Bottomline Technologies, Inc.

Greetings and welcome to the Bottom Line Technologies third quarter fiscal year 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. To queue up for a question, you can press star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Danielle Shear, General Counsel. Thank you. You may begin.

Welcome to Bottom Line's third quarter 2021 earnings conference call. I'm Danielle Shear, and I'm joined by Rob Eberle, Bottom Line's CEO, and Bruce Bowden, our CFO. Statements made on today's call will include forward-looking statements about Bottom Line's future expectations, plans, and prospects. These statements are subject to risks, uncertainties, and assumptions, including those related to the impacts of COVID-19 on our business and global economic conditions. Our forward-looking guidance is based on our assumptions as to the macroeconomic environment today. Many of these assumptions relate to matters beyond our control. 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. We do not assume any obligation to update 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. 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.

Good afternoon and welcome to the Bottom Line third quarter fiscal 21 earnings call. I'm here with Bruce Bowden, who has just joined this quarter as CFO and is an excellent addition to the Bottom Line team. Bruce will provide a review of the quarter's financial results and our future outlook and then Bruce and I will both be available for questions following his remarks. Q3 was an important and very good quarter. Driving subscription revenue growth is a central part of our strategic plan. The highlight of the quarter was the acceleration of our subscription revenue growth, which also drove an acceleration of overall revenue growth. We're delighted to see and report the return of growth. Behind our growth and the financial results we're presenting, and at the core of our strategic plan, is an innovation agenda responding to the most impactful market and competitive dynamics. We successfully executed against that agenda in Q3, extending our product leadership and expanding our market opportunity. I'll provide examples during my remarks. I'll briefly cover some of the key financial results for the third quarter. Subscription revenue was $100 million, which was up 14% from a year ago. We're of course pleased with the acceleration of our subscription growth in the quarter. Subscription growth for the products not impacted by transaction volumes was even stronger at 21%. Looking forward, While currencies moved against us a bit since January, we're confident we'll see continued acceleration in subscription growth in Q4. Subscription bookings were $20 million, which is down about $1.9 million from the prior quarter, as we saw a couple of larger deals for digital banking and Paymodex push out. We expect to see a step up in bookings in the fourth quarter. EBITDA was 24.1 million for the quarter, consistent with our plan and expectations. And we're on track to achieve the 100 million in EBITDA we committed for the year. So, excellent financial results overall for the quarter. While we're really pleased with the financial results we're reporting, we're even more excited by our opportunity ahead and the work we're doing to make the most of that opportunity. Our innovation agenda is a central part of our strategic plan. It's designed to address the fluid competitive dynamics of the markets we compete in, technology advancement, particularly around data, analytics, and machine learning, and the acceleration of the digital transformation of business payments and its impact on our customers and target markets. I'm going to highlight a few development efforts currently underway with specific examples for PayModeX, legal spend management, digital banking, and the UK market. Starting with PayModeX, the most critical factor behind scale, market position, and growth is vendor enrollment. We've made the vendor experience and the technology capabilities for vendors a key priority for the PayModeX network. Solving business pain and reconciling payments, forecasting receipt of funds, and providing remittance detail and formats that allow for automated integration ensures we're delivering critical value to vendors and payers alike. The more value we provide the vendors, the faster the network and our revenues grow. Continuing to deliver increased value to vendors has allowed us to grow the network to over 450,000 vendors. That in turn makes the network more valuable to payers as they get greater automation and rebate and can achieve that faster the larger the vendor network. For our legal spend management product set, growing our market opportunity is a key objective. We're addressing that by introducing new offerings, particularly those targeting law firms, and geographic expansion. A good example is Law Firm Analytics, which is designed to give law firms data insights to help them monitor the performance of the work they do for their largest insurance company clients. Managing partners can access the deduction percentage by attorney to see if a particular lawyer has an unusually high deduction percentage. Access to the data that their most important clients use to evaluate them has real value to law firms. It drives improvements in performance competitive position, and economics. It's also a fabulous way of extending the platform in a means that creates new revenue opportunities and growth, as law firm analytics is a capability we can offer directly to the thousands of law firms on our network. We've also been investing in capabilities to allow for continued success in international expansion, particularly in the UK and Canada. We're fortunate to have a market-leading platform and a well-known and highly regarded brand in these geographies. Our banking customers face a broad range of competitors, from challenger banks to fintech payments and financing providers. Their challenge is customer attraction and retention. They rely on us to provide the technology platform and digital transformation tools to deepen customer engagement grow WalletShare, and grow their business banking franchise. It's a big ask and a big opportunity. So it's no surprise we're bringing a lot of new innovation to market for our digital banking customers. Two significant business banks have signed on as beta customers for our new cash flow optimizer, or CFO, and they're targeting customers and their client base. The early feedback has been fabulous. One bank said, this is an absolute must-have for us. The second bank's comments really went to the core of our mission in serving banks as a trusted innovation partner. They said, our clients can get accounts and services from any bank. This is what we need to have them stick with us. Our customer engagement analytics is another way we're deepening customer engagement for banks. The platform collects data, applies AI and analytics, and delivers actionable insights that enable banks to achieve important objectives, such as increased conversion rates on new account openings, predicting a reduced attrition, target next actions, and measure customer engagement, which is particularly valuable when going through events like bank mergers. The biggest market dynamic in the UK is easily open banking, which has created change, and opportunity. An early but high potential innovation driven by open banking is confirmation of payee. The product detects fraud by matching the recipient's name and account details and the payment to the information maintained by the bank. We have two banks on as early adopters and a strong pipeline. A broader market trend across all of our markets is the convergence of AP and AR. In that regard, the acquisition of Treasury Express during the quarter was a strategically important event. It's a good example of supplementing and accelerating our organic innovation agenda with a strategic technology acquisition. While it's not particularly meaningful in terms of current revenues, adding less than half a million to the quarter, the strategic insignificance is the proven cloud-based Treasury capabilities, which extend the offerings we can provide to new and existing customers. It also gives us an important element of our payments and cash lifecycle platform. Bottom line is clear and acknowledged leadership and business payments. We also have a lot of receivables experience and are developing the next generation integrated receivables platform. Combining these capabilities, AP and AR, and now adding treasury, gives us a single platform to address the full cash lifecycle. Industry analysts regularly speak about the convergence of AP and AR, and we're well on our way to having that capability and more in market. From a competitive position, offering a full platform strategy gives us a significant advantage over any point solution competitor. The platform breadth provides an opportunity for existing customers to expand their relationship with bottom line and new customers to adopt element or the entire platform. The product pipeline and innovations I've outlined are each strategically directed at addressing market dynamics and opportunities, adding more capabilities for customers, extending our competitive advantage, expanding our TAM, driving growth in subscription revenue and lifetime customer value, and continued success for bottom line and its shareholders. So in conclusion, we're really pleased with the third quarter and our acceleration in subscription growth. At a 400 million subscription run rate, we can easily see our next milestone, 500 million in subscription revenue. With an acceleration in subscription growth coming in Q4 and the strategic expansion of our product set, we're well positioned for the future. Shareholders will be rewarded as we see strong subscription growth in the fourth quarter and next year. So with that, I'll turn it over to Bruce, and then we'll both be available for questions.