Paymentus Holdings Inc. Q1 2023 Earnings Call
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Good day, and loving containing first quarter 2023 earnings call.
This call is being recorded and all participants are currently in a listen only mode.
There'll be an opportunity to ask questions following management's prepared remarks.
I'd like to ask a question. Please press star on your telephone keypad.
At this time I will now turn the call over to David Hangover Investor Relations.
Go ahead.
Thank you good afternoon and welcome to pay met this first quarter of 2023 earnings call George.
Joining me on the call today is to Sean Sharma, our founder and CEO and Sanjay Kalra, our Chief Financial Officer.
Following our prepared remarks, we'll take questions.
Our press release.
Was issued after the close of market today and is posted.
On our website.
Where this call is simultaneously webcast.
The webcast replay of this call in our supplemental slides accompanying this presentation will be available on our company's web site under the Investor Relations site at IR <unk> com.
Statements made on this webcast includes forward looking statements within the meaning of the private Securities Litigation Reform Act.
Scott.
Forward looking statements use words, such as will believe expect anticipate and similar phrases that denote future expectation or intent regarding our financial results and guidance the impact of and our ability to address continued.
You can have a uncertainty in inflation.
Market opportunities business strategy implementation timing product enhancements impact from acquisition and other matters.
These forward looking statements speak as of today, and we undertake no obligation to update them.
These statements are subject to risks uncertainties and assumptions that may cause actual results to differ materially from those set forth in such statements, including the risks and uncertainties set forth under the captions special note regarding forward looking statements and risk factors in our annual report on Form 10-K for the year ended December 31 2020.
To which we filed with the SEC on March three 2023.
And our quarterly report on Form 10-Q for the quarter ended March 31 2023.
Which we expect to file with the SEC shortly and elsewhere in our other filings with the SEC.
We encourage you to review these detailed forward looking statement safe Harbor and risk factor disclosures.
In addition, during today's call, we will discuss certain non-GAAP financial measures specifically.
Contribution profit adjusted gross profit adjusted EBITDA and adjusted EBITDA margin.
non-GAAP financial measures, which we believe are useful in measuring our performance and liquidity should be considered in addition to and not as a substitute for or in isolation from GAAP results.
Encourage you to review additional disclosures regarding these non-GAAP measures, including reconciliations of the most directly comparable GAAP measures in our earnings press release issued today and the supplemental slides for this webcast each available on the Investor Relations page of our website.
With that I'd like to turn the call over to Vishal Shah, our founder and CEO two shot.
Thank you David.
As you can see from slide three.
Once again had a very successful quarter with topline growth and adjusted EBITDA ahead of our expectations.
Revenue increased 27, 1% on year over year basis to reach $148 $3 million.
Our first quarter adjusted EBITDA was $8 $4 million, which was 56, 4% higher than Q1 of last year.
Contribution profit for the quarter was also higher than we had originally expected at $52 $5 million disc.
Despite the ongoing macro.
These numbers are especially exciting to me from a profitability standpoint, and demonstrate our continued progress.
On a yield basis or just an EBITDA grew by three $3 million or 56, 4%, which means 50% of incremental contribution profit dollars drop through to the adjusted EBITDA line.
We believe this is even more compelling if you factor in the macro environment between Q4 and Q1, we had about 400 to 500 basis points of macro and seasonality related inflationary impact mean.
On an inflation or inflation neutral basis.
We would've expected to drop the vast majority for a contribution.
Adjusted EBITDA as Opex did not increase on a relative basis.
As we continue to make pricing adjustments to address inflation overtime. We believe these adjustments will become a tailwind for us when energy prices move closer to the pre inflationary levels.
We are also encouraged that our core <unk> business has been growing well and is scaling profitably.
Again as more of our incremental revenue dollars.
Drop through adjusted EBITDA.
Parallel to this we continue to make investments in complementary offerings in our instant payment network or IBM.
And to small and medium sized businesses or smbs.
IP remains an exciting part of our strategy and is growing well on SMB. We are receiving positive feedback from our partners and seeing encouraging early signs from the smbs.
As a reminder, IP, which is still under 10% of overall revenue is growing faster than our core business, even though <unk> SMB are currently dilutive to what.
Adjusted EBITDA margins.
Said differently Q1, adjusted EBITDA from our core Biller business was meaningfully higher than the reported number of 15, 7%.
Going into consideration of the financial impact of the strategic investments we are making.
To drive our future growth.
Key highlights from the quarter as listed on slide four.
From a bookings perspective, we had a very strong quarter, our best ever.
Which resulted in a strong backlog at quarter end.
This is especially important for us having be substantial bookings at the end of the first quarter gives us a great deal of runway to get our clients implemented for revenue recognition in 2024.
To add some additional color here our bookings for the quarter included several large scale clients across diverse verticals.
We expect that most of these new clients will not be affected by inflation. Once they go life. Both the <unk> price these transactions with variable fees and the underlying industry segment itself.
These new clients included a large state agency.
A sizable property management company and.
An extent extensive health care system multiple large insurance companies and allows utility.
As a reminder, the biggest impact from inflation has been from the energy utilities and not from the other industry verticals.
In addition to bookings we remain laser focused on onboarding is speed and related customer engagement.
Our successful client launches in Q4 contributed to our better than expected Q1 performance.
The subset of these clients also have seasonality seasonally higher volumes in Q1 versus other quarters.
We are pleased that we were able to get these clients light for Q1 to recognize the benefit.
We similarly remained focused on client on boarding during Q1 and are happy with improving post pandemic conditions that allow for increased face to face large client engagements.
We expect these high touch engagements during the first quarter will lay the groundwork for us to bring additional acuity clients live in Q2, and we're off to a good start.
During the quarter, we expanded our long term relationship with Oracle by certifying with Oracle Cloud in addition to the on Prem solution.
This allows oracle cloud clients to easily integrate with our platform.
We continue to see growth in our Oracle <unk> client base.
During the quarter, we also expanded our relationship with Guidewire, a software platform for more than 500 property and casualty insurers insurers.
As part of this we have launched an integrated billing center App that is available to guidewire customers and allows insurance companies to keep pace with the rapidly evolving customer need for a streamlined payment and billing experience.
We also completed and launched another implementation of our billing and payment platform for a large municipal utility, adding another state capital to our list of growing customers.
Ranked as a top tier and municipal utility in the nation. The city leaders identified three primary objectives for this project.
First.
To drive more online payments second lower customer service costs.
And third increase customer satisfaction by letting the customer at the city's customers pay how when and where they want.
And over to payment methods.
Inclusive payment channels for their entire customer base.
We upgraded the city with our platform to achieve all these objectives and position the city well for the future.
Let me now touch base on implementation backlog.
And how it relates to our expected growth trajectory and ability to deliver expanded adjusted EBITDA margins in 2024.
From where we sit today with the strength of the implementation backlog exiting 'twenty 'twenty four coupled with Cumulus Q1, 'twenty completely performance.
Have a lot of confidence in.
Our ability to deliver growth in 2024.
At the same time, our first quarter results also demonstrate our improving ability to deliver incremental adjusted EBITDA margins and dollars to the bottom line.
We believe all of these factors leave us well positioned to continue growing revenues and to expand profitability.
Even further next year.
In summary, I'll reiterate.
What we said on the last call.
On our last call that we remain very confident regarding the long term growth prospects of the business.
This is especially true given the expanding <unk> ecosystem, we are building.
Which we believe allows us to reach a broader Tam and leverages the entire spectrum of interchange from a call center in our biller business. The interchange neutral in IPM business to interchange being a revenue source and our SMB offering and beyond.
We are already off to a good start as indicated by our first quarter results and we look forward to updating you on our progress in future calls.
Now, let me turn it over to Sanjay to review our financial results in greater detail.
Thank you Chuck.
I'm very excited to be a part of momentum and thank you all for joining us today.
Before I discuss our quarterly results and outlook I'd like to remind everyone that the financial results I'll be referring to include non-GAAP financial measures.
As David mentioned earlier, our Q1 press release and earnings presentation includes reconciliations of non-GAAP financial measures to GAAP.
That are disclosed on this call.
Both of these are available on our website.
Turning to slide five.
For the first quarter of 2023, we have delivered solid financial results that were above the top end of our guidance ranges.
We believe these results demonstrate the strength of our business, which continues to perform well despite macroeconomic challenges still at play.
Our first quarter results included revenue of $148 3 million.
Contribution profit of $53 5 million and adjusted EBITDA of $8 4 million.
We continue to experience solid business momentum in the first quarter this drove robust bookings.
Enabling us to exit the quarter with a solid backlog.
Based on our strong quarterly performance and the positive market trends as Sean mentioned earlier and our expectations for the remainder of 2023.
We are modestly raising our full year 2023 revenue contribution profit and adjusted EBITDA guidance.
I'll talk about shortly.
Now, let's review, our first quarter financials in more detail.
As I mentioned Q1 revenue was $148 3 million up 27, 1% year over year.
This growth was largely driven by increased transactions from existing builders.
And launch of new <unk> and increased activity in our instant payment network or IBM business.
Transactions grew $208 5 million in the first quarter up 23, 4% year over year.
Yeah.
First quarter 'twenty three contribution profit in Greece to $53 5 million up 13% year over year.
Contribution margin was 36, 1% for the first quarter compared to 46% in the prior year period.
Well the revision profit per transaction for the quarter was 49 down from 54 in the prior year period.
Okay.
Contribution profit growth lag revenue growth, primarily due to continued inflation in the utility sector and builder mix with larger builders coming onboard.
As we've noted in the best variables outside our control such as an increase in the average payment amount or changes in the payment mix can influence contribution profit on a quarterly basis.
To offset some of the impact of continuing inflationary conditions. We are currently engaged in active repricing conversations with our customers and are encouraged by what we have already achieved to date.
Adjusted gross profit was $43 7 million for the first quarter up 16, 9% year over year.
Operating expenses increased to $41 1 million or 13, 4% increase year over year.
The increase is primarily due to increased sales and marketing expenses as we continue to focus resources on our go to market strategy.
During Q1 'twenty three we made a change to the employee merit and compensation cycle in.
In the previous year's raises were given on the employee's anniversary more or less evenly distributed throughout the year.
In 2023 always is very effective from January one 2023.
Okay.
Adjusted EBITDA for the first quarter was $8 4 million or 15, 7% of contribution profit up 56, 4% compared to $5 4 million or 11, 4% of contribution profit in the prior year.
This annual growth is a result of our repricing and continued expense management actions.
I believe this also demonstrates the inherent operating leverage we have in the business and our ability to adapt to changing market conditions as we continue to grow.
Other income was $1 4 million during the first quarter, reflecting increased interest income from our bank deposits and effective cash management.
non-GAAP net income was $2 9 million or <unk> <unk> per share compared to non-GAAP net income of $3 7 million or an EPS of <unk> <unk> in the prior year.
Largely due to higher income tax benefit in the prior year.
We will now discuss our balance sheet and liquidity position.
We ended Q1 with unrestricted cash of $143 6 million compared to $147 3 million at the end of 2022.
The $3 $7 million decrease is primarily comprised of $4 8 million of gas generated from operations offset by $8 3 million cash used in investing activities.
The company does not have any debt.
Our days sales outstanding at the end of Q1 was 46 days consistent with DSO at the end of 2022.
Working capital at the end of Q1 was approximately $181 million an increase of approximately $3 8 million from the end of 2022.
We had 193 3 million shares outstanding at the end of Q1 compared to $123 2 million shares outstanding at the end of continuing to do the margin increase was due to vesting of employee restricted stock units.
Now, let me share some brief observations since joining <unk> as its CFO then review our updated outlook for Q2 and the full year 2023.
Since I joined the company two months ago. My initial focus has been on two main priorities.
First a dwindling myself with everything <unk> does its business model and diverse operations.
Our strategy meeting the entire team learning as much as possible about what has transpired since the IPO.
And second doing a deep dive into the financials in order to gain a better understanding of our 2023 budget in 2024 financial goals.
On the first point now that I'm more familiar with the inner workings of the company.
I'm, even more amazed than I was originally by the expanding and compelling opportunities that I believe lie ahead for Ventas.
We are well positioned to capitalize on the attractive industry trends in the end markets that we serve.
I'm also excited by the depth of talent and experience of my team members and look forward to working with them and contributing to <unk> future growth.
As I now turn more attention to <unk> long range financial model and targets.
Im also considering how we can best provide investors and analysts with greater color on the performance of our business.
This includes evaluating our current Kpis and non-GAAP disclosures.
While this process is still underway one specific metric, which has drawn my attention is exit backlog.
I believe our new bookings in Q1 demonstrates the robust demand for our technology solutions and our strong exit backlog gives us further confidence and visibility in the growth trajectory for the company.
Now I'll turn to our non-GAAP guidance for Q2, 'twenty three beginning on slide six.
In Q2, 'twenty three we expect revenues to be in the range of $142 million to $148 million, representing 21% year over year growth at midpoint.
Contribution profit to range from $54 million to $56 million, which is 13% year over year growth at the midpoint.
And adjusted EBITDA of 8 million to $9 million representing.
We are presenting a growth of 70% year over year at the midpoint.
Given the progress we have already seen in Q1, and our expectation for the remainder of the year for the full year 2023 on slide seven.
We now expect revenue in the range of 591% to $606 million.
Up 2% from the midpoint of our prior guidance.
Contribution profit in the range of 225 to 237 million also up modestly versus our prior guidance.
And adjusted EBITDA to range from 34 to $38 5 million, representing a three 6% increase at the midpoint versus our prior guidance.
In summary, we had a strong first quarter, where we can continue to build on our solid momentum from <unk> to.
Which we have got it into 2023.
As a result, we believe we have positioned ourselves well for the balance of 2023.
Thank you everyone for your attention today and now I'll turn it back to <unk> for final remarks, before we open up the call for questions.
Thanks Sanjay.
Closing.
Based on our first quarter results and the strength of our backlog.
We believe we're extremely well positioned for the balance of 2023 and into contract only four.
We also are laser focused on bringing more and more of these new customers live on our platform to continue to expand profitability.
And adjusted EBITDA margins.
Our strategy remains simple and in this order first signed as many clients as possible to grow the network.
This includes larger clients.
Second onboard those clients as quickly as possible.
And simultaneously deliver best in class service.
And third in.
Prove operating efficiencies and manage costs in order to drive margin expansion and bring more to the bottom line.
I want to take this opportunity to thank each of my colleagues at Pimentos, who work tirelessly to serve our clients. Thank you.
That concludes our prepared remarks, I'll now open the lines up for questions.
Absolutely.
And do you like to ask a question. Please press star followed by one on your telephone keypad.
Jeremy in your question I'm, sorry, followed by Kim.
Again to ask a question at Starwood.
And if you are using a speaker phone.
Please pick up your handset before asking your question.
Our first question comes from John Davis with Raymond James.
Please proceed.
Hey, good afternoon guys.
You talked a lot about.
You know kind of the pricing changes that you were going to make it into this year given inflation.
Just curious how those conversations have gone.
Unexpected attrition, obviously numbers were good goodness.
The increase in guide for the full year I was just curious how those conversations have gone with your customers as you implemented pricing changes that you talked about late last year.
Hey, John Thank you for the question.
The conversations are going extremely well actually.
Clients Library.
Understanding and they.
We're not the only ones, who we're talking to them about.
The challenges.
Their vendor network, if you will.
So we are receiving positive feedback.
Some of the.
Some of the conversations has resulted into actual meaningful pricing increases, which we will continue to flow throughout the year, but one thing I do want to highlight.
To you in.
Our rest of the analyst community and the Investor base that.
<unk> as we are seeing.
The trend what we.
We are doing now is an account management team or account management function.
We are just including the pricing discussions as an ongoing framework. So we think that.
Until then inflation is completely behind us will.
We will continue to have those discussions as we are seeing positive.
Tranches.
Okay. No. That's helpful. And then just quickly on I think when you sell the initial 2023 outlook.
You assume no incremental new wins and the.
Contribution profit.
Outlook.
The outlook for the full year.
Mentioned numerous wins here in the first quarter. So just have you started to put those into the guide are you still excluding new wins from our guide just just help us think about where the guidance today versus 90 days ago.
John This is sanjay thanks for the question.
When we guided earlier versus when we are guiding now the major increase we are seeing is based on the activity we have seen from the.
From the growth with the existing dealers and also increased transactions. We did launch some big builders in Q4 last year, and we have seen a decent grower from them as well so all of that's coming from that.
The growth I mean, the increased growth in outlook is coming from these these are things we have seen we have not baked in any significant revenue from the new wins that remains the same what we said last time.
Okay I appreciate the color thanks, guys.
Thank you for your question.
Our next question comes from Dave Koning with Baird.
Baird.
Anthony.
Yeah, Hey, guys, thanks, and a nice nice quarter.
And maybe a couple of questions. My first one just implementations I remember that was part of a little bit of the weakness kind of midyear last year and through the end of last year, you talked about implementation as being a little slower have those picked up are they according to plan or they actually may be ahead of plan now or how are you seeing those.
Actually that's a good question and I was trying to allude to in my prepared remarks.
The post pandemic conditions is now actually helping us a little bit, especially in the large deals that where we saw some of the <unk>.
More of the discretion of the implementation time lines.
We are now able to see customers.
First of all both in the sales cycle, but also in the implementation phase as well so those high touch engagement.
Engagements are giving us confidence that we will be able to keep within the timelines.
We anticipate.
So.
So the implementation as a whole is actually on a better footing than we were where we were last year.
Okay, now that sounds great and I guess my second question is a numbers question around the gap between gross and net revenue really.
It was reasonably small in Q4, I think a few percent gap this quarter, it's about a 14% GAAP gross grew 27 that grew 13 and next quarter, you're guiding for that gap to be cut in half basically what are the dynamics I understand the inflation impacts, but what are the dynamics of that gap kind of moving around.
Yes, so great question.
Yeah.
The growth of revenue is 27 and the growth of contribution profit at 13 definitely brings the question. So let me give some perspective around what we are seeing and what we expect to happen first of all both of these are going to converge as time passes we are seeing this as a temporary phase.
And one of the reasons as we said as inflation, we are seeing and then in fact seasonality is a part of it as well, but we have also started adding to some extent larger builders in the mix and what larger builders means is builders with heavy volume of transactions.
The contribution.
<unk> margin on these are slightly lower than the corporate.
Contribution margins.
Giving a temporary impact where the contribution margin seem low, but as time passes and as we scale more we expect this gap to converge.
And overall, we should realize economies of scale, which will ultimately improve our contribution margin together with contribution profit dollars. In fact, if you look at what we delivered in Q1 and compared with the guidance of Q2 and the guidance for the full year. Both all in all the three scenarios you will see that this gap is already converted.
<unk> and in the outer years, we expect this to convert even more so we then gets them ready phase and eventually this will be behind us and right now, it's a great opportunity for us too.
<unk>.
You'll see how we can scale the business and eventually get a better contribution profit and margin in the long run.
Thanks, guys great job.
Thank you just a quick point I would add to that is that.
Even Q1 bookings gives us a lot of encouragement in that regard as well.
Awesome. Thanks.
Thank you so much.
Thank you for your question.
Our next question comes from Jason Kupferberg with Bank of America. Please proceed.
Good good afternoon, Shawn it's Andre this is Tyler Dupont on for Jason Thanks for taking the questions.
First I just wanted to start by looking at the EBITDA margins I mean, they came in pretty healthy. This quarter can you maybe just speak to what in particular drove that upside surprise and sort of how we should be thinking about margins going through 2023 as well.
Is it still the right idea to think about quarterly expansion on a year on year basis and.
And I guess going off that point as well.
Where are you anticipating the most margin efficiencies to come from throughout the year. So most of the G&A or or any color there would be helpful.
Yes, Jason I will say that when we guided we were expecting close to 40% growth year over year and became a $56. Seven. So we definitely are also very encouraged about the results.
And the thing with Duchenne pointed out I will just.
Remind that the company's objective is to drop as much as possible. The contribution profit dollars, we generate to the bottom line.
Significantly inherent operating leverage in the business, we don't really need to spend the money. If the contribution profit is increasing so I would say that the increase is mainly coming from.
Operating expenses not increasing in the same line in the same ratio as the contribution profit is increasing so overall I think the.
Operating leverage exist in future <unk> will also be from the same right now we are putting some investments in Q2.
Sales and marketing and also in Q3, but overtime, we expect that the operating leverage would be more than what we see this year in fact for the whole year Youre seeing EBITDA up by 27% year over year at the midpoint.
In Q2, we are seeing good growth there as well. So we're encouraged by what we delivered and we believe that this growth is going to come.
On the top line just to mention as well on the contribution profit line. The growth is coming from it's mainly organic growth an increase in transaction some of the existing dealers and we are also seeing traction on.
<unk> as well, which will adopt more as it drove significant but we have seen good increases there as well. So I think everything is contribution is contributing in the right direction, helping us grow diabetes.
Okay. That's helpful. Thank you for that and then just curious as a follow up on bookings growth.
Looks like you had pretty robust increase in that as well as the number of transactions.
But maybe if you could just spend a minute or two parsing out how much of that growth.
It was from new versus existing clients.
And if there's any vertical concentration that's worth mentioning.
And then I guess also jumping from that as well just sort of how we should think hey, Matt. This is anticipating revenue conversion just curious if we should be thinking like how we should be thinking about average conversion rates given that given the current macro backdrop.
I think we have not shared in the past the.
The new versus existing.
But you could actually.
It is safe to assume that we worked very hard.
Towards the tail end of the year to bring as many customers live as possible to actually beat our 2022.
Topline guidance guidance, which we did and then.
And also set ourselves up for 2023.
As we exited the year with a healthy backlog so we have done.
That.
We're also seeing some same store sales pitch.
Sanjay alluded to earlier, so I think all of those are appointed appointing the right direction in terms of the conversion itself I think.
We will continue to take a look at whether we can.
They start to share some of that information the backlog and the and how that converts over time Mike.
Can tell you.
As I.
<unk> said earlier, we are seeing positive trends in the implementation area.
In the overall business, just because we are able to interact with our clients, especially the larger ones.
In the high touch engagement that is needed to bring to life.
Okay, great very helpful. Thanks, and congrats on the quarter.
Thank you.
Our next question comes from Andrew.
Please proceed.
Hey, guys, it's Andrew on for Darren just a few on the strategy side can you maybe talk about the Oracle <unk> client base and the opportunity that exists within especially with the updated implementation and then with regards to the IPM just remind us where you are with respect to executing on the third horizon of that strategy.
Okay.
Sure.
Thank you Andrew.
In terms of Oracle Oracle is a great partner has been a great partner, we have been doing a lot of things together with them in defense, our Oracle customer base continues to grow this cloud integration actually helps us.
We're in Oracle.
Oracle cloud.
The client would find it very easy to integrate with the Memphis to the certification of the integration we have achieved so we already.
We're excited about that.
In terms of the IP and herself.
Look IP to us.
<unk>.
Sure.
As multi dimensional strategy.
First cornerstone youre trying to bring in or we are trying to bring in.
The participants who have who have been left behind if you will.
Through the.
Through the platform, we built for the builders.
So what I mean by that is the banks and other foreign tax who were left behind that wanted to play in that.
Bill payment space, but just couldn't.
Get in just because of the strength of the services you provide directly to the dealers.
Two of our platform so with IP and now we have been able to bring those in and we are seeing tremendous progress. There are a lot of interest in the market, but the second thing.
Second thing about Ips, which I think will become a lot more clear as we continue to execute our strategy is a very efficient distribution model for us a channel for us.
We have banks as partners, we have fantastic partners.
And we also have distribution to lot of businesses through our payment network.
And many of which could utilize our increasing functional footprint of receivable payment payables expense management and accounting and so on.
Especially in the SMB space. So we're very excited about that.
So far we have seen great progress.
Great. Thanks, great quarter, Okay. Thank you.
Our next question comes from Tim.
<unk> with J P. Morgan.
Please proceed.
Hey, Thanks, good afternoon.
Good stuff I wanted to ask was fast already I wanted to get a little bit more maybe too short on the SMB push with the payables.
Discussion you had last time as well just any surprises there.
In terms of momentum and sort of connect closer to the smbs.
Yes.
Yes.
Thank you.
Good question.
I was just planning about the surprises.
We are seeing lot of positive.
Excitement about the about the product.
And.
It's early stages.
In.
A lot of discussions early on and getting a lot of positive feedback as well as from the SMB themselves.
Folks are using the product, giving us feedback.
And we are seeing a lot of encouraging signs there.
We believe that.
The whole SMB strategy and our strategy to build SMB in a way that all of that functionality is available for enterprise clients as well, especially those who use our receivable capabilities can now leverage payables and expense management and all of that.
That comes with it.
I think gives us lot of confidence.
We are setting up setting ourselves up for a great.
A great future ahead.
That's all I'm able to share right now, but we will share more as we see more progress.
Okay, Great and then just my quick follow up just to expand or addicted deeper into whats going on the bank partner side, given all the stresses in the banking system and all the turmoil.
Et cetera is that have you noticed any change in terms of.
Existing relationships or even prospective partners on the banking side.
Yeah.
Sure.
Actually.
Some of our large bank partners Theyre getting.
Even stronger so we're very excited about that.
By Trump's off the overall our bank network. We are we're not seeing any any negative change we remain just as bullish as we were before about the entire ecosystem of.
Of our platform, whether it's on the bank side of the credit Union side or the dealer side.
Great great.
Thanks for the update.
Thank you.
Our next question from Sandler O'neill.
With Goldman Sachs.
Thanks.
Hey, guys I appreciate you taking the question.
I wanted to maybe follow up on some of the backlog commentary it sounded like that was sort of catching your eye on early on.
From from kind of digging into some of the numbers I'm wondering if there's any kind of quantification or or perspective, you can give us on kind of how the current level of backlog compares to maybe a year ago, and how that might actually translate towards it.
An acceleration of top line as we as we go into 2024.
So I appreciate the question.
I am a little reluctant at this point to share the numbers I'll be honest.
I am very excited about looking at the backlog and various other kpis, which I'm still trying to understand it.
Once we deliver good process around them, then I'll be happy to share them on a going forward basis.
So that's why a number is not out yet, but I am excited and hence at least.
Qualitatively I'm sharing that the backlog is very robust and our bookings were very solid as well.
That gives us a lot of confidence in not only this year, but outer years trajectories pretty visible to me builds on.
How the implementation goes but we have a very strong backlog that said I can provide some comfort that how much it has grown.
Year over year.
It's.
Again quantification quantification is not something I like to go.
Go here, but I would say it's <unk>.
Significant increase year over year.
And if I may.
Well, if I may add.
If I may add to that is that.
Where we sit today.
And we're looking at.
Uh huh.
Where we want to be next year.
Based on.
How well.
We have executed against the implementation backlog to bring customers live, especially in Q4 and then what we are what we're how hard we work during Q1 to bring some of our customers live in Q2.
Combine that with the backlog and the early success in Q Q1 <unk>.
We feel good about.
Where we are relative to 2023 and 2024.
And one of the things, which I think.
I just wanted to highlight is that when.
When we when we measure the backlog we take out all of the same store sales.
From it.
So.
Said differently, let's say, if I book of clients for a $1 billion in <unk>.
Second half of 2022, and the client goes live.
<unk> sometime in 2043.
There is some tail winds that digitization tail events that take place and then by the time over a period of time that customer continues to rise with us as well the same store sales so.
When you factor that in as even.
The more.
More impressive.
Especially with the size of the backlog.
But we will take a look at US and you mentioned, what we could what we could share as the time goes by.
Got it makes a lot of sense I appreciate that and then I guess as a follow up question.
When you guys think about EBITDA conversion over over the next couple of years, obviously, you've had a lot of investment priorities, whether it's the IPM while business platform from the acquisitions, but.
When we look at kind of Capex and capitalized software it is running around.
100% of EBIT loss, so just wondering how youre thinking about the level of that investment in the business what the outlook is for that and whether we could see.
Very strong top line growth contribute towards more cash flow conversion as we get into 2024.
I think that.
But I will say this is actually one of the key points, we wanted to get across and that was that.
We have always been a relatively.
Profit profitability centric organization.
Obviously being a being public has some costs associated with it that challenged some of the profitability dimensions. We had all the metrics we used to have.
And then obviously the macro and so on but one of the things we wanted to get across was that we have the ability to drop.
A lot of the <unk>.
Top line and the contribution profit dollars to the EBITDA line.
And we are already doing.
A lot with our core biller business.
Save and except the IPR on the SMB some of those new initiative investments we are making.
But we feel we feel good about.
Generating dropping more to the cash.
Sure.
Cash line, if you will.
In 2024, just because.
Even as we are making the investments we feel we feel good about where we sit today with our current opex itself. That's something you want to add I would just add that.
I appreciate the question Youll see $8 4 million EBITDA and the cash flow Youll see $8 1 million software get back and hence, hence the cushion but.
If you look at our cash flow statement, even though the cash might have dropped by around $3 8 million in the quarter, but overall, our working capital has significantly increased so have a lot of cash is sitting in accounts receivable, which we plan to turnaround in the next quarter next quarter. The cash would go up that's expectation and while we don't guide for cash but going forward.
Our planning for cash as you know either to stay neutral or maybe slightly negative depending of the.
Software development increases, but overall OLED investment is happening for future growth for the projects for which we don't see revenue yet and that is basically going to drive more growth.
And Thats that we had all of this investment is going so thats alder year's revenue growth.
Which is invested today and I think we are on track in terms of.
Managing cash well as cash other than for the whole year.
Got it appreciate all the color thanks for taking my question.
Thank you Bill.
Thank you for your question.
There are no further questions waiting at this time I will pass the conference back over to the management team for any closing remarks.
Well thank you thank.
Thank you everyone. Thank you for being.
Being here with us today and.
Heather.
Have a great day.
Ziv.
Thank you.
That concludes today's conference call. Thank you all for your participation you may now disconnect your lines.