Bottomline Technologies Inc (EPAY) Q1 2022 Earnings Call Transcript

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Bottomline Technologies Inc (EPAY)
Q1 2022 Earnings Call
Nov 9, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to the Bottomline First Quarter Fiscal 2022 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Amy Brownrig. You may begin.

Amy Brownrigg -- Investor Relations

Good afternoon, everyone. Welcome to Bottomline's First Quarter Fiscal 2022 Earnings Conference Call. I'm Amy Brownrigg, and joining me this afternoon are Rob Eberle, Bottomline's CEO; and Bruce Bowden, CFO. Statements made on today's call will include forward-looking statements about Bottomline's future expectations, plans and prospects. These statements are subject to risks, uncertainties and assumptions, including those related to the impacts of COVID-19 on our business and global economic conditions. Our forward-looking guidance is based on our assumptions as to the macroeconomic environment today. Many of these assumptions relate to matters beyond our control.

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. We do not assume any obligation to update forward-looking statements. During this call, Bottomline's financial results are presented on a non-GAAP basis. These non-GAAP results include, among others, 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 Relations section of our website. A summary of the guidance provided during the call is available from the company upon request.

Let me now turn it over to Rob for his remarks.

Robert A. Eberle -- President, Chief Executive Officer & Director

Thank you, Amy. Good afternoon, and welcome to the Bottomline Fiscal '22 earnings call. As always, we appreciate your interest in Bottomline. I'm here with Bruce Bowden, our CFO, who'll provide a detailed review of our financial results and our guidance. Bruce will also outline the new manner in which we'll be disclosing and reporting on our key product sets. This will help investors understand the financial profile and contribution of each and, importantly, allow investors to track the growth and success of these major products.

As always, we'll answer questions after Bruce's remarks. We're pleased to report on a strong Q1. Subscription revenue growth was on target at 15%, highlighted by a breakout quarter in Paymode-X. We made significant advancements in our product set, expanding TAM and extending our competitive advantage. We announced that we'll be welcoming three new Board members. Mike Curran will be rejoining the Board. And we're also adding Phil Hilal and Larry Klane as new members. We look forward to adding their experience and perspective. We've also formed a strategy committee of the Board, which will make recommendations with respect to our market position and strategy, opportunities to accelerate our subscription revenue growth and other ways to create additional shareholder value. I'll provide some color on several of our most significant product advancements in a moment.

But first, I'll outline the key financial results for the first quarter. Subscription revenue was $103.5 million, reflecting year-over-year growth of 15%. Our investment thesis is straightforward. Our product set, market position and execution are well positioned to produce sustained subscription revenue growth in our target 15% to 20% range. Subscription bookings in the quarter were $19.8 million. Total revenue was $123.6 million, representing year-over-year growth of 10%. And adjusted EBITDA was $23.1 million, in line with our plan and guidance. Our targeted product investment, market opportunity, competitive position and strong execution are all evidenced in the results we're reporting for the quarter. They are also the foundation of our confidence in our ability to drive sustained subscription revenue growth in the coming year and years beyond. There's a lot of really great progress being made across the company in new product innovation.

I'd like to highlight a few for investors as they play a central part in our competitive position in the market, expansion of TAM and long-term growth opportunity. We've spoken of the significant opportunity in front of us to build on a leading position in payments automation and expand into the full payments and cash life cycles. That's payables, receivables and treasury management. I'm pleased to update you on the progress we're making on our new integrated receivables platform, which is one of the building blocks of our PCL strategy.

Over the next few months, we'll be launching our next-generation receivables offering. Some feature of the platform include intelligent reconciliation of payments, remittances and invoices, easy to navigate exception management and the ability to predict behavior over time to increase payment visibility, and forecast receipts. Our PCL strategy will play out steadily over the coming quarters and years, and the receivables releases are significant, an important step in the expansion of our capabilities in this market. Turning to our banking solutions. Developing the market-leading platform is a complex and difficult task, particularly in a highly competitive market. We've done just that with digital banking with our DBIQ platform.

Our leadership was confirmed this past quarter, as we're once again named best-in-class by Aite and the digital commercial banking payments and cash management category with number one in product features, client service, client strength and vendor stability. We continue to offer new capabilities to banks to allow them to more effectively compete and grow their business banking franchise. An example is our new merger IQ platform, which is focused on banks consolidations and positions Bottomline as a key partner in monitoring the customer bases of two merged banks.

The platform provides insights and predictions related to platform usage, transaction volumes, engagement and early warnings of attrition, all critical behaviors banks want to monitor on an acquired customer base. With a combination of a well-established market-leading position, a strong pipeline of new product innovations and a positive outlook, we're confident in our digital banking product set will be a significant contributor to our growth in Q2, the second half of the fiscal year, and the years ahead.

Finally, I'd like to comment on the quarter and some of the advancements we've made with Paymode-X. We had a real breakout quarter in Paymode-X. Growth in the quarter was 31%, but it's not just the acceleration of 31% growth. It's really about execution, momentum and major product extensions. Our comprehensive payable product strategy is resonating with customers and the market. We provide a single offering for all payment types, optimizing customer outcomes across automation, security and rebates. We have an excellent foundation for continued growth based on our position in the market, the size of our network and the strength of our go-to-market. Earlier today, we announced significant new capabilities for Paymode-X via the acquisition of Bora Payment Systems.

The combination with Bora brings us straight to processing of virtual cards, new robust vendor enrollment capabilities, added value to customers' virtual card programs and the potential for new additional channel partners and additional revenue opportunities for our existing channel partners. Our continued product extensions aligned to our customer promise and strategic plan for growth. We couldn't be more excited about the results for the quarter and the road ahead for Paymode-X.

As you can see, we've built a portfolio of market-leading products targeted at intelligently digitizing the way businesses pay and get paid. Our products do this in a manner that is simple smart and secure. Across our payment platforms, we've continued to innovate around these strengths, focusing on products that exceed customers' expectations for automation, intelligence, routing across multiple payment types, fraud prevention, predictive analytics, interoperability and innovation.

In closing, we're excited about fiscal '22 and the runway we see ahead based on our product's position in the market and the size of those markets. Our product set differentiates Bottomline from other players in the space and powers continued demand and growth. We're pleased with the Q1 results and the strategic advancements in the quarter. We're confident in our FY '22 plan. We're also confident we'll continue to execute against that plan, and in doing so, drive shareholder value.

I'll now turn the call over to Bruce and then, of course, we'll both be available for questions.

Adam Bruce Bowden -- Chief Financial Officer & Treasurer

Thanks, Rob, and good afternoon, everyone. As Rob mentioned, today, I'll start with a review of our first quarter 2022 performance. Then I'll share some changes we're making to our financial reporting to provide a clearer and deeper view into the key elements of our business. Finally, I'll cover guidance for Q2 and the fiscal year. Q1 represented another very positive step for our accelerating financial performance. Subscription revenue was $103.5 million and grew 15% year-over-year, both of those hitting the high end of our guidance. Subscription revenue was 84% of total revenue, four points higher than the same period a year ago and recurring revenue was 94%, one point higher than last Q1.

Both of those metrics are at all-time highs as we continue to drive recurring revenue through our key growth platforms. We expect continued acceleration of our subscription revenue growth as the fiscal year progresses. I'll talk more about the drivers of that in a few minutes. Total revenue exceeded our guidance at $123.6 million, representing 10% year-over-year growth, which is within our target range for fiscal '22. Bookings in Q1 were $19.8 million.

Although we would have liked to see more, that bookings level is 19% of our subscription revenue. So it is sufficient to support our target -- 15% to 20% subscription revenue growth target over the longer term, especially when taken together with the other non-bookings revenue growth drivers in our business. And we do expect more robust bookings across the balance of the year. Our pipeline is strong. Moving down the income statement. In the first quarter, core gross margin was 59% as it was in Q4 of '21. At 60%, subscription gross margins were on target for the quarter and consistent with Q4 '21. Our subscription revenue business models are continuing to scale, and we expect gross margin expansion as we progress through the year.

Moving to opex. Sales and marketing was 22.7% of revenue in Q1, 340 basis points higher than in Q1 of 2021. As we've conveyed, we are investing in the teams and programs that are driving accelerating revenue. Product development was 16% of revenue in Q1, 80 basis points higher than Q1 of 2021, fueling the innovation agenda that Rob just discussed. The growth in both innovation and go-to-market expense was predominantly driven by increased investments in our key payment platforms, Paymode-X and PTX where we are seeing particularly accelerated growth.

Operating expense growth also reflects increased compensation costs, including employee salary increases that we had postponed in 2021 due to COVID uncertainty. The market for technical and commercial talent is as hot as it has ever been, and we are committed to remaining competitive in attracting the very best teams to Bottomline. Our people and our products are the two best investments we can make. They are the key to driving our future growth. Adjusted EBITDA in Q1 was $23.1 million, which hit the low end of our guidance.

That represents 19% of revenue, the mathematical result of total revenue above guidance and EBITDA dollars at the lower end of guidance. We remain confident that we will achieve our $106 million EBITDA target for the year. Core operating income was $14 million, within our target range. Core EPS was $0.22 for the quarter. EPS was a little below guidance because in addition to hitting the low end of our operating income target, we have more tax impact than anticipated. Turning now to the balance sheet and cash flows.

In Q1, we executed aggressively on our $50 million share buyback program. repurchasing approximately 517,000 shares for $21.5 million, representing an average price per share of $41.59. We have continued at this pace in Q2. And as of the end of last week, we had repurchased approximately 942,000 shares and spent $39.7 million, so an average price of $42.11. We continue to believe our shares are undervalued, and we'll buy back shares for so long as that's the case. We ended Q1 with $125 million in cash and cash equivalents and $130 million drawn on our revolving line of credit of $300 million. For the quarter, operating cash flow was $10 million, capital expenditures were $12 million and free cash flow was negative $1.5 million.

As a reminder, our Q1 free cash flow is always the low point of the year due largely to seasonal working capital fluctuations. So the big financial picture for the company is a strong start to the year in terms of growth, profitability and capital allocation. We feel very good about where we are on our trajectory into the rest of the year. Now let's take a deeper look at the business. Over the past few quarters, we've heard a lot from investors about our product level reporting.

And today, we are instituting significant changes in response to that. Those changes are designed to provide greater clarity and depth about the key elements of our business and, in particular, full visibility into our key growth and profit drivers. As you will see in the supplemental information and our 10-Q, we have revised certain of our segment and disaggregation of revenue disclosures. To help understand the impact of these changes, we've recast the four quarters of fiscal 2021 as well as the full year of fiscal 2020 in our supplemental slides. So let's take another look at our Q1 performance through this adjusted lens. Legal Spend management, which, as you all know, is a very focused product set, grew 7% year-over-year in Q1.

Once again, and as expected, the growth in LSM picked up from the previous quarter and eight new customers chose our legal spend management products. You'll also see in our updated reporting that legal spend management is our most profitable product line with 24% operating profit in Q1. Remember that on a companywide basis, the difference between operating profit and EBITDA was 7.2% in Q1. So although we don't report EBITDA at the granular segment level, that company level differential should allow you to make a reasonable approximation. Banking Solutions subscription revenue was 8% higher than Q1 of '21 and total revenue growth was 5%. Both of those were impacted by the remainder of the lap of the legacy Texas termination fee in Q1 '21 that we discussed last quarter. Digital Banking Solutions now includes financial messaging, a product that is almost exclusively sold to banks.

In Q1, Financial Messaging generated $21 million in total revenue grew 10% year-over-year and produced 17% operating profit. So this is a sizable growing and profitable product line. Perhaps the most exciting is the dynamic performance of the Payment Platform segment, which includes Paymode-X and PTX. We continue to see very strong and, in fact, accelerated performance there. Subscription and total revenue grew 33% in Q1 versus Q1 of '21 and 29% on an organic basis, which excludes the addition of Treasury Express.

Both Paymode-X and PTX contributed to this strong growth as they continue to capitalize on the large market opportunity in the U.S. and U.K. markets, respectively. I noted on our last call that we expected our Paymode-X and PTX products together to grow between 20% and 30% this year. And thus far, they are exceeding those expectations. During the quarter, we added 24 clients to our Paymode-X customer base. You'll also see in our updated reporting that these platforms generated 17% operating profit in Q1 and and have been consistently profitable across the last five quarters while also driving accelerated growth.

Our last two segments remain unchanged. We hope that these changes to our communication about our business will provide a clearer view of the growth and profitability of its components and be more in line with the way that most investors tend to think about them. We're determined to be responsive to the requests we've been hearing from many of you and to adjust the way we talk about our business to be more helpful to you to understand the growth, profitability and value profiles of its key elements.

Going forward, this should provide a good means to more accurately track our progress. I'd like to move now to our outlook for Q2 fiscal 2022. We expect subscription revenue of $106 million to $108 million, reflecting 14% to 16% year-over-year growth. Total revenue of $125 million to $127 million, 9% to 10% year-over-year growth; adjusted EBITDA of $24 million to $26 million; core operating income of $15 million to $17 million; and core EPS of $0.24 to $0.26. With the accelerating growth we are seeing and good visibility into the balance of the year, today, we are reaffirming our full year fiscal '22 guidance. We continue to expect subscription revenue of at least $445 million, reflecting 15% to 16% year-over-year growth, driven by the continued strength of our key payment platforms, Paymode-X and PTX. We expect total revenue of $520 million, 10% year-over-year growth; adjusted EBITDA of $106 million, 20% of revenue; core operating income between $68 million and $71 million; and core EPS of $1.11 to $1.15.

In closing, we're very pleased with our start to the fiscal year. Our plan is for continued strong performance as the year progresses. The opportunity we see ahead of us in this dynamic and growing market is incredibly exciting, and our leadership position across product lines gives me confidence that we have a promising path ahead of us.

Now we'll open the call for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions]. Our first question comes from the line of Andrew Schmidt with Citi. Please proceed with your question.

Andrew Schmidt -- Citi -- Analyst

Hey. Rob. Hey, Bruce. Thanks for taking my questions here. I want to start off with the question on the recent announcement with the addition of the Board members and the formation of the Strategy Committee. Obviously, there's been a topic of conversation among investors for the last couple of weeks. I was just hoping to get your take. What types of discussions are you having, I guess, at the Board level from a strategic perspective? Obviously, there's input our ways to improve the business. You mentioned accelerated growth, things like that. But our other strategic options also being discussed like spin-out, potential sale, things like that. Any color in terms of the imperative there would be helpful. Thanks a lot.

Robert A. Eberle -- President, Chief Executive Officer & Director

Well, the new Board members just joined yesterday. So we haven't had committee meeting yet at this point, but we certainly have a very good sense, and we had a lot of discussion of where we'll go. Having said that, that's not something a board-level discussion isn't something we could share in particular, either now or in the future. What I would say though is everything is on the table. We're looking at how can we accelerate growth and we're looking at other ways to create shareholder value whether that's a spin-off or any of the other things you mentioned, everything is on -- really on the table, what's going to be the best solution for the business and for shareholders.

Andrew Schmidt -- Citi -- Analyst

Understood. Appreciate that, Rob. And then if I could dig into the performance a little bit in the quarter, kind of how to think about growth going forward at. I really like this new segment disclosure and the clarity and the commentary is a big improvement. So thank you for that. Just on payment platforms consistently in the 30% plus camp the last couple of quarters now. Some of that is recovery and comparisons and things like that. But Bruce, I know you mentioned 20% to 30% expectation. But what's the right way to think about the growth of payment platforms over the intermediate term? And I guess the question is, between your product set evolution, which looks really interesting. And then also kind of the demand environment, do you think we're on a structurally higher growth path here going forward versus just something that's more comparison related? Thanks.

Adam Bruce Bowden -- Chief Financial Officer & Treasurer

Yes. Thanks, Andrew. We've been pretty clear in guiding to that kind of 20% to 30% range for the payment platforms, Paymode-X and PTX. Remember that the 33 and the 31 do include a little bit of benefit from Treasury Express. So the actual performance of the two primary payment platforms is probably more like in the high 20s, 29% as we said this quarter and probably sort of a similar level, a little bit less than that last quarter. That having been said, look, there are a number of drivers for the growth of our payment platforms. Obviously, we're out there booking new business all of the time. You know and most of the investors know that vendor enrollment is a really important driver. And the continued product innovation is an important driver.

We've just really started to drive revenue through virtual card channels. As you know, historically, we're more focused on ACH, basic and premium ACH. And the addition of Bora that we announced this morning and straight-through processing is another way to provide a really efficient payment modality for our customers. So it's really a combination of all of those things, booking new payers and rolling new vendors, providing expanded more efficient functionality. And honestly, Paymode-X, PTX are just firing on all cylinders right now. We'll probably stick with that 20% to 30% range if we can outperform that. That's great. But we're not looking to change that right now.

Andrew Schmidt -- Citi -- Analyst

Perfect. Thanks for that Bruce. And if I can sneak one more in on banking solutions. So I think, Rob, you might have mentioned you expect Banking Solutions to be a nice contributor to growth in the second quarter and the back half of the year. So is it fair to say now that we get past this term fee that we should see a little bit more of a normalization of growth there? And then, I guess, just any comments about just the digital banking pipeline. You've, obviously, heard from others about the sales cycle in the -- and winds picking up. So we'd love to get your perspective there as well. Thanks a lot.

Robert A. Eberle -- President, Chief Executive Officer & Director

Sure. Well, the first thing the math -- as you pointed out, the math of the significant termination fee a year ago really sort of hindered us in terms of a growth rate this quarter, but we cleared that now. So in the second quarter, we'd expect to see a more normalized growth rate for our banking solutions and step up certainly from where we were in Q1, a significant step-up. The market, we have the leading business banking platform. And that benefits us in a couple of different ways. We're going to win the majority of new opportunities for platform deals. We're a strategic partner to major banks who rely on us to grow the business banking franchise. So that's new platform capabilities that we can bring out.

The merchant IQ is a good example of that. In the context of a bank consolidation and there are a number of them in play in the market that we're involved in and working with. Measuring what's happening with the customer base is never more critical because you're trying to see of this acquired base, are we seeing a decline in activity? Are we seeing attrition? Are we seeing any other indications that we're going to lose some of the customer base we're bringing across. So this is actually a brand-new targeted tool. And it's just an example of the kinds of new capabilities we can bring to our banks to help them win, compete and grow their business banking franchise. So the short answer to your question is, yes, with the termination fee, we'll see stronger growth next quarter, and that will help our overall subscription growth rate as well.

Andrew Schmidt -- Citi -- Analyst

Great. Good to hear about the top of the funnel capabilities there. Thanks, guys. Appreciate the comments.

Robert A. Eberle -- President, Chief Executive Officer & Director

Thank you, Schmidt.

Operator

Our next question comes from the line of Matt Schwartz with Raymond James. Please proceed with your question.

Matt Schwartz -- Raymond James -- Analyst

Hey. This is Matt on for John Davis. Thanks for taking my question. Just wanted to ask about the confidence in the full year outlook. [Indecipherable] may be a modest weaker 2Q guide. And then just what gives you confidence in the employee acceleration going forward? Thanks.

Adam Bruce Bowden -- Chief Financial Officer & Treasurer

Hey, Matt, I'm sorry, that was very garbled for us. Could you just repeat that one more time, maybe a little more slowly, so we make sure we get it.

Matt Schwartz -- Raymond James -- Analyst

Sure. Am I clear now?

Adam Bruce Bowden -- Chief Financial Officer & Treasurer

Yes, that's a little better. Thanks.

Matt Schwartz -- Raymond James -- Analyst

Okay. So I just wanted to ask about the confidence in the full year outlook, given maybe modestly weaker 2Q guide? And then what gives you the confidence in the employee acceleration going forward?

Adam Bruce Bowden -- Chief Financial Officer & Treasurer

Sure. Yes, obviously, we have rolling forward forecasts of all four quarters. And our plan for fiscal '22 all along contemplated accelerated growth across the course of the quarters. Between the lap for digital banking that continued and, in fact, was more significant in the first quarter, the continued acceleration of both Paymode-X and legal spend management out of COVID and our visibility into the pipeline of our digital banking deployments. We've kind of known all along that this was going to be the shape of things. We've stuck with our guidance for now the 15-plus percent subscription revenue growth. And if Paymode-X and PTX continue to fire as well as they are, we would hope maybe we could do a little better over the course of the year. But for now, I think we're going to stick with where we are.

Matt Schwartz -- Raymond James -- Analyst

All right. Great. Thanks so much, guys.

Robert A. Eberle -- President, Chief Executive Officer & Director

Thanks, Matt.

Operator

Our next question comes from the line of George Sutton with Craig Hallum. Please proceed with your question.

James -- Craig Hallum -- Analyst

Hi, guys. This is James on for George. Thanks for taking my questions. So you mentioned in the announcement this morning, a little bit on the call today that Bora brings in some new banking channel partners. And since JPMorgan is one of those partners, I'd be curious to know, sort of, how the relationships you're bringing in through the acquisition will be structured relative to your existing Paymode partners? And I guess how many Paymode partners could you potentially have following the acquisition?

Robert A. Eberle -- President, Chief Executive Officer & Director

Well, to be clear, those partners that brought on those are Bora partners. So they are the potential for new channel partners, but they aren't Paymode-X channel partners today. What the real benefit of the acquisition of technology, and I should mention, we have that fully integrated and running already now. We had not fully integrated and running the day we announced or the day we closed the transaction. So we're -- the real benefit is the ability to drive more virtual card transactions and to do so in a much simplified way for our particularly larger vendors that are taking significant volumes of virtual card transactions. So it's an important technology to be adding. It gives us -- we've had an existing relationship on other products with JPMorgan, but it gives us a another way that we're now working with them. But to be clear, they are not today a Paymode-X channel partner.

James -- Craig Hallum -- Analyst

Got it. And then through our checks, we've seen that you're adding some SMB focused sales reps for Paymode. Could you maybe talk about your strategy in the lower end of the market or the thought process there, since historically been up market. And I guess maybe that sort of ties into the acquisition this morning, I guess, will the virtual card capabilities sort of help you in that strategy given that's sort of a [Indecipherable] method in lower...

Robert A. Eberle -- President, Chief Executive Officer & Director

Well, yes. So there's three different things in there. Virtual card is going to help an enterprise level for sure, and it's going to help the medium business and small business as well. So that capability helps us across all the markets we would target. The -- moving down market is really a function of product capabilities that we've been adding. So the Paymode-X example would be B2C payments as an -- so the Paymode-X can address more of the mid-market in small business requirements. In terms of the direct sales force, though, that team is not one thing I just slightly up. That team is targeting enterprise, mid-marketing enterprise, customers as our target market. So I wouldn't look at our direct sales team as a vehicle to go down market, really it's product capability that helps us extend into a broader market than we're addressing today. And the sales team is, again, focused on mid-market and enterprise.

James -- Craig Hallum -- Analyst

Got it. Thanks for taking my questions.

Operator

Thank you. Our next question comes from the line of Gary Prestopino with Barrington Research. Please proceed with your question.

Gary Prestopino -- Barrington Research -- Analyst

Hi. Good afternoon, everyrone. A couple of questions here. In terms of the sales and marketing expense, obviously, it's elevated as a percentage of sales this quarter. Going forward, does that start stepping down as a percentage of sales? Or do you intend to keep it fairly high like you did in Q1?

Adam Bruce Bowden -- Chief Financial Officer & Treasurer

We don't anticipate a significant step down in sales and marketing as a percent of revenue. Our objective is to accelerate our revenue growth and drive incremental gross margin, including gross margin scale so that we have additional operating expense to invest while still maintaining our 20% EBITDA target.

Gary Prestopino -- Barrington Research -- Analyst

Okay. And then in terms of the strategic review, I know you said you haven't had a meeting with the new board members and all that. But what is your thoughts on the timetable that when we would hear something, you could share that?

Robert A. Eberle -- President, Chief Executive Officer & Director

Well, that would depend on, of course, what actions we end up taking and how -- what those time frames for those actions might be. So I wouldn't want to speculate today and commit that we'd have some answer or some new news. I would tell you we're open to any -- and all ideas that are going to drive shareholder value. We think bottom line is well undervalued given the products we have, the market position we have in the revenues and growth history and trajectory we have. So we're looking forward to working with the committee from a management perspective on one of the ways that we address that and can increase shareholder value at bottom line.

Gary Prestopino -- Barrington Research -- Analyst

Okay. And then lastly, Bruce, you mentioned the -- something I didn't quite get it with the EBITDA adjustments as it pertains to the segment profitability. Could you maybe help us as to where -- how those things fit out to each different segment, particularly payments, banking and legal?

Adam Bruce Bowden -- Chief Financial Officer & Treasurer

Yes. That was -- yes, thanks, Gary. That was exactly what I intended to convey in my comment is that we don't report EBITDA at the segment level, and we're not looking to change that today. What I was trying to convey is that if you look in the aggregate, the difference between our operating margin and our EBITDA is about 7%. So if you wanted to look across our segment operating profits and add 7% to each of those. It's not a bad approximation. There's no particular skew in the differential that to be concerned with.

Gary Prestopino -- Barrington Research -- Analyst

Okay. Thank you.

Robert A. Eberle -- President, Chief Executive Officer & Director

Yup.

Operator

Our next question comes from the line of Chris Kennedy with William Blair. Please proceed with your question.

Chris Kennedy -- William Blair -- Analyst

Hey, guys. Really appreciate the new disclosures. Rob, you mentioned the breakout quarter for Paymode-X. Can you provide a little bit more perspective on what the growth has been over the last several quarters of Paymode?

Robert A. Eberle -- President, Chief Executive Officer & Director

Well, I'd make a couple of comments, and Bruce can comment on specific growth quarter-by-quarter, if he cares to. But one, the 31% is an acceleration for us, so certainly, just on subscription growth alone. But that's frankly the least of it. I think the pieces of really our breakdown quarter of the momentum we have today -- momentum we have in bookings, momentum we have in the depth and closeness with which we're working with channel partners, momentum we have in vendor enrollment and momentum we have in terms of product capabilities, which include the straight-through processing that we've added now with Bora. So really, it's the extending the capabilities of the platform, executing on vendor enrollment and bookings that makes us break out quarter really looking forward into the coming quarter and the remainder of the fiscal year. So that's really the keys, and calling it what I think is very fair to call breakout quarter.

Adam Bruce Bowden -- Chief Financial Officer & Treasurer

Yes. And Chris, I'll just add. If you go back into the COVID quarters, I think we were pretty clear in conveying that the transactional nature of the revenue streams from Paymode-X led to material declines in the growth rate. If you go previous to COVID, performance in the high teens and 20s for Paymode-X was kind of what we had come to expect and we wanted to try to accelerate that further. And as COVID is kind of in the rearview mirror now, that's why we're able to show the kind of growth numbers that we're putting forth last quarter and this quarter.

Robert A. Eberle -- President, Chief Executive Officer & Director

And it's really across the board to leadership, key roles, product roles, leadership of the product itself, all of those areas where we're really executing, that positions us well for the next couple of quarters and, frankly, several years.

Adam Bruce Bowden -- Chief Financial Officer & Treasurer

Vendor enrollment, I'll just add in particular. We get very, very regular reporting on our vendor enrollment efforts, and that team is doing an amazing job.

Chris Kennedy -- William Blair -- Analyst

Okay. Very helpful. And then one follow-up. Can you talk a little bit more about the virtual card opportunity? What percentage is the mix today? And then how does that impact revenue? Thanks a lot, guys.

Robert A. Eberle -- President, Chief Executive Officer & Director

Bruce sort of referenced that the mix today is very small in terms of revenue bottom line. We've focused and, frankly, pioneered, ACH+ and driving -- ACH is one of the payment types. So what we're doing now is adding virtual card capability, which really rounds out a full integrated payables strategy. And as for our existing channel partners who have a significant level of card. It adds even more vendor enrollment capability and ease of those transactions for the vendors that want to accept cards. So it's not a revenue -- major revenue contributor today, but it really rounds out the capabilities and positions us very well for strong revenue growth in the future.

Chris Kennedy -- William Blair -- Analyst

Thank you.

Operator

Our next question comes from the line of Matthew Roswell with RBC. Please proceed with your questions

Matthew Roswell -- RBC -- Analyst

Yes. Good evening. And I want to reiterate I like the new segment reporting. So a question on the expenses that convoluted and I apologize in advance for that. If we think about the step-up in expenses year-over-year, can you talk about sort of what percentage of that you would consider kind of return to normalcy, meaning you brought wage increases back. I'm assuming that sales-related travel is starting to pick up. What -- and what percentage is kind of investment? And then on that sort of incremental investment piece, the percentage that's associated with hiring people against things like R&D expense. Hopefully, that makes sense.

Adam Bruce Bowden -- Chief Financial Officer & Treasurer

Yes, that makes sense, Matt. No problem. Very little of it. Let me start with what it is and very little of it is a return of travel expense. Like most companies, we aren't anywhere near back into kind of the the pre-COVID level of activity there. And it also isn't a lot of expense that is not people related. 70% of our cost structure is our teams. And so when we're making these investments in very large part, those investments are toward people.

The catch-up as you pretty well put it on the levels of compensation, the fact that we didn't do merit increases for a while are a material part of the step-up in expense for sure. But quite a lot of the investment is going toward teams that are immediately driving revenue. They are digital marketing teams, the reinforcement of the vendor enrollment team for Paymode-X, customer success. And then there's also significant investment going into product development. So growth for us is a product of investing in new offerings to bring to market and investing in the go-to-market leverage that we need and the go-to-market muscle we need to make that happen. So it's really across the board and all of those things.

Robert A. Eberle -- President, Chief Executive Officer & Director

Yes, I'd separate it that -- I'd agree with everything Bruce said, but one way to look at it would be there's incremental new investment that we're making in the areas he talked about. And then just salary increases, which have been across the board in compensation-related expenses across the board, because -- we -- as we've said, we had held those back during COVID, the market is as competitive as it's been. And we have a super team, and we want to make sure we're really very competitively positioned in terms of compensation.

Matthew Roswell -- RBC -- Analyst

Okay. And if I could quickly get the repurchase information again. I just wasn't able to write it down fast enough. And then on the year-to-date. [Indecipherable]. On to the second part, I think you said year-date or is it quarter-to-date?

Adam Bruce Bowden -- Chief Financial Officer & Treasurer

Yes, Matt, let me just pull those numbers back out for a second. I don't have that in front of me. We'll take the next question...

Matthew Roswell -- RBC -- Analyst

Yes, Matt, let me just pull those numbers back out for a second. I don't have that in front of me. We'll take the next question...

Adam Bruce Bowden -- Chief Financial Officer & Treasurer

We'll take the next question. I'll come right back to you.

Matthew Roswell -- RBC -- Analyst

Okay. Thanks.

Robert A. Eberle -- President, Chief Executive Officer & Director

Thank you.

Operator

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session...

Adam Bruce Bowden -- Chief Financial Officer & Treasurer

Hold on. Hold on one second.

Robert A. Eberle -- President, Chief Executive Officer & Director

No, no, no. We're going to give a closing remark anyway. So thank you. Bruce will give us that -- repeat that stock buyback.

Adam Bruce Bowden -- Chief Financial Officer & Treasurer

Yes. So as of the end of the first quarter, we had repurchased 517,000 shares for $21.5 million, and that represents an average buyback share price of $41.59. I mentioned then that we had continued the repurchase over the course of Q2 to date. And that as of the end of last week, as of activity repurchases through last Friday, we repurchased 942,000 shares and spent $39.7 million so an overall average price of $42.11.

Robert A. Eberle -- President, Chief Executive Officer & Director

So thank you. I'd say in closing, we're really pleased with the quarter, particularly the momentum we saw on Paymode-X, as we indicated. We're confident in our plan. We're executing against that plan, and we look forward to reporting a strong Q2 to investors. So thank you for your interest in Bottomline and your time this evening.

Operator

[Operator Closing Remarks].

Duration: 45 minutes

Call participants:

Amy Brownrigg -- Investor Relations

Robert A. Eberle -- President, Chief Executive Officer & Director

Adam Bruce Bowden -- Chief Financial Officer & Treasurer

Andrew Schmidt -- Citi -- Analyst

Matt Schwartz -- Raymond James -- Analyst

James -- Craig Hallum -- Analyst

Gary Prestopino -- Barrington Research -- Analyst

Chris Kennedy -- William Blair -- Analyst

Matthew Roswell -- RBC -- Analyst

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