Q1 2022 BTRS Holdings Inc Earnings Call

May 10, 2022

[music].

Okay.

Good afternoon, ladies and gentlemen, thank you for standing by welcome to build.

The old trusts first quarter 2022 earnings conference call. As a reminder, this call is being recorded should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.

I'd now like to turn the call over to John T. Williams head of Investor Relations to begin.

Thank you operator before we begin I'll remind you that today's call may contain forward looking statements, including our full year 2022 outlook our expectations regarding the continued growth of our software and payments business potential for margin expansion net dollar retention rate and our medium and long term targets. These forward looking statements are subject to numerous risks and <unk>.

Certainties, including those set forth in our most recent annual report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission on March 19, 2022, and in subsequent reports that we file with the Securities and Exchange Commission from time to time and available on the Investor Relations section of our website actual.

Results may differ materially from any forward looking statements. We make today. These forward looking statements speak only as of today and the company does not assume any obligation or intend to update them, except as required by law.

In addition, todays call may include non-GAAP measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures reconciliations to the nearest GAAP measure can be found in today's earnings release, which is available on our website hosting todays call are friendly and build trust founder and Chief Executive Officer, Steve <unk> build trust President and Mark shifts.

They'll trusts Chief Financial Officer, I'll, now turn the call over to <unk> to begin.

Thanks, John and thank you everyone for joining the call today I'd like to start by first thanking the 700, plus build trust employees across the globe, who continue to challenge the status quo and drive meaningful outcomes for our customers. We live in trying times and I couldnt be more proud of our team we strive everyday to make magic happen, we've got to reinvent ourselves. These last two years.

A work from anywhere culture, and as a public company and that transition has been amazing thanks to west Fantastic team up and down the Org chart now onto the results another great quarter in the books, both financially and operationally as is customary I'll begin with some operational metrics and recent business highlights.

Then our president Steve Donato will discuss some of our growth initiatives and finally, our CFO Mark shifting will provide details on our performance and reaffirmed 2022 guidance.

Overall, we executed extremely well in our first fiscal quarter and continued to successfully deliver against the key objectives. We previously discussed as a result, we are reaffirming our 2022 outlook given good visibility comfort and confidence in our strategy and strong secular tailwind that continued a positive positively impact our business.

Our software and payments segment growth continued to accelerate through a turbulent macro environment on a reported basis Q1 software and payments revenue grew 16% year over year, which is the GAAP number. This actually does not adequately reflect the underlying trends in our business because of a onetime event that occurred in Q1 of 2021 I pointed out last year at this.

Time that we had a BDC customer transition off of our platform and a year of deferred revenue was accelerated into that quarter. We think the more appropriate way to assess our year over year growth is to exclude the impact of the loss of the customer, including the impact of the onetime accelerated deferred revenue from our 2021 numbers for comparison purposes.

Our comments about our Q1 2022, non-GAAP adjusted revenue and margins reflect this exclusion with that in mind Q1 software and payments growth was 34% when adjusted for the impact of that onetime customer loss.

We posted very strong adjusted gross margins of 73, 3% in the first quarter up 290 basis points when adjusted for the impact of that onetime customer loss total payment volume or <unk>, which is the dollar value of customer payment transactions that we process on our platform increased 45% year over year to $22 billion versus $15 one.

Yeah.

In the year ago quarter.

<unk> through the business payments network or VPN TPB increased to 86% year over year in Q1 against exceptional prior year growth of 146%. The credit card component of <unk> grew to $2 1 billion in Q1 up 50% year over year consistent with our prior statements, we still expect <unk> to grow.

At least 100% on a full year over year basis.

Direct card revenue or <unk>, which is the revenue we generate from processing credit card payments through all of our solutions was $4 9 million or 68% year over year growth in our quarterly yield of six three basis points. We're thrilled with the consistent strong growth in progress here direct card revenue growth again meaningfully exceeded card volume growth.

We still expect that yields will grow into the teens over the long term as transactions move to our payback payback platform and capture a larger share of transaction revenue.

Now lets cover some recent business highlights and callouts.

We recently announced an exciting expansion of our relationship with American Express where suppliers that except amex cards will have access to our complete order to cash solution, allowing them to automate their accounts receivable process and remove complexity, while making it possible to easily track and reconcile virtual card payments to get paid faster the.

The growth of virtual cards in the accounts payable side as a result is an overall positive and BTB payments, but create significant complexity for suppliers, who need to reconcile large numbers of unsorted unmatched payments to open invoices, we believe bringing our order to cash solution to amex affiliated merchant suppliers makes their decision to accept virtual card far easier as our.

Sweet makes it simple to do everything they need from invoicing to cash application to collection.

For <unk>. This is a fantastic partner with and an opportunity to address the needs of an entirely new group of customers. We expect will be very interested in our digital lockbox and other solutions, we've been pretty clear that we are a big focus on expanding distribution to accelerate growth and we believe it's working our expanded amex and keybanc relationships and our coupon partnership are just a few.

One of the most recent examples of that.

In February we announced the acquisition of order to cash our European order to cash cycle platform provider for approximately $59 million in cash. This is a key piece of our expansion into Europe , and a crucial element of our strategy to grow and cross sell into the region.

Integration of our European businesses are well underway and are tracking as expected with some initial integration and scaling cost that we expect will unlock revenue opportunities leadership is in place Mark Lehman, who cofounded in order to cash now serves as our managing director and head of European business. We're excited about the opportunity to expand our total addressable market and look forward to scale.

Up the availability of our solutions more broadly in the region. As we previously said, we do not have business our team members in Russia or Ukraine. The war is tragic and we green for the people affected but so far this war is not having a material impact on our business in Europe .

In terms of our most valuable asset our team we pivoted to a work from anywhere culture about a year ago I will admit that I was nervous at first while there are some downsides the upsides clearly outweigh them less commuting time more family time happier employees and most importantly, the notion of boundary less recruiting.

Lets us focus on finding the best people across the board without regard for geography. This is powerful for bill dropped that it has an exceptional benefit in a tight labor environment. It helps us keep our great teammates and attract new ones. One consequence of this pivot as we now have way too much office capacity Mark will discuss what we're doing here in terms of sub leasing and restructuring which we.

We believe will help cash flow and our path to profitability.

Finally, we're pleased to announce that John Murray recently joined our board of Directors. John is a terrific addition to the build trust board with a rich background, helping companies, serving <unk> customers transform and scale and a proven track record of generating shareholder value. He.

He most recently served as board chair of credit IQ ahead of its acquisition by <unk> Dot Com and with CEO of Paypal are privately held payroll and benefits company John was appointed to the board in April and we're looking forward to his contributions in the boardroom.

Strategically and operationally we're doing the things we said, we do and are off to a great start in 2022 on top of strong secular trends and are growing and Underpenetrated Tam more recent macro trends like increased labor costs higher interest rates supply chain difficulties and the rise of work from anywhere or driving additional demand for automation and Digitization solutia.

<unk> that reduce cost and increase efficiency. Accordingly, we believe we are well positioned to meet these ever creating demand through a platform of integrated software and payment solutions.

Like to now turn the call over to Steve Donato, who is making his first appearance on an earnings call and will be available for the Q&A as well build trust was fortunate four years ago to land, Steve as our president and the results. Since then speak for themselves he'll be sharing some more detail and insights on the growth side of our business Steve.

Thanks, Lynn and good afternoon to all I'm, Steve <unk> President of build trust I lead our teams that are directly responsible for growth and customer delivery. These include marketing sales professional services and customer success as well as our M&A activities.

Revenue growth in the way we're scaling the business are top of mind for our team and for our investors as we work to capitalize on the massive market opportunity that our solutions address.

I want to take a few minutes today to describe what we're doing to organically and strategically drive continued and sustainable growth.

We've increased our investment in sales and marketing in recent years and expect to spend approximately 28% of net revenue in these areas in 2022.

This is a rate that begins to approach what we see of comparable companies and one that's more aligned with our growth opportunity than our historic levels of spend in these areas, which were in the low 20% of net revenue.

We are already seeing the benefits of this investment in increased growth our software and payments segment CAGR was 24% during the period in 2017 to 2021 and accelerated to an annual growth rate of 28% in 2021.

Underlying software and payments revenue increased from $44 million to $104 million over that same 2017 to 2021 period.

As we mentioned in our Q4 call we are driving solid performance and customer acquisition in Q1, we acquired more new logos.

Any previous quarter in our history.

While we were pleased with these early results we have the opportunity to sustain this revenue growth trajectory as we scale.

We continue to acquire new customers at attractive LTV to CAC ratios, demonstrating the economic rationality of continued increased investment in growth.

We are deploying this increased investment to strengthen our brand further scale, our direct sales and demand generation actions increased the contribution to bookings from the indirect channel and retain our focus on expanding our relationships with existing customers I will now spend a moment on each of these actions.

We are strengthening our brand awareness through the publication of thought leadership through engagement with industry analysts. We are becoming educated on our category and better positioning the global reach of our solutions and customer base, we seek to build our brand with discipline and in the service of demand.

We continue to increase the size of our direct sales team as well as to supporting demand generation efforts. We expect to see continued increased productivity from this team as they become increasingly tenured and we diversify our demand generation sources.

Our channel team goes to market in three ways and we have reasons to be optimistic on each front.

The first is with what we call payable providers. These are companies that represent buyers who need to pay our supplier customers and find the BPA in an efficient way to achieve that objective.

We are driving participation in the VPN from the source, which comprises part of our increased TPG.

Recently added payroll providers include Cooper and harvest.

The second is with financial institutions that we believe increasingly understand the value of having our digital lockbox and VPN invoice distribution capabilities available to their supplier customers. This is evidenced by expanded partnerships with American Express and Keybanc.

These arrangements increased the network reach of VPN and a strong source of cross sell opportunities for our entire solution set.

Lastly, traditional enterprise software distribution channel opportunities, which include entities like ERP.

System integrators, as well as advisory and PPO firms represent another avenue for efficient growth, we are gaining traction in this area with our new team as we better align our go to market and platform capabilities to be successful with this method of acquiring new business.

We have a strong opportunity to grow along with our ever increasing customer base, our land and expand strategy helps customers along their path to digital transformation across all of accounts receivable.

Evidence of this success is apparent in our software and payments net dollar retention rate of 120% in 2021. This.

This is up 10 percentage points year over year.

I'd like to share two examples of ways that we can grow within our existing customer base.

The first is with a fortune 500 services company that represents a good example of a customer that we were assisting on this digital transformation journey.

Compelling for me to learn of the activity based costing approach that this company utilized to determine that processing check payments was three times more costly for them and electronic payments.

This company serves a wide variety of business customers and had a historically high concentration of check payments. They were incurring seven figure annual third party keen fees and had deployed a team of 75% to ADP Pearl manually working cash application exception cases.

This was exacerbated by a meaningful productivity Cline as a result of a new ERP transition and a tremendous challenge to retain train and recruit team members to perform these tax.

These conditions created urgency for them to act.

Together, we implemented a solution that now applies more than 600000 payments per month and systematic fashion.

We automate more than $25 million monthly and DPM payments.

And we have optimized their payment processing cost based upon the rich dataset and our payment facilitation capabilities.

This has led to faster payment application and enhanced labor utilization efficiency among other benefits for the company.

It has also led to the growth in revenue that we earn from them as a customer.

My Second example, highlights an opportunity resulting directly from our European expansion.

Bill Trust has been serving a global enterprise customer with more than $10 billion in annual revenue with invoicing and payment solutions and as a participant in the VPN in North America for several years.

We now also provide invoicing services to this company in 18 additional countries and are in close dialogue with them about how to deliberate optimize global solution across the entire build trust product suite.

I was just putting one example of how we're expanding global reach capabilities and team position us for growth with our existing multinational customers and <unk>.

Better position us to win more business among this prospect group.

Our sales and marketing investments were focused on accelerating growth expanding our distribution capabilities and enlarging our addressable market.

We are confident that we will continue to deliver more of the positive results. We are now seeing.

And that our investments in coming periods, we will continue to deliver returns.

We look forward to sharing more about our strategic vision at our annual build trust insight event, which will be held virtually on June 14th of June 16.

We'll be debuting a special investor focused to track at the event and we're hopeful that you will join us for that as well as the entire area.

With that I'll hand, it over to our CFO Mark shifting to review, our first quarter results and provide our financial outlook.

Thanks, Steve and good afternoon, everyone. We're very pleased with our Q1 2022 results on a year over year basis reported net revenue grew 12% software and payments segment revenue grew 16% and adjusted gross profit grew 12% adjusted for the impact of the onetime customer loss previously mentioned.

We saw continued acceleration in the business during the quarter with year over year net revenue growth of 24% software and payments segment revenue growth of 34% and adjusted gross profit growth of 29, 5%. Adjusted gross margin was 73, 3% a 10 basis point decline on a reported basis, but are too.

190 basis point expansion after adjusting for the impact of the onetime customer loss. This margin expansion was driven by our highly profitable software and payment segment and this gross margin of 85% in the quarter.

On an organic basis adjusted for the impact of the onetime customer loss net revenue in the quarter was $35 million a year over year increase of 16% from the year ago period software and payments revenue was $28 million a year over year increase of 25% and adjusted gross profit was $26 million a.

Year over year increase of 23%. This strong performance was driven by strong net dollar retention and accelerating growth in part D. TV and direct card revenue as expected Q1 print revenue declined 6% to $4 million as we continue to drive print volume to digital services revenue was flat year over year.

At $3 million.

In line with our expectations operating expenses.

Excluding stock based comp were $35 million up 45% year over year. This increase reflects the addition of our European operations as well as the full year impact of increasing head count over the course of last year. Despite that percentage up opex is tracking in line with our internal forecast, particularly when looking at.

Each line item as a percentage of our net revenue.

Q1, adjusted EBITDA was a loss of $5 million as compared to a loss of $3 million when adjusted for the onetime customer loss in the prior year period. We are pleased that this year. Unlike last year, we expect <unk> adjusted EBITDA results to be sequentially improved relative to what age as we focus on managing towards <unk>.

<unk> ability.

Excluding stock based comp research and development expenses were $14 million versus $10 million in the prior year period, driven by product development and higher contractor costs. This also includes R&D expenses related to European operations that were not on our first three quarters last year sales.

Marketing expenses were $10 million versus $8 million in the prior year period, primarily due to additional investment in direct sales and channel distribution efforts.

General and administrative expenses, including amounts that are added back to the calculation of adjusted EBITDA were $11 million versus $7 million in Q1 2021.

As Philip mentioned earlier, our work from anywhere policy has many benefits, including the opportunity to restructure our physical footprint. We have now closed our offices in Chicago, and Colorado and have reduced our new Jersey headquarter space. In addition, we closed our la Porte, Illinois print facility due to the reduction in overall print volume.

These actions will drive modest, but permanent cost savings going forward that will directly benefit adjusted EBITDA.

We ended the quarter with $153 million in cash and equivalents and short term marketable securities on our balance sheet and no debt.

Note that we used approximately $59 million during Q1 to complete the acquisition of order to cash.

Our share count at quarter end was 163 million basic shares and 168 million fully diluted shares, including all estimated current potentially issuable common shares tied to in the money employee options and <unk>.

Now onto our guidance our full year 2022 outlook is unchanged, where we thought we'd be at this point in the year and remain confident in our remainder of the year outlook.

Finally, a few quick notes on our expected cadence for 2022 Q1 net revenue as a percentage of full year net revenue at the midpoint of our guide was 22% squarely in the middle of expected, 21% to 23% range for the balance of the year, we expect 23% to 25% in Q2, 25% to 20.

7% in Q3, and 27% to 29% in Q4.

For adjusted gross profit and adjusted gross margin, we still expect <unk> to be below in two ways to be above the midpoint.

For adjusted EBITDA, We expect Q2 will look roughly like Q1, followed by a significant sequential improvement in both Q3 and Q4 are.

Our medium and long term outlook as reiterated in our recently released investor deck, and we printed in our Q1 quarterly earnings supplement are unchanged as our expectation to become adjusted EBITDA positive sometime in the back half of 2023 to the first half of 2024, our targets exclude the impact of any future Emma.

And assume no major macroeconomic disruptions that might cause us to reevaluate our strategy or spending.

This year is off to a great start and we look forward to seeing our efforts bear fruit in the months ahead. Thanks again for joining the call and we're happy to answer your questions. Operator, Please open the lines.

We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.

If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

The first question comes from Andrew Schmidt with Citi. Please go ahead.

Okay.

Yes, hi.

Steve Mark. Thank you for taking my questions here and good job the consistency and tough quarter.

I wanted to start out just on the sales environment and just the.

Just what you're hearing from customers, obviously, there's been some incremental volatility relative to 90 days ago.

Some of them, which some of the factors that can actually benefit built trust and demand trends.

Just wondering just from your perspective.

Weather.

The demand for products has changed or just what youre hearing in general any high level thoughts there'll be much appreciate it thanks a lot.

Hey, Andrew it's Glenn Thanks for the question I'm going to let you cannot I'll take this.

It's focused on oil growth parts of the business, Steve you want take that.

Got it thanks, Andrew Hey, we're I would say that we are as optimistic as ever we had a terrific quarter from a sales perspective, we continue to build pipe. So while there's been a fair amount of market volatility we are not seeing it in our sales cycles or in our demand generation.

Very clear, thank you for that and Steve.

You alluded to this in your commentary but.

Obviously investing more in customer acquisition.

It sounds like on the other side Youre seeing.

You see relatively favorable unit economics, maybe kick up in the LTV equal with existing customers and new customers. Maybe just a few comments on what youre seeing in terms of sales and marketing efficiency I know, it's a little bit early but just what youre seeing in terms of the recent wins in deals and how unit economics might be trending. Thanks.

Yes, it's a bit early to tell in detail, but we are.

Just very pleased with our continued momentum bring.

Bringing in the most new logos in our history in the first quarter.

It is exciting to us so no no huge differences just continued performance and continued execution, that's helping us grow.

Perfect. Thank you for that and then just one last question on the incremental cost saves that were identified.

Sounds like the timeline to profitability was modified so is it fair to think about just the savings being reinvested in growth and where might those savings.

Reinvested because it sounds like some of those items could be fairly meaningful thanks a lot.

Sure Hey, Andrew It's Mark I think that the savings that we had were factored into the guide you provided for the year.

Contemplated that during the course of the year, we would be able to get this done.

We're able to start that process in the quarter and so for the most part they've been factored in but I'd focus a little bit more broadly.

What's going on.

Cost management structure, if you think about G&A quarter over quarter basis.

It's down I think 9%, 10% and probably.

We're going to stay.

At that level for the remainder of the year. So we have just more broadly that's just.

One of many components, we focus on in trying to manage our cost structure.

Perfect. Thank you very much mark thanks, everyone I appreciate the comments sure.

The next question comes from Tien Tsin Huang with Jpmorgan. Please go ahead.

Thank you and Steve could help you on the call since you've mentioned the new logos being a record I'm curious what channels.

Our most productive for you any surprise, there and you expect that sort of new logo performance.

Continue here, given what youre seeing on the <unk>.

On the ground.

Yeah.

Yes, no particular surprises across channel as I mentioned in my remarks, we're working hard to diversify the channels that we bring in.

But continued execution and no no real surprises on where it came from and where building pipe. So we're working hard to continue that momentum and continue the trajectory and we expect that we can keep doing so.

Yeah.

Got it so as you all were formulating the outlook here on the guidance I know the quarter was tracking in line.

No no change here any additional consideration.

From a macro perspective.

Asking this along the earnings calls with the stock market is telling us with fears of GDP slowing.

Placement concerns et cetera, do you feel like your businesses.

Built to withstand that given what <unk> seen in past cycles, just trying to better understand how much you may have weighed that as you thought about the outlook.

Hey, Tien tsin, it's flint. Thanks for the question, yes, so we've been through a lot in the 20 years since I started the business and during the financial crisis, and a 7% or eight we actually saw more business.

We're kind of counter cyclical in that way.

When time is tough one business businesses are looking for more cost savings measures and we've got lots for them to backdrop and gogo economies or the focus on topline growth. So businesses that are looking for improved financial performance Steve.

Steve and his team have plenty of things to offer them. So we're not particularly worried about the macro environment in terms of sales and marketing. It does certainly affect our stock price, which may impact our ability to do M&A with stock, but as Mark pointed out we still have a great war chest on the balance sheet.

Perfect I appreciate Youre your history lesson there. Thank you.

Okay.

The next question comes from George <unk> with Cowen. Please go ahead.

Great. Thanks for taking my questions guys.

I guess first item from a from a housekeeping perspective can you guys break out what the contribution of international revenue.

In the quarter and was that has that trapped in line with expectations better or a little less just curious how that is.

Performed thus far and maybe what youre seeing or have seen through April if you're willing to comment on that.

Hey, George its mark.

So far things are tracking in line with expectations, we haven't broken out.

Europe had some segment I think as it becomes more material component of our overall results.

We would consider doing so at that time.

Okay I could I can appreciate that and then just last question market. We're looking at I know you reiterated the.

The full year guide.

It just seems like maybe there's a little bit of a push out I guess relative to our expectations for the second quarter into the into the second half and a second half was always expected to be.

Stronger, but just is there anything to call out there anything that surprised you anything maybe taking a little longer to ramp or is that is that kind of in line with what you guys were thinking originally.

Oh.

It's a modest push from some of what we might have expected in Q2 Q3 and four and this is just timing some of the things we're doing.

Just taking a little bit longer to implement.

But no big surprises and no big push.

Okay. Thank you.

Thank you.

The next question comes from Joseph <unk> with Canaccord.

Please go ahead.

Hey, guys nice results here this quarter.

Just if you could refresh.

My memory again was this.

Second consecutive quarter of record new logo wins is that right.

I believe I believe Thats correct, yes.

So just drilling down on that a little bit more.

Just.

The.

Okay.

Sure.

Just the kind of the.

Characteristics of some of those new clients in terms of size.

Et cetera versus.

Or anything to call out there.

Yes, I'll just I'll remind you that last quarter, we also talked about signing the biggest customer ever right.

But when you sign a record number of logos theres going to be lots of mid market logos in there as well as enterprise class logos, but I think what it says is that the sales and marketing team is hitting on all cylinders and there is also contribution from the channel we spoke about it last year, how we are investing aggressively in the channel because we don't want to have to drive all of our new <unk>.

We're still relatively early there, but we're starting to see contributions from the channel and I would expect that would continue to pay dividends over time as we land. These deals we talked about the American Express deal. This quarter, we talked about the Cooper deal last quarter.

There are third parties, who are financially motivated to drive new business for us and Thats, helping.

Got it and then while we're on that large customer any updates on progress on the ramp there.

Have you signed last quarter front.

No no updates.

But everything.

Updates positively or negative it's going as planned.

Okay and then.

Is there any updates on kind of the progress on digital lockbox.

The go to market, there and the branding of it.

And then on that on that bank channel as well thanks guys.

Yes, I would say that we continue to get strong interest from the bank channel and third party is the American Express deal is a great example of the digital Lockbox Rep.

Resonating with a financial institution that wanted to bring those great capabilities to their their suppliers what they call merchants.

We've.

Talk about the bank channel we.

The press release with Keybanc about an expanded partnership with them around VPN and I would expect us to continue to have more and more banks interested in offering the digital lockbox to their treasury clients. We continue to believe that every supplier of scale is going to need a digital lockbox as more and more payments move from Jack based to electronic.

Electronic doesn't mean, good ACTH payment or a virtual card D. E mail are very expensive to process and a digital lockbox automates that entire process. So the question for banks and we posed this to them is do you want to be relevant in this product set when you're talking with your treasury clients and resoundingly the answer has been yes.

We need to continue to prove that we can sign the banks and the banks can find their treasury clients, but early indications are that's going to be.

Can be a strong contributor for us.

Great. Thanks, a lot.

The next question comes from Chris Kennedy with William Blair. Please go ahead.

Good afternoon. Thanks for taking my question, Steve I wanted to hear a little bit more about the.

Productivity ramping of your direct sales force where are we on that journey.

Okay.

Yes.

We have a lot of product.

Generally it takes about six months to get people effective and rolling and ramping and a year before that really really contributing.

And it continues to be so so I think the logo performance and the growth you're seeing is in part a result of folks that we've hired some time ago that are now really contributing as we've made team more effective and we continue to grow so we expect that to continue.

Okay Fantastic and then can you just talk a little bit about Europe .

Does your go to market change in Europe versus the U S and talk about the strategy. There. Thanks, a lot guys.

Sure.

We acquired businesses with <unk>.

Growing well in Europe and that continues now we have the opportunity to share.

Sure.

Multinational customers that we had within the build trust based already and the example, I gave.

In my early remarks is a good one and that is one of several.

As part of the integration, bringing together the solution set that go to market branding all of those things that you need to block and tackle through when you integrate acquired businesses and a team.

Strategy and another component is all well underway. So we expect to see not only the same kind of organic growth from the businesses, we acquired but through our integration work into a global brand and global sales effort to get some acceleration in years to come.

Yeah.

Thank you.

The next question comes from Josh Beck with Kb Cm. Please go ahead.

Hey, guys. This is matti on for Josh.

Let's talk a little bit about the Cooper partnership if you guys could give a little color on the product market fit within Cooper and curious how that ties into the Cooper pay offering and then my follow up on that is obviously they have some larger customers with growing mid market presence wondering which segment you guys are seeing.

<unk>.

<unk> opportunity across their customer base. Thanks.

Sure.

Yes, what we can tell you about Cooper is there's sort of two parts to that partnership.

We have a variety of organizations.

Organizations that we call <unk>, which is <unk>.

Both banks and software companies that operate on the accounts payable side and what all of those companies have in common is they desire to pay more people electronically. So Cooper is looking for is access to the business payments network Directory, which has.

The ability to pay some very large suppliers like that ex GE healthcare and staples and many many more so.

One access to VPN directory and are willing to pay for it to drive increase in digital adoption.

The second part of that relationship as they recognize that when they try to convince a supplier to accept digital payments often one of the objections. They get is yes, okay I'll take your digital payment, but I don't want it via e-mail what else you got.

So there was a referral element to that partnership where they can bring us in or a digital lockbox sale into that large supplier to make it more interesting for them to accept the digital payments.

Got it that's super helpful and if I could just ask one more with respect to the new customer additions are you seeing any notable shift upmarket maybe compared to your installed base.

Steve you want to take that.

Sure, Yes, I think compared to the installed base that we've acquired over the last 20 years, we continue to move upmarket relative to our entire customer base. So I think that continues but it's not a new trend.

Certainly where we're targeting in the markets that we're segmenting to go after so.

Versus the existing customer base certainly we continue to go upstream in terms of customer size and deal size.

Got it thanks for the color.

Okay.

The next question comes from Matt Young.

London with Needham. Please go ahead.

Thank you good evening guys congrats.

And Mark on the quarter I wanted to just ask you about the card revenue I'm, assuming that most of the lucrative revenue stream for you.

When I look at the chart that you have in your slide deck.

Yield has been trending up how should we think about that relative to just overall TPB growth any way to sort of handicap that impact over time in our model.

Well, let me first right.

Alright.

So first let me comment on the most lucrative revenue.

Not the case.

Well that software and payments revenue was incredibly both.

Both high <unk> margins.

Compared to our services and print.

They're both fantastic revenue stream. So it's not just payment. The reason we call out the payments revenue is because it is very lucrative and it is growing fast and it's growing faster than TPB now part of that is because we continue to monetize payments more effectively we have a book of payments business that is on our gateway model that we're transitioning over time.

Two our payback model. In addition, most new business, we signed it goes on the payback each of that contributes to increased yield overtime that we've guided to being in the teens over the long term.

Understood.

Very helpful. A good reminder for me.

Flint on the bps and just maybe more on the strategy side.

But what is the strategy in terms of Onboarding New partners. What are some of the incentives that you provide or what is the attraction for these different players to get onto the BPM. If you could just maybe lay out the.

Onboarding strategy and how that's playing out overtime.

I mean, there's two general flavors of partners on VPN, it's on the buyer side and on the supplier side on the buyer side, we are pretty good density there already with.

Many banks in most of the software companies already on VPN, but getting them on VPN is just step one getting them to access <unk>.

Can get them additional digital payments, but they don't have to cut a paper check of course, they're going to route those payments through VPN and that is as muscle we have today and we are always improving upon.

On the supplier side is making sure that the partners, mostly the banks recognize that this digital lockbox is something that's going to be incredibly important I'll remind you that.

Just recently, we started offering ECH support as part of that digital lock box and if you look at the numbers that we shared in the deck CCH volumes have been growing very very fast because there are a lot of AC payments out there that are tougher businesses to handle so we need to continue to convince partners that their customers want a digital lockbox.

And the best way to do that is to sign them by ourselves because we go to these banks and say listen we're already finding your customers on these digital lock boxes and Youre not party to this transaction I think how successful this could be if you were leading leading the charge here.

Right.

That's very helpful. Thank you so much.

Thanks, Mike.

The next question comes from Sanjay <unk> with <unk>. Please go ahead.

Thanks, Good evening.

I guess first question is just valuations have come in quite a bit.

The industry I'm wondering if you guys are seeing opportunities to do some deals and acquire companies.

So we don't comment on future M&A opportunities, but we continue to be focused on acquisitions. We've got one of the reasons why we went public it so that we could be more acquisitive. We've done two deals in the last six or seven months and we're always on the hunt for something that makes strategic sense I think.

Public valuations not just the industry across the board have come down but that has also started to trickle into private valuations, which is where we do most of our hunting. So.

If I was a betting man I would bet with those valuations coming down we'll see some more reasonable.

Prices for targets that we're interested in.

And I guess when you guys think about.

Possible deals you might do would they be more bolt on or would you like to add another leg to the stool. How should we think about what you might seek to do I know international has been a focal point, but maybe you can just speak to what might be interesting.

Yes, I think we bucket those into a few different categories.

Geographic expansion.

Which we've just executed on two but theres many geographies, where we are underrepresented. So we are continuing don't there.

His product extensions, so things that accounts receivable need that we may not offer something like sales order automation for instances an area that we've talked about in the past.

There are certainly rollouts or other vertical players.

Several years ago about a company that was the market leader in the heavy equipment industry and we.

We're just very underrepresented there so.

Acquired them and we're able to do a whole lot of cross selling into that base of that expanded our footprint there quite substantially.

And then around VPN theres, some strategic plays around increasing supplier growth through M&A. So lots of different types of companies that will occur.

Great just one last question, maybe a follow up to some of the earlier questions.

Yes, there was a question about cost saves and profitability and I know the timeline to profitability hasnt changed relative to last quarter, but obviously the market has been very focused on.

An accelerated path to profitability and that determining stock valuations.

As you've seen with your stock.

I'm just curious if your thought process has changed or does that even play into sort.

Sort of how you're thinking about positioning clearly nothing is changed thus far but what are you thinking about that and then Mark you mentioned to the extent that there was macro weakness you have some levers at your disposal, maybe you could just speak to some of those thank you.

Sure.

I think previously even now more focus we're toggling between topline growth and profitability.

We are.

Able to I think manage our business.

With a little bit of.

<unk>.

Our focus on G&A more than at this point sales and marketing and R&D I think right now those two are really critical as we are focused not just on.

Our direct.

Sales, but our burgeoning.

Channel opportunities showing fruit there, we certainly don't want to.

Undermining them, but all of a sudden for short term reasons.

Under feeding them, we have an opportunity in international as well to ensure that our products ours are available on a cross border basis, even better than they were before so we're thinking about seeing direct benefits from those spends and we're making sure we are more focused.

Then before on ensuring the benefits are actually realizable from the spend but the real focus for trying to get to profitability is more on the G&A side, where.

We can get that operating leverage again as I've said before you don't need to hire another person to grow card volumes.

For tier bursting and alike, so theres a lot of.

Growth just built into how the business runs without needing to hire more people for it and in terms of Incrementals that we're just more focused.

We might have been before on ensuring that we're getting the right results for any incremental spend.

Okay.

Yeah.

Was there a follow up.

No just just maybe that the beginning part like any any change in terms of how you guys are thinking I mean, clearly you haven't changed your view on timeline for profitability, but is that being sort of weighed maybe accelerating that.

Listen I think.

We have not.

Without the change in profitability, it's the first quarter of the year and we have not made any comments about changing any of the future numbers you can read into the commentary where there are some cost save measures that we've taken which is probably an indication that there's more of a focus on profitability.

Thanks.

The next question is a follow up from Tien Tsin Huang with Jpmorgan. Please go ahead.

Mr. Tien Tsin Huang did you have an additional question you rejoin the queue.

Perhaps you needed your phone.

Okay, perhaps the questions will be taken offline.

Again, if you have a question. Please press Star then one.

This concludes our question and answer session I would like to turn the conference back over to Lynn for any closing remarks.

Once again, thank you everybody for joining the call.

Very happy with the results in the first quarter the headline number of the adjusted software and payments growth of 34% is an exact direction. We want we're trying to drive higher growth in the business and we've succeeded in doing that and I think over time youll see that materialize in terms of both profitability and we look forward to continuing this journey with you. Thank you everybody.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.

Sure.

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Okay.

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Okay.

[music].

Good afternoon, ladies and gentlemen, thank you for standing by welcome to build.

The old trusts first quarter 2022 earnings conference call.

As a reminder, this call is being recorded should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.

I'd now like to turn the call over to John T. Williams head of Investor Relations to begin.

They'll trusts Chief Financial Officer, I'll, now turn the call over to <unk> to begin.

Thanks, John and thank you everyone for joining the call today I'd like to start by first thanking the 700, plus Belfast employees across the globe, who continue to challenge the status quo and drive meaningful outcomes for our customers. We live in trying times and I couldnt be more proud of our team will strive everyday to make magic happen. We've got to reinvent ourselves. These last two years as a.

Work from anywhere culture, and as a public company and that transition has been amazing thanks to west Fantastic team up and down the Org chart now onto the results another great quarter in the books, both financially and operationally as is customary I'll begin with some operational metrics and recent business highlights.

Our president, Steve Donato, who will discuss some of our growth initiatives and finally, our CFO Mark <unk>, who will provide details on our performance and reaffirmed 2022 guidance.

<unk> that we had a BDC customer transition off of our platform and a year of deferred revenue was accelerated into that quarter. We think the more appropriate way to assess our year over year growth is to exclude the impact of the loss of the customer, including the impact of the onetime accelerated deferred revenue from our 2021 numbers for comparison purposes.

In the year ago quarter.

<unk> through the business payments network or VPN, TBB increased 86% year over year in Q1 against exceptional prior year growth of 146%. The credit card component of <unk> grew to $2 1 billion in Q1 up 50% year over year consistent with our prior statements, we still expect <unk> to grow.

At least 100% on a full year over year basis.

We still expect that yields will grow into the teens over the long term as transactions move to our payback payback platform and capture a larger share of transaction revenue.

Now lets cover some recent business highlights and callouts.

We recently announced an exciting expansion of our relationship with American Express where suppliers accepts amex cards will have access to a complete order to cash solution, allowing them to automate their accounts receivable process and remove complexity, while making it possible to easily track and reconcile virtual card payments to get paid faster.

Sweet makes it simple to do everything they need from invoicing to cash application to collection.

Build trust that this is a fantastic partner win and an opportunity to address the needs of an entirely new group of customers. We expect will be very interested in our digital lockbox and other solutions, we've been pretty clear that we are a big focus on expanding distribution to accelerate growth and we believe it's working our expanded amex and keybanc relationships and our coupon partnership are just a few.

The most recent examples of that.

Iteration of our European businesses are well underway and are tracking as expected with some initial integration and scaling cost that we expect will unlock revenue opportunities leadership is in place Mark Lehman, who cofounded in order to cash now serves as our managing director and head of European business. We're excited about the opportunity to expand our total addressable market and look forward to scaling.

The availability of our solutions more broadly in the region. As we previously said, we do not have business our team members in Russia or Ukraine. The war is tragic and we green for the people affected but so far this war is not having a material impact on our business in Europe .

In terms of our most valuable asset our team we pivoted to a work from anywhere culture about a year ago I'll admit that I was nervous at first while there are some downsides the upsides clearly outweigh them less commuting time more family time happier employees and most importantly, the notion of boundary less recruiting this lets us focus on finding the best people across the.

Our board without regard for geography. This is powerful for bill dropped and it is an exceptional benefit in a tight labor environment. It helps us keep our great teammates and attract new ones. One consequence of this pivot as we now have way too much office capacity Mark will discuss what we're doing here in terms of sub leasing and restructuring, which we believe will help cash flow and our path to <unk>.

<unk> ability.

<unk> that reduce cost and increase efficiency. Accordingly, we believe we are well positioned to meet these evergreen seeing demands through a platform of integrated software and payment solutions.

Now I'll turn the call over to Steve Donato was making his first appearance on an earnings call and will be available for the Q&A as well build trust was fortunate four years ago to land, Steve as our president and the results. Since then speak for themselves he'll be sharing some more detail and insights on the growth side of our business Steve.

Thanks, Lynn and good afternoon to all I'm, Steve Donato President of build trust I lead our teams that are directly responsible for growth and customer delivery. These include marketing sales professional services and customer success as well as our M&A activities.

Revenue growth in the way we're scaling the business are top of mind for our team and for our investors as we work to capitalize on the massive market opportunity that our solutions address.

I want to take a few minutes today to describe what we're doing to organically and strategically drive continued and sustainable growth.

We've increased our investment in sales and marketing in recent years and expect to spend approximately 28% of net revenue in these areas in 2022.

This is a rate that begins to approach what we see of comparable companies and one that's more aligned with our growth opportunity and our historic levels of spend in these areas, which were in the low 20% of net revenue.

Underlying software and payments revenue increased from $44 million to $104 million over that same 2017 to 2021 period.

As we mentioned in our Q4 call we are driving solid performance and customer acquisition in Q1, we acquired more new logos than <unk>.

Any previous quarter in our history.

While we were pleased with these early results we have the opportunity to sustain this revenue growth trajectory as we scale.

We continue to acquire new customers at attractive LTV to CAC ratios, demonstrating the economic rationality of continued increased investment in growth.

We are strengthening our brand awareness through the publication of thought leadership through engagement with industry analysts were becoming educated on our category and better positioning the global reach of our solutions and customer base, we seek to build our brand with discipline and in the service of demand.

Our channel team goes to market in three ways and we have reasons to be optimistic on each front.

The first is with what we call payable providers. These are companies that represent buyers who need to pay our supplier customers and find the BPA in an efficient way to achieve that objective.

We are driving participation in the BPA from the source, which comprises part of our increased TPB.

Recently added payroll providers include Cooper and harvest.

These arrangements increased the network reach of VPN and a strong source of cross sell opportunities for our entire solution set.

Lastly, traditional enterprise software distribution channel opportunities, which include entities like ERP.

Evidence of this success is apparent in our software and payments net dollar retention rate of 120% in 2021. This.

This is up 10 percentage points year over year.

I'd like to share two examples of ways that we can grow within our existing customer base.

The first is with a fortune 500 services company that represents a good example of a customer that we are assisting on this digital transformation journey.

Compelling for me to learn of the activity based costing approach that this company utilized to determine that processing check payments was three times more costly for them than electronic payments.

This company serves a wide variety of business customers and had a historically high concentration of check payments. They were incurring seven figure annual third party keen fees and have deployed a team of 75% to ADP Pearl manually working cash application extraction cases.

This was exacerbated by a meaningful productivity Cline as a result of a new ERP transition and the tremendous challenge to retain train and recruit team members to perform these tax.

These conditions created urgency for them to act.

Together, we implemented a solution that now applies more than 600000 payments per month and systematic fashion.

We automate more than $25 million monthly and DPM payments.

And we have optimized their payment processing cost based upon the rich dataset and our payment facilitation capabilities.

This has led to faster payment application and enhanced labor utilization efficiency among other benefits for the company.

It has also led to the growth in revenue that we earn from them as a customer.

My Second example, highlights an opportunity resulting directly from our European expansion.

<unk> has been serving a global enterprise customer with more than $10 billion in annual revenue with invoicing and payment solutions and as a participant in the VPN in North America for several years.

I was just putting one example of how we're expanding global reach capabilities and team position us for growth with our existing multinational customers and better position us to win more business. Among this prospect group.

Our sales and marketing investments are focused on accelerating growth expanding our distribution capabilities and enlarging our addressable market.

We are confident that we will continue to deliver more of the positive results. We are now seeing.

And that our investments in coming periods, we will continue to deliver returns.

We look forward to sharing more about our strategic vision at our annual build trust insight event, which will be held virtually on June <unk> to June 16.

We'll be debuting a special investor focused to track at the event and we're hopeful that you will join us for that as well as the entire area.

With that I'll hand, it over to our CFO Mark shifting to review, our first quarter results and provide our financial outlook.

Thanks, Steve and good afternoon, everyone. We are very pleased with our Q1 2022 results on a year over year basis reported net revenue grew 12% software and payments segment revenue grew 16% and adjusted gross profit grew 12%.

Adjusted for the impact of the onetime customer loss previously mentioned, we saw continued acceleration in the business during the quarter with year over year net revenue growth of 24% software and payments segment revenue growth of 34% and adjusted gross profit growth of 29, 5% adjusted gross margin was 73, 3%.

A 10 basis point decline on a reported basis, but a 290 basis point expansion after adjusting for the impact of the onetime customer loss. This margin expansion was driven by our highly profitable software and payment segment and this gross margin of 85% in the quarter.

The year over year increase of 23%. This strong performance was driven by strong net dollar retention and accelerating growth in part D. TV and direct card revenue as expected Q1 print revenue declined 6% to $4 million as we continue to drive print volume to digital services revenue was flat year over year.

At $3 million.

In line with our expectations operating expenses, excluding stock based comp were $35 million up 45% year over year. This increase reflects the addition of our European operations as well as the full year impact of increasing head count over the course of last year, despite that percentage up opt.

Next is tracking in line with our internal forecast, particularly when looking at each line item as a percentage of net revenue. Our Q1, adjusted EBITDA was a loss of $5 million as compared to a loss of $3 million when adjusted for the onetime customer loss in the prior year period. We are pleased that this year unlike last year.

We expect <unk> adjusted EBITDA results to be sequentially improved relative to what age as we focus on managing towards profitability.

Marketing expenses were $10 million versus $8 million in the prior year period, primarily due to additional investment in direct sales and channel distribution efforts general and administrative expenses, including amounts that are added back to the calculation of adjusted EBITDA were $11 million versus $7 million in Q1 'twenty.

'twenty one.

As Philip mentioned earlier, our work from anywhere policy has many benefits, including the opportunity to restructure our physical footprint.

We have now closed our offices in Chicago, and Colorado and have reduced our new Jersey headquarter space. In addition, we closed our la Porte, Illinois print facility due to the reduction in overall print volume. These actions will drive modest but permanent cost savings going forward that will directly benefit adjusted EBITDA we.

We ended the quarter with $153 million in cash and equivalents and short term marketable securities on our balance sheet and no debt no.

Note that we used approximately $59 million during Q1 to complete the acquisition of order to cash.

Now onto our guidance our full year 2022 outlook is unchanged, where we thought we'd be at this point in the year and remain confident in our remainder of the year outlook.

7% in Q3, and 27% to 29% in Q4.

For adjusted gross profit and adjusted gross margin, we still expect <unk> to be below in two ways to be above the midpoint.

For adjusted EBITDA, We expect Q2 will look roughly like Q1, followed by a significant sequential improvement in both Q3 and Q4 are.

And assume no major macroeconomic disruptions that might cause us to reevaluate our strategy or spending.

We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad.

If youre using a speakerphone please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

The first question comes from Andrew Schmidt with Citi. Please go ahead.

Yes, hi.

Steve Mark. Thank you for taking my questions here and good job the consistency in a tough quarter.

I wanted to start out just on the sales environment and just the.

Just what you are hearing from customers, obviously, there's been some incremental volatility relative to 90 days ago.

Some of which some of the factors that can actually benefit built trust and demand trends.

Just wondering just from your perspective.

Weather.

The demand for products has changed or just what youre hearing in general any high level thoughts there'll be much appreciate it thanks a lot.

Hey, Andrew it's Colin Thanks for the question I'm going to let you cannot I'll take this.

It's focused on oil growth parts of the business Stephen I'll take that.

Very clear, thank you for that and Steve.

You alluded to this in your commentary but.

Obviously investing more in customer acquisition.

It sounds like on the other side Youre seeing.

Do you see relatively favorable unit economics, maybe kick up in the LTV equal with existing customers and new customers. Maybe just a few comments on what youre seeing in terms of sales and marketing efficiency I know, it's a little bit early but just what youre seeing in terms of the recent wins in deals and how you made a comments might be trending.

Yes, it's a bit early to tell in detail, but we are.

Just very pleased with our continued momentum bring.

Bringing in the most new logos in our history in the first quarter.

It is exciting to us so no no no huge differences just continued performance and continued execution, that's helping us grow.

Perfect. Thank you for that and then just one last question on the incremental cost saves that were identified.

It sounds like the timeline to profitability was modified so is it fair to think about just the savings being reinvested in growth and where might those savings.

Reinvested because it sounds like some of those items could be fairly meaningful thanks a lot.

Sure Hey, Andrew It's Mark I think that the savings that we had were factored into the guide you provided for the year.

Contemplated that during the course of the year, we would be able to get this done.

We're able to start that process in the quarter and so for the most part they've been factored in but I'd focus a little bit more broadly.

What's going on in our cost management structure, if you think about G&A quarter over quarter basis.

Is down I think 9%, 10% probably.

We're going to stay.

At that level for the remainder of the year. So we have just more broadly that's just.

One of many components, we focus on in trying to manage our cost structure.

Perfect. Thank you very much mark thanks, everyone I appreciate the comments sure.

The next question comes from Tien Tsin Huang with Jpmorgan. Please go ahead.

Thank you Steve could help you on the call since you've mentioned the new logos being a record I'm curious what channels.

Our most productive for you any surprise, there and you expect that sort of new logo performance.

Continue here, given what youre seeing on the <unk>.

On the ground.

Yes, no particular surprises across channel as I mentioned in my remarks, we're working hard to diversify the channels that we bring in.

But continued execution and no no real surprises on where it came from and where building pipe. So we're working hard to continue the momentum and continue the trajectory and we expect that we can keep doing so.

Yeah.

Got it so as you all were formulating the outlook here on the guidance I know the quarter was tracking in line.

No no change here any additional consideration.

From a macro perspective.

Asking this a 100 earnings calls what the stock market is telling us with fears of GDP slowing.

Ladies and concerns et cetera, do you feel like your businesses.

Built within that given what <unk> seen in past cycles, just trying to better understand how much you may have weighed that as you thought about the outlook.

Hey, Tien tsin, it's flint. Thanks for the question Yeah. So we've been through a lot in the 20 years since I started the business and during the financial crisis, and a 7% or eight we actually saw more business in.

We're kind of counter cyclical in that way when time is tough one business businesses are looking for more cost savings measures and we've got lots for them to pick from and Gogo economies or the focus on topline growth. So businesses that are looking for improved financial performance.

Perfect I appreciate Youre your history lesson there. Thank you.

The next question comes from George <unk> with Cowen. Please go ahead.

Great. Thanks for taking my questions guys.

First item from a from a housekeeping perspective can you guys break out what the contribution of international revenue.

Was in the quarter and was that how is that tracked in line with expectations better a little less just curious how that is.

Performed thus far and maybe what youre seeing or have seen through lots of April if you're willing to comment on that.

Hey, George its mark.

So far things are tracking in line with expectations, we haven't broken out Europe as a segment I think as it becomes more material component of our overall results.

We would consider doing so at that time.

Okay I could I can appreciate that and then just last question Mark if we're looking at I know you reiterated the.

The full year guide.

It just seems like maybe there's a little bit of a push out I guess relative to our expectations for the second quarter into the into the second half and a second half was always expected to be.

Stronger, but just is there anything to call out there anything that surprised you in maybe taking a little longer to ramp or is that is that kind of in line with what you guys were thinking originally.

Oh.

It's a modest push from some of what we might have expected in Q2 to Q3 and four and this is just timing some of the things we're doing.

Just taking a little bit longer to implement.

But no big surprises and no big push.

Okay. Thank you.

Thank you.

The next question comes from Joseph <unk> with Canaccord.

Please go ahead.

Hey, guys nice results here this quarter.

Okay.

My memory again was this.

Second consecutive quarter of record new logo wins is that right.

I believe I believe Thats correct, yes.

So just drilling down on that a little bit more.

Jeff.

The.

Yeah.

Just the kind of the.

Characteristics of some of those new clients in terms of size.

Et cetera versus.

Anything to call out their point.

Yes, I'll just I'll remind you that last quarter, we also talked about signing the biggest customer ever right.

But when you signed a record number of logos theres going to be lots of mid market logos in there as well as enterprise class logos, but I think what it says is that the sales and marketing team is hitting on all cylinders and there is also contribution from the channel we spoke about it last year, how we are investing aggressively in the channel because we don't want to have to drive all of our new biz.

<unk>.

Got it and then while we're on that large customer any updates on progress on the ramp there.

Have you signed last quarter front.

No no updates.

But everything.

Well update positively or negative it's going as planned.

Okay and then.

Is there any updates on kind of the progress on digital lockbox.

The go to market, there and the branding of it.

And then on that on that bank channel as well thanks guys.

Yes, I would say that we continue to get strong interest from the bank channel and third party is the American Express deal is a great example of the digital Lockbox Rep.

<unk> with the financial institution that wanted to bring those great capabilities to there.

They are suppliers, what they called merchants.

We've.

Talk about the bank channel.

Electronic doesn't mean, good on ACTH payment or a virtual card. The email are very expensive to process and a digital lockbox automates that entire process. So the question for banks and we pose to them is do you want to be relevant in this product set when you're talking with your treasury clients and resoundingly the answer has been yes.

We need to continue to prove that we can sign the banks and the banks can find their treasury clients, but early indications are that's going to be.

Can be a strong contributor for us.

Great. Thanks, a lot.

The next question comes from Chris Kennedy with William Blair. Please go ahead.

Good afternoon. Thanks for taking my question, Steve I wanted to hear a little bit more about the.

Productivity ramping of your direct sales force where are we on that journey.

Okay.

Yes.

We have a lot of product.

Generally it takes about six months to get people effective and rolling and ramping and a year before that really really contributing.

It continues to be so so I think the logo performance and the growth you're seeing is in part a result of folks that we've hired some time ago that are now really contributing as we've made team more effective and we continue to grow and so we expect that to continue.

Okay Fantastic and then can you just talk a little bit about Europe .

Is your go to market change in Europe versus the U S and talk about the strategy. There. Thanks, a lot guys.

Sure.

We acquired businesses with <unk>.

Growing well in Europe and that continues now we have the opportunity to share.

Sure.

Multinational customers that we had within the build trust based already and the example, I gave.

In my early remarks is a good one and that is one of several.

Strategy in another continent is all well underway. So we expect to see not only the same kind of organic growth from the businesses, we acquired but through our integration work into a global brand and global sales effort to get some acceleration in years to come.

Yeah.

Thank you.

The next question comes from Josh Beck with Kb Cm. Please go ahead.

Hey, guys. This is matti on for Josh.

Sure.

Opportunity across their customer base. Thanks.

Yes, what we can tell you about Cooper is there's sort of two parts to that partnership.

We have a variety of organizations.

Organizations that we call <unk>, which is <unk>.

The ability to pay some very large suppliers like that ex GE healthcare and staples and many many more so they want access to VPN directory and they are willing to pay for it to drive increased digital adoption the <unk>.

Second part of that relationship as they recognize that when they try to convince a supplier to accept digital payments.

Often one of the objections. They get is yes, okay I will take your digital payments, but I don't want it via E Mail what else you got.

So there was a referral element to that partnership where they can bring us in or a digital lockbox sale into that large supplier to make it more interesting for them to accept the digital payments.

Got it that's super helpful and if I could just ask one more with respect to the new customer additions are you seeing any notable shift upmarket maybe compared to your installed base.

Steve you want to take that.

Certainly where we're targeting.

The markets that we're segmenting to go after so.

Versus the existing customer base certainly we continue to go upstream in terms of customer size and deal size.

Got it thanks for the color.

Okay.

The next question comes from London.

London with Needham. Please go ahead.

Thank you good evening guys congrats.

And Mark on the quarter I wanted to just ask you about the hard revenue.

Excuse me that most of the lucrative revenue stream for you. So when I look at the chart that you have in your slide deck.

The yield has been trending up how should we think about that relative to just overall TPB growth any way to sort of handicap that impact overtime in our model.

Well, let me first.

All right.

So first let me comment on the most lucrative revenue.

Not the case.

Software and payments revenue is incredibly both high <unk> margins.

Compared to our services in print.

They're both fantastic revenue streams. So it's not just payment. The reason we call out the payments revenue is because it is very lucrative and it is growing fast and it's growing faster than TPB now part of that is because we continue to monetize payments more effectively.

We have a book of payments business that is on our gateway model that we're transitioning over time to our payback model. In addition, most new business. We signed it goes on the payback each of that contributes to increased yield overtime that we've guided to being in the teens over the long term.

Understood.

Very helpful. A good reminder for me.

And then flint on the bps, just maybe more on the strategy side.

Onboarding strategy and how that's playing out overtime.

I mean, there's two general flavors of partners on VPN, it's on the buyer side and on the supplier side on the buyer side, we are pretty good density there already with.

Many banks in most of the software companies already on VPN, but getting them on VPN is just step one getting them to access <unk>.

Many of the suppliers is an ongoing challenge as we continue to add more and more suppliers, we want to make sure that they are paying those suppliers on VPN, but it all comes down to the value prop that we can offer them. If we can get them additional digital payments, but they don't have to cut a paper check of course, they're going to route those payments through VPN and that is as muscle we have today and we are.

We're always improving upon.

On the supplier side is making sure that the partners, mostly the banks recognize that this digital lockbox is something thats going to be incredibly important I'll remind you that.

Recently, we started offering ECH support as part of that digital lock box and if you look at the numbers that we shared in the deck CCH volumes have been growing very very fast because there are a lot of ACTH payments out there that are tougher businesses to handle so we need to continue to convince partners that their customers want a digital lockbox.

And the best way to do that it's a sign them by ourselves because we go to these banks and say listen we're already finding your customers on these digital lock boxes and Youre not party to this transaction I think how successful this could be if you were leading leading the charge here.

Right.

That's very helpful. Thank you so much.

Thanks, Matt.

The next question comes from Sanjay <unk> with <unk>. Please go ahead.

Thanks, Good evening.

I guess first question is just valuations have come in quite a bit.

In the industry I'm wondering if you guys are seeing opportunities to do some deals and acquire companies.

So we don't comment on future M&A opportunities, but we continue to be focused on acquisitions. We've got one of the reasons why we went public so that we could be more acquisitive.

Done two deals in the last six or seven months and we're always on the hunt for something that makes strategic sense I think public.

Public valuations not just the industry across the board have come down but that has also started to trickle into private valuations, which is where we do most of our hunting. So.

If I was a betting man I would bet with those valuations coming down we'll see some more reasonable.

Prices for targets that we're interested in.

And I guess when you guys think about.

Yes, I think we bucket those into a few different categories.

Geographic expansion.

Which we've just executed on two but there is many geographies, where we are underrepresented. So we are continually don't there.

His product extensions, so things that accounts receivable needs that we may not offer something like sales order automation for instances an area that we've talked about in the past.

There are certainly rollouts or other vertical plays.

Several years ago about a company that was the market leader in the heavy equipment industry and we will.

We're just very underrepresented there so.

Acquired them and we're able to do a whole lot of cross selling into that base of that expanded our footprint there quite substantially.

Then around VPN theres, some strategic plays around increasing supplier growth through M&A. So lots of different types of companies that we're looking at.

Great just one last question, maybe a follow up to some of the earlier questions.

Yes, there was a question about cost saved and profitability and I know the timeline to profitability hasnt changed relative to last quarter, but obviously the market has been very focused on it.

An accelerated path to profitability and that determining stock valuations.

As you've seen with your stock.

I'm just curious if your thought process has changed or does that even play into.

Sort of how you're thinking about positioning clearly nothing is changed thus far but are you thinking about that and then Mark you mentioned to the extent that there was macro weakness you have some levers at your disposal, maybe you could just speak to some of those thank you.

Sure.

I think previously even now more focus we're toggling between topline growth and profitability.

We are.

<unk> to I think manage our business.

With a little bit of.

Focus on G&A more than at this point sales and marketing and R&D I think right now those two are really critical as we are focused not just on.

Our direct.

Sales, but our burgeoning.

Channel opportunities showing real fruit there, we certainly don't want to.

Undermining them, but all of a sudden for short term reasons.

Then before on ensuring the benefits are actually realizable from the spend but the real focus for trying to get to profitability is more on the G&A side, where.

We can get that operating leverage again as I've said before you don't need to hire another person to grow card volumes.

For tier bursting and alike, so theres a lot of.

Growth just built into how the business runs without needing to hire more people for it and in terms of Incrementals that we're just more focused.

We might have been before on ensuring that we're getting the right results for any incremental spend.

Yeah.

Was there a follow up.

Listen I think.

We have not.

Thanks.

The next question is a follow up from Tien Tsin Huang with Jpmorgan. Please go ahead.

Mr. Tien Tsin Huang did you have an additional question you rejoin the queue.

Perhaps you needed your phone.

Okay, perhaps the question can be taken offline.

Again, if you have a question. Please press Star then one.

This concludes our question and answer session I would like to turn the conference back over to Lynn for any closing remarks.

Once again, thank you everybody for joining the call.

Very happy with the results in the first quarter the headline number of the adjusted software and payments growth of 34% is the exact direction. We want we're trying to drive higher growth in the business and we've succeeded in doing that and I think over time youll see that materialize in terms of both profitability and we look forward to continuing this journey with you. Thank you everybody.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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