Bottomline Technologies, Inc.

Greetings. Welcome to the bottom line first quarter fiscal 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Amy Brownrigg. You may begin.

Good afternoon, everyone. Welcome to Bottom Line's first quarter fiscal 2022 earnings conference call. I'm Amy Brownrigg and joining me this afternoon are Rob Eberle, Bottom Line's CEO, and Bruce Bowden, 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, 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 Relations 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.

Thank you, Amy. Good afternoon and welcome to the Bottom Line Fiscal 22 earnings call. As always, we appreciate your interest in Bottom Line. I'm here with Bruce Bowden, our CFO, who will provide a detailed review of our financial results and our guidance. Bruce will also outline the new manner in which we'll be disclosing and reporting on our key product sets. This will help investors understand the financial profile and contributions of each and importantly, allow investors to track the growth and success of these major products. As always, we'll answer questions after Bruce's remarks. We're pleased to report on a strong Q1. Subscription revenue growth was on target at 15%, highlighted by a breakout quarter in PayModex. We made significant advancements in our product set, expanding CAM, and extending our competitive advantage. We announced that we'll be welcoming three new board members. Mike Kern will be rejoining the board. We're also adding Phil Hillel and Larry Twain as new members. We look forward to adding their experience and perspective. We've also formed a strategy committee of the board, which will make recommendations with respect to our market position and strategy, opportunities to accelerate our subscription revenue growth, and other ways to create additional shareholder value. I'll provide some color on several of our most significant product advancements in a moment, but first I'll outline the key financial results for the first quarter. Subscription revenue was $103.5 million, reflecting year-over-year growth of 15%. Our investment thesis is straightforward. Our product set, market position, and execution are well positioned to produce sustained subscription revenue growth in our target 15 to 20% range. Subscription bookings in the quarter were 19.8 million. Total revenue was 123.6 million, representing year-over-year growth of 10%. and adjusted EBITDA was 23.1 million, in line with our plan and guidance. Our targeted product investment, market opportunity, competitive position, and strong execution are all evidenced in the results we're reporting for the quarter. They're also the foundation of our confidence and our ability to drive sustained subscription revenue growth in the coming year and years beyond. There's a lot of really great progress being made across the company in new product innovation. I'd like to highlight a few for investors as they play a central part in our competitive position in the market, expansion of TAM, and long-term growth opportunity. We've spoken of the significant opportunity in front of us to build on our leading position in payments automation and expand into the full payments and cash life cycles. That's payables, receivables, and treasury management. I'm pleased to update you on the progress we're making on our new integrated receivables platform, which is one of the building blocks of our PCL strategy. Over the next few months, we'll be launching our next generation receivables offering. Some features of the platform include intelligent reconciliation of payments, remittances, and invoices, easy to navigate exception management, and the ability to predict behavior over time to increase payment visibility and forecast receipts. Our PCL strategy will play out steadily over the coming quarters and years, and the receivables release is a significant and important step in the expansion of our capabilities in this market. Turning to our banking solutions, developing the market-leading platform is a complex and difficult task. particularly in a highly competitive market. We've done just that with digital banking with our DBIQ platform. Our leadership was confirmed this past quarter as we're once again named best in class by AT in the digital commercial banking payments and cash management category, with number one in product features, client service, client strength, and vendor stability. We continue to offer new capabilities to banks, to allow them to more effectively compete and grow their business banking franchise. An example is our new MergerIQ platform, which is focused on banks' consolidations and positions Bottom Line as a key partner in monitoring the customer basis of two merged banks. The platform provides insights and predictions related to platform usage, transaction volumes, engagement, and early warnings of attrition all critical behaviors banks want to monitor on an acquired customer base. With the combination of a well-established market leading position, a strong pipeline of new product innovations, and a positive outlook, we're confident our digital banking product set will be a significant contributor to our growth in Q2, the second half of the fiscal year, and the years ahead. Finally, I'd like to comment on the quarter and some of the advancements we've made with PayModeX. We had a real breakout quarter in PayModeX. Growth in the quarter was 31 percent, but it's not just the acceleration to 31 percent growth. It's really about execution, momentum, and major product extensions. Our comprehensive payable product strategy is resonating with customers and the market. We provide a single offering for all payment types optimizing customer outcomes across automation, security, and rebates. We have an excellent foundation for continued growth based on our position in the market, the size of our network, and the strength of our go-to-market. Earlier today, we announced significant new capabilities for PayModeX via the acquisition of BOR payment systems. The combination with BOR brings us straight through processing of virtual cards, new robust vendor enrollment capabilities, added value to customers' virtual card programs, and the potential for new additional channel partners and additional revenue opportunities for our existing channel partners. Our continued product extensions align to our customer promise and strategic plan for growth. We couldn't be more excited about the results for the quarter and the road ahead for PayModeX. As you can see, we've built a portfolio of market-leading products targeted at intelligently digitizing the way businesses pay and get paid. Our products do this in a manner that is simple, smart, and secure. Across our payment platforms, we've continued to innovate around these strengths, focusing on products that exceed customers' expectations for automation, intelligence, routing across multiple payment types, fraud prevention, predictive analytics, interoperability, and innovation. In closing, we're excited about fiscal 22 and the runway we see ahead based on our product's position in the market and the size of those markets. Our product set differentiates bottom line from other players in the space and powers continued demand and growth. We're pleased with the Q1 results and the strategic advancements in the quarter. We're confident in our FY22 plan. We're also confident we'll continue to execute against that plan, and in doing so, drive shareholder value. I'll now turn the call over to Bruce, and then of course, we'll both be available for questions.

Thanks, Rob, and good afternoon, everyone. As Rob mentioned, today I'll start with a review of our first quarter 2022 performance. Then I'll share some changes we're making to our financial reporting to provide a clearer and deeper view into the key elements of our business. Finally, I'll cover guidance for Q2 and the fiscal year. Q1 represented another very positive step for our accelerating financial performance. Subscription revenue was 103.5 million and grew 15% year over year, both of those hitting the high end of our guidance. Subscription revenue was 84% of total revenue, four points higher than the same period a year ago, and recurring revenue was 94%, one point higher than last Q1. Both of those metrics are at all-time highs as we continue to drive recurring revenue through our key growth platforms. We expect continued acceleration of our subscription revenue growth as the fiscal year progresses. I'll talk more about the drivers of that in a few minutes. Total revenue exceeded our guidance at $123.6 million, representing 10% year-over-year growth, which is within our target range for fiscal 22. Bookings in Q1 were 19.8 million. Although we would have liked to have seen more, that bookings level is 19% of our subscription revenue, so it is sufficient to support our target 15 to 20% subscription revenue growth target over the longer term, especially when taken together with the other non-bookings revenue growth drivers in our business. And we do expect more robust bookings across the balance of the year. Our pipeline is strong. Moving down the income statement, in the first quarter, core gross margin was 59%, as it was in Q4 of 21. At 60%, subscription gross margins were on target for the quarter and consistent with Q4 of 21. Our subscription revenue business models are continuing to scale. and we expect gross margin expansion as we progress through the year. Moving to OpEx, sales and marketing was 22.7% of revenue in Q1, 340 basis points higher than in Q1 of 2021. As we've conveyed, we're investing in the teams and programs that are driving accelerating revenue. Product development was 16% of revenue in Q1, 80 basis points higher than Q1 of 2021, fueling the innovation agenda that Rob just discussed. The growth in both innovation and go-to-market expense was predominantly driven by increased investments in our key payment platforms, Paymodex and PTX, where we are seeing particularly accelerated growth. Operating expense growth also reflects increased compensation costs, including employee salary increases that we had postponed in 2021 due to COVID uncertainty. The market for technical and commercial talent is as hot as it has ever been, and we are committed to remaining competitive in attracting the very best teams to bottom line. Our people and our products are the two best investments we can make. They are the key to driving our future growth. Adjusted EBITDA in Q1 was $23.1 million, which hit the low end of our guidance. That represents 19% of revenue, the mathematical result of total revenue above guidance and EBITDA dollars at the lower end of guidance. We remain confident that we will achieve our $106 million EBITDA target for the year. Core operating income was $14 million within our target range. Core EPS was 22 cents for the quarter. EPS was a little below guidance because in addition to hitting the low end of our operating income target, we had more tax impact than anticipated. Turning now to the balance sheet and cash flows, in Q1, we executed aggressively on our $50 million share buyback program, repurchasing approximately 517,000 shares for $21.5 million, representing an average price per share of $41.59. We have continued at this pace in Q2, and as of the end of last week, we had repurchased approximately 942,000 shares and spent $39.7 million, so an average price of 42.11. We continue to believe our shares are undervalued and will buy back shares for so long as that's the case. We ended Q1 with $125 million in cash and cash equivalents and $130 million drawn on our revolving line of credit of 300 million. For the quarter, operating cash flow was 10 million, Capital expenditures were $12 million, and free cash flow was negative $1.5 million. As a reminder, our Q1 free cash flow is always the low point of the year due largely to seasonal working capital fluctuations. So, the big financial picture for the company is a strong start to the year in terms of growth, profitability, and capital allocation. We feel very good about where we are on our trajectory into the rest of the year. Now let's take a deeper look at the business. Over the past few quarters, we've heard a lot from investors about our product level reporting. And today, we are instituting significant changes in response to that. Those changes are designed to provide greater clarity and depth about the key elements of our business, and in particular, full visibility into our key growth and profit drivers. As you will see in the supplemental information and our 10Q, we have revised certain of our segment and disaggregation of revenue disclosures. To help understand the impact of these changes, we have recast the four quarters of fiscal 2021 as well as the full year of fiscal 2020 in our supplemental slides. So, let's take another look at our Q1 performance through this adjusted lens. Legal spend management, which as you all know is a very focused product set, grew 7% year-over-year in Q1. Once again, and as expected, the growth in LSM picked up from the previous quarter, and eight new customers chose our legal spend management products. You'll also see in our updated reporting that legal spend management is our most profitable product line, with 24% operating profit in Q1. Remember that on a company-wide basis, the difference between operating profit and EBITDA was 7.2% in Q1. So although we don't report EBITDA at the granular segment level, that company-level differential should allow you to make a reasonable approximation. Banking Solutions' subscription revenue was 8% higher than Q1 of 21, and total revenue growth was 5%. Both of those were impacted by the remainder of the lap of the Legacy Texas termination fee in Q1 2021 that we discussed last quarter. Digital banking solutions now includes financial messaging, a product that is almost exclusively sold to banks. In Q1, financial messaging generated $21 million in total revenue, grew 10% year over year, and produced 17% operating profit. So this is a sizable, growing, and profitable product line. Perhaps most exciting is the dynamic performance of the payment platform segment, which includes PayModeX and PTX. We continue to see very strong and, in fact, accelerated performance there. Subscription and total revenue grew 33 percent in Q1 versus Q1 of 21, and 29 percent on an organic basis, which excludes the addition of Treasury Express. Both PayModeX and PTX contributed to this strong growth, as they continue to capitalize on the large market opportunity in the US and UK markets, respectively. I noted on our last call that we expected our PayModeX and PTX products together to grow between 20% and 30% this year. And thus far, they are exceeding those expectations. During the quarter, we added 24 clients to our PayModeX customer base. You'll also see in our updated reporting that these platforms generated 17% operating profit in Q1 and have been consistently profitable across the last five quarters, while also driving accelerated growth. Our last two segments remain unchanged. We hope that these changes to our communication about our business will provide a clearer view of the growth and profitability of its components. and be more in line with the way that most investors tend to think about them. We're determined to be responsive to the requests we've been hearing from many of you and to adjust the way we talk about our business to be more helpful to you to understand the growth, profitability, and value profiles of its key elements. Going forward, this should provide a good means to more accurately track our progress. I'd like to move now to our outlook for Q2 fiscal 2022. We expect subscription revenue of $106 to $108 million, reflecting 14 to 16 percent year-over-year growth. Total revenue of $125 to $127 million, 9 to 10 percent year-over-year growth. Adjusted EBITDA of $24 to $26 million. Core operating income of $15 to $17 million. and core EPS of 24 to 26 cents. With the accelerating growth we're seeing and good visibility into the balance of the year, today we are reaffirming our full year fiscal 22 guidance. We continue to expect subscription revenue of at least $445 million, reflecting 15 to 16% year-over-year growth. driven by the continued strength of our key payment platforms, PayModex and PTX. We expect total revenue of $520 million, 10% year-over-year growth, adjusted EBITDA of $106 million, 20% of revenue, core operating income between $68 and $71 million, and core EPS of $1.11 to $1.15. In closing, We're very pleased with our start to the fiscal year. Our plan is for continued strong performance as the year progresses. The opportunity we see ahead of us in this dynamic and growing market is incredibly exciting, and our leadership position across product lines gives me confidence that we have a promising path ahead of us. Now we'll open the call for questions.

Thank you. At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Andrew Schmidt with Citi. Please proceed with your question.

Hey, Rob. Hey, Bruce. Thanks for taking my questions here. I want to start off with the question on the recent announcement with the addition of the board members and the formation of the strategy committee. Obviously, this has been a topic of conversation amongst investors for the last couple weeks. Just hoping to get your take. What types of discussions are you having, I guess, at the board level from a strategic perspective? Obviously, there's input on ways to improve the business. You mentioned accelerating growth, things like that. But are there strategic options also being discussed, like spin-out, potential sale, things like that? Any color in terms of the imperative there would be helpful. Thanks a lot.

Well, the new board members just joined yesterday, so we haven't had committee meetings yet at this point, but we certainly have a very good sense and we've had a lot of discussion on where we'll go. Having said that, that's not something, a board-level discussion isn't something we could share particulars either now or in the future. What I would say, though, is everything's on the table. We're looking at how can we accelerate growth, and we're looking at other ways to create shareholder value, whether that's a spinoff or any of the other things you mentioned. Everything's really on the table. What's going to be the best solution for the business and for shareholders.

Understood. Appreciate that, Rob. And then if I could dig into the performance a little bit in the quarter and kind of how to think about growth going forward. I really like this new segment disclosure and the clarity in the commentary is a big improvement. So thank you for that. Just on payment platforms, you know, consistently in the 30% plus range, camp the last couple of quarters now. Um, some of that is, is, um, you know, recovery and comparisons and things like that. But Bruce, I know you mentioned, you know, 20 to 30% expectation, but what's the right way to think about the growth of payment platforms over the intermediate term? And I guess the question is, you know, between your product set, um, evolution, which looks really interesting. And then also kind of the demand environment, do you think we're on a structurally higher growth path here going forward versus just something that's more comparison related? Thanks.

Yeah, thanks, Andrew. You know, we've been pretty clear in guiding to that kind of 20% to 30% range for the payment platforms, PayModex and PTX. Remember that the 33 and the 31 do include a little bit of benefit from Treasury Express. So the actual performance of the two primary payment platforms is probably more like in the high 20s, 29%, as we said this quarter, and probably sort of a similar level a little bit less than that last quarter. That having been said, look, there are a number of drivers for the growth of our payment platforms. Obviously, we're out there booking new business all of the time. You know and most of the investors know that vendor enrollment is a really important driver. And continued product innovation is an important driver. We've just really started to drive revenue through virtual card channels. As you know, historically, we're more focused on ACH, basic and premium ACH. And the addition of fora that we announced this morning and straight through processing is another way to provide a really efficient payment modality for our customers. So it's really a combination of all those things, booking new payers, enrolling new vendors, providing expanded, more efficient functionality. And honestly, PayModeX, PTX are just firing on all cylinders right now. We'll probably stick with that 20% to 30% range. If we can outperform that, that's great. But we're not looking to change that right now.

Perfect. Thanks for that, Bruce. And I have to sneak one more in on a banking solution. So I think... You know, Rob, you might have mentioned you expect banking solutions to be a nice contributor to growth in the second quarter and the back half of the year. So is it fair to say now that we get past this term fee that we should see a little bit more of a normalization of growth there? And then I guess just any comments about just the digital banking pipeline. You've obviously heard from others about the sales cycle and the winds picking up. So we'd love to get your perspective there as well. Thanks a lot.

Sure. Well, the first thing, the math, as you pointed out, the math of the significant termination fee a year ago really sort of hindered us in terms of a growth rate this quarter, but we cleared that now. So in the second quarter, we'd expect to see a more normalized growth rate for our banking solutions and step up, certainly from where we were in Q1, a significant step up. The market, we have the leading business banking platforms. And that benefits us in a couple different ways. We're going to win the majority of new opportunities for platform deals. We're a strategic partner to major banks who rely on us to grow the business banking franchise. So that's new platform capabilities that we can bring out. MergerIQ is a good example of that. In the context of a bank consolidation, and there are a number of them in play in the market that we're involved in and working with, Measuring what's happening with the customer base is never more critical because you're trying to see, of this acquired base, are we seeing a decline in activity? Are we seeing attrition? Are we seeing any other indications that we're going to lose some of the customer base we're bringing across? This is actually a brand new targeted tool, and it's just an example of the kinds of new capabilities we can bring to our banks to help them win, compete, and grow their business banking franchise. The short answer to your question is yes, with the termination fee, we'll see stronger growth next quarter, and that will help our overall subscription growth rate as well.

Great. Good to hear about the top of the funnel capabilities there. Thanks, guys. I appreciate the comments. Thank you. Thanks, Andrew.

Our next question comes from the line of Matt Schwartz with Raymond James. Please proceed with your question.

Hey, this is Matt for John Davis. Thanks for taking my question. I just wanted to ask about the confidence and the full year outlook given what's maybe a modesty week or two guide. And then just what gives you confidence in the applied acceleration going forward? Thanks.

Hey, Matt, I'm sorry. That was very garbled for us. Could you just repeat that one more time, maybe a little more slowly so we make sure we get it?

Sure. Am I clear now?

Yeah, that's a little better. Thanks.

Okay, cool. So I just wanted to ask about the confidence in the full year outlook, given maybe modestly weaker 2Q guide, and then what gives you the confidence in the implied acceleration going forward?

Sure. Yeah, obviously we have rolling forward forecasts of all four quarters, and our plan for fiscal 22 all along contemplated accelerated growth across the course of the quarters. Between the lap for digital banking that continued and, in fact, was more significant in the first quarter, the continued acceleration of both PayModex and legal spend management out of COVID, and our visibility into the pipeline of our digital banking deployments, we've kind of known all along that this was going to be the shape of things. We've stuck with our guidance for now, the 15-plus percent subscription revenue growth, and... If PayModeX and PTX continue to fire as well as they are, we would hope maybe we could do a little better over the course of the year. But for now, I think we're going to stick with where we are.

All right, great. Thanks so much, guys. Thanks, Matt.

Our next question comes from the line of George Sutton with Craig Hallam. Please proceed with your question.

Hi, guys. This is James on for George. Thanks for taking my questions. So you mentioned in the announcement this morning, a little bit on the call today, that Bora brings in some new banking channel partners. And since J.P. Morgan is one of those partners, I'd be curious to know sort of how the relationships you're bringing in through the acquisition will be structured relative to your existing pay mode partners. And I guess how many pay mode partners could you potentially have following the acquisition?

Well, to be clear, those partners that brought on, those are borrower partners, so they are the potential for new channel partners, but they aren't Paymodex channel partners today. What the real benefit of the acquisition of technology, and I should mention, we have that fully integrated and running already now. We have that fully integrated and running the day we announced, or the day we closed the transaction. So the real benefit is the ability to drive more virtual card transactions and to do so in a much simplified way for our particularly larger vendors that are taking significant volumes of virtual card transactions. So it's an important technology to be adding. We've had an existing relationship on other products with J.P. Morgan, but it gives us another way that we're now working with them. But to be clear, they are not today a Paymodex channel partner.

Got it. And then through our checks, we've seen that you're adding some SMB-focused sales reps for pay mode. Could you maybe talk about your strategy in the lower end of the market or the thought process there since historically you've been upmarket? And I guess maybe this sort of ties into the acquisition this morning. I guess will the virtual card capabilities sort of help you in that strategy given that's

So there's three different things in there. Virtual card is going to help at enterprise level for sure, and it's going to help the medium business and small business as well. So that capability helps us across all markets we would target. The moving down market is really a function of product capabilities that we've been adding. So the PayModeX example would be B2C payments. so that PayModeX can address more of the mid-market and small business requirements. In terms of the direct sales force, though, that team is not, one thing I just slightly off, that team is targeting enterprise, mid-market and enterprise customers as our target market. So I wouldn't look at our direct sales team as a vehicle to go down market. Really, it's product capability that helps us extend into a broader market than we're addressing today. And the sales team is, again, focused on mid-market and enterprise.

Got it. Thanks for taking my questions.

Thank you. Our next question comes from the line of Gary Prestopino with Barrington Research. Please proceed with your question.

Yeah, good afternoon, everyone. A couple of questions here. In terms of the sales and marketing expense, you know, obviously it's elevated as a percentage of sales this quarter. Going forward, does that start stepping down as a percentage of sales or do you intend to keep it fairly high like you did in Q1?

We don't anticipate a significant step down in sales and marketing as a percent of revenue. Our objective is to accelerate our revenue growth and drive incremental gross margin, including gross margin scale, so that we have additional operating expense to invest while still maintaining our 20% EBITDA target.

Okay. And then in terms of this strategic review, I know you say you haven't had a meeting with the new board members and all that, but what is your thoughts on the timetable that when we would hear something, you could share that?

Well, that would depend, of course, what actions we end up taking and what those timeframe for those actions might be. So I wouldn't want to speculate today and commit that we'd have some answer or some new news. I would tell you we're open to any and all ideas that are going to drive shareholder value. We think bottom line is well undervalued given the products we have, the market position we have, and the revenues and growth history and trajectory we have. So we're looking forward to working with the committee from a management perspective on what are the ways that we address that and can increase shareholder value of bottom line.

Okay. And then lastly, Bruce, you mentioned something I didn't quite get it with the EBITDA adjustments as it pertains to the segment profitability. Could you maybe help us as to how those things foot out to each different segment, particularly payments, banking, and legal?

Yeah, thanks, Gary. That was exactly what I intended to convey in my comment is that we don't report EBITDA at the segment level, and we're not looking to change that today. What I was trying to convey is that if you look in the aggregate, the difference between our operating margin and our EBITDA is about 7%. So if you wanted to look across our segment operating profits and add 7% to each of those, it's not a bad approximation. There's no particular skew in the differential to be concerned with.

Okay, thank you.

Yep.

Our next question comes from the line of Chris Kennedy with William Blair. Please proceed with your question.

Hey, guys. Really appreciate the new disclosures. Rob, you mentioned the breakout quarter for PayModeX. Can you provide a little bit more perspective on what the growth has been over the last several quarters of PayMode?

Well, I'd make a couple comments, and Bruce can comment on specific growth quarter by quarter if he cares to, but One, the 31% is an acceleration for us, so certainly just on subscription growth alone. But that's frankly the least of it. I think the pieces that really break our core are the momentum we have today, momentum we have in bookings, momentum we have in the depth and closeness with which we're working with channel partners, momentum we have in vendor enrollment, and momentum we have in terms of product capabilities. which include the straight-through processing that we've added now with Borrower. So really it's extending the capabilities of the platform, executing on vendor enrollment and bookings that makes us breakout quarter really looking forward into the coming quarter and the remainder of the fiscal year. So that's really the keys in calling it what I think is very fair to call breakout quarter.

Yeah, and Chris, I'll just add, if you go back into the COVID quarters, I think we were pretty clear in conveying that the transactional nature of the revenue streams from PayModeX led to material declines in the growth rate. If you go previous to COVID, performance in the high teens and 20s for PayModeX was kind of what we had come to expect, and we wanted to try to accelerate that further. And as COVID is kind of in the rearview mirror now, that's why we're able to show the kinds of growth numbers that we're putting forth last quarter and this quarter.

Yeah, and it's really across the board, too. Leadership, key roles, product roles, leadership of the product itself, all of those areas where we're really executing that positions us well for the next couple quarters and, frankly, several years.

Then vendor enrollment, I'll just add in particular, you know, we get very, very regular reporting on our vendor enrollment efforts, and that team is doing an amazing job. Okay, very helpful. And then one follow-up. Can you talk a little bit more about the virtual card opportunity? What percentage is the mix today, and then how does that impact revenue? Thanks a lot, guys.

Bruce sort of referenced that the mix today is very small in terms of revenue. Bottom line, we've focused and, frankly, pioneered ACH Plus and driving ACH as one of the payment types. So what we're doing now is adding virtual card capability, which really rounds out a full integrated payables strategy and adds for our existing channel partners who have a significant level of card it adds even more vendor enrollment capability and ease of those transactions for the vendors that want to accept cards. So it's not a major revenue contributor today, but it really rounds out the capabilities and positions us very well for strong revenue growth in the future.

Thank you.

Our next question comes from the line of Matthew Roswell with RBC. Please proceed with your question.

Yes, good evening. And I want to reiterate, I like the news segment reporting. So a question on the expenses. It's a bit convoluted, and I apologize in advance for that. If we think about the step-up in expenses year over year, could you talk about sort of what percentage of that you would consider kind of returned in normalcy, meaning you brought wage increases back? I'm assuming that sales-related travel is starting to tick up. and then what percentage is kind of investments. And then on that sort of incremental investment piece, the percentage that's associated with hiring people against things like R&D expense. Hopefully that makes sense.

Yeah, that makes sense, Matt. No problem. Very little of it, let me start with what it is. Very little of it is a return of travel expense. Like most companies, we aren't anywhere near back into kind of the – the pre-COVID level of activity there. And it also isn't a lot of expense that is not people-related. 70% of our cost structure is our teams. And so when we're making these investments, in very large part, those investments are toward people. The catch-up, as you pretty well put it, on the levels of compensation, the fact that we didn't do merit increases for a while, are a material part of the step up in expense for sure. But quite a lot of the investment is going toward teams that are immediately driving revenue. They are digital marketing teams, the reinforcement of the vendor enrollment team for Paymodex, customer success. And then there's also significant investment going into product development. So growth for us is a product of investing in new offerings to bring to market and investing in the go-to-market leverage that we need and the go-to-market muscle we need to make that happen. So it's really across the board on all of those things.

Yeah, I'd separate it that I agree with everything Bruce said, but one way to look at it would be there's incremental new investment that we're making in the areas he talked about. And then just salary increases, which have been across the board and compensation expenses are across the board because As we've said, we had held those back during COVID. The market is as competitive as it's been, and we have a super team, and we want to make sure we're really very competitively positioned in terms of compensation.

Okay, and if I could quickly get the repurchase information again. I just wasn't able to write it down fast enough. And then on the year dates, The second part, I think you said year-to-date or is it quarter-to-date?

Yeah, Matt, let me just pull those numbers back out for a second. I don't have that in front of me. We'll take the next question.

We can take it offline.

We'll take the next question. I'll come right back to you.

Thanks. Thank you.

Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. Hold on one second.

We're going to give a closing remark anyway. Thank you. Bruce will give us that repeat that stock buyback.

Yeah, so as of the end of the first quarter, we had repurchased 517,000 shares for $21.5 million in and that represents an average buyback share price of $41.59. I mentioned then that we had continued the repurchase over the course of Q2 to date, and that as of the end of last week, as of activity repurchases through last Friday, we repurchased 942,000 shares and spent $39.7 million, so an overall average price of $42.11.

So thank you. I'd say in closing, we're really pleased with the quarter, particularly the momentum we saw in PayModeX, as we indicated. We're confident in our plan. We're executing against that plan. And we look forward to reporting a strong Q2 to investors. So thank you for your interest in Bottom Line and your time this evening.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.