Q1 2024 Avidxchange Holdings Inc Earnings Call

May 8, 2024

Operator: Good morning, everyone, and thank you for joining us for the Avidxchange Hldg's Incorporated First Quarter 2024 Earnings Call. Please note this event is being recorded.

Good morning, everyone and thank you for joining us for the avid exchange Holdings incorporated first quarter 2024 earnings call. Please note. This event is being recorded.

Operator: Joining us on the call today is Michael Praeger, Avidxchange's Co-Founder and Chief Executive Officer, Joel Wilhite, Avidxchange's Chief Financial Officer, and Subhaash Kumar, Avidxchange's Head of Investor Relations. Before we begin today's 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 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. Also, please note that the company undertakes no duty to update or revise forward-looking statements.

Operator: 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.

Operator: We begin today's 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.

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

Operator: Operational outlook and financial guidance. During today's call also 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. <unk>.

Operator: 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. 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. If you require operator assistance, please press star then zero.

Operator: 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 finance.

Operator: The results prepared in accordance with GAAP. If you require operator assistance. Please press Star then zero I would now like to turn the conference over to Michael Prager. Please go ahead.

Michael Praeger: I would now like to turn the conference over to Michael Praeger. Please go ahead. Thank you, everyone, for joining us today. Joel Wilhite and I are excited to discuss Avidxchange's first quarter 2024 results. This is our 11th reporting quarter since becoming a public company in October of 2021, and we now have delivered 11 consecutive quarters of financial outperformance relative to our expectations. Amid prolonged macroeconomic volatility, our results highlight the relative resilience of our financial model.

Michael Praeger: Thank you everyone for joining us today, Joe Wilhite and I are excited to discuss avid exchange's first quarter 2024 results. This is our 11th reporting quarters since becoming a public company in October of 2021, and we now have delivered 11 consecutive quarters of financial outperformance relative to our expectations.

Michael Praeger: <unk>.

Michael Praeger: Amid prolonged macroeconomic volatility our results highlight the relative resilience of our financial model with the continued choppiness, we're seeing in customer transaction volumes, we remain steadfast in our in executing our strategic playbook. This includes driving our yield expansion to counter the impact of uneven transaction.

Michael Praeger: With the continued choppiness we are seeing in customer transaction volumes, we have remained steadfast in executing our strategic plan. This includes driving our yield expansion to counter the impact of uneven transaction volumes, focusing on expanding our gross margin through unit cost reductions, and driving operating leverage through cost discipline and smart investment to expand our adjusted EBITDA mark. The drivers of our success continue to be our middle market customers and the impact of our purpose-built value proposition for middle market companies.

Michael Praeger: <unk> focusing on expanding our gross margin through unit cost reductions and driving operating leverage through cost discipline and smart investments to expand our adjusted EBITDA margin.

Michael Praeger: The drivers of our success continues to be our middle market customers and the impact of our purpose built value proposition for middle market companies.

Michael Praeger: More crucially, it entails engineering and executing our various product offerings, technology, go-to-market, and operational value proposition that delivers quantifiable benefits of digitally transforming our customers' back office by automating accounts payable and payments over the differentiated two-sided network that we have today. The payback for our customers is rapid, impactful, and quantifiable in both the efficiency related to labor cost savings and supporting their ability to grow without adding incremental back office headcount. This, in turn, deepens our competitive advantage as we are a market leader in driving digital transformation strategies for middle market companies.

Michael Praeger: More crucially it entails engineering and executing our various product offerings technology go to market and operational value proposition that delivers quantifiable benefits of digitally transforming our customers back office by automating accounts payable in payments over the differentiated two sided network that we have.

Michael Praeger: Today the.

Michael Praeger: The payback for our customers as rapid impactful and quantifiable on both the efficiency related to labor cost savings and supporting their ability to grow without adding incremental back office head count.

Michael Praeger: This in turn deepens, our competitive advantage as we are market leader in driving digital transformation strategy for middle market companies.

Michael Praeger: Thanks to our dedicated and talented team members, the runway for value creation for both our customers and investors is still in the very early stages. On today's call, I will touch on the five key priorities we have for this year that we're using to gauge our path of financial and operating progress, in addition to continuing to widen our competitive advantage around the middle market. Our key priorities for this year include a performance culture, customer obsession, innovation, growth, and scale objectives.

Michael Praeger: Thanks to our dedicated and talented team members the runway for value creation for both our customers and investors is still in the very early stages.

Michael Praeger: On today's call I will touch on the five key priorities. We have for this year that we're using to gauge our path of financial and operating progress. In addition to continued to widen our competitive advantage around the middle market.

Michael Praeger: Our key priorities for this year include performance culture customer obsession innovation growth and scale objectives.

Michael Praeger: Taking off, we believe that the quick, shorthand measure of performance culture is our financial score. Looking at the first quarter of 2024, we delivered solid financial results across the board. Joel will go into more detail on our results later in today's call, but here are some of the highlights. Revenue growth in the quarter was over 105 million, up over 21% year over year. The growth in the quarter was led by a combination of continued yield expansion coupled with transaction growth.

Michael Praeger: Kicking off we believe that the quick shorthand measure on performance culture is our financial scorecard.

Michael Praeger: And looking at the first quarter of 2024, we delivered solid financial results across the board.

Michael Praeger: Joel will go into more detail on our results later on today's call, but here are some of the highlights.

Michael Praeger: Revenue growth in the quarter was <unk>.

Michael Praeger: $105 million up over 21% year over year.

Michael Praeger: The growth in the quarter was led by a combination of continued yield expansion coupled with transaction growth.

Michael Praeger: Our success around yield expansion is a result of our value proposition related to our various e-payment modalities focused on converting paper check suppliers into electronic payment adopters, as well as continued efficiencies with our processes, automation, and AI improvements around executing these various forms of electronic painting.

Michael Praeger: Our success around yield expansion as a result of our value proposition related to our various E payment modalities focus on converting paper checks suppliers into electronic payment adopters as well as continued efficiencies with our processes automation and AI improvements around executing these various form.

Michael Praeger: <unk> electronic payments.

Michael Praeger: Non-GAAP gross margins continued their upward trajectory, coming in at 72.4% and crossing the lower band of the 72% to 75% non-GAAP gross margin target ahead of our 2025 gross margin expectations as we outlined during our investor day last June. Along with solid operating expense discipline, our adjusted EBITDA margins in the quarter exceeded 16%. Furthermore, our transaction yield, which is a metric that we focus on across our executive leadership team, as it demonstrates the power and effectiveness of our Avidxchange business flywheel model, was up almost 15% to reach $5.47 per transaction.

Michael Praeger: non-GAAP gross margins continued their upward trajectory coming in at 72, 4% and crossing the lower band of the 72% to 75% non-GAAP gross margin target ahead of our 2025 gross margin expectations as we outlined during our Investor Day last June.

Michael Praeger: Along with solid operating expense discipline, our adjusted EBITDA margins in the quarter exceeded 16%. Furthermore, our transaction yield which is a metric that we focus on across our executive leadership team as it demonstrates the power and effectiveness of our avid exchange business flywheel model was up almost 15%.

Michael Praeger: To reach $5 47 per transaction.

Michael Praeger: Moving on to our customer obsession metrics, one of the data points we track is our top of funnel prospect activity. The first quarter of 2024 saw some very encouraging trends, as well as some adjustments to our marketing initiatives that we believe will be net positive for the year but negatively impacted us during the past quarter. Overall, top of funnel activity during the first quarter of 2024 was unchanged year over year, with certain verticals leading and some lagging.

Michael Praeger: Moving onto our customer obsession metrics one of the data points. We track is our top of funnel prospect activity. The first quarter of 2024 saw some very encouraging trends as well as some adjustments to our marketing initiatives that we believe will be net positive for the year, but negatively impacted us during the past quarter or.

Michael Praeger: The real estate vertical, our longest-standing vertical market segment, led the pack and was up high double-digit percentages on a year over year basis. The growth in the real estate vertical is very encouraging as we have not seen this level of growth in more than a year, led by very strong multifamily activity. We also saw double-digit growth in our education and nonprofit verticals as well. Most compelling of all, our buyer customer close rates were up almost 50% year over year virtually across all of our industry verticals, further demonstrating our increasing sales effect.

Michael Praeger: We're off the top of funnel activity during the first quarter of 2024 was unchanged year over year with certain verticals, leading in some lagging the real estate vertical our longest standing vertical market segment led the pack was up high double digit percentages on a year over year basis the.

Michael Praeger: The growth in the real estate vertical is very encouraging as we have not seen this level of growth in more than a year led by very strong multifamily activity.

Michael Praeger: We also saw double digit growth in our education and nonprofit verticals as well most compelling a ball or buyer customer close rates were up almost 50% year over year virtually across all of our industry verticals further demonstrating our increasing sales effectiveness.

Michael Praeger: However, in a handful of our verticals, we did see instances where our top of funnel performance lagged during Q1. In the quarter, those verticals included our new markets, homeowners association, or HOA management, as we call it, construction, and vertical and financial services. Let me briefly discuss the reasons for this leg and how the top of the funnel has rebounded since.

Michael Praeger: However, in a handful of our verticals, we did see instances, where our top of funnel performance lagged during Q1 in the quarter. Those verticals included our new markets Homeowners Association or HOA management, as we call it construction and vertical in financial services.

Michael Praeger: Let me briefly discuss the reasons for this lag and how the top of funnel has rebounded since.

Michael Praeger: As we continue to onboard new leaders in our sales and marketing group designed to help us scale to our next milestone target of reaching $1 billion in revenue, they have brought greater discipline, alignment, and allocation of our marketing and go-to-market investment dollars. As part of this evolution, we have prioritized our resource allocation mix to focus on slightly fewer but higher-yielding industry user conferences and trade shows that meet our ROI and lead flow targets.

Michael Praeger: As we've continued to onboard new leaders and our sales and marketing group designed to help us scale to our next milestone target of reaching 1 billion of revenue they have broad greater discipline alignment and allocation mix of our marketing and go to market investment dollars as part of this evolution, we have prioritized our resource allocation mix.

Michael Praeger: The focus on slightly fewer higher yielding industry user conferences and trade shows that meet our ROI and lead flow targets.

Michael Praeger: As a result, we exited a number of the lower-yielding conferences and trade shows during the quarter and prioritized greater investment in higher-yielding conferences and trade shows occurring over the balance of the year. This resulted in a 30% year over year decline in trade show traffic during the quarter, with a corresponding impact on our top of funnel metrics during Q1 as we implemented this strategy.

Michael Praeger: As a result, we exited a number of the lower yielding conferences and trade shows.

Michael Praeger: During the quarter and prioritize greater investment in higher yielding conferences and trade shows occurring over the balance of the year.

Michael Praeger: This resulted in a 30% year over year decline in trade show traffic during the quarter with a corresponding impact on our top of funnel metrics during Q1 as we implemented the strategy.

Michael Praeger: We've allocated more of our investment resources for higher-yielding trade shows in Q2 and for the balance of the year, which we believe still have a higher impact on our overall top of funnel engagement. And the good news is that this strategy is already getting traction, as our top of funnel activity is up nicely in the high single-digit percentages across the board so far in the second quarter. We believe that the strategic changes we're making to our marketing efforts, notwithstanding the macro backdrop, are the right moves and highly aligned with our long-term organic growth objective.

Michael Praeger: We've allocated more of our investment resources for higher yielding trade shows in Q2 and for the balance of the year, which we believe still have an overall higher impact to our overall top of funnel engagement metrics.

Michael Praeger: And the good news is that this strategy is already getting traction is our top of funnel activity is up nicely in the high single digit percentages across the board so far in the second quarter.

Michael Praeger: We believe that the strategic changes, we're making to our marketing motions notwithstanding the macro backdrop are the right moves and are highly aligned with our long term organic growth objectives.

Michael Praeger: With our recent accounting system integration partnerships, we're cautiously optimistic about our top of funnel as we scale up for the remainder of the year. Now, turning to our innovation priority, I'd like to provide an update on Payment Accelerator, formerly Invoice Accelerator 2.0.

Michael Praeger: With our recent accounting system integration partnerships, we're cautiously optimistic about our top of funnel as we scale up for the remainder of the year.

Michael Praeger: Now turning to our innovation priorities.

Michael Praeger: This product enables the small business supplier customers on our network frictionless access to improving their cash flow by leveraging our robust underwriting analytics, security, and scalability protocols. We're extremely excited about the prospects for Payment Accelerator as expected to be a meaningful growth contributor in 2025 and beyond, as we believe that supplier financing and cash flow management offerings will be the third leg of our overall revenue model in partnership with driving additional software and payment network revenue.

Michael Praeger: Like to provide an update on payment accelerator, formerly invoiced accelerator to point out.

Michael Praeger: John as we believe that supplier financing and cash flow management offerings will be the third leg of our overall revenue model in partnership with driving additional software and payment network revenues.

Michael Praeger: Given that this is a credit product, we continue to meter the launch in order to better understand the user experience given that this next-generation product has an entirely new digital front-end user experience complete with self-service digital enrollment capability. In addition, we also want to ensure that our various third-party integrations that support Payment Accelerator are working and supporting our back office processes as designed at scale. These include enterprise-grade features such as data science analytics critical for successful payment interception and support for a new subledgering central repository required for real-time offsets and bifurcation of payments to properly execute the innovative money movement approach.

Michael Praeger: Given that this is a credit product we continue to meet our launch in order to better understand user experience given that this next generation product is an entirely new digital front end user experience complete with self service digital enrollment capabilities.

Michael Praeger: In addition, we also want to ensure that our various third party integration that support payment accelerator are working and supporting our back office processes as designed at scale.

Michael Praeger: These include enterprise grade features such as the data science analytics critical for successful payment interception and support for a new sub ledger in central repository required for real time offsets and bifurcation of payments to properly execute the innovative money movement approach.

Michael Praeger: This will enable us to seamlessly leverage multiple third-party financing partners in the future, as well as open this offering to a large portion of our 1.2 million supplier customer base, many of which fall into the small business segment, even including support for larger middle market suppliers looking to accelerate larger invoices. Put this new generation user experience in perspective; Payment Accelerator, compared to its predecessor, is designed to onboard a supplier in a matter of minutes versus several days. What makes this process frictionless is that we eliminate the need for a traditional financial review underwriting process, which requires historical financial statements from suppliers.

Michael Praeger: This will enable us to seamlessly leverage multiple third party financing partners in the future as well as open this offering to a large portion of our $1 2 million supplier customer base, many of which fall into the small business segment, even including support for larger middle market suppliers looking to accelerate larger invoices.

Michael Praeger: To put this new generation user experience in perspective payment accelerator compared to its predecessor is designed to onboard a supplier in a matter of minutes versus several days.

Michael Praeger: What makes this process frictionless is that we eliminate the need for traditional financial review underwriting process, which requires historical financial statements from suppliers.

Michael Praeger: However, we leverage supplier and buyer history in transaction data, as well as real-time visibility into the transaction status and approvals inherent in our two-sided network, to underwrite and lower the credit risk, as well as provide protective setup provisions across the entire flow of invoices that a particular supplier may have on our network. The rapid onboarding process is also the result of the platform's highly integrated back-end that is designed to simultaneously validate the supplier's bank account information along with know-your-customer and know-your-bank compliance regulations in real-time as the supplier completes an online questionnaire of legal entity data and beneficial ownership information.

Michael Praeger: However, we leveraged supplier and buyer history and transaction data as well as real time visibility into the transaction status and approvals inherent in our two sided network to underwrite and lowered the credit risk as well as provide protective set of provisions across the entire flow of invoices that a particular supplier may have on our.

Michael Praeger: Work.

Michael Praeger: The rapid Onboarding process is also the result of the platform's highly integrated back in the designed to simultaneously validate the suppliers bank account information along with know your customer and know your bank compliance regulations real time as the supplier complete an online questionnaire of legal entity data and beneficial ownership infer.

Michael Praeger: <unk>.

Michael Praeger: Once onboarded, a supplier is presented with multiple acceleration offers with transparent pricing and various time-based funding options, including real-time payments. In addition to the payment accelerator offering, which highlights the eligible supplier invoices available for acceleration, we also provide an auto fund option where our intelligent decision engine automatically identifies all the supplier's eligible invoices and funds them automatically, ensuring the fastest access to cash availability every time an eligible invoice is available on our network. We have a growing network of supplier customers currently live using this auto fund option. This includes Charlotte, North Carolina-based supplier J.W.

Michael Praeger: One is on boarded our suppliers presented with multiple acceleration offers with transparent pricing and various time based funding options, including real time payments.

Michael Praeger: In addition to the payment accelerator offering highlighting the eligible supplier invoices available for acceleration. We also provide an auto fund option, where our intelligent decision engine automatically identifies all of the suppliers eligible invoices and funds them automatically ensuring the fastest access to cash availability every time.

Michael Praeger: <unk> and eligible invoice is available on our network.

Michael Praeger: We have a growing network of supplier customers currently live using this auto fund option. This includes Charlotte North Carolina based supplier J W home improvement.

Michael Praeger: Home Improvement was looking for quick access to receipt of payments for their invoices to support their overall business expansion and found the simplicity of our auto fund feature to be a major plus in our payment accelerator offering. We're leveraging data science and user experience and heat maps to understand and analyze user behavior as we intend to scale this offering five times over the next several years. We believe that our Payment Accelerator product will ultimately bring an intuitive front-end user experience for all of our B2B constituents, similar to that of a best-in-class consumer payments application with robust back-end instant decisioning and underwriting capabilities.

Michael Praeger: Which was looking for quick access to receipt of payments for their invoices to support their overall business expansion and found the simplicity of our auto fund feature to be a major plus in our payment accelerator offerings.

Michael Praeger: We are leveraging data science and user experience of heat maps to understand and analyze the user behavior as we intend to scale this offering fivefold.

Michael Praeger: Over the next several quarters.

Michael Praeger: We believe that our payment accelerator product will ultimately bring the intuitive front end user experience for all of our <unk> constituents similar to that of a best in class consumer payments application with robust backend instant decision and underwriting capability.

Michael Praeger: Next, I'd like to provide a progress update on some of our major accounting and ERP partnerships that we announced in 2023 as part of our strategic growth priority. Recall that we announced two marquee partnerships last year: Abfolio in the multifamily vertical industry and M3 in the hospitality vertical. Both of these partnerships are highly strategic in nature for very specific reasons.

Michael Praeger: Next I'd like to provide a progress update on some of our major accounting and ERP partnerships that we announced in 2023 is part of our strategic growth priorities.

Michael Praeger: Recall that we announced two marquee partnerships last year.

Michael Praeger: Our folio and the multifamily vertical industry and M. Three in the hospitality vertical.

Michael Praeger: Both of these partnerships are highly strategic in nature for very specific reasons, let's.

Michael Praeger: Let's start with that Folio, whose strategic rationale stems from its size, scope, and our vertical market experience. Recall the accounting system partnership with Folio is our biggest ever with a top accounting system provider focused on the multifamily real estate burden. We are currently executing our initial go-to-market phase with Affolio as we went live with our joint invoice and pay API integration a few weeks ago, and it is now available for general availability to all 19,000 Affolio customers through the Affolio Stack Marketplace.

Michael Praeger: Let's start with that folio, who has strategic rationale stems from its size scope and our vertical market experience recall, the accounting system partnership without folio is our biggest ever with a top accounting system provider focused on the multifamily real estate vertical.

Michael Praeger: We are currently executing our initial go to market phase without folio as we went live with our joint invoice and pay API integration a few weeks ago and is now broadcasting for general availability to all 19000, <unk> customers through our folio stack marketplace as part of our joint go live motion now fully was dipped.

Michael Praeger: As part of our joint go live motion, Fuling was deploying various marketing outreach initiatives across channels to steer its customers to our offering in its marketplace through email, landing pages, webinars, and joint pipeline reviews. What is truly exciting is the increasing top of the funnel activity we've already seen in the lead up to the go live integration announcement, along with high customer engagement. Since the announcement of our partnership in the fourth quarter of 2023, we have tripled the number of new opportunities created in the first quarter.

Michael Praeger: Point, various marketing outreach initiatives across channels, the spirits customers to our offering and it's marketplace through email landing pages, Webinars and joint pipeline reviews.

Michael Praeger: What is truly exciting is the increasing top of funnel activity, we've already seen in the lead up to the go live integration announcement, along with high customer engagement.

Michael Praeger: Since the announcement of our partnership in the fourth quarter of 2023, we have tripled the number of new opportunities created in the first quarter. We believe this kind of ramp sets us up nice tone for this partnership for 2024 with meaningful revenue built in 2025 and beyond as we believe that over 50 per.

Michael Praeger: We believe this kind of ramp sets us up for a nice tone for this partnership for 2024 with meaningful revenue build in 2025 and beyond, as we believe that over 50 percent of that full 19,000 existing customers are a strong product market fit for our office. Moving on to the M3 partnership in the hospitality vertical, where we're seeing similar opportunity dynamics unfold. M3, as you may recall, is the hospitality market leader in cloud-based accounting solutions and data management platforms tailored specifically for the hospitality industry. M3's customer base exceeds 1,000 hotel management groups and owner-operators, including 50% of the top hotel managers and operators in the United States.

Michael Praeger: Ascent of fully of 19000 existing customers, our strong product market fit for our offering.

Michael Praeger: Moving on to the <unk> partnership in the hospitality vertical where we're seeing similar opportunity dynamics unfold.

Michael Praeger: Three as you may recall is the hospitality market leader in cloud based accounting solutions, along with data management platform tailored specifically for the hospitality industry <unk>.

Michael Praeger: <unk> customer base exceeds 1000 hotel management groups and owner operators, including 50% of the top hotel managers and operators in the United States.

Michael Praeger: M3 is highly strategic for us, given that it accelerates our entry into the hospitality vertical through a player with a dominant position in the market. We went live with our embedded pay integration with M3's core select accounting solution in the third quarter of 2023. Since our initial launch, we've seen robust opportunity creation through our joint marketing efforts, including dedicated M3 representatives evangelizing partners such as Avidxchange for our highly integrated and embedded pay offering.

Michael Praeger: M. Three is highly strategic for us given that accelerates our entry into the hospitality vertical through a player with a dominant positioning in the marketplace.

Michael Praeger: We went live with our embedded paint integration with <unk> core select accounting solution in the third quarter of 2023.

Michael Praeger: Since our initial launch we've seen robust opportunity creation with our joint marketing efforts, including dedicated M. Three representatives evangelizing partners such as avid exchange for our highly integrated and embedded pay offering.

Michael Praeger: These opportunity creations are up four-fold on a year-over-year basis compared to Q1 2023. Given the traction we are seeing, we have jointly decided to broaden our relationship and just signed a contract extension with M3 to provide integration into its flagship accounting core solution. This accounting core integration is slated to go live in the second half of 2024.

Michael Praeger: These opportunity creations are up four four on a year over year basis compared to Q1 2023.

Michael Praeger: Accounting for integration is slated to go live in the second half of 2024, we believe that both our <unk> and three partnerships along with several others that are in the pipeline position us well for long term growth within our large addressable and <unk> AP automation market for middle market companies.

Michael Praeger: We believe that both our Atfolio and M3 partnerships, along with several others that are in the pipeline, position us well for long-term growth within our large addressable and unpenetrated AP automation market for middle market companies. Finally, on our key priority related business scale, I'd like to discuss the opportunities for sustained gross margin expansion, a major lever that we've relentlessly been addressing to great success. The success in gross margin expansion perfectly complements the operating expense and investment discipline that we have demonstrated since becoming a public company.

Michael Praeger: Finally on our key priority related business scale I'd like to discuss the opportunities for sustained gross margin expansion a major lever that we've relentlessly been addressing to great success.

Michael Praeger: Success in gross margin expansion perfectly complements the operating expense and investment discipline that we have demonstrated since becoming a public company.

Michael Praeger: To ensure continued expansion of gross margins, we believe that we have significant room to run as we work towards our long-term 80% plus gross margin target. We have continued to engineer new innovative technology, automation, and AI solutions that we believe could work at scale across every component and subcomponent of our operational value chain across our business. The latest arrow in our quiver is our new AI-powered IVR payment automation solution. To put this particular use case opportunity in perspective, currently, we employ both follow-the-sum sourcing strategies and chatbots to make payments across our various payment modalities.

Michael Praeger: To ensure continued expansion of gross margins, we believe that we have significant room to run as we work towards our long term, 80% plus gross margin target.

Michael Praeger: We have continued to engineer new innovative technology automation and AI solutions that we believe could work at scale across every component and sub component of our operational value chain across our business.

Michael Praeger: The latest arrow in our quiver as our new AI powered IV, our payment automation solution to put this particular use case opportunity in perspective currently we employ both followed with some sourcing strategies and chat bots to make payments across our various payment modalities.

Michael Praeger: While sourcing strategies optimize both unit costs and timezone coverage, our IPA-driven bots optimize unit costs and timezone coverage at speed and scale. But RPA-driven bot methods of payment execution have certain limitations given that they need IVR to perform the exact path of execution every time, or they break and need constant remapping work to be done, along with requiring human beings to be inserted at critical junctures for the process to be successful.

Michael Praeger: The sourcing strategies optimize both unit cost and time zone coverage, our IP, driven baas optimize unit cost and time zone coverage at speed and scale, but our P. Driven bought methods of payment execution have certain limitations given that they need IV iron to perform the exact path of execution every time or they break and need constant re.

Michael Praeger: The mapping work to be done along with requiring human beings to be inserted at critical junctures for the process to be successful.

Michael Praeger: So anytime anything changes or if there is a latency, bot automation fails, and the payment becomes manual or potentially kicked to a paper check. With our new AI-powered IVR automation solution, which is self-learning and self-correcting, optimizing the functionality of what our existing bots currently do along with what our bots cannot do, such as adjusting the changes and updates in a particular IVR decision tree marks a major new innovation milestone for

Michael Praeger: So anytime anything changes or if there is a latency bought automation fields and the payment becomes manual or potentially take to a paper check with our new AI powered IV, our automation solution, which is self learning and self correcting optimizing the functionality of what our existing bonds currently do along with what our bots cannot do such as the <unk>.

Michael Praeger: <unk> and the changes and updates in a particular IPR decision tree marks a major new innovation milestone for us.

Michael Praeger: During Q1, our new AI payment execution solution, which is still in the early stages of deployment, already demonstrated 2x the productivity of our prior bot technology and over 10x the productivity of humans executing this function. With this capability, we can increase our ability to scale across supplier payments and capture automation of low volume suppliers, where the cost versus benefit is disproportional to the high cost of automation versus the lower volume and spend of many of these suppliers, driving increased electronic payment penetration rates even further in our business.

Michael Praeger: During Q1, our new AI payment execution solution, which is still in the early stages of appointment already demonstrated a two X the productivity of our prior bot technology and over 10 X the productivity of humans executing this function.

Michael Praeger: With this capability, we can increase our ability to scale across supplier payments and capture automation of low volume suppliers, where the cost versus benefit is disproportional due to the high cost of automation versus the lower volume and spend of many of these suppliers.

Michael Praeger: Driving increased electronic payment penetration rates, even further in our business.

Michael Praeger: And most importantly, we believe this solution will scale non literally as we double and triple our transaction volume on the payment network in the future. In closing, we're off to a very strong start in 2024. And I'm excited with the progress we're making across our five operating priorities for the year, which include continuing to develop and recruit key talent to support our performance culture, our customer obsession, and continuing to increase the value proposition for both our buyer and supplier customers, delivering our innovation initiatives and offerings to support our durable long-term 20% organic growth objectives, along with continued scaling of our business towards the next billion dollar milestone in the coming year. We recognize that the macro backdrop has remained volatile and challenged over the past two years and creates a cautious approach to discretionary spending across the middle market.

Michael Praeger: And most importantly, we believe this solution will scale non literally as we double and triple our transaction volume on the payment network in the future.

Michael Praeger: In closing we're off to a very strong start in 2024 and I am excited with the progress we're making across our five operating priorities for the year, which include continued develop and recruit key talent to support our performance culture, our customer obsession and continuing to increase the value proposition for both our buyer and supplier customers.

Michael Praeger: Delivering on our innovation initiatives and offerings to support our durable long term, 20% organic growth objectives.

Michael Praeger: Along with continued scaling of our business towards our next billion dollar milestone in the coming years.

Michael Praeger: We recognize that the macro backdrop has remained volatile and challenge over the past two years and creates a cautious approach towards discretionary spending across the middle market.

Michael Praeger: However, we remain laser focused on operational rigor and execution, along with controlling those elements of our business model that we can control directly, which includes our targeted innovation investments geared towards continuing to expand the customer value proposition and impact we're having on both our buyer and supplier customers, increasing our competitive advantage across the middle market. As we remain on track to deliver our 2024 financial commitments, we believe the robust product payload and integration partnerships that we've announced provide us with an important tailwind for building for 2025 and beyond. I want to provide a special thanks to all my Avidx team members for their hard work, dedication, and relentless focus on executing our operational and strategic priorities.

Michael Praeger: However, we remained laser focused on the operational rigor and execution along with controlling those elements of our business model that we can control directly which includes our targeted innovation investments geared towards continued expanding the customer value proposition and impact we're having on both our buyer and supplier customers, increasing our competitive advantage across the <unk>.

Michael Praeger: Market.

Michael Praeger: As we remain on track to deliver our 2024 financial commitments, we believe the robust product payload and integration partnerships that we've announced provide us with an important tailwind building for 2025 and beyond I want to provide a special thanks to all my avid X team members for their hard work dedication.

Michael Praeger: <unk> and relentless focus on executing our operational and strategic priorities.

Joel Wilhite: We believe we're still in the very early innings of penetrating what is a large and unpenetrated market opportunity to deliver business-to-business accounts payable and payments automation offerings to middle market companies given our product innovation, strong execution, competitive, and financial strength. We believe we're well positioned to drive impactful value for customers, create future growth opportunities for our team members, and unlock significant long-term value for our shareholders. With that, I'd like to turn the call over to my partner, Joel Wilhite. Thanks, Mike. And good morning, everyone.

Michael Praeger: We believe we're still in the very early innings of penetrating what is a large and underpenetrated market opportunity deliver business to business accounts payable and payments automation offerings to middle market companies.

Joel Wilhite: Given our product innovation strong execution competitive and financial strength.

Joel Wilhite: We believe we are well positioned to drive impactful value for customers create future growth opportunities for our team members and unlock significant long term value for our shareholders.

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

Joel Wilhite: I'm pleased to talk to you today about our first quarter 2024 financial results, which reflect continued execution of our growth strategies amid continued macro uncertainty. Overall, we delivered another quarter of healthy year-over-year financial performance relative to the implied first quarter 2024 business outlook and excluding float and political revenue contributions. First quarter revenues came in higher due to payment and software yield expansion driven by ongoing ePay conversions.

Joel Wilhite: Thanks, Mike and good morning, everyone I'm pleased to talk to you today about our first quarter 2024 financial results, which reflect continued execution of our growth strategies amid continued macro uncertainty.

Joel Wilhite: Overall, we delivered another quarter of healthy year over year financial performance relative to the implied first quarter 2020 for business outlook.

Joel Wilhite: And excluding float in political revenue contributions.

Joel Wilhite: First quarter revenues came in higher due to payment and software yield expansion driven by ongoing ebay conversion.

Joel Wilhite: That, together with higher gross margins driven by higher revenues, ongoing progress on unit cost initiatives, software, and pay yield expansion, as well as sustained expense discipline, led to significant adjusted EBITDA outperformance. It's worth highlighting that this is our second consecutive quarter of adjusted EBITDA profit, ex-float. Most notably, we more than doubled our adjusted EBITDA profit sequentially, ex float and political, to $3.7 million in Q1 of 2024 from $1.5 million in Q4 2023.

Joel Wilhite: That together with higher gross margins driven by higher revenues.

Joel Wilhite: Ongoing progress on unit cost initiatives software and pain, when you pay yield expansion as well as sustained expense discipline led to significant adjusted EBITDA outperformance.

Joel Wilhite: It's worth highlighting that this is our second consecutive quarter of adjusted EBITDA profit ex float and political.

Joel Wilhite: Most notably we more than doubled our adjusted EBITDA profit sequentially ex float and political to $3 $7 million in Q1 of 2024 from $1 $5 million in Q4 2023.

Joel Wilhite: Due to higher transaction growth, software and payment yield expansion, lower unit cost, and operating leverage, leaving us incrementally more confident in achieving our financial targets rolled out during our June 2023 investor day. Now, turning to year-over-year results. Total revenue increased by 21.6% to $105.6 million in Q1 of 2024 over the first quarter of 2023. However, it's important to note that the number of business days year-over-year remained unchanged at 63 days.

Joel Wilhite: Due to higher transaction growth software and payment yield expansion lower unit cost and operating leverage leaving us incrementally more confident in achieving our financial targets rolled out during our June 2023 Investor day.

Joel Wilhite: Roughly 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 and political revenue. Our strong revenue growth also resulted in total transaction yield expanding to $5.47 in the quarter, up 14.9% from $4.76 in Q1 of 2023. Of the 14.9% increase, more than half of the increase was driven by pay and software yield coupled with a transaction mix skewed towards payment. The remainder was due to float and political revenue.

Joel Wilhite: Now turning to year over year results total revenue increased by 21, 6% to $105 $6 million in Q1 of 2024 over the first quarter of 2023.

Joel Wilhite: Software revenue of $29.7 million, which accounted for 28.1% of our total revenue in the quarter, increased 10.1% in Q1 of 2024 over Q1 of 2023. The increase in software revenues of 10.1% was driven by growth in total transactions of 5.8%, which continues to be impacted by macro choppiness, with the balance driven by growth in certain subscription-based revenues. Payment revenue of $75.2 million, which accounted for 71.2% of our total revenue in the quarter, increased 27.1% in Q1 of 24 over Q1 of 23.

Joel Wilhite: It's important to note that the number of business days year over year remained unchanged at 63 days.

Joel Wilhite: Roughly three quarters of the revenue growth was driven by the combination of the addition of new buyer invoice and payment transactions.

Joel Wilhite: With software and pay yield expansion the remaining revenue growth this quarter was driven by higher year over year float and political revenues.

Joel Wilhite: Our strong revenue growth also resulted in total transaction yield expanding $5.47 in the quarter up 14, 9% from $4 76 in Q1 of 2023.

Joel Wilhite: Of the 14, 9% increase more than half of the increase was driven by paid and software yield coupled with transaction mix skewed towards payments.

Joel Wilhite: The remainder was due to float and political revenues.

Joel Wilhite: Software revenue was $29 $7 million, which accounted for 28, 1% of our total revenue in the quarter increased 10, 1% in Q1 of 2024 over Q1 of 2023.

Joel Wilhite: The increase in software revenues of 10, 1% was driven by growth in total transactions of five 8%, which continues to be impacted by macro choppiness with the balance driven by growth in certain subscription base revenues.

Joel Wilhite: Payment revenue was $75 $2 million, which accounted for 71, 2% of our total revenue in the quarter increased 27, 1% in Q1 of 24 over Q1 of 'twenty three.

Joel Wilhite: Payment revenue reflects the contribution of interest revenues, which were $13.1 million in Q1 of 24 versus $7.1 million in Q1 of 2023. Political media revenue in the current quarter was approximately $800,000, negligible in the same period a year ago.

Joel Wilhite: Payment revenue reflects the contribution of interest revenues, which were $13 $1 million in Q1, 24 versus $7 $1 million in Q1 of 2023.

Joel Wilhite: Political media revenue in the current quarter was approximately $800000 of negligible in the same period a year ago.

Joel Wilhite: Excluding the impact of float and political revenues, which represent a third of the 27.1% increase, the remaining roughly two-thirds of the increase in payment revenues was driven by a combination of an increase in pay yield expansion, greater payment mix, and payment transaction volume increase of 8.1%. On a gap basis, gross profit of $69.2 million increased by 32.7% in Q1 of 2024 over the same period last year, resulting in a 65.5% gross margin for the quarter compared to 60% in Q1 2023. Non-Gap Gross Margin increased 510 basis points to 72.4% in Q1 of 2024 over the same period last year, with the lion's share of the increase driven mostly by unit cost deficiencies and yield expansion.

Joel Wilhite: Excluding the impact of float and political revenues, which represent a third of the 27, 1% increase the remaining roughly two thirds of the increase in payment revenues was driven by a combination of an increase in pay yield expansion greater payment mix and payment transaction volume increase of eight 1%.

Joel Wilhite: On a GAAP basis gross profit of $69 $2 million increased by 32, 7% in Q1 of 2024 over the same period last year, resulting in a 65, 5% gross margin for the quarter compared to 60% in Q1 2023.

Joel Wilhite: Hi.

Joel Wilhite: non-GAAP gross margin increased 510 basis points to 72, 4% in Q1 of 2024 over the same period last year with the lion's share of the increase driven mostly by unit cost efficiencies and yield expansion.

Joel Wilhite: Now moving on to our operating expenses. On a gap basis, total operating expenses were $79.4 million, an increase of 6.6% in Q1 of 2024 over Q1 of last year. On a non-GAAP basis, operating expenses excluding depreciation, amortization, and stock-based compensation increased 1.4% to $58.8 million in the first quarter of 2024 from the comparable prior year period. On a percentage of revenue basis, operating expenses, excluding depreciation, amortization, and stock-based compensation, declined to 55.7% in the first quarter of 2024 from 66.8% in the comparable period last year.

Speaker Change: Now moving onto our operating expenses.

Joel Wilhite: On a GAAP basis total operating expenses were $79 $4 million, an increase of six 6% in Q1 of 2024 over Q1 of last year.

Joel Wilhite: On a non-GAAP basis operating expenses, excluding depreciation amortization and stock based compensation increased one 4% to $58 $8 million in the first quarter of 2024 from the comparable prior year period.

Joel Wilhite: On a percentage of revenue basis operating expenses, excluding depreciation amortization and stock based compensation declined to 55, 7% in the first quarter of 2024 from 66, 8% in the comparable period last year.

Joel Wilhite: The year-over-year percent decline largely highlights expense discipline and significant operating leverage across GNA, sales, and marketing, as well as R&D to an extent, even after stripping out the contribution of float. I'll now talk about each component of the change in operating expenses on a non-GAAP basis. Non-GAAP sales and marketing costs decreased by roughly $300,000 or 1.7% to $18.6 million in Q1 of 2024 over Q1 of last year, which reflects ongoing yet targeted investments in sales and marketing spend to support our continued growth. Non-GAAP research and development costs increased by $1.3 million or 6.5% to $22.1 million in Q1 of 2024 over Q1 of last year.

Joel Wilhite: The year over year percent decline largely highlights expense discipline and significant operating leverage.

Joel Wilhite: Across G&A sales and marketing as well as R&D to an extent, even after stripping out the contribution of float.

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

Joel Wilhite: non-GAAP sales and marketing costs decreased by roughly $300000 or one 7% to $18 $6 million in Q1 of 2024 over Q1 of last year, which reflects ongoing yet targeted investments in sales and marketing spend to support our continued growth.

Joel Wilhite: non-GAAP research and development costs increased by $1.3 million or six 5% to $22 $1 million in Q1 of 'twenty four over Q1 of last year. The increase was due to continued reinvestment in our products and platform, including spend management pay offering and payment accelerator.

Joel Wilhite: The increase was due to continued reinvestment in our products and platform, including spend management, pay offering, and payment accelerator. Non-GAAP G&A costs decreased slightly by roughly $200,000 or 1.2% to $18.1 million in Q1 of 2024 versus Q1 of last year due to leveraging public company costs across a larger revenue base. They continue their annualized downward progression as a percentage of revenues, as we indicated during our investor day. Our gap net loss was $1 million for the first quarter of 2024 versus a gap net loss of $16 million in the first quarter of 23, with the reduction in losses driven by a combination of strong revenue flow through.

Joel Wilhite: non-GAAP G&A costs decreased slightly by roughly $200000 or one 2% to $18 $1 million in Q1 of 2024 versus Q1 of last year due to leveraging public company cost across a larger revenue base.

Joel Wilhite: They continue their annualized downward progression as a percentage of revenues as we indicated during our investor day.

Joel Wilhite: Our GAAP net loss was $1 million for the first quarter of 2024 versus a GAAP net loss of $16 million in the first quarter of 'twenty three with the reduction in losses, driven by a combination of strong revenue flow through.

Joel Wilhite: Solid Gross Profit Increase in Expense Control leading to lower operating losses coupled with 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 first quarter of 2024 was $11.3 million versus a net loss of $3.4 million in the same period last year, a $14.7 million positive swing driven by the aforementioned factor. On a non-gap basis, Q1 2024 adjusted EBITDA was $17.7 million versus $400,000 in Q1 2023, largely due to the aforementioned factors.

Joel Wilhite: Solid gross profit increase and expense control, leading to lower operating losses, coupled with higher interest income and lower interest expense due to reduced borrowing costs and partial debt pay down.

Joel Wilhite: On a non-GAAP basis, our net income in the first quarter of 2024 was $11 $3 million versus a net loss of $3 $4 million in the same period last year, a $14 7 million positive swing driven by the aforementioned factors.

Joel Wilhite: On a non-GAAP basis, Q1, 2024, adjusted EBITDA was $17 $7 million versus $400000 in Q1 of 2023, largely due to the aforementioned factors.

Joel Wilhite: Turning to our balance sheet for a moment I wanted to touch on a few key items. We ended the year with a strong corporate cash position of <unk>.

Joel Wilhite: $443 $6 million of cash and marketable securities.

Joel Wilhite: Against that outstanding total debt balance of $75 $8 million, including a note payable for $13 $9 million, we had $30 million on our undrawn under our credit facility at year end corporate cash. Meanwhile, was split roughly two thirds among money market funds commercial paper and time deposit.

Joel Wilhite: Corporate cash, meanwhile, was split roughly two-thirds among money market funds, commercial paper, and time deposit instruments, with the remaining third in deposit accounts. The weighted average maturity on the corporate cash was roughly 36 days, while the effective interest rate on our corporate cash position for the first quarter was roughly 5.2%. Customer cash at quarter end was approximately $1.2 billion, with an interest rate of roughly 5% for the quarter. The sequential decline in customer cash was largely due to typical seasonal patterns related to disbursement and settlement of payments in flight from the prior quarter.

Joel Wilhite: Instruments with the remaining third and deposit accounts.

Joel Wilhite: Weighted average maturity on our corporate cash was roughly 36 days, while the effective interest rate on our corporate cash position for the first quarter was roughly five 2%.

Joel Wilhite: Customer cash at quarter end was approximately $1 2 billion with an interest rate of roughly 5% for the quarter. The sequential decline in customer cash was largely due to typical seasonal patterns related to disbursement and settlement of payments in flight from the prior quarter. This along with average customer cash back.

Joel Wilhite: <unk> intra quarter and shifts in calendar days between weekdays and weekends of recede and disbursement of that cash impacts float revenue.

Joel Wilhite: This, along with average customer cash balances intra-quarter and shifts in calendar days between weekdays and weekends of receipt and disbursement of that cash, impacts float revenue. Turning to our updated 2024 business outlook, we now expect total revenue for the year to be in the range of $442 million to $448 million. Based on the midpoint, we expect approximately 47% of the 24 revenue distribution in the first half versus 53% in the second half.

Joel Wilhite: Turning to our updated 2024 business outlook. We now expect total revenue for the year to be in the range of $442 million to $448 million.

Joel Wilhite: Based on the midpoint, we expect approximately 47% of the 24 revenue distribution in the first half versus 53% in the second half or 2020 for revenue outlook reflects approximately $45 million of interest revenue from customer funds, a $1 million increase from our initial 24 outlook.

Operator: Our 2024 revenue outlook reflects approximately $45 million of interest revenue from customer funds, a $1 million increase from our initial 2024 outlook versus roughly $41 million earned in 2023. We anticipate approximately 54% of the $45 million in interest revenue from customer funds in the first half of 2024, with the remaining approximately 46% in the second half of 2024. Also, we anticipate political media revenue contribution of approximately $9 million given that this is our first presidential cycle under FastPay.

Operator: First this roughly $41 million earned in 2023.

Operator: We anticipate approximately 54% of the $45 million in interest revenue from customer funds in the first half of 2024 with the remaining approximately 46% in the second half of 2024.

Operator: Also we anticipate political media revenue contribution of approximately $9 million given that this is our first presidential cycle under fast pay.

Operator: Recall, we acquired FastPay in 2021. And for context, in 2022, during the midterm election cycle, the political arm of FastPay generated roughly $8.5 million in revenue. Similarly, we expect non-GAAP adjusted EBITDA profit ranging between $71,000,000 and $75,000,000 for the year. With that, I would now like to turn the call back over to the operator to open up the line for Q and A. Operator? We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys.

Operator: Recall, we acquired fast pay in 2021 and for context in 2022 during the mid term election cycle, the political arm of fast pay generated roughly $8 $5 million in revenue.

Operator: Similarly, we expect non-GAAP, adjusted EBITDA profit ranging between $71 million and $75 million for the year.

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

Operator: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if you're using a speaker phone. Please pick up your handset before pressing the keys.

Operator: The time request <unk> has been addressed and you would like to withdraw your question. Please press Star then two.

Operator: Management has asked that each participant limit their question to one.

Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Management has asked that each participant limit their question to one. At this time, we will pause momentarily to assemble our roster. The first question comes from Dave Koning with Baird, please go ahead. Yeah, hey, guys, great job. And I guess my question is, so it looks, it looks to me like this is the best growth quarter in maybe a couple years, if you exclude float and politics, which is great to see. And it reflects a lot of what you talked about payments yield, which has been up now for seven, I think nine straight quarters. What's the shape of that going forward?

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

Joel Wilhite: I know there's puts and takes between interest revenue and a payment accelerator coming on, but does that just step function just go up every quarter still? Or how should we see that over the next several quarters? Yeah, thanks, Dave.

Operator: The first question comes from Dave Koning with Baird.

Joel Wilhite: Please go ahead.

Joel Wilhite: Yeah, Hey, guys, great job and I guess my question. So it looks it looks to me like this is the best growth quarter in and maybe a couple of years when you exclude float and political which is great to see and it reflects a lot of what you talked about payments yield which has been up now seven I think nine straight quarters what.

Joel Wilhite: The shape of that going forward I know, there's puts and takes between interest revenue between invoice payment accelerated coming on does that just step function just up every quarter still or how should we see that over the next several quarters.

Joel Wilhite: I appreciate your comments and appreciate your question as well. I think what I would just say on the TPV yield, in particular, that's really been, you know, helping support that payment revenue line is, you know, like we said before, you might see variability from quarter to quarter, but our, you know, our track record is kind of steady expansion over time. And of course, you know, gear three of our model checks coming out of the system, increasingly finding opportunities to monetize digital payment, together with some of the initiatives that we've talked about and that Mike mentioned, payment accelerator, etc.

Speaker Change: Thanks, Dave.

Speaker Change: State your comment.

Joel Wilhite: I appreciate your question as well.

Joel Wilhite: What I would just say on the TPG yield in particular, that's really been helping support that payment revenue line is like.

Joel Wilhite: Like we said before you might see variability from quarter to quarter, but our our.

Joel Wilhite: Our track record is kind of steady expansion over time and of course, you know that.

Joel Wilhite: Gear three of our model checks coming out of the system increasingly finding opportunities to monetize digital payment together with some of the initiatives that we've talked about and that Mike mentioned payment accelerator et cetera give us kind of the tools and leavers to continue to see that yield expand over time, yes.

Joel Wilhite: Give us kind of the tools and levers to continue to see that yield expand. Yeah, I mean, just to follow up on what Joel said is, you know, across our team, we're laser focused on, you know, kind of the one metric that I like talking about, which is transaction yield. And certainly, you know, that's up over 70 cents over last year and, you know, up slightly over last quarter.

Joel Wilhite: But that's the one that we kind of lean into in terms of all the different, you know, strategies we're executing across the business to continue to, you know, focus on what we can control. And one of the metrics there is that transaction. The next question comes from Darrin Peller with Wolf Research. Please go ahead.

Speaker Change: You know David to follow up on what Joel said is.

Darrin David Peller: Across our team we are laser focused on kind of the the one metric that I like talking about which is the transaction yield.

Joel Wilhite: Certainly.

Darrin David Peller: Over 70% over last year.

Joel Wilhite:

Darrin David Peller: Slightly over last quarter, but that's the one that we lead into in terms of all the different strategies, we are executing across the business to continue to.

Darrin David Peller: Focus on what we can control and what are the metrics there as that transaction yield metric.

Joel Wilhite: The next question comes from Darrin Peller with Wolfe Research. Please go ahead.

Michael Praeger: Guys, can we just expand a little bit more on the top of the funnel comments that I know Mike was commenting on earlier, the conferences and changes to philosophy around them, and maybe what you're seeing in terms of bookings momentum, and just to add on to that demand for some of the new offerings on the supplier side as well? Yeah, Darrin, no, I appreciate the question. You were breaking up a little bit, but I think it was around the top of the funnel and commentary there.

Darrin David Peller: Guys can we just expand a little bit more on the top of funnel comments that I know, Mike you were commenting on earlier bit conferences and changes to philosophy around it and maybe what youre seeing in terms of bookings momentum.

Darrin: Just to add onto that demand for some of the new offerings on the supplier side as well.

Speaker Change: Quick update there.

Speaker Change: Still relatively early.

Speaker Change: It would be great.

Michael Praeger: You know, I think, you know, what we saw was, you know, different verticals certainly experiencing, you know, different types of activity. You know, on the positive side, we're really encouraged by what we saw in the real estate vertical, which was, you know, the best results in a, in probably a couple years related to top of funnel. And then combined with, you know, education and nonprofit being, you know, really strong.

Speaker Change: Yes, Darrin no.

Michael Praeger: You get the question.

Speaker Change: You were breaking up a little bit, but I think it was around the top of funnel and commentary there.

Michael Praeger: I think what we saw was.

Michael Praeger: Different verticals.

Michael Praeger: Experiencing kind of a different types of activity.

Michael Praeger: On the positive side, we're really encouraged with what we saw in the real estate vertical that was best results.

Michael Praeger: A couple of years related to top of funnel.

Michael Praeger: And certainly, kind of the multifamily piece of multifamily and industrial real estate was very strong for us. Not a big surprise, considering that, you know, that's a key area that we have strong industry, domain knowledge, experience, and also have lots of partnerships, you know, in that area. On the flip side, you know, certainly verticals like our HOA management vertical, you know, or associate management vertical, as we call it, combined with financial services. And, you know, we experienced some kind of leg activity.

Michael Praeger: And then combined with education and nonprofit being really strong.

Michael Praeger: And certainly kind of the multifamily piece of multifamily and industrial pieces of the real estate were very strong for us so not a big surprise considering that that's a key area that we have strong industry domain knowledge experience and also have lots of partnerships.

Michael Praeger: That area.

Michael Praeger: On the flip side certainly.

Michael Praeger: Verticals like.

Michael Praeger: Our HOA management.

Michael Praeger:

Michael Praeger: Sophie management verticals, we call it.

Michael Praeger: Combined with financial services.

Michael Praeger: And we experienced.

Michael Praeger: So we kind of lagged activity and one of the things that you know in terms of.

Michael Praeger: And one of the things that, you know, in terms of, you know, peeling back the onion and reasons why, we also implemented a fairly large, just, you know, kind of strategic shift in our approach to, you know, lots of different, you know, industry conferences. And so, you know, just to give you a sense of it, last year in Q1, we attended about 85 different conferences and industry trade shows, and we were about 30 less this year.

Michael Praeger: Peeling back the onion and reasons why we also implemented a fairly large just strategic shift in our approach to <unk>.

Michael Praeger: Lots of different kind of industry conferences, and so for just to give you a sense of it last year in Q1, we attended about 85 different conferences and industry Tradeshows.

Michael Praeger: And we were about 30% less this year and and so rather than spreading the peanut butter pretty thin related to our investment dollars.

Michael Praeger: And so, you know, rather than spreading kind of the peanut butter pretty thin related to our investment dollars, the team is being much more strategic in terms of, you know, where do we invest in terms of the highest yielding conferences and events that we can attend, you know, to drive both our ROI yield as well as the activity from these. And so one, you know, kind of result of that is that we attended less in Q1, but it was also super encouraging about, you know, some of the...

Michael Praeger: The team is being much more strategic in terms of.

Michael Praeger: Where do we invest in terms of the highest yielding conferences and events that we can attend to drive both.

Michael Praeger: Our ROI yield as well as the activity from these.

Michael Praeger: And so one.

Michael Praeger: Kind of a result of that is that we tended less in Q1, but also super encouraging about.

Michael Praeger: Some of them.

Michael Praeger: Unknown Attendee, Shray Gurtata, Subhaash Kumar, Avidxchange Hldg, So that's maybe a little bit of flavor related to. The next question comes from Sanjay Sakrani with KBW. Please go ahead. Thanks. Good morning. I guess I have a question just on macro broadly. One is just on the float.

Michael Praeger: <unk> segment that did not do as well in Q1.

Sanjay Sakrani: We saw a bounce back in or bouncing back in Q2 and overall actives.

Sanjay Sakrani: Activity up 9%, so far in the quarter.

Sanjay Sakrani: And so we.

Sanjay Sakrani: Thank you.

Sanjay Sakrani: Over the course of the year those strategies will pay dividends for us and we're going to be right, where we expect to be in terms of driving overall growth objectives. So thats, maybe a little bit of flavor related to accomplish all of them.

Sanjay Sakrani: The next question comes from Sundry, Sanjay So crummy with K B W. Please.

Sanjay Sakrani: Please go ahead.

Sanjay Sakrani: Thanks, Good morning, I guess I have a question just macro broadly one is just on the float.

Joel Wilhite: I guess you had decent outperformance relative to the quarterly run rate, and it seems like you expect float contribution to come down over the back part of this year. What's the rate outlook on that? And then secondly, just macro in general, I know Mike kind of talked about it still being mixed, but maybe just elaborate a little bit more on sort of what you're seeing. And if there are green shoots, I think you mentioned a little bit about real estate, but I would love more elaboration around that. Thank you. Yeah, you bet. Great questions! I'll take floats and macro.

Michael Praeger: Yes.

Sanjay Sakrani: <unk> had decent outperformance relative to the quarterly run rate and it seems like you expect flow contribution to come down over the back part of this year whats the rate outlook in that and then secondly, just macro in general I know, Mike kind of talked about it still being mixed but maybe just elaborate a little bit more on sort of what youre seeing and if there's green shoots that I think you mentioned a.

Joel Wilhite: In real estate, but would love some more elaboration around that thank you.

Joel Wilhite: So on your float question, you know, we did 13 million in the quarter, a little bit higher than our expectations. And one thing to keep in mind is that, you know, rate is a factor, but also customer balances are a meaningful factor. And in fact, in Q1, rates had not been an impact whatsoever.

Speaker Change: Yeah, you bet, great questions I'll take float in macro.

Joel Wilhite: On your first question, we did $13 million in the quarter, a little bit higher than our expectations and one thing to keep in mind is that right is a factor, but also customer balances are a meaningful factor and in fact in Q1 rates was.

Joel Wilhite: Not an impact whatsoever, and so those customer balances are really impacted by just the timing and whether or not a period and lands on a weekday or weekend and such.

Joel Wilhite: And so those customer balances are really impacted by, you know, just the timing and whether the period end lands on a weekday or a weekend and such. And so, that sort of beat in the quarter is kind of what led us to bump up the range for that float beat. In terms of your question about the expectations in the back half, we, you know, we haven't really meaningfully changed from our initial guidance where we did anticipate a handful of rate cuts in the back part of the year, something like, you know, 75 bips.

Joel Wilhite: And so that's that's.

Joel Wilhite: That sort of beat in the quarter is kind of what led us to.

Joel Wilhite: <unk>.

Joel Wilhite: The range for that flow in terms of your question about the expectations in the back half, we we haven't really meaningfully changed from our initial guidance, where we did anticipate.

Joel Wilhite: A handful of rate cuts in the back in the back part of the year something like 75 bps, we'll see what actually shakes out, but that's kind of how we think about float revenue just keeping in mind those customer balances being a huge driver.

Joel Wilhite: We'll see what actually shakes out, but that's kind of how we think about float revenue, just keeping in mind those customer balances being a huge driver. I think from a macro perspective, I would just kind of go back to, you know, what we've been experiencing now for over a year is just some suppression in spending and transactions associated with, you know, our buyers on our platform. And we attribute that to, in particular, discretionary spending and no one particular vertical, just general caution and spending. And that's continued through the first quarter and even into, you know, the month of April.

Joel Wilhite: I think from a macro perspective, I would just kind of go back to the what we've been experiencing now for over a year. It is Jeff.

Joel Wilhite: Some suppression in spending in transactions associated with our buyers on our platform and we attribute that to in particularly discretionary spending and no. One particular vertical just general caution in spending and that's that's continued through the first quarter even into <unk>.

Joel Wilhite: Through the month of April and so that's that that macro impact is something that continues to be bacon baked into our guidance.

Joel Wilhite: And so that's, you know, that macro impact is something that continues to be baked into our guidance. The next question comes from Greg Maurer with FT Partners. Please go ahead.

Joel Wilhite: The next question comes from Greg <unk> with Ft Partners. Please go ahead.

Joel Wilhite: Yeah, hi, thanks for taking the question. I appreciate all the commentary around the macro. Is the volatile macro driving any changes in transaction mix between modalities, you know, whether it's VCC, ACH, or another?

Craig Jared Maurer: Yeah, Hi, thanks for taking the question.

Craig Jared Maurer: So appreciate all the commentary around the macro is the volatile macro driving any changes in transaction mix between modalities, whether its BCC HCA.

Joel Wilhite: Robert.

Joel Wilhite: Yeah, so, Craig, I appreciate the question. What I would say is that where we see macro impacting our business the most is on discretionary spending. So I would say having, you know, less impact on, you know, kind of that, you know, the allocation across different payment modalities.

Craig Jared Maurer: Yeah, So hey, Greg I appreciate the question.

Joel Wilhite: What I would say I think where we see macro impacting our business. The most is on the discretionary spend volumes.

Joel Wilhite: So I would say, having less impact on kind of that the allocation across different payment would <unk> those.

Joel Wilhite: Those are probably very, you know, specifically driven, you know, by supplier experience and typically find suppliers. You know, think about a combination of timing of the payment, you know, the price of the payment combined with the level of data, you know, and automation. And those things really drive, you know, kind of payment modality acceptance, much more so than, you know, macroeconomic type issues we've experienced.,,,, The next question comes from Andrew Bauch with Wells Fargo; please go ahead. Hey, thanks, guys.

Joel Wilhite: Those are probably very specifically driven.

Andrew Thomas Bauch: By supplier experience and typically find suppliers.

Andrew Thomas Bauch: Think about a combination of timing of the payment.

Andrew Thomas Bauch: The price of the payment combined with the level of data remains data provided and automation.

Andrew Thomas Bauch: And those things really drive kind of a payment modality acceptance.

Andrew Thomas Bauch: Much more so than <unk>.

Andrew Thomas Bauch: Macro economic type issues as what we've experienced so.

Joel Wilhite: Typically.

Andrew Thomas Bauch: In my conversations that I have it's usually around discretionary spend on overall volume is where we're seeing the impact.

Andrew Thomas Bauch: The next question comes from Andrew Baum with.

Andrew Thomas Bauch: Wells Fargo. Please go ahead.

Joel Wilhite: I know you don't guide on a quarterly basis, but wanted to get a sense of your results this quarter relative to your internal expectations. Revenue came in, you know, three to four million ahead of what our expectations were. And then, you know, on the full year basis, you had the guy come up a million. So just wanted to get a sense of how this all played out.

Andrew Thomas Bauch: Hey, Thanks, guys.

Andrew Thomas Bauch: I know you don't guide to a quarterly basis, but wanted to get a sense of.

Joel Wilhite: Your results this quarter relative to your internal expectations revenue came in $3 million to $4 million ahead of what our expectations were and then on a full year basis, you had the guy come up $1 million. So just wanted to get a sense on how this all played out and what are the puts and takes around the quarters.

Joel Wilhite: Typically.

Joel Wilhite: And what were the puts and takes around the quarter specifically? Yeah, it's, I hear your question. And I think you kind of summarized it well, just to repeat, you know, we had relative to sort of the first quarter, let's just say, using consensus as the benchmark, is about 3 million up. We attribute a couple of that to float revenue and a couple of that to sort of underlying, you know, outperformance in the business, particularly around yield.

Joel Wilhite: Yes.

Speaker Change: I hear your question and I think you kind of summarized it well just to repeat we had relative to sort of the first quarter or let's just say using consensus is the benchmark was about 3 million up.

Joel Wilhite: We attribute a couple of that to the float revenue in a couple of that sort of underlying outperformance in the business, particularly around yield.

Joel Wilhite: And.

Joel Wilhite: Our guidance.

Joel Wilhite: I kind of mentioned in the last response contemplate sort of a continued activity that we see from a volume trends perspective for the rest of the year. So.

Joel Wilhite: Um, and, you know, our guidance, like I kind of mentioned in the last response, contemplates sort of the continued activity that we see from a volume trends perspective for the rest of the year. So, um, you know, we're excited about having another quarter under our belt where we're sort of, you know, beating revenue expectations, seeing yield consistently expand, expanding gross margin, and sort of doubling even our profit x float quarter per quarter. So that's what we're focused on executing. The next question comes from Bryan Keane with Deutsche Bank. Please go ahead. Hi guys. Good morning.

Bryan Connell Keane: We're excited about having another quarter under our belt, where we're sort of beating revenue expectations seeing yield consistently expand expanded gross margin and sort of doubling EBITDA profit ex float quarter over quarter. So that's what we're focused on executing.

Joel Wilhite: The next question comes from Bryan Keane with Deutsche Bank. Please go ahead.

Michael Praeger: Mike, is there anything you can do on your end to try to drive faster transaction growth? Or is it just just macro driven that you're you're, and there's not a lot you can do to move that number or grow that number? Yeah, hey, Brian, that's a great question. And it's one that, you know, I spent a lot of time asking my team about. So when I think of that transaction number, there are kind of two buckets.

Bryan Connell Keane: Hi, guys good morning.

Michael Praeger: Mike is there anything you can do on year end to try to drive faster transaction growth or is it just just macro driven that you're not a lot you can do to move that number grow that number.

Michael Praeger: There are, you know, existing customers that are already on our platform, they're implemented, and we're receiving some of the headwinds on discretionary spend related to, you know, the CFOs across the middle market. That one is, you know, probably, we have less ability to impact in the short term.

Mike: Yeah, Hey, Brian that's a great question and it's one that you know.

Michael Praeger: I spent a lot of time asking my team about.

Michael Praeger: So when I think of that transaction number theres kind of two buckets, there's existing customers that are already on our platform. They are implemented and where we're seeing some of the headwinds on discretionary spend.

Michael Praeger: <unk> the CFO is across the middle market.

Michael Praeger: That one is probably we have less ability to impact in the short term.

Michael Praeger: And, however, the other piece of it is, you know, new transactions that we're adding. And in that bucket, you know, certainly, there are things that you know, and strategies that we're deploying. One of the biggest things is, you know, kind of, the evolution of our, you know, sales and go-to-market activity. And, you know, one of the things that I highlighted during the call that we're, you know, really excited about is, you know, the impact of some of the new partnerships that are just, you know, in the early stages of being launched, certainly, Folio being a big one, combined with time three, and then just, you know, the continued execution of existing partnerships.

Michael Praeger: And however, the other piece of it is.

Michael Praeger: New transactions that were adding to the platform.

Michael Praeger: And in that bucket.

Michael Praeger: Certainly.

Michael Praeger: There are things that and strategies that we're deploying one of the biggest things is.

Michael Praeger: The evolution of our sales and go to market activity.

Michael Praeger: And.

Michael Praeger: One of the things that I highlighted during the call that we are.

Michael Praeger: Really excited about is the impact of some of the new partnerships that are just you know.

Michael Praeger: In the early stages of being launched certainly at folio being a big one combined with M. Three and then just the continued execution of existing partnerships. So one of the things when it highlights a top of funnel in the last quarter was what we saw in real estate.

Michael Praeger: So, you know, one of the things, one of the highlights following the last quarter was what we saw in real time. And that was, you know, certainly a big part of that activity was from the, you know, kind of I'd say the legacy partnerships that we've had, you know, companies like MRI, ResMed, RealPage, you know, examples like that. And, but we are, you know, really excited about Folio M3 as new partnership examples.

Michael Praeger: And, you know, right now, we feel that we're, you know, kind of on pace to execute those. But certainly, you know, I'm talking to my The next question comes from Ramsey Elisal with Barclays. Please go ahead.

Michael Praeger: And that was.

Michael Praeger: Certainly a big part of that activity was from the kind of I'd say the legacy partnerships that we've had.

Ramsey El: Companies like MRI, rather has been real page examples like that and but we are really excited about.

Ramsey El: At Folio M. Three is new partnership examples and.

Ramsey El: Right now we feel that we're on pace to execute those but certainly.

Ramsey El: I'm talking to my team every day about things that we can do to continue to accelerate those type of partnerships.

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

Michael Praeger: Hi, thanks for taking my question. On the top of funnel headwinds, will we see more of a kind of noticeable air pocket from the sales pivot that hits numbers in a specific quarter this year? Is there any type of cadence dynamic to be aware of? And then, just on the M3 and AppFolio rollouts, I was just curious if you had any updated thoughts on, you know, annualized revenue contribution or how much you have embedded in guidance this year for those deals? Hey Ramsey,

Ramsey El: Hi, Thanks for taking my question.

Ramsey El: On the top of funnel headwinds, we see more of a kind of a noticeable air pocket from the sales pivot that hits numbers in a specific quarter. This year is there any type of cadence dynamic to be aware of and then just on the M. Three and App folio rollout. So I was just curious if you had any updated thoughts on.

Michael Praeger: Annualized revenue contribution or how much you havent bedded in guidance this year for those deals.

Michael Praeger: I'll take the first part, and Mike will take the second part. So, I wouldn't really call out Nair Pocket necessarily. I mean, we think, you know, we've got – we like – there's puts and takes overall, but we like our progression of customer ads for the year and feel good about, you know, the guidance set up, and certainly then exiting for a strong 25. So, I don't know, Mike, if you want to comment on the M3 in that portfolio. Yeah,

Ramsey: Hey, Randy I'll take the first part and Mike.

Mike: I can take the second part so I wouldn't I wouldn't really call out necessarily an air pocket I mean, we think we've got we like there's puts and takes overall, but we like our progression of customer adds for the year and feel good about that.

Mike: Guidance setup.

Michael Praeger: And then exiting first strong 25, so I don't know, Mike if you want to comment on that <unk> yeah yeah.

Michael Praeger: What I would say, you know, Ramsey, is these partnerships are different from the standpoint of one is in a vertical that we know really well, and that we're a long-term leader in, being, you know, the multi-family segment of real estate. And we already have kind of key integration partnerships, you know, with the other competitors in that segment, i.e., like the RealPage, the ResMids of the world And so, that, you know, is one that I think has the capability of, you know, ramping up faster.

Mike: What I would say Ramsey is.

Michael Praeger: These partnerships there.

Michael Praeger: They are different from the standpoint of one is in a vertical that we know really well and that we're a long term leader in the multifamily segment of real estate.

Michael Praeger: And we already have they come into key integration partnerships with the other competitors in that segment.

Michael Praeger: We like the real page the residents of the world and so.

Michael Praeger: That was one that I think has the capability of ramping faster now having said that we had.

Michael Praeger: Now, having said that, you know, we had, you know, kind of, you know, already plans in place that we expected to ramp faster to some degree. And then, you know, the M3 partnership is one that, you know, in the same – we have the same level of excitement about, but it's just in a new emerging vertical for us, being hospitality, that we announced last year. So, we, you know, don't have the same level of, you know, existing name recognition and penetration within that vertical as we do with the real estate side.

Michael Praeger: Already plans in place that we expected to ramp faster to some degree and then <unk>.

Michael Praeger: Three partnership as well.

Michael Praeger: And the same we have the same level of excitement about but it's just in.

Michael Praeger: Our new emerging vertical for us big hospitality that we announced last year. So we don't have the big of the existing name recognition.

Michael Praeger: <unk>.

Michael Praeger: And penetration within that vertical as we do in the real estate side.

Michael Praeger: So, you know, I would say we're right on plan in terms of our, you know, internal expectations and certainly, you know, working hard to have those ramped up. The next question comes from Tianxin Huang with JP Morgan. Please go ahead.

Michael Praeger: So.

Tianxin Huang: I would say we're right on plan in terms of our internal expectations and certainly working hard to have those ramp throughout the year.

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

Joel Wilhite: Thank you. Just a clarification on the question, if you don't mind. Just the 53% of revenue in the second half, that's unchanged. So the implied second quarter revenue, if we're calculating this correctly, is... suggesting it will be flat sequentially when it's usually up. Is that correct? And if so, why?

Tianxin Huang: Thank you just to clarify.

Tianxin Huang: A clarification and a question if you don't mind, just the 53% of revenue in the second half is no.

Joel Wilhite: That's unchanged so the implied second quarter revenue for calculating this correctly is suggesting it will be flat sequentially when.

Joel Wilhite: When it's usually up is that correct and if so why and then just on the on the Rems and other asset just the real estate up high double digits is that a result of folio production or is it or is it more.

Joel Wilhite: And then just on the, I know Ramsey and others asked it, just the real estate up high, double digits. Is that a result of portfolio production, or is it more macro? Thank you.

Speaker Change: Macro thank you.

Joel Wilhite: Okay. Good questions, Tenjin. I'll go first, and Michael will come after me.

Speaker Change: Got it okay.

Speaker Change: Good question Tien Tsin I'll go first and Michael come after me. So on your first question, yes, the backend.

Speaker Change: In our guidance the back end of the year is slightly less back ended with updated guidance, but largely consistent in that sort of 50 53 ish 52 553 range and then your question about what is implied in Q2 of course, we don't guide the next quarter, but but your math isn't isn't it wrong and what we are doing is taking a fairly <unk>.

Joel Wilhite: So on your first question, yeah, the back end is, in our guidance, the back end of the year is slightly less back-ended with updated guidance, but largely, you know, consistent in that sort of 50, 53-ish, 52.5, 53 range. And then your question about what is implied in Q2, of course, we don't guide the next quarter, but, you know, your math isn't wrong, and what we are doing is taking a fairly cautious posture here with guidance as we look out across the rest of the year.

Joel Wilhite: Posture here with guidance as we look out across the rest of the year I wouldn't say, there's anything significantly different in terms of the activity that were experiencing in terms of the macro getting.

Joel Wilhite: I wouldn't say that there's anything significantly different in terms of the activity that we're experiencing in terms of the macro getting, you know, better or worse, but we are exercising an additional measure of prudence as we're giving guidance. And so just kind of keeping the range changed just to that flow beat.

Joel Wilhite: Better or worse, but we are exercising an additional measure of prudence as we're as we're giving guidance and so just kind of.

Joel Wilhite: Keeping the keeping the range change just to that flow beat in Q1.

Joel Wilhite: And maybe to follow up on, you know, the second part of your question related to, you know, that top of the funnel and the, you know, double-digit growth that we saw in real estate, was it dominated by, you know, one particular partner like Atfolio? And the answer is, is no; it was really, you know, nice activity across the board within, you know, kind of real estate specifically, actually, you know, weighted towards multifamily. But within multifamily, we saw, you know, both more mature partners, such as RealPage and ResMed, contribute nicely, along with MRI.

Joel Wilhite: And maybe to follow up on the second part of your question related to that top of funnel.

Joel Wilhite: Double digit growth that we saw in real estate, whether dominated by one particular partner like at Folio and the answer is no.

Joel Wilhite: No it was really.

Joel Wilhite: Nice activity across the board within.

Joel Wilhite: Real estate, specifically actually.

Joel Wilhite: Weighted towards multifamily, but within multifamily we saw.

Joel Wilhite: Both.

Joel Wilhite: And then on the, you know, kind of new partner side, certainly we've seen the ramp for Atfolio, but it wasn't, you know, kind of, [inaudible] The next question comes from James Faucette with Morgan Stanley. Please go ahead.

Joel Wilhite: More mature partners, such as real page of regimen contribute nicely.

James Faucette: Along with MRI and then on the.

James Faucette: New partner side, certainly we've seen the ramp about folio, but it wasn't kind of.

James Faucette: Heavily weighted we're weighted for one particular partner, we saw nice across the board activity within that sector.

James Faucette: The next question comes from James Fawcett with Morgan Stanley. Please go ahead.

Joel Wilhite: Great. Thank you. I want to follow up on Tingen's question in terms of like the seasonality in your indication that, you know, that you're being prudent here. It sounds like in terms of how you're applying that to the political contribution that that's also the case. Is that fair?

James Faucette: Great. Thank you I want to follow up on Jim's question in terms of like the valley and your indication.

Joel Wilhite: We're being prudent here.

Joel Wilhite: It sounds like in terms of how you're applying that to the political contribution that that's also the case is that fair.

Joel Wilhite: And it seemed like you were kind of laying out that this is your first presidential cycle with that business. That's right, James. We commented in the February call when we set initial guidance for political revenue this year and nine million. We're sort of holding to that, you know; we're cautiously optimistic.

Joel Wilhite: And it seemed like you were kind of laying out the peripheral.

Joel Wilhite: The natural cycle.

Joel Wilhite: Without those.

Joel Wilhite: That's right James we commented in the February call when we set initial guidance for.

Joel Wilhite: For that political revenue.

Joel Wilhite: Revenue this year and 9 million were sort of holding to that we're cautiously optimistic.

Joel Wilhite: Optimistic it's our first presidential cycle, it's largely back end weighted and there could be a range of outcomes in terms of overall spend so we're being we're being conservative there as well.

Joel Wilhite: It's largely back-end weighted, and there could be a range of outcomes in terms of overall spend. So we're being, you know, we're being conservative there as well. The next question comes from Alex Markgraff with KeyBank Capital Markets. Please go ahead. Mike, maybe one for you just on some of the comments around the improvement and in automation with some of the bots and AI. I'm just curious.

Speaker Change: The next question comes from Alex Mark Graf with Keybanc capital markets. Please go ahead.

Alexander Wexler Markgraff: Thanks, Mike maybe one for you just on some of the comments around the improvement in automation, but with some of the thoughts I'm. Just curious I don't know if im doing it justice in describing that way, but just curious in the context of digital transaction penetration does that in any way sort of.

Michael Praeger: I don't know if I'm doing it justice by describing it that way, but just curious, in the context of digital transaction penetration, does that in any way sort of accelerate the path to the 55 to 60% range you laid out for 2025 in the most recent investor day? Thanks. Yeah, that's a really insightful question, Alex, related to, you know, kind of that increase in automation, especially around, you know, the AI, you know, tools, and I kind of referenced one of those being, you know, our IVR tool that we've now deployed. And the answer is, it does have meaning and it does have an impact.

Michael Praeger: The path to the 55% to 60% range you laid out for 2025 in the most recent investor day. Thanks.

Speaker Change: Yes, that's a really.

Speaker Change: Thanks for the question Alex related to.

Michael Praeger: Does that.

Michael Praeger: The increase in automation, especially around the AI.

Michael Praeger: Tools and I kind of referenced one of those being.

Michael Praeger: IV our tool that we've now deployed and the answer is it does have a media it doesn't have an impact.

Michael Praeger: Where it has an impact is on small dollar transactions, where we've had very specific our ROI models were.

Michael Praeger: Transaction fell underneath the threshold.

Michael Praeger: What it would cost us internally to execute that transaction.

Michael Praeger: <unk> through either.

Michael Praeger: Human being or Bob then it got kicked out.

Speaker Change: Now with our AI tools, we're able to process those transactions down to a much smaller dollar amount than we've historically been able to do and so that means that more small dollar amount transactions will be going out with chronically now having said that they are small dollar amount of transactions. So it won't have a big impact on the AUM.

Michael Praeger: We're all volume.

Speaker Change: But it certainly is part of our overall strategy with customers and how we maximize.

Michael Praeger: <unk> transactions away from paper to electronic overall, and it's just one additional lever of all of the strategies that we're deploying.

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

Michael Praeger: The next question comes from Rufus home with BMO. Please go ahead.

Speaker Change: Hey, good morning, Thanks, guys.

Michael Praeger: Does it come back to your comments on the EBIT margin guidance. It looks like it implies just a small step down in margins from the first quarter level through the rest of the year.

Speaker Change: Hello, a floating comes a factor here, but I wanted to ask if there was some incremental investment spend that you are now looking to make thats, adding to the margins leveling off we're being just a touch lower through the rest of the year.

Speaker Change: Yeah. Good question. So again, we were.

Michael Praeger: Really pleased with the quarter and the progression of Opex as a percentage of revenue keeps marching.

Michael Praeger: Sort of down as we talked about at Investor Day last year, where we're seeing increasing leverage in the business I would say that there would be some potential variability quarter to quarter. If you think about what what's implied in the guide so I can point to.

Michael Praeger: Some investments a couple of million dollars sequentially into Q2, particularly around R&D sales and marketing and so quarter to quarter, there will be some variability.

Speaker Change: But over over the year and going forward, we expect to continue to see this operating leverage show up in the financials and contribute to EBITDA.

Speaker Change: Thank you.

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

Speaker Change: Thank you again, everyone for your interest in avid exchange to wrap up we delivered another strong quarter, given our disciplined execution and strong financial performance amid the current macro volatility we believe our portfolio of product innovations.

Michael Praeger: Industry, leading accounting system integration partnerships, along with multiple monetization levers aligned with our customer needs, creating growth opportunities for our team members and driving long term value creation for our investors with that we look forward to sharing our progress on our next earnings call.

Michael Praeger: You cannot close the conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Michael Praeger: [music].

Speaker Change: Uh huh.

Michael Praeger: [music].

Michael Praeger: Okay.

Michael Praeger: [music].

Michael Praeger: Good morning, everyone and thank you for joining us for the avid exchange Holdings incorporated first quarter 2024 earnings call. 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.

Michael Praeger: And where it has an impact is on small dollar transactions, where, you know, we had very, you know, specific AI models where, if a transaction fell underneath the threshold of what it would cost us internally to execute that transaction electronically through either a human being or a bot, then it got kicked out. And now, with our AI tools, we're able to process those transactions down to a much smaller dollar amount than we've historically been able to. And that means that more, you know, those small dollar amount transactions will be going out electronically.

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

Speaker Change: 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.

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

Michael Praeger: Operational outlook and financial guidance. During today's call also 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.

Michael Praeger: 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.

Michael Praeger: All of these non-GAAP financial measures to financial results prepared in accordance with GAAP. If you require operator assistance. Please press Star then zero I.

Michael Praeger: Now, having said that, you know, they are small dollar amount transactions, so it won't have a big impact on the overall volume. But it certainly is, you know, as part of our overall strategy with customers and how we maximize, you know, moving transactions away from paper checks to electronic overall, and it's just, you know, one additional lever of all the strategies. Again, if you have a question, please press star then 1. The next question comes from Rufus Holm with BMO. Please go ahead.

Michael Praeger: I would now like to turn the conference over to Michael Prager. Please go ahead.

Joel Wilhite: Hey, good morning. Thanks, guys. I wanted to come back to your comments on the EBITDA margin guidance. It looks like it implies just a small step down in margins from the first quarter level through the rest of the year. And I guess lower float income is a factor here. But I wanted to ask if there was some incremental investment spend that you're now looking to make that adds to the margins, leveling off, or being just a touch lower through the rest of the year. Thanks. Thanks, Rufus. Yeah, a good question.

Speaker Change: Thank you everyone for joining us today, Joe Wilhite and I are excited to discuss avid exchange's first quarter 2024 results.

Joel Wilhite: So again, we were really pleased with the quarter and the progression of OPEX as a percentage of revenue keeps marching, you know, sort of down. As we talked about on investor day last year, where we're seeing increasing leverage in the business, I would say that there would be some potential variability quarter to quarter to think about what's implied in the guide. So I can point to, you know, some investments, a couple million dollars sequentially into Q2, particularly around R&D, sales, and marketing.

Joel Wilhite: And so, quarter to quarter, there will be some variability. But, over the year and going forward, we expect to continue to see this operating leverage show up in the financials and contribute to EBITDA. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Michael Praeger for any closing remarks.

Speaker Change: This is our 11th reporting quarters since becoming a public company and October of 2021, and we now have delivered 11 consecutive quarters of financial outperformance relative to our expectations.

Michael Praeger: Thank you again, everyone, for your interest in Avidxchange. To wrap things up, we delivered another strong quarter. Given our disciplined execution and strong financial performance amid the current macro volatility, we believe our portfolio of product innovations, industry-leading accounting system integration partnerships, along with multiple monetization levers, align with our customer needs, creating growth opportunities for our team members, and driving long-term value creation for our customers. With that, we look forward to sharing our progress on our next earnings. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. [inaudible] Subhaash Kumar

Michael Praeger: In executing our strategic playbook. This includes driving our yield expansion to counter the impact of uneven transaction volumes focusing on expanding our gross margins or unit cost reductions and driving operating leverage through cost discipline and smart investments to expand our adjusted EBITDA margin.

Operator: .. © BF-WATCH TV 2021, Subhaash Kumar, Avidxchange Hldg [inaudible] ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good morning, everyone, and thank you for joining us for the Avidxchange Hldg's, Incorporated First Quarter 2024 Earnings Call. Please note this event is being recorded. Joining us on the call today is Michael Praeger, Avidxchange's Co-Founder and Chief Executive Officer, Joel Wilhite, Avidxchange's Chief Financial Officer, and Subhaash Kumar, Avidxchange's Head of Investor Relations.

Operator: Before we begin today's 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 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. Also, please note that the company undertakes no duty to update or revise forward-looking statements.

Operator: The drivers of our success continue to be our middle market customers and the impact of our purpose built value proposition for middle market companies.

Operator: More crucially, yet until engineering and executing our various product offerings technology go to market and operational value proposition that delivers quantifiable benefits of digitally transforming our customers back office.

Operator: Automating accounts payable in payments over the differentiated two sided network that we have today.

Operator: The payback for our customers as rapid impactful and quantifiable on both the efficiency related to labor cost savings and supporting their ability to grow without adding incremental back office head count.

Operator: This in turn deepens, our competitive advantage as we are a market leader in driving digital transformation strategy for middle market companies.

Operator: Thanks to our dedicated and talented team members the runway for value creation for both our customers and investors is still in the very early stages.

Michael Praeger: On today's call I will touch on the five key priorities. We have for this year that we're using to gauge our path of financial and operating progress. In addition to continue to widen our competitive advantage around the middle market.

Michael Praeger: Our key priorities for this year include performance culture customer obsession innovation growth and scale objectives.

Michael Praeger: Kicking off, we believe that the quick, shorthand measure of performance culture is our financial score. In looking at the first quarter of 2024, we delivered solid financial results across the board. Joe will go into more detail on our results later in today's call, but here are some of the highlights.

Michael Praeger: Kicking off we believe that the quick shorthand measure on performance culture is our financial scorecard.

Michael Praeger: And looking at the first quarter of 2024, we delivered solid financial results across the board Joe will go into more detail on our results later in today's call, but here are some of the highlights.

Michael Praeger: Revenue growth in the quarter was over 105 million, up over 21% year over year. The growth in the quarter was led by a combination of continued yield expansion coupled with transaction growth. Our success around yield expansion is a result of our value proposition related to our various e-payment modalities focused on converting paper check suppliers into electronic payment adopters, as well as continued efficiencies with our processes, automation, and AI improvements around executing these various forms of electronic payment.

Michael Praeger: Revenue growth in the quarter was up over $105 million up over 21% year over year.

Michael Praeger: The growth in the quarter was led by a combination of continued yield expansion coupled with transaction growth.

Michael Praeger: With our processes automation and AI improvements around executing these various forms of electronic payments.

Michael Praeger: Non-GAAP gross margins continue their upward trajectory, coming in at 72.4% and crossing the lower band of the 72% to 75% non-GAAP gross margin target ahead of our 2025 gross margin expectations as we outlined during our investor day last June. Along with solid operating expense discipline, our adjusted EBITDA margins in the quarter exceeded 16%.

Michael Praeger: Furthermore, our transaction yield, which is a metric that we focus on across our executive leadership team, as it demonstrates the power and effectiveness of our Avidxchange Business Flywheel model, was up almost 15% to reach $5.47 per transaction. Moving on to our customer obsession metrics, One of the data points we track is our top of the funnel prospect activity. The first quarter of 2024 saw some very encouraging trends, as well as some adjustments to our marketing initiatives that we believe will be net positive for the year but negatively impacted us during the past quarter. Overall, top of funnel activity during the first quarter of 2024 was unchanged year over year, with certain verticals leading and some lagging.

Michael Praeger: <unk> reached $5 47 per transaction.

Michael Praeger: Overall, the top of funnel activity during the first quarter of 2024 was unchanged year over year with certain verticals, leading in some lagging the real estate vertical our longest standing vertical market segment led the pack was up high double digit percentages on a year over year basis.

Michael Praeger: The growth in the real estate vertical is very encouraging as we have not seen this level of growth in more than a year led by very strong multifamily activity.

Michael Praeger: However, in a handful of our verticals, we did see instances where our top of funnel performance lay during Q1. In the quarter, those verticals included our new markets, homeowners association, or HOA management, as we call it, construction, and vertical, and financial services. Let me briefly discuss the reasons for this leg and how the top of the funnel has rebounded since.

Michael Praeger: However, in a handful of our verticals, we did see instances, where our top of funnel performance laid during Q1 in the quarter. Those verticals included our new markets Homeowners Association or HOA management, as we call it construction and verdict and financial services.

Michael Praeger: Let me briefly discuss the reasons for this lag and how the top of funnel has rebounded.

Michael Praeger: As we continue to onboard new leaders in our sales and marketing group designed to help us scale to our next milestone target of reaching $1 billion in revenue, they've brought greater discipline, alignment, and allocation of our marketing and go-to-market investment dollars. As part of this evolution, we have prioritized our resource allocation mix to focus on slightly fewer but higher-yielding industry user conferences and trade shows that meet our ROI and lead flow targets.

Michael Praeger: As we continue to onboard new leaders and our sales and marketing group designed to help us scale to our next milestone target of reaching $1 billion of revenue. They have brought greater discipline alignment and allocation mix of our marketing and go to market investment dollars as part of this evolution, we have prioritized our resource allocation mix.

Michael Praeger: The focus on slightly fewer of our higher yielding industry user conferences and trade shows that meet our ROI and lead flow targets.

Michael Praeger: As a result, we exited a number of the lower yielding conferences and trade shows.

Michael Praeger: During the quarter and prioritize greater investment in higher yielding conferences and trade shows occurring over the balance of the year.

Michael Praeger: This resulted in a 30% year over year decline in Tradeshow traffic during the quarter with a corresponding impact on our top of funnel metrics during Q1 as we implemented the strategy.

Michael Praeger: We've allocated more of our investment resources for higher-yielding trade shows in Q2 and for the balance of the year, which we believe still have a higher overall impact on our overall top of funnel engagement. And the good news is that this strategy is already getting traction as our top of funnel activity is up nicely in high single-digit percentages across the board so far in the second quarter. We believe that the strategic changes we're making to our marketing efforts, notwithstanding the macro backdrop, are the right moves and highly aligned with our long term organic growth objective.

Michael Praeger: With our recent accounting system integration partnerships, we're cautiously optimistic about our top of funnel as we scale up for the remainder of the year.

Michael Praeger: Now turning to our innovation priorities.

Michael Praeger: Like to provide an update on payment accelerator, formerly invoiced accelerator to point out.

Michael Praeger: Given that this is a credit product, we continue to meter the launch in order to better understand the user experience given that this next-generation product has an entirely new digital front-end user experience, complete with self-service digital enrollment capabilities. In addition, we also want to ensure that our various third-party integrations that support Payment Accelerator are working and supporting our back office processes as designed at scale. These include enterprise-grade features such as data science analytics critical for successful payment interception and support for a new subledgering central repository required for real-time offsets and bifurcation of payments to properly execute the innovative money movement approach.

Michael Praeger: Given that this is a credit product we continue to meet our launch in order to better understand user experience given that this next generation product is entirely new digital front end user experience complete with self service digital enrollment capabilities.

Michael Praeger: In addition, we also want to ensure that our various third party integrations that support payment accelerator are working and supporting our back office processes as designed at scale.

Michael Praeger: These include enterprise grade features such as the data science analytics critical for successful payment interception and support for a new sub ledger and central repository required for real time offsets and bifurcation of payments to properly execute the innovative money movement approach.

Michael Praeger: This will enable us to seamlessly leverage multiple third-party financing partners in the future, as well as open this offering to a large portion of our 1.2 million supplier customer base, many of which fall into the small business segment, even including support for larger middle market suppliers looking to accelerate larger invoices. Put this new generation user experience in perspective. Payment Accelerator, compared to its predecessor, is designed to onboard a supplier in a matter of minutes versus several days. What makes this process frictionless is that we eliminate the need for a traditional financial review underwriting process, which requires historical financial statements from suppliers.

Michael Praeger: To put this new generation user experience and perspective payment accelerator compared to its predecessor is designed to onboard a supplier in a matter of minutes versus several days.

Michael Praeger: However, we leverage supplier and buyer history and transaction data, as well as real-time visibility into the transaction status and approvals inherent in our two-sided network to underwrite and lower the credit risk, as well as provide a protective set of provisions across the entire flow of invoices that a particular supplier may have on our network. The rapid onboarding process is also the result of the platform's highly integrated back end that is designed to simultaneously validate the supplier's bank account information along with know-your-customer and know-your-bank compliance regulations in real-time as the supplier completes an online questionnaire of legal entity data and beneficial ownership information.

Michael Praeger: Work.

Michael Praeger: The rapid Onboarding process is also the result of the platform's highly integrated backend that designed to simultaneously validate the suppliers bank account information along with know your customer and know your bank compliance regulations real time as the supplier complete an online questionnaire of legal entity data and beneficial ownership infer.

Michael Praeger: <unk> <unk>.

Michael Praeger: When it's onboarded, a supplier is presented with multiple acceleration offers with transparent pricing and various time-based funding options, including real-time payments. In addition to the payment accelerator offering, which highlights the eligible supplier invoices available for acceleration, we also provide an auto fund option where our intelligent decision engine automatically identifies all the supplier's eligible invoices and funds them automatically, ensuring the fastest access to cash availability every time an eligible invoice is available on our network.

Michael Praeger: One is on boarded our suppliers presented with multiple acceleration offers with transparent pricing and various time based funding options, including real time payments.

Michael Praeger: In addition to the payment accelerator offerings, highlighting the eligible supplier invoices available for acceleration. We also provide an auto fund option, where our intelligent decision engine automatically identifies all of the suppliers eligible invoices and funds them automatically ensuring the fastest access to cash availability.

Michael Praeger: Free time and eligible invoice is available on our network.

Michael Praeger: We have a growing network of supplier customers currently live using this auto fund option. This includes Charlotte, North Carolina-based supplier JW Home Improvement, which was looking for quick access to receipt of payments for their invoices to support their overall business expansion and found the simplicity of our auto fund feature to be a major plus in our payment accelerator offering.

Michael Praeger: We have a growing network of supplier customers currently live using this auto fund option. This includes Charlotte North Carolina based supplier J W home improvement, which was looking for quick access to receipt of payments for their invoices to support their overall business expansion and found the simplicity of our auto fund feature.

Michael Praeger: To be a major plus in our payment accelerator offerings.

Michael Praeger: We are leveraging data science and user experience and heat maps to understand and analyze user behavior as we intend to scale this offering five times over the next several years. We believe that our Payment Accelerator product will ultimately bring an intuitive front-end user experience for all of our B2B constituents similar to that of a best-in-class consumer payments application with robust back-end instant decision and underwriting capabilities. Next, I'd like to provide a progress update on some of our major accounting and ERP partnerships that we announced in 2023 as part of our strategic growth plan. Recall that we announced two marquee partnerships last year. Abfolio in the multifamily vertical industry and M3 in the hospitality vertical. Both of these partnerships are highly strategic in nature for very specific reasons.

Michael Praeger: We are leveraging data science and user experience of heat maps to understand and analyze the user behavior as we intend to scale. This offering fivefold over the next several quarters.

Michael Praeger: Next I'd like to provide a progress update on some of our major accounting and ERP partnerships that we announced in 2023 is part of our strategic growth priorities.

Michael Praeger: Recall that we announced two marquee partnerships last year.

Michael Praeger: Folio and the multifamily vertical industry and three in the hospitality vertical.

Michael Praeger: Both of these partnerships are highly strategic in nature for very specific reasons.

Michael Praeger: Let's start with that folio, whose strategic rationale stems from its size scope and our vertical market experience recall, the accounting system partnership without folio is our biggest ever with a top accounting system provider focused on the multifamily real estate vertical.

Michael Praeger: As part of our joint Go Live motion, FOLIA was deploying various marketing outreach initiatives across channels to steer its customers to our offering in its marketplace through email, landing pages, webinars, and joint pipeline reviews. What is truly exciting is the increasing top of the funnel activity we have already seen in the lead up to the go live integration announcement, along with high customer engagement. Since the announcement of our partnership in the fourth quarter of 2023, we have tripled the number of new opportunities created in the first quarter.

Michael Praeger: <unk> various marketing outreach initiatives across channels, the spirits customers to our offering and it's marketplace through mill landing pages, Webinars and joint pipeline reviews what.

Michael Praeger: What is truly exciting is the increasing top of funnel activity, we've already seen in the lead up to the go live integration announcement, along with high customer engagement.

Michael Praeger: Since the announcement of our partnership in the fourth quarter of 2023, we have tripled the number of new opportunities created in the first quarter.

Michael Praeger: We believe this kind of ramp sets us up for a nice tone for this partnership for 2024 with meaningful revenue build in 2025 and beyond, as we believe that over 50% of that full set of 19,000 existing customers are a strong product market fit for our. Moving on to the M3 partnership in the hospitality vertical, where we're seeing similar opportunity dynamics unfold. M3, as you may recall, is the hospitality market leader in cloud-based accounting solutions, along with a data management platform tailored specifically for the hospitality industry. M3's customer base exceeds 1,000 hotel management groups and owner-operators, including 50% of the top hotel managers and operators in the United States.

Michael Praeger: We believe this kind of ramp sets us up nice tone for this partnership for 2024 with meaningful revenue built in 2025 and beyond as we believe that over 50% of our fully of 19000 existing customers our strong product market fit for our offering.

Michael Praeger: Moving on to the <unk> partnership in the hospitality vertical where we're seeing similar opportunity dynamics unfold.

Michael Praeger: <unk> customer base exceeds 1000 hotel management groups and owner operators, including 50% of the top hotel managers and operators in the United States.

Michael Praeger: And three is highly strategic for us given that accelerates our entry into the hospitality vertical through a player with a dominant positioning in the marketplace.

Michael Praeger: We went live with our embedded paint integration with <unk> core select accounting solution in the third quarter of 2023 since.

Michael Praeger: These opportunity creations are up four four on a year over year basis compared to Q1 2023.

Michael Praeger: Given the traction we are seeing we have jointly decided to broaden our relationship and just signed a contract extension with <unk> to provide integration into its flagship accounting core solutions. This accounting core integration is slated to go live in the second half of 2024, we believe that both are at folio and three partnership.

Michael Praeger: We believe that both our Affolio and M3 partnerships, along with several others that are in the pipeline, position us well for long-term growth within our large addressable and unpenetrated AP automation market for middle market companies. Finally, on our key priority related to business scale, I'd like to discuss the opportunities for sustained gross margin expansion, a major lever that we've relentlessly been addressing to great success. The success in gross margin expansion perfectly complements the operating expense and investment discipline that we have demonstrated since becoming a public company.

Michael Praeger: Along with several others that are in the pipeline position us well for long term growth within our large addressable and Underpenetrated AP automation market for middle market companies.

Michael Praeger: Finally on our key priority related business scale I'd like to discuss the opportunities for sustained gross margin expansion a major lever that we have relentlessly been addressing to great success. The success in gross margin expansion perfectly complements the operating expense and investment discipline that we have demonstrated since becoming a public company.

Michael Praeger: To ensure continued expansion of gross margins, we believe that we have significant room to run as we work towards our long term, 80% plus gross margin target.

Michael Praeger: The latest arrow in our quiver as our new AI powered IV, our payment automation solution to put this particular use case opportunity in perspective currently we employ both follow the sun sourcing strategies and chat bots to make payments across our various payment modalities.

Michael Praeger: To put this particular use case opportunity in perspective, currently, we employ both follow-the-sun sourcing strategies and chatbots to make payments across our various payment modalities. While the sourcing strategies optimize both unit costs and timezone coverage, our IPA-driven bots optimize unit costs and timezone coverage at speed and scale. But RPA-driven bot methods of payment execution have certain limitations given that they need IVR to perform the exact path of execution every time, or they break and need constant remapping work to be done, along with requiring human beings to be inserted at critical junctures for the process to be successful.

Michael Praeger: While our sourcing strategies optimize both unit cost and time zone coverage, our IP, driven baas optimize unit cost and time zone coverage at speed and scale, but our P. Driven bought methods of payment execution have certain limitations given that they need IV iron to perform the exact path of execution every time or they break and need constant.

Michael Praeger: Re mapping work to be done along with requiring human beings to be inserted at critical junctures for the process to be successful.

Michael Praeger: So anytime anything changes or if there is a latency, bot automation fails, and the payment becomes manual or potentially kicked to a paper check. With our new AI-powered IVR automation solution, which is self-learning and self-correcting, optimizing the functionality of what our existing bots currently do, along with what our bots cannot do, such as adjusting the changes and updates in a particular IVR decision tree, marks a major new innovation milestone for us.

Michael Praeger: So anytime anything changes or if there is a latency bought automation fails in the payment becomes manual or potentially take to a paper check with our new AI powered IV, our automation solution, which is self learning and self correcting optimizing the functionality of what our existing bonds currently do along with what our bots cannot do such as <unk>.

Michael Praeger: <unk> and the changes and updates and a particular IPR decision tree marks a major new innovation milestone for us.

Michael Praeger: Driving increased electronic payment penetration rates, even further in our business.

Michael Praeger: And most importantly, we believe this solution will scale non-literally as we double and triple our transaction volume on the payment network in the future. In closing, we're off to a very strong start in 2024. And I'm excited with the progress we're making across our five operating priorities for the year, which include continuing to develop and recruit key talent to support our performance culture, our customer obsession, and continuing to increase the value proposition for both our buyer and supplier customers, delivering our innovation initiatives and offerings to support our durable long-term 20% organic growth objectives, along with continued scaling of our business towards the next billion dollar milestone in the coming year. We recognize that the macro backdrop has remained volatile and challenged over the past two years and creates a cautious approach to discretionary spending across the middle market.

Michael Praeger: And most importantly, we believe this solution will scale non literally as we double and triple our transaction volume on the payment network in the future.

Michael Praeger: In closing we're off to a very strong start in 2024 and I'm excited with the progress we're making across our five operating <unk> for the year, which include continued develop and recruit key talent to support our performance culture, our customer obsession and continuing to increase the value proposition for both our buyer and supplier customers.

Michael Praeger: Delivering on our innovation initiatives and offerings to support our durable long term, 20% organic growth objectives.

Michael Praeger: Along with continued scaling of our business towards our next billion dollar milestone in the coming years.

Michael Praeger: However, we remain laser focused on operational rigor and execution, along with controlling those elements of our business model that we can control directly, which includes our targeted innovation investments geared towards continued expanding the customer value proposition and impact we're having on both our buyer and supplier customers, increasing our competitive advantage across the middle market. As we remain on track to deliver our 2024 financial commitments, we believe the robust product payload and integration partnerships that we've announced provide us with an important tailwind for building for 2025 and beyond. I want to provide a special thanks to all my Avidx team members for their hard work, dedication, and relentless focus on executing our operational and strategic priorities.

Michael Praeger: Market.

Michael Praeger: <unk> and relentless focus on executing our operational and strategic priorities.

Michael Praeger: We believe we're still in the very early innings of penetrating what is a large and unpenetrated market opportunity delivering business-to-business accounts payable and payments automation offerings to middle market companies given our product innovation, strong execution, competitive, and financial strength. We believe we're well positioned to drive impactful value for customers, create future growth opportunities for our team members, and unlock significant long-term value for our shareholders. With that, I'd like to turn the call over to my partner, Joel Wilhite. Thanks, Mike. And good morning, everyone.

Joel Wilhite: Given our product innovation strong execution competitive and financial strength.

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

Joel Wilhite: Overall, we delivered another quarter of healthy year over year financial performance relative to the implied first quarter 2020 for business outlook.

Joel Wilhite: And excluding float in political revenue contributions.

Joel Wilhite: First quarter revenues came in higher due to payment and software yield expansion driven by ongoing E pay conversion.

Joel Wilhite: That, together with higher gross margins, driven by higher revenues, ongoing progress on unit cost initiatives, software, and pay yield expansion, as well as sustained expense discipline, led to significant adjusted EBITDA outperformance. It's worth highlighting that this is our second consecutive quarter of adjusted EBITDA profit, ex-float. Most notably, we more than doubled our adjusted EBITDA profit sequentially, ex float and political, to $3.7 million in Q1 of 2024 from $1.5 million in Q4 2023.

Joel Wilhite: That together with higher gross margins driven by higher revenues.

Joel Wilhite: Ongoing progress on unit cost initiatives software and pain, when you pay yield expansion as well as sustained expense discipline led to significant adjusted EBITDA outperformance.

Joel Wilhite: It's worth highlighting that this is our second consecutive quarter of adjusted EBITDA profit ex float and political.

Joel Wilhite: Most notably we more than doubled our adjusted EBITDA profit sequentially ex float and political to $3 $7 million in Q1 of 2024 from $1 $5 million in Q4 2023.

Joel Wilhite: Due to higher transaction growth, software and payment yield expansion, lower unit cost, and operating leverage, leaving us incrementally more confident in achieving our financial targets rolled out during our June 2023 investor day. Now turning to year-over-year results, total revenue increased by 21.6% to $105.6 million in Q1 of 2024 over the first quarter of 2023. It's important to note that the number of business days year over year remained unchanged at 63 days

Joel Wilhite: Now turning to year over year results total revenue increased by 21, 6% to $105 $6 million in Q1 of 2024 over the first quarter of 2023.

Joel Wilhite: It's important to note that the number of business days year over year remained unchanged at 63 days.

Joel Wilhite: Roughly 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 and political revenue. Our strong revenue growth also resulted in total transaction yield expanding to $5.47 in the quarter, up 14.9% from $4.76 in Q1 of 2023. Of the 14.9% increase, more than half of the increase was driven by pay and software yield coupled with transaction mix skewed towards payment. The remainder was due to float and political revenue.

Joel Wilhite: Roughly three quarters of the revenue growth was driven by the combination of the addition of new buyer invoice and payment transactions.

Joel Wilhite: With software and pay yield expansion the remaining revenue growth this quarter was driven by higher year over year float and political revenues.

Joel Wilhite: Our strong revenue growth also resulted in total transaction yield expanding $5.47 in the quarter up 14, 9% from $4 76 in Q1 of 2023.

Joel Wilhite: Of the 14, 9% increase more than half of the increase was driven by PE and software yield coupled with transaction mix skewed towards payments.

Joel Wilhite: The remainder was due to float and political revenues.

Joel Wilhite: Software revenue was $29 $7 million, which accounted for 28, 1% of our total revenue in the quarter increased 10, 1% in Q1 of 2024 over Q1 of 2023.

Joel Wilhite: Payment revenue was $75 $2 million, which accounted for 71, 2% of our total revenue in the quarter increased 27, 1% in Q1 of 24 over Q1 of 'twenty three.

Joel Wilhite: Payment revenue reflects the contribution of interest revenues, which were $13 1 million in Q1 of 'twenty four versus $7 1 million in Q1 of 2023.

Joel Wilhite: Political media revenue in the current quarter was approximately $800000 of negligible in the same period a year ago.

Joel Wilhite: Sorry.

Joel Wilhite: Now moving onto our operating expenses on.

Joel Wilhite: On a GAAP basis total operating expenses were $79 $4 million, an increase of six 6% in Q1 of 2024 over Q1 of last year.

Joel Wilhite: On a non-GAAP basis operating expenses, excluding depreciation amortization and stock based compensation increased one 4% to $58 8 million in the first quarter of 2024 from the comparable prior year period.

Joel Wilhite: On a percentage of revenue basis operating expenses, excluding depreciation amortization stock based compensation declined to 55, 7% in the first quarter of 2024 from 66, 8% in the comparable period last year.

Joel Wilhite: The year over year percent decline largely highlights expense discipline and significant operating leverage.

Joel Wilhite: Across G&A sales and marketing as well as R&D to an extent, even after stripping out the contribution of float.

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

Joel Wilhite: non-GAAP research and development costs increased by $1.3 million or six 5% to $22 $1 million in Q1 of 24 over Q1 of last year. The increase was due to continued reinvestment in our products and platform, including spend management pay offering and payment accelerator.

Joel Wilhite: They continue their annualized downward progression as a percentage of revenues as we indicated during our investor day.

Joel Wilhite: Solid Gross Profit Increase in Expense Control leading to lower operating losses, coupled with higher interest income and lower interest expense due to reduced borrowing costs and partial debt pay-down. On a non-GAAP basis, our net income in the first quarter of 2024 was $11.3 million versus a net loss of $3.4 million in the same period last year, a $14.7 million positive swing driven by the aforementioned factors. On a non-gap basis, Q1 2024 adjusted EBITDA was $17.7 million versus $400,000 in Q1 2023, largely due to the aforementioned factors.

Joel Wilhite: On a non-GAAP basis, our net income in the first quarter of 2024 was $11 $3 million versus a net loss of $3 $4 million in the same period last year, a $14 $7 million positive swing driven by the aforementioned factors.

Joel Wilhite: On a non-GAAP basis, Q1, 2024, adjusted EBITDA was $17 $7 million versus $400000 in Q1 of 2023, largely due to the aforementioned factors.

Joel Wilhite: Turning to our 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 $443.6 million of cash in marketable securities against an outstanding total debt balance of $75.8 million, including a note payable for $13.9 million. We had $30 million on our undrawn credit facility at year end. Corporate cash, meanwhile, was split roughly two-thirds among money market funds, commercial paper, and time deposit instruments, with the remaining third in deposit accounts.

Joel Wilhite: Turning to our 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 <unk>.

Joel Wilhite: $443 $6 million of cash and marketable securities.

Joel Wilhite: Against the outstanding total debt balance of $75 $8 million, including a note payable for $13 $9 million, we had $30 million on our undrawn under our credit facility at year end corporate cash. Meanwhile, was split roughly two thirds of my money market funds commercial paper and time deposit.

Joel Wilhite: Instruments with the remaining third and deposit accounts.

Joel Wilhite: The weighted average maturity on the corporate cash was roughly 36 days, while the effective interest rate on our corporate cash position for the first quarter was roughly 5.2%. Customer cash at quarter end was approximately $1.2 billion, with an interest rate of roughly 5% for the quarter. The sequential decline in customer cash was largely due to typical seasonal patterns related to disbursement and settlement of payments in flight from the prior quarter.

Joel Wilhite: Weighted average maturity on our corporate cash was roughly 36 days, while the effective interest rate on our corporate cash position for the first quarter was roughly five 2%.

Joel Wilhite: <unk> intra quarter and shifts in calendar days between weekdays and weekends of receipt and disbursement of that cash impacts float revenue.

Joel Wilhite: Our 2024 revenue outlook reflects approximately $45 million of interest revenue from customer funds, a $1 million increase from our initial 2024 outlook versus roughly $41 million earned in 2023. We anticipate approximately 54% of the $45 million in interest revenue from customer funds in the first half of 2024, with the remaining approximately 46% in the second half of 2024. Also, we anticipate political media revenue contribution of approximately $9 million given that this is our first presidential cycle under FastPay.

Joel Wilhite: Turning to our updated 2024 business outlook. We now expect total revenue for the year to be in the range of $442 million to $448 million.

Joel Wilhite: First this roughly $41 million earned in 2023.

Joel Wilhite: We anticipate approximately 54% of the $45 million in interest revenue from customer funds in the first half of 2024 with the remaining approximately 46% in the second half of 2024.

Joel Wilhite: Also we anticipate political media revenue contribution of approximately $9 million given that this is our first presidential cycle under fast pay.

Joel Wilhite: Recall, we acquired FastPay in 2021. And for context, in 2022, during the midterm election cycle, the political arm of FastPay generated roughly $8.5 million in revenue. Similarly, we expect non-GAAP adjusted EBITDA profit ranging between $71,000,000 and $75,000,000 for the year. 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 question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys.

Joel Wilhite: Recall, we acquired fast pay in 2021 and for context in 2022 during the mid term election cycle, the political arm of fast pay generated roughly $8 $5 million in revenues.

Joel Wilhite: Similarly, we expect non-GAAP, adjusted EBITDA profit ranging between $71 million and $75 million for the year.

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

Joel Wilhite: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if you're using a speaker phone. Please pick up your handset before pressing the keys.

Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Management has asked that each participant limit their question to one. At this time, we will pause momentarily to assemble our roster. The first question comes from Dave Koning with Baird, please go ahead. Yeah, hey guys, great job. And I guess my question, so it looks to me like this is the best growth quarter in maybe a couple years if you exclude float and politics, which is great to see. And it reflects a lot of what you talked about payments yield, which has been up now for seven, I think nine straight quarters. What's the shape of that going forward?

Joel Wilhite: Time request <unk> has been addressed and you would like to withdraw your question. Please press Star then two.

Operator: Management has asked that each participant limit their question to one.

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

Joel Wilhite: I know there's puts and takes between interest revenue and the payment accelerator coming on, but does that just step function just up every quarter still? Or how should we see that over the next several quarters? Yeah, thanks, Dave.

Operator: The first question comes from Dave Koning with Baird.

Joel Wilhite: Please go ahead.

Joel Wilhite: I appreciate your comments and appreciate your question as well. I think what I would just say about TPV in particular, that's really been, you know, helping support that payment revenue line is, you know, like we've said before, you might see variability from quarter to quarter, but our, you know, our track record is kind of steady expansion over time. And of course, you know, gear three of our model checks coming out of the system, increasingly finding opportunities to monetize digital payment, together with some of the initiatives that we've talked about, and that Mike mentioned, payment accelerator, etc., give us kind of the tools and levers to continue to see that yield expand over time.

Speaker Change: Yes, Thanks, Dave.

Joel Wilhite: State your comments and I appreciate your question as well.

Joel Wilhite: What I would just say on the TPG yield in particular, that's really been helping support that payment revenue line is likely.

Joel Wilhite: Like we said before you might see variability from quarter to quarter, but our our.

Joel Wilhite: Our track record is kind of steady expansion over time and of course, you know that.

Joel Wilhite: Yeah, I mean, just to follow up on what Joel said is, you know, across our team, we're laser focused on, you know, kind of the one metric that I like talking about, which is the transaction yield. And certainly, that's up over 70 cents over last year and, you know, up slightly over last quarter. But that's the one that we kind of lean into in terms of all the different, you know, strategies we're executing across the business to continue to, you know, focus on what we can control. And one of the metrics there is that transaction. The next question comes from Darrin Peller with Wolf Research. Please go ahead.

Joel Wilhite: Yes.

Joel Wilhite: David to follow up on what Joel said is.

Darrin David Peller: Across our team we are laser focused on kind of the the one metric that I like talking about which is the transaction yield.

Darrin David Peller: And certainly that's up over 70 over last year.

Joel Wilhite:

Darrin David Peller: Slightly over last quarter, but thats. The one that we lead into in terms of all the different strategies, we are executing across the business to continue to.

Darrin David Peller: <unk> focus on what we can control and what are the metrics there as that transaction yield metric.

Joel Wilhite: The next question comes from Darrin Peller with Wolfe Research.

Darrin David Peller: Please go ahead.

Michael Praeger: Guys, can we just expand a little bit more on the top of the funnel comments that I know Mike you were commenting on earlier, the conferences and changes to philosophy around them, and maybe what you're seeing in terms of Milking's momentum and just to add on to that demand for some of the new offerings on the supplier side as well? Yeah, Darrin, no, I appreciate the question. You were breaking up a little bit, but I think it was around the top of the funnel and commentary there.

Mike: Update there.

Speaker Change: Still relatively early.

Michael Praeger: Great.

Speaker Change: Yes, Darrin no.

Speaker Change: The question.

Speaker Change: You were breaking up a little bit, but I think it was around the top of funnel and commentary there.

Michael Praeger: I think what we saw was.

Michael Praeger: Different verticals.

Michael Praeger: Certainly experiencing kind of a different types of activity.

Michael Praeger: On the positive side, we're really encouraged with what we saw in the real estate vertical that was best results.

Michael Praeger: Probably a couple of years related to top of funnel.

Michael Praeger: And certainly, kind of the multifamily piece of multifamily and industrial real estate was very strong for us. Not a big surprise, considering that, you know, that's a key area that we have strong industry, domain knowledge, experience, and also have lots of partnerships, you know, in that area. On the flip side, you know, certainly verticals like our HOA management vertical, you know, or associate management vertical, as we call it, combined with financial services, and, you know, experience, you know, some kind of leg activity.

Michael Praeger: And then combined with education and nonprofit.

Michael Praeger: Strong.

Michael Praeger: And certainly kind of the multifamily piece of multifamily and industrial pieces of real estate were very strong for us so not a big surprise considering that that's a key area that we have strong industry domain knowledge experience and also have lots of partnerships.

Michael Praeger: In that area.

Michael Praeger: On the flip side certainly.

Michael Praeger: Verticals like.

Michael Praeger: Our HOA management.

Michael Praeger:

Michael Praeger: Sophie management verticals, we call it.

Michael Praeger: Combined with financial services.

Michael Praeger: And we experienced some.

Michael Praeger: So we kind of lagged activity and one of the things that in terms of.

Michael Praeger: Peeling back the onion and reasons why we also implemented a fairly large just strategic shift in our approach to <unk>.

Michael Praeger: Lots of different kind of industry conferences, and so for just to give you a sense of it last year in Q1, we attended about 85 different conferences and industry Tradeshows.

Michael Praeger: And, and so, rather than spreading kind of the peanut butter pretty thin related to our investment dollars, the team is being much more strategic in terms of, you know, where do we invest in terms of the highest yielding conferences and events that we can attend, you know, to drive both, you know, ROI yield as well as activity from these. And, and so one, you know, kind of result of that is that, you know, we tended to do less in Q1, but also super encouraging about some of the, Unknown Attendee, Shray Gurtata, Subhaash Kumar, Avidxchange Hldg. So that's maybe a little bit of flavor related to it. The next question comes from Sanjay Sakrani with KBW. Please go ahead. Thanks. Good morning. I guess I have a question about just macro macro broadly. One is just on the float.

Michael Praeger: And we were about 30% less this year and and so rather than spreading the peanut butter pretty thin related to our investment dollars.

Michael Praeger: The team is being much more strategic in terms of.

Sanjay Sakrani: Where do we invest in terms of the highest yielding conferences and events that we can attend to drive both.

Sanjay Sakrani: Our ROI yield as well as the activity from these.

Sanjay Sakrani: And so one.

Sanjay Sakrani: Kind of result of that is that we tended less in Q1, but also super encouraging about.

Sanjay Harkishin Sakhrani: Some of the.

Michael Praeger: <unk> segment that did not do as well in Q1.

Sanjay Sakrani: We saw a bounce back in or bouncing back in Q2 and overall.

Sanjay Sakrani: Activity up 9%, so far in the quarter.

Sanjay Sakrani: And so we.

Sanjay Harkishin Sakhrani: The next question comes from Sundry, Sanjay So crummy with K B W. Please.

Sanjay Sakrani: Please go ahead.

Sanjay Harkishin Sakhrani: Thanks, Good morning, I guess I have a question just macro broadly one is just on the float.

Joel Wilhite: Yes.

Joel Wilhite: <unk> had decent outperformance relative to the quarterly run rate and it seems like you expect flow contribution that come down over the back part of this year whats the rate outlook in that and then secondly, just macro in general I know, Mike talked about it still being mixed but maybe just elaborate a little bit more on sort of what youre seeing and if there's green shoots I think you've mentioned.

Joel Wilhite: In real estate, but would love some more elaboration around that thank you.

Joel Wilhite: So on your float question, you know, we did 13 million in the quarter. It's a little bit higher than our expectations. And one thing to keep in mind is that, you know, rate is a factor, but also customer balances are a meaningful factor. And in fact, in Q1, rates had not been an impact whatsoever.

Joel Wilhite: Yes, you bet great questions I'll take float in macro.

Joel Wilhite: On your first question, we did so $13 million in the quarter, a little bit higher than our expectations and one thing to keep in mind is that right is a factor, but also customer balances are a meaningful factor and in fact in Q1 rates was.

Joel Wilhite: Not an impact whatsoever, and so those customer balances are really impacted by just the timing and whether or not our period end lands on a weekday or weekend and such.

Joel Wilhite: And so those customer balances are really impacted by, you know, just the timing and whether the period end lands on a weekday or a weekend and such. And so, that sort of beat in the quarter is kind of what led us to bump up the range for that float beat. In terms of your question about the expectations in the back half, we, you know, we haven't really meaningfully changed for our initial guidance where we did anticipate a handful of rate cuts in the back part of the year, something like, you know, 75 bips.

Joel Wilhite: And so that's that's sort of beat in the quarter is kind of what led us to bump up.

Joel Wilhite: The range for that flow in terms of your question about the expectations in the back half.

Joel Wilhite: We haven't really meaningfully changed from our initial guidance, where we did anticipate.

Joel Wilhite: Handful of rate cuts in the back in the back part of the year something like 75 bets, we'll see what actually shakes out, but that's kind of how we think about float revenue just keeping in mind those customer balance is being a huge driver.

Joel Wilhite: I think from a macro perspective, I would just kind of go back to the what we've been experiencing now for over a year is just.

Joel Wilhite: Some suppression in spending in transactions associated with our buyers on our platform and we attribute that to in particularly discretionary spending and no. One particular vertical just general caution in spending and that's continued through the first quarter even into <unk>.

Joel Wilhite: Through the month of April and so that's.

Joel Wilhite: That macro impact is something that continues to be bacon baked into our guidance.

Joel Wilhite: And so that's, you know, that macro impact is something that continues to be baked into our guidance. The next question comes from Greg Maurer with FT Partners. Please go ahead.

Joel Wilhite: The next question comes from Greg <unk> with Ft Partners. Please go ahead.

Craig Jared Maurer: Yeah, Hi, thanks for taking the question.

Craig Jared Maurer: So appreciate all the commentary around the macro is the volatile macro driving any changes in transaction mix between modalities, whether it's <unk> or other.

Joel Wilhite: Yeah, so, Craig, I appreciate the question. What I would say is that I think where we see macro impacting our business the most is on discretionary spending. So, I would say it's having less impact on, you know, kind of that allocation across different payment modalities. Those are probably very, you know, specifically driven, you know, by supplier experience and typically find suppliers think about a combination of timing of the payment, you know, the price of the payment combined with the level of data, you know, remittance data provided in automation.

Craig Jared Maurer: Yes, So hey, Greg I appreciate the question.

Joel Wilhite: What I would say I think where we see macro impacting our business. The most is on the discretionary spend volumes.

Joel Wilhite: So I would say having less impact on.

Joel Wilhite: And of that the allocation across different payment modalities.

Joel Wilhite: Those are probably very specifically driven.

Joel Wilhite: By supplier experience and typically find suppliers.

Joel Wilhite: Think about a combination of timing of the payment the price of the payment combined with the level of data remains data provided and automation.

Joel Wilhite: And those things really drive, you know, kind of a payment modality acceptance, much more so than, you know, macroeconomic type issues like we've experienced. Subhaash Kumar, Avidxchange Hldg. The next question comes from Andrew Bauch with Wells Fargo; please go ahead. Hey, thanks, guys.

Joel Wilhite: And those things really drive kind of a payment modality acceptance.

Andrew Thomas Bauch: Much more so than <unk>.

Andrew Thomas Bauch: Macro economic type issues as what we've experienced so.

Joel Wilhite: Typically.

Andrew Thomas Bauch: In my conversations that I have it's usually around discretionary spend on overall volume is where we're seeing the impact.

Andrew Thomas Bauch: The next question comes from Andrew bulk.

Andrew Thomas Bauch: Wells Fargo. Please go ahead.

Joel Wilhite: I know you don't guide on a quarterly basis, but I wanted to get a sense of your results this quarter relative to your internal expectations. Revenue came in, you know, three to four million ahead of what our expectations were. And then, you know, on a full year basis, you had the guy come up a million.

Andrew Thomas Bauch: Hey, Thanks, guys.

Andrew Thomas Bauch: I know you don't guide to a quarterly basis, but wanted to get a sense of.

Joel Wilhite: Your results this quarter relative to your internal expectations revenue came in $3 million to $4 million ahead of what our expectations were and then on a full year basis, you had the guy come up $1 million. So just wanted to get a sense on how this all played out in over the puts and takes around the quarter spin.

Joel Wilhite: Typically.

Joel Wilhite: So just wanted to get a sense of how this all played out, and what were the puts and takes around the quarter specifically? Yeah, it's um, I hear your question, and I think you kind of summarized it well. Just to repeat, you know, we had relative to sort of the first quarter, let's just say, using consensus as the benchmark, is about 3 million up. We attribute a couple of that to float revenue and a couple of that to sort of underlying, you know, outperformance in the business, particularly around yield.

Joel Wilhite: Yes.

Speaker Change: I hear your question and I think you've kind of summarized it well just to repeat we had relative to the first quarter lets just say using consensus is the benchmark of about 3 million up.

Joel Wilhite: We attribute a couple of that float revenue in a couple of that sort of underlying outperformance in the business, particularly around yield.

Joel Wilhite: And, you know, our guidance, like I kind of mentioned in the last response, contemplates sort of the continued activity that we see from a volume trends perspective for the rest of the year. So, you know, we're excited about having another quarter under our belt where we're sort of beating revenue expectations, seeing yield consistently expand, expanding gross margin, and sort of doubling EBITDA profit X float quarter per quarter. So that's what we're focused on executing. The next question comes from Bryan Keane with Deutsche Bank. Please go ahead. Hi guys. Good morning.

Joel Wilhite: And.

Bryan Connell Keane: Our guidance.

Bryan Connell Keane: Kind of mentioned in the last response contemplate sort of a continued activity that we see from a volume trends perspective for the rest of the year. So.

Bryan Connell Keane: We're excited about having another quarter under our belt, where we're sort of beating revenue expectations seeing yield consistently expand our expanding gross margin and <unk>.

Bryan Connell Keane: Doubling EBITDA profit ex flow quarter over quarter. So that's what we're focused on executing.

Joel Wilhite: The next question comes from Bryan Keane with Deutsche Bank. Please go ahead.

Bryan Connell Keane: Hi, guys good morning.

Michael Praeger: There are, you know, existing customers that are already on our platform; they're implemented, and we're seeing some of the headwinds on discretionary spend related to, you know, the CFOs across the middle market. That one is, you know, probably, we have less ability to impact in the short term.

Mike: Yeah, Hey, Brian that's a great question and it's one that.

Michael Praeger: I spent a lot of time asking my team about.

Michael Praeger: When I think of that transaction number theres kind of two buckets, there's existing customers that are already on our platform that are implemented and we're seeing some of the headwinds on discretionary spend related to the CFO across the middle market.

Michael Praeger: That one is probably we have less ability to impact in the short term.

Michael Praeger: And however, the other piece of it is new transactions that were adding to the platform.

Michael Praeger: And I part of it is, you know, new transactions that we're adding to. And in that bucket, you know, certainly, there are things that you know, and strategies that we're deploying. You know, one of the biggest things is, you know, kind of, you know, the evolution of our, you know, sales and go-to-market activity. And, you know, one of the things that I highlighted during the call that we're, you know, really excited about is, you know, the impact of some of the new partnerships that are just, you know, in the early stages of being launched, certainly, Folio being a big one, combined with time three, and then just, you know, the continued execution of existing partnerships.

Michael Praeger: And in that bucket.

Michael Praeger: <unk>.

Michael Praeger: There are things that.

Michael Praeger: And strategies that we're deploying one of the biggest things is kind of the evolution of our sales and go to market activity.

Michael Praeger: <unk>.

Michael Praeger: One of the things that I highlighted during the call that we're really excited about is the impact of some of the new partnerships that are just.

Michael Praeger: In the early stages of being launched certainly fully yo being a big one combined with M. Three and then just the continued execution of existing partnerships. So one of the things when it highlights a top of funnel in the last quarter was what we saw in real estate.

Michael Praeger: So, you know, one of the things, one of the highlights following the last quarter was what we saw in real time. And that was, you know, certainly a big part of that activity was from the, you know, kind of, I'd say the legacy partnerships that we've had, you know, companies like MRI, ResMed, RealPage, you know, examples like that. And, but we are, you know, really excited about Folio M3 as new partnership examples.

Michael Praeger: And, you know, right now, we feel that we're, you know, kind of on pace to execute those. But certainly, you know, I'm talking to my team every day about, you know, things that we can do to continue to accelerate, you know, those types of, The next question comes from Ramsey Ellisout with Barclays. Please go ahead.

Michael Praeger: And that was.

Michael Praeger: Certainly a big part of that activity was from the kind of I'd say the legacy partnerships that we've had.

Ramsey El: Companies like MRI, rather has been real page examples like that and but we are really excited about.

Michael Praeger: Folio M. Three is new partnership examples and.

Ramsey El: Right now we feel that we're on pace to execute those but certainly.

Ramsey El: I am talking to my team every day about things that we can do to continue to accelerate those type of partnerships.

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

Joel Wilhite: Hi, thanks for taking my question. On the top of funnel headwinds, will we see more of a kind of noticeable air pocket from the sales pivot that hits numbers in a specific quarter this year? Is there any type of cadence dynamic to be aware of?

Ramsey El: Hi, Thanks for taking my question.

Ramsey El: On the top of funnel headwinds, we see more of a kind of a noticeable air pocket from the sales pivot hits numbers in a specific quarter. This year is there any type of cadence dynamic to be aware of and then just on the M. Three and App Folio Rollouts I was just curious if you had any updated thoughts on.

Ramsey El: Annualized revenue contribution or how much you havent bedded in guidance this year for those deals.

Joel Wilhite: And then just on the M3 and app folio rollouts, I was just curious if you had any updated thoughts on, you know, annualized revenue contribution or how much you have embedded in guidance this year for those deals. Hey, Ramsey. I'll take the first part and Mike will take the second part. So, I wouldn't really call out necessarily in our pocket. I mean, we think, you know, we've got, we like, there are some puts and takes overall, but we like our progression of customer ads for the year and feel good about, you know, the guidance set up and certainly then exiting for a strong 25. So, I don't know, Mike, if you want to comment on the M3 in that folio.

Speaker Change: Hey, Randy I'll take the first part.

Mike: I can take the second part so I wouldn't I wouldn't really call out necessarily an air pocket I mean, we think we've got we like.

Mike: Puts and takes overall, but we like our progression of customer adds for the year and feel good about that.

Joel Wilhite: The guidance setup and certainly then exiting first strong 25, so I don't know Mike if you want to comment on that <unk> yeah.

Michael Praeger: Yeah. What I would say, you know, Ramsey, is these partnerships are different from the standpoint of one is in a vertical that we know really well and that we're a long-term leader in being, you know, the multi-family segment of real estate. And we already have the kind of key integration partnerships, you know, with the other competitors in that segment, i.e., like RealPage, the ResMids of the world.

Mike: What I would say Ramsey is.

Michael Praeger: Yes.

Michael Praeger: These partnerships there.

Michael Praeger: They are different from the standpoint of one is in a vertical that we know really well and that we're a long term leader in the multifamily segment of real estate.

Michael Praeger: And we already have the kind of the key integration partnerships with the other competitors in the <unk>.

Michael Praeger: In that segment.

Michael Praeger: We like the real page the residents of the world and so.

Michael Praeger: And so, that, you know, is one that I think has the capability of, you know, ramping faster. Now, having said that, we had, you know, kind of, you know, already plans in place that we expected to ramp faster to some degree. And then, you know, the M3 partnership is one that, you know, in the same way we have the same level of excitement about, but it's just in, you know, a new emerging vertical for us, being hospitality, that we announced last year. So, we don't have the same level of existing name recognition and penetration within that vertical as we do with the real estate side.

Michael Praeger: That was one that I think has the capability of ramping faster now having said that we had kind of already plans in place that we expected to ramp faster to some degree and then <unk>.

Michael Praeger: <unk> partnership is when.

Michael Praeger: And the same we have the same level of excitement about but it's just.

Michael Praeger: Our new emerging vertical for us big hospitality that we announced last year. So we don't have the big of the existing name recognition.

Michael Praeger: <unk>.

Tianxin Huang: And penetration within that vertical as we deal with the real estate side.

Michael Praeger: So.

Michael Praeger: I would say we're right on plan in terms of our internal expectations and certainly working hard to have those ramp throughout the year.

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

Joel Wilhite: Thank you. Just a clarification on the question, if you don't mind. Just the 52% of revenue in the second half, that's unchanged. So the implied second quarter revenue, if we're calculating this correctly, is... suggesting it will be flat sequentially when it's usually up. Is that correct? And if so, why?

Tianxin Huang: Thank you just to clarify.

Unknown Attendee: A clarification and a question if you don't mind, just the 53% of revenue in the second half.

Joel Wilhite: That's unchanged so the implied second quarter revenue for calculating this correctly is suggesting it will be flat sequentially when.

Joel Wilhite: When it's usually up is that correct and if so why and then just on the on the ramps and other asset just the real estate up high double digits is that a result of folio production or is it or is it more.

Joel Wilhite: And then just on the, I know Ramsey and others asked it, just the real estate up in the high double digits. Is that a result of app folio production or is it more macro? Thank you. Got it. Okay. Good questions, Tingen. I'll go first and Michael will come after me.

Speaker Change: Macro thank you.

Speaker Change: Got it okay.

Speaker Change: Good question Tien Tsin I'll go first and Michael come after me. So on your first question, yes, the backend.

Joel Wilhite: In our guidance the back end of the year is slightly less back ended with updated guidance, but largely consistent in that sort of 50 53 ish 52 553 range and then your question about what is implied in Q2 of course, we don't guide the next quarter, but but your math isn't isn't wrong and what we are doing is taking a fairly <unk>.

Joel Wilhite: Better or worse, but we are exercising an additional measure of prudence as we're as we're giving guidance and so just kind of.

Joel Wilhite: Keeping the keeping the range change just to that flow beat in Q1.

Joel Wilhite: And maybe to follow up on, you know, the second part of your question related to, you know, that top of the funnel and, you know, double digit growth that we saw in real estate, was it dominated by, you know, one particular partner like Atfolio? And the answer is, is no; it was really, you know, nice activity across the board within, you know, kind of real estate specifically, actually, you know, weighted towards multifamily. But within multifamily, we saw, you know, both more mature partners, such as RealPage and ResMed, contribute nicely, along with MRI.

Joel Wilhite: And maybe to follow up on the second part of your question related to that top of funnel.

Joel Wilhite: Double digit growth that we saw in real estate was dominated by one particular partner like at Folio and the answer is no.

Joel Wilhite: No it was really.

Joel Wilhite: Nice activity across the board within real estate, specifically actually.

Joel Wilhite: Weighted towards multifamily, but within multifamily we saw.

Joel Wilhite: Both.

Joel Wilhite: And then on the, you know, kind of new partner side, certainly we've, you know, seen the ramp for Atfolio, but it wasn't, you know, kind of, Unknown Attendee, Shray Gurtata, Subhaash Kumar, Avidxchange Hldg. The next question comes from James Faucette with Morgan Stanley. Please go ahead.

Joel Wilhite: Mature partners, such as real page a regimen contribute nicely.

James Faucette: Along with MRI and then on the.

James Faucette: New partner side certainly.

Joel Wilhite: Seeing the ramp of that fully but it wasn't kind of.

Joel Wilhite: Heavily weighted we're overweighted for one particular partner, we saw nice across the board activity within that sector.

James Faucette: The next question comes from James Fawcett with Morgan Stanley. Please go ahead.

Joel Wilhite: Great, thank you. I want to follow up on Tingen's question in terms of like the seasonality in your indication that, you know, that you're being prudent here. It sounds like, in terms of how you're applying that to the political contribution, that that's also the case. Is that fair?

James Faucette: Great. Thank you I want to follow up on Jim's question in terms of like the valley and your indication.

Joel Wilhite: You're being prudent here.

Joel Wilhite: It sounds like in terms of how you're applying that to the political contribution but that's also the case that is that fair.

Joel Wilhite: And it seemed like you were kind of laying out that this is your first presidential cycle with that business. That's right, James. We commented in the February call when we set initial guidance for that political revenue this year at nine million. We're sort of holding to that, you know; we're cautiously optimistic.

Joel Wilhite: And it seemed like you were kind of laying out.

Joel Wilhite: Residential cycle.

Joel Wilhite: Without those.

Joel Wilhite: That's right James we commented in the February call when we set initial guidance.

Joel Wilhite: For that political.

Joel Wilhite: Revenue this year $9 million or sort of holding to that we're cautiously optimistic it's our first presidential cycle.

Alexander Wexler Markgraff: Largely back end weighted and there could be a range of outcomes in terms of overall spend so we're being we're being conservative there as well.

Alexander Wexler Markgraff: The next question comes from Alex Mark Graf with Keybanc capital markets. Please go ahead.

Michael Praeger: Thanks, Mike. Maybe one for you on some of the comments around the improvement in automation with some of the bots and AI. I'm just curious, I don't know if I'm doing it justice in describing it that way, but just curious, in the context of digital transaction penetration, does that in any way sort of accelerate the path to the 55 to 60% range you laid out for 2025 in the most recent Investor Day?

Alexander Wexler Markgraff: Thanks, Mike maybe one for you just on some of the comments around the improvement in automation, but with some of the.

Michael Praeger: I'm just curious I don't know if im doing it justice in describing that way, but just curious in the context of digital transaction penetration does that in any way sort of accelerate the path to the 55% to 60% range you laid out for 2025.

Speaker Change: Recent investor day. Thanks.

Michael Praeger: Thanks. Yeah, that's a really insightful question, Alex, related to, you know, the kind of impact that, you know, the increase in automation, especially around, you know, the AI, you know, tools, and I kind of referenced one of those being, you know, our IVR tool that we've now deployed. And the answer is, it does have a medium, it does have an impact.

Mike: Yes, that's a really insightful question, Alex related to kind of does that.

Michael Praeger: The increase in automation, especially around the AI.

Michael Praeger: Tools and I kind of referenced one of those being our IV our tool that we've now deployed and the answer is it does have a media it doesn't have an impact and that where it has an impact is on small dollar transactions, where we've had very specific ROI models.

Michael Praeger: And where it has an impact is on small dollar transactions, where, you know, we've had very, you know, specific ROI models, where if a transaction fell underneath the threshold of what it would cost us internally to execute that transaction electronically through either a human being or a bot, then it got kicked out. And now, with our AI tools, we're able to process those transactions down to a much smaller dollar amount than we've historically been able to. And that means that more, you know, those small dollar amount transactions will be going out electronically.

Michael Praeger: Sure.

Michael Praeger: Transaction fell underneath the threshold.

Michael Praeger: What it would cost us internally to execute that transaction electronically through either human being or about then it got kicked out.

Michael Praeger: And now with our AI tools, we're able to process those transactions down to a much smaller dollar amount than we've historically been able to do and so that means that more those small dollar amount transactions will be going out with chronically now having said that they are small dollar amount of transactions. So it won't have a big impact on.

Rufus Holm: The overall volume.

Rufus Holm: But it certainly is part of our overall strategy with customers and how we maximize.

Rufus Holm: Moving transactions away from paper checks to electronic overall, and it's just one additional lever of all the strategies that we're deploying.

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

Rufus Holm: The next question comes from Rufus home with BMO. Please go ahead.

Joel Wilhite: Thanks, guys. I wanted to come back to your comments on the EBITDA margin guidance. It looks like it implies just a small step down in margins from the first quarter level through the rest of the year, and I guess lower floating costs will be a factor here.

Rufus Holm: Hey, good morning, Thanks, guys I wanted to come back to your comments on the EBIT margin guidance. It looks like it implies just a small step down in margins from the first quarter level through the rest of the year.

Rufus Holm: I guess below a floating comes a factor here, but I wanted to ask if there was some incremental investment spend that you are now looking to make thats, adding to the margins leveling off of being just a touch lower through the rest of the year. Thanks.

Joel Wilhite: But I wanted to ask if there was some incremental investment spend that you're now looking to make that's adding to the margins, leveling off, or being just a touch lower through the rest of the year. Thanks. Thanks, Rufus. Yeah, good question.

Rufus: Yeah. Good question. So again, we were.

Joel Wilhite: Really pleased with the quarter and the progression of Opex as a percentage of revenue keeps marching.

Joel Wilhite: It's sort of down as we talked about at Investor Day last year, where we're seeing increasing leverage in the business I would say that there would be some potential variability quarter to quarter. If you think about what what's implied in the guide if I can point to some.

Joel Wilhite: Some investments a couple of million dollars sequentially into Q2, particularly around R&D sales and marketing and so quarter to quarter, there will be some variability.

But over the year and going forward, we expect to continue to see this operating leverage show up in the financials and contribute to EBITDA. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Michael Praeger for any closing remarks. Thank you again, everyone, for your interest in Avidxchange. To wrap things up, we delivered another strong quarter. Given our disciplined execution and strong financial performance amid the current macro volatility, we believe our portfolio of product innovations, industry-leading accounting system integration partnerships, along with multiple monetization levers, align with our customer needs, creating growth opportunities for our team members, and driving long-term value creation for our customers. With that, we look forward to sharing our progress on our next earnings. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Joel Wilhite: But over over the year and going forward, we expect to continue to see this operating leverage show up in the financials and contribute to EBITDA.

Speaker Change: Thank you.

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

Joel Wilhite: Thank you again, everyone for your interest in avid exchange to wrap up we delivered another strong quarter, given our disciplined execution and strong financial performance amid the current macro volatility we believe our portfolio of product innovation industry, leading accounting system integration partnerships along with <unk>.

Joel Wilhite: <unk> monetization levers aligned with our customer needs, creating growth opportunities for our team members and driving long term value creation for our investors with that we look forward to sharing our progress on our next earnings call.

Joel Wilhite: You cannot quote the.

Joel Wilhite: Conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Q1 2024 Avidxchange Holdings Inc Earnings Call

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