Q3 2022 Paya Holdings Inc Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome to the Pie of Holdings, Inc. Third quarter earnings Conference call. At this time all participants are in a listen only mode. If anyone should require operator assistance. Please press star and then zero on your telephone a question and answer session will follow the formal presentation.
As a reminder, this conference call is being recorded on today's discussion will contain forward looking statements based on our current assumptions expectations and beliefs, including our financial guidance to grow the pie of business, our objectives and business strategies as well as other forward looking statements.
Please refer to the disclosure at the end of the Companys earnings press release and form 8-K filed with the SEC for information about forward looking statements that would be made or discussed on the call. All statements made today reflect our current expectations only and we undertake no obligation to update any statements to reflect the events that will occur after this call.
You can learn more about the specific risk factors that could.
Cause our actual results to differ materially from today's discussion in the risk factors section in the company's Form 10-K filed with the SEC March 2022, and a subsequent periodic reports that the company has filed with the SEC.
Also during the call we will discuss certain non-GAAP measures of our performance GAAP to non-GAAP financial reconciliations and supplemental financial information.
Got it in the earnings press release, and the 8-K filed with SEC.
This call is also available via webcast you.
You can find all the information I have just described in the Investor Relations section of the pie as the webcast. Please note. We'll also posted a supplemental third quarter 2022 presentation to the Investor Relations section of the pit.
A webcast.
Now joining us on the call today are CEO , Jeff <unk> and CFO Glenn Rizzoli. Following the prepared remarks, we will open the call to your questions with that I'll now turn the call over to Jeff.
Thank you operator, and good morning, everyone. Thanks for joining us today as we review <unk> third quarter 2022 financial results and the efforts underway to further accelerate our growth at the conclusion of my remarks, Glenn will cover our detailed financial results and then we will take questions.
<unk> reported another quarter of strong financial results led by our integrated solutions segment, and our proprietary ACTH 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 power revenue.
In the third quarter payment volume grew 14% to $12 6 billion total revenue grew 13% to $71 4 million and adjusted EBITDA grew 14% to $18 6 million our.
Our third quarter results reflect the momentum we continue to see in our high growth Underpenetrated and less cyclical end markets, coupled with our continued investments in the business.
As a reminder, in any given quarter. The vast majority of our revenue growth comes from the continued penetration of our exceptional partners in durable end markets, principally b to b not for profit health care and government. This quarter was no exception with growth primarily driven by partners in each of these verticals.
And bolstered by continued strong retention, which itself is a testament to the value of powerful integrated solutions and Pi is great customer support and high quality end markets.
I'm also pleased to highlight selected new customer wins in the quarter, each of which contributes to pie as future growth trajectory.
We're proud to now include feeding America as a prior customer.
<unk> America is the nation's largest domestic hunger relief organization, serving 40 million people, including 12 million children and 7 million seniors beating.
Feeding America chose <unk> due to integrations with feeding America's business platform as well as pie as differentiated features the core and reporting capabilities.
<unk> is proud to support feeding America's phenomenon mission to advance change in America by ensuring equitable access to food.
Another Great example is our recent win of California based international Shoe and apparel company case with global brands payer was chosen for our robust <unk> payment solution that integrates into their existing ERP systems, enabling a seamless experience for their <unk> corporate customers to pay invoices online.
Also providing lower costs.
Which is often appropriate for larger transactions.
Innovation continues to be a key growth lever at pioneer and we remain on track to deliver on our 2022 technology investments enriching our <unk> solutions continued enhancement of our partner portal and reporting UX UI as well as key enhancements to our proprietary <unk> platform.
These investments helped accelerate growth in key areas, which allow us to continue to capture a strong share of a multi trillion dollar fast growing Tam.
Specifically in the quarter, we launched our new citizen portal, which is the next innovation for Pi is offering in the municipal government sector. The launch of this portal geared towards bill paying citizens and employees at Pi as municipal clients was created to make it easier for citizens to view bills and make payments as well as improving the <unk>.
Transactional relationships between munis.
<unk> and their citizens through next generation citizen engagement functionality.
This new software will help drive electronic adoption, including Autopay recurrence increased the win rate of our direct Salesforce and helped drive engagement with ISP partners in this vertical.
Empire. We are also seeing implementation times continue to trend down and <unk> ability to implement quickly is an increasingly important decision factor in our new wins in the government vertical.
This trend is expected to continue to accelerate with the launch of the new citizens portal.
More broadly the pace of innovation that pie has never been faster and is complemented by past and present investments in technology infrastructure as well as pie as well tuned technical and operational support.
I would also like to take a moment to update you on an exciting change. We recently made as pie has continued to grow and thrive we've been increasingly dedicating and aligning resources to three of the fastest growing end markets within our integrated solutions business, which are <unk> government and strategic verticals, which includes <unk>.
Non profit healthcare and insurance.
Each of these end markets now have dedicated leadership and teams working across sales marketing product and customer success.
To a large extent this simply formalizes, our commercial operating model by ensuring that pie of talent is organized around our client end markets for innovation domain depth quality and speed of execution, all of which helped maximize highest growth potential. We of course continue to gain terrific operating leverage across <unk>.
In areas, such as technology infrastructure back office finance and people operations.
On capital allocation, our priorities haven't changed we remain focused on organic growth through the continued and ongoing investment in our people and solutions in order to extend our market leadership, while expanding our addressable market.
M&A also remains a key focus area for us and complements the organic growth profile of the business.
We continue to work an active pipeline of M&A opportunities and remain both disciplined and enthusiastic to execute strategic and accretive acquisitions.
Before turning it over to Glenn a few words about driving a great growth company amid heightened uncertain macro.
Combination of pie is exceptional and more durable end markets, along with strong profitability cash flow generation and balance sheet provides excellent conditions to remain laser focused on quality top and bottom line growth for the medium term, while also delivering solid short term results along the way.
That I will turn it over to Glenn to walk you through the financials in a bit more detail Glen.
Thanks, Jeff and good morning, everyone.
<unk> delivered strong financial results in the third quarter total payment volume in the third quarter was $12 6 billion, an increase of 14% year over year.
Integrated solutions and ACC for the larger drivers of volume growth this quarter.
Third quarter total revenue was $71 $4 million growing 13% versus last year.
<unk> solutions revenue was $45 7 million up 15% led by the strength in <unk> and more specifically continued strength with our ERP partners.
Payment services revenue was $25 6 million up 10% year over year with <unk> revenue growing 19%.
Continue to see solid attach rates of our proprietary <unk> offerings with our new software partnerships.
non-GAAP gross profit in the third quarter was $35 9 billion up 10% with gross margin of 53% down versus the prior year driven by impressive growth with some of our larger integrated partners.
Integrated solutions gross profit of $21 9 million was up 9% while payment services gross profit was $14 million up 13%.
Adjusted operating expenses were $17 3 million in the quarter up approximately $1 million year over year as we ramped our growth investments to enhance our go to market strategies and product innovation, while also realizing cost efficiencies in other areas of our business.
Adjusted EBITDA in the quarter was $18 6 million up 14% versus the prior year.
GAAP net income for the quarter was $1 3 million versus a loss of $3 million in the prior year with earnings per share of <unk> <unk>.
Adjusted net income for the quarter was $11 3 million with adjusted EPS of <unk> <unk> per share.
Net cash provided by operating activities was $28 million over the first three quarters of the year our share count at the end of the third quarter was 127 million diluted shares outstanding.
You can reference an illustrative walk through of our share count and our earnings presentation.
Regarding our balance sheet, we had $156 million in cash and $247 million of gross debt with a net leverage ratio below one three times on a trailing basis.
Turning to our full year guidance, we are raising the low end of our revenue guidance to reflect our strong performance to date, along with our outlook for the remainder of the year. We expect that revenue will fall within a range of $280 million to $283 million gross profit margin to be approximately 51% and adjusted EBITDA in a range of <unk> 73 to <unk>.
$74 million.
That concludes my prepared remarks. This morning, I'll turn the call back over to Jeff to Closeout, Jeff.
Thank you Glenn Pyre has reported another strong quarter, which I see as a direct result of our very focused and compelling strategy in great end market, coupled with excellent execution by the amazing talent, we have at Pi. So I close out this call with a heartfelt thanks to everyone at <unk>, who continues to execute.
So well in the present, while also building an even greater growth company for the future.
With that operator, we're ready to take questions.
Thank you, ladies and gentlemen would like to ask a question. Please press star one on your Touchtone telephone again to ask a question. Please press star 111 moment. Please.
First question comes from Robert Napoli of William Blair. Your line is open.
Good morning.
And Glenn Nice nice quarter I guess.
First question would be.
Jeff you highlight looking to accelerate.
Further accelerate growth.
<unk>.
What are you can you maybe quantify that or give some color around that and how do you think about growth with this how are you being affected by the macro as we think about 2023.
Good morning, Bob Thanks for the question.
Couple of things I think theres two different points in there so.
First in terms of macro as we've said before.
<unk> B Gov nonprofit healthcare, obviously have great characteristics.
Relative to some of the more volatile consumer sectors, so that serves us well.
And I think shows through in our results and importantly, the predictability of our results.
Your other question.
<unk> defined medium term growth objectives, which you are familiar with.
Is low double digit topline.
Much larger bottomline growth over the medium term and the investments we're making today are there to ensure that we can meet <unk> exceed those objectives.
Yeah.
Okay.
Thank you then maybe just to follow up on.
Gross margin.
EBITDA margin stable gross margin a little bit of.
Pressure on gross margin.
What is driving the gross margin PREPA and how do you see pressure and how do you think about.
Gross profit margin and adjusted EBITDA margins as you think about.
Growing that EBITDA much faster than revenue.
Yes, so I'll start.
Hi, Greg.
Go ahead Glen.
Hey, Bob This is Glenn.
Similar similar story to tell.
Last quarter right, we've seen really solid growth in our.
<unk> partners.
Specifically some of the ERP.
Relationships that we have in those just come at a slightly.
Less favorable revenue share compared to our blended.
That we really like that growth, we love those partnerships, we love that end market are those end markets and b to b.
And so yes, we're comfortable with that growth and that slight decline on the gross margin side.
From a quarter sequential perspective, not a ton difference a little bit lower versus Q2, but we don't see this as a.
It's something that is a concern and you kind of referenced why because we still think we have great scalability on the bottom line and with our EBITDA and you saw a little bit of that this quarter with a slight expansion, we still feel good about bottom line EBITDA expansion.
Moving forward.
Great.
Hey, Bob It's Jeff Let me just add two quick things to what Glenn said.
First of all we have been consistent with all of you.
We don't manage to gross margin percentage, we want all our partners to exhibit healthy growth and if that number moves around a little bit due to mix, albeit gross margin dollar growth.
More of a focus.
And to the question on bottom line growth I think your question is the gradual expanding of margins and I would simply observe the following.
The majority of our operating expenses is run the business, which in general does not need to go grow as quickly obviously theres discretionary investment in there as well, but the fundamental underpinnings of our cost structure provide for margin expansion over time, and we feel confident in that.
Ahead.
Thank you.
Thank you one moment please.
Thank you. Our next question comes from the line of James positive Morgan Stanley . Your line is open.
Thank you very much.
Just looking at that you're really strong balance sheet.
Cash generation ability.
Are you thinking about priorities right now around your capital allocation and maybe more specifically on acquisitions and any updated perspective on current valuations.
What those are looking like as you look at potential acquisitions.
Yes, good morning, James This is Jeff.
First and foremost capital allocation priority is to pay it hasnt changed so just to reiterate investments in our organic growth profile always come first complimented by strategic and accretive M&A.
To your <unk>.
Second part of your question about the environment I think we're all observing the same characteristics more broadly in terms of perhaps we will see gradual adjustments to valuation expectations. So punch line is we.
We are enthusiastic we are also disciplined.
And look forward to the right deals at the right time that add to the growth profile of pilot.
And the pipeline is solid.
Got it got it and then.
I wanted to dig in quickly on your payment volume.
Any trends that you can call out sequentially between.
And card and maybe going back even over the last few quarters, and how youre thinking about that going forward.
It looks like CT volume has been relatively flat in recent quarters voice data has been really a solid driver for you guys, but.
Just what do you think is happening there and how are you thinking about that trajectory.
Yes, because I think I assume this is glenn.
It looks sequentially Q3 is always kind of a.
Typically a flattish type volume quarter for us from Q2.
So that's not surprising that our card volumes are pretty similar.
As last quarter, and you can see kind of in last year's numbers too.
So yes look I think we're looking at the same things a lot of people are looking at year over year growth in into the quarter and everything and certainly there is.
There's going to be.
There has been a little bit of a slowdown.
Slowdown in the level of growth rate, it's still a nice growth as you've seen in the quarter.
But as we look out.
Certainly going to see some level of slowdown we think.
But for US we haven't seen too much ourselves yet.
And even into the first month of the quarter for Q4 here.
The growth is still good.
For something to happen I think everyone's very.
Conscious of the external environment, but for US I think some of it is really going back to our our strong end markets and where we play some of them are just less volatile and thats. Another area of why you might not see sequential big changes on a quarter to quarter basis.
Think about <unk> to be solid player has some cyclicality, but our end markets tend to be pretty pretty solid there and then not for profit health care and government Barry.
Solid stable market. So some of it again it circles back to those end markets and the stability.
And I think that.
That helps us when things slow down a little bit and we just don't get as much upside volatility sometimes as well.
Got it thanks for that Glenn Thanks, Joe.
Thank you.
Our next question comes from the line of Joseph.
Jaffe of Cantor Canaccord your line is open.
Hey, guys. Good morning, Nice results just.
A higher level question here on your vertical.
Where you're focused.
All solid markets, but.
It would be just kind of.
It's just.
It's so much larger.
The growth characteristics and perhaps even the greenfield on the <unk> side are quite quite large I was wondering if you could.
Kind of lay out for us some of your vision.
How much perhaps more focused you RMB to be versus the other verticals.
How you see that payment volume in that vertical potentially moving over time relative to your other verticals now have a follow up.
Good morning, Joe It's Geoff Great question, So two things first of all.
We love all of our vertical end markets, and we manage and invest in each of them apropos of the opportunities we see.
So there isn't much trading off between them, but more in maximizing the potential of each one.
So the first part of your question of course.
The <unk> Tam is massive it is the foundation of how this company was built and we have never desk more talent against more ERP integrations more sales and partner support and obviously what has been operational and customer excellence.
So to support excellence for a long long time, so we share your view there.
And really.
Have never felt better about the potential that that provides and one other thing I would add Joe when we mentioned this before.
When we acquired velocity earlier in the year that is a great example of how you can step function expand your opportunity.
Whether it's very specific popular integrations domain expertise intellectual property et cetera. So I think you can hear from me, we share your enthusiasm and see tons of <unk>.
Tailwind and accelerated growth over time.
That's great. Thanks, Jeff and then just given the macro.
In real time, we are seeing a lot of companies kind of dialed back a tad on investments.
And the like just wondering what you are you may be thinking about.
In this environment and then two.
How are your partners or what Youre seeing from your partners in terms of keeping up the momentum.
And driving payments into their customer base, which is obviously your customer base too.
The resources there continuing to devote.
To helping you penetrate the customer thanks a lot.
Great. Thanks, Joe It's Jeff.
So firstly in your question about macro and I'll tie this to one of Glenn's earlier comments one of the great things about running a company like <unk> and the durability of these end markets and obviously the stability of performance is if you stay disciplined and well managed along.
The way you don't need to be going through those gyrations, where you're hiring and then firing starting projects in stopping projects. So in general.
As Glenn said, we keep a close eye on an uncertain environment as everybody should do of course, even though we don't see much of an impact on our business and our end markets. It's just responsible to be mindful of but as a general matter. We see this environment as a great opportunity for Pi ought to stay.
Focused on our growth investments to attract incredible talent.
And push growth even further.
The second part of your question around partners.
One of the great things about these our partner roster is there is a lot of embedded growth in terms of penetrating their existing base. Some of our best partners are also significant acquirers of companies themselves, which bring us chunkier growth opportunities and Cedar point and we've met.
This earlier throughout the year, we have increased our investments in helping our partners penetrate the base principally this is marketing programs our insight in terms of what works.
Sales support sales training and we continue to Tunis, so not only do we add to it but we tune it and as a result get more partner uptake and frankly share of mind.
Those companies to drive that opportunity even further.
Alright, Thanks, a lot Joe congrats on the quarter.
Thank you one moment please.
Our next question comes from the line.
One moment.
Our next question comes from the line of Josh Seigler of Cantor. Your line is open.
Mr. Larry is open.
One moment, please make sure your phone is on mute.
Yes, hi, good morning, Thanks for taking my question.
Can you give us some color on the recent growth initiatives, specifically around payback timing do you expect them to start incrementally contributing to growth in 2023.
Yes, good morning, Josh its Jeff ill start and Glenn can pick it up.
So in terms of time first of all the Rois on our investments are all very compelling.
Speed with which they manifest in the P&L very so fastest rois would be investments in sales and marketing support around partner penetration that I was just referring to.
For sure, obviously, new product solutions and innovations such as <unk>.
New <unk> solution that we announced this quarter.
<unk> and streamline <unk> solutions and ERP integrations.
Put that.
At the longer end and then in the middle sales resources sales effectiveness. So they really run the gamut and I emphasize the point that we manage this company for the medium term. So we will be patient, where we should be patient and we will set high expectations for.
Quicker results, where that's appropriate as well so it all blends together I know.
That's not it doesn't quite get to the heart of your question, but that is a reality and we do measure the ROI of everything we do so that we can learn and continue to be smarter and nowhere to double down and where to lighten up as we look ahead.
Got it.
Very helpful color. Thank you I know we've spoken a lot today about the demand environment, specifically in regard to the current macro uncertainty. However, I'd be curious what you're hearing from new partnerships.
You think the macro environment is impacting your ability to win your business.
Yes, Josh that's a great question, what I would tell you is that our pipeline of new opportunities both through our partners and where we sell directly.
We don't see a shift I would say, we do not see an acceleration in those efforts, we do not see a deceleration in those efforts.
Relative to the macro climate remember these partnerships when they are stood up last for 510 years even longer.
These are really fundamental business choices about how youll manage the business.
And really are not tied so much to the environment at the moment. So so we feel good about that level of engagement and adoption and as I mentioned in the prepared remarks very importantly, we also continued to be very focused on anything we can do at Pi to help speed up the implementation times and speed to <unk>.
Revenue.
Thank you very much I appreciate the color.
Thanks, Josh.
Thank you. Our next question comes from the line of Andrew Jeffrey of Jewish Your line is open.
Hi, Good morning, I appreciate you taking the questions.
All of the sort of questions on growth in <unk>.
Return on investment I think are definitely top of mind for a lot of investors also.
Good Jeff to hear you talk about some of these wins like K Swiss and the citizen portal.
Maybe what I'll ask you about specifically.
Comment on.
Implementation times, I know Thats, an area, where <unk> been investing in.
And perhaps that's.
One thing, we could point to and think about.
As we look out to 'twenty, three and try to build our models in terms of.
Now that.
Government vertical might.
Actually accelerate.
Can you just elaborate a little bit on what you're doing there and whether or not that is maybe.
Driving some some tangible share gains and new wins are we going to hear about over the next few quarters. In addition to the ones you called out today.
Yes, Andrew Thanks, that's a great question, it's Jeff So first of all I want to set the context and remind folks that the vast majority of our new revenue at any given point in time is through the penetration of our existing partners I E already implemented.
So that's very important to understand in terms of bringing implementation timelines down of course it is helpful.
And more importantly, if fosters great partnerships, it fosters attention and support so.
Earlier comments about.
Partners and the sell through momentum.
So it benefits in a bunch of different ways I wouldn't isolate it as a principal driver of short term growth.
Because while it's significant it's not.
As significant as the other levers in the short term, obviously overtime thats beneficial. It's also by the way more efficient.
Right, it's more efficient for pyre, it's more efficient for our partners. If you streamline the tasks that <unk> simplified the integrations.
The training and support that comes with it.
You actually save money as well.
Okay. So multiple benefits I guess, so I guess.
Is it is it right to kind of think that.
The new business wins, you called out today and or the citizen portal, which I know is an expansion of the current capabilities are really just sort of.
Part of the overall growth.
Algorithm, rather than being incremental I think we're again, just all trying to gauge what.
What the benefits of some of the spending that Youre doing this year, we will have on next year and as we look out into 'twenty four.
Yes, Andrew it's Jeff again.
I think youre thinking about it the right way I wanted to emphasize a point and we'll use.
Citizen and municipal portal as a great example of that.
That is two things first of all products and solution should never be static there is always opportunity to improve the UX UI and therefore increase adoption satisfaction and so on so we feel strongly that in our core vertical end markets, we should always be innovating and whether that.
Innovation is to defend an existing growth rate or accelerated further obviously the interest you want.
But we don't view it.
As anything other than running a good quality business for the medium term.
And being as good as we possibly can be and each of those core vertical end markets and I think Andrew just to close out on that I think that is the key point that folks should understand about separating winners and losers is these businesses integrated vertically focused.
<unk> solutions require end to end excellence in each of your core vertical end market. So for US <unk> of course Gulf as we were just talking about nonprofit health care and so on is.
That's what drives winning is that focus and tailoring those solutions end to end for each of those end markets.
Okay I appreciate that thanks.
Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press star one on your Touchtone telephone again to ask a question. Please press star one one.
Our next question comes from the line of David <unk> of Evercore. Your line is open.
Thank you good morning in the past year, you decided to step up some investment spending to capture a higher organic growth and it did trade off margin expansion, which is I think the real strengths of your model.
To kind of increase spending.
There have been a few questions on this but trying to tie it together for 2023, how should we think about.
Growth in your kind of Opex non transaction Opex in 2023 in terms of bracketing, what operating leverage might be in the year ahead.
Yes, so David I'll start and then Glenn.
Go ahead no go ahead, Jeff.
So David I'll just.
I will make a macro point and then I'll, let Glenn follow up.
So first of all we like all companies are in our planning cycle now to evaluate each investment opportunity on its merits. So we don't have a declarative statement of course to make at this time.
As you would expect.
What I would say is what we have always said.
And that is we are managing this company for Maxim on top and bottom line growth over the medium term.
We will continue and having a great balance sheet and having great cash flow provides you the latitude to make whatever level of investments you think are appropriate.
Having said that and as mentioned earlier on this call.
The inherent operating leverage in our business is clearly there and has been demonstrated by the performance of this company over the past several years, so regardless of any given moment in time, we feel good about that margin expansion over time, but to your point, we will also.
Make investments selectively.
When we believe strongly that they're the right thing to do for the medium term.
Understood just as a follow up as we look at your investment spending this year are there any in any areas of investment spending that you brought forward.
Into this year that might otherwise have occurred next year in terms of.
Framing how investments that might evolve in the year ahead understanding that at this juncture you are not yet quantifying.
David It's Jeff again.
Yes.
I'll say, one thing and then Glenn you should add onto this.
Yes.
So we tend to increase investment modestly.
And as Glenn mentioned earlier on the call by the way we've realized efficiencies in other part of the business. So the gross amount of investment in the future is actually higher than the expense growth rate in and of itself I think that's an important point that sometimes gets lost but.
I wouldn't look at it orders of magnitude as I did in extra project in 'twenty three 'twenty, two sorry, and therefore I will do one less project in 'twenty three.
We see lots of opportunity for growth in our core end markets and again, we evaluate them one by one back to the ROI conversation earlier.
Understood. Thank you.
Thank you.
Our next question comes from the line of John Davis of Raymond James Your line is open Mr. Davis Your line is open.
Thanks, Good morning, guys.
Glen or maybe just start with do you guys have you given us an idea of what percentage of your transactions are AD valorem price versus kind of a fixed fee per transaction just trying to understand how how inflation will play through the numbers.
Look I think what we've spoken about in the past.
<unk> tends to be a little bit more per trend driven.
And I think you guys are aware <unk> somewhere.
Around 15% of our revenue. So it gives you a good indication we do have some fees on the card side as well, but that 15% numbers not a bad indicator of transaction or fee based revenue versa.
Spread basis point revenue.
Okay, and then I know we've talked a lot about <unk> on this on this call Jeff but.
Obviously, 35% of revenue can you give us a sense of how fast.
<unk> is growing relative to the rest of the company.
Even if it's just Directionally and then also just remind us what the largest end market verticals are within <unk> a lot of different people and there is a lot of vertical there. So just as we try and think through your kind of macro exposure as we go into 'twenty three.
Yes, John Great Great question, let's try to put a little context around it.
So first of all the <unk> label is a very broad and general label in its broadest version I can make the argument that serving municipalities is a pvp type business as well many aspects of health care. Our biggest section there is a practice management so.
There's even a broader definition of <unk>.
Or maybe you might say <unk>, but it's really b to B C.
Specifically in terms of the way that we provide information to all of you.
Integrated solutions segments think of it this way.
And Glenn will correct me, if I don't get this exactly right.
The integrated solution segment is your proxy BBB is about half of the integrated solution segment, and then Gov and health care nonprofit insurance is the other half of the integrated solutions segment.
They are all exhibiting strong growth.
They all have the same favorable characteristics and they all get investment.
Specific to their individual opportunities and sorry, the last part of your question I realize I didn't answer within.
The <unk>, 35% manufacturing distribution logistics supply chain or the kinds of subcategories that probably would resonate.
Thank you.
You guys.
Okay no that's it.
Helpful and then.
So as we look at.
You talked a lot on this call about some of the incremental investments to drive accelerated growth.
So as we think about heading into next year, maybe what are the puts and takes from a from a top line perspective, you guys have a mid term kind of.
Targets out there I mean should we think of 'twenty three kind of in that range of your midterm targets are just not looking for formal guidance, but just kind of any colors or any color of puts and takes we can get on 23 would be helpful.
Yeah, So John .
Okay go ahead please.
Well I mean first and foremost we're going to say the same thing right. We're not going to give 'twenty. Three guidance are you just not going to do that and I. Appreciate that's not the.
The specific question, but look I think at the end of the day it's.
The macro is going to be.
A big item rate, even though we have really really strong in markets that we feel good about and less cyclical.
Resilient.
We still need to be a little closer to where we're entering the year I think.
It'd be a little more affirmative there and Thats really why we give guidance in February .
November 4th or whatever so I think it's really tough to say at this point until we see where the economy and macros.
No.
Settling out, but again, we feel again, good about the verticals and the mix of business and.
Any economic situations still feel good about growth.
Okay, Alright, thanks, guys.
Okay.
Thank you. Our next question comes from the line of Timothy <unk> of Credit Suisse. Your line is open.
Great. Thank you. So the end markets, we've talked a lot about that today and clearly there are much more stable than some of the more volatile end markets that are a little bit more consumer focused given that they seem to be pretty attractive not just you guys, but to other competitors as well and I know in the past we've talked about some of the larger players tend not to compete as much in these.
End markets, whether it be government municipal health.
Health care nonprofit.
Just could you give us an update in terms of when you do head into Rfps is that changing at all because it would seem that these would be attractive to others as well are you starting to see any of the larger players show up in the Rfps or is it pretty much status quo.
Yes, Thanks, Tim It's Jeff Great. Great question. So first of all broadly speaking the competitive landscape remains very fragmented number one number two these are fast growing end markets. So as we've referred to before more of a land grab that a share war.
Which is these are both very attractive qualities broadly in terms of competitive landscape. It hasnt changed so typically the largest opportunities are the ones with rfps and very often a mid and small size are not rfps or even formal processes. It doesn't mean you might not have.
Competition.
But it's not with the same level of intensity.
As you would imagine.
And it also varies by end market. So governments by requirement very often have a more formalized procurement process, but a significant new ERP partnership is is more likely many months maybe quarters, maybe even a year.
Of cultivating a relationship educating them on how it would work.
Both the technical integration and the sell through so it's not the same competitive dynamic as you might see in traditional card present consumer.
Verticals.
So net net we feel good about the competitive landscape I think you asked specifically about larger names.
Pretty rare in our market occasionally for the largest opportunities and then by the way. The decision factor is almost always not a price decision. It's the strength of solutions the strength of support accessibility of your talent to help partners manage through.
Through to success.
Excellent I appreciate all that industry context, Thank you Jeff.
Thanks, Tim.
Thank you one moment please.
Next question comes from the line of Mike Grondahl of Northland Capital. Your line is open.
Yeah, Hey, Jeff just a quick question when you were going through beta be government and then you got the strategic.
You mentioned insurance can you just give us a little bit of color, what youre doing in that I'll call. It sub vertical I guess.
Yes, Mike Great question, So I mentioned, a minute or two ago. These different definitions of b to b or what I'll call <unk> be like businesses.
Think about middle market insurance think about the agency structure.
They look a lot like other b to B markets of course, there are areas, where you need to tailor your solutions to meet their needs may be its a compliance module, maybe it's tied to funding.
Making sure that a transaction funding aligns with when a policy is bound as an example.
We have great partners in the insurance vertical who bring the value added software that complements <unk> solution to drive that end market, but I think tying it back to the earlier conversation is another example.
<unk> like business.
<unk> underlying growth I think you all know the amount of paper invoice pay per checking insurance I can't imagine that's higher anywhere so the opportunity to electronic Phi and integrate those payment streams is quite substantial.
Got it got it thank you.
Yeah.
Thank you one moment please.
Our next question comes from the line of Robert Napoli of William Blair. Your line is open.
Yeah.
Sorry. This is Bob Napoli can you hear me.
Yes, okay.
Alright, Thank you for the follow up.
And I'd add that we've kind of beat this to death, but it is really important.
The potential for accelerating growth and I guess as we've gone through this quarter we've seen.
Some companies talk about delayed decisions I think companies, but better tech stacks.
Complained about delayed decisions.
Some others with your tech stack and now.
And to accelerate growth companies with the best Tech stocks seem to be able to grow at faster rates and <unk> is a market where.
You see some companies growing at 80%.
There is good growth across the board in that space.
You could take your growth from.
Low double digit to mid teens, I mean, I think that would really change the perception of your company what does it take is it a tech stack.
Net improvement is there are just investing more.
And it's kind of a balancing act with your high margins.
That you may not want to do that but what does it take how is your tech stack now what is it going to take to really accelerate growth and indeed, the 35% of your business could grow probably at twice the rate you're growing at today I'm just not sure the tradeoffs.
Yes, Bob that is an excellent question so first of all.
We feel very good about our tech stack I would tell you pace of delivery caliber of talent and very important by the way thoughtfulness around the solution.
Brian you can spend twice as much money and not get good stuff so far.
First and foremost quality and quantity of delivery never been stronger strength and modernization of our tech stack <unk> is an investment we've been making for years and it pays off dividends in terms of faster deployment and importantly.
Durability and responsiveness etcetera.
To your question about where technology investments can further accelerate your growth rate, we agree with you and that's why we have been investing not just in the infrastructure, but in the talent to deploy these amazing solutions, both really well.
And faster where possible.
You mentioned in your question about trading off.
We don't manage this company for the short run.
That's not a signal about increased.
Increased investment level, that's not a point there my point is we have always and will continue to always manage to the medium term growth opportunities of the company doing whatever makes sense and when you have strong cash flow and a pristine balance sheet, you can do those things and not be distracted.
In terms of your investment programs for <unk>.
And the uncertain macro climate of the moment that is a great luxury of a very durable business like pie that.
You don't have to manage for too much for the short term.
No that makes sense and is that so that investment in like <unk> can you double the growth and let me take it.
Some increased investment there in such a large market can you double the growth of that.
Of that vertical if you would.
Oh, yes.
Yeah, no listen I think ambitions around high.
And at the same time, we don't want to set unrealistic expectations in the short term around any one area. What I would tell you is <unk> is the core and the foundation of this company. It is our greatest competitive strength in almost everything we do and we are doing everything you could possibly.
Imagine to maximize the potential growth of that business and you are right that technology solutions are a big part of that that means more ERP integrations better tools and support for the Vars, who often are selling in those end markets.
Wider base.
Of those integrations and equally important Bob the tech is fundamental of course, but it's also the sales and marketing support that you provide to partners that accelerates growth and it's also the excellent technical and operational support you provide to people, which drive satisfaction it drives.
Great retention you already see a pie at so if your question is.
Do are we excited by accelerating the growth indeed be Oh unquestionably yes.
Specifics about steepness of that curve and timing impasse.
Impossible to say, but we share your enthusiasm and we are investing accordingly.
Thank you.
Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press star one one on your Touchtone telephone against the ask a question. Please press star 111 moment. Please.
Yeah.
Thank you.
Im showing no further questions at this time I'd like to turn the call back over to Mr. Jeff <unk> for any closing remarks.
Great. Thank you operator, thanks, everybody for joining us. So early this morning, we appreciate the questions.
And we look forward to continuing to be very candid and transparent and supportive and we closed out the quarter Super proud with continued progress and success in the business have aggressive.
Ladies and gentlemen, this does conclude today's conference. Thank you all for participating you may now disconnect have a great day.
The conference will begin shortly.
As Johan during Q&A, you can dial star one one.
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