Bottomline Technologies to acquire two Euro firms

Both companies serve banks on the SWIFT system

Bottomline Technologies announced earlier this week that it will be spending $109 million to buy two European financial communication companies, despite a deepening net loss of $3.8 million in the fourth quarter that ended June 30.

With the quarterly 11-cent-a-share loss, the firm ended the year with a $14.4 million net loss for the year, or 41 cents a share.

Nevertheless, revenues for the year were up, and the company has plenty of cash on hand, thanks to issuing notes worth about $138 million.

In fact, Rob Eberle, the Portsmouth-based financial software and services firm’s CEO, was upbeat. “The headlines are: another quarter of strong financial performance to end a record fiscal year,” he said in a press release.

Bottomline has already closed the largest deal – the $104 million purchase of Switzerland-based Sterci SA — but still has to finalize the agreement to purchase London-based Simplex GTB Ltd. Both are providers of corporate and banking interface for the Society for Worldwide Interbank Financial Telecommunications (SWIFT) system. More than 10,000 financial institutions and corporations in over 200 countries use the secure SWIFT network to exchange standard financial messages.

Bottomline branched out into SWIFT several years ago through another acquisition, but this deal – with its added 150 employees and 350 customers – will enable Bottomline to serve some 530 institutions in about 20 countries, moving Bottomline “from one of many players to a clear leader in this space,” said Earle.

Eventually, the acquisitions will lead to increased earnings, but the “financial haircut” (Eberle’s term for the cost of the merger) will cost the company.

CFO Kevin Donavan predicted that it would result in a $4 million to $5 million negative drag on earnings in the next two quarters. Bottomline predicts that the acquisitions will add $25 million in revenue next fiscal year and some $40 million in fiscal 2015.

Next year the company said it expects $296.5 million in revenue. Operating income (which is different from net income) will be at $47 million, up from $42.7 million this year, Bottomline predicted.

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