Bottomline Technologies, Inc.
Q1 2016 Earnings Call Transcript

Published: 30 Oct 2015

[Operator:]

Ladies and gentlemen, thank you standing by and welcome to the Bottomline Technologies First Quarter 2016 Earnings Conference Call. Statements made on today's call will include forward-looking statements about Bottomline's future expectations, plans and prospects. All such forward-looking statements are subject to risks and uncertainties. Please refer to the cautionary language in today's earnings release and Bottomline'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. Bottomline does not assume any obligation to update any forward-looking statements. During this call, Bottomline's financial results are presented on a non-GAAP basis. These non-GAAP results include, among others, constant currency growth rates, gross margins, operating income, EBITDA, net income and earnings per share. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the Investor Resources section of Bottomline's website, at www.bottomline.com. Bottomline will be providing forward-looking guidance on this call. A summary of the guidance provided during the call is available from the company upon request. [Operating Instruction]. And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mr. Rob Eberle. Please go ahead, sir.

[Robert Eberle:]

Good afternoon. Thank you for your interest in Bottomline Technologies and welcome to the first quarter fiscal 16 earnings call. I'm delighted to report on what was a strong quarter for Bottomline Technologies. I'm joined by Rick Booth, our Chief Financial Officer, who will provide a detailed review of the quarter's financials results and our business model going forward. We'll both be available for questions following Rick's remarks. The headlines for the first quarter are strong financial performance, strong sales results and our strategic growth drivers, and with our strong sales results and growing pipeline increased visibility in the future growth acceleration and margin expansion. The financial headlines for the first quarter were subscription in transaction revenues grew 15% on a consistent currency basis the 46.2 million. Subscription and transaction revenue was 56% of total revenue in the quarter. Revenues overall was $82.9 million, up 5% on a consistent currency basis. EBITDA increased to $18.4 million, operating income was $15.3 million or 18.5% of revenue. Finally, we recorded EPS of $0.37 for the quarter, ahead of our target and expectations. The biggest highlight of the quarter was the customer response and early sales success was having with product innovations we are brought to market for a key growth drivers. We are executing against the strategic plan which is design to one extend our leadership position, two win the business and three drive accelerating subscription revenue growth and expanding our operating margins. Our sales results show our strategy is on-track and working. In Q1, our annual recurring revenue sales were almost double the prior year. Fundamental appears in the income statement and a little of the one pack for the next several quarters. But it is a very positive and clear amplification of our competitive position, growth prospects and future financial performance. I'm going to focus my remarks on the strategic growth drivers behind those strong new booking results. Clear highlight in Q1 that evidences our momentum, foretells future revenue growth acceleration was our sales results for Paymode-X. We signed 24 new customer relationships for Paymode-X this quarter, which is almost double the LIBOR a year ago. This is a key metric for investors to track our progress. Each time we sign a new customer that means we have a new organization that will pass vendors to Paymode-X. Under our vendor pay model, as we enroll those vendors in the Paymode-X network, we get a percentage of every payment to that enroll vendor. We take in a feature-rich technology network with the scale and we're not monetizing it to an interchange model. We've proven the model works. Vendors will pay a percentage base fee for the technology platform and in return they receive automation, better information and faster payments. Paymode-X is the largest network of its type by a wide margin with over 300,000 vendors and a 157 billion in annual transaction volume. Those of who you follow us know, we've been at this a while and you can recall and we be delighted to win six or seven deals a quarter. With close to 50 new deals in the last two quarters, we have a real market momentum. Our revenue under the vendor pay model is more than double from a year ago and we'll grow even faster over time as we see impact of the new wins from the last several quarters. We have never been more excited about the opportunity to be the way businesses pay and get paid. One key and we are executing against this opportunity is our investing large in potential strategic partners, like we have with Bank of America. In Q1 we were delighted to welcome Bank of New York Mellon as a new bank channel partner for Paymode-X. Paymode-X is clearly performing, with our strong pipeline and a commitment way to seeing from a growing list of important partners, we are confident that we will continue. We also had strong results and have bright outlook for legal spend management. We had five new customer relationships in the first quarter. We also extended our leadership position with the GA of PartnerSelect. This platform represents a new revenue potential as we now have the opportunity to monetize the over 12,000 law firms we have on our network. In additions, it brings competitive differentiation as no other competitor offer similar capability. If you see a parallel of Paymode-X, that's not a coincidence. In both cases, we are bringing new capabilities and an innovative business model to a network richer and larger than any of its competitors, that is a winning formula for long-term return. Turning to digital banking and cyber fraud risk management. We believed that extending our leading payments and cash management platform, with customer acquisition capabilities, small and mid-size business financial management tool and data analytics would be appealing to a large number of banks. We saw an integrated and intuitive digital experiences the banks best way to defend their franchise, gain competitive advantage and drive profitable growth. We also saw cyber fraud risk management solution is a key part of that integrated digital banking platform. I'm delighted to report that's exactly what happened in the market and we could not be better positioned. As a result, we have a large pipeline and we expect to drive significant annual return revenue deal. Against that backdrop perhaps our most appealing, gratifying and important win this quarter was our first sale over a new digital banking platform combined with our web fraud and security solutions. As new customer a $15 billion to $20 billion asset bank was particularly focused on growing its commercial and business banking franchise. They more effectively compete with bigger banks in the region and the beat the market leaders and capitalizing and monetizing the attractive SMB segment. Finally, based on our combination with web fraud and cyber security capability particularly well thought out that the industry's risk management in regulatory environment. This win which comes early than we would have expected from a new offerings, is a clear proof point the innovation we've brought to market and our platform resonate. It also validates the competitive advantage and importance of integrated cyber fraud risk management capability. For the seven figure annual subscription and total contract value in the $5 million to $10 million range. This new customer relationship is of course a nice to add to our FY 2017 revenue plan, but it is one account. Far more important and exciting is that fact that we build significant pipeline of opportunity just like some larger and we're confident this is the first of many meaningful new customer wins. Thanks to actively seeking new technology to maintain and grow their business banking franchises and our timing and strategy are on target to help them. So stepping back, we have a strategic plan and we're executing against that plan. We're growing a company while transitioning the revenue model. That in and of itself is rare, this model transitions compress revenues and margins. This year, FY 2016, represents the last year of model transition and financial headwinds. And in FY 2017 which begins just nine months from now for us, we will for the first time see the full financial benefit of our efforts with no transition headwind. We've made strategic well far on our investments in large markets where we have a lot of knowledge, experience and customers. That translates to high-odds of success and driving accelerated growth. Our market wins and strong pipeline are early evidence that our investments will be successful. We are confident we will convert our pipeline to win and in doing so drive strong financial performance. We understand however and the market makes it clear, the commentary alone isn't enough. Fortunately, our success in pipeline give us the opportunity and confidence to share a clear path of future financial results for investors. Rick will be providing our long-term business model targets during his remarks. We are very confident in those targets and committed to achieving or exceeding them. We are confident that our strategic plan and the financial model we are committing to today will reward bottom line shareholders. So with that, I'll turn it over to Rick for detail review with the financials and our guidance going forward and then of course both of us will be available for any questions.

[Richard Booth:]

Thank you, Rob. From a financial perspective, the quarter reshape primarily by strong subs and trans revenue growth. I am pleased to say that this performance helped drive core operating income and earnings per share both above guidance. The financial highlights of the quarters include the subs and trans revenue grew 15% on a constant currency basis, and this growth brought our total revenue to $82.9 million. Operating income with $15.3 million or 18.5% of revenue, EBITDA with 18.4 million or 22% of revenue and earnings per share up $0.37 with $0.03 ahead of guidance. In addition to this financial metrics, we are seeing sale success and the pipeline that positions us well at the remainder of 2016 and 2017. I will now provide the more detailed look into the first quarter financial results, turning first to revenue growth. Our totaled revenue of $82.9 million represents 5% year-over-year growth on a constant currency basis, driven by subs and trans revenue of $46.2 million which is up 15% on a constant currency basis year-over-year. As a percentage of revenue subs and trans is now 56% of totaled revenue up six percentage points year-over-year. Subs and trans is the largest component of recurring revenue and recurring revenue of $56 million with 80% of overall revenue up five percentage points year-over-year. If you annualized the first quarter result, our subs and trans revenue run rate is $185 million and our recurring run rate is over 264 million, each representing significant growth in the valuable revenue streams. I'll also note that in the quarter we reported 2.2 million less of professional services revenue then in the same period in the prior year. This is consistent with our strategy. We want to provide professional services only if necessary to implement our solutions and to ensure our customer success. Just as important, as current revenue production is that we added a significant number of new subs and trans base customers across our key growth drivers, where our product vision is driving new deal signings at a very significant rate. We signed 24 Paymode-X agreements under the vendor pay model this quarter. This is the record and almost twice the same time period a year ago. We were selected by seven new customers for our digital banking platforms and we also added five legal spend management customers. These new relationships continue to validate our investments in new solutions and provide visibility into our future recurring revenue growth. Now as you know, in our model these customers take time to implement to go live and then to ramp up into full revenue production, but once revenue is achieve, they provide visibility and consistency to the model as well as the power to drive margin expansion. As we turn to margin and profit growth, higher revenue drove year-over-year expansion in operating income, EBITDA and gross margin. We finished the quarter with operating income at 15.3 million, or 18.5% of revenue as well as EBITDA of 18.4 million, or 22% of revenue. The overall gross margin with 48.6 million or 59% and the subs and trans gross margin was 56%, which is a gross margin expansion of three percentage point on a year-over-year basis. From an operating expense standpoint, sales and marketing expense for the quarter was 16.8 million or 20% of revenue. And development expense was 10.1 million or 12% of revenue. In terms of cash flow our operating cash flow was 10.9 million for the quarter and we ended the quarter with a 128.3 million of cash on hand. In addition to the strong cash balance, we also have a significant backlog. Backlog at the end of September was 157.5 million up 13% from last year. I'd like to note that we have now completed this year repurchase program we announced in June. During Q1, we repurchased 814,000 shares at a cost of 21.4 million and subsequent to quarter end we completed the announced program. As a result we've now repurchased the total of 1 million shares at an average price of $26.37, at these prices we believe our stock is a very attractive investment especially with the subs and trans momentum we are discussing today. So to summarize the first quarter, we are pleased by the performance of our four key growth drivers, with constant currency growth of 15% in subs and trans revenue as well as our overall operating income performance of 18.5% and $0.37 earnings per share. But even more important than a single quarter, if you step back and looks the performance of the business, the financial underpinning of our business model is built on three pillars. First, invest in significant new products and offerings targeted at large markets in which we have competitive advantage. Second, to leverage those offerings to drive new deal signings and recurring revenue; and third, to use the power of this subs and trans revenue to expand the growth in operating income margin. We are doing all three of those things and we are seeing the impact even though Partner Select and Digital Banking 3.0 are both two new to be showing up in our P&L today other than its cost. One of the benefits of our model is that we have a good view of longer term growth in revenue and operating income. Based on the strong execution and momentum we are seeing today and pleased to be able to begin sharing some of that visibility with you. When we assess our pipeline deal singings and backlog we are confident in our ability to complete the transition of our digital banking product set to a subs and trans model while remaining within our guidance for fiscal 2016. And we are increasingly confident in the outlook for 2017 and beyond. More specifically in 2017 we expect to drive subs and trans revenue growth of 18% to 19%. From a 2016 base of approximately $200 million of subs and trans revenue as deal signed in fiscal 2016 to live and ramp up in volumes. Overall, we expect to hold direct through business at roughly today's level which will lead to total revenue of approximately $400 million in fiscal 2017. With the enhanced leverage this provides we will deliver operating income of 20% to 21% in 2017. This step up in operating income is enabled by both continued growth margin expansion and operating expense leverage as revenues increase. These same factors will continue to drive margin expansion to enable us to achieve our 25% operating income target. We'll now open up the call for any questions.

[Operator:]

[Operating Instruction] And our first question will come from Brett Huff with Stephens, Inc. Please go ahead.

[James Rutherford:]

Hi, good afternoon. This is James Rutherford in for Brett. Thanks for the additional color on 2017, its very helpful. I just wanted to confirm first of all on the revenue mix was that just because of the services that came in later than you expected?

[Richard Booth:]

Yes. The services were down 2.2 million year-over-year, but interestingly not. If you step back and you think about the business on an apples-to-apples basis without the banking pro services, that would add another three points into our growth rate. And that's really increasingly the way that we think about the businesses is doing what we need to drive subs and trans growth. And we're less focused on selling professional services other than as required to implement our solutions and help our customers succeed.

[James Rutherford:]

Okay. And then that was a low margin revenue which is why you were able to beat on the - which pieces of the cost base....?

[Robert Eberle:]

Well it's not just not - this is Rob. I would just add something on that because I think Rick's points is exactly right. It's not just low margin revenue, it's actually revenue that we are avoiding, except it’s necessary to implement our solutions or to have our customers succeed. So that's a strategic decision we've made to improve the mix. So we should work whether its three point difference in growth this quarter or over the last six quarters we actually running in a $5 million run rate just over 5 million less than we used to be in services. I like that. That's why I want to be less services except this necessary to implement our solution and make our customer to success.

[James Rutherford:]

Great. One more follow up on Paymode-X, congratulate on a nice wins there. Just was curious if I get update on how aggressively Bank of America sales force to selling under the new vendor pay model versus kind of old bank pay model?

[Robert Eberle:]

Yeah there were 100% behind the vendor pay model now ended of another real strong quarter for us when I breaking out bank by bank for obvious reasons, but they had a real strong quarter and I would delighted with that partnership.

[James Rutherford:]

Thanks very much.

[Operator:]

Thank you. Our next question will come from George Sutton with Craig-Hallum. Please go ahead.

[Jason Kreyer:]

Hi, gentlemen this is Jason for George. I am just wondering if you can help me understand the impact on services revenue as we look over the next few quarters maybe relative to the guidance that you provided last quarter. And then kind of with that just understanding and we talk to couple quarters ago about increasing some investments into some of these new growth areas. It seems like the lot of the operating expenses came in lower this quarter relative to the last couple of quarters? And so if you can help us understand why the lower spend in Q1 here?

[Robert Eberle:]

I'd just reiterate, we are very pleased with our Q1 performance celebrating the subs and trans revenue growth and operating income performance. So there really our two key areas of focus. The professional services and software which has Rob mentioned by the time no longer key areas of focus. And so although they are impacted by the transition, we're less concerned in those areas, and we do manage our P&L appropriately. So with the success that we had in introducing our new offerings and then promoting them, we've got the ability to manage our P&L with these revenue levels to very attractive profitability with more upside as we grow.

[Jason Kreyer:]

Okay. So should we expect a lower contribution for the balance of the year for these services, the kind of like we saw in Q1?

[Robert Eberle:]

No. Really that been driven by customer activity. It's less, if customers need services, we'll provide those services. But it's not an area of the business we're trying to drive and it's not an area of the business we're obsessing about or measuring in terms of the growth rate. So, I think the guidance we've given instead of guidance we have today, but we could find that we're up or down on services one way or the other a bit. It's not going to be something a particular focus for us. I understand that it ends up driving an overall growth rate and having more of a - for some investors it may play into their thinking model. But for us whereas Rick said, we're focused on subs and trans growth in driving the operating income.

[Jason Kreyer:]

Okay. Thanks. And then just one more, you talk about the pipeline a little bit on digital banking in the cyber fraud and you had the one nice win that you talk about here in Q1. And can you talk about that pipeline in regards to the sales cycle and can you help us with our expectations on when we should see more of those deals happen?

[Robert Eberle:]

We've got a strong pipeline and we're well-known innovator in the banking space. Having said that, we're bringing out is really new. So we were surprise to have a deal this early. I will expect and hope that we begin to see another deal or two in this quarter and then really be in the back half of the year that I think will covert in the bulk of the pipeline we're building today. It's a very active for us, to engage with banks virtually every single day. And what we are bringing to markets its really interesting, because the combination of the broader capabilities in digital with banking and the cyber fraud risk management does in fact give us the competitive advantage, beyond what we actually anticipated when we bought together the IntraLinks acquisition.

[Jason Kreyer:]

Thank you.

[Operator:]

Thank you. We now have a question from Wayne Johnson with Raymond James. Go ahead please.

[Wayne Johnson:]

Hi, yes. Good afternoon. So I was writing the bunch of this stuff down, so I apologize for the rewind here. 2017, I think you said 20% to 21% operating margin, if I heard correctly, did you layout what 2016 was?

[Richard Booth:]

No, we do no change in 2016 guidance, 18% operating income.

[Wayne Johnson:]

Yeah. Okay. All right, that's - I appreciate that. And so just thinking, whole lot on a couple of things here. So on the subscription and transaction services, good report in the quarter, it seems like the gross profit margins ticked up there, they were higher than our model, good sign, it seems like, is that a sustainable level? And where do you see those margins going over the next few years?

[Richard Booth:]

I think given the nature of the cost base on those, we see continued growth in subs and trans margins. Since you were writing the numbers down while we were going through our call, let me just call out one other element that we broke out. We are aiming towards 200 million in subs and trans revenue and total over fiscal 2016.

[Wayne Johnson:]

Right, I got that part, okay. Thank you. I appreciate that. So moving on to the product side, can you talk a little bit about the market for Intellinx kind of outside of the traditional financial institution customer base there?

[Robert Eberle:]

You know the principal market we'll be deploying and will be in healthcare, coming off of our Cedars-Sinai and we are working with couple of banks - I am sorry, couple of hospitals let's say in healthcare organization to in that vertical. I think the piece so I'd say is what we found is the connection; we thought we have the opportunity to sell two things side by side and it would be nice that they are integrated. What we didn't fully appreciate is that functionality and extra capability you get by having an integrated solution. So what that allows you to do is if you have a fraud, if you have a web fraud or payment fraud or any other fraud and it's integrated with the solution you actually can put on the breaks if you will. You can stop that transaction. So in many ways much more powerful than any other two standalone solution could be even if our solution was standing next to our cash management platform. So we are going to be putting our largest degree of emphasis around as a banking market and it's a huge opportunity for us. Anybody that buys our digital banking platform which really the only reason I'd think they wouldn't buy our cyber fraud solutions is if they under contract for something for a period of time and then after that time I think we'd be placed. Integration is so critical in some point at least that's the feedback we have been getting over the last couple of months.

[Wayne Johnson:]

All right, okay. I appreciate that. And then just thinking about the Paymode-X product line or services, could you talk a little bit about the competitive environment out there, like you said it seems like you're gaining more and more momentum. Can you tell us about the competitive landscape? What are the alternatives out there that you guys are running in those bakeoffs?

[Robert Eberle:]

First thing I'd say is it's a huge market. We - what we're focused on as payment network or providing payment automation to a pay on new vendors. There is a lot of other people out there that are focused on difference aspects of the purchase to pay cycle automating, invoice proceed or dynamic discounting or like. Our focus is on automating the payment in most affectively doing so and monetizing that through an interchange model. We find it - we are not losing the competition. If you're looking for somebody to put in a customer system that's not us, but if you want a payment network that's going to connect to largest number of vendors, that provide the highest level of automation and provide dividends or rebate that's bottom line. And our channel partners we've been fortunate to have channel partners that are making a real impact in the market. So I think if you told we do in 24 deals I'd have thought that would have been years target even a year ago. The level we're at now we are really finding self-success and have true market momentum and more attracting the attention now of more significant partners that will take us even further.

[Wayne Johnson:]

That 24 new customer wins is an impressive number. How long will it take for those customers to ramp and be boarded?

[Robert Eberle:]

Well there is two questions, so the first is how long will it take for them to be light. And that's a normal kind of implementation. It's really around IT teams. In this, the ramp to getting all the vendors on that actually is pretty long tale. So what we see is we are continuing to add vendors a year and two years into cycle. Now we will be monetizing revenue early on and many times number of existing vendors on the network. But the fully monetize this relationships is probably a two year cycle. That's not the bad thing that just the nature of it.

[Wayne Johnson:]

Great, thank you.

[Operator:]

Thank you. And next we have Richard Davis with Canaccord. Please go ahead.

[Richard Davis:]

Thanks, couple of questions. When we say the cyber deals in the 5 to $10 million range it is banding it or their actual contractual things that we will make the contract be 5 or $10 million. And there duration of that deal or is that can imagine it all one year. So must be good year so?

[Richard Booth:]

Sorry. So what I said is it has the seven figure subscription, multiyear. And so the total contract value. And that was frankly just an attempt to be there is an exact number, but from a competitive standpoint I going get that exact number out. But it lands between 5 to $10 million and it's a subscription over $1 million annually.

[Richard Davis:]

Okay, got it. This helps.

[Richard Booth:]

With the opportunity by the way to saw some additional things and near to so additional capabilities as we developed them overtime. So we could see that growing, but what it is sold in subscription model. That's part of the big hard turn that we made in our digital banking solutions where this year we are not selling anything on a software license basis we are selling pure subscription. So timing on as we want to see an impact to this until back half of 16, but we are adding a real nice revenue flow 17 [indiscernible] my remarks with wonderful pipeline a product that's right on. For the target customers we are - these are customers who want to grow the business in commercial banking franchise and bring new capabilities to compete win customers. For that market we're in a great position and as I said in response to an earlier question, I think we're going to see a real strong sales results particularly in the back half of our fiscal 2016, so over the next nine months.

[Richard Davis:]

And then how do you pay your sales people on that, as they paid on the TCV, total contract value, do they get paid upfront or do they get paid in the units so that it's getting typical payouts of 10% to 12%?

[Richard Booth:]

They paid up front and they paid off of annual recurring revenue because by adding more years to the contracts doesn't necessarily more value to us if you provide in a real strong solution. So they paid off a waiver, they paid up front. We actually have a lot of expenses that occur upfront. All the implementation expenses and the services expenses, all of those are hit the P&L now when none of the revenue does. I better stop or recur start we think but it's a difficult. It's actually a challenge. The more we sell them, more expense we have in this period as then we're getting the revenue including any services revenues doesn't start until you actually alive with the application.

[Richard Davis:]

Got it. And then one quick tactical question. So you kind of touch on this so the revenue mix, when you gave guidance, when you - should we just think about professional services is just like a higher standard deviation line item with bias to the downside, which is a good thing or not a bad thing, is that right way to think of that line item. Is that the way to think about it?

[Richard Booth:]

Yeah. I think that's a fair way to think about it. Because even when you do have separately billable pro-services associated with the subs and trans transaction. Bulk of those revenues comment and at that time of go live see if got more variability around that.

[Richard Davis:]

Got it. Actually I figure it out and I just wanted to make sure, I had the story straight. Okay. Thanks so much.

[Richard Booth:]

Thank you.

[Operator:]

Thank you. We have a question from Mayank Tandon with Needham and Company. Go ahead please.

[Mayank Tandon:]

Thank you, good evening. This is for Rob and Rick I just wanted to get a sense of, when you think about that target of 400 million for 2017 and then I think you said it breaks down to 18% to 19% growth in subs and trans, just talk about the visibility, how much of that business do you already have booked? And how much of that do you have to still win to hit that target on the subs and trans side?

[Robert Eberle:]

We have high revenue visibility as you know, in the last quarter 80% of our revenue is recurring and there is a long tale on the deals that are being signed in 2016 so those deals are critical to the 2017 revenue. So we have excellent visibilities at 2017.

[Mayank Tandon:]

In other words you've already won the deals that can get you to that level or do you still have to win deals to get to that 2017 level or will that contribute beyond 2017, I am just trying to get a sense of the visibility that you have to that number this early in 2016?

[Robert Eberle:]

Of course, we need to continue to win deals. But we have substantial visibility we done. If you simply think about the various components of the business there is some software revenue in it and that we need to continue to win. There is still some pro services in there, that, that will continue to commence. So it's not 100% locked, but we do have that very strong visibility in it and it’s getting better all the time.

[Richard Booth:]

Yeah, I'd see if your question as to if we have more visibility than we have had in the past, absolutely. What we have and as we are moving the business up in the subs and trans piece and as we are now signing new deals into subs and trans, the visibility is definitely increasing. And as we clear the headwind we'll start to see all of those revenues occur in FY 2017. The deal I talked about today that's an example the deal that layers in FY 2017 is part of our confidence.

[Mayank Tandon:]

Right, that's helpful. Then Rob just in terms of this is a big picture question, there is a lot of innovation going on in terms of payment particularly on the consumer side. Is there anything applicable from that consumer side to B2B payment that might help accelerate the growth in our Paymode-X channel?

[Robert Eberle:]

Let me answer that in a couple of ways. First, if I would say lot of what's occurring in a consumer market than it occurs in business banking or in business payments, so multiple being an example, different security features being an example, you'll see it's not particularly confidential but you'll see us next week and announcing the mobile payments in phone-based platform for business payments in the U.K. which we are doing with Barclays for example. So mobile payments, a thing you see in consumer around mobile or definitely relevant bottom line and we are providing our customer that's part of our digital banking platform for example. So that'd be one area where new things we are seeing anything see around consumer generally makes way to business or business payment as well. The second area I thought is what's going on with chain and things like that that really plays very well for bottom line because if that becomes a payment type what we do or one of our great strength is having ability to manage different payment types. So do I want to send wire and check and card payment whatever that will be and when I think this will go if you likely first start with securities payments because there is a big amounts which is complex. And so as this unfolds, if this unfolds the way many are predicting now, it will start like that just like what messaging did. And that place for bottom line it becomes a new payment type. And my sort of hope and dream is that becomes like another upgrade cycle across our platforms that the ability to issue a payment to these new settlement networks, if you will block chain becomes a reason for a whole upgrade cycle and bottom line pipeline.

[Mayank Tandon:]

Great. That's a great color. Thank you very much.

[Robert Eberle:]

Thank you.

[Operator:]

And our next question is from Chris Kennedy with William Blair. Go ahead please.

[Chris Kennedy:]

Hi guys. Thanks for taking the question. Is there any way to frame the recent signings, I mean last year you gave a few data points on you signed X total contract value over the last 12 months. Is there any way to - any update on those?

[Robert Eberle:]

We didn't have a contract value because of many cases were estimating that. I did indicate in my remarks that our signings from an ARR standpoint the way we would look at them with estimates is almost double a year ago.

[Chris Kennedy:]

Okay. Are there any initiatives internal initiatives that you can do to help accelerate the on boarding to Paymode-X?

[Robert Eberle:]

We are doing some things with predictive analytic that will accelerate that. So we are doing things with the productive analytic capabilities that we brought in the company and have been developing ourselves. So that will help segment vendors that will be a way to segment of vendor population and target vendors quicker. We're also looking at other partnerships that could bring more payment type more capability to Paymode-X. We would like to accelerate on the one hand, but frankly it simply a matter of time. With the number of players who are sign in and what we've seen in that, when we look out a year and two years we'll be seen a very attractive revenue contribution.

[Chris Kennedy:]

Okay, great. And then one last one the transition of the business model, the headwinds are coming to an end next year I mean what type of headwind has it been on the last couple of years?

[Robert Eberle:]

What type of headwind? Well there is a couple of transitions, one if you move away from services so you take a look of six quarter period that's 5.2 million decline on a $300 million business. That's - $5.2 million sorry on a quarter basis. So that's about 6% or so on our just on the services piece of loan. The headwind in terms of we haven't done a calculation on what the headwind is one where you can kind of back end of that is just think about 18% to 19% the subscription and transaction revenue growth were comfortable with now. If you are holding the rest of the business flat I mean to growing it somewhere in the 12 - 11, 12% something like that, so that kind of backs into a somewhere around 6, 7% headwind. One comment I'd make, today bottom line set out about making this transition overtime without ever having revenues declined or profitability decline. If you would doing that again starting that again you would do it much quicker, you try to pull it, have the down revenue, you have down profitability. But this is the path for run, this is the path where completing and then we are excited about what FY'17 brings because no headwind and rolling the subs and trans revenues this year's should be a powerful year.

[Chris Kennedy:]

Okay. Great. Thanks a lot.

[Operator:]

Thank you. And we have no further questions in queue.

[Robert Eberle:]

Well, thank you everyone. Thank you for your time. Thank you for your interest in Bottomline. We look forward to reporting to you on next quarter and we look forward to achieving the guidance in the business model that Rick has outlined during his remarks, and then look forward to seeing many of you personally as we're out on the road speaking with investors. Thank you.

[Operator:]

Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.