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Bottomline Technologies Inc. F4Q10 (Qtr End 06/30/10) Earnings Call Transcript

Bottomline Technologies Inc. F4Q10 (Qtr End 06/30/10) Earnings Call Transcript

Bottomline Technologies Inc. (EPAY)

F4Q10 (Qtr End 06/30/10) Earnings Call Transcript

August 12, 2010 5:00 pm ET


Rob Eberle – President and CEO

Kevin Donovan – CFO


Jon Maietta – Needham & Company

George Sutton – Craig-Hallum

John Kraft – D.A. Davidson & Co.

Brett Huff – Stephens



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» Bottomline Technologies F3Q09 (Qtr End 3/31/2009) Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. And welcome to the Bottomline Technologies fourth quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct the 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, During their remarks, references to Bottomline's financial results relate to non-GAAP or core financial results. These results are also referred to as core operating income, core EBITDA, core net income and core earnings per share in our earnings release.

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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 the 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.

Rob Eberle

Good afternoon. Thank you for your interest in Bottomline Technologies Inc. Welcome to the fourth quarter fiscal '10 earnings call. I'm delighted to report on what was another strong quarter for Bottomline, capping an outstanding fiscal year.

I'm 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'll be available for questions following Kevin's remarks.

Q4 was another strong quarter for Bottomline. Revenue growth was a clear highlight of the quarter, with revenue up 19% from the prior year. Subscription and transaction revenues were up 54% from the prior year. Our focus on SaaS or software as service platforms is paying off as evidenced by this growth.

Operating income was $7.6 million, up over $2 million from the prior year. Operating income as a percent of revenue was 18%, EPS was $0.24.

The fourth quarter capped an outstanding fiscal year. From a financial standpoint for the year, we grew revenues 15% to $158 million, we grew EBITDA 77% to $34 million, we grew operating income 92% to $29 million and we generated EPS of $1 per share.

Just as importantly, from a strategic standpoint we positioned our business for growth and future success with the PayMode platform, our strategic relationship with Bank of America and a cash balance of over $122 million.

Turning back to the fourth quarter, it was a great combination of in-quarter execution and strategic positioning for future growth. As I noted, we grew our subscription and transaction revenue 54% from the prior year, which reflects our success with SaaS platform, such as the Legal eXchange.

During the quarter, we added five new customers to the Legal eXchange, included Riverport Insurance and Berkley Risk Administration. Each time we add new customers to Legal eXchange, we are adding incremental revenues to a relatively fixed-cost basis, driving attractive and predictable incremental margins.

Our investment in the SaaS business model is paying off. As we ended the quarter with just shy of $12 million in subscription and transaction revenue. This means we are close to a $50 million a year run rate subscription and transaction business.

This is important to investors because, one, it is a predictable revenue stream and goes to the overall predictability of our business, second, as our subscription and transaction revenues grow, it will drive margin expansion and EPS growth and finally, as the Street gets greater visibility to this asset, it will become a more important component in Bottomline's overall valuation.

We continued our strategic progress with PayMode in the quarter and we’re delighted to not only see continued sales activity from Bank of America, we're actually seeing net increase. Increased sales proposals and increased new customers, including, for example, a large state that came on to the platform in the fourth quarter.

Finally, I'll comment on our follow-on offering and our plans for the additional cash we've raised. We have a history of successful acquisitions. We've proven acquisitions, if done right, to be a great way to acquire new technology, new customers, enter new markets, bring on strong talent and most importantly accelerate growth.

What has happened is that the M&A market has become a cash market. Sellers are not interested in or would apply a significant discount to stock. We want to be in a position to pursue additional M&A and not be excluded from a process or opportunity because of the cash on our balance sheet.

With our successful raise of an additional $62 million, we are now well-positioned to pursue strategic acquisitions. Our target areas include the following, product extensions, geographic expansion, healthcare and bank carve outs.

We have an active pipeline and a disciplined valuation process. We know there are properties out there that would make attractive additions to our business. We do not have a particular timeline for the deployment of the funds.

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