||||||||
| Cost of revenues: |
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| Subscriptions and transactions |
30,760 | 25,867 | 85,372 | 74,535 | ||||||||||||
| Software licenses |
233 | 265 | 632 | 589 | ||||||||||||
| Service and maintenance |
13,793 | 12,607 | 38,993 | 39,308 | ||||||||||||
| Other |
930 | 835 | 2,298 | 2,891 | ||||||||||||
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| Total cost of revenues |
45,716 | 39,574 | 127,295 | 117,323 | ||||||||||||
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| Gross profit |
55,420 | 46,525 | 160,332 | 138,588 | ||||||||||||
| Operating expenses: |
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| Sales and marketing |
22,418 | 18,976 | 63,119 | 57,176 | ||||||||||||
| Product development and engineering |
14,131 | 13,057 | 41,838 | 39,074 | ||||||||||||
| General and administrative |
12,755 | 10,863 | 35,565 | 35,339 | ||||||||||||
| Amortization of acquisition-related intangible assets |
5,818 | 6,006 | 16,708 | 18,381 | ||||||||||||
| Goodwill impairment charge |
— | — | — | 7,529 | ||||||||||||
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| Total operating expenses |
55,122 | 48,902 | 157,230 | 157,499 | ||||||||||||
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| Income (loss) from operations |
298 | (2,377 | ) | 3,102 | (18,911 | ) | ||||||||||
| Other expense, net |
1,293 | 4,479 | 9,288 | 12,596 | ||||||||||||
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| Loss before income taxes |
(995 | ) | (6,856 | ) | (6,186 | ) | (31,507 | ) | ||||||||
| Income tax provision (benefit) |
7 | (232 | ) | (4,031 | ) | (4,029 | ) | |||||||||
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| 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 | ) | ||||
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| Shares used in computing basic and diluted net loss per share: |
38,348 | 37,965 | 38,055 | 37,891 | ||||||||||||
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Bottomline Technologies
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
| March 31, | June 30, | |||||||
| 2018 | 2017 | |||||||
| ASSETS |
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| Current assets: |
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| Cash, cash equivalents and marketable securities |
$ | 102,126 | $ | 126,542 | ||||
| Cash and cash equivalents, held for customers |
2,907 | — | ||||||
| Accounts receivable |
89,806 | 64,244 | ||||||
| Other current assets |
17,887 | 16,807 | ||||||
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| Total current assets |
212,726 | 207,593 | ||||||
| Property and equipment, net |
27,682 | 26,195 | ||||||
| Goodwill and intangible assets, net |
375,216 | 365,980 | ||||||
| Other assets |
19,546 | 17,671 | ||||||
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| Total assets |
$ | 635,170 | $ | 617,439 | ||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| Current liabilities: |
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| Accounts payable |
$ | 10,643 | $ | 9,013 | ||||
| Accrued expenses and other current liabilities |
33,414 | 29,179 | ||||||
| Customer account liabilities |
2,907 | — | ||||||
| Deferred revenue |
80,611 | 74,113 | ||||||
| Convertible senior notes |
— | 183,682 | ||||||
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| Total current liabilities |
127,575 | 295,987 | ||||||
| Borrowings under credit facility |
150,000 | — | ||||||
| Deferred revenue, non-current |
23,766 | 22,047 | ||||||
| Deferred income taxes |
13,546 | 15,433 | ||||||
| Other liabilities |
22,495 | 22,016 | ||||||
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| Total liabilities |
337,382 | 355,483 | ||||||
| Stockholders’ equity |
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| Common stock |
44 | 43 | ||||||
| Additional paid-in-capital |
669,331 | 624,001 | ||||||
| Accumulated other comprehensive loss |
(23,075 | ) | (32,325 | ) | ||||
| Treasury stock |
(129,914 | ) | (113,071 | ) | ||||
| Accumulated deficit |
(218,598 | ) | (216,692 | ) | ||||
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| Total stockholders’ equity |
297,788 | 261,956 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 635,170 | $ | 617,439 | ||||
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