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Bottomline Technologies Inc (EPAY)
Q2Â 2019 Earnings Conference Call
Jan. 31, 2019, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
See all our earnings call transcripts.
Prepared Remarks:
Operator
Ladies and gentlemen, thank you for standing by and welcome to the Bottomline's Second Quarter 2019 Earnings Conference Call.
Statements made on today's call will include forward-looking statements about Bottomline's future expectations, plans and prospects. All such forward-looking statements are subject to risks and uncertainties. Please refer to the cautionary language in today's earnings release and Bottomline's most recent periodic reports filed with the SEC for a discussion of the risks and uncertainties that could cause the company's actual results to be materially different from those contemplated in these forward-looking statements.
Bottomline does not assume any obligation to update any forward-looking statements. During this call, Bottomline's financial results are presented on a non-GAAP basis. These non-GAAP results include among others, constant currency growth rates, gross margin, operating income, EBITDA, net income and earnings per share. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the Investor Resources section of Bottomline's website, www.bottomline.com. Bottomline will be providing forward-looking guidance on the call. A summary of the guidance provided during the call is available from the company upon request.
I would now like to turn the conference over to our host Mr. Rob Eberle. Please go ahead.
Robert A. Eberle -- President and Chief Executive Officer
Good afternoon. Thank you for interest in Bottomline Technologies, and welcome to the second quarter of fiscal 2019 earnings call. I'm here with Rick Booth, our Chief Financial Officer who'll provide a detailed review of the quarter's financial results and our guidance going forward. As always, both Rick and I will be available for any questions, following his remarks.
We are once again reporting solid operating results and financials, evidencing the merit of our strategic plan and our execution against that plan. Beyond our financial results in the quarter, I'm even more excited about the future and the steps we took in Q2 to drive continued growth. The future prospects for the business, our market opportunity, product set and business model are all aligned for strong performance for years to come.
I'll focus my remarks on our product set and market position. But first let me briefly touch on the financial highlights of the second quarter. For consistency, I'll report dollar amounts as reported and year-over-year percentages on an FX-neutral and consistent accounting basis. Subscription and transaction revenues grew 14% in Q2. Subscription and transaction revenue for the products other than banking solutions grew 17%. We expect banking solutions growth to be in our target 15% to 20% range within fiscal '20 that's based on the large backlog we're currently implementing.
Subscription and transaction revenue was $71.3 million, a run rate at $285 million. Subscription and transaction bookings were $22.5 million. Bookings in Q2 were up $5 million from last quarter, evidencing our market opportunity, strong customer demand and sales execution. Revenue overall was $104.8 million. EBITDA was $25.6 million, up $3.1 million from the prior year. We're continuing to produce attractive profitability, while prioritizing key product growth initiatives. EPS was $0.35 consistent with our target and expectations and we ended the quarter with $96 million in cash.
The financial results we're reporting demonstrate the alignment of market opportunity, our strategic plan, our product set and our execution. During the quarter we continued the advancement of our product set. Our goal is simple, to have the leading technology solution. The solution best equipped to drive business results for our customers. We believe that is the best and right strategy for customers and a big part of why they sign on with Bottomline and is certainly the best strategy for the company both short-term and long-term.
Product leadership drives new wins. Today's enterprises are sophisticated consumers of technology. They know what is possible. They see it from leading enterprise solution providers and they see it every day in their consumer lives. The advancements we're making in our product set are increasing our competitive advantage, help drive our strong bookings in Q2 and will produce continued strong bookings in the future.
There's a playbook we successfully deploy across all our major product platforms. Key elements of that playbook are product leadership driving wins; new capabilities and products driving additional add-on sales; revenues growing year-after-year as our customers grow; and market expansion to new capabilities and new geographies. We saw that playbook at work across wins in Paymode-X, Banking Solutions and Legal Spend Management in Q2. I'll provide some more color on that starting with Legal Spend Management.
We've seen consistent strong growth in Legal Spend Management and that was certainly the case again in the second quarter. Revenue growth is driven by the addition of new customers, the sale of add-on products to existing customers, the growth of our customers' business and even the increases in legal fees and costs. We also believe we're seeing an increased volume resulting from major disaster claim events. This past quarter we signed seven new legal spend customers based on our product leadership and we added new add-on products for six of our existing customers.
From a technology perspective, we've been developing analytics and machine learning technologies for some time now. We've utilized them in our Paymode-X vendor enrollment and in our fraud detection solutions as two examples. We will now leverage the technology to further automate the legal spend bill review process. Developing new product capabilities and innovations and then deploying it across our full product set accelerates our innovation and it does so in a cost-effective manner.
One of our add-on products is PartnerSelect, which is the most effective way for insurers to choose a lawyer, assign work and manage the workflow of the engagement through to completion. The law firms that provides automation and a marketing tool that while the firm just showcase its particular strengths and expertise. And for insurers it provides analytics to choose the best firm for the matter concerned.
We're also extending our international reach with legal spend management. We have several legal spend customers in Canada and we've recently begun selling into the UK. We're leveraging our global presence in existing local UK data center which has a benefit of assuring complete GDPR compliance. We expect to be live in Q4 with the first customer revenues coming in FY '20. The UK market is relatively untapped and provides a very attractive additional source for future legal spend growth.
The same growth playbook played out for us with a key new customer sign-on for digital banking during Q2. As is always the case, we compete and win based on product leadership. Frost Bank is a $31 billion leading Texas bank, serving customers from small start-ups to large corporates, primarily in the Houston, Dallas Fort Worth and San Antonio markets. Frost's stated business objective is to double the size of their corporate base over the next five years.
They evaluated a mix of alternatives, but ultimately determine Bottomline provided the full functionality, an extensible and configurable user experience. They required to attract and retain corporate customers and to achieve their double-the-size of the business objective. In addition, the overall breadth of Bottomline's solution capabilities was unmatched as they signed on for DB 3.0, Secure Payments, which is our integrated Cyber Fraud and Risk Management Solution and our bank-to-bank payments automation. This was a thorough and competitive process, with both their core provider and current treasury provider are involved. We won because we brought the platform best aligned with their business objectives, because we're the proven leader in business banking and because of our continued commitment to technology innovation.
Finally, we saw another strong Paymode-X bookings quarter with 29 new customers sign-ons in the second quarter. We're particularly pleased to see wins across six different sales channels, including Bank of America, Citizens, Fifth Third, The Bank of New York Mellon and TD Bank. The sales' success were seen across multiple channels, governance since the market expansion strategy at work. The value proposition is resonating with prospective customers and our sales results ensure the continued strong growth of Paymode-X.
So in summary, we're extremely well positioned for continued subscription and transaction growth. We're targeting large markets, we've been established leadership position and the actions we're taking will extend that lead. Most of all, customers are responding. We have the opportunity to drive continued and sustained 15% to 20% subs and trans growth and we're fully focused on in executing to achieve that objective. As I look across the business, I see every capability to do so. We're well positioned to drive continued growth and success in a huge market. And in doing so, create long-term shareholder value.
So with that, I'll turn it over to Rick and then again, both of us will be available for questions following his remarks.
Richard D. Booth -- Chief Financial Officer
Thank you, Rob. I'm pleased to report on another solid quarter. We delivered total revenue of $104.8 million, an EBITDA of $25.6 million, both of which exceeded our guidance. Operating income of $20 million and $0.35 core earnings per share were at the top end of our range and subs and trans revenue of $71.3 million was equivalent to $285 million on a run-rate basis.
I'll focus my remarks today on three areas. First, I'll briefly review our attractive strategic position and business model; then I'll review our Q2 financial results in detail; and finally, I'll update guidance for the remainder of the year. Our financial results rest on the firm foundation of our attractive strategic position and business model. We address a large and growing market for business payments. Our product platforms are clearly differentiated in the market. Our sales teams have strong momentum. We are a trusted innovation partner to our customers with long-term valuable customer relationships and our attractive business model allows us to simultaneously deliver current financial results and make the investments we need to drive growth and value for the long-term.
To review our quarterly financial results in detail, I'll speak briefly to each line in our P&L. And in addition, we've posted supplemental materials to our website for your reference. Beginning with the revenue, subscription and transaction revenue is our priority. It drives growth today and it positions us to continue to grow with our customers as they expand the use of our products. We reported growth in overall subs and trans revenue of 13% which is equivalent to 14% after normalizing for its currency and accounting.
This growth was led by products fully converted to subscription which grew 15% in US dollars or 17% on a normalized basis. With this growth, our $71.3 million of subs and trans revenue was equivalent to $285 million on an annualized basis. And this means, 68% of our revenue came from these subs and trans offerings, up 2 full percentage points from a year ago.
Maintenance revenue is another valuable and highly profitable component of our revenue mix and a combination of maintenance in subs and trans revenue provides us with 85% recurring revenue, an excellent visibility to the upcoming results. License revenue, by design is only a small part of our overall business. In Q2, we reported license revenue of $5.7 million and service revenue which reflects the professional services we offered to ensure our customers exceed was $9.8 million in the quarter. So our total revenue of $104.8 million was up 11% on a constant currency basis.
Of course, the driver behind our revenue growth is bookings and we had good sales performance in the quarter. We signed $22.5 million of new subs and trans bookings led by Paymode-X and global business solutions. This brings us to $85 million in new subs and trans bookings for the last four quarters as customers continue to choose Bottomline as their trusted innovation partner to automate business payments. While bookings are estimates, and customers take time to implement and ramp to full revenue production, this provides us with visibility to future subs and trans growth in fiscal '19 and beyond.
Looking at new customer signings. Our Paymode-X Network added 29 new payers across multiple channel partners, which further validates the attractiveness of our full payment automation value proposition as well as the effectiveness of our channel partners. We signed two new customers to our Digital Banking product set, including the competitive platform deal that Rob described earlier. With those signings, and after go lives in the quarter, we have approximately $16 million of annual subscriptions which are not yet being recognized in our P&L.
Our Digital Banking implementations continue to go well and we brought one major customer live in the quarter which keeps us on track to bring approximately two-thirds of this revenue backlog live later in fiscal '19. We signed seven new insurers to our Legal Spend Management network and expanded our relationships with six others, further validating the breadth and depth of our value proposition, and the leading technology capabilities that Rob mentioned.
Continuing down the P&L, we delivered on our financial commitments, while investing significantly to advance our solutions and drive long-term growth. Adjusted EBITDA of $25.6 million is up $3.1 million or 14% year-over-year. EBITDA margin was 24% consistent with our plan and we also drove core operating income of $20 million and core earnings per share of $0.35.
So in total, these results evidence the attractiveness of our business model which allows us to meet our financial commitments while also investing for growth. Our overall gross margin of $61.6 million or 59% of revenue is up 1 percentage point year-over-year. Sales and marketing spends for the quarter was $18.5 million and development expense was $15.3 million in the quarter, an increase of $2.8 million or 22% year-over-year as we ramp the planned investments in our products.
Turning to cash flow and the balance sheet. Operating cash flow is very strong a $19.2 million for the quarter. Free cash flow of $12.6 million for the quarter was also very strong and this allowed us to end the quarter with $96 million of cash and investments on hand. We deployed some of that cash just after quarter-end to purchase a new UK headquarters for GBP16 million or $20.7 million. This will replace our current leased to known facilities. Financially, we evaluated a range of alternatives and concluded that purchasing the facility was the best structure for us as it gives us control, optimizes our local tax situation and limits the incremental P&L costs to less than $300,000 per quarter beginning when we take occupancy in mid-fiscal '20.
As I turn to guidance, let me say a few words about the British pound. When we announced our detailed fiscal 2019 guidance in May, the pound was at $1.36. By the end of our second quarter at December 31st, the pound had declined to $1.27. Although there is no impact to our underlying operating results, the impact of that decline on our reported revenue was $1.5 million in the quarter and will be a further $3.8 million through the second half of the year. Of which, approximately two-thirds is subs and trans revenue.
Flowing this through our guidance calculations, means that for the full year of fiscal 2019 we expect to report $295 million to $298 million of subs and trans revenue; $415 million to $420 million of total revenue; $98 million to $100 million of adjusted EBITDA; $76 million to $78 million core operating income; and core earnings per share of between $1.27 and $1.32. Our guidance for the upcoming Q3 is as follows: $74 million to $76 million of subs and trans revenue; $103 million to $105 million of total revenue; $21 million to $23 million adjusted EBITDA; $16 million to $17 million core operating income; and $0.27 to $0.29 core earnings per share.
So in conclusion, I'm pleased to report a solid quarter, including $104.8 million in total revenue, $25.6 million in EBITDA and 14% overall normalized subs and trans growth led by 17% normalized growth from our products already in the subs and trans model. Currency does and will fluctuate, but we have a great opportunity in future in front of us, by continuing to focus on the things that we can control. We are well positioned in a large and growing market. Our current financial performance is strong. And as planned, we're making the investments we need in order to create value for customers and shareholders for years to come.
And with that, we can open the call to questions.
Questions and Answers:
Operator
Thank you. (Operator Instructions) And our first question will come from the line of Andrew Schmidt with Citi. Please go ahead.
Robert A. Eberle -- President and Chief Executive Officer
Andrew, let me...
Hey, Rob, hey, Rick.
Andrew Schmidt -- Citigroup -- Analyst
Let me make one...
Thanks for taking my question.
Richard D. Booth -- Chief Financial Officer
Andrew, let me make one comment before we do that. I misspoke earlier, the Q3 EBITDA guidance as reflected in our supplemental materials is $22 million to $24 million, not $21 million to $23 million as I said earlier.
Andrew Schmidt -- Citigroup -- Analyst
Got it. Okay. Thank you.
Richard D. Booth -- Chief Financial Officer
Sorry to interrupt you.
Andrew Schmidt -- Citigroup -- Analyst
No worries. So on the full year guide, obviously the revenue outlook for subs and trans came down. I guess, could you just walk us through whether that's all FX, is there something else in there? Maybe some incremental intuit attrition or any other factors to consider when we model the outlook here for the rest of the year?
Robert A. Eberle -- President and Chief Executive Officer
I appreciate the question on the guidance. It's literally just currency. There is no effect on underlying operations. And although we can't control currency, we have a great opportunity focusing on the things that we can control.
Andrew Schmidt -- Citigroup -- Analyst
Got it. If we think about the guide from -- in the third quarter, if we take out I guess, the FX impact, it seems like we should start seeing an acceleration in subs and trans growth just from the unrealized Digital Banking revenues coming online. I guess when you strip out the FX noise should we expect to see that acceleration in the back half just on the currency neutral basis in subs and trans?
Richard D. Booth -- Chief Financial Officer
It begins to accelerate in the back half and it really kicks in in fiscal '20. So we're confident that we'll be seeing growth in the 15% to 20% range from Digital Banking within fiscal '20. Not necessarily in Q1, but you'll begin to see that trend and we'll get there in fiscal '20.
Andrew Schmidt -- Citigroup -- Analyst
Okay. And then the Bottomline outlook. As my understanding that you are mostly hedged on the expenses, but it seems like there's about maybe a 40% flow through in some of the margin of the Bottomline. Is there something incremental investments being incurred or what's -- I guess, what's the best way to think about the flow through -- FX to the Bottomline?
Richard D. Booth -- Chief Financial Officer
No, it's -- we often say that we have about 70% to 80% effective natural hedge built in there. So back at the envelope I think it works out to about 30% impact.
Andrew Schmidt -- Citigroup -- Analyst
Okay. Thank you for that. And then I guess last question more strategically. Pretty good progress with Paymode-X in the quarter and certainly it seems to show up in the positive bookings number. You see Mass card come out and do things around Mass Card Track obviously the MasterCard B2B Hub. Visa is doing a variety of partnerships. Not just doing similar things from a business directory perspective. But do these recent developments change sort of your strategic imperative? Does it require additional investment to work? I guess with more people going after the opportunity to obviously if you're fragmented by the whitespace. How does it affect to the strategy here when you go after business payments?
Robert A. Eberle -- President and Chief Executive Officer
No I think actually it underscores that we're targeting a large opportunity and we're right on track for that. Business directory, we're close to 400,000 vendors in our Paymode-X. That's what's others are trying to achieve with the business directory and accelerating that vendor enrollment process where we'd have our intelligent engagement model, leveraging predictive analytics and other capabilities to do just that.
A central directory could be an interesting thing. We could be part of that. There are variety of different people proposing those and there always there have been for quite some time. In terms of MasterCard and Visa, we have partnerships with both. We do more today than we do with Visa -- I'm sorry, we do more with Visa than we do with MasterCard. And it's an attractive partnership for us and a vehicle where theirs -- that capabilities they have that we don't and things that we can bring and that they certainly don't have around business payments. So we're actively partnering with both organizations.
Richard D. Booth -- Chief Financial Officer
The other thing I'd share about business directory is, people talk a lot about business directories but a business directory without value-added functionality for both the payer and the recipient and a business model that makes it work for both sides, is there is no value. So a lot of the ideas I think are more ideas and concepts but not linked to a proven application in business model.
Andrew Schmidt -- Citigroup -- Analyst
Understood. Thanks, guys. Appreciate the thoughts.
Operator
Thank you. Our next question comes from the line of John Davis with Raymond James. Please go ahead.
John Davis -- Raymond James -- Analyst
Hey, good afternoon guys. Rick, just a clarification question on the guidance. The Bottomline EPS guidance looks like came down roughly $0.13 but EBITDA $2 million. Can you just help square what is below the line there causing that difference?
Richard D. Booth -- Chief Financial Officer
No, there is a -- there is nothing unusual going on there. I think it's the impact of other line items below EBITDA.
John Davis -- Raymond James -- Analyst
Okay, that's (inaudible). EBITDA is coming down $2 million if I were just to do back the envelope that probably like $0.04. So OK, we can take that offline. I'll just...
Richard D. Booth -- Chief Financial Officer
Yeah.
John Davis -- Raymond James -- Analyst
And then I want to be very clear on the subs and trans guidance for this year. It seems like I hear it's all FX, but it does sound like the Digital Banking getting to 15% to 20% has gone from second half this year and now into next year. I just want to make sure that's the case? And is any of that FX-related? Just trying to figure out there's anything else besides the FX going on in subs and trans?
Robert A. Eberle -- President and Chief Executive Officer
No, there is no FX in fact in Digital Banking and Digital Banking was not intended for 15% to 20% in the back half of this year. That was never in our guidance.
John Davis -- Raymond James -- Analyst
Okay. And then good to see bookings kind of bounced back here? Can you just talk about expectations for the full year? Or how you frame it, not being -- not looking for a number. But do you guys target a certain percentage of subs and trans? Or just help us think about how you judge yourself on bookings kind of normalizing for the lumpiness that can occur?
Robert A. Eberle -- President and Chief Executive Officer
Yeah. Well one of the -- Yeah, well we're delighted with the bookings number 22.5%, you're right, it bounced back. I think we'll see some level of bounce generally now, that's not to suggest it would be down in Q3 or Q4. But we don't manage to that number. What I mean by that is, we're not going to measure ourselves by trying to bring in deals, lower pricing, change on terms in order to have a stronger bookings number. We commented that on the first quarter. Had we had two quarters of $20 million instead of $17 million and then $22.5 million it probably would've been a smoother run but we just don't manage that number.
Second thing I'd say is, we feel really good about the bookings going forward. It's all about product leadership and what we're doing in the product areas, capabilities we're bringing out in each of our key areas and some other things we're doing on a centralized basis and then deploying to those, gives us just a strong position with customers. We have analysts supporting our leading position in some of our key product sets and we of course have always have and continue to have strong reference customers. So, we will continue to see strong bookings would be my expectation. And then we'd look for as to we have enough bookings that supporting that the subs and trans growth levels and we certainly do. In the first half of the year and obviously looking at the quarter of itself we do as well.
John Davis -- Raymond James -- Analyst
Okay. And then just wanted to touch on the UK, US both have a decent size business in the UK and generated some amount of revenue there. Any impacts I think here would be the more resistant to any type of near-term change in macro? Have you seen a deterioration in your business? Any changes in customer behavior? I guess just the obligatory Brexit question?
Robert A. Eberle -- President and Chief Executive Officer
Yeah, no, no. The Brexit question is obligatory because it's on Page 1. What someplace doesn't even make the main news, but someplace tucked in the payments world, it's the hottest place on the planet. And the reasons it's hot is that what's going on an open banking. Now how that will evolve? We don't exactly, but it is a very attractive market because there is a change and whenever there's a change that's good for us. It means, there's new capabilities we can bring out, an existing customers have to adapt to that change. So the open banking is really exciting opportunity for us.
So rather than the Brexit headlines which we've not seen a lot or actually frankly any real impact from other than the headlines of course. What is so exciting and happening at the ground level in payments is open banking and how does that change the whole payment landscape? And we're right in the middle of that. I don't think anybody has that figured out. So if the next question is what does that long-term mean and how will that work? I don't know but we're right in the middle of that from a business payment leadership position and it couldn't be more exciting to have that level of change in one of our largest markets.
John Davis -- Raymond James -- Analyst
Okay. And Rick, the software licenses was a little bit better this quarter. Is that just ASC 606 moving some revenue around or it just looks like it's popped up now two quarters in a row. I don't know if there's any specific we would call out on the license revenue side?
Richard D. Booth -- Chief Financial Officer
Yeah, there's a little bit of ASC 606 effect and then we also we hit a revenue of that on a contract dating back to May 2017 for one of our banking client. So an old on-premise contract had a license of that.
John Davis -- Raymond James -- Analyst
Okay. And last one for me, any timeline when Visa, have you guys started to see any incremental revenue from your partnership with Visa? I understand it's probably not material today but that the partnership was announced relatively recently on a quarter or so ago. How is that tracking? Timeline? Is there time when you think it could be material? Or at least any color there would be helpful.
Robert A. Eberle -- President and Chief Executive Officer
Well if you don't define it on what's today's revenue, I believe I'd tell you it's certainly a material relationship for us today. And the introductions we're getting, the opportunities. I was invited to attend and present on a panel on -- two of us in a forum with some of their largest customers, that's so valuable for us that endorsement. So revenue today, no we're not driving revenue today. That's not -- wouldn't really actually be our measure of what's certain. We hope will be a longer-term significant strategic partnership. And of course, over the long haul is when we would hope and expect to drive revenue but certainly not our measure today.
John Davis -- Raymond James -- Analyst
Okay. Thanks, guys.
Operator
Thank you. And next we'll go to the line of George Sutton with Craig-Hallum. Please go ahead.
George Sutton -- Craig-Hallum Capital -- Analyst
Thank you. Rob, you mentioned in your prepared comments that you were in the process of prioritizing some of your key growth initiatives. I'm just curious what things are you prioritizing relative to prior? And what things are you de-emphasizing?
Robert A. Eberle -- President and Chief Executive Officer
The areas that are key for us really on the product side. So what we're doing around new technologies in our key products of Digital Banking platforms for example, and what we're doing in product there, we're doing around legal spend actually touched on some of that geographic expansion and bringing in machine learning and parts of the bill review. And then in Paymode-X, we've done a lot around vendor enrollment and we always are doing a lot around securities. So those would be some of the biggest priorities from a product standpoint.
George Sutton -- Craig-Hallum Capital -- Analyst
Got you. A question for Rick on the FX assumptions you're making. It looks -- if I'm looking correctly, the pounds actually improved from your perspective since the end of the year. So what are you using in your assumptions from a currency perspective?
Richard D. Booth -- Chief Financial Officer
Yeah, we got a little bit of conservatism in the value of the pound that we're using, George.
George Sutton -- Craig-Hallum Capital -- Analyst
So you're not using the current rate, you're using a different rate, is that?
Richard D. Booth -- Chief Financial Officer
Yeah, it's been up and down. It has trended positively a little bit but we're not yet certain that we expect that to continue.
George Sutton -- Craig-Hallum Capital -- Analyst
Okay. Thanks guys.
Operator
Thank you. And next we'll go to the line of Mayank Tandon with Needham & Company. Please go ahead.
Mayank Tandon -- Needham & Company -- Analyst
Thank you. Good evening. Rob, maybe just high-level. There's obviously been some concerns about economic slowdown, particularly in Europe and given you have exposure to the UK and some parts of Europe. Maybe you could just comment on what you're seeing in terms of the pipelines? Conversion rates? Size and scope of deals within your bank customers broadly?
Robert A. Eberle -- President and Chief Executive Officer
Yeah -- no. I sort of referenced that earlier but we're seeing -- we saw a strong quarter in Europe and we're continuing to see that. I think what's happening is, you got a changing payment environment. So that -- at our level, the broader economic headlines of what could or may -- may or may not occur on a Brexit scale is not at an any impact on the business for us today. What is the opposite of what we're seeing is, open banking and what does that mean? How does our platform -- how do our platforms impact that? And then the other piece we've seen, our Cyber Fraud and Risk Management solutions done particularly well in Europe as well.
So we're not being impacted. I -- 2008 our business grew which was our largest customers were at that time, Bank of America, Citi and AIG actually was one of our largest customers. Our business still grew. Payments businesses have to make payments. They're going to make payments whether the economy slows or whether the economy is moving. Our growth comes as their businesses grow, our growth comes as volume transactions and of course selling new solutions and selling to customers. But we've got a real confidence. We've got the right product set in Europe and we have not to-date seen any impact from any of the Brexit possibilities or Brexit discussions.
Mayank Tandon -- Needham & Company -- Analyst
That's helpful. And then if you could just talk about our competition, particularly on the B2B payment side. It seemed to be several start-ups out there and also some scaled players that are obviously going to tackle this large opportunity. Just from your standpoint, are they nipping at your heels or do you to feel like you're still ahead of the competition as they try to close the gap between you and them?
Robert A. Eberle -- President and Chief Executive Officer
No. We don't see -- what we see is -- there's more competition on a very small or micro business level where handling everything for them from an invoice purchase order all the way through to a payment. Those businesses that typically doing that on a virtual card to card basis. You don't -- we don't see an integrated payables offering ACH, ACH plus, card, check or full automation and full monetization with a network like we have. So now I wouldn't see -- I don't think we've seen anybody nipping at our heels in that direction. If the objective is very, very small business, that's less where we play today but otherwise -- so that's just a matter of what our strategic market and what our target market is, then it is competition.
Mayank Tandon -- Needham & Company -- Analyst
And finally for Rick. Rick, any updated thoughts on the capital allocation side in terms of use of cash on the M&A side versus maybe potential buybacks if the stock were to pull back from these levels?
Richard D. Booth -- Chief Financial Officer
We feel good about our organic growth opportunities in front of us. We always stay in the market. But from a capital allocation perspective, the big expense was the building in the UK that I mentioned, and we are glad to be able to fund that with cash on hand, optimize our local tax situation, we still maintain the strong balance sheet.
Mayank Tandon -- Needham & Company -- Analyst
Got it. Thank you.
Operator
Thank you. And next we'll go to the line of Brett Huff with Stephens. Please go ahead.
Brett Huff -- Stephens, Inc. -- Analyst
Good evening, Rob and Rick. Thanks for taking the questions. Just a quick review. And I want to make sure I got the bookings right. Rick, can you just remind us so the bookings this quarter or in 2Q were $22.5 million and what was the year-over-year comp on that?
Richard D. Booth -- Chief Financial Officer
The year-over-year comp was $21.746 million. So $21.7 million.
Brett Huff -- Stephens, Inc. -- Analyst
And then what was that last quarter? I know that some folks were...
Richard D. Booth -- Chief Financial Officer
17 -- $17.4 million last quarter.
Brett Huff -- Stephens, Inc. -- Analyst
And the comp on that was -- it was higher the year-over-year?
Richard D. Booth -- Chief Financial Officer
Yeah, in Q1 of 2018 it was $22.4 million.
Brett Huff -- Stephens, Inc. -- Analyst
Okay. And Rob, I know you noted that it's hard you can't really manage the business to that. But you also shared a thought that bookings would be strong, we should just always be ready for bookings that are little lumpy. There's really no way getting around it. Is that the right message to takeaway?
Robert A. Eberle -- President and Chief Executive Officer
I think that's right. It's both the combination of its lumpy and the management piece of that. We could easily make this symmetric and have forecast the meetings and say we have to be at this number and pull in transactions. Sophisticated customers or purchasing organizations that know that we're a public company, know there is quarters. We just don't -- we don't want to exceed that leverage to them.
I think I probably did this at one of the investor conferences or so. But we had an instant last quarter where there was provisions around cybersecurity it would sensibly have made us be an insurance policy and we said, no we're not signing that, we're not going to do that, that's not what we do. These were our provisions. Quarter -- the deal pushed out of the quarter and signed in early in October. That's fine. I'd rather have that happen and have us conceding contractual provisions that don't make sense for us.
Brett Huff -- Stephens, Inc. -- Analyst
That's make sense. And then the question about the long-term guide, you guys provided really helpful the, 100, 300 long-term guide several years ago and I think Rob, you said in the past that it was -- many thought it was a reach goal when you gave it and you guys have come up to it pretty nicely. We had some folks ask, is -- do you all think that you'll provide a similar medium-term goal once we sort of achieve this over the next couple of quarters? Or how should we think about as we're on the sell side around try to make sure we understand what the kind of the medium-term business model is and that's a helpful metric. But not sure if you guys are thinking about giving us a new one or how should we think about that?
Robert A. Eberle -- President and Chief Executive Officer
I think we -- we'd look at that as that makes sense. I certainly wouldn't say today that Bottomline is going to be giving 2-year out stretch goals regularly. I think that made sense for us to do. I think by the way when we gave that, I know some feedback we had, some degree on calls, but certainly one on one was that it seemed like a stretch, seemed like unrealistic, seemed like when and of course, it's -- we are very much on target to that range right today.
So no commitment now that we would be giving out longer-term targets. I think we'll look at the business and look at what's happening in the capital markets and what our investors is going to be in the best interest of investors. We all know giving out something that isn't going to come together, we don't have confidence over two, three or five year or any longer-term, doesn't make sense. So we're always balancing that.
Brett Huff -- Stephens, Inc. -- Analyst
Okay. And then last question for me is, how do we measure sort of the side of your two-sided network which is, that's the vendors or the payees I guess that people are getting paid. Is that -- should we perceive that to be a little bit of a land grab that you want to get the most that you can, quickest and that will help drive value meaning, you get more spend on your platform quicker when you install a new payer? Or are you to a point were that's you could do more but it's not necessarily going to be that much more of a competitive advantage. I'm just trying to get a sense of the capital intensity of...
Robert A. Eberle -- President and Chief Executive Officer
Yeah. It's certainly not a land grab of how many payers but payer number we achieved. I mean, I referenced there is a lot more noise and a lot more competitors that are providing some level of automation or got an inch deep mile wide level of automation with the card. They can sign up 50 or 100 customers in a quarter. That doesn't mean anything to us. We're signing a meaningful organizations that are driving -- each of which is driving meaningful revenue. So our 29 is a great number for us. If somebody else had 50, that wouldn't mean a thing to me.
Brett Huff -- Stephens, Inc. -- Analyst
Okay. That's all I need. Thanks for your time as always.
Operator
Thank you. Next we'll go to the line of Bob Napoli with William Blair. Please go ahead.
Robert Napoli -- William Blair -- Analyst
Thank you and good afternoon. Rob, on the B2B payments business on Paymode. I mean that there's a lot of innovation, a lot of investments going into that space as people brought up here on the call. Five years from now, where -- what does -- where does Paymode, where does Bottomline need to be? I mean, it's -- I don't think it's probably just an accounts payable. It's got to be accounts payable, receivable, it's the business spend management. Where does this business need to go to stay ahead of the competition and the innovation and do you need to make some acquisitions in order to get there?
Robert A. Eberle -- President and Chief Executive Officer
Well I don't think the answer is broader. We've had different product sets for broader. We see competitors that are broader. When you're operating at the smallest business level. If you're operating at the micro business level then, yes, you're going to offer purchase to pay and a full solutions across with limited functionality.
We're not going to move for example, to purchasing, we would see our customers were having a reimburse, somebody like that on purchasing. So that's not a place that we would find our customers telling us to add more capability or -- add capability or we would need to do an acquisition. We really specialize and the strongest on the payment automation, monetizing that, doing that securely and seamlessly for our customers. What's the misconception is the idea that our receivables side is something Bottomline doesn't plan or do anything, we provide a lot of value to our vendors in fact, you won't have a network, if you're only providing capabilities and technology for payers.
So a lot of Paymode-X capabilities are vendor-facing, gives the vendors a lot of visibility to payment, integration in the systems, workflow all of those kinds of capabilities. There isn't an acquisition or GAAP that I see that we would need to do or would do around Paymode-X. I wouldn't say never on anything, you can always add scale and things. But there isn't a gap in product where we have to go out and buy again a purchasing platform a receivables capability. I think what you will see is, as you look five years, I think every company pays and gets paid to a network like Paymode-X and I think will be one of those networks that's a leader.
I think you get to some level of interoperability at that point in time, five years out. So you could have a series of networks that have interoperability but I don't think a business is executing theirs own payments today. I think -- I don't mean to make this answer too long, but I think, like if you ask an organization, what are you doing for CRM today, they're using this system of some type that is in Salesforce, HubSpot whatever it would be five years from now can I ask a business where we used to pay and get paid. If they're larger, their answer will be Paymode-X or somebody like us and if they're smaller, they might be using an Avid or a MineralTree or someone else.
Robert Napoli -- William Blair -- Analyst
And just -- I mean just if you could remind me -- your ag target size of business that Paymode is signing up in a revenue basis, would you call it -- is it -- could you give me range of...
Robert A. Eberle -- President and Chief Executive Officer
We actually have customers of all different -- smaller levels. But I guess smaller for us we'd say $10 million. We're not off signing up $300,000 business or a small business or a $5 million or $1 million business. So you could say sort of a $10 million and above with the sweet spot being larger than that real mid market organizations are best for Bottomline.
Robert Napoli -- William Blair -- Analyst
Thank you very much. Appreciate it.
Robert A. Eberle -- President and Chief Executive Officer
Thank you.
Operator
Thank you. (Operator Instructions) And we'll go to the line of Peter Heckmann with Davidson. Please go ahead.
Peter Heckmann -- D.A. Davidson & Company -- Analyst
Good afternoon, gentlemen. Thank for taking my questions. I have two. I'll go ahead and give those questions and then wait for the answer. But just trying to understand the guidance that -- the subscriptions and transactions revenue guidance seems to imply on a constant currency basis something like 13% to 15% organic revenue growth for subs and trans in the back half. But when I look at total revenue, the rest of the business needs to be down on 13%, 14%, 15% in the back half to get to your numbers.
So number one is, is there something that I may have missed in terms of retention or maintenance is falling off more significantly, certainly it looks more significant than just FX. And then the second question, we'd get back to that issue of FX that the 1% decline in the midpoint of your guidance on revenue makes sense based upon 23% of revenue in the UK. But then again -- your 75% or 80% hedged, how do you get to a 5% decrease in EBIT and then a 9% decrease in EPS? just doesn't -- if you're hedged it, the decline should be somewhat closer to this decline of revenue.
Richard D. Booth -- Chief Financial Officer
Yeah. So let me address that. So we had about $323 million of revenue left to go in the year, a quarter that in the UK kind of declined by about 7%. That get to you about $5.5 million of revenue impact, very similar to what we guided. We assume 30% exposure, you -- you're at $2 million EBITDA exposure.
Peter Heckmann -- D.A. Davidson & Company -- Analyst
Okay. But again how does $2 million of EBITDA exposure turn into $4 million on the EBIT line and then a 9% decline on EPS? Is there something going on with the tax provision?
Richard D. Booth -- Chief Financial Officer
The reported tax rate can fluctuate. I think that most important thing about taxes to remember is, in this quarter, for example, we paid $200,000 of cash taxes. For the full-year, we expect to be around $1.6 million of cash taxes. So when you're dealing with core EPS which is affected by the hypothetical higher tax rate, you've got other puts and takes. And I've got someone checking on like the -- on the other items.
Peter Heckmann -- D.A. Davidson & Company -- Analyst
Okay. And then just could you give us services in the year-ago period? I think you said this quarter it was 9 -- $9.8 million?
Richard D. Booth -- Chief Financial Officer
Yeah. It was down slightly. I don't have the exact number in front of me.
Peter Heckmann -- D.A. Davidson & Company -- Analyst
Thank you.
Operator
Thank you. And we have no additional questions in queue.
Robert A. Eberle -- President and Chief Executive Officer
Well thank you, everyone. Thank you for your time, thank you for your attention and thank you for your interest in Bottomline Technology. We should look forward to reporting on Q3 in three months from now. Talk to you soon.
Operator
Thank you, ladies and gentlemen. That does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.
Duration: 50 minutes
Call participants:
Robert A. Eberle -- President and Chief Executive Officer
Richard D. Booth -- Chief Financial Officer
Andrew Schmidt -- Citigroup -- Analyst
John Davis -- Raymond James -- Analyst
George Sutton -- Craig-Hallum Capital -- Analyst
Mayank Tandon -- Needham & Company -- Analyst
Brett Huff -- Stephens, Inc. -- Analyst
Robert Napoli -- William Blair -- Analyst
Peter Heckmann -- D.A. Davidson & Company -- Analyst
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