Supplementary Materials First Quarter Fiscal 2018 Earnings Call November 2, 2017
Safe Harbor This document contains forwardlooking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including financial projections subject to risks, uncertainties and other factors that could materially affect our actual results. Actual results may differ materially from those indicated by such forwardlooking statements as a result of various important factors including, among others, competition, market demand, technological change, strategic relationships, recent acquisitions, international operations and general economic conditions. Any forwardlooking statements or financial projections 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 forwardlooking statements or financial projections. Further, our financial projections do not consider the impact of any pending or future changes to accounting pronouncements under US Generally Accepted Accounting Principles. For additional discussion of factors that could impact our operational and financial results, please refer to our Form 10K for the fiscal year ended June 30, 2017 and subsequently filed Form 10Qs and Form 8Ks or amendments thereto. NonGAAP Financial Information The financial results and projections in this document are presented on both a GAAP and a nongaap basis. NonGAAP projections include core operating income, adjusted EBITDA, adjusted EBITDA margin, core operating margin, core earnings per share and constant currency growth. Reconciliations of our non GAAP results and guidance to the most directly comparable GAAP results and guidance are included at the end of this document. 2
Q1 Core Results Strategic Plan Subscription and Transaction Revenue Growth (CC) 20% Top of 1520% target Drive subscription and transaction revenue growth of 1520% per year Established Products Subscription and Transaction Revenue Total Revenue Core Operating Income 45.0M 70.0M 15.3M Attractive economic model with expanding margins Expand operating and EBITDA margins Invest in market leading cloud payment solutions Transition key products historically sold in license model to subscription revenue model Transitioning Products Core Operating Margin 22% Subscription and Transaction Revenue Growth 8% Subscription and Transaction Revenue 15.8M Total Revenue 21.3M Core Operating Income 2.2M Core Operating Margin 10% Products historically sold in license will add to our overall growth as subscriptions currently being implemented go live Margins will expand as transition is completed Allocate capital with discipline Subscription and Transaction Revenue Growth (CC) 16% Consistent with 1520% target Subscription and Transaction Revenue 60.7M Total Revenue 91.3M Consolidated Bottomline Core Operating Income 17.4M Core Operating Margin 19% Adjusted EBITDA 22.1M Adjusted EBITDA Margin 24% Core EPS 0.30 Opportunistic share repurchases and eliminating convertible bond Core operating income, adjusted EBITDA, adjusted EBITDA margin, core operating margin and core EPS are nongaap measures. Definitions and reconciliations to the most directly comparable GAAP measures are included at the end of this document. Growth rates expressed in constant currency. 3
Revenue Mix Evolution 67% of revenue is subscription and transaction growing at 1520% per year (up from 63% a year ago) 86% of overall revenue is recurring Strategically, we provide services only as necessary to ensure our customers success We offer software license only in select market circumstances Subscription and Transaction Revenue 86% of Revenue is Recurring 250 200 150 100 50 Maintenance 19% 160 120 80 40 Maintenance and Services Revenue 11 12 13 14 15 16 17 11 12 13 14 15 16 17 Fiscal Years 30 25 20 15 10 5 Software License Revenue 11 12 13 14 15 16 17 Subs & Trans 67% Services 11% Software 3% 4 Fiscal Years Fiscal Years 4
Q2 18 Core Guidance (in millions, except for per share amounts and margin percentages) Established Transitioning Total Bottomline Subscription & transaction Y/Y growth CC (1) 20% 15% Subscription & transaction revenue 48.5 15.5 64 Total Revenue 71 21.5 92.5 Core operating income (1) 16 0 16 Core operating margin % (1) 17% Adjusted EBITDA (1) 21 Adjusted EBITDA as a % of Revenue (1) 23% EPS 0.26 1) Core operating income, adjusted EBITDA, core operating margin, core EPS and constant currency (CC) growth are non GAAP measures. Definitions and reconciliations to the most directly comparable GAAP measures are included at the end of this document. 2) Transitioning product represents our Digital Banking Segment as defined in our SEC filings. 5
Reconciliations to the Most Directly Comparable GAAP Results and Guidance and Definitions of NonGAAP Financial Measures 6
Q2 18 GAAP Reconciliation (in millions, except for per share amounts and margin percentages) Established Transitioning Total Bottomline Subscription & transaction Y/Y growth 21% 15% Subscription & transaction revenue 48.5 15.5 64 Total Revenue 71 21.5 92.5 Operating income 1 Operating margin % 1% Net Income (3) EPS (0.09) 1) Transitioning product represents our Digital Banking Segment as defined in our SEC filings. 7
Q2 18 Guidance Reconciliation (in millions, except for per share amounts) Operating Income Operating Margin Total Bottomline Q2 18 Q2 18 GAAP Operating Income / GAAP Operating Margin 1 1% Adjustments: Amortization of Intangible Assets 5 5% Equity Based Compensation 8 9% Global ERP system implementation costs 2 2% Minimum pension liability adjustments 0 0% Core Operating Income / Core Operating Margin 16 17% GAAP earnings per share (0.09) Adjustments: Amortization of Intangible Assets 0.13 Equity Based Compensation 0.21 Global ERP system implementation costs 0.05 Minimum pension liability adjustments 0.01 Amortization of debt issuance and debt discount costs 0.07 Tax effect on non GAAP income (0.10) Core earnings per share 0.26 1) Core operating income, adjusted EBITDA, adjusted EBITDA margin, core operating margin and core EPS are non GAAP measures. Definitions are included at the end of this document. 2) The table above presents a reconciliation of our Core guidance to our GAAP guidance. It is impracticable to separately reconcile GAAP guidance to Core guidance for the Established Products and Transitioning Product components of our business, because the non GAAP adjustments affecting such a reconciliation are excluded from our operating segment measures of profit or loss and therefore these amounts are not tracked in or allocated to any individual operating component of our business and are not available without unreasonable efforts. 8
Q2 18 Guidance Reconciliation (continued) Reconciliation of Reconciliation of Adjusted EBITDA Adjusted EBITDA Margin Q2 18 Q2 18 GAAP Net loss / GAAP Net loss margin (3) (4%) Adjustments: Other expense, net 4 4% Provision for (benefit from) income taxes 1 1% Depreciation and amortization 5 5% Amortization of acquired intangible assets 5 5% Stock based compensation expense 8 9% Minimum pension liability adjustments 0 0% Global ERP system implementation costs 2 2% Adjusted EBITDA / Adjusted EBITDA margin 21 23% 1) The table above presents a reconciliation of our Core guidance to our GAAP guidance. Adjusted EBITDA and Adjusted EBITDA margin are non GAAP measures. Definitions are included at the end of this document. 9
FY18 Core Guidance (in millions, except for per share amounts and margin percentages) Established Transitioning Total Bottomline Subscription & transaction Y/Y growth CC (1) 18% 21% Up to 10% 15% Subscription & transaction revenue 190 195 60 65 250 255 Total Revenue 290 295 80 85 370 375 Core operating income (1) 65 0 65 Core operating margin % (1) 22% 0% 17% Adjusted EBITDA (1) 85 Adjusted EBITDA as a % of Revenue (1) 23% EPS 1.06 1) Core operating income, adjusted EBITDA, core operating margin, core EPS and constant currency (CC) growth are non GAAP measures. Definitions and reconciliations to the most directly comparable GAAP measures are included at the end of this document. 2) Transitioning product represents our Digital Banking Segment as defined in our SEC filings. 10
FY18 GAAP Reconciliation (in millions, except for per share amounts and margin percentages) Established Transitioning Total Bottomline Subscription & transaction Y/Y growth 17% 20% Up to 10% 14% Subscription & transaction revenue 190 195 60 65 250 255 Total Revenue 290 295 80 85 370 375 Operating income 10 Operating margin % 3% Net Income (3) EPS (0.07) 1) Transitioning product represents our Digital Banking Segment as defined in our SEC filings. 11
Reconciliation of FY18 Guidance (in millions, except for per share amounts) Operating Income (Loss) Reconciliation of Operating Margin Total Bottomline FY18 FY18 GAAP Operating Income 10 3% Adjustments: Amortization of Intangible Assets 20 5% Equity Based Compensation 30 8% Global ERP system implementation costs 4 1% Minimum pension liability adjustments 1 0% Core Operating Income 65 17% GAAP earnings per share (0.07) Adjustments: Amortization of Intangible Assets 0.53 Equity Based Compensation 0.78 Global ERP system implementation costs 0.11 Minimum pension liability adjustments 0.03 Amortization of debt issuance and debt discount costs 0.16 Tax effect on non GAAP income (0.48) Core earnings per share 1.06 1) Core operating income, adjusted EBITDA, core operating margin and core EPS are non GAAP measures. Definitions and a reconciliation to the most directly comparable GAAP measures are included at the end of this document. 2) The table above presents a reconciliation of our GAAP guidance to our Core guidance. It is impracticable to separately reconcile GAAP guidance to Core guidance for the Established Products and Transitioning Product components of our business, because the non GAAP adjustments affecting such a reconciliation are excluded from our operating segment measures of profit or loss and therefore these amounts are not tracked in or allocated to any individual operating component of our business. 12
Reconciliation of Adjusted EBITDA Reconciliation of Adjusted EBITDA FY18 Reconciliation of Adjusted EBITDA Margin FY18 GAAP Net loss (3) (1%) Adjustments: Other expense, net 10 3% Provision for (benefit from) income taxes 2 1% Depreciation and amortization 19 5% Amortization of acquired intangible assets 20 5% Stock based compensation expense 30 8% Minimum pension liability adjustments 1 0% Global ERP system implementation costs 5 2% Adjusted EBITDA 85 23% 1) The table above presents a reconciliation of our GAAP Net loss to adjusted EBITDA. Adjusted EBITDA is a non GAAP measure. Definitions and reconciliations to the most directly comparable GAAP measures are included at the end of this document. 13
Bottomline Technologies Reconciliation of NonGAAP Measures Three Months Ended September 30, 2017 Amortization of AcquisitionRelated Intangible Assets GAAP Revenues: Subscriptions and transactions Software licenses Service and maintenance Other Total revenues 60,714 2,365 27,342 875 91,296 Stockbased Compensation Cost of revenues: Subscriptions and transactions Software licenses Service and maintenance Other 27,411 170 12,232 667 (685) (631) Total cost of revenues 40,480 (1,316) Gross profit 50,816 Operating expenses: Sales and marketing Product development and engineering General and administrative Amortization of acquisitionrelated intangible assets 19,305 13,815 11,829 5,188 Total operating expenses Income (loss) from operations Global ERP System Implementation Costs Tax Effect on NonGAAP Income NonGAAP 60,714 2,365 27,342 875 % of Revenue 66% 3% 30% 1% 91,296 100% Margins 56% 93% 58% 24% 26,721 170 11,589 667 (5) 2 (14) 39,147 1,316 5 (2) 14 52,149 57% (5,188) (3,453) (1,438) (2,253) (47) (236) (704) 1 5 1 (9) (10) (2) (2,076) 15,797 12,136 6,795 % of Revenue 17% 13% 7% 0% 50,137 (5,188) (7,144) (987) 7 (21) (2,076) 34,728 38% 679 992 8,460 Income (loss) before income taxes Provision for income taxes (3,784) 457 5,188 Net Income (loss) (4,241) 5,188 5.7% (0.11) (0.11) 37,730 37,730 (5) Amortization of Debt Issuance and Debt Discount costs 5,188 Shares used in computing net income (loss) per share: Basic Diluted Minimum Pension Liability Adjustments (2) (12) (4,463) Restructuring Expenses (Benefit) 2 Other expense, net Basic net loss per share Diluted net income (loss) per share Acquisition and IntegrationRelated Expenses (9) 2,076 17,421 19% 3,709 (754) 1% (9) 35 3,709 2,076 4,542 16,667 4,999 18% 5% (9) 0.0% 35 0.0% 3,709 4.1% 2,076 2.3% (4,542) 5.0% 11,668 13% 8,460 992 8,460 9.3% 992 1.1% 35 0.30 38,311 (1) Core net income and core earnings per share are nongaap measures and exclude certain items, specifically amortization of acquisitionrelated intangible assets, goodwill impairment charges, stockbased compensation, acquisition and integrationrelated expenses, restructuring related costs, minimum pension liability adjustments, noncore charges associated with our convertible notes and revolving credit facility, global enterprise resource planning (ERP) system implementation costs, and other noncore or nonrecurring gains or losses that arise from time to time. In computing diluted core earnings per share, we exclude the effect of shares issuable under our convertible notes to the extent that any such dilution would be offset by our note hedges; the note hedges would be considered an antidilutive security under GAAP. 14
Bottomline Technologies Reconciliation of NonGAAP Measures Three Months Ended September 30, 2016 GAAP Revenues: Subscriptions and transactions Software licenses Service and maintenance Other 52,132 2,121 27,673 1,158 Amortization of AcquisitionRelated Intangible Assets Stockbased Compensation Total revenues 83,084 Cost of revenues: Subscriptions and transactions Software licenses Service and maintenance Other 23,886 128 13,285 878 (367) (849) (126) Total cost of revenues 38,177 (1,216) Gross profit 44,907 Operating expenses: Sales and marketing Product development and engineering General and administrative Amortization of acquisitionrelated intangible assets 18,875 12,935 12,704 6,285 Total operating expenses Global ERP System Implementation Costs Tax Effect on NonGAAP Income NonGAAP % of Revenue 52,132 63% 2,121 3% 27,673 33% 1,158 1% 83,084 100% (14) (104) 23,379 128 12,332 878 Margins 55% 94% 55% 24% (126) (118) 36,717 1,216 126 118 46,367 56% (6,285) (3,285) (1,356) (2,342) (20) (6) (1,097) (74) (73) (12) (2,491) 15,496 11,500 6,762 % of Revenue 19% 14% 8% 0% 50,799 (6,285) (6,983) (1,123) (159) (2,491) 33,758 41% Income (loss) from operations (5,892) 6,285 8,199 1,249 277 Other expense, net (3,935) Income (loss) before income taxes Provision for income taxes (9,827) 681 6,285 8,199 (10,508) 6,285 7.6% 8,199 9.9% Shares used in computing net income (loss) per share: Basic Diluted (0.28) (0.28) 37,940 37,940 Amortization of Debt Issuance and Debt Discount costs Basic net loss per share Diluted net income (loss) per share Minimum Pension Liability Adjustments Net Income (loss) Acquisition and IntegrationRelated Expenses 2,491 12,609 15% 3,372 (563) 1% 1,249 277 3,372 2,491 2,978 12,046 3,659 14% 4% 1,249 1.5% 277 0.3% 3,372 4.1% 2,491 3.0% (2,978) 3.6% 8,387 10% 0.22 38,028 (1) Core net income and core earnings per share are nongaap measures and exclude certain items, specifically amortization of acquisitionrelated intangible assets, goodwill impairment charges, stockbased compensation, acquisition and integrationrelated expenses, restructuring related costs, minimum pension liability adjustments, noncore charges associated with our convertible notes and revolving credit facility, global enterprise resource planning (ERP) system implementation costs, and other noncore or nonrecurring gains or losses that arise from time to time. In computing diluted core earnings per share, we exclude the effect of shares issuable under our convertible notes to the extent that any such dilution would be offset by our note hedges; the note hedges would be considered an antidilutive security under GAAP. 15
Reconciliation of Adjusted EBITDA and Adjusted EBITDA margin Reconciliation of Adjusted EBITDA Reconciliation of Adjusted EBITDA Margin Three Months Ended Three Months Ended 9/30/17 9/30/16 9/30/17 9/30/16 GAAP Net loss / GAAP Net loss margin (4,241) (10,508) (5%) (13%) Adjustments: Other expense, net 4,463 3,935 5% 5% Provision for income taxes 457 681 1% 1% Depreciation and amortization 4,668 4,087 5% 5% Amortization of acquisitionrelated intangible assets 5,188 6,285 6% 8% Stockbased compensation expense 8,460 8,199 9% 10% Acquisition and integrationrelated expenses 992 1,249 1% 1% Restructuring benefit (9) 0% 0% Minimum pension liability adjustments 35 277 0% 0% Global ERP system implementation costs 2,076 2,491 2% 3% Adjusted EBITDA / Adjusted EBITDA margin 22,089 16,696 24% 20% (1) The table above presents reconciliations of adjusted EBITDA to GAAP Net loss and Adjusted EBITDA margin to GAAP Net loss margin. Adjusted EBITDA and Adjusted EBITDA margin are nongaap measures. Adjusted EBITDA represents our GAAP net income or loss, adjusted for charges related to interest expense, income taxes, depreciation and amortization, and other charges. Adjusted EBITDA margin represents Adjusted EBITDA divided by revenue. 16
Reconciliation of Diluted Core Earnings Per Share Three Months Ended 9/30/17 9/30/16 GAAP basic and diluted net loss per share (0.11) (0.28) Plus: Amortization of acquisitionrelated intangible assets 0.13 0.17 Stockbased compensation expense 0.22 0.22 Acquisition and integrationrelated expenses 0.03 0.03 Global ERP system implementation costs 0.05 0.06 Minimum pension liability adjustments 0.00 0.01 Amortization of debt issuance and debt discount costs 0.10 0.09 Tax effects on nongaap income (0.12) (0.08) Diluted core earnings per share 0.30 0.22 Numerator: Three Months Ended 9/30/17 9/30/16 Core net income 11,668 8,387 Denominator: Weighted average shares used in computing basic and diluted net loss per share for GAAP 37,730 37,940 Impact of dilutive securities (stock options, restricted stock awards and employee stock purchase plan) (1) 581 88 Weighted average shares used in computing diluted core earnings per share 38,311 38,028 (1) These securities are antidilutive on a GAAP basis as a result of our net loss, but are considered dilutive on a nongaap basis in periods where we report nongaap net income. 17
NonGAAP Financial Measures We have presented supplemental nongaap financial measures as part of this earnings release. The presentation of this nongaap financial information should not be considered in isolation from, or as a substitute for, our financial results presented in accordance with GAAP. Core net income, core earnings per share, constant currency information, adjusted EBITDA and adjusted EBITDA as a percent of revenue are nongaap financial measures. Core net income and core earnings per share exclude certain items, specifically amortization of acquisition related intangible assets, goodwill impairment charges, stockbased compensation, acquisition and integrationrelated expenses, restructuring related costs, minimum pension liability adjustments, noncore charges associated with our convertible notes and revolving credit facility, global enterprise resource planning (ERP) system implementation costs, and other noncore or nonrecurring gains or losses that arise from time to time. Noncore charges associated with our convertible notes and revolving credit facility consist of the amortization of debt issuance and debt discount costs. Acquisition and integrationrelated expenses include legal and professional fees and other direct transaction costs associated with business and asset acquisitions, costs associated with integrating acquired businesses, including costs for transitional employees or services, integration related professional services costs and other incremental charges we incur as a direct result of acquisition and integration efforts. Global ERP system implementation costs relate to direct and incremental costs incurred in connection with our implementation of a new, global ERP solution and the related technology infrastructure. In computing diluted core earnings per share, we exclude the effect of shares issuable under our convertible notes to the extent that any such dilution would be offset by our note hedges; the note hedges would be considered an antidilutive security under GAAP. Periodically, such as in periods that include significant foreign currency volatility, we may present certain metrics on a constant currency basis, to show the impact of period to period results normalized for the impact of foreign currency rate changes. We calculate constant currency information by translating prior period financial results using current period foreign exchange rates. Adjusted EBITDA and adjusted EBITDA as a percent of revenue represent our GAAP net income or loss, adjusted for charges related to interest expense, income taxes, depreciation and amortization, and other charges, as noted in the reconciliation that follows. We believe that these supplemental nongaap 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, including more meaningful comparisons of financial results to historical periods and to the financial results of less acquisitive peer and competitor companies. Our executive management team uses these same nongaap financial measures internally to assess the ongoing performance of the company. Additionally, the same nongaap information is used for planning purposes, including the preparation of operating budgets and in communications with our board of directors with respect to our core financial performance. Since this information is not a GAAP measurement of financial performance, there are material limitations to its usefulness on a standalone basis, including the lack of comparability of this presentation to the GAAP financial results of other companies. 18