Q1 2022 Avidxchange Holdings Inc Earnings Call

May 5, 2022

Good evening, everyone and thank you for joining us for the avid Exchange Holdings, Inc. First quarter 2022 earnings call.

Joining us on the call today is Mike Prager avid exchanges co founder and Chief Executive Officer, Joel Wilhite avid exchanges, Chief Financial Officer, and <unk> Kumar Havent exchanges head of Investor Relations.

Before we begin todays call management has asked me to relay. The forward looking statement disclaimer that is included at the end of today's press release.

This disclaimer emphasizes the major uncertainties and risks inherent in the forward looking statements. The company will make this afternoon.

Please keep these uncertainties and risks in mind as the company discusses future strategic initiatives potential market opportunities operational outlook and financial guidance during today's call.

So please note that the company undertakes no duty to update or revise any forward looking statements. Today's call will also include a discussion of non-GAAP financial measures.

As that term is defined in regulation G of non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP.

Accordingly at the end of today's press release. The company has provided a reconciliation of these non-GAAP financial measures.

<unk> financial results prepared in accordance with GAAP.

With that I'll now turn the call over to Mike Frager. Please go ahead.

Thank you everyone for joining us today, Joel and I are excited to discuss avid exchange's first quarter 2022 results and the continued momentum we are experiencing across our business driven by our middle market focus and our four growth gears of our avid exchange business flywheel that drives our business.

Overall, we once again delivered a solid quarter of both operational and financial performance with results coming in better than our forecast.

This is the third consecutive quarter of over 20% organic revenue growth. These positive results reflect the middle market's steady demand for avid exchange is industry, leading and differentiated business to business accounts payable automation software and our payment solutions that are purpose built for middle market companies.

We experienced strong revenue performance of over $71 million, which was up 29% over the same period last year and higher non-GAAP gross margin exceeding 62% together with lower expenses, which led to a reduced EBITDA loss of $5 6 million in the quarter as a result, we are.

Raising our full year revenue outlook, while lowering our adjusted EBITDA losses relative to our previous guidance, which Joel will discuss later in today's call.

Our first quarter 2022 results were very much a continuation of the trends we highlighted on our first earnings call back in November of last year, we're seeing our buyer customer demand be broad based across the various vertical markets. We operate in the.

The homeowner Association management market, our HOA as we call it which we highlighted in our last earnings call. In March continues to recover nicely. We also saw healthy overall growth in both our buyer and supplier customer counts separately, we made a small tuck in acquisition of new customers in the first quarter from pay clearly.

For total cash consideration of $7 million.

<unk> clearly operates in the media vertical with a focus on political segment and had a roster of over 40 politically focused media customers, which we acquired.

This acquisition, coupled with fast pay in July 2021, cement our leadership in the media vertical continuing.

Continuing with our results during the first quarter, we experiencing strong transaction volume growth totaling $16 9 million, which was up almost 16% with a total payment volume increasing by 41% to $15 2 billion. This past quarter, our new homeowner Association management customer.

<unk> Ross management is a great example of what is driving our growth.

As a leader in the luxury high rise and homeowner Association management segment with over 100 associations under management Dallas based worth management was drowning in heavy paper invoice approval and coding processes being responsible for the timely processing of thousands of monthly invoices and payments.

Avid exchanges purpose built AP automation software and payment solutions streamline their manual and paper intensive AP process by eliminating paper and voices and their paper checks, enabling their AP specialists to be more value added and providing business insights and analysis to the association property managers.

The worth Ross example is also significant in another way as they are also strategic cornerstone customer given how influential they are in the HOA market to.

To build on our momentum in the HOA vertical we also announced the hiring of HOA industry veteran Michael <unk> as Vice President of our HOA business.

Another powerful example of what is fueling our growth continues to be our strategic channel partnerships. We are excited to have just signed another major preferred strategic partner agreement and the real estate vertical with regimen and the industry, leading and rapidly growing multifamily property management and accounting systems software company.

Regiment targets middle market residential multifamily property owners that manage our portfolio of real estate ranging anywhere from 500 to 5000 rental units regimen today has a base of over 700 buyer real estate customers utilizing our property management and accounting system features and view the avid exchange is a high <unk>.

<unk> strategic relationship, which will enable regimen to further move upmarket with more robust accounts payable and payment tools to help their highest value customers manage their dynamic business rules for invoice approvals and payments more effectively.

With this high profile resident strategic partnership we are now deeply embedded with five of the top seven real estate accounting system providers in the industry.

In short, our operating and financial results demonstrated strong execution against our long range business plan of being to the facto standard for accounts payable and payment automation across the middle market.

Further validates the investments we have outlined and have made since our IPO.

With that let me provide you with an update on how we are executing against our investment objectives set at our IPO last October impacting each gear of our avid exchange business flywheel and gear, one which is delivering a great AP and payment automation software experience to our buyer customers. We are excited to announce the.

The launch of our next generation procurement and purchase order management tools, which now includes three wave invoice matching capability.

Let me provide some context to why this enhanced functionality for our next generation purchase order management tools are both strategic to us as well as being high impact to customers.

We estimate that a significant portion of the middle market businesses, particularly in the upper end of the segment have some form of purchase order or <unk> as we referred to it and business process already in place today and many times. This is a paper based process.

And the real estate vertical alone one of the largest industry verticals. For example, there is an upstream need to better control decentralized spending related to repairs and maintenance through a streamlined purchasing an invoice process.

Our next generation purchase order tools, our strategic advancement and an appealing feature set for both new and existing customers, while enabling us to penetrate the horizontal ERP providers further and target new vertical industries, such as the middle market manufacturing segment.

This offering we believe will further support the tailwind for customer adoption and achieving our long term growth objectives. Lastly, the benefit of this offering should also increase already strong customer close rates with key strategic partners, who have also seen strong customer demand for this type of functionality across their middle market customer base.

Now turning to the second year of our flywheel, which is focused on maximizing overall transactions on our platform a key aspect of our strategy has continued to expand and improve upon our integrations two accounting systems, especially those with large market share of those in key verticals rich.

Remember that if we're not highly integrated with our customers' core accounting system and provide them a seamless user experience, it's very difficult to demonstrate the efficiency impact of a fully automated process.

In combination with our recently released next generation purchasing tools, along with our built inside integrations with our top four highly strategic horizontal accounting systems ERP partners, which include net suite, Microsoft dynamics Sage intact and Quickbooks Enterprise. These next generation built inside integrations provide us <unk>.

<unk> to ensure our systems are synchronized real time, with our customers accounting and general Ledger systems, along with providing a seamless user experience.

We believe that the combination of these gear, one and gear two enhancements position us well to expand into new verticals, while giving us a broad beachhead to leverage with our future international expansion strategy.

These horizontal ERP systems have significant market share across the middle market.

Under gear three of our avid exchange business flywheel, which is focused on maximizing the conversion of paper checks to electronic payments with our suppliers were excited to recently launch our straight through processing offering.

TP as we call it STP as a method of automating virtual card payment acceptance along with its detailed <unk> data by integrating the payments directly to the suppliers merchant processor and being able to deposit the virtual card funds directly into the suppliers merchant account.

In 2020, a survey conducted by the out exchange research team asked of adding automatic processing capabilities to our Mastercard virtual card process would increase their acceptance.

The result was that approximately 75% of those supplier survey found additional value in a straight through process, which would eliminate the need for any manual process on the supplier side for the processing of a virtual card payment and receipt of their funds.

In addition, 67% of supply or stated that the only way to make virtual card acceptance more efficient is by eliminating the manual touch points and labor previously required to process card based payments and helping to streamline their reconciliation process.

In particular, our existing supplier customers, who receive over 25 monthly payments today from the avid pay network, but presently do not accommodate receiving virtual card payments due to the need for this manual intervention saw the greatest value. This kind of supplier customer profile also represents over 20% of our check based payment volume on the <unk>.

Pay network today.

Of the numerous supplier testimonials that some of the benefits of STP. The best is probably Bryce Clark of capital work, which you had previously was receiving more than 25 checks a month <unk>.

<unk> I've enjoyed the time saving benefits so much that I'm willing to pay the regular merchant account rate on those payments I wouldn't want to go back to manual check processing now, but I've seen the benefits that STP provides.

So our new STP offering in short provides an efficient and approved supplier experience along with unrivaled scalability and reliability to drive further adoption of E payment acceptance from our suppliers and as another tool to increase the conversion of paper check suppliers to E payment acceptors.

And finally, our gear for us leveraging our vast spending and payment data to drive value across our networks in the first quarter, we launched to a select number of early adopter customers new functionality that we call avid analytics.

Avid analytics helps our buyer customers with ways to better manage and optimize their existing purchasing spend along with driving additional operational efficiencies around the speed and quality of their dynamic in voice and payment approval workflows and support their business.

Through our avid exchange customer advisory board, which spans across our vertical markets. We've gained intelligent and actual insights into what kind of data is valuable within each of our vertical markets to deliver increased value and improve business outcomes for our customers.

And the real estate industry for example, and just one use case is with our multifamily buyer customer operating in multiple states and regions now utilizing our avid analytics payment dashboard to identify which properties take the longest or shortest time to approve and clear payments based on actuals relative to contractual terms.

Thereby positively impacting either supplier relationships or increasing their working capital.

This new information rich and interactive analytics tool is built in an easily configured and customer managed user interface driven by business intelligence capabilities, which creates a dashboard, enabling various data filters, which allows our buyer customers to gain valuable insights to better understand their data spending trends.

And real time measure their business benchmarks and Kpis.

In closing we delivered another set of solid across the board quarterly financial results.

<unk> avid exchange flywheel metrics.

While we continue to see strong customer transaction retention. These.

These strong results further reinforce our conviction and plan to achieve adjusted EBITDA breakeven as we exit 2024, if not before.

While we continue to take advantage of the significant middle market opportunity in front of us.

We maintained a solid balance sheet as we exited the quarter and are well positioned to sustain our operating momentum given the pace of innovation across our platform and the strength of our product suite as evidenced by the four years of our avid exchange business flywheel.

Overall, we're pleased with the results and ongoing progress and look forward to updating you on future earnings calls with that I'd like to turn the call over to Joel Wilhite, Our Chief Financial Officer Joel.

Thanks, Mike and good evening, everyone I'm excited to talk to you today about our strong first quarter 2022 financial results, which reflect continued execution of our growth strategies as well as our upward guidance revision for full year 2022.

Overall, we had a solid first quarter of financial performance. Our first quarter 2022 revenues came in better than our forecast driven by higher total payment volumes and higher transactions.

That together with better operational efficiencies and lower expenses contributed to a lower than consensus adjusted EBITDA loss in the first quarter of 2022.

Total revenue increased by 29% to $71 2 million in Q1 2022 over the first quarter of 2021 organic revenue growth, which excludes the contribution of our fast pay and pay clearly acquisitions, which closed in August 2021, and January 2022, respectively.

Was 22, 6% organic.

Organic growth is primarily driven by the addition of new buyer invoicing payment transactions, which increased E payments to suppliers.

It's worth pointing out to those that are new to the story that both fast pay and pay clearly, which our media advertising books of business are more weighted towards both the midterm and presidential election cycles in the U S. Our.

Our strong revenue growth also resulted in total transaction yield expanding to $4 23 in the quarter up 11, 6% from $3 79 in Q1 2021 roughly.

Roughly half of the increase was associated with improvements in each of software and payments yield with the remaining half being inorganic.

Software revenues of $23 9 million, which accounted for 33, 6% of our total revenue in the quarter increased 17, 1% in Q1 of 2022 over Q1 of 2021 software revenues include 100000 dollar contribution from fast pay.

The increase in software revenues was primarily.

By the growth of total transactions of roughly 15, 6% in Q1 2022.

Payment revenue of $46 5 billion, which accounted for 65, 3% of our total revenue in the quarter increased 36% in Q1 of 2022 over Q1 2021, excluding.

Excluding fast paying pay clearly, which together contributed $3 4 million in the quarter organic payment revenue growth was 26% the increase in payment revenues was driven by the growth in total payment volume of 45% and 35, 6%, excluding fast pay and pay clearly.

On a GAAP basis gross profit of $39 $1 million increased by 38, 9% in Q1 of 2022 over the same period last year, resulting in 390 basis points improvement in gross margin for the quarter to 54, 9%.

non-GAAP gross margin increased 300 basis points to 62, 3% in Q1 of 2022 over the same period last year with half of the increase driven by increased total transaction yield in the quarter. The other half from the previously discussed acquisition.

Moving onto our operating expenses.

On a GAAP basis total operating expenses were $63 7 million an increase of 38% in Q1 of 2022 over Q1 of last year, driven by head count additions to support our growth initiatives increased expenses in preparation of our transition to become a public company and the recognition of non cash.

Stock based compensation costs.

On a non-GAAP basis operating expenses, excluding depreciation and amortization increased 27, 5% or $10 8 million to $50 million in the first quarter of 2022 from the comparable period prior year I'll now talk about each component of the change in operating expenses on a non-GAAP basis.

non-GAAP sales and marketing cost increased by $2 9 million to $16 3 million in Q1 of 'twenty two over Q1 of last year with the increase driven by the continued investment in our direct and channel strategies to acquire new buyers and suppliers as well as the consolidation of fast pay and take clearly results.

non-GAAP research and development cost increased by $4 4 million to $18 2 million in Q1 of 2022 over Q1 of last year.

The increase was due to continued investment in our products and platform along with the inclusion of fast pay and pay clearly.

non-GAAP general administrative costs increased by $3 4 million to $15 4 million in Q1 of 2022 over Q1 of last year, driven largely by expenses in preparation for our transition to become a public company along with the inclusion of fast pay and pay clearly.

Our GAAP net loss was $25 $1 million for the quarter versus a GAAP net loss of $70 million in the prior year period with a comparable reduction in loss is primarily a function of expense associated with the amended ft partners agreement impacting our prior year period results.

On a non-GAAP basis, our net loss in the first quarter of 2022 was $14 $5 million down $1 $2 million compared to the year ago quarter on a non-GAAP basis. Adjusted EBITDA was a loss of $5 6 million in Q1 of 2022 compared to a loss of $6 5 million in Q1 of 2021.

Both driven by solid organic revenue growth.

Turning to our balance sheet for a moment I wanted to touch on a few key items. We ended the quarter with cash position of $523 $6 million. The cash is split between cash and investments of $294 $9 million, which is mostly in demand deposit accounts the.

The remaining $228 $7 million isn't a basket of financial instruments, including Treasury bills money market funds and commercial paper with a weighted average maturity of roughly 100 days the weighted average interest rate on our corporate cash position is roughly 30 basis points, our outstanding debt balance at quarter end was 121.

$4 million.

Out of our $133 $5 million credit facility.

And finally restricted funds held for customers saw a drawdown of $310 million from the end of 2021 to the end of the first quarter 2022.

Flex normal seasonality between year end and Q1, ending balances were year end holidays, and seasonal mail disruption can delay some suppliers from processing payments. We think this dynamic was exacerbated somewhat by the further impacts on mail and time away from work caused by the omicron variant around the year end.

I'll now move on to our updated full year 2022 guidance. We now expect total revenue for the year to be above what we previously provided and in the range of 303 million to $307 million for the year.

We are also adjusting our non-GAAP adjusted EBITDA expectations lower to a loss between $35 million and $39 million, we still expect roughly 47% of 2022 revenues in the first half with the remaining 53% in the second half of the year, we expect around 50% of our EBITDA losses to <unk>.

Occur in the first half versus second half of 2022.

In summary, we delivered strong first quarter 2022 financial and operating results and our momentum to date is very encouraging I would now like to turn the call back over to the operator to open up the line for Q&A operator.

Thank you, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad. We ask you please limit yourselves to two questions.

Once again Thats star one to be placed in the question queue. Please limit yourselves to two questions each.

First question is coming from Dave Koning from Baird. Your line is now live.

Oh, Yeah, Hey, guys. Thanks, so much and congrats on a good quarter.

And I guess first of all are you seeing much divergence just with the macro conditions right now just seem divergent in different verticals just in terms of some doing really well some starting to slow at all and just how is that impacting kind of the way youre thinking of things going forward.

Yeah, David Hey, good to hear from you.

So I would say what we saw in the quarter was really good strength across.

I would say, our real estate and financial services vertical horizontal also performed really well and really bright spot also was our bank channel with both bank of America, <unk> Keybanc really contributing nicely during the quarter.

And then.

The two hardest hit verticals, we had during COVID-19 being the HOA into construction verticals, we saw kind of bounce back nicely over the last two quarters and so.

I would say that we are seeing continued improvement across all the verticals.

Versus any headwinds.

Related to the current economic environment and really seen strong.

Both invoice and payment flows.

Great. Thanks, and maybe just a quick follow up your transaction yield clearly continues to go up with payments volume being strong, but it was only up a couple of cents sequentially. In Q1, you expect that to continue to rise I guess through the through the remainder of this year sequentially each quarter.

Yes.

Joe.

It's reasonable to expect that that that's a metric that we think that important measure of the efficiency and the obviously the yield across both sides of our both sides of our network and we would expect that to sort of steadily inch up over time.

Keep in mind that we've had good contribution in the past several quarters from both inorganic and organic.

And in the sequential you don't have kind of added inorganic impact.

Steady steady improvement would be the expectation.

Yes.

Got it thanks, guys good job.

Thank you. Thank you.

Thank you next question is coming from Ramsey El <unk> from Barclays. Your line is that a lot.

Hi, gentlemen, thanks for taking my questions. This evening.

I wanted to ask about your kind of updated view on the on the path to profitability given the outperformance on gross margins EBITDA I think Joe mentioned 2024, and then I heard eight or sooner I'm, just wondering what kind of pull that back.

I'm gonna profitability forward or is that something that youre now incrementally motivated to achieve maybe given market conditions, but any color you can give us around the thought process there would be great.

You bet.

So let me I'll take it.

<unk> start and then Mike may want to chime in as well.

We were pleased with the results in the quarter, we didn't give.

Guidance for the first quarter, but we did kind of exceed our internal forecast top and bottom line and also as a result consensus and so like in our last call, we sort of sharpened up our our language around our path to profitability I would just reinforce what we said before as we exit 2024, we do expect to kind of be at that EBA.

Our breakeven point, we are encouraged by the first quarter results, we're continuing to invest we pointed to the areas of scale that contribute to that breakeven point being continued gross margin improvement.

G&A as we exit 'twenty, two should be kind of pulled the public company.

Invested in R&D in that period of time afterwards, so we feel good about that guidance that we've given already yes.

And maybe Mike commented that you picked up on Ramsey, we're actually.

CEO , who will pick up on that comment.

But.

I think we're just being really.

Judicious about where we are investing in the business.

And placing our bets on those items that we really are bullish about in terms of future growth and probably be below more streamlined in terms of how we're investing.

What I would say just to wrap up the add on to what Joel said.

Okay.

A broader question.

Is there an opportunity.

Can move.

Upmarket downmarket might be kind of a different business sort of a big software platform like a bill dot com, but it feels like a lot of what youre doing would be just applicable to sort of a larger and larger enterprise is there any.

Roadmap, maybe medium term thinking about moving into increasing the Tam by moving up market a bit.

Yes, I think Thats, a great question and I think maybe.

We touched it out a little bit in terms of the impact that our next generation purchase order and procurement tools have.

What I would say however, there's kind of a fine line between kind of deep functionality.

Enhanced purchase order management versus kind of deep procurement spend management, which is more in the kind of enterprise.

Coupe of rebar type category and I think.

We're naturally attracting bigger customers.

Some of the enhancements, we've made to our tools and we already have a number of enterprise customers.

But I think.

What I would say is especially those that are kind of in the service related categories, maybe non kind of direct where they are.

Heavy direct spend where you'd need heavy deep procurement related tools will be more of the kind of flavor of enterprise that will naturally attract.

What I would say.

And what we're seeing is a number of our historical middle market company.

<unk>.

With their growth starting to.

The enterprise customers. So we do think that's a natural phenomenon and that's one of the reasons why we.

We're excited to release, our new purchase order functionality to solve those business.

Challenges that are more.

Middle market or enterprise customer has related to purchasing.

Okay.

That's fantastic. Thanks, so much for your comments today.

Yes. Thank you.

Thank you next question is coming from Darrin Peller from Wolfe Research Your line is that right.

Hey, Darrin, Hey, guys Hey.

Thanks.

Let me just start off quickly on the volume trends, we're seeing which did come in above our model and when I look at the the driving for US I mean, we know there is an element of inflation in the market that's been sustaining but net net I mean, I think there is a.

It at least seems to be that the number of customers is driving more than that more than the inflationary benefits in terms of upside and so.

Maybe just touch on what Youre seeing in terms of customers' willingness to use your offerings more than before and then if you can just revisit the cross sell opportunity in terms of taking your existing customers land and expand which is something that I know we've spoken a lot about over the last few quarters.

Yes, maybe I can start to add some flavor and then Joe can add to it as well.

I think we as I indicated earlier, we certainly.

<unk> saw.

A handful of our vertical markets exceeded our expectations over the course of the quarter.

And specifically real estate and financial services.

And then the bank channel being kind of a third one.

And.

Along with that in terms of the cross sell.

We talked about construction.

Really coming back to where it was kind of pre COVID-19.

But with that.

As part of the core associates acquisition that we did now.

Couple of years ago.

If you remember that was.

A software only so we acquired a group of software companies that we've been cross selling into and with some great examples with like market construction and Sorel Development Corp.

Over the course of the quarter.

Along with it.

Many others that started to adopt our payment solution to go with there.

AP automation solution or whether we are purpose built for construction so.

The answer is we are absolutely starting to see it in probably construction was a real highlight in terms of that cross sell opportunity during the quarter.

Okay.

That actually that actually makes a lot of sense I mean, so the vertical centric reopening obviously is a factor, but theres, obviously more traction within certain verticals is what you're saying from a product yes.

<unk>.

Always explain to people.

Verticals are created equal and depending on what's happening in one of the benefits that we have of having now kind of verticals.

As we see different types of behavior, depending what's going on in the market at different times across the state, but it becomes pretty diversified.

Just quickly on the guidance change I mean, if we talk about where we are today versus where you were I mean, it's only been a quarter really but when you think about the uptick in what the assumptions are in there that you wouldn't have expected. When you first gave that guidance. So in other words, what's outperforming sense.

And what's embedded in the assumptions, thanks again guys.

Yeah, you bet, let Joel take that I'll take that Darrin. So so yes, we were like I said, we were pleased with the results for the quarter I think versus consensus around 4% be certainly beat our expectations into what's driving that we really just saw strong fundamental transaction volume growth in the quarter.

So a bit greater than we than we expected and so what we're really doing with that with our guidance revision is bringing up the top line, reflecting what we saw in the first quarter together.

Together with reflecting kind of the drop through from an EBITDA perspective, and a little bit of a.

Different a different pace of investment the continued investment in the business for the year.

Okay. Thanks, a lot guys.

Yes.

Thank you next question is coming from James Fawcett from Morgan Stanley . Your line is now live.

Thanks, I wanted to delve on one of the questions around competition or market you talked about like where you are looking at potentially incrementally, but what about in your core market of the middle market. How much is that competitive intensity changed over the last little while in and are you seeing any direct competition.

And from home typically.

Yes, Hey, James I appreciate the call.

Question.

So.

What I would say is that.

Really over the last certainly since we've been a public company and even a couple of quarters before really no meaningful change at all in the competitive landscape. Our number one competitor continues to be the status quo paper based process that companies have.

And when we do run into competition.

Within the vertical markets. They are usually with a vertical specific software companies.

With some of the M&A activity they.

They continue to get less and less.

We are generally in the segment overall and BTB payments, maybe automation, where there has been new competition has typically been at the small business level.

Level.

We really haven't seen any new entrants.

Certainly probably a couple of years in the in the middle market segment.

In the horizontal which we refer to as really being supported by the net suite micros.

Microsoft dynamics agent Tak.

Type of ERP systems.

That continues to be.

Pretty.

Static as well in terms of.

The same players.

And where it is.

U S domestic is where we usually dominate.

When.

We run into customers, who have a significant amount of their transactions being cross border International we may see additional players such as like a policy.

As an example.

But.

I'd say.

The competition landscape has been consistent.

Over the last year plus.

Got it got it and then when you look at strategic opportunities et cetera.

Valuations in the market have changed or are there things that you can do or that youre looking at from an acquisition perspective.

Expand.

Both either functionality or market reach so just kind of how youre thinking about that as a strategic priority, especially with the change in valuations we've seen over the last six months or so.

Yes, that's a real good question and in fact, when we talk about routinely here at avid exchange.

M&A is a core element of our playbook typically focused on vertical market expansion and where we can be a payment partner for some of these vertical software companies, who have not yet adopted a payment solution.

And unfortunately there is.

Theres not very many players that have any scale, so the industry's kind of littered with.

Lots of smaller kind of subscale companies that do provide that type of opportunity for us.

However, I would say that.

Based on.

The conversations we've been involved in the last six months I don't think the kind of the valuation adjustments that we've seen in the public markets.

<unk> made their way into certainly the private market for the companies that R&R segment.

So we.

My expectation is that we'll probably even see kind of more deal activity as we.

We go into the second half of this year to 23, then we're probably seeing today.

That's great. Thank you very much.

Yes, Thanks James.

Thank you next question today is coming from will Nance from Goldman Sachs. Your line is not a lot.

Hey, guys good evening.

Wondering if we could talk about just kind of the inflationary environment that we're in whether it's having any impact on customers' willingness to kind of pull the trigger and Mike I know you've talked a lot about how sometimes the limiting factor is just the pace of customer adoption in the middle market and needing that catalyst to get them over the edge wondering if there is anything in the market that you see as an opera.

<unk> to maybe push a couple of more customers over.

Yes, I think it's a good question typically.

And I would kind of bucket it may be in the combination can inflationary.

Kind of.

Threat of recessionary type environment that usually.

With caution.

Caution in the CFO as mine in terms of wanting to add additional head count to these back office processes and so historically when we run into this situation.

207 to eight as an example.

We did pretty well in terms of CFO is wanting to use technology.

To automate and scale their business versus hiring more human beings.

And so that's certainly a lever that we lean into.

And so.

So we expect.

Again as the kind of the.

The economy goes theres different kind of messaging that we use that we know based on our experience has worked in the past and that's certainly one of the levers that we expect to use.

If the economy does continue to erode.

Got it that's helpful. And then I was just wondering if you could talk about any trends that you've seen recently in the pace of electronic payment adoption anything that you guys have done I know you've talked a lot about some of the things you've done with custom interchange rates on the virtual card side or what have you seen on kind of the enhanced ACA each side and what are your any expectations longer term about.

The mix of payments trends and any leverage that you guys have to accelerate that.

Yes, that's a great question I mean, I think I'll start by.

Kind of piggybacking off of some of the comments that I made during the.

My opening statement related to our straight through processing our STP.

Actually that we've rolled out through the quarter.

We think that especially for higher volume type of suppliers.

This is a great tool to.

We have them move to become carbon something where historically they haven't because of the manual nature of the process as well as the manual reconciliation.

And so but I think generally what we've said is that.

We continue to grow aggressively our standard virtual card or a standard.

Abbott paid direct which is our ECS ECH plus programs, but.

Where we're going to really get too.

Kind of accelerating that supplier adoption I believe is when we start.

I should say continue creating different types of value propositions with different payment methods combined with different <unk>.

Message of distributing the remittance data.

Combined with different pricing mechanisms.

To really create that unique value proposition for certain subsets of suppliers and.

Absolutely what were doing.

We've created some specialized sales teams on the supplier side to focus on those type of opportunities and it's not one size fits all it's going to be creating these kind of customers.

I would just say, it's not custom by supplier per se, but really kind of.

Customary payment modalities with data with pricing for different subsets of suppliers as we think is the winning strategy.

Got it sounds interesting.

Back in the queue, but I appreciate you taking the questions today.

Thanks, Paul.

Thank you next question today is coming from Andrew Barish from SMB Nikko Securities. Your line is now live.

Hey, guys. Thanks for taking the question maybe to dovetail off of Will's question, there I mean.

In this type of environment are you seeing any increased demand for invoice accelerator in.

Maybe the CFO has become more networking capital conscious.

Just a broader update on where that offering is and your plans for the next year.

Yes. So first of all your first part of your comment insights that we've seen kind of increased demand I think absolutely the answer is absolutely.

And that's one of the reasons why we're very focused on.

I kind of referenced.

Got it on prior calls this year is about building, what we refer to as invoice accelerated two points, which is kind of the next generation of our employee salary of offering which incorporates.

Although the latest kind of data science and algorithms that determine eligibility in terms of how we use that.

Historical data to really determine the underwriting eligibility of invoices.

And incorporating those components along with.

Really of voice of the supplier customer in terms of additional feature sets, but they would like to see in this type of offering.

<unk>.

Are on pace to.

Deliver that.

Over the course of <unk>.

I should say work on it over the course of the year. So.

We can really begin scaling that program as we go into 'twenty three.

Is what our expectation is.

But the.

And probably the current environment is even kind of.

Got it.

Even more excited about the opportunity around invoice accelerator.

Because of the value propositions of surprise to those suppliers.

Yes, absolutely.

Honing in on on the media vertical I mean, I know that fast pay was a key asset in helping you gain penetration into that vertical.

And ahead of this political cycle and really two to three two to three months away from from political ads starting to ramp up materially.

<unk> been investing in that offering and maybe you could just give us a highlight of the investments you've made and any shift in your expectations on what <unk> can do for you.

Yes, I think.

<unk> talked about a quarter ago.

Launched a new specialized kind of political called.

Call it political plus.

Payment offering for <unk>.

Political media type customers that there is a different business process that.

Political payments go through just because of the nature of <unk>.

Having to be kind of real time delivered to meet certain kind of.

Production timing and things like that.

<unk>.

And so yes, we are.

We're bullish about that segment the pay clearly acquisition of kind of 40, plus customers that it was a nice tuck in because.

We really saw pay clearly is the other.

Player in the political side and so we.

We believe that we are now the standard as it relates to political payment management.

For media companies and.

And certainly.

Looking forward to the upcoming political cycle.

Like.

Like everyone is probably the challenge is that it's really hard to kind of forecast what political spending is going to do in any particular.

Year.

But we're certainly kind of excited about the value proposition that we're delivering and the solution set that we have for political media companies and we expect to see good adoption as we go into the upcoming political.

Season.

Yes, it's pretty rare to say that somebody is looking towards the political cycle, but best of luck.

Exactly.

Probably where the opposite of what most people think about having a nice.

Having everybody get along and like each other probably the.

We'll do better.

As you know.

The political season heats up for sure.

Got it thanks, Mike.

Yes.

Thank you next question today is coming from Josh Beck from Keybanc. Your line is now live.

Hey team thanks for taking the question.

Hey, Josh.

Hey, Mike I wanted to ask just a little bit about the return to in person travel certainly that's one of the things that has really changed in the.

Now few months very likely is going to continue.

How much does that help sales productivity.

Pipeline, just just curious on some of those.

Intangible impact.

Impacts that youre seeing.

Yes, I think you may win the Goldstar for Tonight, because that's one of the questions that I'm. The most excited about is.

One of the.

I think we've been referring to it as.

<unk> business adoption really was pretty robust.

During COVID-19.

But the middle market segment.

CFO senior finance leaders historically like to really have conversations a lot of these app and at all the different industry conferences and trade shows related to different user conferences of the accounting systems for example.

And.

During COVID-19 those type of conferences went to zero.

Last year, we started seeing a rebound and we attended.

30, roughly of these in person events and this year, we have on the calendar.

130.

And so we've seen.

A significant ramp up of kind of that lead generation coming from these in person events and so that's one of the things I think we're really excited about in terms of coming out of the Covid season, Cfos are getting back to attending these conferences.

They are really focused on.

They're getting their teams back in the office, taking on additional automation projects and so that's one of the things that were.

Excited about and we're already starting to see that pipeline momentum occurring with many of these in person events.

Well, that's great to hear.

And shifting gears, maybe a little bit to the <unk>.

Margin.

Really expanded nicely year over year, and it's really in my mind, one of the more straightforward.

Models, when you think about expansion and certainly the digitization.

Chuck.

Payments.

Just help us think through that trend maybe.

If not quantitatively just qualitatively as we move.

Through this year.

The mid term.

You bet, Joe I'll, let you.

I'll take that one yes, maybe I'll take that one so great question, we've talked about.

Maybe starting with just linking back to the to the way we've talked about the shape.

<unk> of the company as we sort of looking forward to that EBITDA breakeven point towards the end of the end of 'twenty four of that gross margin sort of steady gross margin expansion is an important part of that.

With the first quarter results expanding year over year margin 300 basis points, we've talked about the path from here to that breakeven point as sort of getting from low <unk> to high <unk> sort of that 70% non-GAAP gross margin ZIP code and we've talked about the way we get there is roughly two thirds revenue yield 100 unit cost improvement.

Not necessarily linearly not necessarily exactly in the in our quarterly sequence, but thats generally how we expect to get to our gross margin target at that breakeven point I think we're pleased with the first quarter. The one other thing that I'll remind you that we have said that gross margin improvement that we've seen really nice quarter over quarter for the past several quarters.

While we will continue to see that gross margin expansion, we have sort of suggested that during 2022.

That expansion might be a little bit more moderated in the past in light of kind of that.

The move fully to the public cloud in some sort of duplicative costs running through the cost of revenue during the year, but.

Excited about having put up good margin expansion in the quarter and we will expect to continue to do that going forward on the way to breakeven.

Well fantastic Thanks, Mike Thanks Joel.

Net.

Thank you next question is coming from Bryan Keane from Deutsche Bank. Your line is now live.

Hey, guys How're you doing.

Hey, Brian go ahead, Brian .

Joel I just wanted to ask on organic growth. It was up I think on my count maybe 210 basis points over last quarter.

I think last quarter was about 25% organic revenue growth I think it was 22 six this quarter so pretty good improvement there how much of that is cyclical versus secular in the business model would you break it down that way.

Yes, I really wouldn't.

Like it that way I think I'd just go back to what you know when I explain kind of what was behind that what was behind the strong quarter. It was really broad based across verticals fund.

Fundamental underlying transaction growth.

And so we just did we did see that we didn't see that strong growth in the quarter and so that's what I would attribute that kind of organic growth rate stepped up too.

And then for the full year, what kind of organic growth is embedded in the guidance.

Yes, so if you take.

Our revised range is 300 <unk> seven.

Basically think of in that mid 0.3 of five which is about 23% overall growth. If you take into account kind of the SaaS pay first couple of quarters before we lap and then a little bit of pay clearly you're right around 20% on an organic basis.

Got it got it.

Alright, Thats all I had thanks guys.

Alright, Thanks, Brian .

Thank you next question is coming from Tien Tsin Huang from Jpmorgan. Your line is now live.

Hey, Thanks, So much you guys have covered a lot of it I just wanted to clarify I think darrin.

Josh asked this but just with the upgraded revenue outlook.

Yeah.

And the narrowed EBITDA loss by more than the revenue change how much of that larger EBITDA dollar improvement is a function of the.

Higher gross margin it sounds like it's going to be more moderate but versus the operating expense efficiency or timing that you talked about Joel just trying to make sure I got all of that.

Yes so.

Like you said.

<unk>.

About <unk>.

At the mid about one 6 million raise.

On revenue and then about $8 million.

Midpoint on EBITDA, So basically you've got the revenue drop through but also think about we've got the beat in Q1 and at different pace and so we're still investing across the business and so I'm not suggesting that we're at that scale point, but we have seen sort of opportunities as Mike mentioned just be disciplined about our operating expense.

And so taking that first quarter be in looking at the shape of that operating expense growth throughout the year together with the revenue raise.

<unk> is really what is really what youre seeing on the bottom line.

Understood and then just a quick follow up just I heard strengthen bank channel and sort of the partner channel.

Given what we know about the macro and I know, there's a lot of uncertainty and whatnot I mean do you see.

See maybe that changing gears, a little bit in terms of desire to push push product more through here just curious how that gets influenced if at all by the macro uncertainty.

Well I would say that our channel partners.

Our all.

Pretty bullish and if you think of it from the standpoint of volume on the ERP software side, where a key element that allows them to sell more of their system right, because we're deeply integrated and embedded into their ERP system. So.

They view that we're kind of a key leverage point.

Point for them to sell more product on the same thing in the bank channel.

<unk>.

As traditional treasury products get more difficult.

This is really a differentiated product for R.

Our bank channel partners to sell to their middle market customers.

So I think we're seeing even more excitement about.

People wanted to get trained.

And understand how to sell more software related solutions that other bank products.

Than we've seen historically.

And so I'm not sure if that's a sign of kind of economic times when in terms of being.

Harder to sell other more treasury products or not but we're certainly seeing the interest from the channels too.

For sales reps don't want to get more training.

And to really lead into how they.

Introduce more customers to our products.

Got it that makes sense because they have a good night and hope things are good in Charlotte.

Thanks Vincent.

Thank you next question is coming from Timothy Chiodo from Credit Suisse. Your line is that right.

Hi, This is Chris Tom on behalf total from credit Suisse. Thanks for taking the question.

Okay.

We've discussed the percentage of par model questions actually potentially growing up to 70% overtime to continue to penetrate your transaction based today. So.

What's the rough split of bumper cars versus not having it dropped in the incremental months hesitant actions youre seeing and.

You can think about that.

Assembly fixtures.

70% level, that's our goal.

Why do you book a lot quicker.

Virtual card and enhanced ACTH, we're thinking.

Yes, so maybe.

There's probably a number of kind of subset of the questions that you have in that one question.

So.

First of all you have a good memory in terms of kind of way set in terms of kind of long term at scale. We are expected to be in terms of that 70% number going from roughly the 40% today.

To that number I think it's going to be a lot of combination of things that we that we talked about Darren asked a similar question.

And for example, we recently.

Launched in terms of our straight through process is a good example, where now we create a different value proposition for that supplier in terms of taking their labor components out of their <unk> card acceptance.

Now has opened up another segment of suppliers that we can convert the virtual card.

We.

Haven't really seen any changes related to overall adoption.

We're adding.

Thousands of.

New suppliers to both virtual card and avid page right.

Every month.

And but we do see continue to see.

Probably the growth rate of avid pay direct.

Continued.

Slightly outpace virtual card, but it's also starting at a smaller base.

But I would say that we think.

That the.

Having kind of all the.

Arsenal that we have on the avid page rack, where we can really control the pricing we can deliver it in a straight through manner, all those type of things.

As one of those levers that really starts to create significant supplier adoption as we kind of move forward.

Alright, Thanks that makes sense and just a quick follow up related to electronic penetration in their vertical market engine.

When you think about the potential of new vertical markets does the level and type of ball.

100 payments penetration penetrate into your consideration.

It has potential payment penetration impact are.

Verticals, yes.

Yes, so I would say.

Yes, no I mean, the number one thing that probably.

Drives organic growth or new verticals is where we are naturally seeing influx of customers coming to us and so if you look at.

For example, our last three organic verticals being health care facilities education, social services have all been driven by.

One day, we realized.

And then the last 18 months we've had.

50, 60 long term care centers come to us be really successful with our product.

<unk>.

Let's look to actually formalize a vertical around.

That type of customer set and so I think we.

That's kind of how organic verticals have been driven in the past and that are.

Through M&A, that's more opportunistic in terms of other verticals like we did with media.

Which certainly was.

Nice.

Opportunity with the <unk> acquisition.

So I would say, it's more driven by those dynamics than kind of where we see kind of card acceptance.

Because we pretty much have seen.

Our ability to get good both card card acceptance on pay direct acceptance.

As Beth across really all the verticals. We've operated in so we have kind of high conviction that we can.

Have the right discussions with those suppliers regarding of the verdict regardless of the vertical.

Thank you very much for the color and congrats on a great quarter.

Thanks, we appreciate it.

Thank you next question is coming from Brent <unk> from Piper Sandler Your line is now live.

Good afternoon, and thank you for taking the question here, Mike you've operated this business for 20 plus years lived through a few cycles.

So I'd love to kind of pick your brain a little bit just as you as you think about prior cycles.

Fed tightening cycle and <unk> six the great recession cycle.

Nine.

Are there certain verticals.

That you serve that are more impacted is it should we think of about it more.

As impacting pipeline, but PPV is impacted just just love to pick your brain here as we think about the unknown.

But we're getting questions on the unknown, but I'd love to understand like in your world you've seen lots of cycles.

How do you think these different portfolios play out.

Yes.

I remind our team about that a lot.

We have.

Especially with some of our younger teammates who never have lived through one of these cycles.

To give him a little history lesson here of what we've seen in the past, but here at avid.

Probably the first cycle that was the most painful one that you left out was the kind of the the dotcom cycle, which is kind of when we got started.

But what I would say is that generally in these cycles, we've done really well in terms of kind of customer adoption because usually what happens is there.

Really a tightening around adding head count across and it's really across all verticals.

And and that plays really well into using automation to do more with less.

<unk>.

And so that dynamic has played well for us.

We've seen maybe some of the impact on flows is.

Maybe changes in.

And spending related to let's.

Let's say average transaction sizes.

Because typically.

<unk>.

For most of our customers.

The amount of payments and transactions has remained relatively static, especially in the light of the industries that we're in if you think about it.

Real estate for example, you have the landscaping Bill every month.

Regardless right you have the utility bills.

The window washing bill now the amount of those bills may fluctuate a little bit, but you still have those builds a process every month.

And what's interesting about it is in the.

The increase in inflationary environment.

That's actually a positive in terms of helping us with average payment sizes as the general cost of goods and services go up so do the average payment sizes. So it's going to be interesting to see kind of.

How those two kind of play.

Play off each other in this particular cycle.

But.

What I would say is that.

We've typically.

<unk>.

<unk> done pretty well.

Utilizing the current environment in a more challenging economic environment to our advantage.

And we expect to do the same thing in this cycle.

And I think especially coming out of Covid, we're really seeing.

Kind of really strong interest.

Just in the last.

Two quarters with now CFO is attending.

These in person conferences, and really leaning into how do I use technology too.

Move everything to the cloud.

Automate.

Buy back office, so I don't have to add head count.

Going forward and Thats, a positive message for us.

Certainly an easier message in a challenging environment than when things are going really well. Because then it's just it's easier for these companies just to add head count.

Support of business process, and not do the hard work and trying to change it.

Totally makes totally makes sense that's helpful color, Mike I guess, Joe just a quick follow up for you as you think about some of these inflationary pressures.

We're now starting to see some some technology.

Components.

Start to consider price increases what's your thought is.

Is there a thought process around raising price at some point.

As your underlying cost to deliver go up.

<unk>.

Mind us when the last price increase was and are you evaluating price increase kind of going forward.

Yes, I'll take I'll take a quick crack at it.

First of all remember, we sell our software to buyers.

Normal.

A year software contract.

Most of those contracts forward.

<unk> CPI increases and so that's been a part of our playbook all along.

That said, we've also I think the most recently, maybe 18 months two years ago sort of across the board unit.

The increase for those transactions to buyers I would say certainly in this environment. We're looking at all of our options and we consider that balancing with.

Making it just sort of a no brainer ROI for a for a middle market CLO.

Oh to adopt the AP automation.

Along with that the only thing I would add is we also.

Where it.

Consistently adding to the value proposition in terms of enhancing our offerings to.

Further justified price increases so it's not just.

No.

That our costs are going up we also believe we are delivering an increased value proposition to our customers.

Totally makes sense, that's all I had thank you guys.

Alright, Thanks, Tim. Thank you. Our final question today is coming from Michael from Bank of America. Your line is now live.

Yes. Thank you very much microphone corn for brand sales at Bofa appreciate the question Tonight.

A major concern to the market right now visibility visibility into wrapping into profitability for 2022 and 2023.

I assume when you model, you're probably stress.

Stress test your assumptions in that model. So how does that standard deviation lock when you stress test for a more negative scenario recessionary scenario versus a blue sky scenario, what does that boundary look like.

Yes.

The first thing Great question and again, we have.

Those who are close to the story and have followed along with us.

Highly recurring highly visible revenue model right the underlying payment.

Files that are coming from our by our customers.

Very predictable I think look I think we've got we've got some good a few quarters under our belt good track record of.

Sort of.

Running running our forecast and you're right. We look at a range of of risks and opportunities across that forecast and so far feel good about kind of the machine that we used to predict the business again remember when we sell a buyer there's a period of time.

During which implementation occurs there's a subsequent period of time during which full adoption occurs and so when we're thinking about what it takes to deliver the guidance that we've put out there today. There is very little go get that needs to happen to get to that number for the year and what we're really focused on selling is really.

Building that revenue for the next year to those two large degree so feel good about kind of our.

Forecasting methods.

Yes, that's a great answer guys. Thank you.

Thank you we reached end of our question and answer session I would like to turn the floor back over for any further or closing comments.

Thanks, So first of all I just wanted to thank everyone for their time today and for some great questions.

We're passionate as you've probably heard in terms of helping our middle market customers.

Good day.

Really excited to kick off the year with a great start and look forward to talking to you next quarter, but our continued progress in executing the year. So with that operator, you can end the call.

That does conclude today's teleconference. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.

[music].

Good evening, everyone and thank you for joining us for the avid Exchange Holdings, Inc. First quarter 2022 earnings call.

Joining us on the call today is Mike Prager Abbott exchanges co founder and Chief Executive Officer, Joe Wilhite avid exchanges Chief Financial Officer, It's Abbas Kumar Havent exchanges head of Investor Relations.

Before we begin todays call management has asked me to relay. The forward looking statement disclaimer that is included at the end of today's press release. This disclaimer emphasizes the major uncertainties and risks inherent in the forward looking statements. The company will make this afternoon.

Please keep these uncertainties and risks in mind as the company discuss future strategic initiatives potential market opportunities operational outlook and financial guidance. During today's call. Also please note that the company undertakes no duty to update or revise any forward looking statements today's call will also incur.

A discussion of non-GAAP financial measures as that term is defined in regulation G of non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP.

Accordingly at the end of today's press release. The company has provided a reconciliation of these non-GAAP financial measures.

<unk> financial results prepared in accordance with GAAP.

With that I'll now turn the call over to Mike Frager. Please go ahead.

Thank you everyone for joining us today, Joe and I are excited to discuss avid exchange's first quarter 2022 results and the continued momentum we are experiencing across our business driven by our middle market focus and our four growth gears of our avid exchange business flywheel that drives our business.

Overall, we once again delivered a solid quarter of both operational and financial performance with results coming in better than our forecast.

This is the third consecutive quarter of over 20% organic revenue growth. These positive results reflect the middle market steady demand for avid exchange is industry, leading and differentiated business to business accounts payable automation software and our payment solutions that are purpose built for middle market companies.

Raising our full year revenue outlook, while lowering our adjusted EBITDA losses relative to our previous guidance, which Joel will discuss later in today's call.

For a total cash consideration of $7 million.

<unk> clearly operates in the media vertical with a focus on political segment and had a roster of over 40 politically focused media customers, which we acquired.

This acquisition, coupled with fast pay in July 2021, cement our leadership in the media vertical continuing.

Continuing with our results during the first quarter, we experiencing strong transaction volume growth totaling $16 9 million, which was up almost 16% with a total payment volume increased by 41% to $15 2 billion. This past quarter, our new homeowner Association management customer.

<unk> management is a great example of what is driving our growth as a leader in the luxury high rise and homeowner Association management segment with over 100 associations under management Dallas based worth management was drowning in heavy paper invoice approval and coding processes being responsible for the timely processing of thousands of <unk>.

Monthly invoices and payments avid.

Avid exchanges purpose built AP automation software and payment solutions streamline their manual and paper intensive AP process by eliminating paper invoices in our paper checks, enabling their AP specialists to be more value added and providing business insights and analysis to their association property managers.

The worth Ross example is also significant in another way as they are also strategic cornerstone customer given how influential they are in the HOA market to.

To build on our momentum in HOA vertical we also announced the hiring of HOA industry veteran Michael <unk> as Vice President of our HOA business.

Regiment targets middle market residential multifamily property owners that manage our portfolio of real estate ranging anywhere from 500 to 5000 rental units regimen today has a base of over 700 buyer real estate customers utilizing their property management and accounting system features and viewed avid exchange is a high.

With this high profile resident strategic partnership we are now deeply embedded with five of the top seven real estate accounting system providers in the industry.

In short, our operating and financial results demonstrated strong execution against our long range business plan of being the the facto standard for accounts payable and payment automation across the middle market.

Further validates the investments we have outlined and have made since our IPO.

The launch of our next generation procurement and purchase order management tools, which now includes three wave invoice matching capability let.

Let me provide some context to why this enhanced functionality for our next generation purchase order management tools are both strategic to us as well as being high impact to customers.

We estimate that a significant portion of the middle market businesses, particularly in the upper end of the segment have some form of purchase order or as we refer to it and business process already in place today and many times. This is a paper based process.

<unk> to ensure our systems are synchronized real time, with our customers accounting and general Ledger systems, along with providing a seamless user experience.

We believe that the combination of these gear one in gear to enhancements position us well to expand into new verticals, while giving us a broad beachhead to leverage with our future international expansion strategy, where these horizontal ERP systems have significant market share across the middle market.

In 2020, a survey conducted by the out exchange research team active adding automatic processing capabilities to our Mastercard virtual card process would increase their acceptance.

The result was at approximately 75% of those supplier survey found additional value in a straight through process, which would eliminate the need for any manual process on the supplier side for the processing of a virtual card payment and receipt of their funds in.

In particular, our existing supplier customers, who receive over 25 monthly payments today from the <unk> network, but presently do not accommodate receiving virtual card payments due to the need for this manual intervention saw the greatest value. This kind of supplier customer profile also represents over 20% of our check based payment volume on the App.

Pay network today.

Of the numerous supplier testimonials that some of the benefits of STP. The best is probably Bryce Clark of capital work, which you had previously was receiving more than 25 checks a month.

He stated I've enjoyed the time saving benefits so much that I'm willing to pay the regular merchant account rate on those payments I wouldn't want to go back to manual check processing now they've seen the benefits that STP provides.

Thereby positively impacting either supplier relationships or increasing their working capital.

And real time measure their business benchmarks and Kpis.

In closing we delivered another set of solid across the board quarterly financial results and avid exchange flywheel metrics.

While we continue to see strong customer transaction retention. These.

These strong results further reinforce our conviction and plan to achieve adjusted EBITDA breakeven as we exit 2024, if not before.

While we continue to take advantage of the significant middle market opportunity in front of us.

Overall, we're pleased with the results and ongoing progress and look forward to updating you on future earnings calls with that I'd like to turn the call over to Joe Wilhite, Our Chief Financial Officer Joel.

Overall, we had a solid first quarter of financial performance. Our first quarter 2022 revenues came in better than our forecast driven by higher total payment volumes and higher transactions.

That together with better operational efficiencies and lower expenses contributed to a lower than consensus adjusted EBITDA loss in the first quarter of 2022.

Was 22, 6% organic.

Organic growth is primarily driven by the addition of new buyer invoicing payment transactions, which increased E payments to suppliers.

Our strong revenue growth also resulted in total transaction yield expanding to $4 23 in the quarter up 11, 6% from $3 79 in Q1 2021 roughly.

Roughly half of the increase was associated with improvements in each of software and payments yield with the remaining half being inorganic.

Software revenues of $23 9 million, which accounted for 33, 6% of our total revenue in the quarter increased 17, 1% in Q1 of 2022 over Q1 of 2021 software revenues include $100000 contribution from fast pay.

The increase in software revenues was primarily.

By the growth of total transactions of roughly 15, 6% in Q1 2022.

Payment revenue of $46 5 billion, which accounted for 65, 3% of our total revenue in the quarter increased 36% in Q1 of 2022 over Q1 2021, excluding fast paying pay clearly, which together contributed $3 4 million in the quarter organic payment revenue grew.

Both was 26% increase.

The increase in payment revenues was driven by the growth in total payment volume of 45% and 35, 6%, excluding fast pay and pay clearly.

On a GAAP basis gross profit of $39 $1 million increased by 38, 9% in Q1 of 2022 over the same period last year, resulting in 390 basis points improvement in gross margin for the quarter to 54, 9%.

non-GAAP gross margin increased 300 basis points to 62, 3% in Q1 of 2022 over the same period last year with half of the increase driven by increased total transaction yield in the quarter and the other half from the previously discussed acquisition.

Moving onto our operating expenses.

<unk> based compensation costs.

non-GAAP research and development costs increased by $4 4 million to $18 2 million in Q1 of 2022 over Q1 of last year the.

The increase was due to continued investment in our products and platform along with the inclusion of fast pay and pay clearly.

Our GAAP net loss was $25 $1 million for the quarter versus a GAAP net loss of $70 million in the prior year period with the comparable reduction in loss was primarily a function of expense associated with the amended ft partners agreement impacting our prior year period results.

On a non-GAAP basis, our net loss in the first quarter of 2022 was $14 $5 million down $1 $2 million compared to the year ago quarter.

On a non-GAAP basis, adjusted EBITDA was a loss of $5 6 million in Q1 of 2022 compared to a loss of $6 5 million in Q1 of 2021, both driven by solid organic revenue growth.

$4 million.

Out of our $133 $5 million credit facility.

And finally restricted funds held for customers saw a drawdown of $310 million from the end of 2021 to the end of the first quarter 2022.

I'll now move on to our updated full year 2022 guidance. We now expect total revenue for the year to be above what we previously provided and in the range of 303 million to $307 million for the year.

Occur in the first half versus second half of 2022.

Once again Thats star one to be placed in the question queue. Please limit yourselves to two questions each.

First question is coming from Dave Koning from Baird. Your line is now live.

Oh, Yeah, Hey, guys. Thanks, so much and congrats on a good quarter.

I guess first of all are you seeing much divergence just with the macro conditions right now just seem divergent in different verticals just in terms of some doing really well so I'm starting to slow at all and just how is that impacting kind of the way youre thinking of things going forward.

Yeah, David Hey, Joe good to hear from you.

So I would say what we saw in the quarter was really good strength across.

I would say, our real estate and financial services vertical horizontal also performed really well and really bright spot also was our bank channel with both our bank of America 30, Keybanc really contributing nicely during the quarter.

And then.

The two hardest hit verticals, we had during COVID-19 being the HOA into construction verticals, we saw kind of bounce back nicely over the last two quarters and so.

I would say that we are seeing continued improvement across all the verticals.

Versus any headwinds.

Related to the current economic environment and really seen strong.

Both invoice and payment flows.

Yes.

David Joe.

It's reasonable to expect that that that's a metric that we think is an important measure of the efficiency and the obviously the yield across both sides of our both sides of our network and we would expect that to sort of steadily inch up over time.

Keep in mind that we've had good contribution in the past several quarters from both inorganic and organic.

And in the sequential you don't have kind of add inorganic impact.

Steady steady improvement would be the expectation.

Yes.

Got it thanks, guys good job.

Thanks, Dan.

Thank you next question is coming from Ramsey El <unk> from Barclays. Your line is now live.

Hi, gentlemen, thanks for taking my questions. This evening.

I wanted to ask about your kind of updated view on the on the path to profitability given the outperformance on gross margin and EBITDA I think Joe mentioned 2024, and then I heard a or sooner I'm, just wondering what kind of pull that back.

I'm gonna profitability forward or is that something that youre now incrementally motivated to achieve maybe given market conditions, but any color you can give us retina conference that'd be great.

You bet.

So let me.

Start and then Mike may want to chime in as well.

We're pleased with the results in the quarter, we didn't give guide.

G&A as we exit 'twenty, two should be kind of full boat public company.

<unk> invested in R&D in that period of time afterwards, so we feel good about that guidance that we've given already.

And maybe my comment that you picked up on Ramsey.

<unk>.

Who would pick up on that comment.

But.

I think we're just being really.

Judicious about where we are investing in the business.

Placing our bets on those items that we really are bullish about in terms of future growth and probably be a little bit more streamlined in terms of how we're investing.

What I would say just to wrap up to add onto what Joel said.

Okay.

A broader question.

Is there an opportunity.

Can move.

Upmarket I think down market might be kind of a different business sort of a big software platform like a bill dot com, but it feels like a lot of what youre doing would be just applicable to sort of a larger and larger enterprise is there any.

Roadmap, maybe medium term thinking about moving into increasing the Tam by moving up market a bit.

Yes, I think Thats, a great question and I think maybe.

We touched that a little bit in terms of the impact that our next generation purchase order and procurement tools have.

What I would say however, there's kind of a fine line between kind of deep functionality.

Enhanced purchase order management versus kind of deep.

Procurement spend management, which is more in the kind of enterprise.

Our Rebbe type category and I think we are.

Naturally attracting bigger customers with some of the enhancements we've made to our tools and we already have a number of enterprise customers.

But I think what I would say is especially those that are kind of in the service related categories, maybe none kind of direct where they have heavy direct spend where you'd need heavy deep procurement related tools will be more of the kind of flavor of enterprise that will naturally attract.

As what I would say.

And what we're seeing is a number of our historical middle market companies for customers with.

Their growth starting to.

Enterprise customers. So we do think that's a natural phenomenon and that's one of the reasons why we were.

We're excited to release, our new purchase order functionality to solve those business.

Challenges that are more.

Upper middle market or enterprise customer has related to purchasing.

Okay.

That's fantastic. Thanks, so much for your comments today.

Yes. Thank you.

Thank you next question is coming from Darrin Peller from Wolfe Research. Your line is that a lot.

Hey, Darrin, Hey, guys Hey.

Thanks.

It at least seems to be that the number of customers is driving more than that more than the inflationary benefit in terms of upside and so.

Yes, that's what I mean, maybe I can start to add some flavor and then Joe can add to it as well.

I think we.

I indicated earlier, we certainly.

Saw.

A handful of our vertical markets exceeded our expectations over the course of the quarter.

And specifically real estate and financial services.

And then the bank channel being kind of a third one.

And.

Along with that in terms of the cross sell.

We talked about construction.

Really coming back to where it was kind of pre COVID-19.

With that.

As part of the <unk> Associates acquisition that we did now.

No.

Couple of years ago.

If you remember that was really a software only so we acquired a group of software companies that we've been cross selling into and we have some great examples with like market construction and Sorel Development Corp.

Over the course of the quarter.

Along with.

Many others.

Hard to adopt our payment solution to go with there.

AP automation solution that we are purpose built for construction so.

The answer is we are absolutely starting to see it in probably construction was a real highlight in terms of that cross sell opportunity during the quarter.

Okay.

That actually that actually makes a lot of sense. So the vertical centric reopening obviously is a factor, but theres, obviously more traction within certain verticals as what you are saying from our products.

<unk>.

Always explain to people.

Verticals are created equal and depending on what's happening in one of the benefits that we have of having now kind of verticals.

No.

As we see different types of behavior, depending what's going on in the market for some time across those eight but it becomes pretty diversified.

Just quickly on the guidance change I mean, if we talk about where we are today versus where you were I mean, it's only been a quarter really but when you think about the uptick in what assumptions are in there that you wouldn't have expected. When you first gave that guide so in other words, what's outperforming sense and.

What's embedded in the assumptions, thanks again guys.

You guys, let Joel take that I'll take that Darrin. So so yes, we were like I said, we were pleased with the results for the quarter I think versus consensus around 4% being certainly beat our expectations into what's driving that we really just saw strong fundamental.

Transaction volume growth in the quarter.

A bit greater than we than we expected and so what we're really doing with that with our guidance revision is bringing up the top line, reflecting what we saw in the first quarter.

Together with reflecting kind of the drop through from an EBITDA perspective, and a little bit of a.

Different a different pace of investment the continued investment in the business for the year.

Okay. Thanks, a lot guys.

Yes.

Thank you next question is coming from James Fawcett from Morgan Stanley . Your line is now live.

Thanks, I wanted to delve on one of the questions around competition or market and you've talked about like where you are looking at potentially incrementally, but what about in your core market of the middle market. How much is that competitive intensity changed over the last little while in and are you seeing any direct competition.

And from home typically.

Yes, Hey, James I appreciate the call.

Question.

So.

What I would say is that.

And when we do run into competition.

Within the vertical markets. They are usually with a vertical specific software companies and with some of the M&A.

Activity.

They continue to get less and less.

We're generally in the segment overall and BTB payments, maybe automation, where there has been new competition has typically been at the small business level.

Level.

We really haven't seen any new entrants.

Certainly probably a couple of years in the in the middle market segment.

In the horizontal which we refer to as really being supported by the net suite Microsoft.

Microsoft dynamics agent Tak.

Type of ERP systems.

That continues to be.

Pretty.

Static as well in terms of.

The same players.

And where it is.

U S domestic is where we usually dominate.

When.

We run into customers, who have a significant amount of their transactions being cross border International we may see additional players such as like a policy.

As an example.

But I would say.

The competition landscape has been consistent.

Over the last year plus.

Got it got it and then when you look at strategic opportunities et cetera.

Valuations in the market have changed or are there things that you can do or that youre looking at from an acquisition perspective.

Expand.

Both either functionality or market reach so just kind of how youre thinking about that as a strategic priority, especially with the change in valuations we've seen over the last six months or so.

Yes, that's a real good question and in fact, when we talk about routinely here at avid exchange.

And unfortunately there is.

Theres not very many players that have any scale, so the industry's kind of littered with.

Lots of smaller kind of subscale companies that do provide that type of opportunity for us.

However, I would say that.

Based on.

The conversations we've been involved in the last six months I don't think the kind of the valuation adjustments that we've seen in the public markets.

<unk> made their way into suddenly the private markets for the company's that R&R segment.

So we.

My expectation is that we'll probably even see kind of more deal activity as we can.

We go into the second half of this year to 23, then we're probably seeing today.

That's great. Thank you very much.

Yes, Thanks James.

Thank you and next question today is coming from will Nance from Goldman Sachs. Your line is that a lot.

Hey, guys good evening.

Wondering if we could talk about just kind of the inflationary environment that we're in and whether its having any impacts on customers' willingness to kind of pull the trigger and Mike I know you've talked a lot about how sometimes the limiting factor is just the pace of customer adoption in the middle market and needing that catalyst to get them over the edge wondering if there is anything in the market that you see as an opera.

<unk> to maybe push a couple of more customers over.

Yes, I think it's a good question typically.

And that would kind of bucket it it may be in the combination can inflationary.

Kind of.

The threat.

Thread of recessionary type environment that usually.

Caution in the CFO as mine in terms of wanting to add additional head count to these back office processes and so historically when we run into this situation and I think.

207 to eight as an example.

We did pretty well in terms of the CFO is wanting to use technology to.

To automate and scale their business versus hiring more human beings.

And so that's certainly a lever that we lean into.

And so we expect that.

Again as the kind of the.

If the economy goes theres different kind of messaging that we use that we know based on our experience has worked in the past and that's.

Certainly one of the levers that we expect to use.

Yeah.

The economy does continue to erode.

Got it that's helpful. And then I was just wondering if you could talk about any trends that you've seen recently in the pace of electronic payment adoption anything that you guys have done I know you've talked a lot about some of the things you've done with customer interchange rates on the virtual card side or what have you seen on kind of the enhanced ACA side and.

What are your any expectations longer term about kind of where the mix of payments trends and any leverage that you guys have to accelerate that.

Yes, that's a great question I mean, I think I'll start by.

Kind of piggybacking off of some of the comments that I made during the.

My opening statement related to our straight through processing, our STP functionality that we've rolled out through the quarter.

We think that especially for higher volume type of suppliers.

This is a great tool to.

Have them move to become carbon something where historically they haven't because of the manual nature of the process as well as the manual reconciliation.

And so but I think generally what we've said is that we.

We continue to grow aggressively our standard virtual card or a standard.

<unk>, which is our <unk> plus programs, but.

Where we're going to really get too.

Kind of accelerating that supplier adoption I believe is when we start.

I should say continue creating different types of value propositions with different payment methods combined with different men.

Methods of distributing the remittance data.

Combined with different pricing mechanisms.

Really create that unique value proposition for certain subsets of suppliers and.

Absolutely what were doing.

We've created some specialized sales teams on the supplier side to focus on those type of opportunities and it's not one size fits all it's going to be creating these kind of customers.

I would just say, it's not custom by supplier per se, but really kind of.

Customary payment modalities with data with pricing for different subsets of suppliers as we think is the winning strategy.

Got it sounds interesting I'll hop back in the queue, but I appreciate you taking the questions today.

Thanks, Paul.

Thank you next question today is coming from Andrew Barish from SMB Nikko Securities. Your line is now live.

Hey, guys. Thanks for taking the question maybe to dovetail off of Will's question there.

In this type of environment are you seeing any increased demand for invoice accelerator.

Maybe the CFO has become more networking capital conscious.

And just a broader update on where that offering is and your plans for the next year.

Yes. So first of all your first part of your comment insights are we seeing kind of increased demand I think absolutely the answer is absolutely.

And that's one of the reasons why we're very focused on as I kind of referenced.

Got it on prior calls this year is about building, what we refer to as invoice accelerated two points, which is kind of the next generation of our employee salary of offering which incorporates all of the.

The latest kind of data science and algorithms that determine eligibility in terms of how we use that.

Historical data to really determine the underwriting eligibility of invoices.

And incorporating those components along with.

Really of voice of the supplier customer in terms of additional feature sets that they would like to see in this type of offering.

And we.

Are on pace to.

Deliver that.

Over the course of or I should say work on it over the course of the year. So.

Can really begin scaling that program as we go into 'twenty three.

Is what our expectation is.

But the.

And probably the current environment is even kind of.

Got it.

Even more excited about the opportunity around invoice accelerator.

Because of the value propositions are surprised to those sorts of suppliers.

Yes, absolutely.

Honing in on on the media vertical I know that fast pay was a key asset in helping you gain penetration into that vertical.

And ahead of this political cycle and really two to three two to three months away from from political ads starting to ramp up materially.

Guys have been investing in that offering and maybe you could just give us a highlight of the investments you've made and any shift in your expectations on what <unk> can do for you.

Yes, I think.

<unk> talked about a quarter ago.

Launched a new specialized kind of political I.

Call it political plus.

The payment offerings for <unk>.

Political media type customers that there is a different business process that.

Political payments go through just because of the nature of <unk>.

Having to be kind of real time delivered to meet certain kind of.

Production timing and things like that.

And.

And so yes, we are.

We're bullish about that segment the pay clearly acquisition of kind of 40, plus customers that was a nice tuck in because.

We really saw pay clearly is the other.

Player in the political side and so we.

We believe that we are now the standard as it relates to political payment management.

For media companies and.

And certainly.

Looking forward to the upcoming political cycle.

Like.

Like everyone is probably the challenge is that it's really hard to kind of forecast what political spending is going to do in any particular.

Year.

Yes, it's pretty rare to say that somebody is looking towards the political cycle, but best of luck.

Exactly.

Probably where the opposite of what most people think about having a nice.

Having everybody get along and like each other probably.

We will do better.

As you know.

The political season heats up for sure.

Got it thanks, Mike.

Yes.

Thank you next question today is coming from Josh Beck from Keybanc. Your line is now live.

Hey team thanks for taking the question.

Hey, Josh.

Hey, Mike I wanted to ask just a little bit about the return to in person travel certainly that's one of the things that has really changed.

The last few months and very likely is going to continue.

How much does that helped sales productivity.

Pipeline just curious on some of those.

Intangible impac.

Impacts that youre seeing.

Yes, I think you may win the Goldstar for Tonight, because that's one of the questions that I'm. The most excited about is.

One of the.

I think we've been referring to it as.

<unk> business adoption really was pretty robust.

During COVID-19.

But in the middle market segment.

CFO senior finance leaders historically like to really have conversations a lot of these happened at all the different industry conferences and trade shows related to different user conferences of the accounting systems for example.

And.

During COVID-19 those type of conferences went to zero.

Last year, we started seeing a rebound and we attended.

30, roughly of these in person events and this year, we have on the calendar.

130.

And so we've seen.

They are really focused on.

They're getting their teams back in the office, taking on additional automation projects and so that's one of the things that were.

Excited about and we're already starting to see that pipeline momentum occurring with many of these in person events.

What was great to hear.

And shifting gears, maybe a little bit to the gross margin really expanded nicely year over year and it's really in my mind one of the more straightforward.

Models, when you think about expansion and certainly the digitization.

Transportation of payments.

Just help us think through that trend maybe.

If not quantitatively just qualitatively as we move.

Through this year.

The mature.

You bet Joe.

I'll take that one yes, maybe I'll take that one so great question, we've talked about.

Starting with just linking back to the to the way we've talked about.

<unk> of the company as we sort of looking forward to that EBITDA breakeven point towards the end of at the end of 'twenty four of that gross margin sort of steady gross margin expansion is an important part of that.

We were pleased with the first quarter results expanding year over year margin 300 basis points, we've talked about the path from here to that breakeven point as sort of getting from low <unk> to high <unk> sort of that 70% non-GAAP gross margin ZIP code and we've talked about the way we get there is roughly two thirds revenue yield 100 unit cost improvement.

Not necessarily linearly not necessarily exactly in the in our quarterly sequence, but thats generally how we expect to get to our gross margin target at that breakeven point I think again, we were pleased with the first quarter. The one other thing that I'll remind you that we have said that gross margin improvement that we've seen really nice quarter over quarter for the past several.

Quarters, while we will continue to see that gross margin expansion, we have sort of suggested that during 2022.

That expansion might be a little bit more moderated in the past in light of kind of that.

The move fully to the public cloud in some sort of duplicative costs running through the cost of revenue during the year, but.

Excited about having put up good margin expansion in the quarter and we will expect to continue to do that going forward all the way to breakeven.

Well fantastic Thanks, Mike Thanks Joel.

Beth.

Thank you next question is coming from Bryan Keane from Deutsche Bank. Your line is now live.

Hey, guys How're you doing.

Hey, Brian .

Right.

Joel I just wanted to ask on organic growth. It was up I think on my count maybe 210 basis points over last quarter.

Yes, I really wouldn't.

Like it that way I think I'd just go back to what when I explain kind of what was behind that.

Sort of a strong quarter it was really broad based across verticals fund.

Fundamental underlying transaction growth.

And so we just did we did see that we didn't see that strong growth in the quarter and so that's what I would attribute that kind of organic growth rate stepped up too.

And then for the full year, what kind of organic growth is embedded in the guidance.

Yes, so if you take.

Our revised range is 300 <unk> seven.

Right around 20% on an organic basis.

Got it got it.

Alright, that's all I had thanks guys.

Alright, Thanks, Brian .

Thank you next question is coming from Tien Tsin Huang from Jpmorgan. Your line is now live.

Sure.

Hey, Thanks, So much you guys have covered a lot already I just wanted to clarify I think darrin.

Josh asked this but just with the upgraded revenue outlook.

And the narrowed EBITDA loss by more than the revenue change how much of that larger EBITDA dollar improvement is a function of the.

Higher gross margin it sounds like it's going to be more moderate but versus the operating expense efficiency or timing that you talked about Joel just trying to make sure I got all of that.

Yes so.

Like you said.

<unk>.

About <unk>.

At the mid about $6 million raise.

On revenue and then about $8 million.

Midpoint on EBITDA, So basically you've got the revenue drop through but also think about we've got the beat in Q1 and at different pace and so look we're still investing across the business and so I'm not suggesting that we're at that scale point, but we have seen sort of opportunities as Mike mentioned just be disciplined about our operating expense.

And so taking that first quarter be in looking at the shape of that operating expense growth throughout the year together with the revenue raised.

<unk> is really what is really what youre seeing on the bottom line.

Understood and then just a quick follow up just I heard strengthened bank channel and sort of the partner channel.

Given what we know about the macro and I know, there's a lot of uncertainty and whatnot I mean do you see.

See maybe that changing gears, a little bit in terms of desire to push push product more through here just curious how that gets influenced if at all by the macro uncertainty.

Well I would say that our channel partners.

Our all.

Pretty bullish and if you think of it from the standpoint of volume on the ERP software side were a key element that allows them to sell more of their system right. Because we are deeply integrated and embedded into their ERP system. So.

They view that we're kind of a key leverage point.

Point for them to sell more product on the same thing in the bank channel.

As traditional treasury products get more difficult.

This is really a differentiated product for our.

Our bank channel partners to sell to their middle market customers and so I think we're seeing even more excitement about.

People wanting to get trained.

And understand how to sell more software related solutions that other bank products.

And then we've seen historically.

So I'm not sure if that's a sign of.

Economic times when in terms of being.

Being harder to sell other more treasury products or not but we're certainly seeing the interest from the channels too.

For sales reps don't want to get more training.

And to really lead into how they.

Introduce more customers to our products.

Got it that makes sense because they have a good night and hoping that good in Charlotte.

Thanks Vincent.

Thank you next question is coming from Timothy Chiodo from Credit Suisse. Your line is that right.

Hi, This is Chris on behalf total from credit Suisse. Thanks for taking the question.

Okay.

We've discussed the percentage of non Christians axles potentially going up to 70% overtime to continue to penetrate your transaction based today. So.

What's the rough split of bumper cars versus not having it dropped in the incremental months has transactions youre seeing and.

You can think about that.

70%, 70% level, that's our goal.

How do you look to lock up.

Virtual card.

Enhanced ACTH, we're thinking.

Yes, so maybe just there's probably a number of kind of subset of the questions that you have in that one question.

So.

First of all have a good memory in terms of kind of way set in terms of kind of long term at scale. We are expected to be in terms of that 70% number going from roughly the 40% today.

To that number I think it's going to be a lot of combination of things that we that we talked about Darren asked a similar question.

And for example, we recently.

Now has opened up another segment of suppliers that we can convert the virtual card.

We.

Haven't really seen any changes related to overall adoption.

We're adding.

Thousands of.

New suppliers to both the virtual card and have a page right.

Every month.

And but we do see continue to see.

Probably the growth rate of avid pay direct.

Continued.

Slightly outpaced virtual card, but it's also starting at a smaller base.

But I would say that we think.

That the.

Having kind of all the.

Arsenal that we have on the avid page rack, where we can really control the pricing we can deliver it in a straight through manner, all those type of things.

As one of those levers that really starts to.

Significant supplier adoption as we kind of move forward.

Alright, Thanks that makes sense and just a quick follow up related to electronic penetration in their vertical market engine.

When you think about the potential of new vertical markets does the level and type of bonds.

Okay electronic payments penetration into your consideration.

It has potential payment penetration impact.

Hoist verticals, yes.

Yes, so I would say.

Yes, and no I mean, the number one thing that probably.

Drive organic growth and new verticals is where we are naturally seeing influx of customers coming to us and so if you look at.

For example, our last three organic verticals being health care facilities education, social services have all been driven by.

One day, we realized.

And then the last 18 months we've had.

50, 60 long term care centers come to us be really successful with our product.

<unk>.

Let's look to actually formalize a vertical around.

That type of customer set and so I think we.

That's kind of how organic verticals have been driven in the past and then are.

Through M&A, that's more opportunistic in terms of other verticals like we did with media.

Which certainly was.

Nice.

Opportunity with the <unk> acquisition.

So I would say, it's more driven by those dynamics than kind of where we see kind of card acceptance.

Because we pretty much have seen.

Our ability to get good both card card acceptance on pay direct acceptance.

As Beth across really all the verticals. We have operated in so we have kind of high conviction that we can.

Have the right discussions with those suppliers regarding of the verdict regardless of the vertical.

Thank you very much for the color and congrats on a great quarter.

Thanks, we appreciate it.

Thank you next question is coming from Brent <unk> from Piper Sandler Your line is now live.

Good afternoon, and thank you for taking the question here, Mike you've operated this business for 20 plus years lived through a few cycles.

So I'd love to kind of pick your brain a little bit just as you as you think about prior cycles.

Fed tightening cycle and <unk> six the great recession cycle.

Nine.

Are there certain verticals.

That you serve that are more impacted is it should we think of about it more.

As impacting pipeline, but PPV is impacted just just love to pick your brain here as we think about the unknown.

But we're getting questions on the unknown, but I'd love to understand like in your world you've seen lots of cycles.

Do you think these different portfolios play out.

Yes.

I remind our team about that a lot.

We have.

Especially with some of our younger teammates who never have lived through we don't one of these cycles.

To give him a little history lesson here, what we've seen in the past, but here at avid.

Probably the first cycle that was the most painful and that you left out was the kind of the the.

Dotcom cycle, which is kind of when we got started.

But what I would say is that generally in these cycles, we've done really well in terms of kind of customer adoption because usually what happens is.

They're really a tightening around adding head count across it's really across all verticals.

And that plays really well into using automation to do more with less.

And.

And so that dynamic has played well for us.

We've seen maybe some of the impact on flows is.

Maybe changes in.

And spending related to let's.

Let's say average transaction sizes.

Because typically.

For most of our customers.

The amount of payment transactions has remained relatively static, especially in the light of the industries that we're in if you think about it.

Real estate for example, you have the landscaping Bill every month.

Regardless right you have the utility bills.

The window washing bill.

Now the amount of those bills may fluctuate a little bit, but you still have those builds a process every month.

And what's interesting about it is in the.

The increase in inflationary environment.

How those two kind of play.

Play off each other in this particular cycle.

But.

What I would say is that.

We've typically.

<unk>.

<unk> done pretty well.

Utilizing the current environment in a more challenging economic environment to our advantage.

And we expect to do the same thing in this cycle.

And I think especially coming out of Covid, we're really seeing.

Kind of really strong interest.

Just in the last.

Two quarters with now CFO is attending.

These in person conferences, and really leaning into how do I use technology too.

Move everything to the cloud.

Automate.

Buy back office, so I don't have to add head count.

Going forward and.

And Thats a positive message for us.

It's certainly an easier message in a challenging environment than when things are going really well. Because then it's just it's easier for these companies just to add head count.

Support of business process, and now through the hard work and trying to change it.

Totally makes sense that's helpful color, Mike I guess, Joe just a quick follow up for you as you think about some of these inflationary pressures.

We're now starting to see some some technology.

Components.

Start to consider price increases what's your thought.

Is there a thought process around raising price at some point.

As your underlying cost to deliver go up.

<unk>.

Mind us when the last price increase was and are you evaluating price increase kind of going forward.

Yes.

I'll take a quick crack at it.

First of all remember, we sell our software to buyers.

Kind of normal.

LT year software contract.

And those most of those contracts forward.

Routine CPI increases and so that's been a part of our playbook all along.

That said, we've also I think the most recently, maybe 18 months two years ago sort of across the board unit.

Increase for those transactions to buyers I would say certainly in this environment. We're looking at all of our options and we consider that balancing with.

Making it just sort of a no.

Greater ROI for a for a middle market CFO to adopt the AP automation.

Along with that the only thing I would add is we also believe we're consistently.

Consistently adding to the value proposition in terms of enhancing our offerings to.

Further justified price increases so it's not just.

No.

That our costs are going up we also believe we are delivering an increased value proposition to our customers.

Totally makes sense, that's all I had thank you guys.

Alright, Thanks, Tim Thank.

Thank you. Our final question today is coming from microphone from Bank of America. Your line is now live.

Yes. Thank you very much microphone corn for brand sales Bofa appreciate the question Tonight.

I think we're not a major concern to the market right now.

<unk> visibility into wrapping into profitability for 2022 and 2023.

When you model, you're probably stress.

Cast your assumptions in that model. So how does that standard deviation lock when you stress tapped for a more negative scenario recessionary scenario versus a blue sky scenario, what does that boundary look like.

Yes, I mean, maybe the first thing great question and again, we have.

For those who are close to the story and are following along with US we have a highly recurring highly visible revenue model the underlying payment.

85 that are coming from our by our customers.

Very predictable I think look I think we've got we've got some good a few quarters under our belt good track record.

Sort of.

Running running our forecast in and Youre right, we look at a range of of risks and opportunities across that forecast and so far feel good about kind of a machine that will be used to predict the business again remember when we sell a buyer there's a period of time.

Building that revenue for the next year to large degree so feel good about kind of our forecasting methods.

Yes, that's a great answer guys. Thank you.

Thank you we reached end of our question and answer session I would like to turn the floor back over for any further or closing comments.

Thanks, So first of all I just wanted to thank everyone for their time today and for some great questions.

<unk> as you probably heard in terms of helping our middle market customers every day.

And really excited to kick off the year with a great start and look forward to talking to you next quarter, but our continued progress in executing the year. So with that operator, you can end the call. Thank you that does conclude today's teleconference. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.

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