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Bottomline Technologies Reports Third Quarter Results

Strong Financial Performance Highlights Quarter

PORTSMOUTH, NH – April 24, 2008 – Bottomline Technologies (NASDAQ: EPAY), a leading provider of collaborative payment, invoice and document automation solutions, today reported financial results for the third fiscal quarter ended March 31, 2008.

Revenues for the third quarter were $32.0 million, an increase of $0.9 million from the third quarter of last year. The growth in revenues included an increase in subscription and transaction revenues to $7.2 million in the third quarter from $6.8 million in the third quarter of last year.

Net loss for the third quarter was $0.3 million, or net loss per share of $0.01. During the third quarter, operating expenses of $18.6 million included amortization of intangible assets of $2.6 million, acquisition-related expenses of $0.1 million and stock-based compensation expense of $2.4 million.

Excluding these acquisition-related and stock compensation items, non-GAAP net income for the third quarter was $4.8 million, representing a $2.0 million, or 71%, increase in non-GAAP net income from the third quarter of last year. Non-GAAP net income per share for the third quarter was $0.20 as compared with $0.12 in the same period last year.

Cash and short-term investments on hand as of March 31, 2008 were $76.9 million, an increase of $5.7 million from the December 31, 2007 balance. The cash and short-term investments at March 31, 2008 include cash that subsequently was used for the acquisition of Optio Software in April. During the third quarter, the company spent $1.9 million on the repurchase of shares of its common stock.

“Bottomline had a good third quarter as evidenced by our strong financial performance,” said Rob Eberle, President and CEO of Bottomline Technologies. “EBITDA increased by 75% year over year as we achieved record EBITDA and non-GAAP net income. We continue to drive our operating plan forward and in doing so are demonstrating the earnings leverage of our business model. In addition, we identified and executed on several strategic opportunities during the quarter, which will drive future growth, profitability, and shareholder value. The quarter’s performance, along with the success of these growth initiatives, gives us confidence in the future of the business and the value being created for shareholders.”

Revenues for the nine months ended March 31, 2008 increased 11% to $95.2 million as compared with $86.0 million in the same period last year. Net loss for the nine months ended March 31, 2008 was $1.8 million, or net loss per share of $0.08. Excluding amortization of intangible assets of $8.0 million, acquisition-related expenses of $0.1 million and stock compensation expense of $6.4 million, non-GAAP net income for the nine months ended March 31, 2008 was $12.6 million, an increase of 81% from the nine months ended March 31, 2007. Non-GAAP net income per share for the nine months ended March 31, 2008 was $0.52 as compared with $0.29 per share in the same period last year.

Customer Highlights

- Signed significant multi-year contracts for Bottomline’s legal spend management solution, Legal eXchange™, with Charter Communications, John Hancock Life Insurance Company, Ophthalmic Mutual Insurance Company (OMIC) and MDAdvantage.

- Expanded the Bank of America relationship through a new agreement to further enhance global treasury services with additional functionality for international payments and cash management.

- ABM Industries, ADT Fire & Security, ARAMARK, County of San Mateo (CA), Craftmade International, The College Board, Day & Zimmermann, The Dish Network, E.ON UK, Johnson & Johnson Vision Care and Western Asset Management expanded their existing deployments of Bottomline solutions for corporate payments and transactional document automation.

- Leading companies chose Bottomline to enhance the capabilities of their Oracle® JD Edwards and Microsoft Dynamics™ business applications with document process automation solutions, including American Civil Constructors, Associated Brands, A.W. Chesterton Company, Classic Residence by Hyatt, Sciele Pharma and Sterling Bancorp.

Corporate and Product Highlights

- Announced the acquisition of Optio Software for $44.9 million. The acquisition, which further extends Bottomline’s leadership position as a provider of advanced capabilities for transactional document automation, adds a significant customer base as well as a strong vertical presence in the healthcare industry.

- Received a top ranking in Global Finance magazine’s Best Treasury and Cash Management Banks and Providers 2008, marking the fourth consecutive year in which Bottomline has been awarded top honors in the Best Accounts Payable Services category.

- Recognized by Celent for its role in enabling Fifth Third Bank to enhance the efficiency and security of its wire initiation processes. In a recent research report, Celent identified Fifth Third as a ‘Model Bank’ for its best-practice use of technology to automate wire transfer initiation processes.

- Announced a global partnership with Tectura Corporation, the world’s largest Microsoft Dynamics solutions provider, enabling the company to resell Bottomline’s document process automation solutions to organizations that have standardized on the Microsoft Dynamics AX platform.

- Hosted Bottomline’s annual Executive Forum & Customer Summit, bringing together senior-level corporate finance and banking executives, and industry analysts to discuss the convergence of global cash management opportunities and technology innovation.

Bottomline Technologies Unaudited Condensed Consolidated Statements of Operations (in thousands, except per share amounts)
	Three Months Ended
	March 31,
	2008 ---------------------	2007 ---------------------
Revenues:
Software licenses	$ 3,149	$ 4,071
Subscriptions and transactions	7,223	6,750
Service and maintenance	18,359	16,856
Equipment and supplies	3,301	3,438
	--------------------	--------------------
Total revenues	32,032	31,115
Cost of revenues:
Software licenses	173	177
Subscriptions and transactions	3,839	3,064
Service and maintenance (1)	8,117	7,864
Equipment and supplies	2,409	2,532
	--------------------	--------------------
Total cost of revenues	14,538	13,637
	--------------------	---------------------
Gross profit	17,494	17,478
Operating expenses:
Sales and marketing (1)	7,411	8,073
Product development and engineering (1)	4,016	4,248
General and administrative (1)	4,516	5,110
Amortization of intangible assets	2,629	2,701
	--------------------	--------------------
Total operating expenses	18,572	20,132
	--------------------	--------------------
Loss from operations	(1,078)	(2,654)
Other income, net	998	682
	--------------------	--------------------
Loss before provision for income taxes	(80)	(1,972)
Provision (benefit) for income taxes	267	(98)
	--------------------	--------------------
Net loss	$ (347)	$ (1,874)
Basic and diluted net loss per share:	$ (0.01)	$ (0.08)
	--------------------	--------------------
Shares used in computing basic and diluted net loss per share:	23,927	23,529
	--------------------	--------------------
Non-GAAP (excludes amortization of intangible assets, acquisition-related expenses and stock compensation expense):(2)
Net income	$ 4,751	$ 2,778
	---------------------	---------------------
Diluted net income per share (3)	$ 0.20	$ 0.12
	---------------------	---------------------
(1) Stock-based compensation is allocated as follows:
Cost of revenues: service and maintenance	$ 271	$ 231
Sales and marketing	800	663
Product development and engineering	209	186
General and administrative	1,095	871
	----------	----------
	$ 2,375	$ 1,951
	======	======
(2) Non-GAAP presentation excludes charges for amortization of intangible assets of $2,629 and $2,701, acquisition-related expenses of $94 and zero, and stock compensation expense of $2,375 and $1,951, for the three months ended March 31, 2008 and 2007, respectively.
(3) Shares used in computing non-GAAP diluted net income per share were 24,238 and 23,953 for the three months ended March 31, 2008 and 2007, respectively.

Bottomline Technologies Unaudited Condensed Consolidated Statements of Operations (in thousands, except per share amounts)
	Nine Months Ended
	March 31,
	2008 ---------------------	2007 ---------------------
Revenues:
Software licenses	$ 9,906	$ 10,005
Subscriptions and transactions	21,407	19,976
Service and maintenance	54,127	45,854
Equipment and supplies	9,786	10,152
	--------------------	--------------------
Total revenues	95,226	85,987
Cost of revenues:
Software licenses	598	560
Subsriptions and transactions	11,723	8,457
Service and maintenance (1)	23,504	21,626
Equipment and supplies	7,024	7,529
	--------------------	--------------------
Total cost of revenues	42,849	38,172
	--------------------	--------------------
Gross profit	52,377	47,815
Operating expenses:
Sales and marketing (1)	22,777	22,887
Product development and engineering (1)	12,468	12,100
General and administrative (1)	13,702	14,558
Amortization of intangible assets	7,958	6,575
	--------------------	--------------------
Total operating expenses	56,905 ---------------------	56,120 ---------------------
Loss from operations	(4,528)	(8,305)
Other income, net	2,790	2,421
	--------------------	--------------------
Loss before provision for income taxes	(1,738)	(5,884)
Provision (benefit) for income taxes	84	(414)
	--------------------	--------------------
Net loss	$ (1,822)	$ (5,470)
Basic and diluted net loss per share:	$ (0.08)	$ (0.23)
	--------------------	---------------------
Shares used in computing basic and diluted net loss per share:	23,806	23,527
	--------------------	--------------------
Non-GAAP (excludes amortization of intangible assets, acquisiton-related expenses and stock compensation expense):(2)
Net income	$ 12, 634	$ 6,996
	---------------------	---------------------
Diluted net income per share (3)	$ 0.52	$ 0.29
	---------------------	---------------------
(1) Stock-based compensation is allocated as follows:
Cost of revenues: service and maintenance	740	520
Sales and marketing	2,097	2,120
Product development and engineering	592	578
General and administrative	2,975	2,673
	-----------	-----------
	$ 6,404	$ 5,891
	======	======
(2) Non-GAAP presentation excludes charges for amortization of intangible assets of $7,958 and $6,575, acquisition-related expenses of $94 and zero, and stock compensation expense of $6,404 and $5,891, for the nine months ended March 31, 2008 and 2007, respectively.
(3) Shares used in computing non-GAAP diluted net income per share were 24,334 and 23,803 for the nine months ended March 31, 2008 and 2007, respectively.

Bottomline Technologies Unaudited Condensed Consolidated Balance Sheets (in thousands)
	March 31,	June 30,
	2008 ------------------------	2007 ----------------------
Assets
Current assets:
Cash, cash equivalents and short-term investments	$ 76,932	$ 65,873
Accounts receivable	19,890	24,169
Other current assets	4,540	5,402
	------------------------	------------------------
Total current assets	101,362	95,444
Property and equipment, net	8,846	8,270
Intangible assets, net	75,322	84,296
Other assets	2,612	1,784
	------------------------	------------------------
Total assets	$ 188, 142	$ 189,794
	===============	==============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$ 6,495	$ 6,650
Accrued expenses	7,098	8,475
Deferred revenue and deposits	25,028	24,998
	------------------------	----------------------
Total current liabilities	38,621	40,123
Deferred revenue, non current	2,208	2,498
Deferred income taxes	4,876	6,258
Other liabilities	1,029	479
	------------------------	----------------------
Total liabilities	46,734	49,358
Stockholders' equity
Common stock	26	25
Additional paid-in-capital	275,247	263,229
Accumulated other comprehensive income	7,534	8,292
Treasury stock	(19,846)	(11,285)
Accumulated deficit	(121,553)	(119,825)
	------------------------	----------------------
Total stockholders' equity	141,408	140,436
	------------------------	----------------------
Total liabilities and stockholders' equity	$ 188,142	$ 189,794
	===============	==============

Non-GAAP Financial Statements

Bottomline has presented supplemental non-GAAP statements of operations as part of this earnings release. The non-GAAP statements of operations exclude certain non-cash items, specifically amortization of intangible assets, stock-based compensation and acquisition-related expenses. The presentation of this information should not be considered in isolation from, or as a substitute for, the financial results presented in accordance with GAAP. Bottomline believes that these supplemental non-GAAP statements of operations are useful to investors because they allow for an evaluation of the company with a focus on the performance of its core operations. Bottomline’s executive management team uses these same non-GAAP financial statements internally to assess the ongoing performance of the company. Since this information is not in accordance with GAAP, there are material limitations to its usefulness on a stand-alone basis, including the lack of comparability of this presentation to the GAAP financial results of other companies. All amounts are in thousands, except per share amounts.

	Non-GAAP  Three Months Ended
	March 31,
	2008 ---------------------	2007 ---------------------
Revenues:
Software licenses	$ 3,149	$ 4,071
Subscriptions and transactions	7,223	6,750
Service and maintenance	18,359	16,856
Equipment and supplies	3,301	3,438
	--------------------	--------------------
Total revenues	32,032	31,115
Cost of revenues:
Software licenses	173	177
Subscriptions and transactions	3,836	3,064
Service and maintenance	7,827	7,633
Equipment and supplies	2,409	2,532
	--------------------	--------------------
Total cost of revenues	14,245	13,406
	--------------------	---------------------
Gross profit	17,787	17,709
Operating expenses:
Sales and marketing	6,580	7,410
Product development and engineering	3,794	4,062
General and administrative	3,393	4,239
	--------------------	--------------------
Total operating expenses	13,767	15,711
	--------------------	--------------------
Non-GAAP income from operations	4,020	1,998
Other income, net	998	682
	--------------------	--------------------
Non-GAAP income before provision for income taxes	5,018	2,680
Provision (benefit) for income taxes	267	(98)
	--------------------	--------------------
Non-GAAP net income	$ 4,751	$ 2,778
Diluted non-GAAP net income per share:	$ 0.20	$ 0.12

	Non-GAAP  Nine Months Ended
	March 31,
	2008 ---------------------	2007 ---------------------
Revenues:
Software licenses	$ 9,906	$ 10,005
Subscriptions and transactions	21,407	19,976
Service and maintenance	54,127	45,854
Equipment and supplies	9,786	10,152
	--------------------	--------------------
Total revenues	95,226	85,987
Cost of revenues:
Software licenses	598	560
Subscriptions and transactions	11,720	8,457
Service and maintenance	22,747	21,106
Equipment and supplies	7,024	7,529
	--------------------	--------------------
Total cost of revenues	42,089	37,652
	--------------------	---------------------
Gross profit	53,137	48,335
Operating expenses:
Sales and marketing	20,647	20,767
Product development and engineering	11,864	11,522
General and administrative	10,698	11,885
	--------------------	--------------------
Total operating expenses	43,209	44,174
	--------------------	--------------------
Non-GAAP income from operations	9,928	4,161
Other income, net	2,790	2,421
	--------------------	--------------------
Non-GAAP income before provision for income taxes	12,718	6,582
Provision (benefit) for income taxes	84	(414)
	--------------------	--------------------
Non-GAAP net income	$ 12,634	$ 6,996
Diluted non-GAAP net income per share:	$ 0.52	$ 0.29

Bottomline has presented supplemental non-GAAP financial measures and statements as part of this earnings release. The non-GAAP financial measures and statements exclude certain non-cash items, specifically amortization of intangible assets, stock-based compensation and acquisition-related expenses. The presentation of this non-GAAP financial information should not be considered in isolation from, or as a substitute for, the financial results presented in accordance with GAAP. Bottomline believes that these supplemental non-GAAP financial measures are useful to investors because they allow for an evaluation of the company with a focus on the performance of its core operations. Bottomline’s executive management team uses these same non-GAAP financial measures and statements internally to assess the ongoing performance of the company. Since this information is not a GAAP measurement of financial performance, there are material limitations to its usefulness on a stand-alone basis, including the lack of comparability of this presentation to the GAAP financial results of other companies. A reconciliation of the GAAP results to the non-GAAP results for the three and nine month periods ending March 31 is as follows:

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