Bottomline Technologies, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the bottom line Q1 2021 earnings call. At this time, everyone joining by phone is in a listen only or muted mode. Later, we will conduct a question and answer session. Instructions will be given at that time. If you should require assistance during the call, please press star then zero on your telephone keypad. As a reminder, this conference is being recorded. I'll now turn the conference over to our host, Danielle Shear, please go ahead.

Welcome to Bottom Line's first quarter 2021 earnings conference call. This is Danielle Shear, and I'm joined by Rob Everly, Bottom Line's CEO, and Rick Booth, the CFO. I'd like to remind everyone that statements made on today's call will include forward-looking statements about Bottom Line's future expectations, plans, and prospects. All such forward-looking statements are subject to risks, uncertainties, and assumptions, including those related to the impacts of COVID-19 on our business and global economic conditions. The forward-looking guidance we provide today is based on our assumptions as to the macroeconomic environment based on the facts as we know them today. Many of these assumptions relate to matters that are beyond our control, including the impact of COVID-19. Please refer to the cautionary language in today's earnings release and Bottom Line'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. Bottom Line does not assume any obligation to update on the forward-looking statements. During this call, Bottom Line's financial results are presented on a non-GAAP basis. These non-GAAP results include, among others, constant currency growth rates, gross margins, operating income, EBITDA, net income, and earnings per share. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the investor resources section of our website. Bottom line, we'll be providing forward-looking guidance on this call, and a summary of the guidance provided during the call is available from the company upon request. Let me now turn it over to Rob for his remarks. Rob?

Good afternoon, and welcome to the Bottom Line first quarter fiscal 21 earnings call. As always, we appreciate your interest in Bottom Line. We're delighted to be reporting on a strong and strategically important quarter. Q1 was the first quarter where 80 percent of our revenue was subscription revenue. We've worked hard to get to the point where subscription revenues and our SaaS platforms drive the bulk of our revenue, reaching 80 percent is a meaningful milestone. Our results and model line up well with the characteristics of a valuable SaaS platform business. A large 20 billion market opportunity and a leading competitive position in that market. Targeted growth of 15 to 20% with an opportunity to exceed that range. An attractive lifetime customer value as we retain customers for a decade or more and our platform strategy provides additional new revenue opportunities. A gross retention rate of 97% and a net renewal rate of well over 100%. Incremental gross margins, 76%, and attractive EBITDA of $26 million. The progress with our SaaS offerings has to some degree been masked by the legacy of traditional revenue streams. But with 80% of our revenue now driven by these platforms, the valuable business we are growing will come into clearer focus. With today's over $360 million in revenue, we can easily see $500 million as the next important milestone, one which we'll achieve within the next three years. At $500 million, our target growth rate translates into $75 to $100 million of incremental high-margin revenue a year. Stepping back from the quarter, we're executing against our strategic plan to build a subscription business of scale driven by market-leading platforms which feature solid SaaS metrics. We continue to drive consistent profitability and cash flow, allowing us to invest in innovation and expand our product capabilities. Our strategic plan is focused on the product set, market position, and execution needed to drive years and years of growth at or above our 15 to 20 percent target range. Before I get further into my remarks, let me touch on the key financial results for the first quarter. We're really pleased with our execution and the quarter's results. Subscription revenue was 90.4 million, which was up 13 percent from a year ago. As in the prior quarter, we continue to see a COVID impact on our transaction-based revenue streams. PayModeX and legal spend management, which has disrupted the acceleration in our subscription revenue growth, but those transaction-based revenues will return in full. Excluding those two platforms, subscription revenue growth was 25%. This is meaningful, as it demonstrates our potential to drive 20% or higher growth as the environment normalizes. Subscription bookings were $22.4 million, a strong start to the fiscal year. EBITDA was $26.2 million for the quarter, with 23 percent of revenue. The $26.2 million in Q1 puts us on track to be over $100 million in EBITDA for the year. And we continue to have a strong balance sheet as we enter the quarter with just under $200 million in cash. so strong financial results for the quarter. I'd like to now provide an example of how we win and how our product innovations position us well for continued growth. I'll then conclude with some remarks on our commitment and plans to drive shareholder value. One of the key platforms driving our growth is our digital banking product set. We had a major win this quarter, which highlights the strength of our strategy and the opportunity for future growth. We're pleased to be selected by a major regional bank who will be deploying our DVIQ payments and cash management platform with secure payments. It was particularly interesting and gratifying to see the bank accelerate the conversion of this customer-facing strategic system, despite other competing priorities. They realized that if they waited, they'd risk falling behind their competition. They determined our platform was the clear market leader and represented the best opportunity to aggressively grow their business banking franchise. Beyond our technology, we were chosen because they saw a superior grasp of the bank's strategic imperatives, an enduring commitment to innovation, an unwavering commitment to their success, not just in the sales and implementation phase, but importantly, an empowering, sustained competitive advantage for the bank. Like any bank or key customer, they were choosing a vendor and partner not just based on our capabilities today, but as much or more based on our innovation agenda and what we'll have for the three, five, eight, ten years from now. Across everything we do, we're focused on building great products that deepen the customer engagement and transform the digital experience. The innovation principles we set for ourselves across our entire product set are providing a simple, intuitive, and beautiful software experience. Leveraging embedded intelligence to personalize the user experience, ensure platforms continuously learn and improve performance, and generate data-driven intelligence and insights. And it's all based on an open, API-enabled architecture to make disparate systems work seamlessly, promote interoperability, flexibility, and collaboration, and reduce fragmentation and friction. I'll give a couple examples related to our banking product set. One innovation effort underway is focused on the digital capabilities for corporate and commercial onboarding. Second important new platform capability we're developing is Cash Flow Optimizer, which brings a variety of data related to cash from different sources into one intelligent platform and then provides insights, predictions, and recommendations, all driven by embedded intelligence. These platforms are additional means by which we help banks win and grow their business banking franchise and drive continued growth for bottom line. While we're focused on customers, products, and growing the business as the primary priority, we believe the value of the business is not currently reflected in the stock. We have a four-part plan to address that, focused on growth, profitability, investor outreach, and a buyback program. First and foremost, we will continue producing growth driven by product leadership and innovation. We have a huge market opportunity and a competitive advantage in the markets we address, which will translate to strong growth for years to come. We have 25% growth in our platforms not impacted by decreased volumes and 13% overall in the first quarter. This shows our ability to produce growth at or above our target 15% to 20% range in a normal environment. Accelerating growth will drive a higher valuation. Second, We'll continue to produce strong EBITDA, even while making a significant investment in product development, marketing, and sales. We had EBITDA of 26.2 million in the first quarter, which sets us up well to produce EBITDA of 100 million on the year, a result we're fully committed to. Growth and investment remains our priority, but we can achieve 100 million EBITDA as well. We can do a better job ensuring more investors understand the value we're creating. I'll be doing that personally at several events and meetings with investors over the month of November. We have a great story to tell. $360 million of subscription revenue with strong SaaS metrics, a leading position in large, important markets. Targeted growth of 15% to 20% with an opportunity to exceed that growth and strong EBITDA. Bottom line represents an asymmetrical risk investment for any investor and an extremely attractive price point for SaaS investors. Finally, with the shares undervalued, we'll be buying back shares beginning immediately under our previously authorized $50 million buyback program. So in conclusion, we're really pleased with the results for the first quarter. We're now an 80% subscription SaaS business We're investing and winning with more growth ahead. We're building a valuable franchise, one which will serve customers and reward investors. With the continued growth of our product set and revenues, FY21 will be an exciting and rewarding year for our company and our shareholders. So I'll now turn it over to Rick, and then we'll open up the call for questions.

Thank you, Rob. I'm pleased to report on another strong quarter, as both revenue and profitability exceeded guidance and expectations. This is the first quarter in which more than 80% of revenue comes from subscriptions. And so I thought it would be useful to share some traditional SaaS metrics to help investors evaluate us compared to other similar companies. We compare favorably in many ways. We have a $20 billion TAM. We offer mission-critical applications And these create attractive lifetime customer value. Our retention and renewal rates help illustrate this. We have 97% gross renewal rates calculated on a dollar basis on a rolling four-quarter view. And our net renewal rates are over 100% when we add the cross-sell of new products and expansion of usage by our existing customers. As we add products and capabilities to our subscription platforms, these metrics should continue to rise. These customer relationships are valuable as our incremental subscription margins are 76%. And we deliver overall EBITDA margins over 20% while driving innovation to further accelerate SaaS revenue. So from an investor perspective, I believe the bottom line represents an attractive opportunity to invest in subscription revenue growth at a very attractive price. Turning to detailed results for the quarter, I'll begin with our most important revenue stream, subscription revenues. The key story in the quarter was the growth in subscription revenues, which are now over 80% of total revenues. Overall subscription revenue grew 13%, and $90.4 million of subscription revenue is equivalent to $362 million per year. Just over 80% of total revenue came from subscription offerings, up six full percentage points from a year ago. And I found it particularly encouraging that subscription revenues were up 25% when you exclude PayModeX and LSM product lines, which are impacted by transaction volumes in the short term. I'll expand a bit on what we're seeing in these two products. First, and most importantly, we continue to add customers as fast or faster than we did pre-COVID, as strong demand for new customers to adopt our solutions continues. We're also bringing new customers live without delay and doing so virtually. In the short term, these positive trends are being offset by the impact of transaction volumes from existing customers due to the recent lockdowns and slowdown in economic activity in some of the key verticals we serve. As we had expected, legal spend management revenue reflected reduced transaction volume on a year-over-year basis from existing customers offset by growth in the customer base both domestically and in the UK market. The volume impact of the shutdown is an anomaly we do not expect to continue. PayModeX saw payment volumes grow approximately 7% quarter over quarter, but total volumes from existing customers were still 2% below the same period in prior year. As an example, one of the verticals we serve is processing commission payments for travel agents, and that's off by 60% from normal volumes and revenues. Recurring revenue is now 93% of total revenue, up 4 percentage points year over year, and total revenue at 112.4 was ahead of guidance and expectations. Turning to sales, I'm pleased to report solid bookings and continued strong demand for our offerings. Customers signed 22.4 million of new subscription bookings. And while these bookings figures are estimates and customers take time to implement and ramp to full revenue production, this provides us with a high level of visibility into future revenue streams. Our PayModeX network sold 27 new payers, including several large deals. We're expanding our bank channel partners and seeing good traction with both our channel partners and our direct sales force. We signed five new customers to our digital banking product set, including the large platform deal Rob described earlier. With those signings, we have approximately 18 million of annual digital banking subscriptions which are signed but not yet being recognized in our P&L. We expect the vast majority of the 18 million to go live this fiscal year. Our legal spend management network added six new customers, and another six insurers expanded their relationships with us So overall, a solid quarter for new bookings. Turning to profitability, subscription revenue growth continued to drive strong profitability. EBITDA of $26.2 million was 23% of revenue. Core operating income was $18.5 million. And core earnings per share were $0.31. Each of these metrics was ahead of plan and expectations. Subscription gross margin was 62%. up 2.4 percentage points year-over-year. In the quarter, we added $10 million of subscription revenue, of which 76%, or just under $8 million, flowed through to gross margin. Sales and marketing expense was $21.8 million, or 19% of revenue, as we used savings from travel and in-person conferences to further expand both our direct and channel sales efforts. Development expense was $17.1 million, or 15 percent of revenues, as we drove product innovation and platform expansion while managing costs. Between sales and marketing and development, we've increased our growth investments from 32 percent of revenue to 35 percent in the last two years as we prioritize driving revenue growth. From a cash flow perspective, This allowed us to generate $8 million of operating cash flow, which reflects normal Q1 seasonality, and brings us to $87 million of operating cash flow and $43 million of free cash flow on a GTM basis. We ended the quarter with $197 million of cash and investments on hand, and that gives us a well-funded financial position, which is important to our customers. Turning to guidance. In the upcoming quarter, we expect to continue to deliver strong performance with subscription revenue of 94 to 96 million, total revenue of 112 to 114 million, core income of 17 to 18 million, adjusted EBITDA of 24.5 to 26.5 million, and core earnings per share of 27 to 28 cents. Looking to full year FY21 as payment volumes recover, we expect to see that reflected in our results. For subscription revenue, we expect a return to subscription revenue growth of 15 to 20 percent, driven by a combination of increased volumes from existing customers and sustained demand for our products and solutions. For EBITDA, we expect to produce 100 million or more of EBITDA in FY21, And for non-subscription revenue, we expect the customer preference for our cloud solutions over on-premise applications to remain strong and for services and maintenance to continue to become less important as we've seen in recent years. As we step back, based on our confidence in bottom line strategy, growth prospects and value, we will immediately begin buying back stock under our existing 50 million share repurchase authorization. Of the 30 million remaining on that authorization, we commit to no less than 10 million in repurchases to be completed between now and December 31st. So in conclusion, I'm pleased to have been able to report on a strong quarter. A significant milestone as subscription revenues exceeded 80% of total revenue, 13% subscription revenue growth, and 25%, excluding our COVID-impacted lines, 76% incremental gross margins, 23% EBITDA margins, and confidence in producing 100 million or more of FY21 EBITDA. And with that, we can open the call to questions.

Ladies and gentlemen, if you wish to ask a question, please press 1 then 0 on your telephone keypad. You may withdraw your question at any time by repeating the 1-0 command. And if you are using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, you may press 1, then 0 at this time. And one moment, please, for our first question. And our first question is from the line of Andrew Schmidt with Citi Financial. Please go ahead.

Hey, Rob. Hey, Rick. Thanks for taking my questions. Good quarter of the results here.

Thank you.

So why don't we talk a little bit about the run rate of the business, the growth rate exiting 2021. Got a couple things going on. You have a potential recovery in the volume-based businesses. Seems like you're experiencing an accelerated decline in the non-substant trans, which is a headwind in the near term, but as you get to the end of 2021 and that that part of the business becomes the smaller part of the mix. The overall top line growth should accelerate. So just any comments around, you know, how we should think about just, you know, the run rate growth of the business, getting all those dynamics, particularly exiting this fiscal year.

I'll make some comments, and I'm sure Rick would as well. The first thing I tell you, what I always try to do as an operating executive is take a look at normalizing things for variables that have occurred. So I know, for example, we were headed into Q3 and Q4 last year at 20 and then 21%. That was our forecast. And with subscription revenue, that's usually pretty much right on the money. So you can feel good about the engine, or I feel good about the engine driving growth in our subscription and growth in our business. The second data point then is one we referenced on the call here. When we take out the... transaction-based revenue models that are legal spend management and PayModeX, 25% growth in the quarter. So I think the question is when do we see volumes normalize? And at that point in time, I have every confidence we'd be in our 15 to 20% target growth range, and I think there's a potential for us to be above that. When aware, it's tougher to pick exact timing, the engine driving growth in our business is as strong as ever.

Well said, Rob. The other bit of context that I want to just remind everyone of is that we planned and expected the migration away from license revenue and some maintenance revenue this year, going from fiscal 20 to fiscal 19. That's a more than $10 million hit. And the beautiful thing is in the fourth quarter, This quarter, we had less than a million dollars of software, so less than 1% of revenue. So it's impossible for that to be a significant drag going forward. So I just wanted to remind people, given the comment, about other revenue.

Yeah, that's helpful. I appreciate that. And then I appreciate all the comments on innovation in the product setting. I do think it's helpful for investors to understand what you're doing and more details regarding innovation, so that's helpful. I guess, you know, Rob, in your prepared remarks, you had, you know, a lot of comments in terms of just, you know, what you're trying to do from an innovation perspective. But if you take a step back, you know, and you look at the product set, which products are most exciting to you? Which have the most potential? You know, and maybe talk about the product roadmap over the next year or two. That'd be helpful.

Well, the first thing I'd say, a lot of what we're doing, in fact, I'd say across the board what we're doing in terms of product innovation, some of the things I talked about, machine learning, personalization, data insights, beautiful software, and an intuitive experience, APIs, all of those pieces, those are common across all of our platforms. That's our innovation agenda across all of our platforms. I think the dynamics and opportunities are a little bit different. So I take a look at I think the largest opportunity we have in Europe and in the U.S. is really around businesses paying and getting paid. That would be PTX in Europe, PayModeX in the U.S. That's certainly the biggest overall camp. From a competitive position in a really attractive market, we also address digital banking where banks that are serious about their business banking franchise want to compete and grow wallet share. grow customer count, grow their business, they're going to select bottom line. And so the opportunity there is really significant, not just to win those deals, but then new capabilities like some of the things I referenced during the call, commercial onboarding and our cash flow optimizer. So those are two huge market opportunities for us. Legal spend management doesn't have the same size market opportunity, but the position we have is so strategic. We're seeing all of the flow of legal billing from major insurers. So one of the things we've been doing there is introducing new capabilities, law firm analytics, for example, that law firms can't subscribe to or the carriers. So new product opportunity as well as continuing to sell. If that sounds like I didn't have a particular favorite, that's right, because I think each of those major areas we're investing in and driving growth in, payments in Europe, payments in the U.S., digital banking, legal spend management. They all have a great opportunity. And if you step aside from transaction impact, every one of them is growing at or above our target range.

That's helpful context. And just last question. On LSM, could you talk a little bit about kind of the recovery curve there? I know there can be a lag in terms of just legal claims being submitted and things like that. So if you just talk about what you're seeing and how we should expect that to trend, that would be helpful.

You're right, Andrew. The lag between an accident and litigation and suing and therefore legal bills can range approximately six months. And we had commented... in our last call, that volumes were up in July relative to what we had seen in May and June, but not as materially as we had seen in PayModeX. It actually trended slightly down in August. So July to August was slightly down, but then we've seen a steady recovery in each of the following months. So three months so far of some slight improvements.

Okay, got it. Thank you, Rob. Thank you, Rick. Appreciate the comments.

Our next question from the line of John Davis with Raymond James Financial. Please go ahead.

Hey, good afternoon, guys. Rick, one quick one for you here to start off. I appreciate the color on the full year. I'll call it Outlook because I know it's not an official guide. But it seems to imply the margin will be a little bit down from what it was in 4Q last And to be clear, the 1Q margin was definitely well ahead of expectations. But just curious, you know, the puts and takes, what did drive the margin up? Was it just lower travel expense? And kind of how do you see that trending throughout the rest of the year just from a margin perspective?

Yeah, so first of all, as you recall, when we were talking in our last earnings call, people were asking about the outlook, and we acknowledged that there was some uncertainty out there. So we're in the face of uncertainty. We're always prudent in managing costs. We have some great product opportunities that are in front of us, and so our hope is to ramp our investments as we move through the year. We've got some flexibility, so we're highly confident in our ability to deliver our EBITDA forecast, but our goal is to optimize subscription revenue growth while continuing to provide an attractive EBITDA. As Rob referenced, Consistent profitability is our theme as opposed to maximizing profitability in the short term, given the large space that we're targeting.

Okay, that's helpful. And then I apologize that you're going quickly and I missed it. Just the bookings number again, and then just coupled with that, a lot of checks we've done and private companies we've talked to, as well as banks, have really talked about the increase in tech budgets as a result of the pandemic. So just curious, you know, from more of a subjective perspective, are you guys seeing that uptick in demand as your pipeline building? Just kind of any kind of macro comments you can give maybe both here in the U.S. and in the U.K.

Yeah, there's no question we've seen an uptick in demand. We track that at the top of the funnel. The orders on any given quarter, particularly a quarter that includes, you know, some months and a difference on some months, I thought it was a really solid orders number. But, yes, no question we're seeing more demand, more interest, and I think that translates into more opportunity, which is Rick's reference. We're making the investment around product and marketing and sales to maximize that.

Okay, Rick, just quickly, the bookings number again. Sorry, I just missed it during the prepared remarks. $22.4 million, J.D. Okay, thanks. And then... Rob, maybe a bigger picture question. I think the 25% X the transaction-related businesses is encouraging, and Rob, you alluded to even upside to the 15% to 20% over the longer term or maybe even exiting this year. But from a higher level, I think you kind of touched on it on Andrew's question, but if we think about the three different businesses that you have, the payment network business in the U.S. and in Europe, digital banking and LSM, How do we think about what those growth rates are for those different businesses and how we can get to potentially 20 or even higher? Is it digital banking needs to grow 25%? Is it upside in the payments? How do we kind of get to that 20 plus percent from a growth rate perspective for those three different businesses?

Well, we have for ourselves satisfied our ability to get to that 20, 21%. Of course, we didn't see that occur with the disruption of COVID. But we know we can get there. It's really each piece is contributing to that. There isn't a single driver that's more important than another, but each piece is contributing to that. So we know we can get to that range. The way I think about that, I think we're going to deliver attractive growth and attractive value at 15% to 20%. There's a good possibility we can achieve above that, and if we do, we just outperform.

That's fair, but suffice it to say there's not one business that's going to grow materially faster than that range. They're all kind of in that range, maybe slightly above, slightly below, but you don't need Digital Banking to grow 25 or PayModeX to grow 30 to get to that number. It's all kind of in that 15% to 20% plus or minus. There's not a big difference in growth rates in the businesses, I guess is what I'm getting at.

Right. There's broad, strong demand in each of those verticals, and you really think about them as part of the same large opportunity. You know, how businesses pay and get paid and banks are one of the means in which we reach them. So it's not surprising to me that we have consistent growth rates across the product lines.

Okay, and then last one for me quickly, just more of a modeling question for Rick. So you alluded to service and maintenance revenue. Is there an expectation for the year, or at least for 2Q, it looks like it sets down a little bit from 1Q. So, should we expect just sequential declines throughout the year? You've been very clear that's going to get smaller or shrink over time, but just trying to think about how we should model that line throughout fiscal 21.

I would expect to see a slowing of the rate of decline, and I would model it separately. So, license, we've essentially taking the hit that we planned. So that's pretty clear. In looking at service and maintenance, I would expect the rate of decline to slow in the second half of the year. Okay.

All right.

Thanks, guys.

Our next question from the line of George Sutton with Craig Hellam. Please go ahead.

Thank you. This is Adam for George. In the press release, you referred to working with 35 banks in Europe on SRD2. I was hoping you'd provide a little more detail on that. Are these banks that have been working with Bottom Line before, and is there any opportunity for geographic expansion with any of them?

It's some of both. It's some of both. We're ahead of others around this directive. It's a part of our financial messaging solution. We have new customers and existing customers. that we're working with on that. It certainly adds to our competitive advantage and attractiveness. It's what we want to do in each area where we participate is be ahead of regulatory changes or open banking type changes or technology changes like machine learning and analytics that I referenced earlier. So specifically to your question, it's some of both, but it's all new revenue in each of those banks.

And from a geographic perspective, is that limited to a few specific countries or is it more widespread?

So we, we do, um, that's, that specific thing is focused more around the banks we work with in Europe and Geneva, um, in particular. But what we'll typically see is the technologies that will deploy for FM. We deploy around the world, Singapore and Australia and London, us, um, the, our, universal aggregator as part of our FM solution, financial messaging solution set. That's one of the core pieces in our partnership with Visa and B2B Connect, for example. So what we'll do is take technologies and use them in different marketplaces, which have a slight adjustment typically to payment types or protocol, but we can deploy most of our technologies around the world.

Great. And obviously, a couple of small acquisitions in the quarter. I was hoping just relative to that, how should we think about what your approach to M&A is going to look like in the future as you go towards this new innovation plan?

We focus our attention on expanding functionality and strategic advantage rather than chasing the largest companies in any given size. We maintain price discipline. All right, great. Thank you. I would not expect M&A to be a hugely material use of capital on a go-forward basis.

Thank you. Our next question from the line of Brett Huff with Stevens Incorporated. Please go ahead.

Good afternoon, guys. Hope you're well. Hey, Brett. I want to dig in a little bit on the 15 to 20 percent, 21 outlook. And first of all, appreciate that sort of view. I know it's still pretty uncertain, and so I appreciate the range. But I want to make sure that I got sort of what the parameters or the caveats were. The way I read it in the release was kind of depends on how COVID macro sort of comes out. And I just want to make sure I heard again, you know, how we should think about that 15% to 20% in 21, kind of what's built into the macro assumptions there, just so we know how to do a sensitivity on it.

I think you put your finger right on it, Brett. The key unknown is how quickly we'll see the economy returning to normal. So we know that as the economy returns to normal, we'll see that 15% to 20%. As I mentioned, and I gave some indicators, we're seeing some recovery of payment volumes, for example, 7% quarter over quarter, but as of now, they're still 2% below prior year, and normally, they would be significantly above. So, dependent on the state of the economy, in either Q3 or Q4, we should see that, but we're not ready at this point to provide a precise guide on full years of revenue. Nonetheless, we're confident that with our operating discipline, we can deliver on our EBITDA commitment.

Okay, that's great. And so just to dig in a little bit on that, it was my second question. I'm glad you mentioned the payments volume. So the 7% was total pay mode volume growth that you're seeing in the first quarter, and normally kind of it runs at 900. Is that the right way or 9%? Is that the right way to interpret what you said?

No, we would normally see payment volume increases up more significantly than that, but it was up 7% sequentially. So from the quarter ended June 30th to the quarter ended September 30th.

I see. So it's up 700 basis points sequentially.

And did you tell us what the... No, seven full percentage points. Yep.

Right, I'm sorry, seven points higher sequentially. And did you, you were talking, there was a lot of info, did you actually say what the actual growth was? I'm just wanting to make sure I didn't miss that.

Sorry, could you repeat the question?

Yeah, I just wanted, did you actually give the pay mode volume growth? If you gave that, I just want to make sure I got it, if so.

Yes, it was up 7% from June to September. But September, September,

20 was still two percent below the payment volumes that we saw in september 2019. okay um and then on the um the new initiative um you know the buyback i get that we're going to start right away in addition to that you mentioned sort of a little bit more outreach to investors it sounds like you're getting started in november to do that What other items are going to be on that? Does it sound like maybe we'll get some more incremental data points, such as the SaaS metrics that you provided and things like that?

No, I think it's just that. I think at 80% here of our revenues, subscription revenues, driven by market-leading SaaS platforms, a big opportunity in front of them. I think it's a great story to tell. I don't think that story's been as clear for investors. If I'm It's capital markets and investors' decision, but I'm told by those that do get close to us and look at it, they say, I can get in a SaaS business that's at scale 360 million. Yes, it's not growing at 40% or some of the superstar rates, but it's got an attractive and predictable growth level, and I can get in that at a price point multiple that's entirely different from what I'd see in others, which creates asymmetrical risk, right? I think there's significant upside if we can be seen in the clearer picture of what we really have built around the subscription revenue streams and SaaS platforms to trade at a much higher level than we're at today. And that's the story we'll be out telling.

That's great. And last one for me, sorry to ask so many questions. Rick, could you just repeat the SaaS metrics that you gave us? Those sounded like they were helpful and I couldn't write fast enough.

Yeah, certainly. So 97%. gross renewal rates and well over 100% net renewal rates, even in today's environment. And we're confident that those will move up over time as we continue to build the functionality into our platforms. And those relationships, the customer relationships, are very, very valuable because of our 76% incremental gross margin on subscription revenue. So that, to me, is the real opportunity.

Okay, great. Thank you. Appreciate the extra time.

And our next question from the line of Peter Heckman with D.A. Davidson. Please go ahead.

Good evening. This is Carson on for Pete. Thanks for taking our question. Just one quick one on your recent MAA activity. Can you provide the annual run rate and purchase price for your two new acquisitions?

Certainly, I can address that question. And I mentioned this earlier, but I can go into a bit more detail. We focus our attention on expanding functionality and strategic advantage, as opposed to going after the largest companies in a given market. So FMR, for example, is a very small company focused on corporate onboarding. And that's a perfect extension of our existing account opening tools. And that will significantly extend the reach and functionality of our platforms as we integrate the capabilities. But on day one, We're taking on board three customers, five employees, and our total expenditure on that was $2.3 million. So as you'd expect, there's minimal revenue in the short term, but it helps accelerate our onboarding development efforts. MSS is likewise focused on strategic advantage, in this case, on acquiring local language capabilities to extend our financial messaging solutions more deeply into German-speaking Europe. Their small but experienced team is focused on extending our reach but there's no significant contribution to FY21 results.

Great, that's very helpful. Thanks a lot for your time. Appreciate it.

You know, I think the common theme you can see there in our M&A strategy is being creative, being smart, being price sensitive, finding value without spending a 15 times revenue company, which there's plenty around. There's plenty of opportunity to do that. They could add some things, but I think what we're doing is executing far more effectively and efficiently around M&A.

Right. Completely understood. Thank you.

Thank you. And I'll turn it back to management for closing remarks.

Well, thank you. Thank you for your interest in bottom line. Very strong quarter for us. We're delighted with the results and even more excited for the year ahead. Appreciate your time and interest.

Thank you. Ladies and gentlemen, this conference call has ended. We thank you for using the AT&T conference service. You may now disconnect. Thank you.