Q1 2021 BTRS Holdings Inc Earnings Call
Good afternoon, ladies and gentlemen, and thank you for standing by and welcome to Bell trusts first quarter, 2020, One and earnings conference call. At this time all lines have been placed on mute to prevent any background noise. Following the speakers' remarks, we will open and the Lions.
<unk> for your questions. As a reminder, this conference call is being recorded I would now like to turn the conference over to Dara Dirks to begin.
Thank you before we begin I'd like to remind you that today's call may contain forward looking statements. These forward looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC and available in the Investor Relations section of our website actual results may differ materially from any forward looking statements we make today.
These forward looking statements speak only as of today and the company does not assume any obligation or intent to update them, except as required by law. And addition, today's call may include non-GAAP measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures reconciliations to the nearest GAAP.
And it can be found in today's earnings release, which is available on the company's website hosting the call today are Flint Lane Ultra founder and Chief Executive Officer, and Mark just keep they'll trusts chief financial officer with that I'd like to turn the call over to flow speaking.
Thanks, Dara and thank you everyone for joining the call today.
The digital transformation of accounts receivable and BTB payments continues to accelerate the events of the last year permanently change the landscape of how corporations around the world conduct business.
Pose a heightened awareness about the need to automate and digitize the order to cash process work from home policies are affecting how our customers and their buyers operate finance departments are increasingly implementing solutions to take advantage of efficient and cost effective ways to streamline invoicing lower DSO improved customer.
Satisfaction and reduce cost.
Our industry, leading platform offers customers and end to end solutions spanning the entire order to cash process, including credit Decisioning ecommerce invoicing and payments cash application and collections. These mission critical solutions are integrated with a number of ecosystem players, including financial institutions ERP.
And accounts payable software platforms to help our customers accelerate cash flow and more quickly and efficiently generate sales.
Equally important to the solutions. We provide are the teams we have focused on helping our customers drive the business outcomes and they desire from our solutions for instance, R. E solutions team helps our supplier customers run marketing campaigns to convince their small business customers to switch from paper checks to electronic payments and the switch from analog to digital can be accelerated.
Greatly with our proven best practices.
And our business payments network or B, B and continues to scale reaping the benefit of strong network effects and taken together, we're incredibly well positioned to capture more than our fair share of this enormous and growing market.
Our 2020 momentum has carried over into 2020 one for a strong start to the year. We're very pleased with our first quarter results, which exceeded our expectations. We finished the quarter with over 33 million in net revenue representing approximately 35% year over year growth as we noted on our last earnings call. We had some deferred revenue that was going to be.
Accelerated to the first quarter, rather than spread across the year, making the first quarter larger than normal we think a more fair way to look at this is to exclude the accelerated deferred revenue. If you do so our net revenue and the quarter grew 25% year over year, which is a big step up from Q1 of 2020.
Our software and payments segment growth, excluding the accelerated deferred revenue was up 27% compared to 18% growth and Q4, 2020 another big step up.
As a private company, we always operated the business and our transparent fashion with our board and our investors. Our plan is to continue with the same philosophy as a public company. Excluding this accelerated deferred revenue will allow investors to do a more apples to apples comparison of our financial performance, while the acceleration of this deferred revenue helped us and the first quarter it will make for a <unk>.
Tough comp and 12 months, so don't be surprised if we remind you of that.
On the basis on our outperformance, we are raising guidance for the full year, which mark will discuss later.
During the quarter, we made progress against a number of growth strategies, we continue to be aggressive on the sales and marketing and front many of the new salespeople that we've hired over the last six months have started to book wins on the board and our pipeline remains strong which will have a small impact on this year's results, but should support our next year's growth objectives.
Channel partners are particularly meaningful to Bpm's expansion and we are seeing more volumes and more supplier leads from our VPN partners. We're also excited to announce earlier today. The Bottomline technologies, one of the early pioneers and accounts payable automation and joined BP and to help expand their supplier payment strategy.
<unk> continues to have incredible momentum and is the fastest growing part of our business.
And as first quarter card volume was up 117% year over year and total payment volume was up 146% year over year, when including ACTH and wire payments you may recall that we added these new payment modalities and August 2000, and 'twenty as part of VPN and 3.0.
Spent a fair amount of time and the past discussing difficulties that suppliers have processing virtual credit cards.
At your wire payments can actually be more difficult to handle because the remittance information isn't delivered with the payment.
E C H and wire payments hit a customer's bank accounts and remittance information most often comes to the email. So the first step is to make sure you've got a match between the two if you've got thousands of ACTH payments per month. This is no easy task. The remittance information also comes in many different formats, it could be and the body of the email it could be and a PDF attachment.
And where it actually can be stored on a website that a customer has to log into to retrieve R.
Our BP and ACTH solution automates this process and customers are responding incredibly well to this new capability and in fact, one customer shoulder story that the ath process now is so seamless that they've begun campaigns to convinced there are other customers to pay this way, which they never would've done before B B S.
Before I turn the call over to Mark I'd like to invite you all to attend our build trust summit, which is being held virtually next week. The event, which is the accounts receivable and BTB payments industries largest conference will feature impactful keynote addresses from shifts seven and CEO and former U S. C. T O Megan Smith, and former NFL quarterback Steve young as well as and impressive roster.
And with Fintech industry experts, including the Ceos of avid exchange and bottom line as well as the head of payments from JP Morgan.
Ultra summit is a great way to learn more about our solutions. We've also been known to make some big announcements at summit and more information and registration details can be found on our website I really hope you can join us with that I'll turn the call over to Mark to review, our first quarter results in detail as well as provide our updated financial outlook Mark.
Thanks, Glenn and good afternoon, everyone.
<unk> mentioned, we are very pleased with our first quarter results before we get into the details I'd like to provide some further clarity around our business model and in particular, how we monetize payments.
Oh trust generate subscription revenue from processing, a P H payments and interchange as well as gateway fees in connection with processing credit card and virtual card payments. These payments are made by buyers either at our customer portals, where smaller buyers review and pay invoices were two BP, yet where larger buyers, including a P provide.
Make payments.
Subscription revenue at payment portals is usually derived from a bundled solution like billings and payments were subscription tiers are determined by the number of invoices delivered as well as and number of invoices paid and.
In addition, we process credit cards through these portals and given that we became a paper only and the last three years most of the card volume as we processed and the customer portals are as a gateway, where we receive a fee for this service.
On a tax payments on V P N and somewhat similar wage as we monetize payments through portals.
And we generate BPM platform subscription fees from our supplier customers again based on subscription tiers determined by the number of invoices paid.
And second where we are at the pace that we can offer our customers a level two and level III discounts on virtual card processing and from those savings and we look to generate interchange on volumes generally ranging from 10 to 40 basis points.
Finally, we received single digit basis points on volumes from a P providers for providing them access to the suppliers on VPN.
Putting all of that together, our highest TPB growth driver is card payments and within card our highest growth is take that volumes at the same time, given the long history of accepting cards and providing only gateway services, our largest card revenue as fees from such services. In addition, we generate material subscription revenue from.
Processing ACTH transactions and from providing the VPN network. This revenue is payments revenue, but it is bundled with other subscription revenue and we have not yet determined a way to fairly and consistently breakout the payments related push it true.
Turning now to our first quarter financial results net revenue was $33 $1 million and the quarter and increase of 35 per cent year over year.
As a reminder, this result includes the impact of revenue accelerated into the quarter as Flint previously mentioned compressing into Q1, what otherwise would have been revenue evenly distributed throughout the full year.
Normalized net revenue across the year net revenue would have grown in excess of 25 per cent year over year.
Software and payments segment revenue grew 40% year over year and grew 27% year over year, excluding the impact of accelerated revenue in the quarter services revenue was again ahead of expectations growing 110% year over year to $2 $9 million, while print revenue declined 6% year over year.
Year to $4 $5 million.
Adjusted gross profit was $24 $3 million or 73, 4% of total revenue and compares to $16 $7 million or 68 per cent of total revenue and the first quarter of 2020.
Absent the acceleration of higher margin and revenue into the quarter adjusted gross margin would've been closer to 71% and adjusted gross profit would have been $21 $8 million and year over year increase of 31%.
The year over year margin improvement was driven by a combination of mix shift and segment revenue towards higher gross margin and software and payments as well as by the benefit of improved realizations for professional services.
Turning now to our operating expenses in the quarter.
Research and development expenses were $11 million as compared year over year to $9 $4 million and increase of 12%.
Excluding stock based compensation expense R&D expenses were $9 $8 million compared to $9 $3 million and a year ago period.
Sales and marketing expenses were $8 $9 million up approximately 35% from $6 $4 million and the first quarter last year excluding.
Excluding stock based compensation expense sales and marketing expenses were $7 $6 million compared to $6 $3 million and a year ago period.
And year over year increase reflects the strategic decision. The company has made to accelerate top line growth two and increase in assessing and budget to a larger percentage of overall revenue.
General and administrative expenses were $12 $5 million more than double from $5 $2 million and a year ago period, excluding stock based compensation expense G&A expenses were $6 $6 million compared to $5 million and the year ago period.
The preponderance of the increase is attributable to the costs associated with becoming a public company and we would not expect to see these cost grow in line with net revenue.
With the impact of the accelerated revenue into the quarter adjusted EBITDA was positive $319000 compared to a loss of approximately $3 $7 million and the prior year period.
Excluding the impact of the accelerated deferred revenue adjusted EBITDA and the quarter was a loss of $2 $2 million.
We ended the quarter with $286 million and cash and equivalents and short term investments on our balance sheet and no debt for borrowed money.
Turning now to the full year outlook, we are raising our annual total and net revenue guidance by $1 million for the fiscal year ending December 31, 2021 we expect.
Total revenue between $160 million to $166 million, including Reimbursable costs revenue of $37 million net.
And net revenue to be and a range of $123 million to $129 million, which at the midpoint of $126 million would represent 16% year over year growth.
We continue to expect adjusted gross profit to be and a range of $85 million to $89 million or $87 million at the midpoint and increase year over year of $11 million and adjusted gross margin of 69% to 71% or 70% at the midpoint, which would be relatively flat.
The year ago period, as adjusted gross margin in 'twenty, and 'twenty benefited from onetime cost cutting measures, creating and unusually tough year over year comp.
Lastly, we continue to expect adjusted EBITDA to be and a range of negative $14 million day negative $16 million.
We plan to reinvest this quarter's over performance into the business. So we expect adjusted EBITDA to be closer to the higher end of that range.
And as a reminder, the year over year decrease and adjusted EBITDA is driven primarily by the combination of a reversal of onetime COVID-19 related cost saves such as reduced salaries and discretionary sales and marketing spend from a partial year and and increasing costs in excess of $7 million attributable to becoming a public company with approximately.
And one half of those costs attributable to D&O insurance.
As discussed last quarter. There is typically no material seasonality to the business and ordinarily, we expect revenue to grow quarter over quarter as well as year over year, given the accelerated revenue and over performance and a quarter, we expect generally that revenue and each quarter throughout the remainder of the year will be roughly 24% to two.
5% of total net revenue for the year, rather than increasing quarter over quarter throughout the year.
And as discussed on our last call, we expect year over year growth rates and the first half of the year to exceed those rates and the second half of the year Griffin and by the accelerated revenue recognized in the first quarter as long as the tougher comparison and the second half of 2020 and subscription revenue recovered following the initial COVID-19 impact.
We continue to be incredibly excited about the opportunity ahead and look forward to discussing our progress with you and the future. Thank you again for joining the call and we're happy to answer your questions on.
Operator, please open the lines.
Thank you if he would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is and the question queue. You May press star two if he would like to remove your question from the kiln and from participants using speaker equipment and may be necessary to pick up your handset before pressing and Mr. Keyes. Our first question is from Andrew Schmidt with Citi. Please proceed.
Yeah.
And if what hey, Mark Congrats on the great results here, it's really good to see an acceleration and business.
Thanks, Andrew.
So I wanted to dig into that so the 27% underlying software and payments growth I'm wondering if you could and I.
No you know you don't disaggregate software and payments, but could you talk a little bit and that kind of the drivers of acceleration and the first quarter and a little bit of detail and then I'm sorry, if I missed this but did.
Could you discuss the expectation for software and payments growth in 2020 one.
Yes.
Thanks, Andrew.
It really is the growth in the quarter was everything.
Hitting on cylinders. So the subscription revenue came in as expected, we we have no growth and subscription.
And the first half of the year as we said previously that will be a bit stronger than the growth, we'll see and the second half of the year given the comps to 2020 that came in where we expected and payments came in.
Relatively strong as well so they both went to the to that nice performance in terms of the full year I think.
We're probably still looking at software and payments and that 21% growth range.
Okay. Thank you and understanding that the you know the comps get a little bit tougher here is there is there any particular reason why.
Now on the underlying momentum should not continue or kind of pick up given the.
And the investments and sales and marketing given and step up and payments modernization just trying to understand the gating factors to you know maybe.
And maybe higher underlying software and payments growth. Thanks.
Yeah.
And Oh go ahead.
We're we're just emerging from this pandemic as well as our customers are emerging and we're certainly starting to see volumes pick up which means our customers and recovering.
And he.
Construction space, where we have exposure of wholesale distribution manufacturing and we're all growing strong.
We don't know how this plays out over the full year, though and you know with one quarter behind us we're not ready to say how that recovery is going to look for the whole year certainly many of the things that we've invested in and are starting to pay dividends, but we also don't want to get back and get ahead of ourselves with so much unknown about this pandemic recovery.
That makes a lot of sense to be prudent given the environment and understandable and then just if I could sneak one last question on the sales and marketing front.
And the comments it sounds like you've already seen some good traction kind of picking when picking off some wins what does the pipeline look like how is it shaping up on the new sales force and and he just observations from the.
And the the investments and the sales force and conversation with customers and things like that would be helpful.
Sure.
We've been clear with investors that we are going to be aggressive, but not foolish with our sales and marketing spend and we certainly plan on doing so so we've had good traction with some of the new reps and we've had good traction in the different categories. Both on the enterprise and the corporate side and we've had good traction on the partner front as well.
And as you know Andrew we get leads passed to us from our partners on the business payments network with which leads to new suppliers for us and that has been very strong. So we're.
And we're excited about all of those channels and growing all of them aggressively.
Alright, Thank you for taking my I appreciate the comments.
Our next question is from Bob Napoli with William Blair. Please proceed.
Thank you good afternoon, and Flint and Mark and.
A question on the and I know you hired a new head of product development and a while ago, Greg Hanson and I think from precision lender.
And just any discussion on like a little more color on your product roadmap.
Where are you investing now.
Where are you looking to make.
And two two for innovation and that product set.
Yeah.
Yes, it's probably a little too much detail to go into on this call. Greg is actually gonna be speaking it built on summit next week, which is a free virtual session that anybody can sign up for so I'd encourage you to do that if you haven't already.
And clearly the business payments network is a big focus for us and we continue to grow that aggressively and but it's not just that you know we have a variety of accounts receivable solutions as you well know whether it's our online billing sites called invoice connect which we continue to innovate on our cash App solution, where you're just last year, we rolled out a new mobile deposit.
Acceptance from cell phones for our customers, who have field personnel, who have to accept payments on the road. So we're trying to innovate across the entire product stack and we'll be sharing a lot of those details next week at summit.
Okay, and I I think I mean, I mean your plan.
Is that you had put out there maybe a year ago I guess its been since it.
Not quite last fall was four and acceleration and you know it's.
Pretty good acceleration and software and payments revenue growth into.
And the 2022.
And I know, you're investing aggressively in sales and marketing and the VPN is becoming a bigger part of the business. How do you feel about that acceleration I think it's into the high Twenty's and <unk>.
Software and payments revenue growth and 2022.
Mark you want to take that one.
Sure.
You know, we had 18% growth and software and payments last year. This year, where we're seeing 21 per cent and potentially upside to that and.
While we're not going to guide 2022 at this point, but so far we're hitting on all cylinders with respect to everything that was underlying our assumptions around getting to.
That accelerated growth continued accelerated growth into 2020 two.
Thank you and then just last question and I know you hired day also a new head of channel, where a new head maybe I think maybe your first head of channel partnerships and Gwen.
Lazard and I think last December and can you talk about the channel partnership strategy and how that's developing and.
And how important you think that is and as a day.
On medium to long term.
Yeah sure. So we've had a a channel strategy for quite some time.
It is elaborate there are different elements of our channel strategy. One part is what we do related to ERP is like that.
They'd be Oracle infor epic or in terms of integrating our solution with those those products and the other part of the channel strategy is what we're doing with the card brands like visa as you know we have a great partnership with visa.
A big part of it is what we're doing with the banks and we.
And certainly announced.
The major banks, who are partnering with build trust and not only on the issuance.
Issue inside the folks that issue the cards, but also on the treasury side and we.
Could you just see momentum there.
And the final area is around the accounts payable software vendors, we announced earlier today, our partnership with Bottomline technologies and one of the first innovators and the accounts payable side and they recognize the value that we can add to their business model by giving them extra supply of reach which means even more volume flowing through business payments network.
Yeah.
Thank you and just does that on that AP are they can you just talk about the volume you're seeing from the a P providers into the P. P and can you give any color on the momentum there.
Yeah, So we've broken out VPN total payment volume.
And I believe Mark correct me, if I'm wrong, it's north of a 110% growth and might be and that might be the card and I think overall, it's like a 140% growth.
Yeah.
Yeah I mean.
Yeah, just card alone was 100% growth year over year and the quarter and then it will be on 140% as Quint said when you take into account the ACTH volumes.
Thank you appreciate it.
Thanks, Bob.
Our next question is from George Melas with Cowen and company. Please proceed.
Hey, good afternoon, guys and thanks for taking my questions good to be a good to be on the call today.
Wanted to ask first just just now sort of and this post COVID-19 environment and how you guys are thinking about pricing.
Pricing overall I think you know last year, you took a more cautious.
Our approach as the as the pandemic hit just just curious are we back to sort of normalized pricing patterns and how that sort of playing out throughout the course of the year.
Last year, we as you said George we we took a.
Pause on what our business as usual.
And you will 18 months or so our price increases and we are back to our our usual approach for this year so far so good.
Yeah.
Okay. That's that's that's helpful. And then just wanted to ask on on M&A Flint, you know kind of what you're thinking about there on how close you might be a day pulling the trigger on something and then some of the consolidation that we've seen in the space from some of your peers and.
Any thoughts on on on any potential impact at all to the to to build trust. Thanks guys.
Yeah, So theres been some exciting acquisitions and and our category for sure and most recently bill Dot com and their and their D V deal and no. We don't compete at all with Bill Dot Com and so it's not a competitive threat.
And we've done eight acquisitions and the last 11 years and we've been very clear that we and do continue to be acquisitive and part of the reason why we went public and so that we can be more acquisitive and take on big deals and we have a full time focus here and a pipeline of opportunities, but we're not ready to announce anything.
We're going on we're going to wait till we have something cooked and ready to go before we talk about any material deals.
Okay. Thank you congrats on that.
Thanks.
Thanks.
Our next question is from my on tandem with Needham and company. Please proceed.
Hey, good evening. This is actually a cow Peterson on for my own. Thanks for taking the question obviously, good to see that our software and payments revenue I'm coming in really strong I'm. Just wondering if you could give any color on and what drove that strength was it you know increased monetization and within the existing customer.
And based was it like a ramp in kind of new new logo wins, how should we think about the split between net growth.
Yeah, I think it was strong it was strong performance across the board right. So we landed a bunch of so landing logos as interesting and really doesn't affect revenue until we get the business life. So.
Some of our deals can now go lives much faster than before you know a lot of our VPN deals can go live and on and just a few weeks. So we will see in quarter deals close and go live on a.
A lot of it was payments acceleration.
Driving more digital payments.
The CFO is recognized that their businesses on a risk when they do things and not a lot and fashion. There was a big push to make things more digital so just shift from paper to digital will certainly drive more revenue.
And the shift from gateway.
Gateway card business to our payback will drive more revenue as well, even if there aren't more digital payments without running through our payback that will drive additional revenue.
And you know P P and we've been very clear on it is growing faster than anything and the business and there is ample opportunity to monetize VPN through both sides, whether we're charging the folks who are delivering payments through BD and on the AP side.
Or getting revenue from the supplier side, when we sell them or our VP and digital lockbox. So.
Strong performance across the board.
Got it that's helpful. And then I guess, just a quick follow up on and VPN good to see the really strong PPV growth.
Is there a way we can.
Kind of look at you know some of the the TPB trends and think of you know how that is kind of parlaying into monetization.
Either on your on the card side or the AC H side and I'm, just how big of an opportunity do you see b P and longer term and for you guys as part of the build trust story.
Mark you want take that.
Sure.
Look we're seeing.
With me T and three point O coming on last year, we opened up.
Opportunity for more ACTH and to come and as well and in terms of.
Its success as long as the large buyers continue and you know the a T providers continue to be as successful as they are and are looking to make payments on behalf of either large companies are or aggregation of small companies, it's creating greater and greater stress on the system for <unk>.
Pliers ought to be able to deal with.
And those payments or complexity of both the payment as well as the complexity of the remittance. So we can be T. N is a wonderful opportunity.
Corp, Great growth.
In providing.
That network that is open to all buyers and connects.
Very simply to all of our suppliers with the interest we see great opportunity there.
Okay. That's helpful. Thanks, guys nice quarter.
Okay. Thanks.
Our next question is from Josh Beck with Keybanc. Please proceed.
Cash check and see if your line is muted.
Sorry about that I did have a mute.
On thanks team for taking the question wanted to go back to some of your comments flip on.
And it's really the impacts of <unk>.
COVID-19 with respect to volumes so as we've entered this year.
Are we at a point, where you see a line of sight to full recovery just wondering if you could give us and.
And update in terms of how that's shaping up.
Yes, so we were.
And we've been tracking volume since since March and how our customers were performing on a year over year basis. So we have a cohort analysis that we monitor closely and we saw a volume has dropped from March to sort.
Towards the end of May down to about 70%.
And then it bounce back and by June July timeframe, we were sort of back on par and that just covers like the health of their business in terms of overall volumes that does not cover the fact that more of those volumes are now digital.
The digital volumes are way up so we're back to sort of pre.
Pre pandemic volume levels in terms of total volumes with digital volumes, which is where we monetize are actually higher.
Okay very helpful and just curious if you could maybe characterize the pipeline.
Qualitatively is fine, but just when you look at maybe the discussions that you're having the inbound activity. Just curious if you could just help us.
Understand how how that is shaping up maybe versus versus historical pipeline.
So the pipeline is strong.
I think we'd mentioned in the past that we hired a new SVP of sales.
Early last year and he has continued to build out a super strong team across both enterprise and mid market segment as well as our.
And our team that focuses on customers and our team that focuses on new prospects. So.
Our goal is to get all four of those segments cranking.
And a lot of leads cast and from our partners as I discussed.
Internal targets certainly around bookings that we're working hard towards to achieve and when you were and enterprise sales bookings is it's super lumpy right. You could have some months that are super strong and some months that are relatively weak.
Because you know big deals come in when they come in.
But we're very pleased with the progress and the first quarter and.
Ample pipeline to achieve our goals.
Okay.
Really helpful. And then just with respect to the guidance I certainly understand the million of of upside to the previous full year range. Now you know what are going to be some of the key levers that could drive.
The performance towards the higher and versus the lower and should we be.
Thinking about the contribution from new customers, New logos should we would we should we be thinking about b P and what are going to be some of the the key swing factors that that move the final year performance towards the sort of higher or lower end of that range.
Mark do you want take that one please.
Yeah delighted.
And look all of the above and particularly if we just think about what we have in place right now.
And as we see the economy continue to pick up we have a you know a.
Great customer exposure to certain parts of the economy that are coming on very strong homebuilding HVAC plumbing so high.
Some of those things you could see upside in.
Okay.
On invoicing you could see upside in.
And some of our payments.
And actually print as well so a lot of the transactional aspects of the business have an opportunity to pick up along with.
The way the economy is percolating again, it's it's too early and the year for us to say with confidence that will happen and so we're waiting to get a little bit more visibility around that but I think you.
Payments and other transactional aspects of our business can.
Push us to the higher end of the range.
Really helpful team. Thank you.
Sure.
Our next question is from Joseph.
The healthy with Canaccord Genuity. Please proceed.
Hey, Paul and Mark Good afternoon, and great results. Thanks for the question time just.
No.
You announced bottom line last quarter I think repay.
Said that they are integrated with you as well so it seems like you know the attraction on the AP provider side continues to grow.
And we could just talk and a little more detail about.
What's left out there on the bigger on AP provider side, and how this momentum and deal that youre seeing maybe kind of help accelerate kind.
Kind of conversion of what's out there and then I'll have a follow up.
Yeah, that's a great question so.
And any partner model.
The relatively easy part is to get the partners.
Harder part is to actually get the volumes flowing through the network.
Today, you know, we announced bottom line and that's wonderful and everything but now we got a fire them up and we've got to get them paying all of the suppliers on the networks. While we're doing that we also need to continue to drive supplier growth as we drive more and more suppliers on to the network. We want to make sure that all of the AP side knows those suppliers are on the networks and what they can pay them.
Which will then drive more supplier and so there's a wonderful network effect, but just having the participants isn't enough.
Getting them to transact on the network is a big part of that and we.
And we certainly have not reached saturation on the payment side and on the issuing side. There are many banks that we still want on onboard onto the network and some independent software companies that we want to onboard on to network and.
You can imagine that we're in discussions with with most of them.
And that is certainly a key step we've now proven to many of the big players out there that we can add significant value to their business model, we need to do that now proving it and getting a partnership is great now we need to drive additional volumes, which we've certainly done with the participants who've been on the network for a while which leads us to.
Citing announcements like we did today with bottom line that we can show them that we can add some value by driving additional payment volume for them.
That's good color flow, maybe I'll just follow up on that bank channel maybe because.
I know you have a couple of big bank partner, but what does that look.
Does that pipeline look like because.
I mean across the and tech we continue to see that bank.
Need to partner with Fintech.
More and more and.
They've got all the accounts right now bill so just some color there would be great.
Yes, the banks are real and there's really two parts of it or a bank of our bank strategy. There was the issue inside the folks that are issuing virtual cards and on more on the accounts payable side.
And we've announced previously that we've signed five of the top and issuing banks.
On B B and so we've had a lot of success there, but there's another side of the bank as well, it's called Treasury and that's the ones that are dealing with corporates. So corporates are going to need to automate digital payments that is going to be we think that's clear and much like the automated check payments with bank lock boxes, we think corporates are going to need to automate digital payments with a dinner.
Lockbox and so the other side of the business payments network is this digital lock box that we sell and allows them to automate all virtual card acceptance on ECH and acceptance, what's not clear is who's going to sell that to the corporate.
It could be build trust and.
Our direct sales force, but it could also be the banks. So we are making a concerted push to convince banks. If this is something they should offer to their corporates.
And if they don't somebody's gonna itself and the solution and don't they want to be relevant in this category.
But we.
We need to continue we've we've had some success there but that was not our initial foray into the banks. It was more on the on the payment side. So we need to do a better job around getting the bank Treasury Department's reselling the Belfast digital lockbox solution.
That makes sense and then.
Just kind of switching gear.
And with that part of your model I know.
But you had some good LTV to CAC numbers and the pack and now you've.
And then public for a little while but.
You know, what maybe long enough with.
And what are you kind of think about growth and I know you've kind of talked about it a little bit but.
How do you think about that that really attractive metric you have relative to your positioning right now relative to your balance sheet and.
And.
And maybe that kind of cash.
And.
And what might we see there on on the P&L relative to.
The sales and marketing.
And you know maybe I E.
Or I don't know.
And because you're doing that and you're right now, but revenue and and and.
The other big deal wins and high level color would be great. Thanks, a lot guidance.
Thank you Barbara let's take that please.
Sure.
Yep.
So great question, Joe we're still in the early stages of having.
Made a concerted effort around our sales and marketing.
Early indications are things are starting to.
To look nice yeah, we're getting some inbounds we have.
And you know early positive results as Clint mentioned in terms of.
Okay.
And our pipeline.
But it's too early to tell.
You know, we just started the year and we just started this concerted effort over the course of the end of last year. So so far so good we would expect to continue to have the kind of LTV to CAC that we've had in the past and once that's proved out and we'll continue to just spend more wisely and try to get those types of written.
And if we need to pivot to figure out where something didn't quite go right, we'll do that as well, but right now our expectation is to continue to spend as we budgeted and we're cautiously optimistic that we'll get the anticipated results.
<unk> sales team.
And we're making the right progress and the partnership area to expand where we've been and partnership so we feel very positive about the opportunity set.
That's great excellent thanks Mark.
Sure.
Our next question is from Jeff Cantwell with Guggenheim Securities. Please proceed.
Hi, how are you can hear me okay.
That's fine yes.
Okay, Great and that's results here on most most of my questions are being asked I wanted to see if I could ask you specifically about the payment volume this quarter.
Cause that $15 1 billion came in above our expectations and the growth is accelerating there. So can you talk a little bit more about that on in terms of what you think is driving that outperformance is it sort.
Sort of like your customer base, you're seeing some nice momentum from the reopening here and as you mentioned and deep you and looks looks pretty significant as its continuing to grow very quickly. This quarter. So maybe talk about that and flint.
You put some perspective on the operating environment for distressed right now versus what you might have seen at some point over the past 20 years could you maybe tell us why you think that and and and what that might mean for the company going forward any color there would be greatly appreciated.
Okay.
Yeah. So I think the pandemic was a bit eye opening for corporations throughout the U S that were dependent on the U S post office to run their businesses, whether it was delivering and voices or accepting checks and theres been a widespread slowdown and U S mail delivery from a variety of reasons that I won't get into which means that cash.
Cash flow is being slowed down I don't think CFO generally knew how dependent they were on the postal system for their businesses. So there is no outside of build trust and there was there's certainly been a bit of a wake up call that Oh, My gosh, we need to stop doing things via paper and U S. Mail. So that is certainly helping.
I think we have the best solution to capitalize on that for sure whether it out as our SMB focused solutions like our online billing sites that allows small businesses to look at builds and pay bills online whether it's the business payments network, which is focused on large corporate AP departments that arent likely to log into our site, whether it's our mobile deposit acceptance for.
You know collecting payments on the road.
<unk> had a strategy session last year, where we talked about what were the big initiatives that we wanted to focus on for the next 12 months and one of them is we call payments everywhere, we literally want to be able to collect payment at every touch point, whether it is a.
Somebody calling in a payment over the phone whether it is somebody doing collections emails whether it is a payment inside of an email delivery that we do so we are really trying hard to make sure that we have an opportunity to collect the payment from any possible touch point with our customer's customer.
In terms of the operating environment certainly the world has woken up to the BTB payments opportunity and more specifically the accounts receivable side of it you know there are more players now in the category. You know you've got companies that are sort of point solutions that are doing it and you've got some people like us and I'm trying to do integrated receivable.
<unk>, you've got on card brands, who are excited.
Excited about monetizing BTB payments, so there's more and more attention here because it's really like the last big payments opportunity on that.
We're going to make a shift from analog to digital and I think people want to capitalize on that which makes a ton of sense.
Okay, Great and and then my second one this is a follow up to one a day.
On the prior question, a little astrazeneca slightly different ways.
So you called out a major new AP and bottom line.
Can you maybe tell us a little bit more about your thoughts on that you seemed.
And the <unk>.
Nicole.
As you reloading partner expansion as we look back over the past few quarters and and I felt this was an interesting one because from my understanding there Kmart exercised 450000 customers. So I just wanted to see if you're able to tell us anything about that partnership.
Qualitatively and it'd be great to get a feel for how that might be reflected quantitatively for you guys and anything you could tell us about how you're thinking about that partnership going forward would be great. Thanks again.
Sure. So a big part of our V P and strategy is around creating a supplier direct free for a P providers to be able to pay.
We've been clear that the quantity of suppliers. We do not believe is the correct metric and I'm not picking on bottom line here because everybody on the AP side does it they are busy calling up suppliers and saying hey can I pay you electronically.
What's your bank account, what's your routing number do you accept card under what conditions do you accept cards and Theyre all building private supplier directories.
100000, small businesses or a thousand enormous businesses, which are better well.
What's going to give you the better reach so we think it's important to get great reach and we help people like Bottomline and avid and J P Morgan and Comdata and works and all the others that we've announced get better reach by getting them to the largest suppliers because the largest suppliers and they don't want to deal with 100 different AP providers, who all want to.
And the payments and all want to send them remittance and different formats. They want one single type of payments coming through VPN. So that strategy bet that we made three years ago was right. We've now proven that we can do payments better for these large corporates and I think the AP side is recognize that.
And I think some thought that we were trying to replace their network because everybody's got a network right. There. The Ath network. There's the visa network. There is the business payments network, we're not trying to replace anybody's network and we're trying to provide and interoperable framework, so that participants and BTB payments can connect more seamlessly.
Yeah.
Okay great.
Thanks, very much for all the color Congrats again and looking forward to see and it comes out of your stomach.
Thank you thanks, Joe.
Our next question is from.
Since and hung with J P. Morgan. Please proceed.
Hey, thanks, so much.
Glad to see the acceleration here just a couple of clarification questions and a model question. If you don't mind, just just first digging deeper on the pipeline and I know you've gotten.
And for other questions on that guidance.
I'm curious just the progress on the supplier recruitment side of BP and any call outs. There I know you just went into that a little bit glib.
But love to hear a little bit more just on what's happening on supplier and beside now that you've added ECH and wire and things like that also prospects for.
Payback deals.
And how is that looking or has that changed versus <unk>.
90 days ago.
Yeah. So I think we've made the decision Mark correct me, if I'm wrong that we're gonna share our payback percentage on.
And on an annual basis not on a quarterly basis. It just doesn't move that much yet okay.
And I wish I will share with you that P b and a C. H would head which had very nominal volumes before this year. We have we've successfully sold many suppliers are BP and ECH solution and they're not actually even accepting cards, but they recognize they need a need to automate the ath part of their business.
And we've also had a lot of success driving virtual corridor and automation through our BP and card solution. So.
We're seeing strength along both of those solutions because they solve a real problem getting digital payments as hard whether they're E. C. H wire or card is not easy for businesses to accept those payments and volume.
Agreed.
Great.
Which is why we're hoping for the supplier side also pick up because you've gotten a lot of partners already on the guidance raised revenue a million dollars didn't change the rest did I hear correctly that the differences and reinvesting that you're putting you're putting money back into the business there.
Oh, yes.
And we raised.
Had a great quarter and some of it timing some of it over performance.
Looking to reinvest the over performance back into the business in terms of leaving and our margins our.
Gross margin adjusted gross margins, where they were.
That mix shift of where the performance can come from the rest of the year it could be more some more transactional and not.
Not necessarily at the same.
Gross margin so if it's services or print that is contributing in part as we continue.
That would have an impact on gross margin. So we thought you know for the marginal difference would be the range as it was.
Let's see because the reason why I'm glad you said that because when I'm looking at the incremental gross margin it looks like its running around 90% pretty high if you. Even if you exclude the accelerated deferred revenue. So a lot of your net revenue is dropping down.
Adjusted gross profit.
And if that sustains or maybe I should ask and it.
The reason why that wouldn't sustain because it seems like if that does you you'd be running quite ahead of your gross margin target. If that continues well if you call on my logic here and Mark.
Do you follow what you're saying if you look at if we were to back out the acceleration.
On a revenue into the quarter I think our adjusted gross margin is more like 71%.
Taking everything into account software and payments, it's a significantly higher because a lot of that accelerated revenue came in without incremental.
The cost to bring it in so I think that's sort of giving us an inflated outcome for the for the quarter.
Got it thank you for that.
Sure and good luck with the summit next week.
Thanks.
And we have a final follow up from Bob Napoli with William Blair. Please proceed.
Thank you and a good Q&A, but I think youre not can answering my question and thank you just said.
But you know the payback you gave us last quarter was 30%, though and the card volume and pay pumped and since payback is so much higher take rate.
And then the rest of the card volume I thought I just wondered what your thoughts were on I mean is that 30% kind of a baseline that should.
And I did the mix should grow off of and we should see that by payments volume payments revenue growing faster than payments volume should that 30% over time.
Go up to 40 or 50%, what's you know and it just any thoughts on on that given the outsized revenue contribution per dollar of volume for the payback.
Yeah. So you said will payments revenue outstripped outpaced payments volume.
And I would just caution you to talk about card and ECH and separately right and I'm sure.
Right because that's on ECH, we're making on subscription fees on its on a bit basis points model.
I can assure you that we have every incentive and the world to drive to try to drive as much pay pack business as possible and.
And we certainly are executing on that as part of our payments everywhere strategy.
Yeah.
And I think and Mike.
And again it and.
And go back to them I think and Mike.
Prepared remarks, we did say within card the fastest part of our.
Growth is coming from Pei track and so.
We're putting a lot of effort into two ensuring we.
It continues to go that way.
And we can control it.
Great. Thank you appreciate it.
Yeah.
We have each day question and answer session I would like to turn the conference back over to slightly and for closing remarks.
Great I just want to thank everybody again for joining the call.
It's humbling and I truly appreciate your interest and support and what we're doing here and build trust and hopefully.
Hopefully we get to see you next week and built for summit.
One of the upcoming Investor conferences that we'll be presenting that have a great night everybody.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
[music].
Yes.
[music].