Bottomline Tech's Transition Of Legacy Customers To Digital Banking Platform Creating Near-Term Headwinds

Barrington Research previewed Bottomline Technologies EPAY Q4 results in a note published Monday.

The analysts expect the Q4 revenue and core EPS to come at $86 million (versus a consensus of $87 million) and $0.30 (same as the consensus), respectively. They believe Q4 2016 will represent a down quarter in core EPS of 12 percent versus $0.35 in Q4 2015 due to the transitioning of the company's Digital banking revenue model.

Bottomline's large legacy customers are moving to its Digital Banking platform at a faster than expected rate with all sales of digital banking products on a subscription model, as mentioned by the analysts.

"Over the short term, all revenues from the subscription model are deferred until the customer goes live, yet expenses for implementation and services are recorded well before the recognition of revenue," wrote Barrington, mentioning that this transition is having a much larger‐than‐anticipated negative impact to the company's financial results due to the selling of large platform deals coupled with customers selecting more elements of the digital banking suite, which leads to longer and more costly implementations.

The earnings announcement is scheduled on August 25, after the close of the market. Barrington has an Outperform rating on the company with a $30 price target.