Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Bottomline Technologies (NASDAQ:EPAY)

Q3 2007 Earnings Call

October 25, 2007 5:00 pm ET

Executives

Rob Eberle – President, CEO

Kevin Donovan - CFO

Analysts

Colin Gillis - Canaccord Adams

John Maietta - Needham & Company

Brendan Watkins - D.A. Davidson

David Grossman - Thomas Weisel Partners

Nick Fisken - Stephens, Inc.

Operator

Welcome to the Bottom Line Technologies first quarter 2008 earnings conference call. (Operator Instructions) Before commencing the conference, statements made today may including forward-looking information subject to risks, uncertainties and other factors that could materially affect actual results. For further information, please see Bottomline's reports filed with the SEC pursuant to the Securities Exchange Act of 1934, which are available at the SEC's website, www.sec.gov.

During their remarks, Bottomline will refer to certain non-GAAP results. These non-GAAP metrics exclude amortization and intangible assets, and stock compensation expense. Throughout this call, when they refer to non-GAAP, it has that meaning.

Now I'd like to turn the conference over to our host, Mr. Rob Eberle. Please go ahead, sir.

Rob Eberle

Good afternoon. Thank you for your interest in Bottomline Technologies, and welcome to the first quarter fiscal '08 earnings call. I'm delighted to have the opportunity to report on what was a very good quarter for Bottomline.

I am joined by Kevin Donovan, Chief Financial Officer, who will provide a detailed review of the first quarter financial results as well as our guidance going forward. We will be available for questions following Kevin's remarks.

The first quarter was a strong quarter for Bottomline, highlighted by continued earnings growth. Revenue was $31.3 million, a 24% increase from the prior year, driven by broad-based demand for our corporate payment and document automation offerings, as well as delivery of our payment platforms for banks. Recurring revenue was over $20 million, a new high, and 64% of total revenue. EBITDA of $3.4 million is an increase of $1.9 million and more than double the levels of our same quarter a year ago. EPS of $0.16 is an increase of $0.08, or again, a doubling of the prior year's earnings per share.

Backlog at quarter end was a solid $55 million, an increase of 19% versus the prior year. During the quarter, we purchased $3.7 million in stock, and ended the quarter with $65 million in cash. In short, we had the solid revenues, which, when combined with strong operational focus, drove strong EPS results.

As I look at the quarter in our prospects going forward, several things are clear. We continue to have strong success with our Legal eXchange Software as a Service SaaS offering. Our plans to replicate that model and AP automation are progressing on track. We see continued steady demand for our corporate payment and document automation product offerings. We have an active pipeline for global payment solutions targeted at major banks. I will discuss each of these in more detail later in my remarks.

Before doing so, however, I wanted to comment on several general trends, each of which I mentioned last quarter as well, which our business is benefiting from and which will continue to be drivers in our business and we expect will be sustaining forces for a good period of time going forward.

The first is the move from paper to electronic. This is not new, but it's clearly accelerating. There's an increased interest among both corporate and bank customers to remove the paper check from the process.

Second, international trade. More importantly, a desire by global and domestic enterprises alike for improved global payment capability. That's exactly what we provide.

Third, competition among banks to offer increasingly complex and comprehensive web-based payment functionality to their corporate customers. The web is the face of the bank to its corporate clients. The more global payment functionality the bank can offer, the better its competitive positioning. We are the best choice to provide banks with this important capability.

With that, let me go to some of the specifics that occurred in the quarter and that we see going forward. I'll start with our Legal eXchange platform. During the quarter, we added Westchester County Medical Center, the academic medical center of New York Medical College, as a new customer who signed a multi-year contract for Legal eXchange, Bottomline's Software as a Service offering for legal spend management. This is another customer profile which shows the breadth and appeal of this offering. Each time we add a customer to Legal eXchange, we add revenue to a relatively fixed cost basis platform. Over time, it has become a highly profitable model, with strong customer retention.

From a profitability perspective, Bottomline achieves operating margins of over 25% on its Legal eXchange. That's operating margins, and that's after sales development, G&A, and overhead. That didn't happen right away; rather it happened over the course of several years. Initially, the platform produced a loss. But over three years the margins have moved from a loss position to single-digits, then ultimately to today's levels.

The Legal eXchange platform is a true Software as a Service model. Built on a J2EE architecture, it supports multiple customers and thousands of users from a single Bottomline hosted instance of the software. That provides significant benefits in efficient implementations, reliable service, and a highly profitable model for Bottomline.

Our AP automation goal has been to replicate what we have in the Legal eXchange. Last spring we decided to wait for our true Software as a Service technology platform to be available, which we expect to release in our third quarter and not spend time and money getting customers implemented running on lesser platforms. This platform will drive a better customer experience and a more competitive customer proposition and over time, will be significantly more profitable for Bottomline. The development of the platform is proceeding on track, and we are no longer marketing the previously marketed acquired products which were effective in getting us in the market, but are not our long-term strategic direction.

Moving to our corporate payments and documents offerings, I'll first comment on our revenue model, which, at its core is quite simple. We strive to maximize the revenue derived, over time, from our investment in technology. We approach the market with a bias to more predictable recurring revenues of subscription and transaction-based pricing models, but our ultimate allegiance is to the customer buying habits and preferences in the particular markets we serve.

In the markets where the technology offering competitive environment and buyers favor a subscription or hosted model, that's what we provide. What that means in practice is that in some markets and for some customers we sell software -- as that is the way they've always bought and want to continue to buy -- and in other markets, we sell on a subscription and hosted model For example, our corporate payments and documents customers, many of whom have enjoyed our technology for a long period of time, are often accustomed to buying the software model. That's also true of some of the customer segments we serve, such as large banks.

During the quarter we added over 20 new payment and document automation customers. We believe we have a leading platform, as is evidenced by our being presented last week with Global Finance Award for Best Accounts Payable; and that's for the third year in a row. But more than awards, it is the indication our customers give us. In the last quarter, organizations such as Lindt Chocolate, Mill Craft Paper, Toronto Housing, London Overground Rail Operations, and Midwest Insurance all chose our solution.

I'd like to highlight one significant deal with a major insurance company that chose Bottomline to automate payments from multiple treasury and bank office systems. They're typical of many customers we serve in that they want to:

(1) Automate and consolidate disparate payment processing systems, providing visibility in the cash positions across the organization.

(2) They want to increase business efficiency and reduce costs.

(3) They want to reduce bank charges by using fully validated, standard base payment instructions.

(4) They want to comply with regulatory requirements with full audit and tracking capabilities.

(5) They want to centralize control while enabling independent operations at remote locations.

(6) Finally, they want to increase electronic payment volume versus checks, both domestically and internationally.

The solution this organization chose was the WebSeries Global Cash Management Platform. ACH is the first phase of a planned nine phase program that also includes wires, international payments, and claim check processing.

No other company offers the capability we do in this market. This is why we are recognized by awards, and why over 60 of the Fortune 100 and 90 of the Financial Times 100 have chosen Bottomline. It's also one of the reasons many major global banks come to Bottomline to help them provide technology solutions to their largest customers. We are seeing increased business with banks and large financial institutions.

Some of the factors behind our success are the increased investment we've made in our product set; our delivery methodology and reference customers; our understanding, and in many cases, relationship with the banks' largest customers; and the fact that today banks are more interested in purchasing rather than building the critical technologies that drive their customer interface and revenue streams. We are focused on capitalizing on our payment opportunities with both banks and corporates. We see our growth and success continuing with increased sales and marketing, broader new technology, and deeper customer relationships.

Kevin will cover a specific guidance going forward, but I'd like to let you know that we are increasing our revenue and earnings guidance. We do so despite what will be an increased spend in sales and marketing over the next several quarters and beyond, because we see leverage in the model. We are confident we will consistently drive increased earnings as we go forward.

In summary, this was a strong quarter. With revenues up 24%, EBITDA up $3.4 million -- more than double a year ago -- backlog of $55 million, strong cash generation, and EPS of $0.16 a share. We are well positioned to drive future profitability and growth in the business, and I am very excited about our prospects. We're off to a very good start for fiscal '08.

With that, I'll turn it over to Kevin Donovan for a detailed review of the financials. We'll then open the call for questions.

Kevin Donovan

Thank you, Rob. We are very pleased with the first quarter results and the strong start to our fiscal year. We achieved the high end of our revenue guidance, and we're well ahead of our earnings expectations for the quarter. As we look forward, our business remains strong and we are increasing our second quarter and full year guidance. I will provide more details on our updated guidance later in the call.

The quarter was highlighted by strong financial results, including revenues of $31.4 million, representing 24% growth from last year; EBITDA, up $3.4 million, a 123% increase over last year; recurring revenues growth of 20% year-over-year to $20 million; backlog of $55 million, an increase of $8.7 million, or 19% from last year; and non-GAAP EPS of $0.16, double the earnings level of last year.

These results are a clear indication of the strong quarter that we had. I will now provide a more detailed review of the results.

Software license fees increased from last year, and were $3.4 million for the quarter, driven by broad-based demand for our payments and document automation solutions being sold on a perpetual license basis. Recurring revenues were $20.1 million in the quarter, a new high, and 20% growth on a year-over-year basis. Recurring revenue, representing 64% of overall revenue, is derived primarily from software maintenance and subscription and transaction revenues. Subscription and transaction revenues were $6.8 million in the quarter. Recurring revenue for our Legal eXchange offering was approximately $3.3 million in the quarter.

Service and maintenance revenues increased by $4.2 million to $17.7 million, reflecting increased professional service revenue associated with our payments platform provided to banks and higher levels of software maintenance. Excluding equipment and supplies revenue, first quarter revenue grew 28% from last year.

During the quarter, gross margins were 55%, in line with last quarter and last year. Margins for software licenses were 94%, an expansion of 5% from last year. Service and maintenance margins grew 3% to 57%, our highest margin level for this revenue stream in over three years.

Equipment and supplies margins were slightly ahead of prior periods, and gross margins for our subscription and transaction offerings declined from last quarter, which reflects the continued upfront implementation costs for our accounts payable automation offering.

On the expense side, non-GAAP operating expenses were $14.5 million, a decrease of $1.2 million from last quarter. Sales and marketing expense decreased by $1.1 million on a sequential quarter basis as a result of higher commission accelerators in the prior quarter, which was at the end of our fiscal year, and lower marketing and trade show activity during the current quarter. On a year-over-year basis, sales and marketing expenses have increased by approximately $1 million. We expect sales and marketing costs in the second quarter to return to fourth quarter levels based on several major trade shows in the quarter, and the additional expense related to new sales hires.

Consistent with our plan, product development costs, representing 13% of revenue, increased by $250,000 from the last quarter. We continued to drive efficiencies in G&A, with expenses decreasing by approximately $300,000 in the quarter and now representing 11% of revenue, down from 14% of revenue a year ago. The lower operating expenses were a key driver in the earnings upside we achieved in the quarter.

On a non-GAAP basis, net income was $3.8 million or $0.16 per share, representing a $0.02 increase from last quarter, and double the $0.08 earnings of a year ago. EBITDA for the quarter was $3.4 million, a 123% increase on a year-over-year basis. During the quarter, we recorded a net tax benefit of $300,000, which was primarily as a result of taxable losses in our international operations. We expect to continue to be in a small tax benefit position of approximately $100,000 in the second quarter, and a zero tax position for the remainder of the year. GAAP net loss for the quarter was $800,000, or $0.03 per share.

Turning to the balance sheet, the company ended the quarter with $65 million in cash and short-term investments. We repurchased $3.7 million of stock in the first quarter, at an average repurchase price of $13.14, and have approximately $5 million remaining under the current repurchase program. We expect to continue to repurchase shares at these stock price levels.

From a cash flow perspective, we generated $1 million of cash from operations in the quarter, and our DSO was 77 days, a slight increase from a year ago. Our total backlog at the end of September was $55 million, an $8.7 million, or 19% increase from last year.

Turning to our future financial outlook. As Rob indicated, we are raising our revenue and earnings guidance. We continue to prioritize and align our offerings towards the greatest opportunities for near and long-term revenue growth and margin expansion. As a result, we are raising our second quarter revenue guidance to a range of $31.5 million to $32.5 million. Full year revenue is projected to be between $129 million and $131 million.

We are also increasing our second quarter earnings guidance to $0.13, and increasing our full year earnings guidance from $0.50 to a range of $0.57 to $0.59. Our second quarter earnings guidance reflects increased sales and marketing expenses, which are expected to be closer to the expense levels in Q4, as well as a lower tax benefit projected for the quarter.

In summary, we had a very good quarter with solid revenue, strong year-over-year software license growth, a 20% increase in recurring revenue, and a doubling of earnings over the last year. As we look forward, the backlog and pipeline remain strong, providing us with good visibility on our revenue and earnings growth for the remainder of the year.

We will now open up the call for any questions.

Question-and-Answer Session

Operator

Your first question comes from Colin Gillis - Canaccord Adams.

Colin Gillis - Canaccord Adams

Can you talk a little bit about the demand and EPAY's positioning with the large global banks for cash management payments in a multi-currency environment? Particularly the double and the multi-[bite] Asia Pac countries?

Rob Eberle

Sure. A good portion of our business results in the quarter is satisfying that demand. Banks have to provide that payment capability to their corporate customers. As I mentioned briefly in my remarks, it's one of the main ways they compete. So we'll often be selling to revenue. What I mean by that is we'll often be selling in response to a specific RFP a bank may have gotten from one of their largest corporate customers that is requesting that kind of capability.

What that does is it accelerates the sales cycle, and it puts us in a situation where, from a pricing standpoint, it's imperative to the bank that they have the best solution, confidence in the time to implementation, and confidence in the quality and customer experience that will result. Those factors all favor Bottomline, and it's been a real growth driver for us and we have a very strong pipeline going forward, as well.

Colin Gillis - Canaccord Adams

Can you give us some color about the Wipro agreement, how it came about, what type of customers they're looking to leverage the cash management solution across? Maybe a timeframe for one that could start to accelerate or kick in?

Rob Eberle

Well, I would be hesitant to commit to a timeframe and when it would kick in, but I would tell you it's a very positive relationship for us. First off, Wipro is a leading systems integrator and outsourced IT provider. It surveyed all the different providers for this type of capability and then chose Bottomline. So that, to begin with, is significant. This is not the only organization of that size or significance that has chosen Bottomline.

Wipro and these other organizations all have relationships with major banks and major corporates, and what they look to do is to bring in the leading technologies which they then can provide the implementation services, much like the consulting services practices that grew up around the ERP. So we're delighted with the relationship. It's early to say exactly what its impact will be, but it's a very positive thing for us to have announced, and there are other situations that we may announce as well.

Colin Gillis - Canaccord Adams

So this follows on the heels of the Infosys division. Are they looking to sell your products, or are they looking to use your products to drive more efficiencies?

Rob Eberle

Wipro's very different. Wipro is looking to use our product. The way it would work is they could bring us into customer situations where we don't have a relationship. So that might be based on a geography, for example. Our coverage today in the Far East is not as strong as it might be, their coverage is strong. It might be an organization that, for whatever reason, we haven't developed a very strong, strong relationship, and they would have that.

The other side of it is, we have the ability to bring them in, as in larger implementations. If somebody looks at Bottomline and sees an organization of $125 million in sales and wonders is Bottomline going have the capability, we now have the additional resources, or bench, if you will, from a Wipro on a services basis. So there's a win-win in a couple of different directions.

We're a ways away from announcing deals or winning deals, but I'm confident it's going to have a significant impact on the business.

Colin Gillis - Canaccord Adams

On the Legal eXchange side, is there a timetable when we could see the Sprinter functionality built into that core platform?

Rob Eberle

We'd expect to release our AP automation platform in our third quarter.

Colin Gillis - Canaccord Adams

We talked about the 20 new payment document automation wins. Were any of those for the Sprinter product itself?

Rob Eberle

No. That's one of the products we're not actively selling today. That would be for WebSeries, around pay base or around document automation.

Colin Gillis - Canaccord Adams

Rob, when you look at the landscape of the offering that you've got right now, is there any type of technology or strategic gap in your offering that you might need to fill with an acquisition that could be dilutive going forward?

Rob Eberle

No, we don't see any technology gaps. We see some technology opportunities. We see some market opportunities that we have the technology for that we're not yet realizing the maximum potential from. But no, we don't see gaps today that would require us, force us to go out and make a dilutive acquisition.

Operator

Your next question comes from John Maietta - Needham & Co.

John Maietta - Needham & Co.

Rob, just to piggyback off of the Wipro question and that relationship, to the extent you are talking to other large systems integrators, would those relationships potentially follow the Wipro model to the extent that they would be selling your products, or would they differ?

Rob Eberle

Let me clarify a bit on selling. What they really would do is bring us into what becomes a joint sales situation. So while we've trained people and have more training scheduled, Wipro and at least one other at this point, the selling would really occur on a joint basis. Because that's a different level of expertise, that those organizations are not going to develop, and they would look to Bottomline. So it's really more of a partnership than a channel. Does that make sense?

John Maietta - Needham & Co.

Yes. I think last call we had talked about you potentially see some LeX customers come up for anniversary on their contracts. Did you see any upgrade activity this quarter, or is that something we look to in the second half of the year?

Rob Eberle

We had one smaller renewal. We find that that platform where you're integrating and have many, many of the consumer of the legal services law firms on the system, is very sticky. So our renewal rate is in the high 90s. We've had one small division that was acquired once, not renewed, but otherwise we generally are renewing those contracts. So the renewals are very favorable. This past quarter, we had one smaller situation that renewed, but there weren't any significant contracts that were up.

John Maietta - Needham & Co.

The AR number, I know it's not indicative of the health of the business for these next couple of quarters here until we have the new platform release, but if you have that number for this quarter?

Kevin Donovan

Yes, it's really not indicative of the results, as we're not actively selling the AP automation offering.

Operator

Your next question comes from Brendan Watkins - D.A. Davidson.

Brendan Watkins - D.A. Davidson

Going forward, what are your share count and D&A expectations for next quarter and the year?

Kevin Donovan

We expect the share count to be at relatively the same levels as we're seeing today, increasing by 100,000 shares per quarter.

Brendan Watkins - D.A. Davidson

Domestic and international bank spending has been an issue recently in the current environment. Are you guys seeing any major changes with that or lengthening sales cycles? If you could add any color about that, that would be very helpful.

Rob Eberle

We've not seen that today. And our relationship with many of these organizations is very close, and we go through a reorganization with them, et cetera. We have not seen that today, because probably for the largest partners, we're dealing with organizations on the corporate cash management side rather than the retail side of the operation. Fortunately, most of our customers' organizations weren't focused on subprime where the majority that the disruption has occurred.

Brendan Watkins - D.A. Davidson

You guys have a pretty large cash position per share on your balance sheet, and we really appreciate your discipline with your acquisition strategy and your share repurchase. Going forward, we want to get a better idea of what you're seeing in your acquisition pipeline, if you guys are kind of pulling back or if you're still actively looking? Or any other choices you can make with your cash.

Rob Eberle

Looking at acquisitions is an ongoing process for us. We wouldn't have any specific comment on the pipeline.

Operator

Your next question comes from David Grossman - Thomas Weisel Partners.

David Grossman - Thomas Weisel Partners

First, on the backlog, I saw that it dropped sequentially. Is that a result of stopping the sales cycle on the purchase-to-pay product? Or is there something else, is that more a timing issue between more professional services that are in the backlog that may impact that number quarter to quarter?

Rob Eberle

No, you're exactly right. There is some impact from the AP automation that we've had. There's also seasonality in our first quarter from an orders perspective.

David Grossman - Thomas Weisel Partners

Looking at your guidance, it looks like you're talking very positively about the business and the tone of the business. Yet your guidance kind of seems to imply, if my math is right, relatively flat sequential revenues for the balance of the year. Can you help us understand that dynamic and what underlies that, given what appears to be an improving fundamental situation for the business?

Rob Eberle

Well as Kevin indicated, we look at our backlog and what we have in the near-term pipeline in setting the revenue guidance. So while we would certainly have the opportunity and hope to do more than that, we think from a practical and prudent standpoint, the guidance we've set on our revenue has been realistic. This past quarter indicates that it in fact was. We're right in the high end of the range.

David Grossman - Thomas Weisel Partners

If you look at the introduction of the new product in the March quarter, is the typical sales cycle that you can sell in front of that so that you're starting to deliver the product in the March quarter, or is it going to be a ramp like we had with the last cycle on the transition?

Rob Eberle

Oftentimes where it's a new release of a product, a new version, you can sell in advance. But this is really a new product. So our ability to sell in advance of that is limited. In addition, you have the revenue ramp, as it is a Software as a Service model. So while we would expect to book orders and to be able to show the success in the marketplace from an orders perspective, it'll take the time of an implementation and a ramp in transaction volume before you'll see the revenues increase.

David Grossman - Thomas Weisel Partners

So how should we think about that, Rob? Is there implementation revenue that will accompany those sales, or is it bundled into the monthly?

Rob Eberle

There is implementation revenue. But the way the accounting rules treat that is that is blended with the transaction revenues. So while from a cash basis we'd be paid for services that were related to an implementation, from a revenue recognition standpoint, those revenues will be spread over the life of the contract, or expected duration of the contract.

David Grossman - Thomas Weisel Partners

So that'll show up as deferred revenue, right?

Rob Eberle

Right.

David Grossman - Thomas Weisel Partners

So the actual revenue impact, just without getting into detailed numbers, would you expect that subscription and transaction line to start benefiting in fiscal '09 then? Just for the time being, should we expect that line item to stay relatively flat with the exception of incremental successes, maybe, in Legal eXchange?

Rob Eberle

I think we are seeing incremental success in Legal eXchange, and we often see not only new wins but we moved to new divisions that we weren't covering and the like. We will see, then as you indicated in '09, more significant impact from AP automation. But that can vary. You can have customers that have a more accelerated timeline, more significant volume. So we've got a fair amount of experience with the ramp from the Legal eXchange, and it can, as you indicate, take a year's time, but it also can occur on a much quicker basis. In short, it's difficult to predict.

David Grossman - Thomas Weisel Partners

On that service and maintenance line, since that seems to have been the line item that is showing probably the most consistent growth, are there other indicators that we can look at, or should be looking at, that will help us better understand the trajectory of that business? I know you had a big deal with [BoA] a while ago. I assume that that's kind of out of that number by now, at least the bigger implementation piece? How should we think about the growth of that line item, not only through the balance of this year but as we go into next year?

Rob Eberle

I'll let Kevin go into detail on this, but a component of that is actually a similar accounting concept. That is to the extent there's a discount on the deal, that discount is applied to the software. So you actually end up showing what was booked as software revenues as software business, in the service and maintenance line.

Kevin Donovan

So what we see is growth from our payment platforms that we provide to banks. The primary place that those revenues are recorded are on the service and maintenance revenue line.

David Grossman - Thomas Weisel Partners

Meaning that the software license number, all of the discount shows up in the product side and the balance, since it's sold as a solution, is showing up in service and maintenance?

Kevin Donovan

Yes. The professional services are valued at the full price, and any remaining amount on the customer order gets recorded as software license, which can be a small amount of the overall value of the contract.

David Grossman - Thomas Weisel Partners

So is that why the service and maintenance line continues to grow, but the software license number -- I know on a year-over-year basis it's up -- but just looking back, eyeballing the last several quarters it stayed relatively flat.

Kevin Donovan

That's exactly right.

David Grossman - Thomas Weisel Partners

Someone had asked the question earlier about the mood of your larger banking customers from a spending standpoint. Since your product isn't necessarily an annual kind of spend, if you will, when do you typically get a feel for whether or not the broader slowing of the economic growth in the U.S. may be impacting the spend of your customer base?

Rob Eberle

It's interesting. Several years ago, for larger projects, we'd be part of the budget cycle. We'd have a much longer sales cycle, and we'd know that at this point in time whether there was budget dollars for a calendar '08 project. What's changed is it's now customer or revenue driven. So we'll get an RFP, and a large component of the RFP will be around can you implement in 90 days, can you implement in six months time? Because there are requirements or commitments to either current or prospective customers that are made by the banks. We see much less of the budget cycle and we see much more of a bank customer driven buying process.

David Grossman - Thomas Weisel Partners

If you look at, for example, the strength in the software license number this year, and you take out the bigger customer that maybe accounted for that, how are they using the product? Just as a case study, if you will, in terms of how that implementation revenue may roll through over the next several quarters?

Rob Eberle

Sure. What would typically happen is, particularly following the thread we've just been talking about, a large banking or a current customer or a new customer will issue an RFP but it'll be specifically tailored to a customer's RFP or a customer's demand. Again, that can be an existing customer or it can be a new customer.

There are situations where we may be contacted by more than one financial institution, both of whom are competing for a particular corporate business with a particular corporate requirement. It can be either payment type, it can be reporting, it can be a low dollar amount or a high dollar amount. Most jurisdictions, there are different payment types for higher or lower dollar amount payments in the U.S., such as ACH, Fedwire, for example.

Depending on what that particular requirement is that's being placed to the bank, it will drive the bank's urgency and selection in Bottomline. Those typically will have a six month to a year implementation. When it's a customer driven project, when it's a strategic project, the implementation will be a year to 18 months. We have a mix today of both types of business.

David Grossman - Thomas Weisel Partners

Which one is the dominant? Is it usually the customer-driven or the strategic?

Rob Eberle

You know, it's all market-driven so it's very difficult for me to say. And we don't always get visibility. Sometimes we'll actually be in front of the customer, but that's not always the case. So I don't mean to not answer the question, in a way but I would say it's all market-driven. It's very market-driven in what are their customers telling them they require? Sometimes it has a greater level of urgency, and sometimes it's on a more strategic year-and--half out basis. But it's all very much driven by the competitive dynamics of the marketplace.

David Grossman - Thomas Weisel Partners

Would that most likely then be a non-bank customer?

Rob Eberle

I'm sorry, no. I was staying within the business to banks. And you're right. The timeline on selling to, for example, on major insurance, that's going to be a more deliberate process, and it'll be a more traditional budgeted process. The banks are where we can see a particular urgency around timelines.

Operator

Your next question comes from Nick Fisken - Stephens, Inc.

Nick Fisken - Stephens, Inc.

Can you give us an update specifically on the commercial cash management deal pipeline? Characterize it, size of banks in U.S. versus non-U.S.?

Rob Eberle

We're generally stronger in the U.S. today, but we've had increasing success internationally. We're not going to characterize it more than that, from a competitive standpoint.

Nick Fisken - Stephens, Inc.

You say it's more robust now than it's been in years past?

Rob Eberle

Certainly more robust than it's been in years past. The opportunity for Bottomline, there is clearly an opportunity for us to have a stronger presence and selling force internationally.

Nick Fisken - Stephens, Inc.

On the purchase-to-pay, you guys have delayed the rollout there. Can you give us an update on when it's going to come out?

Rob Eberle

Third quarter of our fiscal year.

Operator

Your next question comes from Colin Gillis - Canaccord Adams.

Colin Gillis - Canaccord Adams

Rob, I just wanted to get a sense of what is the headcount for sales right now? Also, could you give us a little color about the focus of the products that they're selling? Has that shifted a few times over the last 12 months or so? Just to help explain the success on the cash management side.

Rob Eberle

It has shifted a bit. It shifts in response to a couple factors. One certainly is the markets, for example, as we're seeing more corporate interests, we just shifted a strong sales individual to Legal eXchange, for example, and added to that team.

Overall, on a global basis, we're about 50 people in our sales organization, quota carrying people at different levels in the sales organization. We're adding to enterprise payments, and we're adding to banking today.

Colin Gillis - Canaccord Adams

The reason you're adding to banking?

Rob Eberle

Opportunity.

Colin Gillis - Canaccord Adams

It's just that strong in front of you?

Rob Eberle

Absolutely.

Colin Gillis - Canaccord Adams

Is the competition just distracted, what with the takeouts and various things like that?

Rob Eberle

There's an element of that, but I'd say the factor, frankly that's moved more than the competition is Bottomline's moved up. We've had some people that have put in place a great delivery process. We've got a strong, strong platform and we have successes with customers that we can point to. So we're getting a reputation that we're short listed on RFPs, where three years ago, RFPs would go down and we didn't know about it and weren't included.

Colin Gillis - Canaccord Adams

WebSeries is just a very good modular product.

Rob Eberle

It's a good product, and we've continued to strengthen it. If you think back two years ago, we said we were going to make an increased investment in it, and it had an earnings impact, but it then had a tremendous payoff.

Operator

There are no other questions in the queue. Mr. Eberle, please go ahead.

Rob Eberle

Thank you, everyone. We appreciate your interest and we look forward to getting together with you on the call for the second quarter.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Bottomline Technologies F1Q08 (Qtr End 9/30/2007) Earnings Call Transcript
This Transcript
All Transcripts