Q4 2021 BTRS Holdings Inc Earnings Call
Good afternoon, ladies and gentlemen, thank you for standing by welcome to Bill Trust's fourth quarter 2021 earnings Conference call. As a reminder, this conference call is being recorded.
I'd now like to turn the call over to John T. Williams head of Investor Relations to begin.
Thank you operator before we begin I'll remind you that today's call may contain forward looking statements, including our guidance for the full year of 2022, our expectations regarding the continued growth of our software and payments business potential for margin expansion net dollar retention rates and our medium and long term targets. These forward.
Looking statements are subject to numerous risks and uncertainties, including those set forth in our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 10th 2021, and in subsequent reports that we file with the Securities and Exchange Commission from time to time, including our annual report on Form 10-K for the year ended December 30 <unk>.
<unk> 2021 and available on 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 intend to update them, except as required by law in.
In addition, todays call may include non-GAAP measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures reconciliation to the nearest GAAP measure can be found in today's earnings release, which is available on our website.
Hosting todays call are Flint land build trusts founder and Chief Executive Officer, and Mark shifting Bill trusts, Chief Financial Officer, I'll now turn the call over to Flint to begin.
Thanks, John and thank you everyone for joining the call today.
We recently wrapped up our first full year as a public company and I'm excited to share with you our outstanding fourth quarter and full year results. We continue to execute on the strategic direction that we previously laid out with investors I'll start by covering some of the operational metrics and then update you on some recent business highlights I'll, then hand, it off to mark for more detail.
On our performance and updated 2022 guidance.
Our software and payments segment again exceeded expectations growing 25% year over year in the fourth quarter and 28% year over year for fiscal 2021, we believe our software and payments business will continue to grow at this pace for some time, which is something mark will discuss in detail. During his remarks, we again posted strong adjusted gross margins at 74.
7% in the fourth quarter and 73, 1% for the full year, an increase of 290 basis points versus fourth quarter of 2021.
We continue to believe margins will trend higher over time as our customers shift to digital from print and adopt more of our software and payment solutions totaled.
Total payment volume or <unk>, which is the dollar value of a customer payment transactions that we process on our platform increased 45, 3% year over year to $22 $9 billion versus $15 7 billion in the year ago quarter.
TPB through the business payments network or VPN TPB increased 98, 7% year over year in Q4, the credit card component of <unk> grew to $2 $2 billion in Q4, it was up 52, 1% year over year.
Direct card revenue or D. C arm, which is the revenue we get from processing credit card payments through all of our solutions was $4 $7 million or <unk> 63, 9% year over year growth in our quarterly yield of five nine basis points direct card revenue growth continues to exceed card volume growth and we still expect yields will grow into the team.
Over the long term as transactions move to our payback and we capture a larger share of revenue.
Net dollar retention in our software and payment segment increased by 10 percentage points from 110% to 120% as you know a large BDC customer exited last year. So we would expect to see N D or soften a bit this year to around 115% and then returned to its prior trajectory thereafter.
Now lets cover some recent business highlights we made two executive hires to lead key segments of the business Kelly <expletive> joined in November as our Chief Marketing Officer Kelly. Most recently worked as the CMO of Indaba and brings significant experience in driving growth through both direct and channel businesses.
Amy clean joined in January as our new Chief Legal Officer, Amy previously held a similar role at Cardtronics and brings considerable SaaS Fintech M&A and international experience that will help guide build trust global expansion.
Our international expansion continues with our acquisition of order to cash a European BTB order to cash cycle platform provider with over 200 customers connections to over 70, B to B and BTG invoicing networks and roughly $10 million in trailing 12 month net revenue. This is our second acquisition since going public in 10th overall and continues our global.
Expansion into Europe , our order to cash is well positioned for both cross sell and further expansion of our business payments network. Our integration team is already hard at work and our M&A team continues to scout out additional opportunities both inside and outside the U S U S.
We had a great end to 2021, finishing our best sales bookings year ever. This included signing the single biggest new customer deal and built a history. This large equipment company receives approximately 10000 monthly virtual credit card payments that require significant manual labor, which is slow expensive and error prone by implementing Bill Trust VPN digitally.
Lockbox solution this customer will be able to digitize over $500 million in annual inbound payments and generate significant cost savings.
Were excited to recently enter into a partnership with Cooper software locking in yet another large AP provider as we expand both sides of VPN or BTB payments network. We believe that Cooper recognizes much like most of the other ably players out there that one of the keys to payments growth is interoperability between software providers. In addition Cooper is.
Also now a build trust referral partner because they recognize that many of the suppliers that they work with need build trust solutions. Finally, we announced a significant upgrade to our cash application solution cash App and point out that now incorporates the BPM digital lockbox and improved machine learning technology suppliers very much want to increased digital payments, but just because.
They are digital doesn't mean that they're easy to process, which has hampered adoption a new approach was required we believe combining cash app with the BP and digital lockbox gives cash app a significant competitive advantage in the market.
I'd like to take a moment to talk about the differences between automation and Digitization check.
Check processing is a great example of something that has seen a high degree of automation in the United States instead of paper checks being sent to our business. There are often mail to appeal box at a bank, which is called the Czech lockbox envelope or open with automated equipment converted to images with high speed scanners, and then optical character recognition technology is used to extra.
The important information is a highly automated process that insulate suppliers from handling paper at a reasonably low cost, but there is something better than automation and that's not having to automate in the first place because the paper check is eliminated paper checks are slow because they are sent via U S. Mail paper checks are not environmentally friendly those things do not change.
No matter, how much automation you throw at it the combination of build trust online billing solutions in the BPM digital lockbox allow our customers to drive Digitization, just faster more cost effective and dryer drives higher customer satisfaction, both for our customers and our customers' customers.
2021 was a euro fantastic progress for build trust business progress as we exceeded our revenue and margin forecast throughout the year and are entering 2022 with significant momentum strategic process as we continue to execute against our plan and invest for growth and organizational progress as we continue to add key contributors and functions across the business.
The guide us through the next phase of our growth.
Before we move ahead to 2022 I'd like to take a quick look back at 2021, and how we performed against the commitments we laid out when we went public a little over a year ago as the CEO I'm happy with our performance. We've kept our promises we beat our internal expectations and raised guidance consistently throughout the year, we're seeing the benefits of our investment in sales and.
Marketing to support our long term growth, our product and technology investments have driven new business opportunities.
We've grown payments significantly both for new and existing customers, we've expanded our partnership channel and significantly enhanced our distribution.
We successfully leveraged our strong balance sheet to pursue M&A and established an international presence completing the acquisition of Belgian based Icontrol in October and Netherlands based order to cash in February we retired all of our outstanding warrants, putting the last remnants of our spec transactions safely in the rearview mirror we.
We believe the momentum created in 2021 is setting us up for an exciting 2022 first we are better positioned than ever before to take advantage of increasingly favorable secular trends rising labor costs and interest rates as well as increasing work from anywhere environments, all lead to demand for more automation and digitization to reduce costs.
And increase efficiency.
We provide a platform to an underpenetrated and sizeable addressable market and the immediately actual portion of that Tam for us has increased materially through our M&A activities, where we increased our existing customer base by over 30% year over year created a greater cross sell opportunity with as embedded base and enhance our competitive positioning to attract new logos.
Finally, our differentiated solutions like the VPN digital lockbox are in very high demand successfully introducing these solutions to new logos creates a flywheel effect as we continue to execute our land and expand strategy.
With increasing confidence in the predictable nature of our results we've improved our disclosures we've made it easier for investors to understand our business and while we wish our current stock price better reflecting our performance will continue to focus on execution and are confident that the market will eventually recognize the value we are creating the exciting market opportunity we are focusing on island.
I'm incredibly excited about 2022 in the future our sales and marketing investments are paying off our channel channel investments are driving significant interest with bank partners. Our M&A engine is working and will continue to be a focus we now have a meaningful base of operations in Europe to drive further global growth our payback strategy will continue to lead to high <unk>.
And payments growth and our innovative business payments network is solving BTB payments problems across the entire BW ecosystem.
2021 was a great year, and I'm expecting even better for 2022.
Now to turn the call over to Mark to review, our fourth quarter results in more detail and provide our financial outlook Mark.
Thanks, Glenn and good afternoon, everyone. As Philip mentioned, we are very pleased with our Q4 and full year 2021 results. We entered 2021 expecting net revenue growth of less than 15%, but instead significantly outperformed with over 20% organic net revenue growth. This growth was driven by our highly.
Profitable software and payment segment, which had full year growth of 28% year over year with organic year over year revenue growth of 26, 9% and 86% segment margins turning now to the quarter.
Q4 software and payments segment revenue grew 25, 1% over a very tough year ago period comp from $22 $1 million to $27.6 million or $1.6 million in excess of our prior year forecast and as included in that forecast I controller contributed less than $1 million and sell.
If we're in payments revenue during the quarter.
This strong outperformance was again driven by higher than expected year over year growth in car T. TV and direct card revenue plus increased customer utilization of our software as more customers unexpected moved up to a higher subscription tiers in the quarter.
As contemplated in our guide Q4 services revenue declined 19, 8% year over year to $2.4 million, primarily from a tough year over year comp, where we had the benefit in 2020 of newly instituted higher hourly rates and mix shift from change requests and current revenue recognition to implementation.
Revenue that is accrued over a five year period. Similarly print revenue declined eight 8% to $4 $1 million as we continue to migrate print customers to our digital platform with those puts and takes Q4 aggregate net revenue increased 15, 4% year over year to $34 1 million.
Or $1.6 million in excess of our expectations based on the over performance of our software and payments segment.
Adjusted gross profit in Q4 was $25 $5 million or 74, 7% of net revenue as compared to $21.3 million or 71, 8% of net revenue in the fourth quarter of 2020. This outperformance in the quarter. Once again was driven by a higher mix of software and payments revenue.
First is our expectations as well as lower than expected direct cost.
Adjusted EBITDA in Q4 was a loss of $7 million as compared to positive $200000 in the prior year period operating expenses, excluding stock comp were largely in line with our expectations and overall were up 64 points, 4% versus the year ago period, excluding stock based comp.
R&D expenses were $13 2 million versus $8 $9 million in the year ago period, we continued to see very good results from sales and marketing efforts, where expenses were $9.6 million versus $6 million in the year ago period, G&A expenses were $12 $2 million compared to 6.4.
<unk> million dollars in Q4, 2020 and reflect incremental spend in the quarter to standup functions. We previously did not have such as M&A acquiring an integration as well as corporate social responsibility expansion and enhancement of our socks and compliance control functions and higher insurance costs as a public company.
Q4 was an investment period and we do not expect these expenses to occur at this level again next year G&A also reflects $2 $2 million of costs related to the retirement of all of our outstanding warrants in December this expense as an add back for adjusted EBITDA, even though reported as the G&A expense.
This strong quarter supported very positive full year 2021 financial results well in excess of our expectations heading into the year net revenue for full year 'twenty 'twenty. One was $131.6 million were year over year increase of 21, 2% with an adjusted gross margin of 73, 1%.
Up 280 basis points versus 73% in 2020, adjusted gross profit was $96 $2 million or 26, 1% growth over the prior year and adjusted EBITDA was a loss of $13 $7 million a year over year decline of $11.5 million.
Were favorable that we have been guiding for the year.
We ended the year with $232 $8 million in cash and equivalents and short term marketable securities on our balance sheet and no debt notes that we used $59 million recently to complete the acquisition of order to cash.
One last item on 2020 , one while we had planned to get our 10-K filing out today. It turns out a little more time is needed to complete the process. We are therefore filing for the standard 15 day extension and expect you will see the filing of our 10-K fairly soon.
Now onto guidance, our full year 2022 outlook accelerates off a strong 2021 trends for the fiscal year ending December 31, 2022, we expect total revenue between 195 million and $207 million or 21% year over year growth at the midpoint.
Our net revenue guidance, which excludes reimbursable items is a range of $165 million to $171 million or 28% year over year growth at the midpoint of $168 million of net revenue.
This view reflects our expectations of strong growth in our key software and payments segment, where we project revenue between $133 million and $139 million or three 1% year over year growth at the midpoint, reflecting organic growth of greater than 25% when adjusted for previously disclose.
Customer loss in Q1, 2021 and approximately five to seven percentage points of growth coming from M&A.
We are very pleased to see a combination of accelerating organic net revenue growth coupled with expanding gross margins, reflecting the increasingly profitable revenue generated by our business absent. Our two recent European acquisitions, we would have expected over 100 basis points of organic adjusted gross margin expansion year over year.
Of course, the two companies. We recently acquired do not operate at our scale and potentially will need investment for purposes of both cross sell capability and revenue acceleration from faster implementations to provide room for those potential costs in our budget. We are guiding full year 2022, adjusted gross margins of 73 point to pursue.
<unk> to 73, 8%.
Year over year growth of 40 basis points at the midpoint of 73, 5%.
With those adjusted gross margins, we expect adjusted gross profit for the year to be in the range of $121 million to $126 million or $123 $5 million at the midpoint, an increase of 28% year over year.
For full year 2022, we are projecting an adjusted EBITDA range of negative $14 million to negative $16 million, which at the midpoint of negative $15 million. He said negative 9% adjusted EBITDA margin more than 100 basis points of improvement year over year.
We developed our 2022 expected adjusted EBITDA outlook in light of the following considerations first we exited 2021 with a number of unfilled budgeted rules shifting those cost to 2022 and somewhat artificially increasing year over year growth in opex. Even so we are pleased with the operating lever.
Once that is embedded in the guide. In addition, we are seeing positive results from our combined sales and marketing and R&D spend so we will accelerate spend in those areas specifically focus on the following first we are expanding our channel partnership efforts.
Second we will continue to invest in direct sales, where we still are maintaining in excess of 621 LTV to CAC and positive trends in net dollar retention.
Third we will continue to spend to support our international product and sales growth plans.
Now I'd like to briefly touch on cadence for 2022, we expect our net revenue cadence to be much like prior years with roughly 21% to 23% recognized in Q1, 24% to 26% in Q2, 25% to 27% in Q3, and 26% to 28% in Q4 and in line.
With that cadence, we expect adjusted EBITDA to steadily improve throughout the year.
As a reminder, our customer left at the end of Q1, 'twenty, one and revenue that otherwise would've been recognized ratably over the year was recognized entirely in the first quarter, resulting in a materially higher year over year growth rate for that quarter than as usual.
As a consequence on a reported basis, we expect our Q1 year over year growth will look materially below the projected growth rate average for the full year.
I'll now turn to our medium and long term outlooks.
We define medium term as three to five years and long term beyond that.
We said last quarter that our confidence in the sustainability of our growth rate has increased and it continues to do so given that we are now providing for the first time. The following medium term targets annual net revenue growth of 20% to 25% software and payments annual revenue growth of 25% to 30% adjust.
Gross margin of 75% to 80% and adjusted EBITA margin of positive 8% to 12% with those calls we plan to become adjusted EBITDA positive sometime in the back half of 2023 to the first half of 2020 for these targets exclude the impact of any future M&A and assume no major disruptions to.
The macroeconomic environment that would cause us to reevaluate our strategy you're spending.
For our long term targets, we introduced our long term software and payments annual revenue growth target of at least 20% with that we increase our net revenue guidance from 15% to about 20%. Since these growth rates will converge over time as print continues to run off and software and payments eventually represent.
Hence the vast majority of our net revenue.
We also reiterate our outlook for long term adjusted EBITDA margin target of 25% plus.
With that said, it's been a fantastic year for build trust as a public company, we remain as excited as ever about the opportunity ahead of us and appreciate your support and partnership. Thanks again for joining the call and we're happy to answer your questions. Operator, Please open the lines.
Thank you well now be conducting a question and answer session.
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Please pull for questions. So it's gonna Starwood.
Thank you. Our first question is from the line of Andrew Schmidt with Citi. Please proceed with your question.
Hey, Flint Mark John .
Great.
Our results here, thanks for taking my questions.
I wanted to first dig into the comment about the record bookings here in la.
A lot going on to 2021 investment that sales force.
You have a.
Broader product platform do you had historically in the meantime, it seems like demand trends or just a our order to cash Digitization has stepped up.
Yes, you know between all of these factors, perhaps may be others, but could you just talk about kind of what's driving the bookings between kind of underlying demand and then your own execution, obviously, there's a mix, but would love to get your perspective. Thanks.
Okay.
Hey, Andrew it's Glenn So my sense is that there are certainly more buyers in the market for our automation solutions I think everything thats happened over the last couple of years with the pandemic and the work from home and the post office slowing down has caused many cfos to say, we've got to do something so theres certainly seems to be more.
Just pent up demand.
As far as our execution goes we've been talking for the last 12 to 18 months about investing in sales and marketing and that's paying dividends. So it has materialized itself and our best sales year ever.
We had a great fourth quarter and I mentioned in my script some of the biggest deal ever.
And there's a lot box deal so the trend in terms of sales and marketing execution in a market that has got a sort of secular tailwind is certainly in our favor.
Got it that's great to hear and then on the international component obviously over the last several months here a couple of nice international capability pickups, maybe you could talk a little bit about just you know that the game plan from here in terms of integration expansion good thing.
Like that would love to get the little more details on the international strategy. Thanks.
Sure. So while these acquisitions our international they are similar to other acquisitions, we've done in the past we did a controller back in October that was a nice deal in order to cash and we just completed earlier earlier in February which is our 10th deal, but we've done deals like that before where they have a set of capabilities that are interesting to our customers.
And there is a bidirectional cross sell that occurs so their customers need some of our solutions.
Our customers need some of their solutions, so that cross selling motion has begun and theres pipeline building around that there are certainly some technology integration that needs to occur but that happens while we're doing that cross selling is not required to begin those cross selling efforts as a great way for us to land eight.
Feasible footprint in a territory and.
And we expect to build off of there and expand into Europe .
And we are part of the reason we went public in the first place was so that we could do acquisitions of these sites and I would expect that we'll continue to do those throughout this year.
Got it it makes a lot of sense. Thanks, Glen Great results guys I appreciate the comments.
Thanks, Andrew Thank you.
Our next question is from the line of Tien Tsin Huang with Jpmorgan. Please proceed with your questions.
Hey, thanks, Thanks, so much good to connect with you guys just on the on the acceleration.
And that revenue and gross profit for 'twenty two nice to see there just just curious on the visibility and in the.
The factors, that's driving that accelerated outlook it sounds like some of it is from the bookings and then.
Benefits from the incremental sales investments, but if you could maybe.
Give us a little bit more on the contribution and the factors that would be great.
Mark you want to take that one sure yep.
Yep.
Thanks, Tim So yeah. The bookings are clearly a component at the same time.
Seeing great momentum in the underlying business in terms of TPB and it's growing not just in card, but we're seeing a nice pick up on our ath volumes.
Which in turn are also adding to the overall.
Both profile of our software subscription revenue.
And to the card revenue that we have we feel we have pretty good visibility too.
We are really not looking for anything heroic out of our cross border capabilities.
Third we granted to.
Two great partners in Europe .
We're looking to grow their core businesses.
They are and then find the opportunities where we can for cross sells their here and here there.
But we also recognize that it's early days and we were not aggressive.
Yes.
Possible outcomes from that.
Got you and then just in terms of my follow up just to I heard or wrote down and you're expanding your channel partner efforts in your investing in direct sales and you're still getting the same LTV to CAC et cetera. So.
Are you leaning in differently in those areas and you know for example in the channel partner efforts is that more to nurture the existing partners you have or do you see some room to.
To find new new new a new desk partners to grow a little faster.
It is SaaS.
Oh go ahead, Chris.
I'm sorry, the vast majority of our success in 2021 was through our direct sales efforts.
We mentioned last January that we brought on Windows are to manage our channel team and we planted some seeds there and we expect significant growth. This.
And this year and in the future, but very little of our projections calls for the bank channel for instance, driving business, but we certainly think that as part of our growth profile, but we didn't want to bake that in until we had something solid to announce.
Okay.
Okay, we'll be tracking that thanks, guys for the update.
Thanks, Andrew.
Our next question is from the line of Bob Napoli with William Blair. Please proceed.
Hey, guys good afternoon nice job.
The the year overall.
And the outlook really appreciate it.
Can you give any color on like what the backlog is a D. A R are added in.
Uh huh.
Our backlog at the end of 2021.
D. A R added in 'twenty one versus 2020.
The 10-K will be coming out shortly bobbing and that will include backlog information.
Okay.
Okay.
Great cool.
Hope to see that.
On the direct card revenue.
You know a nice steady expansion.
Strong growth rate there do you expect the.
Over what timeframe do you expect that card yield to get into the teens as the eight.
A five year or I mean the.
Revenue per transaction is moving up very nicely up 40% year over year, but any color on the.
The trajectory and the direct card revenue and the margin profile of that revenue stream.
Yes, so the.
I think that we're making is that we expect it to be in the teens over the long term and by long term is five years and beyond.
That assumes.
All of the current strategies that we're executing upon it doesn't assume any additional strategies you've been following us for a while and you know that.
We do tend to innovate rollout do things.
We will continue to provide guidance as we have it.
There is certainly an opportunity to expand and accelerate that the business payments network as you know is a.
Rocket ship for US, we expect that to see that as we continue to drive more business onto our pay fact that drives that up materially, but there's very few companies that are increasing yields walder higher than their increase in payment volumes generally it happens in reverse so it's a.
Good dynamic for us.
Thanks, and just last question what are you baking in for revenue and EBITDA for the acquisitions in 2022, and what do you think the growth rates of those are those acquisitions are accretive to the growth rate over the Ah <unk>.
Medium term.
So we're not calling out any specific.
Results for either company or our European operations like we don't call out specific products I would say if youre looking at the guide it should be clear we're showing accelerated.
Organic growth and so overall those operations or adding to.
To that organic growth.
In addition accretive towards.
Yes.
And on gross margin I think we've called out they are not yet operating at scale and so there.
Right now somewhat relative to what otherwise would have been 100 basis point increase in gross margins here.
Carving that back, but we expect over time that they will have the same gross margins that we do.
Great. Thank you Mark Thanks, a lot.
Sure.
Good luck.
Thank you. The next question is from the line of George <unk> with Cowen. Please proceed with your questions.
Hey, guys, let me add my congrats and thank you for taking my questions.
I guess first one if I if I if I'm looking at 'twenty two correctly.
It looks like the different revenue items, it looks like printing services another.
That appears to be growing 'twenty, one over 'twenty two.
That's just a function of the acquisition or is there something else driving that.
It's more a function of the acquisition.
Okay. Okay. Appreciate that and then flipped just you know you've historically had a fair amount of our.
Our pricing power in the model.
Curious as you look at now in this sort of an inflationary.
Inflationary environment customers looking to cut cost and the like E. D does that pricing power or is that changed at all has it increased at all from your point of view on how are you thinking about that going forward.
Yes so.
Without our invoicing and payment solution. You know includes a huge postage component. So we are a great solution for our customers because we're driving postage out which is a significant part of their invoicing expense. So the charges that we deliver to our customers include that postage expense, while we drive E billing it knocks the postage out.
So that gives us the ability to raise prices on our side, which is the net line.
Not impacting the gross line that our customers receive so we.
We continue to be.
Doing price increases on an annual basis like we've talked about and get very little pushback from our customers.
Our next question comes from the line of Joseph <unk> with Canaccord. Please proceed with your question.
Hey, guys just I'll add my congratulations on great 'twenty, one execution really nice to see the business accelerating.
Yeah, I just wanted to circle back to your largest signing here.
Ever in the history of the company here in Q4.
Is there any read through on that relative to sales cycles for really large.
New logos or was this one in the hopper for a while and finally converted.
Yeah. So this is a BPM digital lockbox opportunity in those sales cycles tend to be pretty quick and I think the reason we share that is there are a bunch of customers struggling with crossing inbound virtual cards. This one customer was getting 10000, a month and they were throwing significant labor at this.
No.
So when we're competing with someone.
Somebody else for one of our other solutions, you know theres an evaluation, but.
And that can take some time and the sales cycles could be an RFP at the enterprise generally not an RFP at the mid market, but these VPN digital lock boxes, we're the only one selling and digital lock box that.
The automate ECH automate credit card automate delivery into the accounts payable portals. So it's very unique and our prospects quickly come to that conclusion and in a market where labor is tough to find right they're struggling filling rex.
Literally can't process. These payments so we come in with a solution that they decide quickly. We can go live quickly so that turns into revenue quickly.
This has been a big driver of our growth and will continue to be.
That's great and then just kind of a.
A read through on the digital lockbox traction into the bank channel I know youre, not really talking about it quite yet, but you know some more color on the bank channel relative to that lockbox solution and white labeling it would be much appreciated thanks guys.
Yes, so it's my belief that much like when.
When we move from a cash society to have checks society.
Businesses needed somebody to handle those checks for them. So they hired a bank to do check lockbox with it as we move from a check society into the digital society everybody's going to need a digital lockbox, we've seen interest from the bank channel about being relevant in that conversation and I'd be surprised if we don't announce something this year with the bank related to digital lockbox.
But we believe that any supplier scale is going to need a digital lockbox, who brings it to them as sort of we'll see we're certainly felt a lot of it we've got partnerships with the accounts payable software vendors and we mentioned one with Cooper around it.
ERP is likely we will have interest and we're pretty certain that banks will have interest as well, we don't have anything to announce yet, but I'd be surprised if we don't in the coming quarters.
That's great. Thanks, Glenn.
Next question comes from the line of Jason Kupferberg with Bank of America. Please proceed with your question.
Hey, this is Kathy on for Jason. Thanks for taking my question first I just wanted to ask about margins in the software and payments.
<unk> talked about how you guys have higher gross margin, but can you share anything about how that translates when we get down to the adjusted EBITDA line them you know what margins look like they are for the software and payments business, just trying to kind of get a sense of the sort of like a bridge to get to that 8% to 12% adjusted EBITDA margin for the medium term that you mentioned.
Probably a lot of it is coming from that software and payments teeth.
Alright. Thanks.
Yeah, Great question.
No.
Our software and payments segment.
<unk> as a GAAP segment and you can see the.
Our revenue and margins there.
So pretty much in the mid eighties and for the most part the Opex we have in our.
Business is more aligned to the growth of our software and payments really not so much.
Around.
Quint, where most of that is it's just cost that shows up in gross margin. So what we're doing right now is.
Looking at the ability to to get operating leverage out of the business. It doesn't take another person to grow direct card revenue.
More and more every single day sort of just by breathing.
The portfolio continues to grow so.
What youre seeing is the opportunity for the company to continue to accelerate our software and payments revenue and manage its cost structure and doing so and we're doing that.
In large part with G&A, which this year would have.
<unk> gone well below the average.
Amount of growth.
In our Opex.
For the equities acquisition support with putting around those acquisitions.
On a go forward basis, we believe.
As I've said in the past that justify running out the software and payments revenue.
At something in the mid Twenty's and running for the Opex at something give or take in the 15% range.
Alliance Cross fairly quickly without our having to take great effort to get to profitability, but profitability is clearly on our mind, we have with very very high gross margins on our software and payments revenue, we have great ability to manage the opex associated with it and get ourselves to prop.
Stability.
We believe sometime towards the end of next year beginning of the year after.
Awesome, that's really helpful and if I could just ask a quick follow up on <unk>. I know you guys gave us some helpful disclosure on volume, but is there anything to share on the revenue side can you just talk a little bit more about the opportunity you see them and what are the assumptions.
When you're in the context of your medium term outlook.
VPN like PPV that need to be in like the strong double digits is that kind of going to be moderating and then how much do you have baked into your medium term outlook. There. Thank you.
And it's all about it but thank you.
Yes, a few questions here, so I'll do it.
A few questions.
<unk> there so I'll do my best to try to hit most of them.
<unk> is obviously contributing significant payment volumes to our overall payment volume and is driving higher growth for the TBD because it's growing the BB&T BD is growing at a faster clip.
And that card revenue is.
You know obviously growing quite rapidly.
Driving higher yields so we don't expect any.
Slowdowns and VPN in fact, as the flywheel continues to turn and we get more and more partners on VPN.
Our hope is that it will accelerate you know there is certainly no.
In terms of run rate there is plenty of Tam available simply in our customer base as we expand globally globally with some of our international acquisitions that opens up a whole new market for us. So there is enormous opportunity ahead of us in BP and by no means do we think we've got.
Reached scale there were early innings.
Got it thanks guys.
Thank you.
Thank you as a reminder, you May press star one to ask a question at this time.
The next question is coming from the line of Mike attendant with Needham. Please proceed with your question.
Hey, Good afternoon, guys. This is actually a copy yourself for for my own thanks for taking the questions.
Just wanted to touch a little bit on the software and payments.
Revenue growth outlook for 'twenty, two, especially now that you guys are giving direct heart revenue and that seem to be.
Progressing really nicely, but you know how how should we think about that that software and payments growth.
Really from whether its cross selling software to new customers, having higher payments volume run through the system.
Or just the onboarding of new logos, so any any color or breakdown of rank order you guys could give there would be really helpful.
I was going to say, yes to all of the above.
So.
I think we're seeing in general is our direct card revenue is growing at a higher.
Higher clip than our <unk>.
Software subscription revenue.
I think that should likely continue into 2022.
At the same time, we see both.
Both aspects of T. P D. A C H, one slash wire and card vitamins, both we think accelerating on a year over year basis, we get tremendous.
Benefit out of our land and expand and we're doing I think as you can see in the numbers.
In an increasingly better job.
Linking our.
Sure.
R&D and product solutions with our sales and marketing.
Our go to market strategy, and we're seeing better wins in stronger winds.
<unk> rise to new logos that then become the opportunity for the land and expand opportunity. So it is literally all of the above from the way you set it up.
Got it.
Helpful. And then I guess, just one quick kind of housekeeping follow up with.
With you guys, making a couple of acquisitions in Europe , and having some organic initiatives over there is there.
Any current exposure, whether it's on the customer side or the employee side to the Ukraine, Russia, Belarus region or are you guys more on the western and Central Europe .
I'll take that one mark we have no.
Employees in Ukraine, we don't use any third party offshore partners in Ukraine, and we have no customers in Ukraine. So we assessed that our hearts, obviously go out to everybody.
Struggling.
With what's going on but it is not likely impactful to build trust at this point unless.
The proceeds into other countries like Belgium.
But as of now we are in.
Alright.
To hear thanks, guys nice quarter.
Thank you.
Our next question is from the line of Josh Beck with Keybanc. Please proceed with your question.
Hey, guys. This is matti on for Josh.
Wanted to touch a little bit about the partnership with Cooper and I was wondering if you could give some color on where you see the most opportunity with this and if theres any model implications that you see for this partnership going forward.
Yeah, Kudos really the last big AP player that had not joined the VPN. We've spoken in the past around there could they pay initiatives and they were a little bit late to the game compared to some of the other folks, but theres certainly stepping on the gas and throughout our conversations it became abundantly clear to them and that it could be a <unk>.
Partnership.
Got lots of people they want to pay and receiving payments from 100 different accounts payable providers is not good for our suppliers. So they love the model of driving payments to our existing suppliers, but we also announced a referral partnership because they've got suppliers that won't accept payments unless they give it to them.
More streamlined straight through processing way, which is what we offer with the VPN digital op. So.
I think it's just further evidence that we have solved BTB payments with VPN in a way that no one else has to date.
And that's why we're so bullish about the future.
Awesome, that's really helpful and thank you for laying out the path to positive EBITDA in the future and so I'm thinking high level could you talk about what investments are left to be made in the medium term. Thanks.
Okay.
We're not seeing any step up in investments.
In order to get to higher revenue growth.
And delay our path towards profitability, we think the major investments have been made and now we need to manage the business in light of customer demands.
10 of our European operations.
And the like but I think.
And you saw it in Q4 some of the larger investments we needed to make we made this year and we made them within the budget, we articulated for the year.
That came in a little bit better on adjusted EBITDA than we had forecast. So that is in part why we feel we're on a good path towards profitability.
Thanks, guys and congrats on the quarter.
Thanks, Thank you.
Thank you at this time I will turn the floor back to management for closing remarks.
Once again, thank you everybody for participating the call and hearing more about the <unk> story.
Obviously very bullish about the future. We just had our first year as a public company and we're looking forward to continuing to build on the great things. We've already done. So thank you and have a great evening.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.