Q4 2023 Avidxchange Holdings Inc Earnings Call

February 28, 2024

Mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone.

To withdraw your question. Please press Star then two.

Please note this event is being recorded.

Joining us on the call today is Michael Prager avid exchanges co founder and Chief Executive Officer.

Joel Wilhite.

Avid exchanges, Chief financial Officer, and <unk> Kumar avid exchanges head of Investor Relations.

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

This disclaimer emphasizes the major uncertainties and risks inherent in the forward looking statements the company will make today. Please.

Please keep these uncertainties and risks in mind as the company discusses future strategic initiatives potential market opportunities.

Operational outlook and financial guidance during today's call.

So please note that the company undertakes no duty to update or revise forward looking statements.

Today's call will also include a discussion of non-GAAP financial measures.

[music].

As that term is defined in regulation G.

non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP.

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

To financial results prepared in accordance with GAAP I would now like to turn the conference over to Michael Prager.

Please go ahead.

Thank you everyone for joining us today.

Joe Wilhite are excited to discuss avid exchanges fourth quarter 2023 results.

This is now marks our 10th consecutive quarter.

Have exceeded our revenue and adjusted EBITDA expectations.

This past quarter was also a great reflection of executing the strategies, we articulated during our Investor day. This past June in terms of balancing our growth and profitability objectives.

Consistent with that I am proud to announce that we delivered our first ever $100 million plus revenue quarter.

Along with a $15 million plus adjusted EBITDA profit quarter, thereby posting a 36.

At our rule of 40 construct which combines our revenue growth rate of 21% along with our adjusted EBITDA margin of 15% for the quarter.

Overall, we saw five main themes emerge over this past year that were certainly magnified in Q4.

Good morning, everyone and thank you for joining us for the avid Exchange Holdings, Inc. Fourth quarter 2023 earnings call.

First.

All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

Our continued strong customer engagement.

Second.

Our payment yield and supplier monetization strategies, which will continue to be our secret sauce showing measurable results.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone.

Third.

Our margin expansion and cost efficiency strategies, delivering continued reductions in our unit cost and driving our gross margin expansion and resulting adjusted EBITDA growth.

To withdraw your question. Please press Star then two please note. This event is being recorded.

Fourth.

Joining us on the call today is Michael Krager avid exchanges co founder and Chief Executive Officer.

Our continued focus on investment in new innovation continues to drive competitive differentiation increased value proposition for our customers as well as create the long term pathway to support our 20% plus annual organic growth rate objectives.

Joe Wilhite.

Avid exchanges, Chief financial Officer, and Sue Bosch Kumar avid exchanges head of Investor Relations.

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

And lastly, our 15 b, the resiliency of our middle market customers.

This shows strong customer logo retention metrics exceeding 95% for a combined buyers and suppliers.

This disclaimer emphasizes the major uncertainties and risks inherent in the forward looking statements the company will make today. Please.

I want to highlight our continued high level of customer engagement right off the bat because this success has been fueled first and foremost by our customers' success, which in turn has been enabled by our value proposition that our product technology sales and operations teammates have engineered and executed.

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

Our buyer and supplier customers have validated this lasting value proposition by viewing us as their trusted partner to drive scale workflow efficiency, along with confidence and managing billions of dollars' worth of their invoices and payments over our two sided network.

So please note that the company undertakes no duty to update or revise forward looking statements.

Today's call will also include a discussion of non-GAAP financial measures.

As that term is defined in regulation G.

non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP.

And we wouldn't be here, where we are today.

And where we're headed and our growth and profit trajectory without them.

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

As we seek to scale avid exchange to be a 1 billion dollar revenue business in the coming years.

Still vastly Underpenetrated 40 billion dollar addressable market opportunity.

To financial results prepared in accordance with GAAP I would now like to turn the conference over to Michael Prager.

Staying with the customer theme for a moment, let me just highlight the power of our value proposition with one of our buyer customers Speedway Motorsports.

Please go ahead.

Thank you everyone for joining us today.

Founded in 1959, Charlotte based Speedway Motorsports is a leading player in motorsports marketing promotion and sponsorship specializing in events like NASCAR and Indy car races.

Joel Wilhite and I are excited to discuss Abbott exchanges fourth quarter 2023 results.

This is now marks our 10th consecutive quarter of.

<unk> exceeded our revenue and adjusted EBIT da expectations.

Similar to many of our clients pre avid exchange Speedway was weighed down by a siloed jet decentralized paper intensive accounts payable and payments process on its travelers accounting system.

This past quarter was also a great reflection of executing the strategies, we articulated during our Investor day. This past June in terms of balancing our growth and profitability objectives.

Combined with the newly adopted shared services business model the level of complexity faced by Speedway was overwhelming.

Consistent with that I am proud to announce that we delivered our first ever $100 million plus revenue quarter.

And adopting our avid invoice and avid pay solutions to streamline and digitize and automate their invoice processing of supplier payments Speedway was able to reduce monthly accounts payable work hours shorten its month end accrual process to approximately 30 minutes from a couple of days previously while <unk>.

Along with a $15 million plus adjusted EBITDA profit quarter, thereby posting a 36.

Our rule of 40 construct which combines our revenue growth rate of 21% along with our adjusted EBITDA margin of 15% for the quarter.

Driving an estimated cost savings.

Of over $300000 annually.

Spurred on by the success of invoice and pay solutions.

Overall, we saw five main themes emerge over this past year that were certainly magnified in Q4.

<unk> broadened its lens to other appexchange products, such as Abbott analytics to review and analyze spending on a company wide basis.

First.

Our continued strong customer engagement.

Second.

Senior Vice President of Finance, Sarah graphical set of best Youll.

Our payment yield and supplier monetization strategies, which will continue to be our secret sauce showing measurable results.

You'll be amazed at how avid analytics streamlines tasks and allows managers to see things in real time it.

Third.

Our margin expansion and cost efficiency strategies, delivering continued reductions in our unit cost and driving our gross margin expansion and resulting adjusted EBITDA growth.

It provides us with the ability to give our staff the reporting mechanisms and matrix as they need on a timely basis we.

We are continuing to improve who we spend money with looking at our purchasing data and being able to negotiate gives us buying power we can leverage.

Fourth.

Our continued focus on investment and new innovation continues to drive competitive differentiation increased value proposition for our customers as well as create the long term pathway to support our 20% plus annual organic growth rate objective.

Those savings have been reinvested in other ways to enhance our abstract fan experience and empowering the finance team to focus on other business initiatives.

The ability to create this type of lasting value for our customers such as speedway is at the center of our innovation and product strategies.

And lastly, our 15 being the resiliency of our middle market customers.

There is a deep product pipeline for 2020 for the further builds on the value proposition, we expect to further cement our leadership position in the marketplace.

<unk> strong customer logo retention metrics exceeding 95% for a combined buyers and suppliers.

But before we lay out what new product offerings and platform innovations are in store for 2024.

I want to highlight our continued high level of customer engagement right off the bat because this success has been fueled first and foremost by our customer success, which in turn has been enabled by a value proposition that our product technology sales and operation teammates have engineered and executed.

It's worth highlighting reflecting for a moment on 2023.

Starting with our avid exchange flywheel metrics.

During 2023, we increased the total number of buyer customers utilizing our accounts payable and payment automation software.

Excluding the decommission creator check product offering by eight 1% to 8000 customers from 7400 by our customers in the year prior driven by delivering a great AP automation software experience under gear one of our avid exchange flywheel.

And we wouldn't be here, where we are today.

Quick note on credit check this offering was nonstrategic check printing solution utilized by our smallest customers to print paper checks on premise.

And where we're headed and our growth and profit trajectory without them as we seek to scale avid exchange to be a 1 billion dollar revenue business in the coming years.

That was one of the several products acquired approximately 10 years ago by our peer copayments acquisition and not consistent with our focus on middle market by our customers along with our focus on eliminating paper checks.

Still vastly Underpenetrated 40 billion dollar addressable market opportunity.

Staying with the customer theme for a moment, let me just highlight the power of our value proposition with one of our buyer customers Speedway Motorsports.

By contrast, we are still in single digit penetration across our nine current verticals within.

Our overall estimated addressable market of 435000 middle market companies just in the United States alone.

Founded in 1959, Charlotte based Speedway Motorsports is a leading player in motorsports marketing promotion and sponsorship specializing in events like NASCAR and Indy car races.

In addition to our strong buyer customer engagement, our supplier a customer count was up 24% in 2023 versus 2022 and continues to be part of our secret sauce, and our ability to monetize payments, which was fueled by innovative payment offerings and networking effects of buyers.

Similar to many of our clients pre avid exchange Speedway was weighed down by a siloed jet decentralized paper intensive accounts payable and payments process on its travels accounting system.

Bringing their suppliers to our two sided network.

Combined with the newly adopted shared services business model the level of complexity faced by Speedway was overwhelming.

The resulting addition of new buyer customers and supplier customers drove increased transactions onto our two sided network and our overall spend under management under gear to <unk>.

And adopting our avid in voice and avid pay solutions to streamline and digitize and automate their invoice processing of supplier payments Speedway was able to reduce monthly accounts payable work hours shorten its month end accrual process to approximately 30 minutes from a couple of days previously while draw.

Transaction volumes on our network exceeded $75 million rising seven 4% for <unk>.

Year over year with our total payment volume increasing by over 11% on a year over year basis to almost reaching 76 billion in 2023.

<unk> estimated cost savings.

Of over $300000 annually.

This increase in total payment volume largely mirrored growth in our payment transaction count.

Spurred on by the success of invoice and pay solutions Speedway broadened its lens to other AD exchange products, such as Abbott analytics to review and analyze spending on a company wide basis.

Seven 4% year over year rise in spend under management to 230 billion tracks largely in line with the growth in our transaction volume.

Senior Vice President of Finance, Sarah graphical set of best you'll.

And given our growing transaction volume, we remained focus on maximizing our industry, leading E payment monetization.

You'll be amazed at how avid analytics streamlines tasks and allows managers to see things in real time it.

Which is our secret sauce is we referred to it.

By converting suppliers to one of our various forms of electronic payment on the <unk> network under gear three of our flywheel.

It provides us with the ability to give our staff the reporting mechanisms and matrix as they need on a timely basis we.

We are continuing to improve who we spend money with looking at our purchasing data and being able to negotiate gives us buying power we can leverage.

Yes.

Yeah.

In 2023 E payment Manassei monetize supplier count on the <unk> network grew by roughly 10% from the year prior largely in line with our payment transaction growth rates. We believe this underscores the overall value proposition of our <unk> network for our suppliers.

Those savings have been reinvested in other ways to enhance our abstract span experience and empowering the finance team to focus on other business initiatives.

The ability to create this type of lasting value for our customers such as speedway is at the center of our innovation and product strategies.

The sum of execution and growth across our avid exchange business flywheel encompassing buyers suppliers and transaction monetization resulted in nice growth in our all encompassing transaction yield metric.

There is a deep product pipeline for 2020 for the further builds on the value proposition, we expect to further cement our leadership position in the marketplace.

Which was up over 12% to $5 <unk> per transaction in 2023.

But before we lay out what new product offerings and platform innovations are in store for 2024.

Compared to $4 51 per transaction in 2022.

It's worth highlighting reflecting for a moment on 2023.

In addition in the fourth quarter, we reached a record high transaction yield of $5 45.

Starting with our avid exchange flywheel metrics.

During 2023, we increased the total number of buyer customers utilizing our accounts payable and payment automation software.

Which was up 13, 8% over the same period last year.

We also ended the year with our net transaction retention rate at 101%.

Excluding the decommission create a check product offering by eight 1% to 8000 customers from 7400 by our customers in the year prior driven by delivery of great AP automation software experience under gear, one of our avid exchange flywheel.

Which has been impacted by the pressure of discretionary spend across the middle market. As a result of the current macroeconomic environment, causing middle market companies and their cfos to be more cautious with their discretionary spend.

As we bid farewell to 2023, I want to take a moment to reflect on our financial and strategic accomplishments of the year.

Quick note on credit check this offering was nonstrategic check printing solution utilized by our smallest customers to print paper checks on premise.

2023 was a year of Demonstratable financial resilience and strategic advancement as we delivered both 20% revenue growth and adjusted EBITDA profitability.

That was one of the several products acquired approximately 10 years ago via our pure copayments acquisition and not consistent with our focus on middle market buyer customers, along with our focus on eliminating paper checks.

Driven by the impact of our various efficiency initiatives and scale of our operations from resilience perspective, we delivered a healthy revenue growth up 23% over $380 million for the year. This in the face of ongoing macro choppiness impacting transaction volume around discretionary spend in areas.

By contrast, we are still in the single digit penetration across our nine current verticals within.

Our overall estimated addressable market of 435000 middle market companies just in the United States alone.

In addition to our strong buyer customer engagement, our supplier customer count was up 24% in 2023 versus 2022 and continues to be part of our secret sauce, and our ability to monetize payments, which was fueled by innovative payment offerings and networking effects of buyers.

In marketing advertising and professional services, which we were able to effectively counter balance with continued yield expansion through our various innovation strategies with suppliers.

Meanwhile, the pace of progress on unit cost reduction continued unabated through actions around standardization automation and sourcing.

Bringing their suppliers to our two sided network.

The resulting addition of new buyer customers and supplier customers drove increased transactions onto our two sided network and our overall spend under management under gear to <unk>.

Including numerous work streams utilizing artificial intelligence across all areas of our business.

This enabled us to deliver solid execution on our unit cost objectives, driving gross margin expansion of 540 basis points to 69, 4% in 2023, and we continue to be excited about the expected long term impact on these unit cost reduction initiatives.

Transaction volumes on our network exceeded 75 million rising seven 4% year over year with our total payment volume increasing by over 11% on a year over year basis to almost reaching 76 billion in 2023.

This increase in total payment volume largely mirror growth in our payment transaction count the.

We also continue to focus to optimize our resources and other functional areas as we heightened our opex and investment discipline, which led to a swing of over $45 million and adjusted EBITDA profitability in 2023 over 2022.

Seven 4% year over year rise in spend under management to 230 billion tracks largely in line with the growth in our transaction volume.

And given our growing transaction volume, we remained focus on maximizing our industry, leading E payment monetization.

I'm, especially pleased to say that we exited the fourth quarter with our first ever adjusted EBITDA profit, excluding the contributions of float and political related media revenues.

Which is our secret sauce is we referred to it.

By converting suppliers to one of our various forms of electronic payment on the Abitibi network under gear three of our flywheel.

And finally, we finished the year with a solid balance sheet, including a net cash position of over $374 million.

In 2023 E payment Manassei monetize supplier count on the Abbott pay network grew by roughly 10% from the year prior largely in line with our payment transaction growth rate.

The combination of our strong balance sheet combined with our scaling profitability provides us with significant optionality to continue investing in our targeted strategic initiatives, which we believe will drive shareholder value in years to come.

We believe this underscores the overall value proposition of our <unk> network for our suppliers.

The sum of execution and growth across our avid exchange business flywheel encompassing buyer suppliers and transaction monetization resulted in nice growth in our all encompassing transaction yield metric.

On the strategic front, we believe we have positioned the business for greater success in 2024.

First we inked a key transformational accounting system partnership with a folio are biggest partnership ever with a top provider solutions focused in the real estate multifamily vertical with roughly 19000 customers.

Which was up over 12% to $5 five per transaction in 2023.

Compared to $4 51 per transaction in 2022.

Potentially half of those that meet our target customer profile.

Also in 2023, we leveraged another accounting system.

In addition in the fourth quarter, we reached a record high transaction yield of $5 45, which was up 13, 8% over the same period last year.

Partnership with a cloud based accounting solutions market leader <unk> III as a springboard into our new hospitality vertical with our M. Three core select integration, which went live in November of 2023.

We also ended the year with our net transaction retention rate at 101%.

Both of these integration partnerships should begin to contribute starting in the second half of 2024.

Second our top of funnel buyer sales opportunities increased around 15% in the 12 months of 2023 over 2022, demonstrating strong interest and engagement with fibers.

As we bid farewell to 2023, I wanted to take a moment or flipped from a financial and strategic accomplishments of the year.

Third we advanced our payment product portfolio with several significant innovations, including the launch of our new payment modalities, such as our lead waiver payment modality for the construction vertical.

2023.

The Euro Demonstratable financial resilience and strategic advancement as we delivered both 20% revenue growth and adjusted EBITDA profitability.

Fourth.

We released our much anticipated digital invoice financing product invoice accelerator to point out in October of 2023, now being branded as payment accelerator.

And finally, we continued strengthening our executive talent team with key additions on our revenue and product teams with James Sun as our Chief revenue Officer, and Doug Anderson, as our Chief product officer, while elevating Dan <unk> and John Feldman to the roles of President and Chief operating officer, respectively.

As a marketing advertising and professional services, which were able to effectively counter balance with continued yield expansion through our various innovation strategies with suppliers.

Overall I am very pleased with the leadership team that we've built and feel that we're well positioned as we focus on executing the next chapter of our journey.

Meanwhile, the pace of progress on unit cost reduction continued unabated through actions around standardization automation and sourcing include.

To attain our goal of reaching 1 billion revenues in the coming years.

Including numerous work streams utilizing artificial intelligence across all areas of our business.

With those highlights I want to spend the remainder of my remarks on our product and platform innovation initiatives in 2024.

Both of which fall under gears, three and four of our avid exchange business flywheel.

We're excited about the development of our new spend management platform.

Currently virtually all of our buyers customers invoice based expenses are processed through our platform as we are the system of record for our customers invoice transactions with the remainder of the non invoice based expense transactions being processed outside of our system is it through manual processes or through other third party software applications.

Our new spend management offerings will tackle those remaining non invoice expense transactions.

I'm, especially pleased to say that we exited the fourth quarter with our first ever adjusted EBITDA profit, excluding the contributions of float and political related media revenues.

However, our approach to spend management is highly differentiated and purpose built for the middle market.

Whereas traditional spend management programs are focused mainly on travel and entertainment expenses or should we focus on managing functional team level procurement first.

Finally, we finished the year with a solid balance sheet, including a net cash position of over $374 million the.

Along with managing travel and entertainment expenses for our customers.

You will also be managed at the point of purchase with real time syncing coding and approval status.

And most importantly, our spend management module the highly integrated with our core accounts payable in voice suite, leveraging our geo coding and approval workflow capabilities, along with having centralized expense and data reporting for all of our customers expenses in one platform both.

On the strategic front, we believe we have positioned the business for greater success in 2024.

First we inked a key transformational accounting system partnership without folio are biggest partnership ever with a top provider solutions focused in the real estate multifamily vertical with roughly 19000 customers potentially.

Both invoice and non invoice transactions, which is extremely important in terms of driving adoption cross selling interoperability and user experience.

We expect that our spend management offerings should result in higher attachment rates and non linear growth contributed while driving higher TPB yield in future years.

Potentially half of those that meet our target customer profile.

Also in 2023, we leveraged another accounting system.

There are lots of different use cases for the product.

Partnership with a cloud based accounting solutions market leader <unk>, three as a springboard into our new hospitality vertical with our M. Three core select integration, which went live in November of 2023.

One for instance could be a property manager employing the card to purchase a faucet and the transaction immediately synchronizes with our AP solution.

This we believe will provide finance leaders a holistic view of virtually all expenses that occurs across the company displacing either personal cards without proper controls our petty cash.

Both of these integration partnerships should begin to contribute starting in the second half of 2024.

Second our top of funnel buyer sales opportunities increased around 15% in the 12 months of 2023 over 2022, demonstrating strong interest and engagement with buyers.

With our offerings as insurers.

Their spend will be in compliance with each customer's business rules.

Including budgets and expense categories, as we monetize transactions from both virtual and physical card volume.

The platform is planned for initial rollout with select customers in the latter half of 2024, and then scaling in 2025.

Fourth.

2024 is also the year when we plan to ramp key functionality of our new payments platform, which is the foundation of our avid pay network.

We released our much anticipated digital invoice financing product invoice accelerator to point out in October of 2023, now being branded as payment accelerator.

This is an effort that has been part of our product roadmap for the last several years.

And finally, we continued strengthening our executive talent team with key additions on our revenue and product teams with James sudden as our Chief revenue Officer, and Doug Anderson, as our Chief product officer, while elevating Dan <unk> and John Feldman to the roles of President and Chief operating officer, respectively.

We believe the new capabilities of our payments platform, our transformational and the way our customers experience managing their payments and the way we operate.

A critical dependency in our ability to advance E payment adoption is to create new payment modalities to real time configuration, combining pricing terms speed of settlement access to women's data and payment acceptance automation as opposed to software development dependencies.

Overall I am very pleased with the leadership team that we've built and feel that we're well positioned as we focus on executing the next chapter of our journey.

To attain our goal of reaching 1 billion revenues in the coming years.

Our new payments platform is designed to unify dispirit systems and operational processes within a single platform to deliver the best supplier and buyer customer experiences.

With those highlights I want to spend the remainder of my remarks on our product and platform innovation initiatives in 2024.

With our new platform will be able to be well positioned to guarantee delivery of critical payments on time, despite potential delays of invoice approval by our by our customers.

Both of which fall under gears, three and four of our avid exchange business flywheel.

We're excited about the development of our new spend management platform currently virtually all of our buyers customers invoice based expenses are processed through our platform. As we are the system of record for our customers and voice transactions with the remainder of the non invoice based expense transactions being processed outside of our system.

Second we believe that we can expand our payment footprint to non invoice based transactions such as loan leases and various other tax payments.

Third we've been able to create new payments products real time based on speed remains data pricing automation et cetera, and therefore drive greater EPA would adoption for our buyers and suppliers.

Is it through manual processes or through other third party software applications.

Our new spend management offering will tackle those remaining non invoice expense transactions. However, our approach of spend management is highly differentiated and purpose built for the middle market.

And finally with our new payment platform, we believe will not only be able to enhance revenue through greater yield.

Sure payments wallet would also improve the cost structure in both hard and soft operational cost, including the reduction of paper check payments.

Whereas traditional spend management programs are focused mainly on travel and entertainment expenses are as we focus on managing functional team level procurement first.

In closing, we believe we are well positioned for 2024.

Along with managing travel and entertainment expenses for our customers.

With our 2023 building blocks in place the five themes, which drove our success in 2023 will continue to bear fruit for us in 2024 and beyond.

You'll also be managed at the point of purchase with real time thinking coding and approval status.

Our industry leadership with highly differentiated foundation for our strategic and operating Roadmaps in 2024, and particular, the SaaS, we continue to achieve and reducing unit costs and leveraging operational expenses. We believe we are setting up for delivering on our investor day targets.

Both invoice and non invoice transactions, which is extremely important in terms of driving adoption cross selling interoperability and user experience.

To be sure will be tested along the way given the macro volatility and remain focused on controlling those elements of our business that we can directly control ourselves.

We expect that our spend management offerings should result in higher attachment rates and non linear growth contributed while driving higher TPB yield in future years.

But with the strategy and execution rigor, we have set in motion and are delivering on we believe we're well positioned to drive impactful value for our customers create future growth opportunities for our team members and unlock significant long term value for our shareholders.

There are lots of different use cases for the product.

One for instance could be a property manager employing the card to purchase a faucet and the transaction immediately synchronizes with our AP solution.

This we believe will provide finance leaders a holistic view of virtually all expenses that occurs across the company displacing either personal cards without proper controls our petty cash.

With that I'd now like to turn the call over to my partner Joel Wilhite.

Thanks, Mike and good morning, everyone. I am pleased to talk to you today about our fourth quarter 2023 financial results, which reflect continued execution of our growth strategies amid continued macro uncertainty.

With our offering this insurers.

Their spend will be in compliance with each customer's business rules.

Including budgets and expense categories, as we monetize transactions from both virtual and physical card volume.

Overall, we delivered another quarter of healthy year over year financial performance relative to the implied fourth quarter 2023 business outlook and adjusting for float and political fourth quarter revenues came in higher due to payment and software yield expansion driven by ongoing ipe conversion.

Our platform is planned for initial rollout with select customers in the latter half of 2024, and then scaling in 2025.

2024 is also the year when we plan to ramp key functionality of our new payments platform, which is the foundation of our avid pay network.

That together with higher gross margins driven by higher revenues progress on unit cost initiatives software and pay yield expansion as well as sustained expense discipline led to significant adjusted EBITDA outperformance.

This is an effort that has been part of our product roadmap for the last several years.

We believe the new capabilities for our payments platform, our transformational and the way our customers experience managing their payments and the way we operate.

It's worth noting we delivered our first ever adjusted EBITDA profit a major milestone even after stripping out flow and political.

A critical dependency and our ability to advance E payment adoption is to create new payment modalities to real time configuration, combining pricing terms speed of settlement access to women's data and payment acceptance automation as opposed to software development dependencies.

We believe that by crossing this profit CASM on a core basis underscores not just the power of our business model and disciplined execution, but.

But also our confidence in achieving our rule of 40 target by 2025.

Now turning to year over year results.

Our new payments platform is designed to unify dispirit systems and operational processes within a single platform to deliver the best supplier and buyer customer experiences.

Total revenue increased by 28% to $104 1 million in Q4 of 2023 over the fourth quarter of 2022.

More than three quarters of the revenue growth was driven by the combination of the addition of new buyer invoice and payment transactions, coupled with software and pay yield expansion. The remaining revenue growth. This quarter was driven by higher year over year float revenue net of year over year decline in political revenues.

With our new platform, we will be able to be well positioned to guarantee delivery of critical payments on time, despite potential delays of invoice approval by our by our customers.

Second we believe that we can expand our payment footprint to non invoice based transactions such as loan leases and various other tax payments.

Third we've been able to create new payments products real time based on speed remains data pricing automation et cetera, and therefore drive greater EPA would adoption for our buyers and suppliers.

Our strong revenue growth also resulted in total transaction yield expanding to $5 45 in the quarter up 13, 8% from $4 79.

In Q4 of 2022.

And finally with our new payment platform, we believe will not only be able to enhance revenue through greater yield.

Of the 13th <unk>, 8% increase roughly three quarters of the increase was driven by PE and software yield coupled with transaction mix skewed toward payments. The remainder was due to the flux between float and political revenues.

Share of payments wallet would also improve the cost structure in both hard and soft operational cost, including the reduction of paper check payments.

Software revenue of $29 million, which accounted for 27, 9% of our total revenue in the quarter increased 10, 1% in Q4 of 2023 over Q4 of 2022.

In closing, we believe we are well positioned for 2024 with.

With our 2023 building blocks in place the five themes, which drove our success in 2023 will continue to bear fruit for us in 2024 and beyond.

The increase in software revenues of 10, 1% was driven by growth in total transactions of six 1%, which continues to be impacted by macro conditions with the balance driven by growth in certain subscription based revenues.

Coupling our industry leadership with highly differentiated foundation for our strategic and operating Roadmaps in 2024 in particular the success, we continue to achieve and reducing unit costs and leveraging operational expenses. We believe we're setting up for delivering on our investor day targets.

Payment revenue of $74 $2 million, which accounted for 71, 3% of our total revenue in the quarter increased 25, 5% in Q4 of 2023 over Q4 of 2022.

To be sure will be tested along the way given the macro volatility and remain focused on controlling those elements of our business that we can directly control ourselves.

Payment revenue reflects the contribution of interest revenues, which were $13 $7 million in Q4 of 2023 versus $5 $8 million in Q4 of 2022.

Recall, our year ago payment revenues also included contribution from political media revenue.

With that I'd now like to turn the call over to my partner Joel Wilhite.

Of the 25, 5% increase in payment revenues more than three quarters was driven by a combination of an increase in pay yield expansion and payment transaction volume increase of 9% with the remaining portion driven by the aforementioned flux between interest and political revenues.

Thanks, Mike and good morning, everyone I'm pleased to talk to you today about our fourth quarter 2023 financial results, which reflect continued execution of our growth strategies amid continued macro uncertainty.

On a GAAP basis gross profit of $67 $3 million increased by 34, 8% in Q4 of 2023 over the same period last year, resulting in a 64, 6% gross margin for the quarter compared to 57, 9% in Q4 2022.

Two.

non-GAAP gross margin increased 650 basis points to 71, 4% in Q4 of 2023 over the same period last year and was driven mostly by unit cost efficiencies and yield expansion.

It's worth noting we delivered our first ever adjusted EBITDA profit a major milestone even after stripping out flow and political.

Now moving onto our operating expenses on a GAAP basis total operating expenses were $79 5 million an increase of 1% in Q4 2023 over Q4 of last year on a non-GAAP basis operating expenses, excluding depreciation and amortization increased two 6% to 50.

We believe that by crossing this profit CASM on a core basis underscores not just the power of our business model and disciplined execution, but.

But also our confidence in achieving our rule of 40 target by 2025.

Now turning to year over year results.

$8 $8 million in the fourth quarter of 2023.

Total revenue increased by 28% to $104 $1 million in Q4 of 2023 over the fourth quarter of 2022.

From the comparable prior year period.

On a percentage of revenue basis operating expenses, excluding depreciation and amortization declined to 56, 5% in the fourth quarter of 2023 from 66, 5% in the comparable period last year.

The year over year percent decline largely highlights the significant operating expense leverage, particularly across G&A sales and marketing as well as R&D to an extent, even after stripping out the contribution of float.

Our strong revenue growth also resulted in total transaction yield expanding to $5 45 in the quarter up 13, 8% from $4 79.

I'll now talk about each component of the change in operating expenses on a non-GAAP non-GAAP basis.

non-GAAP sales and marketing cost decreased by $1 1 million or five 7% to $75 million in Q4 of 2023 over Q4 of last year, which was driven by a combination of efficiencies in marketing spend a decrease in performance based compensation and realignment of resources.

In Q4 of 2022.

Of the 13th <unk>, 8% increase roughly three quarters of the increase was driven by pay and software yield coupled with transaction mix skewed toward payments. The remainder was due to the flux between float and political revenues.

<unk>, coupled with the delay in timing of certain investments.

Software revenue was $29 million, which accounted for 27, 9% of our total revenue in the quarter increased 10, 1% in Q4 of 2023 over Q4 of 2022.

non-GAAP research and development costs increased by $2 6 million or 13, 1% to $22 $1 million in Q4 of 2023 over Q4 of last year.

The increase was due to continued reinvestment in our products and platform, including spend management pay offering and payment accelerator.

non-GAAP general administrative costs remained unchanged at $19 $2 million in Q4 of 2024 versus Q4 of last year due to leveraging public company cost across a larger revenue base. They continue their annualized downward progression as a percentage of revenue as we indicated.

Payment revenue was $74 $2 million, which accounted for 71, 3% of our total revenue in the quarter increased 25, 5% in Q4 of 2023 over Q4 of 2022.

Payment revenue reflects the contribution of interest revenues, which were $13 7 million in Q4 of 2023 versus $5 $8 million in Q4 of 2022.

During our Investor day.

Our GAAP net loss was $4 5 million for the fourth quarter of 2023 versus the GAAP net loss of $25 million in the fourth quarter of 2022 with a reduction in losses, driven by a combination of strong revenue flow through and expense control leading to lower operating expenses coupled with.

Recall, our year ago payment revenues also included contribution from political media revenue.

Higher interest income and lower interest expense due to reduced borrowing costs and partial debt paydown.

On a non-GAAP basis, our net income in the fourth quarter of 2023 was $9 $4 million versus a net loss of $7 $5 million in the same year ago period, a $16 9 million positive swing from last year driven by the aforementioned factors.

On a GAAP basis gross profit of $67 $3 million increased by 34, 8% in Q4 of 2023 over the same period last year, resulting in a 64, 6% gross margin for the quarter compared to 57, 9% in Q4 2022.

Similarly on a non-GAAP basis, Q4, 2023, adjusted EBITDA was a $16 $9 million positive swing from an approximately one $3 million loss in Q4 of 2022.

Two.

non-GAAP gross margin increased 650 basis points to 71, 4% in Q4 of 2023 over the same period last year and was driven mostly by unit cost efficiencies and yield expansion.

Turning to the balance sheet for a moment I want to touch on a few key items.

We ended the year with a strong corporate cash position of $451 $6 million of cash and marketable securities against an outstanding total debt balance of $77 $3 million, including a note payable for $13 9 million, we had $30 million on our credit facility Undrawn at <unk>.

Now moving onto our operating expenses on a GAAP basis total operating expenses were $79 $5 million, an increase of 1% in Q4 2023 over Q4 of last year on a non-GAAP basis operating expenses, excluding depreciation and amortization increased two 6% to 50.

Year end.

Corporate cash Meanwhile, split roughly two thirds among money market funds commercial paper and time deposits with the remaining third and deposit accounts.

$8 $8 million in the fourth quarter of 2023.

From the comparable prior year period.

The weighted average maturity on corporate cash was roughly 10 days, while the effective interest rate on our corporate cash position for the fourth quarter was roughly 5.25% customer cash at quarter end was approximately $1 6 billion with an interest rate of roughly 5% for the quarter.

On a percentage of revenue basis operating expenses, excluding depreciation and amortization declined to 56, 5% in the fourth quarter of 2023 from 66, 5% in the comparable period last year.

The jump in customer cash was primarily timing related to funds in transit along with shifts in calendar days between weekdays and weekends of receipt and disbursement of that cash.

I'll now talk about each component of the change in operating expenses on a non-GAAP non-GAAP basis.

Turning to our 2024 business outlook, we expect total revenue for the year to be in the range of $441 million to $447 million based on the midpoint, we expect approximately 47% of the 2024 revenue distribution to be in the first half versus 53% in.

non-GAAP sales and marketing costs decreased by $1 1 million or five 7% to $75 million in Q4 of 2023 over Q4 of last year, which was driven by a combination of efficiencies in marketing spend a decrease in performance based compensation and realignment of resources.

Second half.

2020 for revenue outlook reflects the revenue impact of decommissioning our on premise check printing software create a check the buyer customer base and revenue contribution of which was roughly 1400 and $1 million in 2023, respectively.

Sources, coupled with a delay in timing of certain investments.

non-GAAP research and development cost increased by $2 6 million or 13, 1% to $22 $1 million in Q4 of 2023 over Q4 of last year.

The outlook also incorporates approximately $44 million of interest revenues from customer funds versus roughly $41 million earned in 2023.

The increase was due to continued reinvestment in our products and platform, including spend management pay offering and payment accelerator.

Also we anticipate political media revenue contribution of approximately $9 million given that this is our first presidential cycle under fast de <unk>.

Recall, we acquired fast pay in 2021 for context in 2022 during the midterm election cycle, the political arm of fast pay generated roughly $8 5 million in revenues.

Similarly, we expect non-GAAP, adjusted EBITDA profit ranging between $67 million and $71 million for the year.

During our Investor day.

Our GAAP net loss was $4 $5 million for the fourth quarter of 2023 versus the GAAP net loss of $25 million in the fourth quarter of 2022 with a reduction in losses, driven by a combination of strong revenue flow through and expense control leading to lower operating expenses coupled.

With that I would now like to turn the call back over to the operator to open up the line for Q&A operator.

We will now begin the Q&A session.

Session to ask a question you May Press Star then one on your Touchtone phone. If you were using a speaker phone. Please pick up your handset before pressing the keys.

Higher interest income and lower interest expense due to reduced borrowing costs and partial debt paydown.

On a non-GAAP basis, our net income in the fourth quarter of 2023 was $9 $4 million versus a net loss of $7.

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

And we ask that you. Please limit your questions to one question.

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

The first question comes from Ramsey El <unk> with Barclays. Please go ahead.

Hi, This is trey on for Ramsey. Thanks for taking my question I was just wondering if you could comment a bit more on the magnitude of macro pressure that's factored into the guide is it contemplating any further deterioration or is it more of a steady state.

Yes, great question, and just to be real clear the sort of the macro dynamic that's causing buyers to sort of limit their spend that subset of discretionary spending has really continued consistently through the year even to know our guide contemplates no change.

We're hopeful that that turns around and we expect those types of spending can't be put off forever, but our guide contemplates continued.

Macro conditions that we experienced in 2003.

Got it very helpful. Thanks.

The next question is from Greg Miller with Ft Partners. Please go ahead.

Yeah, Hi, Thanks for taking the question wanted to.

I ask.

You know if you can characterize your assumption on political spend.

You said $9 million in political revenue and 24 in the past you've.

You've outlined that you see 30% to 35% of all political advertising spend and forecasting a $10 billion spend cycles, so I'm trying to understand.

The level of conservatism built into that number thanks.

Yes, Great question, Yeah, we were we are making $9 million into the guide point.

Pointed out that this is our first presidential cycle with fast pay and so.

It's possible that there's some upside to that in the back half.

It's a little less predictable than our core fundamental recurring business and so we felt like $9 million of pruning a prudent guide.

Yeah, Craig I think it's a this is Mike.

I think it's a great question because as Joel said this is our first presidential cycle ourselves managing through it and I think the.

We usually take kind of a cautious approach to new things and this is a good example that youre right. We do control about 35% of all the media related payments in the industry.

But one of the things thats inherited industry, although we have the leading market position is theres not a lot of visibility and lead time too.

<unk> $5 million in revenues.

Similarly, we expect non-GAAP, adjusted EBITDA profit ranging between $67 million and $71 million for the year.

When.

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Orders for advertising placement.

It is very last minute.

With that I would now like to turn the call back over to the operator to open up the line for Q&A operator.

And with short lead times, so theres not a lot of visibility we have to it so that leads us to.

We will now begin the Q&A.

That dynamic combined with its our first rodeo through the political cycle, just take more of a cautious approach to it.

Session to ask a question you May Press Star then one on your Touchtone phone. If you were using a speakerphone. Please pick up your handset before pressing the keys.

Could you, perhaps talk about the take rate and political versus the rest of the business.

Yeah, I think what we've said in the past is it.

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

Slightly but I wouldn't say meaningfully.

If we hired as it is a little is it is a little higher given a higher mix of digital payment accepted.

And we ask that you. Please limit your questions to one question.

One of the just as a flavor there. The reason why we have our leading position in political is that we've been on the forefront of that conversion of <unk>.

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

The first question comes from Ramsey El <unk> with Barclays. Please go ahead.

Creating specialized payment types for media related payments and moving from paper checks to electronic because of the short lead times. So certainly are.

Hi, This is <unk> on for Ramsey. Thanks for taking my question I was just wondering if you could comment a bit more on the magnitude of macro pressure thats factored into the guide is contemplating any further deterioration or is it more of a steady state.

Innovation focus on.

Different payment modalities for media.

It's been kind of a key component of our market position there.

Thanks, I appreciate the color.

The next question is from Dave Koning with Baird. Please go ahead, yeah, Hey, guys. Thanks, so much congrats and maybe.

My main question your dollars of core payments growth was about the strongest we've ever seen and you mentioned it was driven a lot by yield more ipe shift to ebay, but within E. Pay are there certain types of suppliers are asking for more like it's VLCC, just as a percentage like drawing more and more and if thats the case.

We're hopeful that that turns around and we expect those types of spending can't be put off forever, but our guide contemplates continued macro conditions that we experienced in 2003.

Got it very helpful. Thanks.

What's kind of driving all that.

The next question is from Greg <unk> with Ft Partners. Please go ahead.

Yeah, no. Thanks, Great question, Dave and really strong kind of yield yield quarter and even.

Yes, hi, thanks for taking the question wanted to.

Excited about the things we have to come from a yield perspective, but to answer your question right.

Yes.

If you can characterize your assumption on political spend.

We're continuing to sort of March down the path of taking checks out of the system moving towards digital we're also the discipline around operating as creating opportunities through just reducing exceptions better offshore management of processes. Those things, we talk about that drive unit costs down also give us a yield opportunities as well.

You said $9 million in political revenue and 24 in the past you've seen.

You've outlined that you see 30% to 35% of all political advertising spend and forecasting a $10 billion spend cycles, so I'm trying to understand.

<unk>.

Got you Thanks, and maybe just a quick follow up interest revenue was up a lot sequentially, 25%, 30% with rates being I think pretty stable or was there something to the amount of dollars youre holding and is that sustainable.

The level of conservatism built into that number thanks.

Yes, Great question, we are making $9 million into the guide we've pointed out that this is our first presidential cycle with fast pay and so.

Yes, no. It's a great question, so youll notice.

We finished the year with about 1 billion six of customer funds on the balance sheet. So a nice uptick there and it was really that drove the rate in the quarter. So it was about $13 7 million float revenue in the fourth quarter.

It's possible that there's some upside to that in the back half.

No.

A little less predictable than our core fundamental recurring business and so we felt like 9 million was recruiting a prudent guide, yes, Hey, Craig I think it's this is Mike.

There is.

<unk>.

The drivers are really the timing of the funds moving between buyers and suppliers, including things like how much is in transit at a particular, whether it's a weekday cut off for a weekend cut off so that's really sort of.

I think it's a great question because as Joel said this is our first presidential cycle ourselves.

<unk> through it and I think we've.

We've usually take kind of a cautious approach to new things and this is a good example of that Youre right. We do control about 35% of all the media related payments in the industry.

And expansion in customer funds as we finished the year is what drove float and I would suggest.

What is historically kind of consistent is that customer funds will level off over the course of the fourth.

But one of the things thats inherited industry, although we have the leading market position is theres not a lot of visibility and lead time too.

First quarter and 24.

Thanks, guys congrats.

Okay.

When.

The next question is from Andrew <unk> with Wells Fargo. Please go ahead.

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Hey, guys. Thanks for taking the question.

Out of this very last minute.

And with short lead times, so theres not a lot of visibility we have to it so that leads us to.

Just looking at the incremental margins.

Slowed I mean really impressive.

That dynamic combined with its our first rodeo through the political cycle, just take more of a cautious approach to it.

Looks like based on the guide, 60% plus and relative to our estimate of I think 20 Nymex flow in 2023, So I'm just trying to get understand the sustainability of that.

Could you, perhaps talk about the take rate and political versus the rest of the business.

I know that you guys have been making efficiency.

Yes.

I think what we've said in the past.

<unk> in your cost of goods sold line, but trying to weigh that versus what you've seen on the ebay trial, just trying to figure out the magnitude of upside there.

Slightly but I wouldn't say meaningfully meaningfully higher it is it is a little.

Yes, I mean, let me just kind of remind you I will just take us back to the targets that we set out at Investor Day, We said, we would be in the 72% to 75% gross margin range.

In 2025.

And we've had great kind of continued margin expansion by doing the things that we've been talking about consistently.

Our media related payments and moving from paper checks to electronic because of the short lead times. So certainly our innovation focus on.

Thank you.

Since the IPO and so we said that the way we would get there is a mix of yield and unit cost efficiency yield call. It two thirds in unit cost call. It a third though not necessarily linear.

With regard.

Different payment modalities for media has been kind of a key component of our.

Our market position there.

Thanks, I appreciate the color.

And we're just kind of continuing to execute that plan and so if you strip outflow in the fourth quarter, that's a 67% gross margin and so.

The next question is from Dave Koning with Baird. Please go ahead.

Sure.

Hey, guys. Thanks, so much congrats and maybe for my main question. Your dollars of core payments growth was about the strongest we've ever seen and you mentioned it was driven a lot by yield more ipe shift to ebay, but within E pay are there certain types of supplier.

Six six good solid points up year over year, but a ways to go and we've got believers in the opportunity to do that both on yield and unit costs, Yes, Andrew I'd say I can simply look at it it's really the blended combination of two things that.

That efficiency as Joel said driving yield and that certainly.

It's been a nice component of that expansion as well and we continue to see that scaling as we go forward I think.

Talked about we have.

Roughly about a dozen different initiatives across the business related to AI, both customer facing and kind of focus internally.

And then the second piece is on the yield and Thats, where all of our strategies and innovation related to.

Monetization strategies, new payment modalities.

Our straight through process capabilities with suppliers all those type of things are taking hold and so I think the combination of those two.

So we believe were done in the early days of continue to drive that overall margin expansion.

And expect that to continue over time.

Building and is that sustainable.

Yes that makes a lot of sense, if I could just squeeze one more in the 2020 in the press release, you say that 2024 outlook reflects accelerating revenue growth.

Yeah, no. It's a great question, so youll notice.

We finished the year with about $1 billion six of customer funds on the balance sheet. So a nice uptick there and it was really that that.

20% and 23 in the initial guidance for 2017. So can you just clarify what that accelerating revenue growth.

Drove the rate in the quarter. So it was about $13 7 million float revenue in the fourth quarter.

Language means.

Yeah, you bet, we're addressing ex float and political.

Great. Thank you.

The next question is from Darrin Peller with Wolfe Research. Please go ahead.

And expansion in customer funds as we finished the year is what drove float and I would suggest in what is historically kind of consistent is that customer funds will level off over the course of the of the fourth the first quarter and 24.

Hey, guys.

Maybe we'll just start off I just wanted to ask about the supplier growth I think it was 24% and 23.

Which I thought was a great call out and just if you could remind us how that compares to the change in prior year as the general timing for suppliers to be more monetize using.

Got you thanks, guys congrats.

Okay.

The next question is from Andrew <unk> with <unk>.

Different methods, whether it's similar accelerated rather pay network et cetera, and then I guess as a follow up to that I know your goal is potentially going up to 70% monetization of your transactions over time.

Wells Fargo. Please go ahead.

Hey, guys. Thanks for taking the question.

Just looking at the incremental margins ex float I mean really impressive it looks like based on the guide 60% plus in relative to our estimate.

And I'm, assuming that obviously is highly correlated with the supplier network growth in the.

The implementations of different work there so maybe help us with the split if you can on the kinds of tools on the.

I think 29 next flow in 2023, so I'm just trying to get understand the sustainability of that.

Between navigate Iraq or virtual card or other kinds of payment modalities would be great. Thanks, again, guys nice quarter.

I know that you guys have been making efficiency investments in your cost of goods sold line, but trying to weigh that versus what you've seen on the ebay trial I'm just trying to figure out the magnitude of upside there.

Yeah, Hey, thanks Darren.

That was kind of a multifaceted question. So let me kind of.

Yes, I mean, let me just kind of remind you I would just take us back to the targets that we set out at Investor Day, We said, we would be in the 72% to 75% gross margin range in 2025.

Chip away at it so first of all the supplier growth question, Yes, we're super excited we broke the 1 billion threshold and ended the year at $1 two suppliers on the network.

That is that 24% growth is consistent to what we've seen in past years.

And we've had great kind of continued margin expansion by doing the things that we've been talking about consistently.

<unk>.

The IPO and so we said that the way we would get there is a mix of yield and unit cost efficiency yield call. It two thirds in unit cost call. It a third though not necessarily linear.

So we feel like that we're at it continue to be a nice rhythm in terms of growing the network on the supplier side.

Hmm.

And we.

We see kind of a consistent mix of.

And we're just kind of continuing to execute that plan and so if you strip outflow in the fourth quarter that that's a 67% gross margin and so.

Enrol suppliers in terms of payment modalities and so the two big buckets categories that we have are those that are except a form of virtual card and I'll come back to that in the second and the second one is a form of.

Six.

Good solid points up year over year, but a ways to go and we've got believers in the opportunity to do that both on yield and unit costs.

Our avid pay direct which is our <unk> plus.

Andrew I'd say I can see.

Offering.

Back.

Simply look at it it's really good.

10 years ago, we had one payment with <unk> in each of those buckets today in virtual card, we have about a dozen different payment with <unk>, where we have.

Blended combination of two things.

That efficiency as Joel said driving yield and that certainly.

It's been a nice component of that expansion as well and we continue to see that scaling as we go forward.

Partly because of our deep partnership with Mastercard, our ability to manage multiple forms of interchange.

I think as we've talked about we have.

And the combination what we do is we use the.

Roughly about a dozen different initiatives across the business related AI.

Asian of price, which is interchange structure combined with the speed of payment.

Both customer facing and kind of focus internally.

And then the second piece is on the yield and Thats, where all of our strategies and innovation related to.

Bind with the data remittance and reconciliation data.

Monetization strategies, new payment modalities.

And then lastly, combined with level of straight through process and so those are like four variables that we have within our payment modality in different levels within those four create different payment modalities across virtual card that will allow suppliers that.

Our straight through process capabilities with suppliers all those type of things are taking hold and so I think the combination of those two.

So we believe we're in early days of continue to drive that overall margin expansion.

Maybe don't have acceptance of card from across the industry to be able to.

And expect that to continue over time.

Except the card and say the straight through process with high levels of reconciliation data provided directly to them. So it's a non human touch accounts receivable function on their side and those are all examples that we're using.

Yes that makes lot of sense, if I could just squeeze one more in the 2020 in the press release, you say that 2024 outlook reflects accelerating revenue growth.

20% and 23 in the initial guidance for 2017. So can you just clarify what that accelerating revenue growth.

Continue to add suppliers to the network.

Language means.

Yeah, you bet, we're addressing ex float and political.

On the flip side on the avid pay direct.

Doing really the same thing except shuttling through.

Great. Thank you.

H, but again combining speed of payment different price points.

Different levels of women's data, along with different levels of straight through processing.

The next question is from Darrin Peller with Wolfe Research. Please go ahead.

And so.

I think you ended with him kind of reference to long term. We expect that we think we can take monetize payments to about 70% of transactions.

Hey, guys maybe.

Maybe we'll just start off I just wanted to ask about the supplier growth I think it was 24% and 23.

And we still believe that and but again, it's not going to be.

Which I thought was a great call out and just if you could remind us how that compares to the change in prior year as the general timing for suppliers to be more monetize using.

One particular payment modality of that kind of save the day.

And different methods, whether its gymboree accelerated rather pay network et cetera, and then I guess as a follow up to that I know your goal is potentially going up to 70% monetization of your transactions over time.

Lots of different pay modalities, combining different levels of those four factors that we continue to believe is the secret sauce.

That makes sense thanks, guys.

I'll turn it back to the Capex again.

And I'm, assuming that obviously is highly correlated with the supplier network growth in the.

Darren.

The next question is from Jamie Friedman with Susquehanna. Please go ahead.

The implementation of different work there so maybe help us with the split if you can on the kinds of tools on the.

Hi.

Good morning, I wanted to ask.

Between Abrogator act or virtual card or other kinds of payment modalities would be great. Thanks, again, guys nice quarter.

Michael about the.

The spend and expense management product launch you had alluded to that I believe last quarter.

Yes, hey, thanks Darren.

That was a kind of a multifaceted question. So let me kind of a.

Chip away at it so first of all the supplier growth question, Yes, we're super excited we broke the 1 billion threshold and ended the year at $1 two suppliers on the network.

And.

It seemed like you were pretty optimistic.

The opportunity there so.

Any context on that or timing or significance would be helpful. Thank you.

That is that 24% growth is consistent to what we've seen in past years.

Yeah. Thanks, Jamie Yeah, I'm glad you asked that question certainly in the past I was always excited to talk about our invoice accelerated payment accelerate our offering now that thats in the market.

So we feel like that we're at it continue to be a nice rhythm in terms of growing the network on the supplier side.

I'm spending a lot of energy on our on our spend management.

And we.

We see kind of a consistent mix of.

Upcoming platform.

And so yes, we are.

Expect it to be.

At least two initial customers.

Later, this year, but really start having an impact in 'twenty five and beyond.

However.

Our avid pay direct which is our <unk> plus.

The reason for my excitement around it is when you think of all the transactions that we manage today.

Offering.

Back.

10 years ago, we had one payment with <unk> in each of those buckets today in virtual card, we have about a dozen different payment with <unk>, where we have.

We do a really good job of managing close to 100% of all the expense transactions that have an invoice.

For our customers because we are the system of record for all their invoice related expenses and directly or the of the feed to their general ledger get things paid.

Partly because of our deep partnership with Mastercard, our ability to manage multiple forms of interchange and the combination what we do is we use the <unk>.

However, we think that we're managing overall in terms of our customers' expenses, probably in the 85% range of customers expenses related to an invoice and then you have 15% that kind of a fault side that which occur in Tuesday travel and entertainment expense.

A combination of price, which is interchange structure combined with speed of payment.

Combined with the data remittance and reconciliation data.

Kind of functional team level of expenses that they need to make in terms of immediate payments.

Then lastly, combined with a level of straight through process and so those are like four variables that we have within our payment modality in different levels within those four create different payment modalities across virtual card that will allow suppliers that.

So the mission of our spend management platform is to capture as much of that remaining 15% of our spend that a customer has.

They haven't been our platform, but the real thing that makes it unique to avid exchanges, which our customers are really excited about is now having all their financial expense data in one platform for reporting.

Maybe don't have acceptance of card from across the industry to be able to.

Except the card and say the straight through process with high levels of reconciliation data provided directly to them. So it's a non human touch.

So one of the Thorn in the side of lots of the Cfos of our customers as Mike.

Mike we have 85% of our expense data that's great for reporting, but then we have to like piece together the remaining 15%, it's either a manual process or in third party. Other third party applications that are not as well integrated to our general ledger and it'd be great. Just to have one place that we can go and have our expense reporting.

Receivable function on their side and those are all examples that we're using.

Continue to add suppliers to network on the on the flip side on the avid pay direct we're doing really the same thing except shuttling through.

But again, combining speed of payment different price points.

To better run our business and so that's the mission that we're on and we think the spend management product is.

Different levels of remains data along with different levels of straight through process.

And so.

Long term going to give us that capability and provide just a really.

I think you ended with them kind of reference to long term. We expect that we think we can take monetize payments about 70% of transactions and.

Great increase at a value proposition to our by our customers.

Great. Thanks for the context, Mike I'll jump back.

We still believe that and but again, it's not going to be.

One particular payment modality that kind of saved the day.

The next question is from Bryan Keane with Deutsche Bank. Please go ahead.

Lots of different pay modalities, combining different levels of those four factors that we continue to believe is the secret sauce.

Hi, guys. Congrats on these results.

Wanted to go back to the revenue acceleration that you're expecting this year.

That makes sense thanks, guys.

I will turn it back to Jeff Thanks again.

No thats exploding ex political can you just talk about.

Thanks Darren.

The next question is from Jamie Friedman with Susquehanna. Please go ahead.

A couple of the drivers there and then what might make this guidance conservative or any risk to the topline number.

Hi.

Good morning, I wanted to ask.

Then just lastly on EBIT.

Michael about the.

Coming well ahead of our expectations and consensus for this year any any thought.

The spend and expense management product launch you had alluded to that I believe last quarter.

Thoughts on 25, the 20% plus EBITDA margin does that also mean that you may be running ahead of kind of original targets for 25 on EBITDA.

And.

It seemed like you were pretty optimistic.

The opportunity there so.

Thanks, Brian Yeah, Let me just kind of take those in order. So a couple of things. We're excited about in the guide, particularly in the back half our yield driven acceleration associated with we've talked already about kind of beginning to see that curve and payment accelerator.

Any context on that or timing or significance would be helpful. Thank you.

Yeah. Thanks, Jamie Yeah, I'm glad you asked the question certainly in the past I was always excited to talk about our invoice accelerate or nonpayment accelerator offering now that thats in the market.

Also in terms of.

Opportunities to offer increasingly more payment methods.

I'm spending a lot of energy on our on our spend management.

Upcoming platform.

And so to accelerate their digital acceptance. There. We also remember half <unk> folio that are sort of still ramping and soak it could contribute.

And so yes, we expect it to be.

At least two initial customers.

Later in this year, but really start having an impact.

From a volume perspective, so feel good about kind of how things are setting up in the back half.

25 and beyond.

Your second question is like if we were surprised to the upside what would that look like I think we already touched on the approach we took in guidance for the political cycle.

However.

The reason for my excitement around it is when you think of all the transactions that we manage today.

We do a really good job of managing close to 100% of all the expense transactions that have an invoice for our customers. Because we are the system of record for all their invoices related expenses and directly or the of the feed to their general ledger get things paid.

I think the next thing I would point to is is this.

New pay methods like we're really excited about having invested in those and those could potentially move the needle for us not to mentioned payment accelerator all of that said keep in mind the macro backdrop right.

However, we think that we're managing overall in terms of a customer's expenses probably in the 85% range.

Continuing to guide in project, assuming no change and we're hopeful that theres change but of course, that's not contemplated in the guide and then the final question on EBITDA again really kind of proud of how we finished the year and setting ourselves up to sort of turn the profitability corner and be meaningfully profitable.

Customers expenses relate to an invoice and then you have 15% that kind of a fault side that which occur in Tuesday travel and entertainment expense or.

They're kind of functional team level of expenses that they need to make in terms of immediate payments and so the mission of our spend management platform is to capture as much of that remaining 15% of a spend that a customer has.

In 2000 and for your question about 25, what I would say is that even in even with the macro backdrop macro backdrop that exists today.

We've got sort of all the levers available to us as gross margin continues to expand again, we see additional yield and unit cost opportunities to do so plus the leverage that you are seeing in operating expenses. So we feel good about that rule of 40 target for 25.

So one of the Thorn in the side of lots of the Cfos of our customers.

Awesome. Thank you guys.

Mike we have 85% of our expense data that's great for reporting, but then we have to like piece together the remaining 15%, it's either a manual process or third party. Other third party applications that are not as well integrated to our general ledger and it would be great. Just to have one place that we can go and have our expense reporting.

Thank you.

Our next question is from James Faucette with Morgan Stanley. Please go ahead.

Great. Thank you very much I just wanted to ask gentlemen, most of my.

Our questions have been answered in terms of where you're at right now but wanted to ask in terms of M&A you guys have historically done a good job finding opportunities to add additional either and customers in markets or capabilities.

Better run our business and so that's the mission that we're on and we think the spend management product is up.

Long term going to give us that capability and provide just a really.

Capabilities to the platform and so I'm, just wondering how youre thinking about that especially as your profitability improves how should we think about capital allocation and M&A within that and are you seeing good opportunities in pipeline. Thanks.

Great increase at a value proposition to our by our customers.

Great. Thanks for the context, Mike I'll jump back.

Yeah.

Maybe first on capital allocation and Mike can mentioned in context of what we're seeing in the M&A pipe I think we are again sort of turning profitable looking at sort of meaningful free cash flow in our future I would say from a capital allocation perspective, M&A is really interesting to us and in terms of our balance sheet kind of looking at all the options that we have available to us.

The next question is from Bryan Keane with Deutsche Bank. Please go ahead.

Hi, guys. Congrats on these results.

Wanted to go back to the revenue acceleration that you're expecting this year I know that's exploded ex political can you just talk about a couple of the drivers there and then what might make this guidance conservative or any risk to the top line number and then just lastly on.

Yes, maybe a little bit of pipeline, we think it's.

Long term it continues to be.

A part of our overall kind of growth expansion playbook, we think and in addition to kind of our 20% kind of growth mantra that we expect to deliver consistently on a long term basis that there is an inorganic growth lever that we can add to that.

EBIT.

Coming well ahead of our expectations and consensus for this year.

Any thoughts.

<unk>, 25% to 20% plus EBITDA margin does that also mean that you may be running ahead of kind of original targets for 25 on EBITDA.

Should we find the right opportunities.

So I think we're very focused on.

We're talking to lots of participants.

Thanks, Brian Yeah, Let me just kind of take those in order. So a couple of things. We're excited about in the guide, particularly in the back half our yield driven acceleration associated with we talked already about kind of beginning to see that curve and payment accelerator.

Typically there are smaller companies.

That are.

In the different nine verticals that we're in we also have some targets in terms of new verticals that we'd look for acquisitions in and and we're having lots of conversations.

Or still have not seen the kind of private market valuations reflect those that are at the public company level, yet and so I think we're continuing to.

Also in terms of the.

Opportunities to offer increasingly more payment methods.

And so to accelerate the digital acceptance there. We also remember half and three an app folio that are sort of still ramping and so could could contribute.

<unk> and however, when the right opportunities present themselves certainly.

From a volume perspective, so I feel good about kind of how things are setting up in the back half.

With our balance sheet and capabilities.

<unk> positioned to execute these I think the core playbook. However is around vertical market expansion, we feel really good about our product capabilities.

Your second question is like if we were surprised to the upside what would that look like I think we already touched on.

<unk>, we took in guidance for the political cycle.

And so that's.

That wouldn't be kind of a key focus for us it would be more.

I think the next thing I would point to is is this.

Continue to grow beachhead of customers.

Within the nine verticals that we're in as well as use it as an opportunity to expand those verticals even further.

Great. Thank you.

The next question is from Tien Tsin Huang with JP Morgan. Please go ahead.

Hello. Good morning, good results here just on the outlook I wanted to ask if new product.

Contribution as a meaningful or measurable contributor to.

Turned to profitability corner and be meaningfully profitable.

For fiscal 'twenty four here relative to your past initial guidance so.

In 2000 and for your question about 25%, what I would say is that even in even with the macro backdrop macro backdrop that exists today.

So just new product contribution.

Yes, Tien tsin, Great question, I think probably what I would just add is on the supplier side, we talked about the payment.

Feel like we've got sort of all the levers available to us as gross margin continues to expand again, we see additional yield and unit cost opportunities to do so plus the leverage that you are seeing in operating expenses. So we feel good about that rule of 40 target for 25.

Opening up new payment modalities.

But otherwise kind of all the products in the back.

Yes, I think when we look of the new products that we have payment accelerator and then spend management is.

Awesome. Thank you guys.

I alluded to earlier.

Thank you.

Really are.

Our next question is from James Faucette with Morgan Stanley. Please go ahead.

It really factors in terms of executing this year.

They really set us up nicely for $25 26 and beyond.

Great. Thank you very much.

Wanted to ask generally in most of my questions.

Got it so really build up the momentum and then we will feel more of that in fiscal 'twenty five okay got it just on the just thinking about.

I know you've got a lot of questions on past Pan and visibility I'm. Just curious when will you get closer visibility on that is it really going to be just in that third quarter in terms of how a real or conservative that that outlook that you're setting up will be I'm. Just curious how quickly you might see.

Abilities to the platform and so just wondering how youre thinking about that especially as your profitability improves how should we think about capital allocation and M&A within that and are you seeing good opportunities in pipeline. Thanks.

That would the lead time would be based on the past.

Maybe first on capital allocation and then Mike can mentioned in context of what we're seeing in the M&A pipe I think we are again sort of turning profitable looking at sort of meaningful free cash flow in our future I would say from a capital allocation perspective, M&A is really interesting to us and in terms of our balance sheet kind of looking at all the options that we have available to us.

Yes, remember, but based on the past is the key word is this is our first political cycle.

Not an army presidential cycle I should say.

They kind of interim cycles that we do have some experience with we saw.

A smaller level or lower level of activity occur earlier in the year and then obviously it builds up in Q3 as the.

Maybe a little bit of a pipeline we think it's.

Long term it continues to be.

A part of our overall growth expansion playbook. We think in addition to kind of our 20% kind of growth mantra that we expect to deliver consistently on a long term basis that there is an inorganic growth lever that we can add to that.

As the monster quarter.

For it.

So I think we're taking a cautious approach and expecting a kind of a similar build through the year as we've seen in the non presidential cycles end up.

But we're probably is.

As anxious.

Should we find the right opportunities.

To see how everything falls out as you are we just take a cautious approach to it but we think we've set ourselves up really nicely in terms of our market positioning we've added some really nice political customers since.

So I think we're very focused on.

We're talking to lots of participants.

Typically they are smaller companies.

That are.

In the different nine verticals that we're in we also have some targets in terms of new verticals that we'd look for acquisitions in and we're having lots of conversations.

Since the last cycle and really like our industry positioning of being the leader in political payments yes.

No it seems set up well thank you Bob.

Think.

Or still have not seen the kind of private market valuations reflect those that are at the public company level, yet and so I think we're continuing to.

Thank you.

Our next question is from Alex Mark Graf with Keybanc capital markets. Please go ahead.

Yeah.

Hey, guys. Thanks for taking my question just one from me.

Cautious and however, when the right opportunities present themselves certainly.

Quickly on some of these partnerships at Folio M. Three you mentioned the sort of contribution in the second half of 'twenty. Four is starting to show up I'm. Just curious is that sort of the time to benefit we should start to think of as you sign more of these or are there. Some early learnings from the first couple of that Mike.

With our balance sheet and capabilities.

We're in a great position to execute these I think the core playbook. However is around vertical market expansion, we feel really good about our product capabilities.

So that's that wouldn't be kind of a key focus for us it would be more.

Im kind of accelerate that time to revenue as you add more partners here.

We continue to grow beachhead of customers within the line verticals that we're in as well as use it as an opportunity to expand those verticals even further.

Okay. So first of all.

We're super excited about.

Overall sales motion.

Great. Thank you.

I would say the partnerships is certainly exciting I'll talk about <unk>, but remember also that over the last year, it's been a phenomenal year in terms of building a tablet and our go to market strategies.

The next question is from Tien Tsin Huang with JP Morgan. Please go ahead.

Hello. Good morning, good results here just on the outlook I wanted to ask if new product.

Additionally, James sudden as our Chief revenue Officer earlier last year and then.

Contribution as a meaningful measurable contributor to.

The addition of Doug Anderson later in the year as our Chief product officer that combination is really powerful in terms of.

For fiscal 'twenty four here relative to your past initial guidance so.

So just new product contribution.

How we kind of really accelerate that organic growth.

Yeah, Tien Tsin, Great question, I think probably what I would just add is on the supplier side, we've talked about the payment.

Kind of Formula and then executing on the partnerships is a key piece of that.

Opening up new payment modalities.

So I think like some of the new product stuff.

But otherwise kind of all the products in the back.

We typically have a cautious approach to any new partnership until it really.

Yes, and I think when we look of the new products that we have payment accelerator and then spend management is.

We begin to see the scaling of it.

However, although our folio.

I alluded to earlier.

Really are.

The characteristics of being our largest partnership ever.

It really factors in terms of executing this year.

In terms of the number of customers, but they have 19000 customers of which roughly 50%. We think are right in our sweet spot of core customer profile.

They really set us up nicely for $25 26 and beyond.

Got it so really build up the momentum and then we'll feel more of that in fiscal 'twenty five okay got it just on the just thinking about.

And we have lots of learnings from all the other partnerships that we've executed that.

Applying to both M three and they are folio partnership so.

I know you've got a lot of questions on passband and visibility I'm just curious when will you get closer visibility on that is it really going to be just net third quarter in terms of how.

We feel really good about.

Our playbook related to executing these partnerships combined with the talent level that we've assembled.

The position so.

A real or conservative that that outlook that youre setting up will be I'm. Just curious how quickly you might see that with the lead time would be based on the past.

As Joel indicated it will certainly.

More noticeably began impacting the second half of the year, but again.

We feel really good about the setup for $25 26, and the impact of these partnerships long term.

Yes remember based on the past is the key word is this is our first political cycle.

Not an army presidential cycle I should say.

Kind of interim cycles that we do have some experience with we saw.

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

Smaller level or lower level of activity occur earlier in the year and then obviously it builds up in Q3 as the.

As the monster quarter.

Thanks again, everybody for your interest in Abbott exchange as the only publicly traded company with really critical mass in the automation of accounts payable and payment automation.

For it.

So I think we're taking a cautious approach and expecting a kind of a similar build through the year as we've seen in the non presidential cycles end up.

For the middle market, we believe we're in a really solid position to capitalize on the secular trend around digital transformation.

But we're probably is.

As anxious.

The back office and given our disciplined execution in the face of continued kind of macro challenges along with our financial strength. We believe there is a significant runway for revenue growth profitability and value creation for investors.

Last cycle, and we like our industry positioning and being the leader in political payments.

That and we look forward to sharing our progress with you in our next earnings call.

Yes, no it seems set up well thank you Bob.

Thank you.

Thanks again everybody.

Our next question is from Alex Mark graft with Keybanc capital markets. Please go ahead.

The conference has now concluded.

Thank you for attending today's presentation you may now disconnect.

Hey, guys. Thanks for taking my question just one from me.

Quickly on some of these partnerships folio M. Three you mentioned the sort of contribution in the second half of 'twenty. Four is starting to show up I'm. Just curious is that sort of the time to benefit we should start to think of as you sign more of these or are there. Some early learnings from the first couple that might.

Kind of accelerate that time to revenue as you add more partners here.

So first of all.

No.

We're super excited about.

Our overall sales motion.

I would say the partnerships is certainly exciting I'll talk about second but remember also that over the last year. It's been a phenomenal year in terms of building a tower in our go to market strategies.

Additional James sudden as our Chief revenue Officer earlier last year and then.

The addition of Doug Anderson later in the year.

Our chief product officer that combination is really powerful in terms of.

Hi.

Kind of really accelerate that organic growth.

Kind of Formula and then executing on the partnerships is a key piece of that.

So I think like some of the new product stuff.

Typically of a cautious approach to any new partnership until it really well.

We begin to see the scaling of it.

However, although our folio has the characteristics of being our largest partnership ever.

In terms of the number of customers, but they have 19000 customers of which roughly 50%. We think are right in our sweet spot of core.

Customer profile.

And we have lots of learnings from all the other partnerships that we've executed.

We're certainly applying to both M three and they are folio partnership so.

We feel really good about our our playbook related executing these partnerships combined with the talent level that we've assembled.

The position so.

As Joel indicated it will certainly.

More noticeably be get impacted in the second half of the year, but again.

We feel really good about the setup for $25 26.

The impact of these partnerships long term.

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

Yes.

Thanks again, everybody for your interest in avid exchange as the only publicly traded company with really critical mass in the automation of accounts payable and payment automation.

For the middle market, we believe we're in a really solid position to capitalize on the secular trend around digital transformation.

Of the back office and given our disciplined execution in the face of continued kind of macro challenges along with our financial strength. We believe there is a significant runway for revenue growth profitability and value creation for investors with that we look forward to sharing our progress with you in our next earnings call. Thanks again everybody.

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

Goodbye.

[music].

Okay.

[music].

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