Investor Briefing Q3 FY20 1 Safe Harbor This document contains - - PowerPoint PPT Presentation

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Investor Briefing

Q3 FY20

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Safe Harbor

This document contains “forward-looking 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 forward looking statements as a result of various important factors including, among others, competition, market demand, technological change, strategic relationships, recent acquisitions, international operations, general economic conditions, and including the potential effects of the coronavirus pandemic on any of the foregoing Any forward- looking 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 forward- looking 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 10-K for the fiscal year ended June 30, 2019 and subsequently filed Form 10-Qs and Form 8-Ks or amendments thereto.

Non-GAAP Financial Information

The financial results and projections in this document are presented on a non-GAAP basis. Non-GAAP results and projections include core operating income, adjusted EBITDA, adjusted EBITDA margin, core

• perating margin, core earnings per share, and constant currency information. Reconciliations of our GAAP

results to the most directly comparable non-GAAP results and guidance are included at the end of this document. Any non-GAAP outlook we provide has not been reconciled to the comparable GAAP outlook because of the difficulty of predicting the amounts to be adjusted, including but not limited to acquisition-related charges, minimum pension liability adjustments, stock compensation expense and weighted average shares outstanding. Since we expect these factors to have a significant impact on our future GAAP results, a reconciliation is not available on a forward looking basis without unreasonable effort.

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About Bottomline

Bottomline Technologies makes business payments simple, smart and secure

Capitalizing on business payment leadership position in large market opportunity

• Trusted brand in B2B payments
• Scale to execute, agile to innovate
• Large B2B payment network ($200+ billion annual volume)
• Secure business payments (domestic and cross border)
• Leading payments and cash management platform

Leveraging product investment to drive subscription growth

• Investment in market-leading solutions

for large and growing markets

• Targeting 15-20% subscription revenue growth
• $350 million run rate subscription revenue
• 92% recurring revenue

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T H E O P P O R T U N I T Y

B2B Payments Market

$20T+ $25T $23T+

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PAYER PAYMENT RECIPIENT

Business Payment Complexity

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Business Payment Complexity

PAYER’S BANK PAYMENT RECIPIENT’S BANK

CORRESPONDENT BANKS CARD ISSUER BANK MERCHANT ACQUIRER’S BANK CARD NETWORK NATIONAL BANK NATIONAL BANK PROPRIETARY NETWORK

• r wire transfer

• r wire transfer

• r wire transfer

PAYER PAYMENT RECIPIENT

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M A R K E T- L E A D I N G P R O D U C T S

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The way businesses pay and get paid

The Largest Electronic Payment Network for Businesses

400,000+

Members in network

$200+ Billion

in payments processed annually

The Paper Problem

63%

• f organizations still

make more than half of their payments by paper check

67%

• f businesses say

“smarter” systems that drive more efficiencies are necessary for AP’s success1

75%

• f organizations that

were victims of payment fraud experienced check fraud2

B2B Payments Made Simple, Smart & Secure

Paymode-X helps businesses easily automate accounts payable

PAYERS accelerate payment automation, improve payment security and monetize AP spend VENDORS streamline receivables with convenient electronic payments and remittance

BANKS provide clients with innovative payment capabilities, grow market share and expand revenue

• pportunities

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Market-leading commercial banking & payments platform empowers banks to engage intelligently with customers, deliver a unified experience and acquire, deepen and grow profitable relationships.

Digital Banking IQ

Aité Survey of Cash Management Vendors

Best in Class “The vendor to beat” User Interface and Experience Analytics

Helping Banks Grow Organically & Defend vs. Digital Disruption

BANKS GET

• Intelligent engagement platform, with integrated insights & analytics
• Market-leading payments and cash management capabilities
• Embedded intelligence, simplicity & usability

BANK’S COMMERCIAL CUSTOMERS GET

• Proactive insights and engagement from their banking relationship managers
• Integrated, market-leading payments and cash management solutions
• Tools to help manage their finances
• Easy-to-use and customizable digital interface
• Works with SMB business and accounting software

Leadership Position

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Best Partner

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Legal Spend Management

The leading way insurance companies manage their legal spend and relationships

Streamlining and Automating Relationships with Law Firms

LEGAL INVOICE AND SPEND MANAGEMENT Paid as a percentage of legal bill Saves up to 8% of billings Reduces administrative expense by 30 – 50% PARTNERSELECT Choose the right lawyer for a right matter at the right rate Advanced analytics – improve case outcomes

Leadership Position Top-Tier Client Base

300+

Clients

200+

Insurance Companies

13,500+

Law Firms

98%

Retention Rate

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F I N A N C I A L H I G H L I G H T S

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Investment Highlights

Large market

• pportunity

Leading business payments product set Driving subscription revenue Target 15-20% growth Attractive EBITDA Margin Attractive lifetime customer value 10-15 years or more

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Subscription Revenue Growth 16% Subscription Revenue $87.5M Total Revenue $111.7M Core Operating Income $16.0M Core Operating Margin 14% Adjusted EBITDA $23.2M Adjusted EBITDA Margin 21% Core EPS $0.27

Strategic Plan

• Subscription revenue growth of

15-20% per year

• Leverage inherent attractive

lifetime customer value of our solutions

• Continue to extend our product

platform capabilities and market leadership

• Establish Bottomline as the clear

leader in business payments Within target range of 15-20% subscription revenue growth, despite COVID $23.2 million EBITDA, reflecting consistently profitable model. $350M annual run-rate

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Q3 Results

Q3 Results Commentary

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252$M

Subscription Revenue 76% of revenue Growth of 17% on a constant currency basis

332$M

Total Revenue 90% recurring revenue 37% of revenue is international

72$M

EBITDA Consistently profitable model $70M operating cash flow YTD’20 $31M free cash flow YTD’20

YTD FY’20 Financial Overview

90%

10%

252

72

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YTD Key Metrics

17% Subscription growth 76% Subscription revenue 90% Recurring revenue 20% Sales and Marketing 15% Development expense

Subscription Gross Margin YTD FY20 Incremental Subscription Revenue $35.1 Incremental Cost ($8.2) Incremental Gross Margin $26.9 Incremental GM % 77% YTD FY20 Key Metrics

YTD FY20 YoY

+1pp +2pp +2% +7% +4pp

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Balance Sheet Highlights

Net cash on hand at 3/31/20 ($M) Actual Commentary Cash and investments $ 182.3 $120 million additional borrowing capacity from existing facility $300 million credit facility matures July 2023 Total borrowings $ 180.0 TTM results ($M) Actual Commentary Adjusted EBITDA $ 96.6 Consistent predictable cashflow Operating Cashflow $ 85.4 Free Cashflow $ 37.8 Covenant Compliance Actual Commentary Consolidated Net Leverage Ratio 1.4x Credit agreement allows up to 3.75x leverage Consolidated Interest Leverage Ratio 25.6x Credit agreement requires no less than 3.0x coverage

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June Outlook, Updated for Pandemic

Subscription revenue $87.5 In the June quarter the normal ongoing growth from customer go-lives and expansion may be fully

• ffset by the impact of a full quarter’s reduced activity. While difficult to forecast with precision we

expect subscription revenues roughly equal to the $87.5 million in Q3, 12-13% constant currency growth. Subscription Y/Y Growth CC (1) 16% Total Revenue $111.7 In addition to the subscription revenue impact noted above, we expect a further $2-4 million of impact to software, services and other revenues. Total revenue in the June quarter could be $2-4 million lower than Q3. Core operating income(1) $16.0 Reduced revenues with ongoing costs could impact core operating income by up to $1-2 million versus the levels seen in Q3. Core operating margin %(1) 14% Adjusted EBITDA(1) $23.2 Reduced transaction volumes and revenues could reduce adjusted EBITDA by up to $1-2 million versus the levels seen in Q3. Adjusted EBITDA as a % of Revenue(1) 21% Core EPS $0.27 Flow through effects could result in Core EPS in the range of $0.23 - $0.25.

Bottomline is a well-positioned for the current economic challenges with a recurring revenue model and a product set that is mission critical. Like most businesses however there will be some level of COVID impact, primarily in the following areas (i) transaction based revenue streams, (ii) go live dates for existing backlog, (iii) software license and professional services revenues and (iv) new bookings. While the exact impact is difficult to quantify with precision, shown below are the Q3 results with commentary regarding the likely impact of the economic disruption on fiscal Q4. These results may be indicative of performance while the economy is largely shut down.

June quarter and quarters beyond in FY21 as long as disruption continues Q3 Results

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• Sales & Marketing and Product investments

driving 15 – 20% subscription growth

• 16% growth in Q3’20
• Current run rate of $350 million

55 85 118 141 171 195 223 262 296

Subscription Revenue Growth

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Normalized Outlook, Post-Pandemic

Subscription revenue In fiscal 20 year to date, subscription revenue growth accelerated to the upper end of our 15-20% range. We expect to return to growth at these levels, or even higher if (as we expect) demand increases as the economy normalizes. Non-subscription revenue Software and services revenues have been particularly impacted by the current situation. As the economy normalizes we expect the customer preference for our cloud solutions over on-premise applications to remain

• strong. We would expect non-subscription revenues to continue to

decline but at a more modest rate. EBITDA margin We would expect to operate at 21-22% EBITDA margins as we emerge from the effects of the pandemic. Results in fiscal 20 year-to-date and the continued and increasing relevance of our solutions suggest that Bottomline will be able to fairly quickly ramp back up to a normalized level of performance as the economy recovers. Commentary

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Investment Highlights

Large market

• pportunity

Leading business payments product set Driving subscription revenue Target 15-20% growth Attractive EBITDA Margin Attractive lifetime customer value 10-15 years or more

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APPENDIX

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27 30 31 41 55 85 118 141 171 195 223 262 296

118 131 138 158 189 224 255 301 331 343 349 394 422

9 16 19 34 42 46 50 61 71 75 75 94 100

6 13 15 29 37 40 43 53 61 62 58 74 77

Financial Performance

$M $M $M Subscription Revenue Adjusted EBITDA Operating Income $M Revenue

22% CAGR 11% CAGR 22% CAGR

CAGR measured from FY07 to FY19

23% CAGR