Q2 2022 Paya Holdings Inc Earnings Call

As a reminder, this conference is being recorded. Before we begin, let me remind everyone that today's discussion will contain forward-looking statements based on our current assumptions, expectations, and beliefs, including financial guidance, the growth of pious business, our objectives, and business strategies, as well as other forward-looking statements. Please refer to the disclosure at the end of the company's earnings press release and form an 8K filed with the SEC.

For information about forward-looking statements that may be made or discussed on this call, all statements may reflect our current expectations only, and we undertake no obligation to update any statements to reflect the events that will occur after this call. You can read more about the specific risk factors that could cause our actual results to differ materially from today's discussion in the risk factor section of the company's form, 10K, filed with the S.

C in March of 2022 and the subsequent periodic reports that the company files with the SEC.

Also, during this call, we will be discussing certain non-GAAP measures of our performance. GAAP to non-GAAP financial reconciliation and supplemental financial information are provided in the earnings press release and the 8K filed with the SEC. This call is available via webcast. You can find all the information I have described, including a supplemental second quarter 2022 presentation, on the investor relations section of the PIA's website.

Now joining us on this call today are Pius CEO Jeff Hack and CFO , Glenn Ranzouli, following their prepared remarks. We will open the call for your question. With that, now I'll turn the call over to Jeff. With that, now I'll turn the call over to Jeff.

Thank you, operator, and good morning, everyone. Thanks for joining us today as we review Pius II Quarter 2022 financial results and efforts underway to further accelerate our growth. And efforts underway to further accelerate our growth.

At the conclusion of my remarks, Glenn will cover detailed financial results and then we'll take questions.

PIRE reported strong financial results again this quarter, led by our Integrated Solutions segment and our proprietary ACH offerings.

These two growth engines, which continue to capitalize on the secular shift in our markets towards payment, agnostic, software-led commerce represented nearly 80% of total pia revenue in the quarter.

In the second quarter, payment volume grew 15% to over 12 billion, driven by card volume growth of 7% and ACH volume growth of 27%.

Total revenue grew over 13% to $72.5 million and adjusted EBITDA grew 14% to $19.2 million. Better than our expectations and these results also reflect the previously discussed incremental investment in our go-to-market and innovation efforts.

Before I expand on our 2022 growth drivers and outlook, I will recap our strong competitive positioning and the secular tailwinds that drive growth in our business. So we spotlight the ???ut

PIA is a leading independent integrated payments platform serving software partners in attractive middle market verticals such as B2B goods and services, healthcare, government, and nonprofit. These verticals are all high growth and under penetrated for integrated payments. And under penetrated for integrated payments.

Our strong quarterly volume trends clearly demonstrate the powerful combination of software and payments in very attractive verticals that have also proven resilient during periods of macroeconomic uncertainty.

We have demonstrated exceptional capabilities by providing an end-to-end commerce experience to our software partners from order management to invoicing to receipt of goods, to payment, and then post back to business management and accounting systems. We have now provided an end-to-end accounting system. We have now provided an end-to-end accounting system.

All of these solutions enrich the value of the entire software.

generating very material incremental economics for our software partners while improving cash flow and providing expense savings for end customers.

In particular, the pandemic has highlighted the importance of automation and omni-channel integrated payments as a mission-critical value proposition, supporting work-from-home and hybrid workforce models.

Turning to the highlights for the first half of 2022, we significantly expanded our marketing efforts, which has led to a solid increase in our sales pipeline for more qualified and larger opportunities.

We have also added considerable support to our hunters through additional technical sales and customer success resources, and have added resources to capitalize on the massive penetration opportunity within our existing partners.

In the second quarter, we signed a new partnership and particularly proud of it.

Promise is a fast-paced government solutions company which enables government agencies to provide payment accessibility and flexibility to citizens who are unable to pay their bills and fall.

I see this partnership as a great example of doing good business and doing good at the same time.

We also signed a new partnership with Office Ally, a leading US provider of electronic clearinghouse services, revenue cycle management, and healthcare software solutions.

Key selection criteria included PIE is fast and frictionless boarding.

streamlined recurring billing and text-to-pay functionality, as well as our reputation for excellent partner and end customer support.

In the second half of 2022, we expect strong growth to continue in our integrated solutions business led by our valuable ISV partners, including those that came to PAIA via our Paragon acquisition in the spring of 2021.

We expect strong growth in ACH to continue, driven by the secular trend of paper checks converting to electronic payments.

We are also on track to deliver on our 2022 technology investments, enriching our B2B solutions, enhanced citizen and muni-facing solutions for our government vertical, continued enhancements of our partner portal UX UI, as well as key enhancements to our proprietary ACH platform, which continues to be a strong growth lever for PIA.

The launching of Pia Pables this year significantly expands our addressable market by incorporating accounts payable solutions.

We believe we are well positioned to drive Crosssell here due to our deep integrations with existing clients on the accounts receivable side.

We are leveraging these investments to accelerate growth in key areas, which will allow us to continue to capture a strong share of a multi-trillion dollar fast-growing and a strong share of a multi-trillion dollar fast-growing.

M&A remains a key focus area for us as we see a diverse pipeline of targets and we have started to see more moderated valuation expectations from some sellers.

We continue to target businesses of all sizes that extend our distribution and solutions suite, both in core verticals and in attract of adjacencies. They had 2 resources in that valley and 10 activities during large supply and 200?cils such as Fracie- Honora-Wolves, local hacerlo monitoring F vocês sf reg e ren h a dive h g g g v g g v g g v g v g v g v g v g g v g v g v g v g v g v g v g v g v g v g g v g v g v th g v g you

We remain both enthusiastic and disciplined in our evaluation of inorganic opportunities.

Before turning it over to Glenn, I want to reiterate a key point I have shared on previous calls.

We entered 2022 in a great position to deliver strong top and bottom line growth, both of which we have continued to achieve, while at the same time making incremental investments to support our growth trajectory next year and beyond.

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

Thanks Jeff and good morning everyone.

Pied delivered strong financial results in the second quarter. Total payment volume was 12.3 billion, an increase of 15% year-rear, led by card volume growth of 7% and ACH volume growth of 27%.

Integrated solutions in ACH were the larger drivers of volume growth this quarter.

Second quarter revenue was 72.5 million, growing over 13.5% versus last year. Integrated solution revenue was 46.6 million, up 18% led by the strength in B2B and growth from Paragon, which we acquired in April of last year.

Payment services revenue was 25.9 million, up 6% year-rear with ACH revenue growing 18%. ACH revenue growing 18%.

We continue to see strong attachments for proprietary AC offerings with our new software partnerships. architecture offerings with our new software partnerships.

The gross profit in the second quarter was 36.7 million, up 9% with gross margin of 50.6%.

Gross margin was down versus the prior year driven by strong growth from some of our larger integrated partners partially offset by gross margin expansion in our payment services segment.

Integrated Solutions gross profit of $23.1 million was up 9% with gross margin of 49.6%, down versus the previous year, primarily driven by the growth of certain large ISV partners and Paragon. Yes of course we have had aash cooperations, bringing in top- Twenty production managers

Payment services gross profit was 13.6 million of 8% with gross margin of 52.6%. With HCH continuing to drive year by year, gross margin expansion in this segment.

Adjusted operating expenses were $17.5 million in the quarter, up year over year as expected as we ramp our growth investments to expand and enhance our go-to-market efforts.

Adjusted EBITDA in the quarter was $19.2 million, up 14% versus the prior year.

Gaffin and income for the quarters 1.7 million versus the loss of 3.1 million in the prior year with earnings per share of 1 cent in the quarter.

A Justinant income for the quarter was 12.2 million with a jet to the EPS of 10 cents per share. A Justinant income for the quarter was 12.2 million

Net cash provided by operating activities was $17 million over the first half of the year.

Regarding our balance sheet, we add 147 million in cash and 248 million of gross debt with a net leverage ratio below 1.5 times on a trailing basis.

Our share count at the end of the second quarter was 126.6 million diluted shares outstanding.

You can reference an illustrative walkthrough of our share count in our earnings presentation.

Turning to our full year guidance.

We are raising the low end of our revenue and adjusted the EBITDA guidance to reflect the strong first half along with our outlook for the remainder of the year.

We are slightly lowering the range of our gross margin guidance due to the strong growth in our larger integrated partners as mentioned earlier.

We expect that revenue will fall within a range of $279 million to $283 million, gross profit margin in a range of 51% to 51.5%.

and adjusted evita in a range of 73 to 74 million.

That concludes my prepared remarks. I'll turn the call back over to Jeff to close out.

Thank you, Glenn.

Paya is in a very strong position both commercially and financially, with an impressive and diverse roster of partners across high-growth verticals, as well as direct selling and select verticals, all supported by our powerful proprietary software.

Add in a very strong balance sheet and the ability to deliver on the back of our organic and inorganic investments, you can see why we are excited to continue investing in our growth while delivering strong returns for our shareholders.

The results we've delivered, combined with our expectations for the future, serve to further strengthen the excitement we have in our markets and our business. We have in our markets and our business.

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

Certainly. As a reminder to ask a question, if you need to press star 1 1 on your telephone.

For any questions, please press star 1-1.

And our first question will come from Andrew Drefry of Truist. Your line is open.

Hi, good morning guys. Appreciate you taking the question this morning. I wanted to understand a little bit on the integrated performance. It sounds like you've got some big partners doing very well, and I understand how that affects your financials. I wonder if you could elaborate a little bit on which verticals are particularly strong, and whether you see that trend sustaining that the mix up to some of these bigger partners. The

Good morning, Andrew. It's Jeff. So I'll start and then I'll let Glenn follow up. The, in terms of the sources of the business, I think you know we are very heavily skewed to be to be more broadly. And so that is the main driver of that growth rate with larger partners. In terms of obviously how it continues some element of macro, you know, will help inform that.

we characterize that.

And I wanted to ask about also just from a high level.

some of the investments you're making. Sounds like a lot of go-to-market with some process improvement.

Can you talk a little bit about maybe how you see that affecting the LTV to CAC? I mean, is it raising customer acquisition costs or is this...

Sort of more infrastructure, it does sound like there's a marketing component. I just want to try to understand 1 sort of how you think it affects Union Economics and 2 if you think we see Accelerating growth next year as a result of the investments you're making now.

Yeah, it's Jeff again, Andrew. Great great question. So, you know, a couple of things there. So the investments themselves. Marketing sales. Sales support customer success and innovation.

So those are the categories that comprise the incremental investments. Obviously our total investments are higher than that. And it's obviously our total investments are higher than that.

In terms of the CAQ, what I would say to you is, I think you guys appreciate how sticky and durable and long live these partnerships are. So the LTVs are high, and therefore, the LTV to CAQ calculus is pretty straightforward. Obviously, your investments in marketing and sales need to produce revenue to meet the objective. But as long as they produce...

The LTV to CAC is very, very good. So, and the last reminder that I will give you is those investments work all the way through the sales cycle. So, incremental marketing drives more opportunities, which then move into the sales pipeline early and then late stage and then of course, closing business and producing new revenue. So, they all, obviously, if you will, work on their own timeline.

We are very pleased with the progress we've made and the results, some are leading indicators, some come sooner, but overall, those are investments in the future growth of Pia. We are very pleased with the progress we've made

All right, we'll look forward to seeing how that all plays out of the next six to nine months. Appreciate it, thanks. Thank you, Andrew.

Thank you.

And our next question will come from Robert Napoli of William Blair. Your line is open.

I think you called me. This is Bob Nathalie from William Blair. Good morning. Good morning.

Uh...

So I guess

Just on the lifetime value of a customer, I guess, or the stickiness of the customer basis, there's been any...

change in the retention rate, the competitiveness for the customers that you currently have, ramping up increasing marketing, increasing hunters, why now?

Good morning, Bob. It's Jeff. Great question. Let me take that in three parts.

So, 1st of all, in terms of long term value and stickiness, as you would imagine, we measure retention at a very granular level across all of our markets. Those rates have not moved meaningfully in 1 direction or the other, which is 1 of the great qualities of this business. I think you all know. That when you have feature rich, deep integrations. Those customers are very sticky to you for many, many years.

So, I think Bob, that's the fundamental point. I'll hit 2 other things. 1. You said, why now what I would say there is that should always be the case as we have built out our capabilities as we have added talent. The opportunity to deploy high spend and again, this is incremental increase. We see those opportunities and the decision you face in a business.

And that is made a reference to the fact that some of our larger partners have migrated back books to Pia and you'll all recall that that's something we've talked about before as an opportunity. And I wanna clarify that because it gets to the heart of Bob of your retention question. I'm going to go to the heart of Bob of your retention question.

Backbook migrations usually apply to what were previously unintegrated or minimally integrated payments, like you might see in a first gen ISD offering.

and customers are moving for a more robust offering.

So that's the conditions under which back book migrations occur. Conversely, it's extremely difficult to move deeply integrated, deeply integrated back books, particularly middleware or native integrations that are often seen in longstanding ERP offerings.

So that gets to your retention question.

Finally, when people do move, it is usually for poor service, meaning they need more functional richness, so they're not happy with their support, rather than being driven by economics, because things like price concessions and attrition can offset any headline gains. So wrapping that all together, Pia being 80% deeply integrated card plus proprietary ACH, we see this is a very favorable competitive calculus for us.

And as a reminder, the majority of new business is still first time deep integrations in the very large town we all know exists in these end markets. In the very large town we all know exists in these end markets.

Thank you. And then just a follow-up question on the macro and how you view the macro environment. Have you noticed?

any shift at the margin or in the confidence of your customers and the activity, we're through the month of July . You've given solid guidance, but I just curious if or where, what areas you're seeing.

Any incremental weakness or which area of stand out is being strong?

Hey, Bob. This is Glenn. Look, I think for July so far, we've seen really consistent, similar results to Q2, so really no issues or concerns. And I think we feel really good about the business in the second half of the year. I think, obviously, with all the macro noise out there, we're just trying to be conservative with our guidance to go along with that, but we have not seen any type of trend change in the most recent data.

Thank you.

Thank you.

And our next question will come from Josh Seagler of Cantor Fistio, Your Line is Open Josh.

Hi, good morning. Thanks for taking my question. To start with, I want to get a little additional color on ATH. So ATH revenue experience to console acceleration quarter over quarter. Can we go a little bit deeper into some of the drivers behind this growth?

Hey Josh, this is Glenn. Look, I think we, you know, we... We...

really focused on improving our attach rates with our large ISV partners as we look back a few years and it's working, right? We're seeing great attach rates and are selling to what usually are used to be more card-focused sales. It's now really with that ACH offering. You guys know the macro trends and the environment with ACH being a good alternative or good use case for certain industries or verticals that we serve. You know, economics of when a transaction goes over a certain level, ACH just makes more sense.

We've also seen the acceleration of check replacement. So yeah, I think there's a lot of converging factors supporting the ACH growth and really, you know, one of the main reasons we feel good about it looking forward as well is all those same factors I don't think are going away. So you know, we continue to be a great part of our business.

Great, thank you very much. And then I'd be curious to hear how you guys are thinking about the M&A environment right now, especially given that valuations have compressed significantly over to possible quarters.

Yeah, good morning, Josh. It's Jeff. Thanks for the question. You know, if...

It does feel like the environment is moderating, but I would not say that as a widespread statement. So some sellers are certainly approaching the process more what we would say is realistically, but I would not say everyone. So we do see more activity to explore at potentially more reasonable prices. And to that point, obviously, we continue to be very...

Great, thank you very much.

Our next question will come from James Fawcett of Morgan Stanley .

Your line is open.

Hey, good morning. Thanks for taking a few minutes here. Just returning back to one of the comments that were made in a prepared comment, in context of your strong balance sheet and...

pretty good cashier in the business. Talk about the applicant priorities around capital allocations and specifically looking to pull up on your common-around acquisitions, valuations where you may or may not see those coming down and

what you would like to look at provide the opportunity.

Yeah, good morning, James. It's Jeff. I'll start and then Glenn can jump in as well. Capital allocation between ourselves and our board is an ongoing conversation as you would expect. And I would observe as follows. The continued investment in the organic growth of this business supported, frankly, by the cash flow we generate is clearly front and center. The ability to marry that to strategic and accretive M&A.

continues to be strong, albeit with the patience to ensure that the accretion portion works.

And, you know, I think implied in your question, is there are other levers that can be pulled at the right time if deemed appropriate to make sure that we are doing the best across capital allocation for our shareholders? And I would remind you that we have always been very intentional and disciplined about capital allocation, you know, managing a balance sheet to ensure we have the flexibility to capitalize on opportunities as part of it.

Doing things like the timely refinancing of our debt, keeping debt at a responsible level, et cetera. So, I believe we have been very strong and intentional managers of capital allocation in all forms, and you should expect us to continue to do that. Over time, you know, as appropriate.

Then on turning to margins, how should we be expecting the cadence of margin extension, particularly at the operating line to evolve over the medium term, especially when you look at your operating leverage potential and balancing that with internal investment.

What's the right pace that we should be keeping track of?

So, James, it's Jeff again, I'll start and Glenn can chime in.

So we have consistently said to folks that our primary objective is to maximize the profitable growth of PIA.

And that margin is a byproduct of that and it comes in a couple of forms. Of course, mix can influence your margin. And and obviously level of investment that we've talked about before. Can do that we continue to feel very good about the consistently demonstrated margin expansion that we produce in this business. As we continue to perform, and I think that has been a consistent story. So our medium term outlook.

You know, is not different than it was. If at any point it is different, obviously we'll talk about it. But we feel good about steady margin expansion, but again, balanced against the primary calculus of maximizing quality growth. We love maximizing quality growth.

Yeah, and this is Glenn. I think yes, similar to Jeff, I would just add, you know, we made a conscious and deliberate decision this year to invest a little bit more. So what gives me comfort is, you know.

You know, we're expanding that bottom line about the same rate as revenue for this quarter, but that was with these conscious decisions to invest in certain areas, meaning, or said in another way, like we're not feeling pressure on like, you know, from an inflation or our wage side or anything like that, you know, these are very deliberate efforts on our end to put money to work in areas like go to market. So that gives us comfort that, you know, we can, you know, pivot that up and down as needed as we see results. Tomorrow.

You know, to summarize, I think we still feel very good about bottom line margin expansion in the out years. I think we're going to talk about bottom line margin expansion in the out years.

That's great. Thanks, Jeff. Thanks, Glenn.

Ladies and gentlemen, if you do have a question, please press star 11 on your telephone.

Our next question will come from John Davis of Raymond James. Your line is open. Your line is open.

Thank you, Warren, Jeff and Glenn. Maybe Jeff, just spend a minute talking a little bit about the mix of your business as far as what's price and basis points versus per transaction. Obviously, inflation's pretty rampant. Just curious, are you seeing a benefit there? And just curious how like ACH is priced, for example, is the per transaction or is it basis points any code there to be helpful?

Yeah, good morning, John . So headline is that for the most part card business is price on basis points based on per Tran as is. Historical convention, it's not as literal as that, because even when you're pricing on per Tran, you can have steps and tiers by average ticket size and the, like, so think of that as a proxy for basis points. So that's, I think the 1st, part of your question at the core.

In terms of trends, I would say, there are two sides to that, coined both reasonably good. And that is when you have high quality, deep durable, sticky, value added integrations. In terms of the high quality, comprehensive?,issenschaft, lazy driven, hollow, faulty, soull, you

pricing behavior is quite favorable.

And as you know, we've said on this call before, we value the pricing lever, but we are determined to use it responsibly, rather than really pushing the limits and having that spike attrition or anything like that. But at its core, if you have the value prop integrations, then the pricing or spread, if you will, is a very favorable attribute of the business.

Okay, and then Glenn, maybe one for you, just on FX. You know, obviously the implied gross margin down a little bit, keep it down margin. It's kind of in line. So it implies FX is kind of flat to even down a little bit, despite all the investments that you've talked about. So just care if there anything going on, anything pushed out, is it just coming in a little bit better than you thought in any comments on the FX outlook for the year? Yeah, definitely. So for the quarter, FX was up year over year. So we did.

You know, have that cost carry through on the outback slide. We were able to have some offsets and some other functions outside of where we're investing this year. So the increase to your point. And what you're seeing is is right. We're not seeing as high of an OpEx amount as we had projected going into the year. So I think that's favorable that we're still able to make the investments that we said we're gonna do, but finding some offsets to help fund those and allowing us to still expand at a good rate on the bottom line there.

despite GM being a little lower. So, I think we feel, and you see a little bit of our guidance, right? We're going to talk about the bottom line, even though......about the bottom line, even though...

RGM and percentages low later.

Okay, that's helpful. And then one last one for you, Jeff. We've talked a lot about M&A on this call, but I just want to specifically hit your appetite for something larger. So far, the M&A you've done is in kind of little tuck-ins. Would you consider something that's more transformative? Call me.

Just any comments or be helpful, thank you. Yeah, no thanks, it's Jeff again, John . A great question. I think you guys see our balance sheet, you see our leverage. So if you will, the powder to do larger transactions is certainly there from a financing point of view. The answer is yes.

We look at deals small, medium, large. Small is frankly a higher hurdle. You have to love the tack love the people love. The installed base of customers and end markets even more. Medium and larger deals we continue to work on them and I think that's really more going to be a function of the valuation environments. Providing an opportunity to do larger transactions which is something we are prepared to do.

We like our performance and track record in and we would like to see it play out bigger. Predicated, of course, on the opportunities or conditions meeting our criteria, but yes.

is the answer.

Okay, let me squeeze one last thing for Glenn. Glenn, what was the inorganic contribution?

in the quarter.

from the top line. Yeah, sorry about that.

12% Diana

We're getting a growth of 12% in over year for the quarter. I appreciate it.

Yeah, organic growth of 12% year over year for the quarter. Alright, appreciate it. Thanks guys. Alright, appreciate it. Thanks guys.

One moment.

Our next question will come from Mike Grindel of Northwinkle Market.

The line is open.

Is there anything that's sort of new that you're doing for 2023 and future growth, that's sort of new that you're doing for 2023 and future growth, that isn't kind of a continuation? I guess I'm just trying to get a sense for any sort of new investments or new areas that you're kind of making that's specifically for the future, because it's...

that you haven't been kind of ongoing investing in.

Yeah, good morning Mike it's Jeff great question. You know, what I would say the answer is yes. There are, you know, investments for the future that do not produce immediately. I'll give you a few of those examples. We've talked before on these calls about the broader B to B suite, which has been a core focus of and so let me define that. So that is the full continuum of automation married to AP.

driving in our government vertical, very powerful, and will pay dividends for years to come. So those are just two examples. But answer yes, Mike. We, you know, within these investments, and I think Glenn described it right is, you know, incremental investments are not total investments. And by the way, efficiencies that you can get in your day to day also fund those investments.

And our investment regimen runs the gamut of things that should help move the needle in here and those that position us for even faster growth next year and beyond. So those are two great examples of that. So those are two great examples of that.

Great. And then any update on the sales force you're deploying any changes there. You're deploying any changes there.

Yeah, Mike, it's Jeff again. So, as I mentioned on previous call, we do continue to add traditional sales people as you would expect as different markets and opportunities warranted. But I'll remind everybody the hunters, if you will, are only one component of sales success at. It is it's the full continuum from the increased investments in marketing, which produce the at bass. It's the additions we've made to customer success.

which is things like solution engineering and adoption and customer success. So I think very often, you know, if you're talking about a smaller widget business, people just talk about the body count. But at Paya, it's most important that you're getting the mix of those component parts, right? So marketing, hunting, solutioning and customer success, and it's balancing those. And some of our investments.

that we all see is 9%, it doesn't mean that all businesses and all categories are seeing the same level of inflation. As we look across some of your categories in healthcare and government and B2B, could you just maybe parse which categories are seeing maybe high levels of inflation that you're seeing in your volumes or maybe some others that are not? And I know it's a really challenging one, but how much of that 9% or so do you think is actually flowing through to your numbers?

Hey Tim, this is Glenn. Good question. And just look, yeah, we certainly get upside from inflation. It's mostly are the largest pieces in our B2B part of the business, which has a pretty heavy index to inflation. But alternatively or conversely, you have nonprofit healthcare and government which just do not have as a...

as volatile of an inflationary impact, you know, it's more of a time where those verticals move up, you know, more gradually. So, you know, that's part of the reason we like this business, right, is, you know, it's got a good spread, good mixed diversity of verticals that you do get upside on inflation but at the same time, we're not, you know, just only indexed to inflation when you think about some of our growth rates. So, but, you know, I think that's probably the, it's always difficult to get the exact amount that's inflation.

thinking about the benefit would be the headline inflation.

and then maybe discount that a little bit to account for your end market exposure and then further discount that a little bit to account for your mix of revenue that is based on more of a sense per transaction. But I guess on volumes the answer would be different and revenues obviously which is that last part there. and revenues obviously which is that last part there.

Well, exactly, and the ACH side, I think is a variable that gives us good, consistent growth, but where you don't have the spread upside as much. So, you know, again, it gives us, I think, good confidence in the business in either environment. Right? And.

Yeah, and at the end of the day, I think it's tough to, you know, inflation is gonna move in different sick codes and sub-birdicles, right, as well, right, which we all see in the CPI data, where you can see stuff go up and down within the number. So it really is dependent on what's moving at that point in time.

And take him as a chef. Let me just add one more thing to your calculus, so think you're thinking about it right. So think you're thinking about it right. So think you're thinking about it right.

Inflation in a given category of goods.

can also be offset by slightly muted demand or supply chain in the same category.

So, you know, headline inflation is only pure if volumes, you know, of good shift or constant. So there's an offset there as well. I think otherwise you've got to calculate it's exactly right.

Right, Jeff, I completely agree with that. That's a very good point.

My last one here minor follow up around the gross margins due to the mix of the larger ISB partners is that the combination of just more volume, more of your business moving towards those larger partners, they get glitter revenue shares and therefore it's that simple, whereas it also that some of those ISB partners themselves are...

getting better revenue shares as they scale and if that's a competitive thing or if that's just simply I think the answer is the latter which is it's simply

As they scale, they get better revenue shares and that's just sort of the way the industry works.

Yeah, so, Tim, let me take that in 3 pieces. That is a great question.

The 1st piece is having large, great growing partners who, by definition have better rev shares is something we celebrate. We do not lament that. Great growing partners are great growing partners. That's number 1. The 2nd, part of your question, not much of a phenomena of changing the structure of those deals, because when you have these deep durable, sticky, long standing partnerships. They, they hold up well without traditional price.

And the third point in that I think you might have been alluding to is for some of our larger partners, we built revshare tiers into the agreements.

So therefore there is no renegotiations. You shouldn't need a renegotiations. You should be happy that you're breaking through tears.

So some of that is by structural by design. And that's by the way good for both parties, because I want to remind you very often you sign a new partner and there are great hopes and dreams and they want a great rev share. And our view is as the volume produces in line with that ambition, we are very happy. So it also protects pie on the other side. So it also protects pie on the other side.

that if for whatever reason the volume doesn't present the revshare it's the lower level.

So we are very happy with that construct and what it produces.

Excellent. Completely follow Jeff and totally same page and also agree that certainly add more gross profit dollars with those large fast growing partners, which is definitely positive. So thank you for taking all the questions and the follow-up. I appreciate it. Thank you, Tim.

And our next question will come from Robert Napoli, or follow up, William Blair, your line is up. Hi, thanks. Yeah, thank you. My follow up questions were asked and answered. Thank you very much.

I will now turn the call back to Jeff for closing remarks.

Great Thank you. So thrilled to be with you guys again. And what is our 8th public quarter? I think you can hear in our voice. We are proud and pleased with our performance.

very pleased with the progress to continue to advance the growth trajectory of this company and feel very good and excited by the opportunities to continue to present themselves to Pia in what is fundamentally some really attractive high growth and markets. So with that, thanks to everybody for your time and I will talk to you soon.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect.

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The.

The conference will begin shortly. To raise your hand during Q&A, you can dial star 11. The conference will begin shortly. To raise your hand during Q&A, you can dial star 11. The conference will begin shortly. To raise your hand during Q&A, you can dial star 11. The conference will begin shortly. To raise your hand during Q&A, you can dial star 11.