Q1 2022 Paymentus Holdings Inc Earnings Call
With last year.
These sales numbers are inclusive of direct partner and Jpmorgan migrations, which require some sales support to complete.
Relative to the comparable quarter of consequently, one hour sales for our more diverse with less than 40% from the utilities vertical.
The largest areas of increase were city services insurance and mortgage payments.
But we also signed clients as unique as a leading home design company.
We crossed an annual run rate.
<unk> $100 billion in payments volume during the quarter.
We believe very few companies in the U S. Our processing business scale.
Which is nearly a quarter of $1 billion per day on an average.
As we have said before our scale creates opportunities to strengthen our network and process our relationships because of the unique value we bring in underpenetrated segments for digital payments.
We continue to work with establish additional relationships in our newer segments.
In past quarters, we have talked about the expansion of our telecom partnerships.
This quarter, we have signed the healthcare division of one of the top five U S banks.
To expand our footprint in that industry.
We expect the partnership to provide us with expanded access to practice management systems.
Adding partners in areas such as healthcare Delek.
Telecom and other Underpenetrated verticals help our sales efforts and complements complements our direct selling process.
Illustrative of our ability to increase our share of the total addressable market in.
In the quarter, we went live with one of the largest owners of apartments in the country.
Real estate is.
Outside of the core six verticals that we talk about but represents a significant opportunity on its own.
As you can imagine the rent payments fall into our sweet spot of both non discretionary and reoccurring.
We believe this implementation shows the flexibility and the breadth of our platform, which powers industries as diverse as real estate BW logistics and home security providers not to mention our existing core verticals.
We are making progress migrating the JP Morgan Chase client base, we completed our first implementations in the quarter.
And many more are in flight and scheduled to go live throughout the year.
Wireless added revenue isn't material, yet we expect it to build over time.
In addition, the new deal sales channel from Jpmorgan Chase continues to build and the relationship continues to be more and more beneficial for both parties.
A quick note on our IP and ecosystem.
We continue to expand our network and add more and more endpoints, including the <unk>.
As a reminder, <unk> symbiotic with biller direct IP and helps us win more biller direct deals and biller direct wins help us add more IP and partners in volume.
I'll now turn the call over to macro discussion of our financial results in more detail.
Thanks Vishal.
As a reminder, today's discussion includes non-GAAP financial measures. Please refer to the tables in our press release and supplemental slides for a reconciliation of non-GAAP items to the most directly comparable GAAP financial measure.
In the first quarter, we processed $87 9 million transactions, which equates to a year over year increase of 49%.
Transaction volume continues to be driven by strong execution as well as additional IPM transactions in particular, the pay there is bank transaction as well as business to business transactions.
This transaction growth drove a revenue increase of 26, 5% over Q1 of 2021, which resulted in revenue of $116 $7 million in the quarter.
Q1 contribution profit was $47 $4 million, representing a 35% increase over the same period last year.
Consistent with the last several quarters contribution profit grew faster than revenue, primarily due to an increased mix of transactions without interchange, specifically IPM transactions cash based payout transactions and certain <unk> transactions.
Contribution profit per transaction was in line with Q4 of 2021 at 54 zones.
Which was consistent with our expectations and previous communications.
Contribution profit for the quarter was ahead of expectations due to certain customers going live earlier in the quarter than less than was anticipated as well as some favorable mix of payment type.
These items provided a tailwind in Q1, we do not anticipate that tailwind the carryforward in the subsequent quarters.
Sure.
Adjusted EBITDA was $5 4 million for the first quarter, which represents an 11, 3% adjusted EBITDA margin.
This was slightly above our internal expectations for the quarter.
We only provide guidance for the full year, but we never expected the adjusted EBITDA to be spread evenly throughout the year as we ramped up hiring to in 2021 and had additional fees for completing the 2021 audit.
We expected Q1, adjusted EBITDA to be the low point for the year for these and other reasons and we are on track to slightly ahead of what we expected.
Operating expenses rose $13 5 million to $36 2 million for Q1 of 2022 for the same period from the same period last year.
Overall, the increase in operating expenses from last year was driven by investments in staff as well as additional operating expenses associated with the various incentive era.
Amortization of identified intangible assets from the acquisitions and stock based compensation.
Specifically R&D expense increased $2 7 million or <unk> 44, 4% from the first quarter in 2021, as we continue to innovate with and for our customers and partners.
Sales and marketing expense increased $8 million driven by the pay various acquisition continued to expansion of the sales team, adding partnerships to capture our sizable market opportunity and an increase in stock based compensation.
Also travel and marketing events continue to ramp up relative to Q1, 2021, particularly with the impacts of Covid fading.
We experienced an increase in G&A expense of 43% 43, 1% or $2 $9 million due to our acquisitions multi fold increases in the cost of corporate insurance and ongoing investment in public company infrastructure.
Our GAAP net income was $1 $7 million in EPS for Q1 was one.
non-GAAP net income was $3 7 million and non-GAAP EPS was <unk> <unk> for the quarter.
We had a large tax benefit in Q1, driven by a small loss on pre tax income as well as a discrete benefit of $2 $6 million that we recorded related to excess tax benefits on stock based compensation.
As of March 31, 2022, we had $163 $4 million of cash and cash equivalents on our balance sheet.
Cash decreased primarily due to the timing of certain customer payments as well as increased operating expenses due to the acquisition.
At quarter end, we had approximately 121 million shares of common stock outstanding.
Now turning to our 2022 full year outlook.
We are increasing our 2022 revenue outlook to a range of $492 million to $497 million, which represents growth between 24, 5% and 26% year over year.
We are increasing our contribution profit guidance to be between $206 million and $208 million for the year, which is approximately 30% to 31% growth.
Our adjusted EBITDA outlook is in the range of 30% to $33 million with an adjusted EBITDA margin of 14, 5% to 16%.
As we've indicated previously we do not believe the current inflationary environment will have a negative impact on our topline.
Our current guidance reflects some assumptions around continued inflation and potential for increasing wage pressure. However, if inflation continues at higher levels than we have assumed it could have a higher impact on our margins going forward.
As you can see from the updated guidance the high end of our contribution profit guidance implies growth in the same range as 2021.
We believe this level will give us a top decile performance for technology companies based on rule of 50 for the past couple of years.
We are not slowing down and remain excited about how the business is performing.
Finally, as we said last quarter, we anticipate our full year effective tax rate to be around 30%. However, due to the amortization of intangibles associated with acquisitions. The closer we are to breakeven on pre tax book income the more variation, we could see on our tax rate.
I'll now turn the call back over to you Sean for some closing comments.
Thanks, Matt.
To close I would like to provide a brief reminder.
Of what we believe makes us different and position of our positions.
To win a significant share of the massive <unk>.
Our platform was designed to be flexible and meet the billing and payment needs of virtually any industry.
This creates a massive addressable market vessels, both reoccurring and non discretionary in the U S and beyond.
We estimate this at nearly 16 billion Bill payments Bill payment transactions annually in the U S alone.
And we believe we have the ability to address a sizable portion of them.
With our acquisition of Polaris. We also opened up access to bank based payments and we believe IP and extends our reach to virtually any churn or consumer a consumer wants to play through.
Our platform is known for BTC.
But also runs largest scale be to be invoicing and payments clients.
<unk> outside of the 16 billion number I just mentioned.
The platform is known for pains meaningful payments.
Can also provide payout for insurance companies and other industries that need disbursement capabilities payout.
<unk> also incremental to the $16 billion up payment number I talked about.
This is why I continue to be extremely bullish on the business and.
And you'll see us continue to invest in long term growth rather than dropping incremental dollars to the bottom line.
I'd like to thank our 1000 plus employees for their hard work and dedication that makes all of this possible.
With that I'll now turn the call over to the operator for questions.
Absolutely if you'd like to ask a question. Please press star followed by one on the telephone keypad. If for any reason you would like to move that next Gen piece Pitt starring followed by again to ask a question.
As a reminder, if you will using a speakerphone. Please pick up your handset before asking a question who will pumps.
Excuse me our first question goes to romance with Goldman Sachs.
Your line is open. Please proceed.
Hey, guys. Good afternoon, how are you.
Okay.
Good.
I wanted to follow up on the full year guidance I think last quarter, you guys signaled that in the back half of the year you guys could dip below that 30% I think it was a combination of.
Of tough comps in the prior year and some conservatism around the pace of Onboarding. It sounds like you were a little bit more successful in bringing new clients onboard this quarter I'm wondering as we've gotten three months later or have you have you gotten any incremental line of sight onto the pace of Onboarding and is that still your expectation in the back half of the year and what would it take.
I would need to happen for that to occur.
Yes, Thanks, Welles is Matt Great question.
Yes, it's early in the year I would say we still have.
Nothing fundamental has changed in kind of our view with respect to our guidance and modeling and forecast for the year.
We did have a very good result in Q1 and being able to.
Good things like sooner than we had anticipated modeled.
And we're going to continue to work for that as we go through the rest of the year, It's something we've always done and we'll continue to do its a.
Definite focus of Vishal I and the rest of the team.
But it's early in the year and I think we're kind of maintaining our view.
View on the rest of the year at this point in time, and we'll continue to work on as we go through the year.
Got it that's helpful. And then maybe one for Sean it's nice to hear about the the referral agreement with the health care vertical at the large banks.
If we take a step back you guys have done a lot of expansion in your go to market channels since the IPO and I guess when you put together the JP Morgan relationship.
The new healthcare deal I mean, how are you thinking about the tailwind.
To the top line and I guess, even higher level would you consider these partnerships as being potentially additive to that 30% growth rate that you've talked about in the past.
Well.
Good question Bill. Thank you I was going to say is.
Smiling because of the last part of your question.
Look we are very proud of what we have been able to accomplish here everything we set out to do as a business. We said, we're going to build a platform, which allows us to scale horizontally.
To any.
Any vertical industry and vertically to any size of the customer and we have done that and as a result of that.
Modern age Biller direct platform, the FDA did which not only brings billing companies live in the ecosystem, which is a direct ecosystem, but also through the IBM ecosystem. We've created allows them to go to the any endpoint. It is it is allowing us to.
Bring customers on.
Our platform at a faster clip than we have done before and in addition to that we are also seeing <unk>.
Tremendous excitement in the partnership ecosystem behalf you named some of the partners and there are many other partners in the mix as well. So we're seeing tremendous progress there and this clearly helps us continue to grow and maintain the momentum and.
And we're not raising our guidance our guidance is what it is but not a day goes by where we are not looking at how can we accelerate that even more.
Then what.
We are already forecasting so.
Nothing in the guidance, but at least from a.
Overall perspective feel good about where our business is headed.
Yes.
Got it I appreciate that and thank you for taking all my questions.
Of course, thanks a lot.
Thank you. Our next question goes to enter without with SMB Nikko Securities. Andrew Your line is open. Please go ahead.
Hey, guys. Thanks for taking my question and nice set of results here.
Yes, first off Matt I Wonder if you could clarify some of your comments around the first quarter tailwind around favorable mix and the pace of Onboarding I guess can you give us a better sense of what exactly those payment mix types like what drove that benefit and why that wouldn't.
Carryforward in subsequent quarters and is the Onboarding dynamic really just kind of a timing element or.
I would assume that if you are accelerating the rate of these onboard that.
Those tailwind should continue.
Yes, Thanks, Andrew I appreciate the question so on the implementation of Onboarding.
Yeah, when we lay out our model for the year, we assume based on all the information that we have from our own team from the client a certain.
Go live date for a particular client.
Let's say for the some of the acceleration we saw in Q1.
They were clients that we had slated to go live say at the end of Q1, but they went live in the middle of Q1, so that means that we got an extra month and a half of revenue off of them.
But when it comes to Q2, we kind of had that revenue in Q2, all along because they were going to go live in our plan at the end of Q1 anyway. So there's no incremental benefit to Q2 from that client going live earlier in Q1.
And that's what I was sort of referencing with.
With Will's question is.
At this point in time early in the year, we don't want to make assumptions that we'll be able to be successful with additional clients that are in the implementation pipeline ability that same thing because every client is different all the facts and circumstances are different. So it's great for Q1 that we were able to do that we continue to work on doing that everyday going.
Forward and our team is very focused on it but.
It's hard to make an assumption that that can continue through <unk>.
Depending on different facts and circumstances are different clients.
Then on the mix.
Really what I was referring to there is.
We saw some movement say from credit higher cost.
Type of payment to more cash base lower cost type of payment.
In Q1, so we got the benefit of additional contribution profit from that.
The main reason, we said we're not anticipating.
Anticipating that to continue because Q1 is a little bit of a different animal as we've talked about before than the other quarters throughout the year and that is.
It's kind of the high point of the year and what we see for our average payment amount I E. The bill payment amounts that are getting paid on our platform largely due to utilities.
<unk> being higher in Q1, because of the cold winter months and so this year that was maybe even fueled a little bit more with some of the macro things, we're seeing around energy costs.
So I think people a little bit of speculation on my part that people.
May have paid more with different types of payment methods because the bills were higher or they may have split their bills and paid film with our summer credit.
Et cetera, So again, we're not making assumptions that thats going to continue because Q1 has a little bit different profile with respect to the amount of payments, we see in the behavior, we see out of consumers just because those payment amounts are higher.
And I think if I may add little bit to that.
The quarterly dynamic Matt.
Describe sorel is exactly why sometimes it could be misunderstood that what we are when we are guiding to the year suntanned quarters things quarter to quarter, but the guidance for the year is what we're focused on as a whole.
Got it very helpful.
My follow up for Sean I mean.
If we are heading into an economic slowdown and.
Potentially a prolonged recession.
Is this changing any of your conversations with builders that are looking for solutions to be able to better capture rate of payment.
And the like.
Yes.
Great question I can take you back to the last time, we saw a recessionary environment, where it looks like 2010, 11, 12, and so we want that transpire into accelerating growth for us in some ways because.
The business itself.
<unk> talked about at the top of the call the resilient factor in headwear.
I still have to pay my bills of the consumer into the businesses.
You have to keep your lifestyle and you have to pay your insurance you have to pay a market and so on and.
But during these tough times.
<unk> there is increased focus on improving the efficiencies while also trying to improve the customer experience. So that it's easier to collect money from our customers.
And that actually shines, even a stronger light or a brighter light on our platform and our capabilities and as a result.
Do we start to get even more inbound inquiries than we would typically get.
And I'm, not saying that a recession is actually beneficiary to somehow there is there is a benefit to us, but what I'm, saying is that.
The way, we have designed our business and the way we approach the market.
We.
There is a.
Recession.
Because of the pricing model, which we have created that actually helps our case, even stronger in many cases I hope that answers the question.
No it does and that collection rate definitely comes into greater focus for builders. So thank you for the color.
Thanks, Andrew.
Thank you Andrew our next question is to ask them.
Excuse me share the car.
Sydney Ashwin. Please go ahead.
Thank you.
Good quarter guys.
I wouldn't.
Hoping you could perhaps address sort of what we should expect.
With regards to cadence through the year.
You're obviously raising raising expectations.
Is that a is there a timeline one should expect in terms of discrete quarterly layout.
And then let me ask the second question dedicated as well.
<unk>.
The expansion opportunities that you talked about for example entertainment opportunity and so on so forth.
Is there any could you perhaps help size that.
That sort of flows through your system.
That would be helpful. Thanks.
Okay. Thanks Ashwin.
The first one.
I assume what you mean is does it change anything just to clarify for me on the quarterly cadence does it change does the fact that we.
Had the.
Kind of exceeded expectations in Q1 and raised our guidance does it change kind of our thinking for the rest of the year and how the quarters play out is that with <unk>.
Yeah that was what the question okay.
Got it no not really I mean, as I said I think.
The reason, we had a well there were a lot of reason we have a strong Q1 I would say the.
Reason that we had.
Stronger than expected Q1 was the timing of certain implementations happening a bit faster sooner than we expected as well as the.
Some of the mix shift is early in the year, we don't.
Because of the factors I mentioned I think in response to Andrew's question.
We're not comfortable.
Sort of carrying that through to the rest of the year at this point.
So I think the kind of underlying fundamentals for the year or consistent with what we expected and talked about going into Q.
Q4.
We've got.
Sean sort of allude to a second ago, we only provide guidance on an annual basis. The reason, we do that is because there is quarter to quarter variability in our business.
When we get into the back half of the year we've got.
Some of the tough comparisons with some of the acquisitions, both in Q3 and Q4.
But fundamentally we still believe that were 30% grower and obviously our guidance reflects that and I think nothing's going to change that going into 2023.
So.
Yes, I think that was the.
The cover the first one the second one could you just repeat the second question I'm sorry.
Yes, it was just kind of.
Obviously.
Similar to a previous question, but I wanted.
Wondering if you could actually size.
Some of these opportunities that you've talked about <unk> for example.
When you start drilling in rent payments right.
How does that add to the overall pie or was that already included in the overall pie.
I think great question Ashwin I think this is one of the key advantages of the platform. The way we have considered that will be adopted.
Net we are able to add so.
The bill payment market, which is just beat to see payment receivable receivable market itself.
As we talked about it it isn't trillions of dollars of.
Household expense, which goes through.
Just for Bill payments.
B.
The capabilities as we talk about is completely outside of that in a significantly larger in many ways just because of the total amount.
The dollar amounts are included in B to B invoicing process.
And pay outs is a pretty significant opportunity as well so they're both outside of what we are.
What we are pursuing here so.
We talked about in the $16 billion.
Bill payments. So we feel like that this is all of these things we have done the hard work the rails the platform. The capabilities. We have built the workflows. We have created this all setting a great foundation for us to continue to grow.
In the outer years.
The thing I would add to that and totally agree with all of the thing I would add to that is.
We've kind of been thinking about it in a little bit of a two pronged way in the sense of.
When we talk about kind of being a 30% grower, we obviously we're thinking about.
The bill.
Direct business and the platform that we have in our six verticals, but also all verticals right, where obviously taken into account.
Kind of all the different types of doors that can be on it.
What I meant when I said, a two pronged approaches.
The more we can expand that pie.
Have more opportunity at different types of clients that also applies to the bank network with diverse that also applies to some of the IP and stuff.
More.
Kind of certainty you can put around that 30% number because it just gives us more opportunities from which to draw from and then b. If many of them hit then I think it becomes incremental and kind of on top of that 30% number. So it's kind of like we've got to we've got a wide net of things that we can draw from to get there.
And then if we're successful in many of those different things then it starts to go up from there if that makes sense.
Positive Optionality, yes.
Yes.
You said that much more so frankly that I did yes.
Okay.
Yeah.
Thank you. Thank you very much Greg and agile.
Alright, okay.
Thank you Ashwin.
Our next question goes to John Davis with Raymond James Your line is open. Please go ahead.
Hey, good afternoon, guys, Matt I heard you say a couple of times you expect to continue this 30% contribution profit growth into 'twenty three.
But our biomass boiler.
Assume a little bit of an organic acceleration given the.
A modest impacts from the acquisitions that you've done so just wanted to just.
Firm that I'm, just kind of understand what the drivers are to that.
Accelerated growth.
2023.
Yes, Thanks John .
Well 2020.
Two is not done yet.
Sense of.
Michelle and set our guidance or our guidance, but we're certainly.
And every day to try to.
Continue to drive more in 2023.
What we're here for and Thats what were.
Paid for is beginning to drive to add more here.
But with your point based on our current guidance.
I definitely understand your point and I think it's it is a result of all the things that were talked about and we're working to put in place now.
Additional partnerships with the expansion of the opportunities around the outside of our core six core verticals or industries that we're now getting into like the rent payments opportunity.
B to B potential that we started off in and continuing to drive additional clients. There. So I think it's really just the bank opportunity with <unk> is we still are very excited about what that can bring in.
Inbound interest in conversations are happening on that front. So again, I think really answered the questions way I wrapped up with with Ashley's question, which is we really widen the net out over the last year.
The 18 months.
And so just having more opportunity that more different whether it's verticals partners.
Thanks versus what goes on and all and it just gives us more areas of more opportunities to drive additional business group.
Absolutely and on top of that.
We have a customer base.
We have signed customers.
Last several quarters.
This most recent one.
60 deals for 60 deals.
Nothing to sneeze at and so all of these contribute.
To where we could be next year.
And.
So we're excited about the business.
And.
Like Matt said that it is not done but it is also not done from a perspective of adding locked to the to the mix to make sure. We can conceive of video.
Okay.
Super Helpful. And then we will have a question on inflation and trying to understand and you guys are a relatively new public company matter or Michelle maybe just take a second.
Plant or expand upon how inflation actually runs through my understanding is basically a pay per bill, but some of your costs could be.
Higher inflationary environment. So just really want to understand I think that you said that inflation kind of neutral to.
So maybe just kind of.
So on explaining exactly how inflation.
P&L.
Sure.
So.
Yes.
The way, we have engineered our business and the way we have engineered.
Agreements with the clients actually take care of this study issue and has done that for years now.
One of the factors is that for our clients.
Actually I don't want to get too technical because it is a very technical question due to their payment methods involve different payment methods have different type of fee structures to them. Some of them are flat regardless of the form of payment.
Our cost structure is in some cases, regardless of the.
The payment amount, which.
Which is the charge due to inflation by the billing company, we still get our fair share on our margins don't get affected by it.
Some cases.
There is a change where we are getting a flat fee and while on the backend of our cost is variable and thats. It.
A small percentage of those transactions and data as well we have ability to raise the <unk>.
Rising and.
Because it's very understandable by the clients themselves that if they are getting more benefit.
Two the inflation.
Charging higher for their bills, we want.
Any company, which is making that all happened where they are able to collect the money, we want to be able to raise the rate as well on behalf.
<unk>.
Capabilities and the agreement already built in.
So that it doesn't.
It doesn't.
Affect us as much as it will appear actually.
Okay.
Okay Super helpful. Thanks, guys.
Thanks, Sean.
Thank you John .
Our next question goes to Jeff Cantwell with Wells Fargo. Jeff. Your line is open. Please go ahead.
Hey, Thank you for taking my questions and thanks for joining the call.
One thing that stood out on the positive side here and this is being highlighted on this call is raising the guidance, especially given how many other companies have sounded about the quarter and I guess.
Given that youre at the real heart of the economy in many ways because our main clients. You have now can you sort of give us your macro view, where do you see it and what I'm really trying to get at is what made you confident here to raise the guide is that the new brand or is it something about the.
The operational momentum this quarter I just wanted to see what you can point us to that will help us understand what youre thinking about.
As far as positive for the remainder of the year.
Thanks.
Yeah, Thanks, Jeff as Matt and welcome to the fold glad to have you as part of the group here.
Sure.
Yes, so on the macro I think Sean has a little bit earlier.
Obviously.
Things have been a bit tough to start the year on multiple fronts.
And the macro but.
Because of the space that we're in and we're really focused on non discretionary essential recurring bill payments, it's a very resilient business in.
We saw it kind of at the beginning of Covid.
When you are really the impacts of our business at the beginning of Covid was.
A little bit of a slowdown in signing new business and getting customers live because everybody was focused on their own business, but.
But we did not see any slowdown at all to the payments flowing through our platform because people still have to pay their bills they need to keep the lights on and they needed to keep their insurance mortgages et cetera, and so.
It is a very resilient model and I think.
Thats reflected in.
Our results in Q1, and our guidance for the rest of the year that.
Even though the macro may seem a little uncertain.
One thing is constant that people need to continue to pay their bills.
I think as far as the raising the guidance for the year. It's reflected in that that we have not seen any negative impacts we don't expect to see any negative impacts from that.
In addition to.
Again, just keep pointing back to all the things that we've.
Added and continue to announce our ability to execute internally on.
Getting clients live and implemented and Thats actually.
Then back to the one of the earlier questions and kind of delays on our ability to continue that through the rest of the year or not what we saw in Q1 and be able to have faster there's a huge.
Reliance there on the client we can't do it alone.
Have to partner with them it has to be within the.
Bounds of kind of their internal priorities and projects and they've all got a million things going on and so.
If it was completely within our control I'd be like full speed ahead, we're going to get them. All lies tomorrow and figure out how many people we need to hire to do that.
But we also have to work within the bounds of our clients and so.
It's definitely a partnership aspect of it.
But we.
Everything that we kind of see.
From.
Behavior of people paying their bills from the things we put in place.
We feel good about the rest of the year.
And if I may add to this to your broader economic question.
Looking to the Investor base broadly.
If if for example, we were a private company today than you were investors in our company and you have 40 other companies in the portfolio.
You will look at the Memphis and think about but this is a company which is in recurring billing built numerous days you have to pay these essential bills.
And.
Julie.
Turbulent times like these businesses have even a stronger need to collect money and collect the money efficiently and also improve experience for their customers. Both of those things was or what our platform is designed to provide it actually.
That allows you to sleep a little bit better.
And.
Doing well, we have gone through a couple of these things and we didnt covered we continue to grow as a business.
So we had the same thing.
Through the financial crisis so.
What I'm trying to say is that if you take the public market side of things aside which deliver a uncertain PVH.
But we have all experienced.
Bob.
The business inside internally the businesses.
Doing really well.
Okay. That's great color, thanks, very much and congrats on the results.
Thank you thanks, Jeff.
Thank you Jeff.
Our next question goes to Tien Tsin Huang with Jpmorgan your.
Your line is open. Please go ahead.
Thank you so much.
I think John's question and ask it from a bigger perspective, just with inflation and what not are you seeing builders want to promote auto pay as a reason to.
Accelerated or raise a sense of urgency to want to work with you Im just trying to understand the biller side of how they're viewing the uncertainty that people have been asking about it feels like it could be.
Figure out.
Yes, I think so if you look at it from the.
In situations like.
Like these and frankly COVID-19 itself is pretty pretty decent memory.
So the billing companies.
Faced with situations like how do we make it easier for customers too.
To collect.
As well as make it.
Make sure that they have ability to pay a multiple times.
They have to.
Bob.
<unk>.
Also pay itself.
If you can believe it is for customers, who the least concerned about from a collectability standpoint. It is the customers who are not on autopay, where they will say well how do I, how do I reach to the customers at a faster pace than on broadly and and could I do it in a way.
That it doesn't cost.
A lot more money than it would have otherwise so everything of our platform is designed for so for example, if you were the better now is coming to you in a market like this my pitch would be let's take a look at our platform. It is designed for you to not have to change anything on your hand, we will do all the work because we have this.
Advanced integration framework in place and we have hundreds of billing systems are already integrated with and we can integrate with you.
While doing the integration, we can reach all of the customers, who otherwise not being able to reach out to just because of the modern paradigm shifting ecosystem. We have built so all of that resonates extremely well.
To the to the customer and the billing company and.
And therefore multiple payment options options, whereby the customers are and including giving them the ability to pay including at the last minute makes it very easy for the customers to pay and Thats why theres a gravitation towards us.
Sounds like this.
Makes sense, thanks for going through that and then just my quick follow up if you don't mind, just the Reinvestments makes sense and I know theres a lot of divesting them.
The reception partners in verticals, what about just on the product side in general are you have you changed your.
Focus on product development, given given what's happening.
And the World just curious what's what's new from a product perspective, maybe that you were thinking about six months ago.
We continue to make investments in the product we have.
In some ways, we have set up set the tone for the industry as to how the.
How customer experience shift take place and how it platform to really operate and what type of capabilities that should provide to the billing companies.
From a.
For their own teams perspective, the staff of the billing company, but also because customers of the billing company.
When you look at it from that perspective, it's a never ending pursuit.
We exist for two specific goals, how do we improve the customer experience and how do we do it while lowering the cost to collect our cost to serve the customers.
From a billing company standpoint and that.
All of the advancements all investments we make are in that area. The other area, we are actually heavily.
<unk> focused on is how do we improve the velocity of.
Onboarding I'll give you. An example, we have almost.
Sure.
To Matt's point earlier, if we could actually onboard.
Clients and it was entirely in our control liquor onboard them tomorrow like 70, 80% of our clients.
Yes.
Maybe even more.
Could be on boarded without making a single change anywhere in our system. However, it takes time for the clients to get comfortable and go through the process.
We are making investments in is for the remaining 10, 20% as well to make sure back these complex enterprise type.
Deployments are also able to get done without making too many changes.
As the workflows complex sophisticated workforce could be implemented through our platform without coding. So we're making some changes there as well. So you will see more and more about youll hear more and more about that as we go forward.
Okay. Thank you for the update.
Thank you.
Thank you Tien tsin.
Our final question goes to Dave Koning with Baird your.
Your line is open. Please proceed.
Yeah, Hey, guys. Thanks, so much and I just wanted to review contribution profit per transaction I think you've talked before about as you've gotten bigger clients.
It's naturally gone down a little it actually went down less this quarter.
A long time and I guess I'm wondering a is the mix is the mix of business as it comes down coming in at a different trends.
Rent levels like different verticals create kind of different.
Yields and then over time or are we at a point where that starts to stabilize.
Yes, Thanks, Dave appreciate the questions Matt.
Yes, I think yes to both questions.
Q4, and I can't remember, if we said it on the call or maybe it was in <unk>.
Some of the Q&A afterwards, but.
I said, we saw a pretty good step down into Q4.
And there was a lot of questions about it I said, we expect it to stabilize for 2022 and be pretty consistent with where we saw Q4 and there were a couple of reasons for that conclusion and were seeing them play out one was.
If you recall the reason for the step down or a reason for the step down in Q4 was a couple of large clients going live at the end of Q3 early Q4 that had a little bit different profile. One was more b to B will move included.
Some payouts, which were all cash based and so they had a different pricing profile than say, our typical biller direct clients have.
We felt very good because they were very large clients swaps transactions until we felt good in the overall economic profile of the client, but it caused the step down and we didn't see anything in our.
Implementation pipeline that looked it felt like those to date and so we expected.
It has stabilized but then also there is a kind of a terminal point you get to once you if.
If you think about the progression of our <unk>.
Growth is organization, we kind of purposefully starting in horizon, one with small and medium sized clients and when we moved up to large size in horizon, two and the network effect and horizon three.
There is a period of time, where every new large client you add is pulling down the average just simply because of the nature of size and the total portfolio.
Kind of reaching that point now where.
The addition of a new larger client doesn't really have that big of an impact on the average it's going to have some and but the rate at which it's going down certainly will slow dramatically and then the other factor is some of the IPM transactions that we've.
You talked about.
Or.
We don't have any interchange associated with them.
They are priced at a level, that's fairly consistent with sort of what our current car.
Contribution profit per transaction level is so theyre not going to be.
Detracting to that overall points.
So that's kind of what's behind the scenes driving it but we still.
Comments I made I think in Q4.
Still the same nothing's changed to change our thinking there which is the remainder of 2022, we expect to be.
Pretty consistent with Q4, and Q1 and kind of where we are right now.
Gotcha, Thanks, and maybe just a quick follow up sales and marketing. The last few quarters has trended up a lot and it's an corresponds with really really good revenue growth so I get it.
But is there a point where it starts to get Levered levered, a little bit going forward.
Absolutely.
Yes.
I don't want to say, we're at that point, because we continue to invest in the business. What I will say is between taken on some of the sales and marketing costs of <unk> in particular.
As well as we kind of purposely put some investment at the end of 2021.
In the sales and marketing and Youre seeing kind of the first full quarter of that in Q1.
It was higher than what I would say our ongoing level of investment is going to be that was kind of a purposeful.
Push of spend there so.
So I expect from this point forward you will definitely start to see it.
Moderate out and get more leverage over kind of what we saw this.
Last couple of quarters.
Gotcha.
Awesome. Thanks, guys.
Thank you thanks, Dave.
Thank you Dave.
There are no further questions registered at this time. This concludes the pigment to Q1 2022 earnings call. Thank you for your participation you can now disconnect your lines.
Okay.
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