Q3 2020 Earnings Call
[music].
Welcome to bottom line third quarter 2020, <unk> earnings Conference call. My name is Danielle share and I'm joined by Rob Epperly bottom line CEO and Rexs their Seattle.
I'd like to remind everyone that statements made on today's call include forward looking statements about bottomline future expectations plans <unk> that's.
All such forward looking statements are subject to risks uncertainties and assumptions, including those related to the impacts of cobot 19 on her business and global economic condition.
The forward looking guidance, we provide today is based on their assumption as to the macroeconomic environment based on the boxes, we know than today.
Many of these assumptions related matters beyond our control, including it back to school, but 19.
Please refer to the cautionary language in today's earnings release and bottom line. Most recent periodic reports filed with the FCC for a discussion of the risks and uncertainties that could cause the company's actual results to materially different no contemplated in these forward looking statements.
Bottom line does not assume any obligation to update any forward looking statements.
During this call Bottomline financial results are presented on a non-GAAP basis. These non-GAAP results include among others constant currency growth rate gross margin operating income EBITDA net income and earnings per share.
A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure is available in the Investor resources section of our website.
A summary of the guidance provided during the call is available on the company upon your request.
Let me now turn the call over to Rob for his remarks.
Rob.
Good afternoon, and welcome to the Bottomline technologies third quarter fiscal 20 earnings call.
The third quarter was strong quarter for Bottomline.
Demonstrated the mission critical nature of our applications.
The power of our business model.
Any Germany and execution of our team.
We're fortunate.
The vast majority of our revenues from recurring Unimpacted by the Pandemics disruption.
Business model produces consistent strong profitability and cash flow.
We see some effect like every business.
The impact is relatively modest and it will be temporary.
Longer term impacted this crisis with the acceleration of the digital transformation a business payments.
We're well positioned to address some benefits from that.
We had the products.
Market position and plan to extend our competitive advantage through this cycle.
And emerge stronger than ever before.
What is top of mind right now is the impact of Cobot 19.
We have three simple unclear priorities.
First.
The safety and well being of the bottom line team.
Second caring for him supporting our customers.
And third is ensuring our company's stays strong and emerge a stronger.
I'll comment on age, but first the key financial results for the third quarter.
Subscription revenue was 87.5 million.
That's up 16% from a year ago.
Actually started the quarter confident we produce continued acceleration of subscription revenue.
I see growth close sort of 20%.
That growth was partially offset by transaction volume declines in shifts in go lives timing as the quarter progressed.
[noise] subscription bookings were 22.8 million, which was particularly solid given the disruption that customer engagement another normal sales activities.
[noise] revenue over almost 111.7 million.
EBITDA was 23.2 million.
We ended the quarter with over 180 million in cash.
So strong financial results for the third quarter.
I'll focus my remarks on our priorities what we're currently seeing what we expect him to short term and most important how we see the longer term playing out.
Our first priority has been a remains to health and wellbeing of her team.
That encompass is much more than just executing our business continuity plans.
I'm working from home.
It really is providing support at every level.
Training for managers and leaders.
Support for special situations.
Monitoring to continue in EM business impact of the virus anyone necessary arranging for drop shipped office supplies.
[noise], we're taking a measured cautious and thoughtful approach to the next phase of our business operates.
We can operate effectively in a short term play smiled will likely be continuing to do so and most if not all geographies for sometime.
The bottom line team has been extraordinary responding to the crisis and the new business reality.
We cannot be prouder of our company.
Our second priority seen our customers through this and serving them in any way we can.
We're doing the right thing in doing that barrasso deepening relationships with customers at a time when they need to smos.
Our efforts have taken many forms.
In some cases it means working to reschedule implementations as customers focus on their business continuity measures and other challenges.
As expected we've received a responded to hundreds of business continuity plan of readiness inquiries in each case with our customers reassure the bottomlines prepared.
And the right partner.
Sometimes it's just reaching out listening and offering support.
As the federal stimulus some relief programs begin to should take shape.
We could see banks would be called upon to play an important role.
We knew this would be a challenge.
Create extraordinary demand at a time when many physical branches were closed.
We saw an opportunity to help.
We re purpose our online account opening capability to produce the payroll protection program loans.
We made it available that any banco needed it whether they were a customer bottomline or not.
Today, we have a service to approximately $120 million some loans representing over 1800 small business applicants.
Our teams did an incredible job to make this a platform of the there was available in just a matter of days.
We have to the capability entirely without charge snow backend fees transaction fees or other gimmicks, which was noticed and well received across the industry and our company.
It's a fantastic example, the P.T. team responding with purpose.
And agility.
Our support of our customers remains a top priority, it's who we are in good times and it certainly is who we are in challenging times.
Our third priority is ensuring that our company stay strong.
And emerge a stronger.
In terms of ensuring we stay strong knows a lot working in our favor.
The vast majority of our revenues from recurring and Unimpacted by the pandemic.
And economic disruption.
Our business model produces consistent strong profitability and cash flow.
We have a strong balance sheet.
And we serve business customers and all industries.
Like most business. However, we did see some impact in the March quarter. The following areas.
Transaction based revenue streams, such as Paymode X.
Go live dates for existing backlog.
And software licenses and professional service revenues.
Those impacts will likely continue in Q4.
We're also watching new bookings closely as sales interaction with customers is much harder in this environment.
The March quarters bookings were sounded 22.8 million.
We saw strong bookings in April which suggest so far customer demand and sales results remain reasonably intact.
Longer term the impact is quite likely positive.
That's becoming increasingly clear on this crisis will drive change and accelerate digital transformation.
Particularly for the mission critical applications, we provide.
We may already be seen the beginnings of that.
Our recent on demand webcast, managing a p. amidst koeppen 19 as risk seen off the chart engagement.
We will see increased demand one sector economic activity resumes we're confident that.
The disruption we've seen in a desire to manage risk will accelerate technology adoption.
Our product set is spot on to address the digital capabilities the new reality requires.
We also see the competitive landscape shifting our way.
During any economic downturn, we benefit from a flight to quality.
As banks in businesses select vendors they trust and they now have the financial strength to sustain continued investment in technology and customer success.
Our ongoing response during this crisis has deepened the trust of partnerships, we have with our customers and enhanced already top of class brand.
Many of our competitors will not ferrous well companies, who have from raising and burning through large amounts of capital of a lot to contend with.
Our focus will remain on driving innovation meeting customer demand in growing the size and value of our business.
So in summary.
Our company has responded extraordinarily well under the cobot 19 crisis.
Operating effectively and consistently.
We're focused on protecting the safety and well being of our team.
Delivering for customers and keeping our business strong.
We had a strong quarter.
Highlighted by continued subscription revenue growth strong bookings and an adjunct one reselling in response to the crown a virus crisis.
We are deepening relationships with customers are motivated to reduce risk and accelerate digital transformation.
The crisis is validated the strength of the business mission critical applications to drive digital transformation.
Trusted partnerships and an experienced skilled and dedicated team.
Looking ahead, we see fundamental changes and an acceleration in demand us inevitable outcomes.
We have the opportunity and plan to emerge from this situation even stronger.
So now I'll turn it over to Rick and then of course will both be available for questions. Following his remarks.
Thank you Rob I'm pleased to report on a solid quarter subscription revenue was 87.5 million and up 16% year over year subscription bookings were 22.8 million.
And we produced total revenue of 111.7 million.
With EBITDA of 23.2 million and 27 cents core earnings per share.
Despite seeing the initial impacts of cove it in the quarter.
I'll cover four topics in this call first I'll briefly review, our business model and balance sheet.
Second I'll review, our Q3 results.
Third I'll provide Q4 commentary given the covance situation.
And finally, a look ahead and comment on our outlook once the economy normalizes.
From a business model perspective.
Consistent predictable profitability of lung, but at the core of our business model.
We have 92% recurring revenue.
Our customers are primarily large leaving enterprises across a range of industries as opposed to small businesses.
We generated 97 million EBITDA, and maybe 5 million of operating cash flow over the 12 months ending in March.
In this environment financial strength is actually a customer priority and I'll briefly highlight some of the key facts about our balance sheet as well.
We are 182 million or cash and investments on hand.
120 million of Undrawn credit.
And a full 300 million dollar credit facility, which matures in July 2023.
We're presently reporting a net EBITDA leverage ratio of 1.4.
While the credit agreement allows us to go up to 3.75.
Turning to results, we reported solid results in the quarter. Despite the beginnings of covert related disruptions.
Subscription revenue grew 16%, which is within our 15% to 20% target rate.
At 87.5 million that subscription revenue in the quarter. This is equivalent to 350 million on an annualized basis.
And at this rate 78% of total revenue came from subscription offerings up seven full percentage points from a year ago.
Recurring revenue was 92% total revenue of five percentage points year over year.
License revenue was 1.5 million service revenue was 7.4 million and total revenue was 111.7 billion.
We reported solid sales results as well.
Customers signed 22.8 million of new subscription bookings led by Paymode X and our European products.
This brings us to 92 million in new subscription bookings for the last four quarters.
Equivalent to 28% of subscription revenue in the same period.
Our Paymode X network added 25, new payers, including several very large deals.
We signed three new insurers to our legal spend management network and another 11 insurers expanded their relationship with us.
And finally.
We signed two new customers toward digital banking product set and we were also selected as the go forward platform by one of the largest bank groups in North America.
With those signings, we have approximately 15.7 million of annual digital banking subscriptions, which are signed but not yet being recognized in our PNM all.
Which we expect LER roughly one third to go live in the fourth quarter.
Turning to profitability, we continue to produce consistent profitability.
Despite cobiz related impacts flowing through to earnings.
This earnings flow through is to be expected given our largely fixed cost model.
EBITDA of 23.2 million was 21% of revenue.
Core operating income was 16 million and core earnings per share were 27 cents.
Driving these results with subscription gross margin of 61%.
Up 1.4 percentage points year over year.
Year to date, we added 35 million of subscription revenue of which 77% flowed through to gross margin.
This margin expansion reflects the power of our business model of scale once conditions normalize.
And from a cash flow perspective in Q3, we generated 28 million of operating cash flow.
15 million of free cash flow.
We used 4 million to repurchase 90000 shares before pausing our buyback activity.
Turning to the cobot impacts that we observed in the quarter.
For subscription revenue the majority of our subscription revenue was not impacted.
We did see two areas of impact on subscription revenues. However, first.
Transaction based platforms like Paymode X experienced lower volumes as reduced economic activity men fewer payments.
And second some customers shifted out implementation go live date due to covert related disruption.
Combined we estimate Q3 subscription growth could have been two to three points higher without these impacts.
Maintenance revenue was not impacted.
License revenue and service revenue were lower by 1.3 million and 1 million respectively compared against the prior quarter as customers took a more cautious approach to software and services as you would expect in this environment.
These cobot impacts inform my commentary on Q4.
For subscription revenue, we fully expect normal ongoing growth from customer go lives and expansion.
But that may be fully offset by the impact of a full quarters reduced activity.
As such while difficult to forecast with precision, we expect subscription revenues roughly equal to Q3's subscription revenue.
Total revenue in addition to the subscription revenue impact noted above we expect to further two to 4 million of impact to software services and other revenues.
For core income and adjusted EBITDA.
Reduced revenues combined with ongoing costs, good reduced profitability back to one to 2 million versus the levels seen in Q3.
And as we look ahead to the post pandemic world bottom line should quickly ramp up to a normalized level of performance as the economy recovers, although we concur with the emerging consensus among economic forecasters that this is unlikely within calendar 2020.
For subscription revenue in fiscal 20 subscription revenue growth accelerated to the upper end of our 15% to 20% range.
We expect to return to growth at these levels or even higher yes, as we expect demand increases as the economy normalizes.
Now for non subscription revenue.
Software and services revenue were particularly impacted by the current situation.
And as the economy normalize this we expect the customer preference for our cloud solutions over on premise applications to remain strong we would expect non subscription revenue to continue to decline, but at a more modest free.
And from a profitability perspective, we would expect to operate at 21% to 22% EBITDA margins as we emerged from the depth of the pandemic.
So in conclusion I'm pleased to have been able to report a strong business model and balance sheet possession.
Solid financial results in Q3, a solid outlook for next quarter and optimism about the post pandemic world due to the increase relevance of our solutions and the competitive shifts that Rob described earlier.
And with that we can open the call the questions.
Thank you at this time will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad a confirmation total indicate your line is in the question Q.
The press Star followed by the number two.
If you would like to remove your question from the Q.
For participants do you think speaker equipment, and maybe necessary to pick up your handset for pressing the star Keith one moment, please while we pull for questions.
Our first question comes from Andrew Smith with Citigroup. Please state your question.
Hey, guys can speak with you thanks for taking my questions.
Pleasure first on that transaction based revenues could you help us just shy stack seems to be key source of variability.
It's a framework for that would be helpful. And then maybe some comments on how would this trend in March and then into April and then lastly, perhaps what's embedded in the your your perspective for the fiscal fiscal fourth quarter for those businesses.
Hey, Andrew this is Rick.
Oh, I'll address that first and most importantly, I want to note that the vast majority of our subscription revenue is fixed in nature.
We do you have two products that had significant transaction components legal spend management and Paymode X.
And we saw a normal trends right up until.
The third month of the quarter started to see a little bit its supply chain disruptions and then at the end of the month and roughly through.
Through our.
Our first we've seen declining declines in the payment volume versus what we would have expected across virtually all industries with the exception that's healthcare.
The one thing I'd add to that as Rick said.
This is what we would have expected I'd say, what we would have expected without a pandemic in the business slowdown.
Yeah, Good point I think without the.
Without the 10 that Mike we estimate that subscription growth could have been two to three points higher.
Yes.
Okay.
That's helpful. And then the are you assuming that the current trends continue in the fiscal fourth quarter or step down improvement I guess, what's the you gave some comments on your perspective for subs and trans growth in the fourth quarter, just any help there with the at the volume based piece of subs and trans would be helpful.
[music].
Yes, there's the primary driver. So remember we have underlying growth as customers go lives and the vast majority of our subscriptions are fixed so it's too many crosscurrents to speak it wouldn't be useful to speak about isolation volume in isolation.
But between new customers going going live and continued ramping with existing customers.
Offset by the offset by select volume declines, we think that we'll be able to deliver a similar or subscription revenue to what we had this quarter I'm. So similar to the 87.5, which would actually be 12% to 13% constant currency growth given given the changes in the pound.
So we think in this environment, that's pretty solid.
Yes that was there was higher than allows expecting so thats fair.
Just a couple more if I may.
Just on the bookings trend you pretty pretty good bookings given the the drop off in activity in March.
Could you comment it seems like.
The bookings continued to be strong into April.
Could you talk about need be just whether you've seen any sort of slowdown in bookings and maybe where you're getting the interest and then just.
You know some that might be just deals that we're further along in the sales cycle maybe comment on your perspective, if you on how we should think about bookings in this environment.
Given that clients are obviously distracted there seems seems logical that the sales cycle could be a little bit elongated just any perspective on just booking trends quarter to date I know you don't normally comment on this but given the environment. It might be helpful. And then just just how we should think about sales cycle affecting bookings going forward. Thanks.
Yeah. So you covered a lot of great stuff in there and I'll try and touch on each piece of it.
First of all our initial response in our initial thoughts as marchand it.
That's exactly what you said you know Weve got deals that are closing bookings were really pretty solid.
Common sense says that's probably the result of activities purchase activity. Some programs that have been approved took a lot of momentum and they carry over the finish line.
Actually April was much much stronger than that there's a couple of things going on what you're somewhat counterintuitive, an environment, where you can't meet with anyone outside of.
What comprehensive zone, which is still with different experience and as you said customers are refocused on their internal operations business continuity plan some other challenges.
That being said, we're seeing a strong top and the pipeline interest the new materials click throughs on a different pieces of how we can manage payments and fraud as well.
By the way and we didn't fact kept a real strong April you're right. We don't usually you about metrics on a month, but one of them entirely different environment. So we won't be doing then the future, but we had 6.7 million a bookings for the month, which is really solid because it's not a linear business you're always.
Let's see a bit more but less than the first month than a bit more on the future months. Some normal circumstances. Some 11 Paymode X deals in there so it's.
Commonsense tells you a wow, if everybody's shut down well see less some bookings, but we also know but this is fundamentally changing how people are viewing the businesses I was on the call at the major.
New customer opportunity and they were talking about how they're well that change so much and things that they thought they could never do remotely there now reconsidering and that's exactly where this plays in the system could take reconsidering Paymode X summary, considering your whole digital transformation strategy. So a lot of <unk>.
All right common sense say less than a slow economy.
Hey, Paul.
Long and act, let me spend real strong last piece I'll say I'm extraordinarily long answer for which I apologize.
Yes ever we returned to normal.
There's no doubt in bottom line. This is a catalyst and this results in the acceleration of digital transformation around business payments and worked really well position about what we're doing is not as much trying to I have every piece of booking and try to get everything out of a customer today, but positioned ourselves both from a sales standpoint.
Product agenda. So we're really why riding what we think will be a strong wave on the other side.
That's helpful. I have a follow up but I'll jump back into queue in basket. The stack. Thanks, a lot guys.
Our next question comes from John Davis with Raymond James Please state your question.
Hey, good afternoon, guys. So all hope you are all doing well unhealthy.
First just wanted to maybe dive at a little bit.
On a comment around demand for automated ATP accelerate several of your your private appears to have noted pretty significant uptick in demand.
Where what channels or verticals.
Yes, I'd first what channels is that coming from is it through the bank sorting through your your new Salesforce or both and then also are there any specific verticals that you're seeing a bigger uptick in versus others and the other commentary you can kind of give there would be helpful.
One verticals, that's kind of support some protocols.
One I should say bottomlines not exposed to any particular vertical.
Businesses of all types need to pay and get paid so we have customers and all different types of industries, we have a lot of the traveling folks as customers.
Cruise lines travel agents those kind of payments of course, we've seen that off 70%. That's a relatively small portion of our overall revenues.
What we are seeing in terms of channels is actually demand in interest up on all levels question is whether businesses or.
Positioned to think about what's next whether in survival mode, and that'll very more depending on that particular industry in the status of the business a balance sheet like but.
Net net interest is up more since the.
Virus and since the shelter in place requirements of come into play.
Okay. That's helpful. And then yes, I think you noted maybe some of your ears. Your smaller peers that have had been burning cash.
Those properties may come for sale sooner rather than later any interest or appetite.
Maybe picking one of those up I think evaluations done issue in the past, but it feels like it could be a different situation now.
His comment on that in the third any specific area that that may.
Be beneficial or advantageous for you.
Going forward.
Well, what really said what fits into our overall product and innovation agenda.
So lets around day that surround insights around cyber fraud. It's those types of piece is worth doing a lot from our organic product position.
Around new innovations, we're bringing to market, but there is always places, there's something new or something that can be an accelerant to that.
Providing more value to the vendors and Paymode X for example, the integrated payables piece we're doing.
From an M&A standpoint, I think it typically takes a little bit more time for new valuations to sink in.
Sometimes those are down around valuation. So we're we're certainly looking across the market seemed when those opportunities are and you're right valuations have been beyond what we typically would have wanted to Japan. The passion that could come our direction. That's one of the many things that could be kind of a silver.
Turning now that this all of them.
Okay. Thanks, and then recommend caught you off the hook.
So I was pleased by the margin commentary the longer term post pandemic.
21, 22, so just called similar levels.
Maybe just talk about the puts and takes and if anything has changed so as you can see the shift in the business. Obviously, we've been waiting for a long time for of how the catalyst to drives automation, especially in business payments.
So just any commentary there on how to Mars outlook post Togut has changed if at all given what's what's happened.
Yeah, I think what we're seeing is increased outreach and we're continuing to find customers, but the volume is lower in the short term. So there will be some short term pressure on margins but of course.
All familiar with our high incremental margins and so we see those continuing post pandemic and that's really a big part of our business model. You know when you look at that moves year over year, moving closer to pure subscription model and continuing to expand that gross margin. So.
I think although I can't say exactly when post pandemic will be.
I think that the margin outlook is favorable for that in terms of our gross margins.
Okay. Thanks, guys.
Our next question comes from George Sutton with Craig Hallum. Please state your question.
Good afternoon. This is Adam on for George Thanks for taking my question.
Robin Rick you talked a few times about how this will serve as an accelerator for transformation business payments were obviously still in early innings, but I was hoping you could comment a little further on how you see customer priorities changing as a result of what's happened so far.
[noise] say the very last part sort of got lost on that connects and how we see customer what.
Customer priorities changing as a result of coated 19, social Justin claim and alike.
You know what's funny, we've always said internally one of our biggest competitors would be and it's been a nurse show.
It's something or talk to businesses all the time into the B.
Got a type dance, whether it'd be something we want to do at something we're going to do this just moves that up in the priority why went up business be.
As you can though if you can avoid typing world Rob's talking that'd be helpful. Yep, why what why what a business continue to have.
Payments coming out of the around office facility checks being printed in their own office, which is less secure or less efficient all of them should be since it just moves it up in the priority in says yeah, we really should do this.
Second pieces, where they've been organizations that Didnt believe you could really do this as the every large group I was talking to a couple of days ago said. This is made them rethink everything about the business everything about the business process and so what the comments I've made 'em digital acceleration of digital transformation.
It's actually much broader than just business payments I think it's going to have an impact on b to b marketing spend of an impact on sales and sales interaction, it's going to seen the beginnings of impact on major trade Thompson system, how will those come out, but I think you've seen a well button that says we can do this digitally there's benefits beyond just the call.
Costs and automation and efficiency those.
Benefits in business continuity as one of them the lessons we're getting there now so again, we're seeing a lot of interest and 'em, we think that that.
Well continue as you come out on the other side.
Great. Thank you and in terms of being able to service our customers and go along with to go live schedule. How has work from home. So for this and some policies implemented those type print.
Well the biggest challenge is actually what's going on with the customer we have the ability to do that our teams have the ability to do that our technology can do that.
Question is can the customer do that and where typically maybe your nudging a customer long at different points are helping them.
Or pushing them just keep to a schedule.
None of that's appropriate or where we said in this environment. So we have to be sensitive to the other priorities and challenges business continuity or maybe an organization. This is set up the way wheel so work as well from a shelter one place mandate so.
The biggest impact is not what bottom line.
But the biggest impact is what's going on specially with that specific customer and other reasons, they need to delay and implementation they need to put you back and we have to be real sensitive to that this is not a time for our agenda you take precedence, it's really had time to put customers first.
And then final question for me the internal sales team has obviously still new but I was also could provide some color on what impact do you see from having them.
During this period and is there anything new from.
The pin dynamic that you expect them to to do in the future.
I don't know that that be anything new relative to the pandemic other than its a good time to be joining because again, we're seeing a stronger response marketing materials normal seems strong the level of interest and that's what we have that team and a pad that team on board now and it's Super strong team so far.
So I don't think it's a unique benefit or something different but the timing really worked out well as we're seeing more top of funnel interest.
Thank you.
Thanks to our next question comes from Mayank Tandon with Needham. Please state your question.
Thank you a good evening Robin Rick maybe I Wonder if you could just comment on some of the other parts of the business, maybe I missed it I apologize, but would be the legal side. What your expectations are in terms of the impact from coal bid and also in terms of financial messaging and could that be an area that maybe holds up better than the Paymode X business related a transaction revenue.
Just would get your a total yes.
What's interesting there in financial messaging, we've actually seen some increases in volume levels because of all the bid from bank into money movement activity. That's occurred legal spend your white, but that is transaction based revenue model, but if you think about the timeline that begins a litigation.
And that doesn't happen in March.
Should drive April revenue, that's a much longer cycle. So I think any impact to that will be over time.
And be further out we're.
Seem very steady levels in March and April and legal spend management.
Yes, the other thing that.
I want to emphasize is that.
On the financial messaging perspective that revenue was essentially fixed so you've got subscriptions going on there and as Rob noted.
Things are holding up well in terms of LFN volumes and at least right now.
Right.
Excellent.
A few.
Follow ups I wanted to also ask Rob maybe on competition as you've sort of been competing for these new.
New deals have you noticed any change at the margin among whether you know the private to public so any noticeable change in the competitive climate, who is competing with you on visa digital banking and business payments deals.
Well I think there's a couple of things I'll comment unrelated to cope and then I'll comment related to cope at first up unrelated to comp cobot.
Digital banking, we just have continued to extend our clear leadership I think were recognized that the investment we've made in technology, the accolades and awards from.
Industry analysts there was another war, which we reference the Barlow award to our insights capability, allowing banks to understand more about their customers to learn essentially from each click.
Our customers make on their platforms no more and what's the next market opportunity so risk of losing this customer supplemental product leadership standpoint, we've been leaning in technology and that's put put us in a very good position, but I think the competitive landscape will shift as we see the December.
Firemen and on the other side, we've always seen a flight to quality.
That's what occurred in 2008, that's what occurs in any downturn. The end this Rick referenced touching on the highlights of the balance sheet customers will want to understand what's your financial position or is gonna be continued new invest in customer success in new capabilities and where do you see how is your financial.
Additional ability do sell them bottom line as a public company with a strong balance sheet.
Really fair as well on that so or trusted innovation partner, we have the ability to continue to follow through on that to customers with them, reaching out to customers throughout this whole process. So I think that.
That's a little bit more competitive moat to either a startup or newer entering chore.
Private enterprise.
Right and then just a couple of housekeeping golfer Rick Rick did you break out the established versus digital banking piece I didn't see that in the Lee. So if you had that that would be helpful. But also what kind of pound level are you using a in terms of your guidance for the fourth quarter and then the longer term outlook.
Yes.
As to the split between digital banking and the remainder of the business as we've talked about on the last call.
Now that growth rates of converts will no longer be guiding and discussing them separately, although it will be in our in the footnotes of our published financial and from an FX perspective, we're assuming todays today's rate holds through Q4.
And that's part of the reason why when we deliver.
Roughly flat revenue for subscription that'll be a 12% to 13% growth on a constant currency basis.
Right great. Thank you so much.
Our next question comes from Peter Heckmann with David Please state your question.
Great. Thank you for having so much incremental information and tough environment, but a more information we can get the the better I'm just.
I assume just for in an excess of caution, but it looks like you did draw on the credit facility before the end of the quarter was that just Oh precautionary measure.
Yes.
Okay and then.
Any evidence in March that we're just trying to stretch the payment cycle.
And maybe a little bit more activity there in April as I try to figure out if the effect is kind of.
Or around the end of the month or or more.
Could it be several months.
Anything on stretching the payment cycle is a bit more anecdotal bed and then statistical but we do believe that customers are stretching.
The payers are stretching payable is based on our our conversations and what we can see.
But the question is how long that trend will continue.
Right. Okay. Thank you for for the feedback.
Thank you.
Our next question comes from.
Andrew Smith with Citigroup. Please state your question.
Hey, guys. Thanks for taking my follow up I think you know one of the advantages for you might be the ability to continue to invest.
While this weakness is occurring I know you had some investment plans that have already been set in motion.
I'm just wondering if you just talk again, maybe give us a little more flavor for the areas that you're investing in I know in the past you mentioned, adding more value to the Paymode X network I think today, even mentioned, adding more value on the our side things like that is what do you could just give us a little bit.
More perspective in terms of where you are investing I think it's helpful, particularly it will be come out of this just just thinking about the functionality of Dr. quiet. Thanks.
[noise] sure.
So with respect to platforms really across all of our platforms. It's a big part is about data and insights.
In digital banking in this example, so that capability, it's as I referenced so a few moments ago stability for the bank to have that corporate customers using online platform every click might mean something are we seeing the increase in activity. We've seen a decrease in activity, we've seen a customer that looks.
Has that excess cash balance of might be an investment product candidate, we seen somebody that's juggling payments and there's a credit facility candidate. So next actionable items knowledge about customer all of those insights or one of the capabilities. We're spending a lot of time invest in understanding.
Providing today to took customers a second I'd reference would be around cyber fraud.
One other capabilities, what's going on it's a sad reality that instances of fraud have increased and not bike.
He accident, which this.
Disruption so we're continuing to invest in cyber fraud solutions to to integrate with our payment platforms and it available and can be helpful straight from that but with respect to Paymode X weave broaden that platform to be full invoice to pace, we address medium and small.
Businesses as well as larger enterprise, we'd go out full integrated payables capabilities, so any payment type.
And we are introducing more and we will in the future introduce more capabilities for the vendor any network. There has to be a value proposition on both sides I can be a payer and try to mandate a particular type of payment network, but if there is there's less value for the vendor it's much much harder so we.
Bring a lot of value to the vendor and Paymode X and we're continuing to increase that.
During the last piece of just talk about a future, which is our intelligent cash management, we've been working for us.
While one capabilities that.
Really take a look at what's happening with York Cats picture, where is it today Where's it going how are you managing that ER and meant from an investment standpoint, but more from an operating standpoint, that's a product that we don't have the market yet today, but we will have and the next couple of quarters and that's a good example.
Our new capabilities, we're bringing to market, but the timing couldn't be battle for.
All right guys. Thank you very much for the comments.
Thank you Andrew.
Thank you, ladies and gentlemen, there no further questions at this time I'll turn the call back to Rob I really for closing remarks.
Well. Thank you everyone. Thank you for your interest in bottom line, where again in a relatively fortunate position a priority remains at the safety and well being of our team caring for our customers ensure I know business is strong and we're confident our business is going to exit.
This even stronger than before.
Look forward to recognize look both look forward to reporting on the fourth quarter.
In a better time here and I hope you all stay healthy insights.
Thank you. This concludes todays conference all parties may disconnect have a good day.