Bottomline Technologies Reports Third Quarter Results

Bottomline Technologies (NASDAQ: EPAY), a leading provider of collaborative payment, invoice and document automation solutions, today reported financial results for the third fiscal quarter ended March 31, 2008. Revenues for the third quarter were $32.0 million, an increase of $0.9 million from the third quarter of last year. The growth in revenues included an increase in subscription and transaction revenues to $7.2 million in the third quarter from $6.8 million in the third quarter of last year. Net loss for the third quarter was $0.3 million, or net loss per share of $0.01. During the third quarter, operating expenses of $18.6 million included amortization of intangible assets of $2.6 million, acquisition-related expenses of $0.1 million and stock-based compensation expense of $2.4 million. Excluding these acquisition-related and stock compensation items, non-GAAP net income for the third quarter was $4.8 million, representing a $2.0 million, or 71%, increase in non-GAAP net income from the third quarter of last year. Non-GAAP net income per share for the third quarter was $0.20 as compared with $0.12 in the same period last year. Cash and short-term investments on hand as of March 31, 2008 were $76.9 million, an increase of $5.7 million from the December 31, 2007 balance. The cash and short-term investments at March 31, 2008 include cash that subsequently was used for the acquisition of Optio Software in April. During the third quarter, the company spent $1.9 million on the repurchase of shares of its common stock. "Bottomline had a good third quarter as evidenced by our strong financial performance,” said Rob Eberle, President and CEO of Bottomline Technologies. "EBITDA increased by 75% year over year as we achieved record EBITDA and non-GAAP net income. We continue to drive our operating plan forward and in doing so are demonstrating the earnings leverage of our business model. In addition, we identified and executed on several strategic opportunities during the quarter, which will drive future growth, profitability, and shareholder value. The quarter’s performance, along with the success of these growth initiatives, gives us confidence in the future of the business and the value being created for shareholders.” Revenues for the nine months ended March 31, 2008 increased 11% to $95.2 million as compared with $86.0 million in the same period last year. Net loss for the nine months ended March 31, 2008 was $1.8 million, or net loss per share of $0.08. Excluding amortization of intangible assets of $8.0 million, acquisition-related expenses of $0.1 million and stock compensation expense of $6.4 million, non-GAAP net income for the nine months ended March 31, 2008 was $12.6 million, an increase of 81% from the nine months ended March 31, 2007. Non-GAAP net income per share for the nine months ended March 31, 2008 was $0.52 as compared with $0.29 per share in the same period last year. Customer Highlights Signed significant multi-year contracts for Bottomline’s legal spend management solution, Legal eXchange™, with Charter Communications, John Hancock Life Insurance Company, Ophthalmic Mutual Insurance Company (OMIC) and MDAdvantage. Expanded the Bank of America relationship through a new agreement to further enhance global treasury services with additional functionality for international payments and cash management. ABM Industries, ADT Fire & Security, ARAMARK, County of San Mateo (CA), Craftmade International, The College Board, Day & Zimmermann, The Dish Network, E.ON UK, Johnson & Johnson Vision Care and Western Asset Management expanded their existing deployments of Bottomline solutions for corporate payments and transactional document automation. Leading companies chose Bottomline to enhance the capabilities of their Oracle® JD Edwards and Microsoft Dynamics™ business applications with document process automation solutions, including American Civil Constructors, Associated Brands, A.W. Chesterton Company, Classic Residence by Hyatt, Sciele Pharma and Sterling Bancorp. Corporate and Product Highlights Announced the acquisition of Optio Software for $44.9 million. The acquisition, which further extends Bottomline’s leadership position as a provider of advanced capabilities for transactional document automation, adds a significant customer base as well as a strong vertical presence in the healthcare industry. Received a top ranking in Global Finance magazine’s Best Treasury and Cash Management Banks and Providers 2008, marking the fourth consecutive year in which Bottomline has been awarded top honors in the Best Accounts Payable Services category. Recognized by Celent for its role in enabling Fifth Third Bank to enhance the efficiency and security of its wire initiation processes. In a recent research report, Celent identified Fifth Third as a ‘Model Bank’ for its best-practice use of technology to automate wire transfer initiation processes. Announced a global partnership with Tectura Corporation, the world’s largest Microsoft Dynamics solutions provider, enabling the company to resell Bottomline’s document process automation solutions to organizations that have standardized on the Microsoft Dynamics AX platform. Hosted Bottomline’s annual Executive Forum & Customer Summit, bringing together senior-level corporate finance and banking executives, and industry analysts to discuss the convergence of global cash management opportunities and technology innovation. Bottomline has presented supplemental non-GAAP financial measures and statements as part of this earnings release. The non-GAAP financial measures and statements exclude certain non-cash items, specifically amortization of intangible assets, stock-based compensation and acquisition-related expenses. The presentation of this non-GAAP financial information should not be considered in isolation from, or as a substitute for, the financial results presented in accordance with GAAP. Bottomline believes 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. Bottomline’s executive management team uses these same non-GAAP financial measures and statements internally to assess the ongoing performance of the company. 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. A reconciliation of the GAAP results to the non-GAAP results for the three and nine month periods ending March 31 is as follows: Three Months Ended March 31,   Nine Months Ended March 31, (in thousands)   (in thousands)   2008     2007       2008     2007   GAAP net loss $ (347 ) $ (1,874 ) $ (1,822 ) $ (5,470 ) Amortization of intangible assets 2,629 2,701 7,958 6,575 Acquisition-related expenses 94 - 94 - Stock compensation expense   2,375     1,951       6,404     5,891   Non-GAAP net income $ 4,751   $ 2,778     $ 12,634   $ 6,996   About Bottomline Technologies Bottomline Technologies (NASDAQ: EPAY) provides collaborative payment, invoice and document automation solutions to corporations, financial institutions and banks around the world. The company's solutions are used to streamline, automate and manage processes and transactions involving global payments, invoice approval, purchase-to-pay, collections, cash management and document process automation. Organizations trust these solutions to meet their needs for cost reduction, competitive differentiation and optimization of working capital. Headquartered in the United States, Bottomline also maintains offices in Europe and Asia-Pacific. For more information, visit www.bottomline.com. Bottomline Technologies, Legal eXchange and the BT logo are trademarks of Bottomline Technologies, Inc. which may be registered in certain jurisdictions. All other brand/product names are trademarks of their respective holders. Cautionary Language This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are 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' financial results, refer to the Company's Quarterly Reports on Form 10-Q for the quarters ended September 30, 2007 and December 31, 2007, on file with the SEC. 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. Bottomline Technologies Unaudited Condensed Consolidated Statements of Operations (in thousands, except per share amounts)   Three Months Ended March 31, 2008     2007   Revenues: Software licenses $ 3,149 $ 4,071 Subscriptions and transactions 7,223 6,750 Service and maintenance 18,359 16,856 Equipment and supplies   3,301       3,438     Total revenues 32,032 31,115   Cost of revenues: Software licenses 173 177 Subscriptions and transactions 3,839 3,064 Service and maintenance (1) 8,117 7,864 Equipment and supplies   2,409       2,532     Total cost of revenues   14,538       13,637     Gross profit 17,494 17,478   Operating expenses: Sales and marketing (1) 7,411 8,073 Product development and engineering (1) 4,016 4,248 General and administrative (1) 4,516 5,110 Amortization of intangible assets   2,629       2,701     Total operating expenses   18,572       20,132     Loss from operations (1,078 ) (2,654 )   Other income, net   998       682     Loss before provision for income taxes (80 ) (1,972 ) Provision (benefit) for income taxes   267       (98 )   Net loss $ (347 ) $ (1,874 )   Basic and diluted net loss per share $ (0.01 )   $ (0.08 )   Shares used in computing basic and diluted net loss per share:   23,927       23,529     Non-GAAP (excludes amortization of intangible assets, acquisition-related expenses and stock compensation expense):(2) Net income $ 4,751     $ 2,778   Diluted net income per share (3) $ 0.20     $ 0.12     (1) Stock-based compensation is allocated as follows: Cost of revenues: service and maintenance $ 271 $ 231 Sales and marketing 800 663 Product development and engineering 209 186 General and administrative   1,095 871   $ 2,375 $ 1,951   (2) Non-GAAP presentation excludes charges for amortization of intangible assets of $2,629 and $2,701, acquisition-related expenses of $94 and zero, and stock compensation expense of $2,375 and $1,951, for the three months ended March 31, 2008 and 2007, respectively.   (3) Shares used in computing non-GAAP diluted net income per share were 24,238 and 23,953 for the three months ended March 31, 2008 and 2007, respectively. Bottomline Technologies Unaudited Condensed Consolidated Statements of Operations (in thousands, except per share amounts)     Nine Months Ended March 31, 2008     2007   Revenues: Software licenses $ 9,906 $ 10,005 Subscriptions and transactions 21,407 19,976 Service and maintenance 54,127 45,854 Equipment and supplies   9,786       10,152     Total revenues 95,226 85,987   Cost of revenues: Software licenses 598 560 Subscriptions and transactions 11,723 8,457 Service and maintenance (1) 23,504 21,626 Equipment and supplies   7,024       7,529     Total cost of revenues   42,849       38,172     Gross profit 52,377 47,815   Operating expenses: Sales and marketing (1) 22,777 22,887 Product development and engineering (1) 12,468 12,100 General and administrative (1) 13,702 14,558 Amortization of intangible assets   7,958       6,575     Total operating expenses   56,905       56,120     Loss from operations (4,528 ) (8,305 )   Other income, net   2,790       2,421     Loss before provision for income taxes (1,738 ) (5,884 ) Provision (benefit) for income taxes   84       (414 )   Net loss $ (1,822 ) $ (5,470 )   Basic and diluted net loss per share $ (0.08 )   $ (0.23 )   Shares used in computing basic and diluted net loss per share:   23,806       23,527     Non-GAAP (excludes amortization of intangible assets, acquisition-related expenses and stock compensation expense):(2) Net income $ 12,634     $ 6,996   Diluted net income per share (3) $ 0.52     $ 0.29     (1) Stock-based compensation is allocated as follows: Cost of revenues: service and maintenance $ 740 $ 520 Sales and marketing 2,097 2,120 Product development and engineering 592 578 General and administrative   2,975 2,673   $ 6,404 $ 5,891   (2) Non-GAAP presentation excludes charges for amortization of intangible assets of $7,958 and $6,575, acquisition-related expenses of $94 and zero, and stock compensation expense of $6,404 and $5,891, for the nine months ended March 31, 2008 and 2007, respectively.   (3) Shares used in computing non-GAAP diluted net income per share were 24,334 and 23,803 for the nine months ended March 31, 2008 and 2007, respectively. Bottomline Technologies Unaudited Condensed Consolidated Balance Sheets (in thousands)   March 31, June 30, 2008   2007     Assets Current assets: Cash, cash equivalents and short-term investments $ 76,932 $ 65,873 Accounts receivable 19,890 24,169 Other current assets   4,540     5,402     Total current assets 101,362 95,444   Property and equipment, net 8,846 8,270 Intangible assets, net 75,322 84,296 Other assets   2,612     1,784     Total assets $ 188,142   $ 189,794     Liabilities and stockholders' equity Current liabilities: Accounts payable $ 6,495 $ 6,650 Accrued expenses 7,098 8,475 Deferred revenue   25,028     24,998     Total current liabilities 38,621 40,123   Deferred revenue, non-current 2,208 2,498 Deferred income taxes 4,876 6,258 Other liabilities   1,029     479     Total liabilities 46,734 49,358   Stockholders' equity Common stock 26 25 Additional paid-in-capital 275,247 263,229 Accumulated other comprehensive income 7,534 8,292 Treasury stock (19,846 ) (11,285 ) Accumulated deficit   (121,553 )   (119,825 )   Total stockholders' equity   141,408     140,436     Total liabilities and stockholders' equity $ 188,142   $ 189,794   Non-GAAP Financial Statements Bottomline has presented supplemental non-GAAP statements of operations as part of this earnings release. The non-GAAP statements of operations exclude certain non-cash items, specifically amortization of intangible assets, stock-based compensation and acquisition-related expenses. The presentation of this information should not be considered in isolation from, or as a substitute for, the financial results presented in accordance with GAAP. Bottomline believes that these supplemental non-GAAP statements of operations are useful to investors because they allow for an evaluation of the company with a focus on the performance of its core operations. Bottomline’s executive management team uses these same non-GAAP financial statements internally to assess the ongoing performance of the company. Since this information is not in accordance with GAAP, 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. All amounts are in thousands, except per share amounts. Non-GAAP Three Months Ended March 31, 2008   2007   Revenues:   Software licenses $ 3,149 $ 4,071 Subscriptions and transactions 7,223 6,750 Service and maintenance 18,359 16,856 Equipment and supplies   3,301     3,438     Total revenues 32,032 31,115   Cost of revenues: Software licenses 173 177 Subscriptions and transactions 3,836 3,064 Service and maintenance 7,827 7,633 Equipment and supplies   2,409     2,532     Total cost of revenues   14,245     13,406     Gross profit 17,787 17,709   Operating expenses: Sales and marketing 6,580 7,410 Product development and engineering 3,794 4,062 General and administrative   3,393     4,239     Total operating expenses   13,767     15,711     Non-GAAP income from operations 4,020 1,998   Other income, net   998     682     Non-GAAP income before provision for income taxes 5,018 2,680 Provision (benefit) for income taxes   267     (98 )   Non-GAAP net income $ 4,751 $ 2,778   Diluted non-GAAP net income per share $ 0.20 $ 0.12 Non-GAAP Nine Months Ended March 31, 2008   2007   Revenues:   Software licenses $ 9,906 $ 10,005 Subscriptions and transactions 21,407 19,976 Service and maintenance 54,127 45,854 Equipment and supplies   9,786     10,152     Total revenues 95,226 85,987   Cost of revenues: Software licenses 598 560 Subscriptions and transactions 11,720 8,457 Service and maintenance 22,747 21,106 Equipment and supplies   7,024     7,529     Total cost of revenues   42,089     37,652     Gross profit 53,137 48,335   Operating expenses: Sales and marketing 20,647 20,767 Product development and engineering 11,864 11,522 General and administrative   10,698     11,885     Total operating expenses   43,209     44,174     Non-GAAP income from operations 9,928 4,161   Other income, net   2,790     2,421     Non-GAAP income before provision for income taxes 12,718 6,582 Provision (benefit) for income taxes   84     (414 )   Non-GAAP net income $ 12,634 $ 6,996   Diluted non-GAAP net income per share $ 0.52 $ 0.29