Bottomline Technologies Inc. (EPAY)
F3Q10 (Qtr End 03/31/10) Earnings Call Transcript
April 22, 2010 5:00 pm ET
Rob Eberle – President & CEO
Kevin Donovan – CFO
Jon Maietta – Needham & Company
George Sutton – Craig-Hallum
Gary Prestopino – Barrington Research
John Kraft – D.A. Davidson
Paul [ph] – Stephens, Inc.
Chris Shutler – William Blair
Previous Statements by EPAY
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Ladies and gentlemen, thank you for standing by and welcome to the Bottomline Technologies third quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given at that time. As a reminder, this conference is being recorded.
Statements made today may include forward-looking information subject to risks, uncertainties and other factors that could materially affect actual results. For further information, please see Bottomline’s reports filed with the SEC pursuant to the Securities Exchange Act of 1934, which are available at SEC’s Website www.sec.gov.
During their remarks, reference to Bottomline's financial results relate to non-GAAP or core financial results. These results are also referred to as core operating income or EBITDA, core net income and core earnings per share in our earnings release. A reconciliation of GAAP net income to core net income is provided in the earnings release.
These results exclude amortization of intangible assets, equity-based compensation, and acquisition-related expenses. Throughout this call, when they refer to their financial results, it has that meaning. Bottomline will be providing forward-looking guidance on this call. A summary of the guidance provided during the call is available from the company upon request.
I would now like to turn the conference over to our host, Mr. Rob Eberle. Please go ahead.
Good afternoon. Thank you for your interest in Bottomline Technologies and welcome to the third quarter fiscal ’10 earnings call. I am delighted to report on what was another strong quarter for Bottomline. I am joined by Kevin Donovan, Chief Financial Officer who will provide a detailed review of the quarter’s financial results and our guidance going forward. We will be available for questions following Kevin’s remarks.
Q3 was a strong quarter for Bottomline. The financial results, revenue growth, operating income and EPS were all strong, evidencing our focused execution. We set the stage for success in subsequent quarters, with several important new customer wins and the expansion of our relationship with Bank of America through the acquisition of its travel commission payments service. And finally, from a longer term strategic perspective, we made significant progress in integrating the PayMode platform with our Business eXchange capabilities.
Our remarks on each, but first I will touch on the key financial results. Revenue growth was a clear highlight of the quarter, with revenue up 20% from the prior year. Subscription and transaction revenues were up 44% from the prior year. Our focus on recurring revenue streams is paying off as indicated by this growth.
Today, almost two-thirds of our revenues are recurring. Core operating income was up 69% from the prior year. Operating income as a percent of revenue was 18%, right in line with our plan. And EPS was $0.24, an increase of 60% from the prior year, and we are on track to earn $1 per share for the fiscal year.
What I am most pleased about however is our balance between current period activities, near-term initiatives, and future growth opportunities. When you look at the quarter, we are clearly executing as posting the financial results and other metrics we have committed to and reported today. From a subsequent quarter in near-term perspective, we have in place initiatives and programs to drive near-term growth and profit. And longer term, we are investing with an eye-to-the-future growth opportunities that is planting the seeds for tomorrow’s growth, profit and continued success.
Results in the quarter speak for themselves. So, I will focus my comments on the near-term activities for subsequent quarters and investments for the future. The key part of our strategic activities to drive subsequent quarter’s results is winning new recurring revenue customers. This past quarter, we added three new Legal eXchange customers, including Markel Insurance, an international property and casualty insurer, ranked 54
by A.M. Best, Markel chose Bottomline’s Legal eXchange for its ease-of-use, budgeting capability and the expertise of our specialized team.
We are also chosen by ANZ, one of the leading global banks in the world and a current Bottomline customer. As a Global Cash Management solution, they will roll out to their New Zealand customer base. Bottomline’s WebSeries is a payment solution ANZ operates and has deployed in its home Australian market with great success. Based on their Australian customers’ positive response, ANZ has decided to roll Bottomline’s platform out to their other geographies.
And finally, we deepened our relationship with Bank of America by acquiring its travel commission payments service. More than two dozen major travel and hospitality companies and tens of thousands of travel agents around the world, use the Bank of America travel commission payments service for commission payments, remittance and reporting. We are building the unique features required to support them into our PayMode platform.
This is currently expected to be completed by calendar year-end at which point the customers will transition to Bottomline. Even though this transaction is relatively small, we are excited by it for a number of reasons. First, it stands and deepens our strategic relationship with Bank of America. Second, it demonstrates the versatility and capability of PayMode, the relative ease with which we can add these customers to PayMode is indicative of that platform’s capability and suggests there are other opportunities for us to add more scale in the future. Third, it allows us to enter an interesting niche market, with marquee global customers. And four, finally from a financial standpoint, while we are investing today, we are ultimately bring on recurring revenue customers adding scale and profitability to our platform.