Q4 2021 Paya Holdings Inc Earnings Call

Good morning, ladies and gentlemen, and welcome to the Pie of Holdings, Inc. Fourth quarter and full year 2021 earnings conference call. At this time all participants are in a listen only mode. If anyone should require operator assistance. Please press star then.

Zero on your telephone.

Question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded I would now like to turn the conference over to Mr. Matt Humphries head of Investor Relations at Pi you may begin.

Good morning, and welcome to the Pie up fourth quarter and full year 2021 earnings conference call before we begin let me remind everyone that today's discussion will contain forward looking statements based on our current assumptions.

<unk> patients can belief.

Including financial guidance.

With advice business, our objectives and business strategies as well as other forward looking statements.

Please refer to the disclosure at the end of the company's earnings press release and form 8-K filed with the SEC today for information about forward looking statements that will be made or discussed on this call.

All statements made today reflect our current expectations only and we undertake no obligation to update any statements to reflect the events that will occur after this call.

You can learn more about the specific risk factors that could cause our actual results to differ materially from today's discussion and the risk factors section of the company's 10-K, which we expect to file with the SEC in March 2022, and an additional periodic reports that the company files with the SEC.

Also during this call we will discuss certain non-GAAP measures of our performance.

GAAP to non-GAAP financial reconciliations and supplemental financial information are provided in the earnings press release, and the form 8-K filed with the SEC.

This call is also available via webcast you can find all the information I have just described on the Investor Relations section of <unk> website, including a supplemental fourth quarter 2021 earnings presentation.

Joining us on the call today are <unk>, Chief Executive Officer, Jeff <unk>, and Chief Financial Officer Glen Duey.

Following their remarks, we will open the call to your questions with that let me turn the call over to Jeff.

Thank you, Matt and good morning, everyone. Thanks for joining us today, as we review <unk> fourth quarter and full year 2021 financial results and expand upon some exciting recent announcements that accompany our strong financial results.

At the conclusion of my remarks, Glenn will provide further details on <unk> financial performance as well as our 2022 financial guidance.

Higher reported strong financial results in the fourth quarter led by our integrated solutions and <unk> businesses. The continued strong pace of the secular shift in buyer behavior to software led commerce solutions, coupled with the ongoing digital transformation occurring across middle market businesses provides an excellent environment for.

To continue to capitalize on these opportunities via our existing products and solutions combined with our innovation Road map.

Specifically in the fourth quarter past payment volume grew 27% to nearly $12 billion driven by card volume growth of 16% and ACTH volume growth of 46%.

Total revenue grew 24% to a record $67 million led by integrated solutions with continued strength in our ACTH offerings.

Gross profit grew 27% to $35 million and adjusted EBITDA grew 18% to $17 3 million.

Compared to the same period in 2019 total revenue growth was 31% and adjusted EBITDA grew 38%.

Our 2021 full year results were equally strong with volume growth of 29% to a record 43 billion total revenue growth of 21% to $249 million and adjusted EBITDA growth up 23%. These.

These accomplishments reinforce our enthusiasm to continue to deliver superior financial results over time through the disciplined execution of our strategy and capital allocation decisions.

Simply said, we continue to execute on a thoughtful combination of three strategic levers first internal investments in organic growth.

Strategic partnerships and third acquisitions importantly.

Importantly, we pursue all three levers enthusiastically and the relative weight of these three levers will continue to be dynamic based upon where we achieved the greatest impact.

I will now cover recent progress on each of these growth levers.

Our organic focus is on ensuring we have the right people and right solutions in place, while continuing to deliver profitable growth.

As such we are accelerating our innovation roadmap through new tools features and functionality, especially within our <unk> and government protocols to meet the ever growing needs of our partners and clients, while extending our competitive positioning.

The acceleration and expansion of our go to market strategy is also a priority which enables us to drive further penetration, while attracting new partners.

The opportunity to further penetrate existing clients, while also winning new ones has never looked more promising and we will pursue this growth lever aggressively ensuring our teams have all the resources they need to win importantly, the continued ability to attract exceptional talent to.

Further reinforces our confidence and enthusiasm.

Highest pipeline of actionable opportunities continues to grow and we've seen some great new wins, specifically in the fourth quarter and our government protocol, we signed one of the largest water infrastructure service providers in the country, where we will serve as the primary commerce engine to their 4 million customers spread across.

<unk> 19 states.

Another example is a new ISP partnership with a leading software provider in the not for profit and government verticals.

Our ability as a single solution provider offering omnichannel and payment agnostic solutions across multiple protocols were key to our success in finding this partner.

Their needs closely paralleled our strategy of delivering vertically tailored customer centric integrated payment solutions to partners across the middle market.

And finally in our <unk> business, we continue to see success, signing new partners, who are looking for additional kick payment capabilities, particularly for larger ticket transactions and then cross selling into our existing base of customers.

We're excited about the continued opportunities we see for our Acs business going forward and we will pursue these enthusiastically.

As pilot growth organically as well as through the integration of great businesses. We have acquired we continuously refine our overall brand positioning and strategy our solution footprint and of course the customer experience.

As such we recently announced that in our government vertical we have consolidated our existing government capabilities are domain experts and our first billing and payment group brands into a single unified experience copilot Gov through.

Through the end of 2021, our government business search over 2000 government agencies and municipalities across 24 states, while processing over $8 million payments per year.

As part of this strategic alignment, we are able to pursue the government opportunity with a much more targeted and efficient strategy strengthening our capability to capture a strong share of the growth we see here.

<unk> focus as heavily on continuing to extend our value added solutions in support of our existing partners and clients by understanding both current and future needs as part of these efforts, we recently announced a new business partnership with transport.

Global leader in payment technology solutions for financial institutions, Fintech and businesses.

This new partnership substantially expands our <unk> ecommerce solution suite offering a fully integrated accounts payable module and supplier network delivered through a single API and a single portal to customers Cup.

Coupled with Pi as existing accounts receivable solutions. This new partnership allows pilot to become in effect, a one stop shop with a fully integrated <unk>.

Offering.

This partnership serves to strengthen our value proposition, while further enabling our customers to succeed and unlock the growth potential.

And finally on M&A, we're focused on a range of inorganic opportunities that complement pie is organic growth, we remain optimistic on opportunities to layer in inorganic growth and want to remind you that we remain disciplined buyers ensuring that acquisitions meet our strategic and financial criteria are.

Our recent acquisition of velocity is an example of this where we acquired a strategic capability, which extended our competitive positioning.

Specifically velocity provides fully integrated omnichannel payment solutions to accounting and ERP partners, including <unk> and safe.

H B.

The acquisition brings market, leading and proprietary technology exceptional talent and strong integration experience and expertise, allowing us to further enrich the value proposition of our ERP offerings within the <unk> market.

<unk> ability to execute strategic M&A combined with the opportunities, we see to invest organically and a very strong balance sheet and cash flow generation has underpinned our decision making for 2022.

Where appropriate this means accelerating key product innovation and expanding our go to market strategy and a very attractive ROI with incremental capital instead of purchasing a capability for multiples of that these growth initiatives combined with the ability to partner with market leaders gives us both the confidence and flexibility.

To advance our growth agenda, while consistently delivering profitable growth.

With that I'll turn it over to Glenn to walk you through the financials in a bit more detail Glen.

Thanks, Jeff and good morning, everyone as Jeff mentioned earlier, we had a strong fourth quarter to close out 2021, our integrated solutions and ACTH offerings continue to be the lead drivers of our growth and we expect this trend to continue into 2022 and beyond.

Total payment volume in the fourth quarter was $11 7 billion, an increase of 27% year over year, which brings our full year volume to nearly 43 billion up 29% versus 2020.

In the quarter card volume grew 16%.

<unk> volume grew 46% with AC transactions up 22% or.

<unk> and not for profit verticals, where the larger drivers of volume growth this quarter.

For the fourth quarter total revenue was $67 1 billion, an increase of 24% versus last year integrated solutions revenue was $43 1 million up 33% led by the strength in our <unk> and not for profit verticals.

Payment services revenue was $24 million up 11% year over year with Acs revenue growing 21%.

For the full year total revenue was up 21% to $249 4 million integrated solutions revenue grew 27% to $155 2 million and payment services revenue grew 13% to $94 2 million.

In the fourth quarter integrated solutions revenue as a percentage of total revenue stood at 64% and ACTH at 14%.

Taken together these higher growth businesses represent nearly 80% of total revenue and considering Jeff's earlier comments about market trends, we expect this to increase over the coming years.

Gross profit in the fourth quarter was $34 7 million up 27% year over year with gross margin of 51, 7% expanding 130 basis points from the prior year.

Integrated solutions gross profit of $22 2 million was up 28% with a 51, 5% gross margin payment services gross profit was $12 5 million up 25% with a 52% gross margin.

For the full year gross profit was $130 1 million up 25% with gross margin of 52, 2% up 180 basis points versus last year.

Integrated solutions gross profit was up 25% to $81 7 billion with a 52, 6% gross margin and payment services gross profit of $48 4 million was up 25% with a gross margin of 51, 4%.

We saw some modest decline in gross margin and integrated solutions for full year 2021, primarily due to our acquisition of Paragon and.

In payment services, we continue to see gross margin expansion led by the growth in our <unk> business, which is running near 60% gross margin.

Adjusted operating expenses were $17 4 million for the fourth quarter and $64 9 million for the full year, both higher versus prior year as we layered in our Paragon acquisition, along with incremental public company costs.

Adjusted EBITDA in the quarter was $17 3 million up 18% versus the prior year.

For the full year adjusted EBITDA was $65 2 million up 23% and adjusted EBITA margin was up 40 basis points to 26, 1%.

We've talked previously about the acceleration of certain targeted investments into the business to drive further growth.

In the quarter, we pulled forward some of these initiatives given the performance of the business as well as opportunities we see in front of us in key markets to extend our competitive positioning and to broaden our capabilities.

As Jeff mentioned, we are continuing to do so in 2022 as we accelerate investment into our go to market strategy to further elevate our brand while increasing engagement across both our existing and potential new partners.

We are also scaling our innovation efforts internally with additional product and technology spend as we seek to expand and enhance our market leading commerce solutions.

GAAP net income for the quarter was $2 million versus a net loss of $2 1 million in the prior year.

Earnings per share was <unk> <unk> in the quarter.

Adjusted net income for the quarter was $11 9 million with adjusted EPS of <unk>.

For the full year, we reported a GAAP net loss of $3 1 million and adjusted net income of $40 3 million.

GAAP loss per share was <unk> <unk> and adjusted EPS was <unk> 32 for the year.

Net cash provided by operating activities for the full year was $37 million.

Our share count at the end of the fourth quarter was $132 1 million diluted shares outstanding.

Inclusive of approximately $5 7 million earn out shares that have not yet met issuance thresholds you.

You can reference an illustrative walk through of our share count and our earnings presentation.

Regarding our balance sheet at the end of the year, we had $147 million in cash and $249 million of gross debt with a net leverage ratio of slightly below one six times.

Subsequent to the end of the fourth quarter, we paid $6 million in cash for the acquisition of velocity funded from the balance sheet.

Okay.

Now, let's turn to our full year 2022 guidance as a reminder, these targets exclude any incremental M&A, we may execute for the balance of 2022 and only include acquisitions, we had previously announced and closed.

For 2022, we are targeting total revenue in a range of 275 million to 283 billion representing year over year growth of 10, 3% to 13, 5%.

Our gross margin expectations are 51, five to <unk>, 52% and.

And finally, our adjusted EBITDA targets are in the range of 72 million to $74 million.

As discussed for 2022, we are planning on investing incremental capital towards certain strategic product and tech investments, while allocating more dollars to pie as go to market efforts.

These investments are the primary driver of our adjusted EBITDA expectations for 2022 and represent approximately $4 million of incremental and discretionary operating expenses.

We're also expecting a slight EBITDA headwind from the acquisition of velocity for the full year 2022, as we integrate and optimize the business for proper long term success.

Over the past few years, we've consistently been able to accelerate our topline growth. While also expanding margins by 100 to 200 basis points per year, given the track record and the opportunities in front of US. We felt that was a responsible decision to sacrifice a point of margin growth in the near term to accelerate our organic initiatives and enhance our growth trajectory.

Over the medium term.

That concludes my prepared remarks. This morning, I will turn the call back over to Jeff to close up the call Jeff.

Thank you Glenn we are very proud of both the financial and Nonfinancial performance in our first year as a public company.

This was a result of the tremendous efforts of our talented employees and the dedication from our partners. The combination of organic initiatives strategic partnerships and acquisitions all contribute to accelerating our growth. The investments we are making today build upon what we've accomplished so far and underpin our tremendous enthusiasm.

To continue to take pipe to even greater heights.

With that operator, we're ready to take questions.

Thank you as a reminder to ask a question you will need to press star one on your Touchtone telephone again Thats star one on your touch tone telephone to ask a question to withdraw your question press the pound key.

Please standby, while we compile the Q&A roster.

Our first question comes from the line of Bob Napoli of William Blair. Your line is open.

Good morning.

Jeff and Glen.

Nice job on the quarter.

Yes.

And on the year.

I guess just on the outlook just to dig a little deeper into some of the comments.

You guys made on the accelerating go to market and invest.

Investing more in the innovation roadmap what exactly.

How are you doing on both of those fronts and what are you doing on go to market.

Are you doing something different on go to market and some color on the innovation roadmap would be really helpful.

Hey, good morning, good morning, it's Jeff.

For the question.

So two parts to that.

Different no.

Accelerated yes, so think of it this way there's three component parts.

One is accelerating portions of the product and tech roadmap.

Which is not a new set of initiatives, but simply having the horsepower to speed some of that important work up the second.

Is on go to market and sales and in particular.

What we call technical sales support so we like our Hunter and farmer setup.

But adding more technical support to those teams.

<unk> success and also speed to revenue and then third is marketing and as we continue to work on improved.

Strong ROI initiatives, we see the opportunities to dial that up modestly as well.

Okay.

And then I guess on.

Maybe some color on how business trended through the quarter and into January February and as we think about 2022 I mean your payment volume was up 27% in the fourth quarter. I know you have some tougher comps with AC H coming earlier.

This year in 2022, so just any color through the quarter and then if you could also relative to the take rate is there I think your revenue retention was actually up on the year.

Is there any.

Anything different on the <unk>.

View on the take rate I think it was 57 basis points of the revenue yield.

Versus 59, a year ago.

Hey, Bob This is Glenn thanks for the question. Thank you.

Yes.

Yes, no. Good question, yes, as far as the quarter. So the volume trends I'll take that one first and then speak a little bit on take rate and retention.

For the quarter, yet we saw a little bit of acceleration as we ended Q4 so.

Really the reason we came in a little higher on the revenue side, we saw a good finish to the quarter. So we were excited about that and yet we've seen good fall through rate I mean, we never like to call the quarter.

Too early right and we've got another month left but we haven't seen any negative trends, let's put it that way in the first two months of the year. So that's been positive to see.

Obviously, a lot of macro items going on at the moment.

So we're monitoring that and.

I want to make sure where we're not getting ahead of ourselves from a guidance perspective either.

And then for the question around retention and yield.

Yes look we continue to see pricing power on the card side.

So our even though our headline yield.

Is down on a year over year basis right in Q4.

It's down one point less right. So we are.

First point would be that that that distortion from ACI is lessening and youre going to see less of an impact in 2022 here. So the card strength will stick out a little bit more as you look into 2022 as far as yield and pricing and we were up sequentially on card yield up on a year over year basis as well.

Then from a retention standpoint, yes, we saw great year on retention.

Both on the volume side.

And kind of our 100% net volume retention was actually above that this year.

In 2021, so we're given the approximate 100%, but we outperformed that number this year on a volume basis, and then with pricing and pricing power on the card side, we saw a net lift from our net revenue retention perspective.

Good year in that regard.

Look we could hope to see that continue this year I think we have all the reason to believe it will from both a pricing and from a retention standpoint. So.

Yeah.

Thank you. Our next question comes from Chris Zhang of Credit Suisse. Your line is open.

Hi, Good morning, Jeff and Glen This is Chris on for it in Colorado from Credit Suisse.

One question about the longer term top line and EBITDA growth outlook, and especially in the context of what 2022 guide I understand there is some.

New investment, especially in the near term impacting the plant according to margin.

Are you guys just talk about maybe the return until the longer term outlook and particularly the.

100%, plus EBITDA growth longer term and then I have.

My follow up.

Great. Thanks, Chris This is Jeff.

So to your to.

To the first part of your question.

We are not changing our medium term objectives. If you look at the performance of the business over the prior periods you will see that many of those periods are in fact ahead of the medium term objectives and as we have consistently said all along it is.

Is not a straight line from any given point in time to the medium term objective and.

And so we feel very good about the decisions we are making in 2022 to ensure that we can meet and then hopefully potentially exceed those medium term objectives over time.

Alright, I appreciate it I appreciate it and I think.

In terms of the recent announcements of the.

AP solution, that's definitely a very exciting development.

And we built the Tam expansion opportunity.

<unk> factored that into the longer term outlook or maybe.

Your medium term outlook. Thank you.

Yeah. So.

So let me take that in two parts first of all we are very excited about this partnership we were very thoughtful about how we wanted to come.

Combined pie is ah capabilities with industry, leading capabilities and very pleased with the partner.

That we have done that with.

In terms of speed and overall trajectory.

Simply too soon to know, but we see it as significant exciting and very relevant and so the initial.

And this is just the initial introduction is you all are familiar with our strong roster of ERP partners in our installed base, many of whom want or need the AP capabilities as well and they are far more attractive on a bundled basis than Ala carte. So.

Very pleased and excited but too early to.

Add color as to how much of our growth from here It will drive.

Okay. That's very helpful. Thank you very much Jeff wood colored.

Thank you. Our next question comes from John Davis of <unk>.

Raymond James Please go ahead.

Thanks, Good morning, guys.

Jeff and Glen I really wanted to focus for a minute on free cash flow and the balance sheet.

You guys have.

They are certainly healthy balance sheet to say the least.

Just wanted to add a little bit about capital allocation.

Jeff I hear you on the organic investments that you're making but maybe just comment on the M&A environment and then what the plan is to do as you just continue to accumulate cash I think stock buybacks given the liquidity here are tough. So just maybe your thoughts on what to do with the cash flow here and thoughts.

On the current M&A environment.

Great. Thanks.

Great question. This is Jeff again.

Start and then Glenn can pick it up so first of all we are very pleased to continue to have a very strong balance sheet. Thank you for pointing that out.

Our capital allocation priorities have not changed from the first time, we started talking with all of you.

Over a year and a half ago. So we will continue to invest in the organic growth of the business wherever we see high ROI opportunities.

We complement that with the M&A agenda.

You asked about the M&A pipeline and I would say two things one we continue to work a range of opportunities early middle and late stage in varying sizes.

Our disciplined buyers I know.

Hi.

That folks off.

Often ask about that.

But we believe that we will see very continue to see attractive and accretive ways to deploy the capital that we naturally generate in the business.

And in that regard, we don't see that changing anytime soon.

Anything to add.

Sure. Yeah. This is Glenn Yeah, obviously, good free cash flow for the year operating cash flow of $37 million that should continue to grow as we look forward.

Really good part about our business right, we can translate the profitability down to cash we ended the year around $150 million of cash on the balance sheet.

And below $1 six on the leverage ratio net leverage ratio. So it really puts us in a strong position to go deploy some of that capital.

Where we see opportunity right. So.

The market has seen a pullback.

But markets are always a little bit delayed in that but we hope to see some.

Some value come here this year in 'twenty, two and we will be aggressive deploying that where we see those opportunities.

And then obviously, yes.

The share price, we think in a depressed area right, we'll always look at that as well and see if there is any.

Need for to do something about that with our cash as well, but at this point in time, we're really focused on.

Running the business organically and then looking for M&A opportunities and I think we're in a very good position to go deploy that capital when we see good opportunities.

Okay.

Trying to pin you down, but what it does.

Is it fair to say that if the valuations kind of comment or at least the private markets catch up with the public markets weaken we could expect you to be more active this year than you have been since you completed the leaseback process.

Yes.

Sure.

Go ahead, Jeff.

Alright.

I was going to say that would certainly be our objective, but as you know we don't dictate the market conditions.

And we continue to work opportunities very enthusiastically.

But that's about as far as I think we could say Glenn sorry, I cut you off.

No exactly right and look I think.

The discipline dreamless, Okay. This year and hopefully, yes, we want to deploy that capital right, but we're going to continue to be disciplined to make sure. We do use it for the right opportunities.

But.

We're hopeful and we have a good funnel of opportunities out there that we continue to work in.

Continue down that path.

Okay, great. Thanks, and then just wanted to quickly hit on the EBITDA margin call. It flattish this year.

Maybe talk through your historically I know your midterm guidance, there's no there's not a point in time, one year to the next but.

Just help us think about the incremental investments this year and generally speaking you have operating leverage of <unk>.

<unk> 50, plus basis points of year on the EBITDA line and sometimes even closer to 100 and so just is that the right way to think about is the investments. This year call. It 50 to 100 basis points of margin just trying to think about the longer term algo here, recognizing you're investing a little bit more in 'twenty two.

Yes, let me start and tell you how.

Let me start with how we think about it and then Glenn can.

Come in and augment that so first of all we don't start with a margin objective and we've said that to you all.

For.

The get go so we start with what are the right investments to drive maximum profitable growth in the business and the margin at any given point in time is a byproduct of those decisions.

As you pointed out if you look back at this company over the past handful of years Youll see a pen 100 or even higher.

<unk> growth in margin year on year, sometimes as much as 200 basis points.

Which is great, but we manage this company for maximum profitable growth in the medium term and therefore to have flat margins for one year per the guidance to US is a fine result of the business decisions that produced that outcome.

I think implied in your question is the persistence of those investments.

And I would say two things one is the.

The better they perform the more enthusiastic we will be.

And vice versa of course.

But to your broader question we.

We continue to feel very good about the continued margin expansion of this business as a byproduct of the topline growth rates, we achieved and the investments we make in the business.

Okay.

Okay I appreciate the color thanks, guys.

Thank you. Our next question comes from Peter Heckmann of Davidson. Your question. Please.

Good morning, gentlemen, just a couple of questions on.

The fourth quarter and the outlook.

In the quarter itself.

Acquisitions, contributing somewhere around $3 million in revenue.

Yeah, So I'll just hit it on the organic growth side, so our organic growth.

For the quarter was up 17% year.

Year over year for Q4 up 17%.

Got it.

Great Great and then just thinking about.

Velocity it looks like a relatively small deal, but maybe $3 million in annual revenue there.

Yeah, not even no good question and it's.

Sub $2 million at this point so minimal.

Inorganic contribution this year, we're very excited about the transaction and the potential and the technology. It gives us so.

We think it's going to really lift off pretty quickly, but pretty site size wise pretty small contribution this year.

Sub $2 million.

And then also tied to the profitability side. This isn't the lead driver, but it also has a little bit of a headwind on the bottom line as well.

Right right. Okay, and then just as you are lapping that big.

H win from fourth quarter of 2020, how do you think about that outlook do you still think it's mutual grow faster than the corporate average.

Yeah. Good question. So ACTH is still a great grower for US obviously, we had the outsized growth.

This year driven by the deal that larger deal, but we will still continue to continue to see good growth. There we look at it as a.

Low double digits grower right. So it should settle in somewhere around there.

Moving forward.

And we have a lot of good opportunities there and even with the larger partner we continue to.

To see opportunity to have some additional incremental revenue with them as well so.

Still still will be a great story for us.

Good driver of the performance in.

<unk> 2022.

Good deal. Thank you.

Thank you. Our next question comes from David <unk>.

Evercore ISI your line is open.

David Please make sure your line is immediate and isn't a speakerphone lift your handset.

We'll go to the next question comes from Andrew Jeffrey of Truest. Your line is open.

Discuss stepping off the Andrew just wanted to talk a little bit more about the <unk> side of things could you talk to us about the average transaction size move.

Moving up or down.

And is there any callouts in terms.

The vertical markets.

Yes happy to take that this is Glenn on the transaction side, Yes, we saw a good year for average ticket growth rate, obviously tied to the inflationary environment. That's out there so good growth.

Organically for our customers, but then.

The inflationary component does have a positive impact on us.

So average ticket was up both on card and ACTH for the year and overall obviously.

And then from a vertical perspective.

<unk> continues to be.

Strong and performing even into.

<unk> 2022 here early part of the year and we continue to see that as a large.

One of the larger areas of growth for us.

And then yes, I mean, not for profit had a good quarter as well government as well, but just not as outsized as previous quarters.

Settling in at a more normalized growth rate now.

Yes within the vertical I would say <unk>, we're seeing good strength still in the construction and industrial supply side and.

Some of those hard good markets continue to perform well.

Great. Thank you.

Okay.

Thank you. Our next question comes from Mike Grondahl Northland Securities. Your line is open.

Yes, Thanks, guys just thinking about the accelerated investment in your go to market strategy.

Can you kind of highlight the size of your sales today it sounds like Youll add some technical sales or technical support this year and maybe how much bigger you think it'll be at year end in terms of people or percent.

Yes. This is great question. This is Jeff.

So it's this is not.

Step function change, we like the size and shape.

Our sales force and just as a reminder, hunters, who aren't new partnerships farmers, who work on penetrating the installed base of clients. We are always selectively adding in support of the opportunities. We see in particular stepped up marketing efforts often produce increased add backs.

So obviously you want to make sure you've got the folks in place to field those opportunities.

But the the.

The biggest.

Sure.

Is really around the tax technical sales and solutions folks who support the hunters and farmers and important reminder, for folks we are talking about sophisticated middle market businesses in the verticals that we play in and so.

While the integrations themselves are relatively turnkey.

Partners want a technology partner to.

To help them understand how to make the end to end experience.

Terrific, So thats really where the investment comes in.

It is an augmentation it is not a significant change.

And our approach or the shape or size for that matter.

Yeah.

Gotcha.

And then just secondly.

The EBIT kind of reconciliation there was a little bit of restructuring costs.

Does that relate to streamlining the government utilities business vertical that you talked about or is that something else.

No actually Mike Thats. The main dollars there were some of the new executives that came in.

Latter part of 'twenty one.

So there was some recruiting fees.

And things tied to Onboarding and then there was one off boarding as well.

Got it okay. Thanks, guys.

Okay.

Thank you. Our next question comes from James Faucette of Morgan Stanley . Your line is open.

Yeah.

Thank you very much I appreciate all your comments. This morning, I wanted to dig in really quickly on a little bit more on the M&A, particularly vis vis your own stock like how you're trying to prioritize that and then.

If you could give a little more color on the types of acquisition targets that you're looking at.

Whether it be there.

Their exposures growth rates and how we should think about at least generically you expect those to contribute to the medium and long term EBITDA growth targets et cetera that you have.

Good morning, James It's Jeff again thanks.

Thanks, Great questions. So let me take that in parts.

So first of all what what do we look for.

That criteria has not changed.

Anything that allows us to double down in our existing verticals as you. All know there are many sub verticals underneath is always first and foremost adjacent verticals is a very exciting place for us in a place where we're spending a lot of time.

And in terms of what we're looking for there.

Obviously proprietary technology capabilities, when applicable and velocity is a perfect example of that.

As well as extension of our go to market in terms of the penetration of the end markets.

Other part of your question.

Had to do with how you pay for acquisitions and I would remind folks we are in a very healthy cash position relatively low leverage so first and foremost obviously cash.

For acquisitions make sense and the key callout.

On equity is generally speaking and never say anything is an absolute but generally speaking equity for us is used.

Around structuring a transaction not for financing purposes for alignment of objectives are very often that can be captured in earn out provisions and the joint alignment of incentives as opposed to looking at the stock price at any given point in time and using that as the calculus. Obviously, we do that is.

Well.

But much more for alignment so we feel very good about where we're looking.

Doing lots of interesting work on a bunch of fronts and the ability to pay for it and sorry, James the other part of your question had to do.

With.

Growth rates, I think and what I would observe there.

As we have done acquisitions of companies that grow faster than <unk> as a whole and we have done acquisitions of businesses that do not grow faster than pi as a whole. It all comes back to the capabilities and the go to market asset of those businesses and that they will be worth more as part of <unk> then.

Not as part of pilot. So we are not buy in a vacuum simply buying the higher growth rate by paying big premiums to buy higher growth assets. So they need to meet their own strategic criteria on their own merits.

Yeah.

Thanks, a lot.

Thank you. Our next question comes from Josh <unk> of Cantor Fitzgerald. Please go ahead.

Hi, Good morning. Thanks for taking my question. My first question is on ticket size. So obviously its ended up this year, but do you expect the average ticket size to continue to increase as we move into the point right there.

Hey, Josh This is Glenn good question, Yeah look I think we do think it will continue to increase just maybe not at the same level, we saw in 'twenty one.

So yes still bullish on.

On average ticket going up.

We're just definitely careful about the macro environment and obviously good.

Macro year in 'twenty, one that we want to just be careful that we're not just rolling forward all those expectations are.

Rolling forward those results and what's going to happen in 2022, so we're being a little bit more tempered.

On the outlook.

The growth there.

Got it that's helpful and then on the outlook what factors would have to occur during two maintaining two to push you towards the high end of your current garden.

Yeah look I think it could kind.

Kind of the opposite of what I, just said I mean I think if.

Either or.

Macro growth is at a larger clip or inflation <unk> inflation is at a higher clip.

That or sustained rate at a higher clip I think those are things that could lead to outperformance obviously on the organic revenue side, we continue to work large partnerships.

That can really move the needle if we can get those won an integrated quickly right.

The timing of those is always the challenge right trying to layer those in within a year, but healthy pipeline of bolt deals. We're trying to win in deals we're trying to implement.

So we try to take a balanced approach there and our outlook, but obviously, if you ever can move things up as far as implement implementing or.

When deals are little quicker that could certainly help as well.

And then obviously inorganically, we've talked a lot about M&A. So that's also obviously not in our guidance.

Can provide some upside.

Great. Thank you very much.

Thank you. Our next question comes from Joe <unk>.

Canaccord Genuity your line is open.

Good morning. This is balance any on for Joel Thanks for taking our questions.

Jeff you called out the the ISC partnership in the North.

<unk> on thorium link vertical.

Any additional color you can offer there and more broadly how do you feel about about your pipeline.

In 2020, where it is versus 2021.

At this time of the year.

Great.

Thank you it's Geoff both are great questions.

Not a lot to add on the new partnership other than the fact that.

Large successful Isps in those verticals continue to demonstrate their desire for partners like higher who bring them the deep technical expertise and the sales support and the marketing support and so on and so on so these are not.

The payments processing deals.

And obviously, we love those end markets and very proud of the win.

As it relates to the pipeline the pipeline continues to broaden in most if not all areas and that is a byproduct of <unk>.

Focus.

Increase marketing talent and investment and those are the kinds of investments that as you know pay.

Pay off over time so.

So long as those kinds of efforts continued to meet our return thresholds you should expect us to continue to drive them enthusiastically.

Great and then a question for you Glen any comments on the cadence of the investments that you'll be making in 2022.

Good question.

Look I think from like an opex perspective, and cost perspective, they get layered in pretty quickly.

So.

You will see a jump up in expenses here in Q1 2022.

So there's a little bit of build in the year, but for the most part most of those expenses get layered in pretty early.

Thank you.

Again to ask a question. Please press star one on your Touchtone telephone again Thats Star one on your Touchtone telephone.

A follow up question from Bob Napoli of William Blair. Your line is open.

Thank you I just wanted to follow up on the velocity.

Acquisition, I mean, very small acquisition, but you seem very excited about it I guess at $7 million 88.

<unk> AP automation, I mean, theres a lot of players in EAP.

Space and $7 million doesn't seem like a lot of money for us.

Wiring.

Good Tech stack in that business. So what gives you the the excitement and I think.

Glenn you had talked about a quick lift off waking up I guess would have to come from cross selling so so what gives you the excitement on that acquisition that small amount for a player and a very large.

Market.

With lots of can HAE population.

Hey, Bob It's Jeff Let me I think I think to have.

Our items might have gotten.

Hi.

Confused in the comment so let me just step back so our AP AP.

AP initiative is a partnership with trans card.

Okay.

And so that obviously provides immediate capabilities for the cross sell as well as integrating the two offers throughout the course of the year.

Velocity.

As an acquisition of a very strong.

Team and IP K fidelity in the ERP sector, particularly <unk> and certain instances of Sage, which is a nice complement with Pi of course, so velocity is a great example of where a small strategic transaction, particularly if you have compatible cultures.

Can be a big winner.

So the velocity team has developed very highly regarded capabilities in the <unk> ecosystem features and solutions that we admire and by the way would have built on our own so that in that regard it as a great example of buy versus build.

And terrific.

Folks and in fact.

One of the highest rated axiomatic ecosystem technologists.

They're our rankings around this stuff.

As part of that acquisition as well. So that's why we are excited we are.

I agree with your point that when deals get particularly smaller you need to be very clear on why you're excited and suffice to say we are very excited by velocity and in particular, the talent that came with that deal.

Thank you and then maybe just a follow up I guess on the <unk> card.

Partnership in a little more color on exactly what youre doing with <unk>.

With transport or the way you think that the potential for that relationship.

Yes, so Bob I think I mentioned this on an earlier question on the call.

The first step as you would imagine is our ability to immediately begin offering.

Those capabilities to our existing immense installed base and over time the.

Intersection of integrations of features and functions to the.

The extent they are important to these clients.

I want to be consistent with all of you because we've been asked this question in prior periods.

<unk> is a world unto itself AP as a world unto itself. There are obviously opportunities to connect the two for incremental value add.

And that is something we intend to pursue.

But but the beginning point is the incredible deep installed base of partnerships, we have and remember these are deep technical partnerships.

And we are a trusted partner to these people so to be able to introduce the integrated AP capabilities from our position is very exciting to us and I think as I mentioned earlier on the call.

We don't ascribe individual projections to individual partnerships. We are very pleased excited we're off to a.

And.

And obviously it fits with the broader roadmap of broadening capabilities for our <unk> end markets.

Thank you I appreciate it.

Thanks, Bob.

Thank you at this time I would like to turn the call back over to CEO , Jeff <unk> for closing remarks, Sir.

Great. Thank you very much thanks.

Thanks, everybody for being on this morning, we know it's a busy week for many of you.

Suffice to say, we are very proud of how we closed out our first full year as a public company.

And we are just as excited I would say much more excited about what lies ahead for Pi. Most importantly, as we continue to execute against a clear set of strategic priorities.

And and also deliver and report to all of you in a very transparent manner. So hope you all have a great day. Thanks, so much for dialing in.

And this concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

[music].

Okay.

[music].

[music].

[music].

[music].

[music].