Q2 2024 Avidxchange Holdings Inc Earnings Call
Operator: Good morning, everyone, and thank you for joining us for the Avid Exchange Holdings, Inc. second quarter 2024 earnings call. Joining us on the call today is Mike Praeger, Avidxchange's co-founder and Chief Executive Officer, Joel Wilhite, Avidxchange's Chief Financial Officer, and Subhash 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 the major uncertainties and risks inherent in the forward-looking statements the company will make this afternoon.
Good morning, everyone and thank you for joining us for the avid Exchange Holdings, Inc. Second quarter 2024 earnings call.
Joining us on the call today is Mike Krager avid exchanges co founder and Chief Executive Officer.
Speaker Change: Joel Wilhite oven exchanges, Chief financial Officer, and Sue Bosch Kumar.
Speaker Change: Exchanges head of Investor Relations.
Operator: 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.
Speaker Change: Before we begin todays call management has asked me to relay the forward looking statements disclaimer.
Speaker Change: <unk> at the end of today's press release.
Speaker Change: This disclaimer emphasizes the major uncertainties and risks inherent in the forward looking statements. The company will make this afternoon.
Speaker Change: 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.
Speaker Change: Also please note that the company undertakes no duty to update or revise forward looking statements.
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. With that, I will now turn the call over to Mike Praeger. Thank you, everyone, for joining us today.
Speaker Change: Today's call will also include a discussion of non-GAAP financial measures.
As that term is defined in regulation G.
Speaker Change: non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP.
Speaker Change: Accordingly at the end of today's press release.
Speaker Change: The company has provided a reconciliation of these non-GAAP financial measures to financial results prepared in accordance with GAAP.
Speaker Change: With that I will now turn the call over to Mike Prager.
Michael Praeger: Joel Wilhite and I are excited to discuss Avidxchange's second quarter 2024 results. This particular quarter marks a milestone, as we achieved our first ever GAAP net income ahead of our third anniversary as a publicly traded company, while already having delivered four quarters of positive free cash flow. Just as we accelerated our path to adjusted even-thought breakeven and profitability meaningfully ahead of our expectations, we have now delivered GAAP and non-GAAP net income profitability in short order, highlighting the speed of our execution, the power of our new innovation delivery, our growing value proposition for both buyers and suppliers, along with the strength of our Avidxchange culture that has fueled our success and has been a key factor in attracting and retaining the critical Without a doubt, the choppy macroeconomic backdrop continues to test us all.
Michael Praeger: Thank you everyone for joining us today, Joe Willie and I are excited to discuss avid exchange's second quarter 2024 results. This particular quarter marks a milestone as we achieved our first ever GAAP net income ahead of our third anniversary as a publicly traded company while already having.
Michael Praeger: Over four quarters of positive free cash flow.
Michael Praeger: Just as we accelerated our path to adjusted EBITDA breakeven and profitability meaningfully ahead of our expectations. We have now delivered GAAP and non-GAAP net income profitability in short order highlighting the speed of our execution the power of our new innovation delivery, our growing value proposition for both.
Michael Praeger: Buyers and suppliers along with the strength of our avid exchange culture that has fueled our success and has been a key factor in attracting and retaining the critical talent required to execute our dynamic business.
Michael Praeger: Without a doubt the choppy macroeconomic backdrop continues to test us all it has created near term volume headwinds driven by reductions in discretionary spending across the middle market impacting to some degree all of our various vertical and horizontal channels.
Michael Praeger: It has created near-term volume headwinds driven by reductions in discretionary spending across the middle market, impacting to some degree all of our various vertical and horizontal channels. However, we remain focused on capitalizing on the current environment by leveraging our financial strength to advance our new AI-based customer and internal facing product offering. Executing continuous unit cost improvements and operating leverage as well as enhancing customer growth across our addressable market of middle market buyers and their suppliers.
Michael Praeger: However, we remain focused on capitalizing on the current environment by leveraging our financial strength to advance our new AI based customer internal facing product offerings.
Michael Praeger: Executing continuous unit cost improvements and operating leverage as well as enhancing customer growth across our addressable market of middle market buyers and their suppliers.
Michael Praeger: We believe we're still in the very early innings in the drive to digitally transform what is still today for the majority of middle market companies, a highly manual, paper-intensive, and inefficient back office procure to pay process. With over two decades of institutional knowledge, building features and domain functionality around our AP automation and payment network, no one better than Avid Exchange appreciates the opportunity and the dynamic business processes inherent in middle market companies, which are complex, unlike the small business market, and unique across the various middle market industry verticals, unlike the enterprise segment. Our purpose-built value proposition leverages that institutional knowledge and has increasingly embedded artificial intelligence throughout the product development process.
Speaker Change: We believe we are still in the very early innings and the drive to digitally transform we're still today for the majority of middle market companies are highly manual paper intensive and inefficient back office procure to pay process.
Speaker Change: With over two decades of institutional knowledge building features and domain functionality around our AP automation and payment network no one better than Abbott exchange appreciates the opportunity and the dynamic business processes inherent to middle market companies.
Speaker Change: Our complex, unlike the small business market and unique across the various middle market industry verticals. Unlike the enterprise segment.
Speaker Change: Our purpose built value proposition, which is leveraged that institutional knowledge and is increasingly embedded artificial intelligence throughout the product development lifecycle.
Michael Praeger: From our front-end Intelligent Invoice Capture functionality to our back-end payment execution capabilities and all the workflows in between, we are extending our lead and strengthening our competitive position across our differentiated two-sided buyer and supplier network. As such, we believe we are well positioned through our investments to advance future growth and fuel our profit potential by delivering rapid material and quantifiable value in both current cost efficiency and future scalability of our customers' back office transformational initiatives.
Speaker Change: From our front end intelligent invoice capture functionality to our backend payment execution capabilities and all the workflows in between is extending our lead in strengthening our competitive position across our differentiated two sided buyer and supplier network.
Speaker Change: As such we believe we are well positioned through our investments to advance our future growth and fuel our profit potential by delivering rapid material and quantifiable value in both current cost efficiency and future scalability of our customers back office transformational initiatives.
Michael Praeger: NAI Earl Fuhrman is one of the many such customer success stories that highlights the power of our transformational value proposition. As a middle market commercial real estate brokerage and property management firm based in Greenville, South Carolina, NAI Earl Fuhrman has been in business for over 30 years, with multiple regional offices in upstate South Carolina and North Carolina's Piedmont Triad area, as well as partners worldwide.
Speaker Change: <unk> is one of the many such customer success stories that highlight the power of our transformational value proposition as a middle market commercial real estate brokerage and property management firm based in Greenville, South Carolina NII real firm has been in business for over 30 years with multiple regional offices in upstate.
Speaker Change: South Carolina, and North Carolina, Piedmont Triad area as well as partners worldwide.
Michael Praeger: Having grown through acquisitions, the company's back office processes around accounts payable and payment became very cumbersome and paper intensive. Specifically, before automation, controller Robbie Smith's team would print out invoices and create separate books of invoice supporting document information for each property manager to review, assign the proper accounting codes, and approve with a signature. That book would then go back to the AP team, who would then manually data entry or encode the invoices into their MRI accounting software before cutting checks for the approved invoices and completing the PO matching process.
Speaker Change: <unk> grown through acquisitions, the Companys back office processes around accounts payable and payment became very cumbersome and paper intensive.
Speaker Change: Specifically before automation controller Ravi Smith team would print out invoices and create separate books of invoice supporting document information for each property manager to preview assign the proper accounting codes and approved with a signature.
Speaker Change: That book would then go back to the AP team, who would then manually data entering code invoices into their MRI accounting software before cutting checks for the approved invoices and completing the matching process.
Michael Praeger: Since automation, the Smith team has seen a step function change in its invoice and payment processes with MRI VendorPay powered by Avidxchange. As Mr. Smith put it, it is like night and day. Our old process took a week or so.
Unknown Executive: Since automation Smith team has seen a step function change and its invoice and payment processes with MRI vendor pay powered by Abbott exchange as Mr. Smith put it it is like night and day, our old process took a week or so now the whole process is completed in less than two days.
Michael Praeger: Now the whole process is completed in less than two days. This type of productivity transformation of NAI's invoice-to-pay process underscores the power of our value proposition. Shifting our focus to our financial scorecard, we delivered healthy financial results while navigating an ongoing macro choppyness. The overriding theme impacting results for this past quarter was our focus on disciplined execution of our business in three areas. First, beginning with our sales and marketing prioritized go-to-market strategies and focusing on our highest yielding channel.
Speaker Change: This type of productivity transformation of NII is invoice to pay underscores the power of our value proposition.
Speaker Change: Shifting our focus to our financial scorecard, we delivered healthy financial results, while navigating and ongoing macro choppiness. The overwriting theme impacting results for this past quarter was our focus on disciplined execution of our business in three areas.
Michael Praeger: Second, is our positive gross margin expansion driven by our automation aided by the impact of AI and continued to reduce our invoice and payment unit. And finally, third, is our continued overall operating expense rigor combined with the ROI decision making process across every function of business. Joel will go into more detail later in today's call, but here are some of our second quarter highlights. Revenue growth in the quarter was over $105 million, up over 15% year-over-year. The growth in the quarter was led by a combination of transactional volume and transactional yield growth. Non-GAF gross margins, meanwhile, continue their upward trajectory.
Speaker Change: First beginning with our sales and marketing prioritize go to market strategies and focusing on our highest yielding channels.
Speaker Change: Second is our positive gross margin expansion driven by our automation aided by the impact of AI and continued to reduce our invoice and payment unit cost.
Speaker Change: And finally third is our continued overall operating expense rigor combined with our ROI decision, making process across every functional business group.
Speaker Change: Joel will go into more detail later on today's call, but here are some of our second quarter highlights.
Joel: Revenue growth in the quarter was over $105 million up over 15% year over year the growth in the quarter was led by a combination of transactional volume and transactional yield growth.
Joel: non-GAAP gross margins. Meanwhile, continued their upward trajectory coming in at 72, 6%, we're up 430 basis points and crossing the lower band of our 72% to 75% non-GAAP gross margin target ahead of our 2025 gross margin expectations that we set over a year ago during our <unk>.
Michael Praeger: Coming in at 72.6%, we're up 430 basis points and crossing the lower band of our 72% to 75% non-GAAP gross margin target ahead of our 2025 gross margin expectations that we set over a year ago during our investor day. Our initiatives around automation, artificial intelligence, sourcing, and standardization, which are still somewhat in the early stages, continue to bear fruit. Along with solid operating expense discipline, they were adjusted even to a margin in the quarter with 16.6%.
Joel: Yesterday.
Joel: Our initiatives around automation artificial intelligence sourcing and standardization, which are still somewhat in the early stages continue to bear fruit.
Joel: Along with solid operating expense discipline, our adjusted EBITDA margin in the quarter was 16, 6% transactional yield. Meanwhile, was which is a metric that we focus on across our leadership team as it demonstrates the power and effectiveness of our Abbott exchange business flywheel was up more than 10% to reach $5 33.
Michael Praeger: Transactional yield, meanwhile, which is a metric that we focus on across our leadership team, as it demonstrates the power and effectiveness of our Avidxchange business flywheel, was up more than 10% to reach $5.33 per transaction. With that overview, on today's call, I'm excited to cover three topics that will shed insights into our various initiatives that will drive our future growth and margin expansion. First, our top of funnel activity and other key sales metrics, which provide insights into the sales setup for 2025.
Joel: Per transaction.
Michael Praeger: Discussing two new strategic software integration partnerships, which will further drive both Gears 1, 2, and 3 of our AvidXchange business flywheel. And third, highlight innovation around strategies to automate the execution of electronic payments. Starting with our customer obsession metrics, I wanted to update you on our top of funnel and other underlying indicators driving our go-to-market motion. For the six month end of June 2024, the overall top of funnel was down around 4% compared to the same period last year.
Joel: With that overview on today's call I am excited to cover three topics that we'll shed insights into our various initiatives that will drive our future growth and margin expansion.
Joel: First our top of funnel activity and other key sales metrics, which provides insights into the sales out for 2025.
Joel: Discussing two new strategic software integration partnerships, which will further drive both gears, one two and three of our avid exchange business flywheel.
Joel: And third highlight innovation around strategies to automate the execution of electronic payments.
Joel: Starting with our customer obsession metrics I wanted to update you on our top of funnel and other underlying indicators driving our go to market motion.
Joel: For the six months ended June 2020 for the overall top of funnel is down around 4% compared to the same period last year. However, various key underlying indicators improved which adds a nice plot twist to the top of funnel narrative and highlights our strong sales execution against the choppy macro backdrop before I discuss those I'd like to call out here.
Michael Praeger: However, various key underlying indicators improved, which adds a nice plot twist to the top of funnel narrative and highlights our strong sales execution against a choppy macro backdrop. Before I discuss those, I'd like to call out areas of strength and weakness within the top of funnel. On the positive side, we saw our real estate, media, education, and non-for-profit verticals, which comprise almost half of our new opportunities, grow anywhere from high single to mid-double digits on a comparable basis. HOA, Construction, Financial Services.
Joel: Areas of strength and weakness within the top of funnel.
Joel: On the positive side, we saw a real estate media education, and non for profit verticals, which comprise almost half of our new opportunities grow anywhere from high single to mid double digits on comparable basis.
Michael Praeger: Meanwhile, we're down high double digits. The net decrease in our top of funnel was largely due to a more targeted approach we called out last quarter around our go-to-market motion, in addition to increasing our investment and focus on our various partner channels to drive new highly qualified sales opportunities versus a historically larger focus on electronic demand generation programs, which we have seen softening over the last quarter and producing fewer qualified opportunities.
Speaker Change: HOA construction financial services. Meanwhile, we're down high double digits.
Speaker Change: The net decrease in our top of funnel was largely due to a more targeted approach we called out last quarter around our go to market motion. In addition to increasing our investment and focus on our various partner channels to drive new highly qualified sales opportunities versus historically larger focus on electronic demand Gen programs.
Speaker Change: Which we have seen softening over the last quarter are producing less qualified opportunities.
Michael Praeger: As I referenced earlier, amid these puts and takes in our Top of Funnel, there have been some promising trends in other sales-related indicators that are trending positive year-to-date with the potential to continue for the remainder of this year. First, sales cycle time on average for the six months of 2024 versus 2023 on a comparable basis was shortened by roughly one third. Second, close rates for the six months ended June 2024 on a comparative basis remain strong.
Speaker Change: As I referenced earlier amid these puts and takes in our top of funnel there've been some promising trends in other sales related indicators are trending positive year to date with the potential to continue for the remainder of this year.
Speaker Change: First sales cycle time on average for the six months of 2024 versus 2023 on a comparable basis shortened by roughly one third.
Speaker Change: Second close rates for the six months ended June 2024 on a comparable basis remains strong.
Speaker Change: Sales cycle time, and close rates reflect a higher quality pipeline with interest levels that are actionable, which are the fruits of our more disciplined targeted go to market motion.
Michael Praeger: Both sales cycle time and close rates reflect a higher quality pipeline with interest levels that are actionable, which are the fruits of our more disciplined and targeted go-to-market motion. And finally, our buyer customer new logo customer count, a metric we furnish annually for the six months of 2024, outpaced levels comparable for 2023, leaving us optimistic on the potential for higher net new logo ads for 2024 relative to 2023. Now I'd like to talk about the four years of our business, Flywheel.
Speaker Change: And finally, our buyer customer new logo customer account a metric we furnished annually for the six months of 2024 outpace levels comparable for 2023, leaving us optimistic on the potential for higher net new logo adds our 2024 relative to 2023.
Speaker Change: Now I'd like to talk about the four years of our business flywheel.
Michael Praeger: We recently signed some notable new integration partnerships, which advanced Gears 1, 2, and 3 of our Avidxchange business flywheel. Starting with the real estate vertical, we deepened our competitive advantage further with Bill Neal. This AP integration partnership with Buildium extends our relationship with RealPage, one of our biggest ERP partners. As a COG-based property management software company, Buildium targets various verticals, such as condo association management and real estate, including sub-verticals such as multifamily, student housing, affordable housing, et cetera, with approximately 15,000 customers.
Speaker Change: We recently signed some notable new integration partnerships, which advanced years, one two and three of our out of the exchange business flywheel, starting with the real estate vertical we deepen our competitive advantage further with build them.
Speaker Change: This AP integration partnership with building extends our relationship with real page one of our biggest ERP partners.
Speaker Change: As a cloud based property management software company building targets various verticals, such as Condo Association management, and real estate, including sub verticals, such as multifamily student housing affordable housing et cetera.
Speaker Change: With approximately 15000 customers.
Michael Praeger: Roughly 3,500 of which are in our product fit sweet spot. What is just as significant about the building and partnership is that we leverage generative AI in building out the integration. As a result, we are not only able to compress development cycle times by 30% to around 2 months, but we believe that the end user experience will prove to be substantially better given that we are able to train the AI inherent within our existing library of integrations to simulate pain points and test various use cases, including edge cases that deliver the best user experience.
Speaker Change: Roughly 3500 of which are in our product fits sweet spot.
Speaker Change: What is just a significant about the building in partnership is that we leveraged generative AI and building out the integrations as a result, we are not only able to compress development cycle times by 30% to around two months, we believe that the end user experience will prove to be substantially better given that we're able to train the AI inherent within our existing <unk>.
Barry: Barry a integrations to simulate pain pain points and test various use cases, including edge cases that delivered the best user experience.
Michael Praeger: This referral partnership, which is slated to go live in the third quarter of 2024, initially starts out with our AP automation invoice solutions. Additionally, it also represents a significant payments opportunity by potentially adding billions of new payment volume, driving the third gear of our Avidxchange business flywheel, which is the monetization of payment transactions and eliminating paper checks. We believe this partnership highlights not only the large total addressable market but also how much runway for growth that still exists in just the real estate vertical alone.
Speaker Change: This referral partnership which is slated to go live in the third quarter of 2024 initially starts out with our AP automation invoice solutions. Additionally, it also represents a significant payments opportunity by potentially adding billions of new payment volume driving the third year of our avid exchange business flywheel, which is the monetization of payment.
Speaker Change: Actions and eliminating paper checks.
Speaker Change: We believe this partnership highlights not only the large total addressable market, but also how much runway for growth that still exists and just the real estate vertical alone. The initial vertical segment that we launched our business in 2000.
Michael Praeger: The initial vertical segment that we launched our business in in 2000, and where we are the industry leader, our penetration rate is still in the single digits. Another ERP partnership of note showcases our first invoice solution for the media vertical under gears one and two of the flywheel. This integration highlights how we are extending our strategic advantage and success in media-related payments within the media vertical, which we launched through the FastPay acquisition into media AP automation. This AP automation solution leverages our existing tech stack and is built on our cloud invoice automation platform.
Speaker Change: And where is the industry leader our penetration rate is still in the single digits.
Speaker Change: Another ERP partnership showcases our first invoice solution for the media vertical under gears, one and two of the flywheel. This integration highlights how we are extending our strategic advantage and success in media related payments within the media vertical which was launched through the fast pay acquisition into media AP automation.
Speaker Change: This AP automation solution Leverages, our existing tech stack and is built on our cloud and voice automation platform.
Michael Praeger: Our target customer profiles are agencies that process several hundred invoices per month, and the first integration partner we have identified to go live with is WorkamaJig. Founded more than three decades ago, WorkamaJig is a leader in project management software that's designed specifically for marketing teams and creative agencies.
Speaker Change: Our target customer profiles are agencies that process several hundred invoices per month and the FERC integration partners. We have identified to go live with his work of Majid founded more than three decades ago working with <unk> is a leader in the project management software that space designed specifically for marketing teams and creative agencies.
Michael Praeger: Spanning a portfolio of over 3,500 customers, Workamajib is a dominant leader in the marketplace targeting those traditional agencies. Through our invoice automation solution, WorkmanJigs customers will be able to digitally transform their AP workflow with our robust end-to-end capability. These range from our AI-centric invoice ingestion in the front end to an intelligent workflow routing and approval engine to resolve invoice discrepancies, as well as leverage our broad payment modalities and our media payment network on the back end.
Speaker Change: Spanning a portfolio of over 3500 customers working with <unk> is a dominant leader in the marketplace targeting those traditional agencies through our invoice automation solution for <unk> customers will be able to digitally transform their AP workflow with a robust end to end capabilities.
Speaker Change: These range from our AI centric invoice ingestion and the front end to intelligent workflow routing and approval engine to resolve invoice discrepancies as well as leverage our broad payment modalities and our media payment network on the backend.
Michael Praeger: This integration partnership went live and became generally available in the second quarter. Our end-to-end invoice and payment solutions, we believe, not only differentiate our market positioning but also solidify our advantage in selling our payment platform to these targeted media agencies. Turning now to our operations, we continue to make strides on our automation initiatives by leveraging artificial intelligence as a way to further optimize existing automation processes with human agents in the loop.
Speaker Change: This integration partnership went live and became generally available in the second quarter.
Speaker Change: Our end to end invoice and payment solutions, we believe.
Speaker Change: Not only differentiate our market positioning, but also solidify our advantage in selling our payment platform to these targeted media agencies.
Speaker Change: Turning now to our operations, we continue to make strides on our automation initiatives by leveraging artificial intelligence as a way to further optimize existing automation processes with human agents in the loop.
Michael Praeger: One area in which our success is very tangible and serves as an early win is around payment automation for virtual card payments. To name just a few areas of process automation initiatives we've embarked on. This is important as we position ourselves to deliver on our near-term gross margin target of 75% and set our sights on our long-term margin exceeding 75%, as outlined during our 2023 Investor Day. The latest initiative around payment automation is executing virtual card payments through online portals. There are six ways we execute virtual card payments today for our suppliers, by a straight-through process, direct API connections, online portals, IVR systems, email, and over the phone.
Speaker Change: One area in which our success is very tangible and serves as an early win is around payment automation and virtual card payments to name just one of many lanes in process automation initiatives, we've embarked on.
Speaker Change: This is important as we position ourselves to deliver on our near term gross margin target of 75% and set our sights on our long term margin exceeding 75% as outlined during our 2023 Investor day.
Michael Praeger: Just as with email, where virtual card information is sent automatically to a supplier when a payment is created, there are many supplier customers, such as plumbers, roofers, landscapers, etc., that have set up online payment portals through their relationship with various merchant acquirers or third-party website developers to take in these payments. The challenge has been to automate the delivery and application of these virtual card payments to numerous supplier-specific online portals at scale, given the explosion of these online portals along with unique user interfaces that are costly and labor-intensive to scale.
Speaker Change: The latest initiative around payment automation is executing virtual card payments through online portals.
Speaker Change: There are six ways, which we execute virtual card payments today for our suppliers.
Speaker Change: By a straight through process direct API connections online portals IV, our systems E mail and over the phone just as with E mail or virtual card information is sent automatically to a supplier. When the payment is created there are many supplier customers such as plumbers brokers landscapers et cetera that has stood up online.
Speaker Change: Payment portals through their relationship with various merchant acquirers or third party website developers to take in these payments.
Speaker Change: The challenge has been to automate the delivery and application of these virtual card payments that numerous supplier specific online portals at scale given the explosion of these online portals, along with unique user interfaces that are costly and labor intensive the scale.
Michael Praeger: Currently, we are doing over a million of these online portal payments, approximately 80% of which are executed through humans and the remainder being RPA bots. We believe we're at a tipping point where we could transform this process through artificial intelligence and deliver virtually all these online payments without manual intervention, taking our current levels of overall electronic payment automation of around 85% today to well over 90%. What this should enable is not only lower unit costs as we lower headcount growth and lower overall software license fees but better leverage around future costs as we grow our business, driving gross margin.
Speaker Change: Currently we're doing over 1 million of these online portal payments, approximately 80% of which executed through human and the remainder being RPI bonds.
Speaker Change: We believe we're at a tipping point, where we could transform this process through artificial intelligence and deliver virtually all of these online payments without manual intervention, taking our current levels of overall electronic payment automation of around 85% today to well over 90%.
Speaker Change: This should enable us not only lower unit costs, as we lower head count growth and lower overall software license fees, but better leverage around future costs as we grow our business driving gross margins, but equally impactful. We believe is the control visibility and certainty over virtual card payment execution. This provides as we test this.
Michael Praeger: But equally impactful, we believe, is the control, visibility, and certainty over virtual card payment execution this provides as we test this capability through the remainder of this year and look to scale it further in 2025. In closing, we are proud to deliver our first ever GAP MedIncome profitability driven by our continued gross margin expansion, along with disciplined execution across the operations of our business. However, we are even more excited about the future.
Speaker Change: <unk> through the remainder of this year and look to scale. It further in 2025.
Speaker Change: In closing we are proud to deliver our first ever GAAP net income profitability driven by our continued gross margin expansion along with disciplined execution across the operations of our business. However, we were even more excited about the future.
Michael Praeger: We believe the innovation investments we have made across our product portfolio, coupled with the large and marquee integration partnerships we have executed, position us well to accelerate our growth, build on our margin expansion and momentum, and achieve our Rule 40 objective in 2025 and our Rule 50 plus target by 2028. We recognize the choppy macro backdrop and believe the upcoming election is certainly not helping in the near term.
Speaker Change: We believe the innovation investments, we have made across our product portfolio, coupled with the large mark key integration partnerships, we have executed.
Speaker Change: <unk> well to accelerate our growth build on our margin expansion momentum and achieve a rule 40 objective in 2025, and our rule of 50 plus targeted by 2028 were recognized the choppy macro backdrop and believe the upcoming election, certainly is not helping in the near term however, those too shall pass.
Michael Praeger: However, those two will pass as we work towards a significant long-term growth opportunity in front of us across the middle market. Furthermore, while overall top of funnel saw some softness, some of which was a function of our long-term strategic trade-offs, our stronger buyer customer logo cadence year to date 2024 compared to the same timeframe last year leads us to encourage around the sales and revenue trends for 2025. Meanwhile, we remain laser focused on our operational rigor and execution, controlling those elements of our business model that we can directly control, as evidenced by our ongoing unit cost reduction and operating leverage.
Speaker Change: As we work towards the significant long term growth opportunity in front of us across the middle market.
Speaker Change: Furthermore, while overall top of funnel saw some softness some of which was a function of our long term strategic tradeoffs are stronger buyer customer logo cadence year to date 2024 compared to the same timeframe last year leaves us encouraged around the sales and revenue trends for 2025.
Speaker Change: Meanwhile, we remain laser focused on our operational rigor and execution controlling those elements of our business model that we can directly control as evidenced by our ongoing unit cost reduction and operating leverage. Furthermore, with our new payment platform payment accelerator to point out in our spend management offering.
Michael Praeger: Furthermore, with our new payment platform, Payment Accelerator 2.0, and our spend management offerings being sequenced for rollout over the next 6-18 months as our new accounting system and ERP partnerships begin to gain traction, we believe we are set up for a nice growth roadmap for 2025 and beyond as we strive for a strong close in 2024. I want to provide a special thanks to all of our Avidx team members for their hard work, dedication, and relentless focus on executing our operational and strategic priorities that drive value for our customers, create scope for their professional growth, 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.
Speaker Change: The sequence for rollout over the next six to 18 months as our new accounting system and ERP partnerships begin to gain traction. We believe we are set up for a nice growth directory for 2025 and beyond as we strive for a strong close in 2024.
Speaker Change: I want to provide a special thanks to all of our avid X team members for their hard work dedication and relentless focus on executing our operational and strategic priorities that drive value for our customers create great scope for their professional growth and unlock significant long term value for our shareholders.
Speaker Change: 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 second quarter 2024 financial results, which reflect disciplined execution of our growth strategies amid continued macro choppiness. Overall, we delivered another quarter of healthy year-over-year financial performance across the board. I will expand on that in a moment, but let's see how we track relative to implied expectations. Relative to the implied second quarter 2024 business outlook and excluding the float and political revenue contribution, revenues came in a touch below our expectations with slightly better total transaction volume tempered by slightly lower transaction yield.
Joel Wilhite: Thanks, Mike and good morning, everyone. I am pleased to talk to you today about our second quarter 2024 financial results, which reflect disciplined execution of our growth strategies amid continued macro choppiness.
Joel Wilhite: Overall, we delivered another quarter of healthy year over year financial performance across the board.
Joel Wilhite: I will expand on that in a moment, but lets see how we track relative to implied expectations.
Speaker Change: Relative to the implied second quarter, 2024 business outlook, and excluding the float and political revenue contribution.
Speaker Change: Revenues came in a touch below our expectations with slightly better total transaction volume tempered by slightly lower transaction yield.
Joel Wilhite: Gross margin performance remains strong due largely to ongoing progress on unit cost initiatives coupled with software yield expansion. Coupling that with sustained operating expense leverage, we drove significant adjusted EBITDA outperformance relative to expectations. It's worth pointing out that this continues our streak of delivering adjusted EBITDA profit expansion, excluding float and even political contribution. Most notably, as Mike mentioned, we achieved a significant milestone as we delivered our first ever GAAP net income since going public in 2021.
Speaker Change: Gross margin performance remained strong due largely to ongoing progress on unit cost initiatives, coupled with software yield expansion.
Speaker Change: Coupling that with sustained operating expense leverage we drove significant adjusted EBITDA outperformance relative to expectations.
Speaker Change: It's worth pointing out that this continues our streak of delivering adjusted EBITDA profit expansion, excluding float and even political contribution.
Speaker Change: Most notably as Mike mentioned, we achieved a significant milestone as we delivered our first ever GAAP net income since going public in 2021.
Joel Wilhite: Now turning to year-over-year results, total revenue increased by 15.3% to $105.1 million in Q2 of 2024 over the second quarter of 2023. Most 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 for this quarter was driven by higher year-over-year float and political revenue.
Mike: Now turning to year over year results.
Speaker Change: Total revenue increased by 15, 3% to $105 $1 million in Q2 of 2024 over the second quarter of 2023, most 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.
Speaker Change: <unk>.
Speaker Change: The remaining revenue growth for 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 to $5.33 in the quarter, up 10.1% from $4.84 in Q2 2023. Most of the increase was driven by pay and software yield coupled with a transaction mix skewed toward payments, with the remainder due to float and political revenues. Software revenue of $29.9 million, which accounted for 28.5% of our total revenue in the quarter, increased 9.8% in Q2 of 24 over Q2 of 2023.
Speaker Change: Our strong revenue growth also resulted in total transaction yield expanding to $5 33 in the quarter up 10, 1% from $4.84 in Q2 2023.
Speaker Change: Most of the increase was driven by pay and software yield coupled with transaction mix skewed towards payment with the remainder due to float and political revenues.
Speaker Change: Software revenue of $29 $9 million, which accounted for 28, 5% of our total revenue in the quarter increased nine 8% in Q2 of 24 over Q2 of 2023 the increase in software revenues of nine 8% was driven by growth in total transactions.
Joel Wilhite: The increase in software revenues of 9.8% was driven by growth in total transactions of 4.8%, which continues to be impacted by macro choppiness with the balance driven by growth in certain subscription-based revenues. Payment revenue of $74.2 million, which accounted for 70.6% of our total revenue in the quarter, increased 17.3% in Q2 of 2024 over Q2 of 23. Payment revenue reflects the contribution of interest revenues, which were $11.8 million in Q2 of 24 versus $9.2 million in Q2 of 2023. Political media revenue in the current quarter was approximately $800,000 and negligible in the same period a year ago.
Speaker Change: A four 8% which continues to be impacted by macro choppiness with the balance driven by growth in certain subscription based revenues.
Speaker Change: Payment revenue of $74 $2 million, which accounted for 76% of our total revenue in the quarter increased 17, 3% in Q2 of 2024 over Q2 of 'twenty three pay.
Speaker Change: Payment revenue reflects the contribution of interest revenues, which were $11 $8 million in Q2 of 24 versus $9 $2 million in Q2 of 2023.
Speaker Change: Political media revenue in the current quarter was approximately $800000 and negligible in the same period, a year ago, excluding the impact of float and political revenues from both comparable periods payment revenues grew 14, 6% with most of that increase driven by a combination of an increase in pay yield.
Joel Wilhite: Excluding the impact of float and political revenues from both comparable periods, payment revenues grew 14.6%, with most of that increase driven by a combination of an increase in pay yield, greater payment mix, and a payment transaction volume increase of 8.6%. On a gap basis, gross profit of $68.7 million increased by 23.6% in Q2 of 2024 over the same period last year, resulting in a 65.3% gross margin for the quarter compared to 61% in Q2 2023.
Speaker Change: Greater payment mix and payment transaction volume increase of eight 6%.
Speaker Change: On a GAAP basis gross profit of $68 $7 million increased by 23, 6% in Q2 of 24 over the same period last year, resulting in a 65, 3% gross margin for the quarter compared to 61% in Q2 2023.
Joel Wilhite: Non-GAAP gross margin increased 430 basis points to 72.6% in Q2 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. Now moving on to operating expenses. On a gap basis, total operating expenses were $76.8 million, a decrease of 5.7% in Q2 of 2024 over Q2 of last year. On a non-GAAP basis, operating expenses, excluding depreciation and amortization and stock-based compensation, decreased by 0.6% to $58.9 million in the second quarter of 2004 from the comparable prior year period, which was helped by the timing of headcount additions and certain third-party expenses across R&D and sales and marketing expense categories.
Speaker Change: non-GAAP gross margin increased 430 basis points to 72, 6% in Q2 of 24 over the same period last year, but the lion's share of the increase driven mostly by unit cost efficiencies and yield expansion.
Speaker Change: Now moving onto operating expenses.
Speaker Change: On a GAAP basis total operating expenses were $76 8 million a decrease of five 7% in Q2 of 2024 over Q2 of last year.
Speaker Change: On a non-GAAP basis operating expenses, excluding depreciation and amortization and stock based compensation decreased as well by 6% to $58 $9 million in the second quarter of <unk> 24 from the comparable prior year period, which was helped by the timing of head count additions and certain third party expenses.
Speaker Change: Is across R&D and sales and marketing expense categories on a percentage of revenue basis operating expenses, excluding depreciation and amortization and stock based compensation declined to 56% in the second quarter of 2024.
Joel Wilhite: On a percentage of revenue basis, operating expenses, excluding depreciation and amortization and stock-based compensation, declined to 56% in the second quarter of 2024 from 65% in the comparable period last year. Overall, absent certain timing factors, the year-over-year percent decline largely highlights expense discipline and significant operating expense leverage across G&A, sales, and marketing, as well as R&D to an extent, even after stripping out the contribution of I will now talk about each component of the change in operating expenses on a non-GAAP basis.
Speaker Change: From 65% in the comparable period last year.
Speaker Change: Overall absent certain timing factors the year over year percent decline largely highlight expense discipline and significant operating expense leverage across G&A sales and marketing as well as R&D to an extent, even after stripping out the contribution of float and political revenues.
Speaker Change: I will 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 slightly by $184,000, or 1%, to $18.5 million in Q2 of 2024 over Q2 of last year, which, absent the aforementioned timing benefits, reflects ongoing yet targeted investments in sales and marketing spend to support our continued growth. Non-GAAP research and development costs increased slightly by $291,000, or 1.3%, to $22 million in Q2 of 2024 over Q2 of last year.
Speaker Change: non-GAAP sales and marketing costs decreased slightly by $184000 or 1% to $18 $5 million in Q2 of 24 over Q2 of last year.
Speaker Change: Which absent the aforementioned timing benefit reflects ongoing yet targeted investments in sales and marketing spend to support our continued growth.
Speaker Change: non-GAAP research and development costs increased slightly by $291000 or one 3% to $22 million in Q2 of 24 over Q2 of last year the.
Joel Wilhite: The increase, which was also helped by timing factors, was due to continued reinvestment in our products and platform, including spend management, our pay offering, and payment accelerator. Non-GAAP general and administrative costs decreased slightly by $455,000 or 2.4% to $18.4 million in Q2 of 2024 versus Q2 of last year due to leveraging public company costs across a larger revenue base. These expenses continue their annualized downward progression as a percentage of revenue, as we indicated during our investor day. Our gap net income was $436,000 for the second quarter of 2024 versus a gap net loss of $18.8 million in the second quarter of 2023.
Speaker Change: The increase which was also helped by timing factors was due to continued reinvestment in our products and platform, including spend management or pay offering in payment accelerator.
Speaker Change: non-GAAP general and administrative costs decreased slightly by $455000 or two 4% to $18 $4 million in Q2 of 2024 versus Q2 of last year due to leveraging public company costs across a larger revenue base. These expenses.
Speaker Change: You there annualized downward progress progression as a percentage of revenue is as we indicated during our investor day.
Speaker Change: Our GAAP net income was $436000 for the second quarter of 2024 versus a GAAP net loss of $18 $8 million in the second quarter of 2023.
Joel Wilhite: The reduction in losses was driven by a combination of strong revenue flow-through, solid gross profit increase, expense control, and timing of certain expenses leading to lower operating losses, coupled with higher interest income and lower expenses due to reduced borrowing costs and partial debt pay-down. On a non-gap basis, our net income in the second quarter of 2024 was $10.7 million versus a net loss of $500,000 in the same year-ago period.
Speaker Change: With the reduction in losses, driven by a combination of strong revenue flow through solid gross profit increase expense control and timing of certain expenses, leading to lower operating losses, coupled with higher interest income and lower interest expense due to reduced borrowing costs and partial debt paydown.
Speaker Change: On a non-GAAP basis, our net income in the second quarter of 2024 was $10 7 million versus a net loss of $500000 in the same year ago period.
Joel Wilhite: Approximately $11.2 million positive swing from the year-ago period driven by the aforementioned factors. On an on-gap basis, Q2 2024 adjusted EBITDA was $17.5 million versus $3 million in Q2 of 2023, largely due to the aforementioned factors. Turning to our balance sheet for a moment, I want to touch on a few key items. We ended the quarter with a strong corporate cash position of $465 million in cash and marketable securities against an outstanding total debt balance of $76.5 million, including a note payable for $13.9 million. We had $30 million on our credit facility undrawn at quarter end.
Speaker Change: Approximately $11 $2 million positive swing from the year ago period, driven by the aforementioned factors.
Speaker Change: On a non-GAAP basis, Q2, 2024, adjusted EBITDA was $17 $5 million versus $3 million in Q2 of 2023.
Speaker Change: Largely due to the aforementioned factors.
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 22 days, while the effective interest rate on our corporate cash position for the second quarter was roughly 5.2%. Customer cash at quarter end remained unchanged sequentially at approximately $1.2 billion with an interest rate of roughly 5% for the quarter.
Speaker Change: Turning to our balance sheet for a moment I want to touch on a few key items.
Speaker Change: We ended the quarter with a strong corporate cash position of $465 million of cash and marketable securities against an outstanding total debt balance of $76 $5 million, including a note payable for $13 $9 million.
Speaker Change: We had $30 million on our credit facility Undrawn at quarter 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 the weighted average maturity on the corporate cash was roughly 22 days, while the effective interest.
Speaker Change: Right on our corporate cash position for the second quarter was roughly five 2% customer cash at quarter end remained unchanged sequentially at approximately $1 $2 billion with an interest rate of roughly 5% for the quarter.
Joel Wilhite: Turning to our updated 2024 business outlook, we now expect total revenue for the year to be in the range of $436 million to $439 million. Our 2024 revenue outlook reflects approximately $49 million of interest revenues from customer funds, a $4 million increase from our previous 2024 outlook versus roughly $41 million earned in 2023. Also, we anticipate a political media revenue contribution of approximately $9 million, given that this is our first presidential cycle under FASPAY.
Speaker Change: Turning to our updated 2024 business outlook. We now expect total revenue for the year to be in the range of $436 million to $439 million or 2020 for revenue outlook reflects approximately $49 million of interest revenues from customer funds a $4 million.
Speaker Change: The increase from our previous 2024 outlook first as roughly $41 million earned in 2023.
Speaker Change: Also we anticipate political media revenue contribution of approximately $9 million given that this is our first presidential cycle under fast pay 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: Recall we acquired FASPAY in 2021, and for context, in 2022, during the midterm election cycle, the political arm of FASPAY generated roughly $8.5 million in revenues. Similarly, we expect non-GAAP-adjusted EBITDA profits ranging between $73 and $75 million for the year. With that, I'd 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 one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: <unk>.
Speaker Change: Similarly, we expect non-GAAP adjusted EBITDA profit ranging between 73 and $75 million for the year.
Speaker Change: With that I'd now like to turn the call back over to the operator to open up the line for Q&A operator.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May Press Star then one on you touched on this.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed.
Speaker Change: I would like to withdraw your question. Please.
Speaker Change: Please go ahead, Sir thank you.
Speaker Change: In the interest of time, please limit yourself to one question.
Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. In the interest of time, please limit yourself to one question. At this time, we will pause momentarily to assemble our roster. The first question today comes from Dave Koning with Baird. Please go ahead.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: We started with.
Speaker Change: Okay.
Speaker Change: The first question today.
Speaker Change: Dave Koning with Baird. Please go ahead.
Dave Koning: Hey, guys, thank you. And maybe just to kick off the so the guidance for the back half is about 5% lower, the revenue guidance about 5% lower than before. And it seems like two components, you know, you called out macro headwinds.
Dave Koning: Hey, guys. Thank you.
Speaker Change: Maybe just to kick off the <unk>.
Speaker Change: So the guidance for the back half is about 5% lower the revenue guidance about 5% lower than than before and it seems like two components you called out macro headwinds and then and then you talked a little bit about yield.
Speaker Change: In payments missing Q2, so are there some dynamics there are clients, who maybe maybe talk about those two components and how thats affecting your guidance this year and then.
Speaker Change: If if those should have any impact on next year as well.
Joel Wilhite: And then you talked a little bit about yield in payments missing Q2. So are there some dynamics there at play to maybe, maybe talk about those two components? And you know, how that's affecting your guidance this year, and then if that should have any impact on next year as well. Yeah, thanks, Dave. Great question.
Speaker Change: Yes, Thanks, Dave Great question, and you're reading it right I think what we're pointing to.
Speaker Change: Our guidance for the back half of the year at a high level is essentially projecting forward what we experienced in the second quarter. So we're guiding what we're seeing and what we're seeing is a continuation even maybe a tick worse on the overall total transaction volume you know that was a four 8% grower in Q2.
Speaker Change: Down a little from that five 8% in Q1, so really kind of continuing that forward.
Joel Wilhite: And you're reading it right. I think what we're pointing to, in our guidance for the back half of the year, at a high level, is essentially, you know, projecting forward what we experienced in the second quarter. So we're guiding what we're seeing, and what we're seeing is a continuation, even maybe a tick worse on the overall total transaction volume, which was a 4.8% grower in Q2, down a little from that 5.8% in Q1.
Speaker Change: An incremental additional element that I'd point to data. This quarter was something that we are seeing in our yield dynamics. So again overall continued really strong PPV yield certainly relative to the industry and down a basis point. If you think about the progression from Q1 to Q2, but I'd offer a couple of dynamics that we.
Speaker Change: Did.
Speaker Change: We began to see in standout for us.
Speaker Change: In this quarter and let me just go through them real quick to get it out there. So really three things I point to first off we have seen some larger payments with existing suppliers shift away from the higher monetized right number two we've seen a mix shift with new suppliers as we're continually.
Joel Wilhite: So, really kind of continuing that forward, and an incremental additional element that I'd point to, Dave, this quarter, was something that we're seeing in our yield dynamic. So again, really continued really strong TPV yield, certainly relative to the industry, and down a basis point if you think about the progression from Q1 to Q2. But I'd offer up a couple of dynamics that we did begin to see and stand out for us in this quarter. And let me just go through them real quick to get it out there.
Speaker Change: Adding suppliers to the habit pay network through new buyers or new new suppliers that show up in payment files and we're seeing.
Speaker Change: Shift to other payment modalities with variable take rates below kind of the full rack rate interchange and number three and finally and I think I mentioned this in the first quarter a little bit as we are seeing greater monetization of smaller payment sizes driven by the continued sourcing automation.
Joel Wilhite: So really, three things I'd point to. First off, we have seen some larger payments with existing suppliers shift away from higher monetized rates. Number two, we've seen a mixed shift with new suppliers as we're continually adding suppliers to the Avid Pay Network through new buyers or new suppliers that show up in payment files. And we're seeing a shift to other payment modalities with variable take rates, you know, below kind of the full rack rate interchange.
Joel Wilhite: And number three, and finally, and I think I mentioned this in the first quarter a little bit, is that we are seeing greater monetization of smaller payments driven by the, you know, continued sourcing and automation. In standardization, you know, we're able to monetize incrementally smaller payments to monetize, but on a weighted basis and taken all together, we are seeing a little lighter overall TPP yield, and we've extended both that volume and the TPP yield assumptions forward through the end of the year while we're navigating this macro environment. We're not expecting it to get meaningfully better or meaningfully worse.
Speaker Change: And standardization, we're able to monetize incrementally smaller payments to monetize but on a weighted basis and taken all together, we are seeing a little lighter overall TPB yield and we've extended both that volume and the TPB yield assumptions forward through the end of the year, while we're navigating this macro environment.
Speaker Change: <unk>, we're not expecting that to get meaningfully better or meaningfully worse this year.
Joel Wilhite: Gotcha. Thanks, guys. And great EBITDA progress, too, by the way. Thanks, Dave. The next question comes from Ramsey El Assel with Barclays. Please go ahead.
Speaker Change: Got you, thanks, guys and great EBITDA progress too by the way thanks.
Dave Koning: Thanks, Dave.
Dave Koning: The next question comes from Ramsey Al.
Speaker Change: Paul.
Speaker Change: Barclays. Please go ahead.
Ramsey El: Hi guys, thank you for taking my question. I wanted to ask you to kind of give us your updated thoughts on revenue visibility in this environment. I guess it's another way of asking the question about the degree to which you have confidence in your guidance, Avidxchange Hldg. Yeah, again, I would just reinforce what I've said before, what we're guiding is kind of what we're seeing now. I think we are, you know, kind of running the same, you know, high-discipline, high-rigor process we do when we forecast our business.
Speaker Change: Hi, guys. Thank you for taking my question.
Speaker Change: I wanted to ask you to kind of give us.
Speaker Change: Your updated thoughts on revenue visibility in this environment I guess, it's another way of asking the question about the degree to which you have confidence that your guidance is.
Speaker Change: Sort of sufficiently risk adjusted here.
Speaker Change: Maybe accounting for a range of macro outcomes is that something that youre confident you can kind of see at this point.
Ramsey El: And we have a, you know, meaningfully consistent, you know, sort of recurring visibility in our overall total transactions. And so, great question, Ramsey, one that I spend time thinking about. We feel good about the guidance. All right, fantastic. The next question comes from Sanjay Sakhrani with KVW. Please go ahead. Hey, this is Dr. Steven Gluck filling in for Sanjay.
Speaker Change: Yeah again, I would just reinforce what I said before what we're guiding is kind of what we're seeing now I think we are kind of running the same high disciplined high rigor process, we do when we forecast our business and we have a.
Speaker Change: Meaningfully consistent sort of recurring visibility and our overall total transactions and so great question Ramsey one that I spend time thinking about we feel good about the guidance that we provided.
Ramsey: All right fantastic. Thanks.
Speaker Change: The next question comes from Sanjay stock Ronnie.
Speaker Change: Please go ahead.
Speaker Change: Hey, this is Steven Kwok filling in for Sanjay. Thanks for taking my question.
Joel Wilhite: Thanks for taking my call. I guess I just want to drill down on the revenue slowdown. Talk about the sequential change that was seen within the quarters. Was there any noticeable difference between when you started the second quarter and the end of the second quarter? And also, any color around, like, was it from discretionary versus non-discretionary?
Steven Kwok: Just wanted to drill down around the revenue slowed down could you just talk about the sequential change that was seen within the quarters was there any noticeable difference between when you started the second quarter to the ended the second quarter and also any color around like was it from discretionary versus non discretionary.
Sanjay Harkishin Sakhrani: Thank you. Yeah, a great question. Um, I would just point you back to kind of the volume side, certainly, whether year over year sequentially, we're seeing just continued pressure from a discretionary standpoint. We are still maintaining, you know, consistent and really high kind of overall retention of our buyers and our suppliers. But we just see the continued sort of caution and moderation on the part of buyers in their spending, and it is still limited.
Speaker Change: Yes, great question.
Speaker Change: I would just point you back to kind of the on the volume side, certainly weather year over year sequential we're seeing just continued pressure from a discretionary standpoint, we still maintaining consistent and really high kind of overall retention of our buyers and our suppliers.
Speaker Change: But we just see the continued.
Speaker Change: Sort of caution in moderation on the part of buyers in their spending and it is still limited.
Speaker Change: We see limited to discretionary spend type things like advertising professional services travel.
Sanjay Harkishin Sakhrani: We see limited to discretionary spend types, things like advertising, professional services, travel, you know, significant, you know, kind of capital projects and improvements. And it hasn't really widened outside of that discretionary bucket, maybe just gone a little bit deeper relative to what, and then just touching on some of the key initiatives, such as Payment Accelerator and the Spend Management side. Could you talk about the progress around that? You know, how much are they expected to contribute this year and how fast? Bullup in 2025 and beyond. Yeah, this is Mike.
Speaker Change: <unk> kind of capital projects and improvement and it hasnt really widened outside of that discretionary bucket, maybe just go on a little bit deeper relative to what we've seen in the past few quarters.
Speaker Change: Got it and then just touching around some of the key initiatives.
Speaker Change: Payment accelerated spend management side could you could you just talk about like the progress around that how much do you expect it to contribute this year and how fast they can spool up in 2025 and beyond thanks.
Michael Praeger: And I can certainly comment on that. So first of all, Payment Accelerator 2.0 is a new version of our historic invoice accelerator offering. Really excited, you know, about the progress of that offering indicated this year. We're, you know, kind of taking it slow to prove out all the different kinds of functionality of the product that we've improved on over the prior version. And, you know, we continue to kind of, you know, scale it prudently, but certainly, you know, 2025 will be the year that we're seeing, you know, kind of the. Turning to kind of spend management, spend management is, you know, a year or so behind, you know, kind of that payment accelerator.
Speaker Change: Yes. This is Mike and I can certainly comment on that so first of all payment accelerate or to <unk>.
Speaker Change: The new version of our historic and voice accelerator offering.
Speaker Change: Really excited about the progress of that that offering.
Speaker Change: We indicated.
Speaker Change: This year.
Speaker Change: Kind of taking it slow to prove out all the different kind of functionality of the product that we've improved on over the <unk>.
Speaker Change: Your version.
Speaker Change: And.
Speaker Change: We continue to kind of scale it prudently, but certainly 2025 will be the year that we're seeing coming up.
Speaker Change: The real scale take hold in that product as we make it available to all $1 2 million suppliers of which remember we.
Speaker Change: Of that number that we estimate about 60% of that $1 2 million fall in the category of small business suppliers of which we think the product is a perfect fit for <unk>.
Michael Praeger: We expect to introduce it to our first customers at the end of this year, later in Q4. And again, we expect to initially have an opportunity to make that product available to our existing customers throughout 2025 as we also introduce it. The focus on pay and spend management is really to capture the payment volume and transactions that we don't see today. Avidxchange Hldg. But what we see is that transactions that don't have an invoice many times fall outside our system, and that number could be up to... of a company's spend.
Speaker Change: Turning to kind of spend management.
Speaker Change: Management is a year or so behind.
Speaker Change: That payment accelerator, we expect to introduce it to our first customers at the end of this year timeframe.
Speaker Change: Later in Q4 and <unk>.
Speaker Change: Again, we expect to initially.
Speaker Change: We have an opportunity to make that product available to our existing customers throughout 2025, as we also introduce it into new customers.
Speaker Change: The focus on spend management.
Speaker Change: Is really to capture the above.
Speaker Change: Payment volume of transactions that we don't see today that fall outside of an invoice. So today, we do a really good job of capturing all transactions that have an underlying invoices related to them.
Speaker Change: Typically where the system of record for all our customers in terms of all expenses and have an invoice as we feed their general ledger, but what we see is that transactions that don't have an invoice many times fall outside of our system and that number could be up to like 50% of our company spend spend management is really designed to how do we get all the spend that a customer has.
James Eric Friedman: So spend management is really designed to, you know, how do we get all the spend that a customer has related to their in our platform so they can have better reporting, visibility to expense, and cash flow management. Avidxchange Hldg. So there's a little bit of commentary around both payment accelerators. Great, thanks for taking my call. The next question comes from Jamie Friedman with Susquehanna. Please go ahead.
Speaker Change: Related to their expenses in our platform. So they can have better reporting visibility to expense casual management, all those type of things as part of our our platform of which they are asking us to do so unless there is a little bit of commentary around both the payment accelerator on spend management.
Speaker Change: Great. Thanks for taking my question.
Speaker Change: The next question comes from Jamie Friedman with Susquehanna. Please go ahead.
Joel Wilhite: Hi, good morning, guys. A lot of hard work here. I just want to ask one question for Joel and one question for Mike.
Speaker Change: Hi, Good morning, guys a lot of hard work here I just wanted to ask one for Joel It's Mike.
Michael Praeger: Are you still comfortable with the 20% plus revenue CAGR through 2025 and the, I think, 20% plus EBITDA margin, Joel? And then Mike, maybe you could talk about the rule of 40 or 50 for the long term that you articulated at analyst day. Thank you.
Speaker Change: Are you still comfortable with the 20% plus revenue CAGR through 2025, and I think 20% plus EBITDA margin. So and then Mike maybe if you could talk about the rule of 40, where 50 law.
Speaker Change: Long term that you had articulated at the analyst day. Thank you.
Joel Wilhite: Yeah, great, great question, Jamie. I'll start off, I guess, the first way I would sort of answer that question is, you know, we still feel like we're in the early days of a really big opportunity. And we've got a lot of levers, both, you know, to grow revenue and to be a more efficient business. And the evidence is in the gross margin expansion, the profitability, etc. I would say that in the short run, you know, we need the macro to turn around, you know, back to that kind of whether you're talking about 20% or the rule of 40, we're operating in a sort of environment of caution and moderation on the part of buyers.
Joel Wilhite: Yes, great great questions, Jamie I'll start off I guess, the first wave.
Speaker Change: So to answer that question is we still feel like we're in the early days of a really big opportunity and we've got a lot of leavers.
Speaker Change: To grow revenue and at the end to be a more efficient business and the evidence is in the gross margin expansion in the profitability et cetera.
Speaker Change: I'd say that in the short run we need the macro to turnaround.
Speaker Change: Back to that kind of whether youre talking about 20% a rule of 40, we are operating in a sort of environment of caution in moderation on the part of buyers and so I would I would temper our short term expectations, but I'd say that was what that long term opportunity is certainly still there.
Joel Wilhite: And so I would temper short-term expectations, but I'd say those who want that long-term opportunity are certainly still there. Yeah, maybe to kind of pick up on what Joel said, Jamie, related to kind of that, you know, you know, Rule 40, Rule 50.
Michael Praeger: As Joel indicated, certainly, you know, we, you know, we didn't expect that the discretionary spend from customers will rebound at some point in time. We're hopeful that once we get past, you know, the election cycle, and customers just have more clarity on policies, including, you know, kind of the rate environment, that we'll start seeing some return of their discretionary spend, prevent a main, You know, as we've seen in other, But the other, you know, kind of, there's three other things that give us a lot of confidence related to, you know, not only kind of returning to kind of that 20% growth number, but also, you know, kind of delivering on the Rule 40, and that's the innovation, you know, products we have driving future growth, being, you know, the payment accelerator, adoption, and then release and spend management that I just commented on.
Speaker Change: Yes, maybe to kind of pick up on what Joel said, Jamie related to kind of that.
Speaker Change: Rule 40 rule of 50 as Joel indicated certainly.
James Eric Friedman: We would need and expect that the discretionary spend from customers will rebound at some point in time.
Speaker Change: So that once we get past the election cycle.
Speaker Change: And customers just have more clarity on policies, including kind of the rate environment.
Speaker Change: We'll start seeing some return to their discretionary spend preventive maintenance projects things of that nature as we've seen in other cycles, but the other kind of there is two other things that gives us a lot of confidence related to not only kind of returning to kind of that 20% growth number but also kind of delivering on the rule of 40 and that's the innovation.
Speaker Change: Products, we are driving future growth.
Speaker Change: The payment accelerator adoption and then release spend management that I just commented on.
Michael Praeger: But that combined with our new, you know, kind of buyer sales. In terms of the partnerships that we've added over the last year, certainly AFOLIO is a big piece of that, you know, with their 40... I'm sorry, 20,000 customers. You know, roughly half of those, you know, fit within our M3, and then most recently Buildium. So the new sales channels we're really excited about in terms of driving new buyer sales, and then the last lever is around that conversion to paper checks.
Speaker Change: But that combined with our new kind of buyer sales channels.
Speaker Change: In terms of the partnerships that we've added over the last year certainly a folio is a big piece of that with their 40000.
Speaker Change: I am sorry, 20000 customers, which we expect roughly half of those fit within our product market fit.
Speaker Change: L. Three and then most recently <unk>, so kind of the new sales channels.
Speaker Change: We're really excited about in terms of driving new buyer sales and then kind of the last levers around that conversion to paper checks to electronic.
Michael Praeger: We've been kind of commenting on that we believe that our ability to manage, you know, multiple payment modalities across our platform that combine, you know, combinations of speed of payment, price, Unknown Executive, Rufus Hldg Unknown Executive, Rufus Hldg are kind of the key in terms of continuing to drive that conversion from paper chuck to. And so those are kind of the building blocks for that 20%, you know, kind of growth mantra. And then, you know, as it relates to Group 40, we continue to have, you know, kind of those levers, as Joel indicated.
Speaker Change: We've been kind of commenting on that we believe.
Speaker Change: That our ability to manage.
Speaker Change: Multiple payment modalities across our platform that combined.
Speaker Change: Combinations of speed of payment price of payment on levels of remittance data along with levels of automation.
Speaker Change: The key in terms of to continue to drive that conversion from paper to electronic.
Speaker Change: And so those are kind of the building blocks for that 20% kind of growth mantra that we have.
Speaker Change: And then as it relates to grow 40, we continue to have kind of those levers as Joel indicated.
Michael Praeger: Certainly, you know, AI has had a nice impact and will continue to do so as we drive gross margin, and our various other automation strategies continue to build our gross margin. And then, you know, I think we've been able to demonstrate that we have, you know, kind of strong and disciplined execution of the business, and especially around the targets that we have and how we run the business to achieve that objective of Role 40 and then, you know, longer. I got it.
Speaker Change: Certainly.
Joel Wilhite: <unk> had a nice impacted will continue.
Speaker Change: As we drive gross margin and our various other automation strategies continue to build our gross margin and then I think we've been able to demonstrate that we have kind of strong and disciplined execution of the business and especially around the expense discipline that we have and how we run the business too.
Joel Wilhite: <unk> achieved that objective of row, 40, and then longer term ROE 50.
Speaker Change: Got it thank you both.
James Eric Friedman: Thanks, Jamie.
Andrew Thomas Bauch: Thank you both. The next question comes from Andrew Bauch with Wells Fargo. Please go ahead. Hey, good morning.
James Eric Friedman: The next question comes from Andrew Baum with Wells Fargo. Please go ahead.
Joel Wilhite: Thanks for taking the question. I just want to dig into the dynamics around suppliers being more discerning around higher monetized payment offerings. This is something that was called out by one of your closest peers, I think in like the middle of last year, and they basically chalked it up to the macro, but said that when the macro turns, you know, those higher monetized payment methods should see greater adoption.
Andrew Baum: Hey, good morning. Thanks for taking my question just wanted to dig into the dynamics around the supplier being more discerning around the higher monetize payment offerings. This is something that was called out but one of your closest peers I think in like the middle of last year and they basically chalked it up to the macro.
Andrew Baum: But said that when macro churns.
Speaker Change: Those higher monetize payment message should see greater adoption and so my question to you is are you kind of expecting the same thing and what's the risk that we should be thinking about that.
Joel Wilhite: And so my question to you is, are you kind of expecting the same thing? And what's the risk that we should be thinking about that, you know, each quarter that goes by where they're electing for lower monetized payment methods, that those behaviors become more sticky? Yeah, great question.
Speaker Change: Each quarter that goes by where they are electing for lower monetize payment methods that those behaviors become more sticky.
Joel Wilhite: Let me start, and Mike might add a little context. But what I would point to, maybe it's a little bit of a difference than the example that you referenced, is we've always been focused on suppliers as customers, and there's a value proposition. And sort of remember speed, data, and automation, and then kind of the notion of price depends on that level of speed, data, and automation. So what I pointed out when we were talking about those yield dynamics is some mixed shifts, for sure, but not a wholesale kind of retreat from monetized payments, just continuing to seek speed and data and automation, but at some different price points.
Speaker Change: Yes, great Great question, Let me, let me start and Mike.
Mike: Add a little context.
Mike: What I would point to maybe it's a little bit of a different than the example that you referenced is we've always been focused on suppliers as customers and there is a value proposition.
Speaker Change: And sort of.
Mike: Remember the the speed data automation, and then kind of the.
Speaker Change: The notion of price depends on that level of speed data and automation. So.
Speaker Change: What I pointed to when we were talking about the yield dynamics at some mix shifts for sure, but but not a wholesale kind of retreat from monetize payments just continuing to seek the speed and the data and the automation but at.
Speaker Change: Some different different price points. So we're encouraged about.
Speaker Change: Our yield today again at 30 bps on an approaching 100 billion of PPV. We we are we believe we have industry leading yield.
Joel Wilhite: So we're encouraged about our yield today. Again, 30 steps on approaching 100 billion TPV. We believe we have an industry-leading yield, and we'll continue to see that, but we'll also continue to meet suppliers where they are and deliver the value that they're seeking at different prices. Mike, do you want to add anything to that?
Speaker Change: Yield and we'll continue to see that but we will also continue to meet suppliers, where they are and deliver the value that they're seeking at different prices, So my Q&A or anything to that.
Michael Praeger: Yeah, just, you know, kind of reinforce the key element is thinking of the suppliers as a core customer and building a value proposition around them. So one of the things that we're seeing is that, you know, we don't have suppliers leaving our network. We have super high, you know, you know, retention rates and high 90% retention rates.
Speaker Change: Just kind of reinforce the key element is thinking of the suppliers, it's a core customer and building our value proposition around them. So one of the things that we're seeing is that we don't suppliers, leaving our network we have super high.
Speaker Change: Retention rates in the high 90% range really.
Michael Praeger: Related to our supplier. But what we do see, especially as you continue to go deeper to convert those paper check suppliers to electronic, is that at the different price points that we have, it's a value proposition that kind of meets what they're looking for to make that kind of happen. And so, you know, we continue to see, you know, a high volume of new suppliers being added to the net. However, we think the key is and how we drive this over time to get to our, you know, kind of next milestone of 50% monetized. ,,,,,,,, Friends.
Speaker Change: Related to our supplier customers, but what we do see especially around you continue to go deeper to convert those paper checks suppliers to electronic.
Speaker Change: Is that at the different price points that we have a value proposition that it kind of meets what theyre looking for to make that conversion.
Speaker Change: And so.
Speaker Change: We continue to see a high volume of new suppliers being added to the network.
Speaker Change: However, we think the key is and how we drive this over time.
Speaker Change: Get to our next milestone of 50% of monetize payments and greater over time is the continued delivery of new payment modalities to combine speed price remains data along with automation.
Speaker Change: Makes sense. Thank you guys.
Speaker Change: Yes.
Darrin David Peller: Thank you, guys. The next question comes from Darrin Peller with Wolf Research. Please go ahead.
Speaker Change: The next question comes from Darrin Peller with Wolfe Research. Please go ahead.
Joel Wilhite: Guys, hey. You know, I think there's a couple of things that we just want to dive into a little bit. One of them is just the transaction growth rates versus the overall volume growth rate, just on a more technical matter, if any way you can help us guide around what you expect there and transaction size. But more than that, I really want to understand a little bit more around what you're seeing in terms of the dynamic of top of funnel customer ads.
Darrin David Peller: Guys Hey.
Darrin David Peller: I think theres a couple of things, we just want to dive into a little bit one of them is just the transaction growth rates versus the overall volume growth rates just on a more technical matter.
Darrin David Peller: Any way you can help US guide around what you expect there and transaction size, but more than that I really want to understand a little bit more around what youre seeing in terms of the dynamic of top of funnel customer adds Mike last quarter, we talked about different strategy on conferences.
Joel Wilhite: Mike, you know, last quarter, we talked about different strategies for conferences. So maybe just give us a little more update on what you're seeing in terms of net new additions and your strategy, and is the market, are the markets coming to you with how proactive you're being in different ways? Thank you, Darrin.
Mike: So maybe just give us a little more update on what youre seeing in terms of net new additions and your strategy is it market, where the market is coming to you with what how proactive you were being in different ways.
Joel Wilhite: I'm going to take the front end of your question and then Michael will take the back part. So just to add a little context, and I think your question is going to help us understand the kind of growth rates in overall total transactions and then overall total payment volume. Remember that our total transaction, Metric, is the sum of all the transactions on the platform, that is, all the invoices and all the payments, and the subset of the transactions that are payments is a smaller but incrementally faster growing.
Darren: Thanks Darren.
Speaker Change: Got it I'm going to take the front end of your question and then Mike will take the back part so just to add a little context and I think your question is help us understand kind of growth rates.
Mike: Overall total transactions and then overall total payment volume remember that our total transactions.
Mike: Our metric is the sum of all the transactions on the platform that has all the invoices and all the payments and the subset of the of the transactions that our payment is a smaller but incrementally faster growing and I would just say that we still see pretty direct correlation between the growth in payments and the growth in.
Joel Wilhite: And I would just say that we still see a pretty direct correlation between the growth in payments and the growth in overall total payment volume. And I wouldn't point to anything meaningfully different in terms of overall average payment sizes across our verticals. And so, finally, I would just say we're continuing to see that caution exercised by buyers. We talk about the overall total transaction retention rate as a number that we provide annually. Last year it was in the 103 range; normally it's in the 104, 105 range. In this season we're in, we're right around the 100 zip code, even plus or minus.
Mike: Overall total payment volume and I wouldn't point to anything meaningfully different in terms of overall <unk>.
Mike: Average payment sizes across across our verticals and so finally I would just say, we're continuing to see that caution exercised by buyers. You know we talk about overall total transaction retention rate is the number that we provide annually last year.
Mike: And the 103 range normally its in the 104 105 in this season we're in.
Mike: Right around the 100 ZIP code, even plus minus.
Mike: So we're optimistic that as we get through this.
Mike: Economic season that that returns, but but that overall total transaction growth rate is indicative of what we're experiencing.
Joel Wilhite: And so we're optimistic that as we get through this economic season, that will return, but that overall total transaction growth rate is indicative of what we're seeing. Yeah, and Darren, maybe you can turn it to your question on top of funnel activity. So I think, you know, there's kind of, you know, two elements.
Michael Praeger: One is, as I talked about last quarter, a more disciplined approach around, you know, our investments in the highest ROI marketing initiatives. And this has certainly been put in practice and put in place with, you know, how we think about, you know, all the trade show conference, user conference type activity around all our, Make sure we're focused on, you know, the highest ROI in the, The second thing, which was, you know, probably more evident this quarter, is around also a change of mix in terms of how we think about historically maybe more investment in electronic demand gen versus, you know, supporting our partners and certainly move that mix to our partner channels.
Mike: Yes, and Darren maybe turn it to your question on top of funnel activity.
Darren: So I think there's.
Darren: Two elements one is as I talked about last quarter, a more disciplined approach around.
Darren: Our investments in the highest ROI marketing initiatives. This has certainly been.
Darren: Putting this practice, we can put in place with how we think about all the trade show conference user conference type activity around all our partners and making sure we're focused on the highest ROI initiatives.
Darren: The second thing which was.
Darren: Probably more of in this quarter is around also change of mix in terms of how we think about historically, maybe more investment in electronic demand Gen versus supporting our partners and certainly move that mix to our partner channels.
Michael Praeger: Certainly, you know, the new partnerships that we've added, like Folio, M3, Buildium, are good examples where we wanted to increase our investment as we're seeing really high-qualified leads coming from these channels versus maybe, you know, higher volume but lower quality coming from the historical demand gen. [inaudible] So seeing this improve and faster close cycles combined with the maintenance. So I think that demonstrates that, you know, by executing these two strategies, we're seeing, you know, higher-qualified leads coming through the top of the funnel, even though the overall volume.
Darren: The new partnerships that we've added Lincoln folio.
Darren: Three build the Mark good examples where we wanted to increase our investment as we're seeing you really high qualified leads coming from these channels versus maybe higher volume, but lower qualified coming from the historical demand Gen.
Darren: And so we're.
Darren: And we think that that strategy is actually playing playing off as we see overall results our new logo growth is up over last year.
Darren: Combined with strong close rates, but one of the things we did see which is really encouraging.
Darren: Average sales cycle has been cut by a third so that's improved and faster close cycles combined with maintaining strong close rates. So I think that demonstrates that.
Darren: By executing these two strategies that were seeing higher qualified leads coming through the top of funnel, even though the overall volume may be slightly lower.
Michael Praeger: So you're saying when you're adding at a rate that's faster for new logo growth, that's overall new customer ads? In other words, the rate of growth of additions of new customers this year versus last? Exactly, exactly.
Speaker Change #109: So you are saying when you're adding at a rate that's faster for new logo growth. So overall, new customer adds in other words the rate of growth of additions of new customers this year versus last.
Michael Praeger: Kind of, you know, new logo growth, halfway through the year compared to last year, we're up over. Alright, that's good to hear. Thanks, guys. The next question comes from James Fawcett with Morgan Stanley. Please go ahead.
Speaker Change: Exactly exactly kind of new logo growth.
Speaker Change: So through the year compared to last year were up over last year, Alright, thats good to hear thanks guys.
Speaker Change: Yes. Thank you.
James Faucette: Great, thank you so much. I wanted to kind of continue to work on the P&L. And given some of the top line softness, it was definitely constructive to see FLEX-OPEX down year over year in order to get your projected adjusted EBITDA, to protect that. And how are you thinking about the right level of operating expenditure growth for the business over the near to medium term to the extent that revenue growth is a bit more muted? Yeah, James. A good question.
Speaker Change: The next question comes from James Bachman with Morgan Stanley. Please go ahead.
James Bachman: Great. Thank you so much I wanted to kind of continue to work down the P&L and given some of the top line softness does definitely constructive to see flex opex down year over year and order.
Speaker Change: Gets your projected adjusted EBITDA.
Speaker Change: Alright to protect that and.
Speaker Change: How are you thinking about the right level of Opex growth for the business over the near to medium term the extent that revenue growth is a bit more muted.
Joel Wilhite: And I just go back to some of the things that Mike talked about in his prepared remarks and reinforced in his commentary. We're really focused on running a disciplined business. We're also very focused on the growth opportunities ahead of us at the same time. So we continue to balance that.
Mike: Yes, James Good question and I would just go back to some of the things that Mike talked about in his prepared remarks and reinforcing it in his commentary, we're really focused on running a disciplined.
James Bachman: Business. We're also very focused on kind of the growth opportunities ahead of us at the same time, so we continue to balance that.
James Bachman:
Speaker Change #101: What I would what I would say that you'd likely baked into our guidance. There is a little bit of an incremental investment that we're contemplating.
James Bachman: Our opex and getting that focused on.
Speaker Change: On finishing strong in getting launched payment accelerators spend management, our overall pay platform et cetera. So so again.
Joel Wilhite: You know, what I would say is that, you know, baked into our guidance, there is a little bit of an incremental investment that we're contemplating in our OPEX. And again, that's focused on, you know, finishing strong and getting launched, payment accelerator, and spend management. Our overall pay platform, etc. So, again, I don't know that there's an optimal number to give you, but we're very focused on it.
Speaker Change: I don't know that there is an optimal number to give you, but we're very focused on profitability you can see that in the gross margin expansion that continues.
Joel Wilhite: Profitability, you can see that in the gross margin expansion that continues. I'll tell you that even in kind of the shift in our guidance for the back half, we're still really focused on the gross margin that's contemplated there. Maybe the rate of expansion moderates a bit, but we don't expect to go backwards, and so we're continuing to focus on investing in growth and running a discipline.
Speaker Change: I'll tell you that even in kind of the.
Speaker Change: The shift in our guidance in the back half.
Speaker Change: We're still really focused on the gross margin thats contemplated there maybe the rate of rate of expansion moderates a bit but we don't expect to go backwards and so we're continuing to focus on investing in growth.
Speaker Change: And running are running a disciplined business.
Michael Praeger: And then from a business development standpoint, as you know, kind of the choppy economic environment continues to persist. Are there other incremental opportunities to further expand the reach and abilities of Avid through acquisition or looking at adjacencies? How should we be thinking about kind of your, you know, what the right approach to investment is strategically in the current environment for you? Yeah, I think that's a really good question.
Speaker Change #110: Got it and then.
Speaker Change: Development standpoint.
Speaker Change: Okay.
Speaker Change: <unk> economic environment.
Speaker Change: Persist.
Speaker Change #103: Are there other incremental opportunities to further expand.
Speaker Change #103: The reach.
Speaker Change: And.
Speaker Change: Abilities.
Albert: Albert through acquisition or looking at Adjacencies, how should we be thinking about kind of your you know what.
Speaker Change: The right approach.
Speaker Change: New investment is strategically in the current environment for you.
Michael Praeger: Certainly, the kind of inorganic and, you know, tuck-in acquisitions have been, you know, kind of part of our historical growth as we've added new vertical channels, and many of them have happened through, you know, acquisitions. We believe that that's going to be, you know, continue to be part of our, you know, future strategy. We've had, you know, a couple of years of not having any activity on the M&A side.
Speaker Change #104: Yes, I think that's a really good question and certainly the kind of inorganic and providing tuck in acquisitions has been kind of part of our historical kind of growth.
Speaker Change #104: As we've added new vertical channels and many of them have happened through acquisitions.
Speaker Change: We believe that that's going to be continue to be part of our future strategy.
Speaker Change: Had a couple of years of not having any activity on the M&A side I think that's really a combination of number one not really seeing anything that we felt was super strategic that could really move the needle for us strategically in terms of that growth in the second thing is I think the valuation kind of spectrum of kind of private companies versus public has been.
Michael Praeger: I think that's really a combination of, number one, not really seeing anything that we felt was super strategic that could really, you know, move the needle for us strategically in terms of that growth. And the second thing is, I think, you know, the valuation kind of spectrum of, you know, kind of private companies versus public has been a little bit challenging.
Speaker Change: A bit challenging.
Michael Praeger: But I think, you know, those elements, you know, or that element, we're going to see, you know, kind of change, and we're seeing, you know, more activity than we've seen in recent years in terms of, you know, opportunities to continue to do, you know, tuck in acquisitions, move into adjacencies, you know, like you referenced, which is, you know, what we've done historically So I expect that we will, you know, kind of get back to, you know, having a routine cadence around some talking acquisition. Great, thanks.
Speaker Change: But I think those elements.
Speaker Change: That element were going to see kind of where we are seeing it kind of change and we've seen more activity than we've seen in recent years in terms of opportunities to continue to do tuck in acquisitions move into Adjacencies like you referenced which is.
Speaker Change: What we've done historically and haven't really developed playbook on how we execute these effectively so I expect that we will.
Speaker Change: And kind of get back to having routine cadence around some tuck in acquisitions as we go forward.
Speaker Change: Great. Thanks.
Craig Jared Maurer: As a reminder, please limit yourself to one question. The next question comes from Craig Maurer with FT Partners. Please go ahead.
Speaker Change: As a reminder, please limit yourself to one question.
Speaker Change: The next question comes from Craig Maurer with Ft Partners. Please go ahead.
Joel Wilhite: Yeah, hi, thanks for taking the questions. First, over the long term, perhaps your new origination, volume shifts. Toward Partners and Away from Self-Generated Leads, or that mix shifts. How should we expect that to impact the yield, as I assume you're sharing economics there? And second, you know, I'm a little perplexed by the maintained guideline on political revenue at 9 million, which was effectively what you did in 2022 during the midterms.
Craig Jared Maurer: Yeah, Hi, thanks for taking the questions.
Speaker Change: First over the long term as perhaps your new origination volume shifts.
Craig Jared Maurer: Toward partners and away from self generated leads.
Craig Jared Maurer: Or that mix shifts how should we expect that to impact the <unk>.
Speaker Change #111: Yield is I assume youre sharing economics, there and second.
Speaker Change #112: I'm, a little perplexed by the <unk>.
Speaker Change: Maintained guide on political revenue $9 million, which was effectively what you did in 2022 during the mid terms.
Joel Wilhite: I mean, all fundraising and activity points to a massive upswing in spend from certainly that midterm number. So I'm curious if you're forecasting share loss or yield compression or something that's keeping that guidance flat. Thanks. Thanks, Craig. I'm going to take the political question and then I'll have Mike take care of the first part. Great question, and I think, you know, let me kind of reset the table around politics.
Speaker Change: All fund raising and activity points to a massive.
Speaker Change: Upswing in spend.
Speaker Change: Certainly that midterm number so I'm curious if you are forecasting share loss or yield compression or something thats keeping that guidance flat.
Speaker Change #102: Thanks, Greg I'm going to take the political question and then I'll have Mike take care of the first part.
Mike: Great question, and I think let me, let me kind of reset the table around political were sort of reaffirming the $9 million that we've talked about since the beginning of the year.
Michael Praeger: We're sort of reaffirming the $9 million that we've talked about since the beginning of the year. You know, we are seeing consistent patterns with the presidential election. Now, granted, we didn't own fast pay back in 2020, but when we look at the first half, second half distribution, you know, that, uh, we're, we're very I'd also sort of repeat, you know, we don't have a lot of visibility there, it's meaningfully back-ended spin.
Mike: We are.
Mike: Seeing consistent patterns with the presidential election, now granted we didn't own fast payback in 2020, but when we look at the first half second half distribution.
Speaker Change: That that we're very consistent.
Speaker Change: Also sort of repeat we don't have a lot of visibility there. It's meaningfully back ended then.
Michael Praeger: And so if there was an area that, you know, surprised us for the good, it could possibly be this political number. And so that said, we're also seeing the same, you know, kind of dynamics that we're seeing across the business in our traditional media and political media business as it relates to, you know, volume and rate. So a degree of uncertainty, not the same visibility we have in our normal business, and, you know, Yeah, maybe to continue on, you know, what Joel says, remember, you know, kind of, we expect to see the majority of all activity happen after Labor Day. So it makes it harder to have visibility into, you know, what may happen.
Speaker Change: And so if there was an area that surprised us to the good it could possibly be.
Speaker Change #117: Political number and so.
Speaker Change #113: That said, we're also seeing the same kind of dynamic that were seeing across the business and our traditional media and political media business as it relates to volume and rate. So degree of uncertainty not the same visibility we have in our normal business.
Speaker Change: Hoping we are on the conservative side, and we really see it move in the back half, but we're not calling that in our guidance.
Joel Wilhite: Certainly, we're encouraged by some of the Avidxchange Hldg, you know, ballot initiatives in the state. But Craig, I wanted to kind of come back to you. I think your first question was related to, you know, kind of the long-term impact and some of the makeshift of leveraging, having greater leverage within our partner channels. The way we think about it is that we think the net contribution is consistent in terms of, you know, our direct sales efforts.
Speaker Change: Yes, maybe to continue on which also is remember kind of.
Speaker Change: We expect to see the majority of volatility happens after labor day. So.
Speaker Change: It makes it harder to have visibility to what may happen certainly we are encouraged with some of the.
Speaker Change: Forecasted spend levels.
Speaker Change #123: None of the presidential cycle, but all of the.
Speaker Change: Valid initiatives in the state run elections.
Speaker Change: But Craig I wanted to kind of come back to your I think your first question was related to kind of long term impact of some of the mix shift of leveraging having greater leverage within our partner channels. The way, we think about it. So we think the net contribution.
Joel Wilhite: Certainly, the majority of partnerships that we have are more referral partnerships where our direct sales force still leverages those partners, although we're, you know, sharing some of that revenue. We kind of look at it as it's kind of an investment, you know, similar to what we make in marketing-related expenses to drive our internal leads. So we, you know, our models, you know, show that it's really kind of a net-net, you know, kind of equal type of opportunity in terms of And we think it's really kind of a you know, the beauty of our demand gen funnels is we have, you know, lots of different sources that make them up.
Speaker Change: Is consistent in terms of.
Speaker Change: Our direct sales efforts certainly.
Speaker Change: The majority of partnerships that we have are more referral partnerships, where our direct sales force still leverages those partners although were.
Speaker Change: Sharing some of that revenue.
Speaker Change #108: Look at it is it's kind of an investment.
Speaker Change #108: Similar to what we make in.
Speaker Change: Marketing related expense to drive our internal leads so we.
Speaker Change: Our models.
Speaker Change: Show that it's really kind of a net net.
Speaker Change: Kind of equal type of opportunity in terms of overall net impact.
Joel Wilhite: And so as we're seeing softness, for example, in electronic demand generation, and in really high levels of activity through our partner channels, you know, we can make these types of, I think from an execution perspective, we're happy to be working on high quality leads that are having the impact that they have, and the net result is, our net logo growth is up over last year, and our team is working on higher quality leads through that. Thank you, Mike. Thanks, John.
Speaker Change: And we think it's a really kind of a.
Speaker Change #118: <unk> of our demand Gen funnels as we have lots of different sources that make it up and so as we're seeing softness for example in electronic demand Gen.
Speaker Change #118: And really high kind of activity through our partner channels. We can make these types of adjustments.
Speaker Change: From a execution perspective.
Speaker Change: We're.
Speaker Change: We're happy to be working on high quality leads.
Speaker Change: That are having the impact that they have and the net result is.
Speaker Change: Net logo growth is up over last year.
Speaker Change: Team is working on higher quality leads through that change in strategy.
Speaker Change: Okay. Thank you Mike Thanks, Joe Joe.
Joe: You bet.
Timothy Edward Chiodo: The next question comes from Timothy Chiodo with UBS. Please go ahead. Great, thank you for taking the question. I want to talk a little bit about interchange credit, interchange rates in the industry. So the recently rejected settlement, the original agreement was seven basis points on a blended basis and four basis points for essentially every category. Clearly, that is in the process of being reworked.
Speaker Change: The next question comes from Timothy Chiodo with UBS. Please go ahead.
Michael Praeger: But I was hoping you could touch on what you think the implications could possibly be for, number one, commercial interchange rates in general for the industry, and then maybe more specifically, any of the more custom interchange rates that Avid has on the commercial side. Yeah, Tim, good question. And I think, you know, I, you know, I think it was a quarter or two ago, you know, fielded a number of questions on this topic.
Timothy Edward Chiodo: Great. Thank you for taking my question I wanted to talk a little bit about interchange credit interchange rates in the industry. So the recently rejected settlement. The original agreement was seven basis points on a blended and four basis points for essentially every category clearly that is in the process of being reworked but I was hoping you could touch on what you think the implications could possibly be for.
Timothy Edward Chiodo: Number one commercial interchange rates in general for the industry and then maybe more specifically any of the more custom interchange rates that avid has on the commercial side.
Michael Praeger: So how should we think about it? First of all, I think, you know, the biggest impact is certainly going to be on the consumer side, where you typically have, you know, kind of, standardized, you know, interchange rates. One of the things that the dynamic on the business side, and we've been kind of leading the charge here, which is reflected in our, you know, industry-leading, electronic payment adoption rates, is creating multiple payment modalities.
Timothy Edward Chiodo: Yes, Tim Good question and I think.
Speaker Change #114: I think it was a quarter or two ago.
Speaker Change #115: Fielded a number of questions on this topic.
Speaker Change #114: So how do we think about it so first of all I think the biggest impact is certainly going to consumer side, where you typically have kind of.
Speaker Change #114: <unk> standardized interchange rates one of the things that the dynamic of the business to business side, and we've been kind of leading.
Speaker Change #114: The charge here, which are reflected in our industry leading.
Michael Praeger: In fact, even on virtual cards today, we go to market with a dozen different virtual card type offerings that combine again, you know, different interchange price points, Avidxchange Hldg. So, you know, when we look at kind of, you know, our Avid Pay Network, we're actually very proactive in terms of providing kind of the right structure to price product offering or payment modality to what suppliers are looking for in terms of that value proposition. So, thank you.
Speaker Change #114: Electronic payment adoption rates.
Speaker Change #114: Is creating multiple payment modalities in fact, even on virtual card today, we go to market with a dozen different virtual car type offerings that can find again.
Speaker Change #114: Interchange price points with.
Speaker Change #114: Different levels remain stayed on different levels of automation and speed of payment. So.
Speaker Change #114: When we look at kind of our.
Timothy Edward Chiodo: Our Abbott paid network.
Timothy Edward Chiodo: Absolutely proactive in terms of providing kind of the right.
Timothy Edward Chiodo: Structured and priced product offering or payment modality.
Timothy Edward Chiodo: Suppliers are looking for in terms of that value proposition.
Michael Praeger: And the second element is, I think, you know, in our case, MasterCard is our primary exclusive provider for the execution of virtual card payments. You know, with their different data rates, we've been on the forefront of supporting our supplier customers with all the remaining data they need so they can take advantage of that. And so we've already been, you know, on the forefront of helping our suppliers get the best economics they can get by, you know, providing them with data, making transactions more secure, less fraud, all those.
Timothy Edward Chiodo: And the second element is I think in our case Mastercard as our primary.
Timothy Edward Chiodo: Exclusive provider for execution of virtual card payments.
Timothy Edward Chiodo: With their different data rates, we've been on the forefront of supporting our supplier customers with all the women's data they need so they can take advantage of the different data rates.
Timothy Edward Chiodo: So we've already been on the forefront of.
Timothy Edward Chiodo: Helping our suppliers get the best economics, they can get by providing them the data.
Timothy Edward Chiodo: Transactions more secure less fraud, all those type of things and.
Michael Praeger: And we think long-term that, you know, adds to a sticky customer, and it certainly shows up in our, you know, industry-leading retention rate. [inaudible] So we kind of view on the commercial side that, you know, we've already been, you know, kind of proactive in terms of how do we get the right price product for suppliers to be, you know, electronic acceptable. Excellent.
Timothy Edward Chiodo: And we think long term that adds to a sticky customer.
Timothy Edward Chiodo: And it certainly shows up in our industry, leading retention rates that we have for suppliers. So.
Timothy Edward Chiodo: So we kind of view on the commercial side that we've already been kind of proactive in terms of how do we.
Timothy Edward Chiodo: Get the right price product for our suppliers to be electronic acceptance on the long term.
Mike: Excellent. Thank you Mike.
Timothy Edward Chiodo: Okay.
Alexander Wexler Markgraff: Thank you, Mike. The next question comes from Alex Markgraff with KeyBank Capital Markets. Please go ahead.
Speaker Change #127: The next question comes from Alex Mark Graf with Keybanc capital markets. Please go ahead.
Timothy Edward Chiodo: Yeah.
Michael Praeger: Hey guys, thanks for taking my question. Mike, maybe one for you first just to expand on the top of funnel comments. I mean, I understand sort of some of the comps you provided there.
Speaker Change #125: Hey, guys. Thanks for taking my question Mike.
Speaker Change #125: Mike maybe one for you first just to expand on the top of funnel comments.
Michael Praeger: It sounds like some benefits too from a sales cycle standpoint, maybe from a win rate standpoint as well. Just kind of curious about what the net effect of all of this is versus what your expectations were prior to some of this resource reallocation. I mean, I'm assuming it's better, and I hear you on the net ads expectation for 24, so maybe just from a new customer revenue contribution standpoint, how does that compare to what you were expecting prior to this resource allocation?
Speaker Change #119: I mean, I understand sort of some of the comments you provided there it sounds like some benefits too from a sales cycle standpoint.
Speaker Change #119: Maybe a win rate standpoint, as well just kind of curious like what the net effect of all of this is.
Speaker Change #116: Versus what your expectations were prior to some of this resource reallocation I mean, I'm, assuming it's it's better and I hear you on the net adds expectation for 'twenty for us So maybe just from like a.
Speaker Change #116: New customer revenue contribution standpoint.
Speaker Change #125: Does that compared to what you were expecting prior to this resource allocation.
Michael Praeger: Yeah, so I think, first of all, the objective of Top of Funnel is to, you know, hit our, you know, our sales plan and our, you know, new customer ad, you know, kind of objectives for the year. So I think from that perspective, you know, halfway through the year, we feel that we're on pace to, you know, we're running ahead of last year related to, you know, adding new customers.
Speaker Change #116: Yeah, So I think so.
Speaker Change #124: So first of all with the objective of top of funnel is too.
Speaker Change #121: Here are our sales plan and our.
Speaker Change #116: New customer add kind of objectives for the year.
Speaker Change #116: So I think from that perspective.
Timothy Edward Chiodo: Halfway through the year, we feel that we're on pace to.
Timothy Edward Chiodo:
Timothy Edward Chiodo: We're running ahead of last year related to adding new customers and so we're trending towards that overall sales plan objective.
Timothy Edward Chiodo: But at the same time, it's not really we're not spending less on top of funnel or kind of investment has stayed the same it's just a different allocation.
Michael Praeger: And so we're moving towards, you know, that, you know, overall. But at the same time, we're not spending less on Top of Funnel; our investment has stayed the same; it's just a different asset. And so I think, you know, the beauty of having multiple dynamics in our top of funnel that are driven by many different types of sources. As we see, you know, the strength and weakness of different sources, we can adjust our, our spend accordingly.
Timothy Edward Chiodo: And so I think the beauty of having multiple dynamics all of our top of funnel that are driven by many different types of sources as we see.
Timothy Edward Chiodo: The strength and weakness of different sources, we can adjust our our spend accordingly, and so one of the adjustments that we made this last quarter as well.
Michael Praeger: And so, you know, one of the adjustments that we made this last quarter is, you know, moving to the Avidxchange Hldg and the higher quality leads that partners are generating for us. Again, these are existing customers of ours, typically accounting. So there's an existing customer relationship, and they're raising their hand, and they want to automate this business, you know, in partnership with their, you know. And so those are really high-qualified leads, and we're seeing it show up in terms of, you know, shorter sales. Why do we maintain really strong relationships?
Timothy Edward Chiodo: Moving away from.
Timothy Edward Chiodo: Typically some of that electronic demand Gen that produces.
Timothy Edward Chiodo: Lots of leads but lower quality.
Timothy Edward Chiodo: And we've seen kind of softness in that particular channel is to move to where we're seeing strength, which is around supporting our growing number of costs.
Timothy Edward Chiodo: Partners.
Timothy Edward Chiodo: And the higher quality leads that partners are generating for us.
Timothy Edward Chiodo: Again these are existing customers of our typically accounting system and ERP partners. So there is an existing customer relationship and they're raising their hand, and they want to automate this business process in.
Timothy Edward Chiodo: In partnership with their ERP accounting system partner.
Timothy Edward Chiodo: And so it was a really high qualified leads and we're seeing it show up in terms of shorter sales cycles, while we maintain really strong close rates.
Michael Praeger: So I think, you know, overall, I think we'll be more efficient. And certainly, we pay close attention to all the different lead sources we have. And we'll continue over time to make adjustments where we're seeing, you know, strength and weakness. Thanks, and if I could just squeeze one more in on yield, just wanted to get a bit more color.
Timothy Edward Chiodo: So.
Timothy Edward Chiodo: I think overall I think we'll be more efficient.
Timothy Edward Chiodo: And certainly we pay close attention to all the different lead sources, we have and will continue over time to make adjustments, where we're seeing strength or weakness across.
Timothy Edward Chiodo: That overall spectrum.
Joel Wilhite: The dynamic that you're seeing is it's sort of, is it occurring really across the entire supplier base? Is it more narrow in scope with certain suppliers or certain verticals? Any color there? Yeah, you bet. I think it's fairly broad across the vertical. I wouldn't call out any...
Speaker Change #122: Thanks, and if I could just squeeze one more in on yield just.
Speaker Change #139: Wanted to get a bit more color the dynamic.
Speaker Change #136: Dynamic that Youre seeing is it sort of is it occurring really across.
Speaker Change #135: Our supplier base is it more narrow in scope, but certain suppliers or certain verticals any color there would be helpful.
Speaker Change #122: Yeah, you bet I think it's a fairly broad across the vertical I wouldn't call out anything specific there Alan.
Joel Wilhite: Okay, thanks, Joel. Thanks, bye. The next question comes from Rufus Hone with BMO Capital Markets. Please go ahead.
Alan: Okay. Thanks, Sean.
Brian: Thanks, Brian.
Alan: Okay.
Alan: The next question comes from Richard Tong with BMO capital markets. Please go ahead.
Rufus Hone: Hey, good morning, guys. Thanks. Sorry, if this is maybe covered by an earlier question. I joined a little bit late, but I wanted to ask about the full-year revenue guide. How much of the reduction is this macro getting tougher?
Richard Tong: Hey, good morning, guys. Thanks, sorry, if this is maybe covered on an earlier question I joined a little bit late but I wanted to ask about the full year revenue guide how much of the reduction is the macro getting tougher and I don't know any kind of related incremental changes youre seeing in customer behavior, how much of how.
Speaker Change #152: The reduction in the guide was due to that.
Speaker Change #131: And then also how much of the reduction was from incremental lead generation headwinds that youre seeing if you can break it up into those buckets. Thanks, Yeah. Let me let me let me tackle those routes. This one in time for the first question I think I alluded to it but I'll just revisit our guidance contemplates in the back half what we saw in the second quarter both from an overall.
Joel Wilhite: And any kind of related incremental changes you're seeing in customer behavior? How much of the reduction in the guide was due to that? And then also, how much of the reduction was from incremental lead generation headwinds that you're seeing? I don't know if you can break it up into those buckets.
Richard Tong: Total transaction volume that continues to be impacted by moderation in middle or customer spending and also the yield dynamic that we pointed to you on this call and that we began experiencing in Q2 and so that.
Joel Wilhite: Thanks. Yeah, let me tackle those, Rufus, one at a time. So the first question, I think I alluded to it, but I'll just revisit. Our guidance contemplates, in the back half, what we saw in the second quarter, both from an overall total transaction volume that continues to be impacted by moderation in our customers' spending and also the yield dynamic that we pointed to on this call and that we began experiencing in Q2.
Speaker Change #141: Think of it as roughly 50 50.
Richard Tong: In terms of what's driving it it's those two dynamics that are driving the shift.
Joel Wilhite: And so that, think of it as roughly 50-50, you know, balance in terms of what's driving it. It's those two dynamics that are driving the shift. [inaudible] Yeah, when we get to, you know, kind of the second half of the year, really, our new, you know, buyer sales activity drives, you know, what we're doing next year, in this case, 2022. Results.
Richard Tong: In revenue and then from a from an overall sales top of funnel perspective, I think your last question I would just say that.
Richard Tong: Were selling for next year in the future.
Richard Tong: So not not so much an impact on what we sell this year and this year's revenue that would impact next year and going forward when we get to kind of the second half of the year really our new buyer sales activity drives.
Timothy Edward Chiodo: Next year in this case 2025 results so.
Joel Wilhite: So, you know, we've got pretty good visibility to, you know, kind of the activity of our existing customers, but certainly some of the macro. Got it, thank you. The next question comes from Clark Jeffrey with Piper Sandler. Please go ahead. Hello.
Timothy Edward Chiodo: We have a pretty good.
Timothy Edward Chiodo: I think visibility to kind of activity are existing customers, but certainly some of the macro discretionary spend has been some of the headwinds that we've seen.
Speaker Change #130: Got it thanks.
Speaker Change #130: The next question comes from Clark Jefferies with Piper Sandler. Please go ahead.
Clark Jeffrey: Thank you for taking the question. I wanted to ask about the raise in float revenue. And I suspect that's related to the customer preference for payment modality, but I wanted to clarify that and ask that. To say it another way, you're not expecting a change in the yield, the float yield, or the volume as much as a change in the balance of those funds through the year. Thank you. Yeah, good question.
Clark Jefferies: Hello. Thank you for taking the question I wanted to ask about the raise to float revenue and I suspect that's related to the customer preference on payment modality, but I wanted to clarify that and ask that to say it another way.
Speaker Change #134: Not expecting a change in the yields the float yield or the volume as much as a change in the balance of those funds through year. Thank you.
Joel Wilhite: Here's the way I would frame the change in the float. And so just to recap, the last time we gave guidance for full year float revenues of around $45 million; we've increased that to $49 million. And the things that I would point to are, you know, previously, we did factored in rate reductions in the back half of the year; we've reduced the impact of that; I think we have one late-year quarter point.
Speaker Change #133: Yes. Good question, Here's the way I would frame that change in the flow and so just to recap. The last time, we gave guidance for full year float revenue.
Timothy Edward Chiodo: Around $45 million.
Timothy Edward Chiodo: We've increased that to $49 million and the things that I would point to our previously we did have factored in rate reductions in the back half of the year, we have reduced the impact of that I think we have one late year.
Timothy Edward Chiodo: A quarter point and so there's an incremental lift there we also have seen somewhat.
Timothy Edward Chiodo: <unk> higher customer balances and we've experienced that throughout the year. We've just.
Timothy Edward Chiodo: <unk> made a made an assumption in our projections that we would continue to.
Timothy Edward Chiodo: We experienced that again nothing underlying different in the custom.
Timothy Edward Chiodo: Customer experience and the operational funds flow, but just slightly higher customer balances are contemplated in the back half.
Joel Wilhite: And so there's an incremental lift there. We also have seen, you know, marginally higher customer balances. And we've experienced that throughout the year; we've just made an assumption in our projections that we would continue to experience that again, nothing underlying different in the customer experience and the operational funds flow, but just a slightly higher customer balance. Thank you very much. The next question comes from Kim Jin Wong with J.K. Morgan. Please go ahead.
Timothy Edward Chiodo: Thank you very much.
Timothy Edward Chiodo: Thank you this is Glenn.
Speaker Change #145: The next question comes from Tien Tsin Huang with Jpmorgan. Please go ahead.
Kim Jin Wong: Hi, thanks. Good morning to you guys. I know it's been asked a lot, but I just want to understand or get your view here on..., on the payment monetization of suppliers. Choosing on the acceptance side, the lower cost for solutions, is that more cyclical or secular? Do you think that as the cycle shifts, you'll see a shift back, or are the suppliers just smarter around cost optimization? Yeah, I think it's a good question. I don't think it's really cyclical.
Speaker Change #142: Hi, Thanks.
Speaker Change #147: Turning to you guys I know, it's been asked a lot, but just want to understand.
Speaker Change #132: You hear on.
Speaker Change #138: On the monetization of suppliers.
Speaker Change #138:
Speaker Change #140: Choosing on the acceptance side, the lower cost solutions is that more cyclical or secular or do you think that as the cycle shifts.
Speaker Change #149: Youll see a shift back or are the suppliers just smarter around.
Speaker Change #137: Cost optimization.
Speaker Change #143: Yes, I think it's a good question I don't think its really cyclical I think it's.
Speaker Change #144: Really around our value proposition and typically when they make a decision on a particular payment with <unk>, we still see really strong retention of that payment modality for life of that supplier.
Speaker Change #144: Now certainly the big opportunity that we have is that roughly 50% of our overall suppliers are still paper check acceptors. So we're really working Tien tsin on Friday value proposition that's appropriate for that.
Speaker Change #144: Of that 50%.
Speaker Change #144: And again, combining speed of payment the price to remain stayed in the level of automation and what we're seeing is certainly.
Speaker Change #137:
Speaker Change #137: To get certain suppliers to move off of paper check to electronic.
Speaker Change #137: Sometimes the price is it is an element of it and so especially.
Speaker Change #137: We believe that again with the strong value proposition at the right price point.
Speaker Change #137: We get that supplier to be an electronic it's up there and beyond our network for a long period.
Speaker Change #137: And so I think thats part of our world strategy that will continue to see is.
Speaker Change #137: As we grow that percentage of 40% of monetize payments.
Speaker Change #137: 45% to 50% plus over time.
Speaker Change #137: It's going to happen at different price points.
Speaker Change #137: Got it thanks, Mike I appreciate your thoughts on that.
Speaker Change #137: This concludes our question and answer session I would like to turn the conference back over to Mike Reger for any closing remarks.
Speaker Change #137: Yes.
Mike Reger: Thanks, everyone for your interest in Abbott exchange amid the current macro choppiness I'm proud of our disciplined execution and healthy financial performance along with strong profitability results.
Speaker Change #151: As I said before I'm, particularly excited about the future given the pipeline of product innovations and the industry, leading ERP integration partnerships in progress that should propel all four years of our business flywheel and drive long term value creation for our investors with that I look forward to sharing our progress with you on our next earnings call.
Speaker Change #146: Operator, you can close the call.
Speaker Change #147: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Timothy Edward Chiodo: [music].
Timothy Edward Chiodo: [music].
Michael Praeger: I think it's, you know, really around, you know, a value proposition. And typically, when they make a decision on a particular payment modality, we see really strong retention of that payment modality, you know, for the life of that supplier. Now, you know, certainly, the big opportunity that we have is that, you know, roughly 50% of our overall suppliers are still pay-per-check acceptors. So we're really, you know, working to get and providing a value proposition that's appropriate for that, you know, that 50%.
Timothy Edward Chiodo: Joining us on the call today is Mike Prager avid exchanges co founder and Chief Executive Officer.
Speaker Change #157: Wilhite oven exchanges, Chief financial Officer, and Sue Bosch Kumar avid exchanges head of Investor Relations.
Speaker Change #153: 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.
Speaker Change #153: This disclaimer emphasizes the major uncertainties and risks inherent in the forward looking statements. The company will make this afternoon.
Speaker Change #153: 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.
Speaker Change #153: Also please note that the company undertakes no duty to update or revise forward looking statements.
Speaker Change #153: Today's call will also include a discussion of non-GAAP financial measures.
Speaker Change #153: That term is defined in regulation G.
Speaker Change #153: non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP.
Speaker Change #153: 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.
Michael Praeger: And, you know, again, combining speed of payment, the price, the remits data, and the level of automation, And what we're seeing is, you know, certainly, you know, to get certain suppliers to move off of paper checked electronic, you know, sometimes, you know, the price is an element And so especially, you know, we believe that again, with a strong value proposition at the right price point, we get that supplier to be an electronic acceptor and be on our network for a long, And so I think that's, you know, part of our overall strategy that we'll continue to see is, you know, as we grow, you know, that, you know, percentage of 40% of, you know, monetized payments, you know, 45 to 50% plus over time, it's going to happen at, Got it. Thanks, Mike.
Speaker Change #153: With that I will now turn the call over to Mike Prager.
Michael Praeger: I appreciate your thoughts on that. This concludes our question and answer session. I would like to turn the conference back over to Mike Praeger for any closing remarks.
Michael Praeger: Thank you everyone for joining us today, Joe and I are excited to discuss avid exchange's second quarter 2024 results. This particular quarter marks a milestone as we achieved our first ever GAAP net income ahead of our third anniversary as a publicly traded company.
Michael Praeger: Thanks, everyone, for your interest in Avidxchange. Amid the current macro choppiness, I'm proud of our disciplined execution and healthy financial performance, along with strong profitability. As I said before, I'm particularly excited about the future given the pipeline of product innovations and the industry-leading ERP integration partnerships in progress that should propel all four gears of our business flywheel and drive long-term value creation for our industry. With that, I look forward to sharing our progress with you in our next earnings call. Operator, you can close it.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: [inaudible] ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good morning, everyone, and thank you for joining us for the Avidxchange Hldg's Inc. second quarter 2024 earnings call. Joining us on the call today is Mike Praeger, Avidxchange's co-founder and Chief Executive Officer, Joel Wilhite, Avidxchange's Chief Financial Officer, and Subhash Kumar, Avidxchange's Head of Investor Relations.
Speaker Change #153: Already having delivered four quarters of positive free cash flow.
Speaker Change #159: Just as we accelerated our path to adjusted EBITDA breakeven and profitability meaningfully ahead of our expectations. We have now delivered GAAP and non-GAAP net income profitability in short order highlighting the speed of our execution the power of our new <unk>.
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 this afternoon. 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.
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. With that, I will now turn the call over to Mike Praeger. Thank you, everyone, for joining us today.
Speaker Change #159: Innovation delivery, our growing value proposition for both buyers and suppliers along with the strength of our avid exchange culture that has fueled our success and has been a key factor in attracting and retaining the critical talent required to execute our dynamic business.
Joel Wilhite and I are excited to discuss Avidxchange's second quarter 2024 results. This particular quarter marks a milestone, as we achieved our first ever gap net income ahead of our third anniversary as a publicly traded company, while already having delivered four quarters of positive free cash flow. Just as we accelerated our path to adjust it even to a breakeven and prompt mobility meaningfully ahead of our expectations, we have now delivered GAAP and non-GAAP net income profitability in short order, highlighting the speed of our execution, the power of our new innovation delivery, our growing value proposition for both buyers and suppliers, along with the strength of our Avidxchange culture that has fueled our success and has been a key factor in attracting and retaining Without a doubt, the choppy macroeconomic backdrop continues to test us all.
Speaker Change #159: Without a doubt the choppy macroeconomic backdrop continues to test us all it has created near term volume headwinds driven by reductions in discretionary spending across the middle market impacting to some degree all of our various vertical and horizontal channels.
It has created near-term volume headwinds driven by reductions in discretionary spending across the middle market, impacting to some degree all of our various vertical and horizontal channels. However, we remain focused on capitalizing on the current environment by leveraging our financial strength to advance our new AI-based customer and internal facing product offering. Executing continuous unit cost improvements and operating leverage as well as enhancing customer growth across our addressable market of middle market buyers and their suppliers.
Speaker Change #153: However, we remain focused on capitalizing on the current environment by leveraging our financial strength to advance our new AI based customer internal facing product offerings.
Speaker Change #153: Executing continuous unit cost improvement and operating leverage as well as enhancing customer growth across our addressable market of middle market buyers and their suppliers.
We believe we're still in the very early innings in the drive to digitally transform what is still today for the majority of middle market companies, a highly manual, paper-intensive, and inefficient back office procure to pay process. With over two decades of institutional knowledge, building features and domain functionality around our AP automation and payment network, no one better than Avid Exchange appreciates the opportunity and the dynamic business processes inherent in middle market companies, which are complex, unlike the small business market, and unique across the various middle market industry verticals, unlike the enterprise segment. Our purpose-built value proposition, which has leveraged that institutional knowledge and is increasingly embedded with artificial intelligence throughout the product development lifestyle.
Speaker Change #153: We believe we are still in the very early innings and the drive to digitally transform we're still today for the majority of middle market companies are highly manual paper intensive and inefficient back office procure to pay process.
Speaker Change #158: With over two decades of institutional knowledge building features and domain functionality around our AP automation and payment network no one better than Abbott exchange appreciates the opportunity and the dynamic business processes inherent to middle market companies.
Speaker Change #158: Our complex, unlike the small business market and unique across the various middle market industry verticals. Unlike the enterprise segment.
Speaker Change #158: Our purpose built value proposition, which is leveraged that institutional knowledge and is increasingly embedded artificial intelligence throughout the product development lifecycle.
From our front end intelligent invoice capture functionality to our back end payment execution capabilities and all the workflows in between, we are extending our lead and strengthening our competitive position across our differentiated two-sided buyer and supplier network. As such, we believe we are well positioned through our investments to advance future growth and fuel our profit potential by delivering rapid material and quantifiable value in both current cost efficiency and future scalability of our customers' back office transformational initiatives.
Speaker Change #158: From our front end intelligent invoice capture functionality to our backend payment execution capabilities and all the workflows in between is extending our lead in strengthening our competitive position across our differentiated two sided buyer and supplier network.
Speaker Change #153: As such we believe we are well positioned through our investments to advance our future growth and fuel our profit potential by delivering rapid material and quantifiable value in both current cost efficiency and future scalability of our customers back office transformational initiatives.
NAI Earl Fuhrman is one of the many such customer success stories that highlights the power of our transformational value proposition. As a middle market commercial real estate brokerage and property management firm based in Greenville, South Carolina, NAI Earl Fuhrman has been in business for over 30 years with multiple regional offices in upstate South Carolina and North Carolina's Piedmont Triad area, as well as partners worldwide.
Speaker Change #156: <unk> is one of the many such customer success stories that highlight the power of our transformational value proposition as a middle market commercial real estate brokerage and property management firm based in Greenville, South Carolina NII real firm has been in business for over 30 years with multiple regional offices in upstate.
Speaker Change #153: South Carolina, and North Carolina, Piedmont Triad area as well as partners worldwide.
Having grown through acquisitions, the company's back office processes around accounts payable and payment became very cumbersome and paper-intensive. Specifically, before automation, controller Robbie Smith's team would print out invoices and create separate books of invoice supporting document information for each property manager to review, assign the proper accounting codes, and approve with a signature. That book would then go back to the AP team, who would then manually data entry or encode the invoices into their MRI accounting software before cutting checks for the approved invoices and completing the PO matching process.
Speaker Change #162: Growth through acquisitions, the Companys back office processes around accounts payable and payment became very cumbersome and paper intensive.
Speaker Change #153: Specifically before automation controller, Ravi Smith's team with Crinone invoices and create separate books of invoice supporting document information for each property manager to review assign the proper accounting codes and approved with a signature.
Speaker Change #153: That book will then go back to the AAP team, who would then manually data entering code the invoices into their MRI accounting software before cutting checks for the approved invoices and completing the matching process.
Since automation, the Smith team has seen a step function change in its invoice and payment processes with MRI VendorPay powered by Avidxchange. As Mr. Smith put it, it is like night and day. Our old process took a week or so.
Speaker Change #155: Since automation Smith team has seen a step function change and its invoice and payment processes with MRI vendor pay powered by Abbott exchange as Mr. Smith put it it is like night and day, our old process took a week or so now the whole process is completed in less than two days.
Now the whole process is completed in less than two days. This type of productivity transformation of NAI's invoice-to-pay process underscores the power of our value proposition. Shifting our focus to our financial scorecard, we delivered healthy financial results while navigating an ongoing macro-chattering. The overriding theme impacting results for this past quarter was our focus on disciplined execution of our business in three areas. First, beginning with our sales and marketing prioritized go-to-market strategies and focusing on our highest yielding channel.
Speaker Change #161: This type of productivity transformation of NII as invoice to pay underscores the power of our value proposition.
Speaker Change #160: Shifting our focus to our financial scorecard, we delivered healthy financial results, while navigating and ongoing macro choppiness. The overwriting theme impacting results for this past quarter was our focus on disciplined execution of our business in three areas.
Second, is our positive gross margin expansion driven by our automation aided by the impact of AI and continued to reduce our invoice and payment unit. And finally, third, is our continued overall operating expense rigor combined with the ROI decision making process across every functional business. Joel will go into more detail later in today's call, but here are some of our second quarter highlights. Revenue growth in the quarter was over $105 million, up over 15% year-over-year. The growth in the quarter was led by a combination of transactional volume and transactional yield growth. Non-GAF gross margins, meanwhile, continue their upward trajectory.
Speaker Change #155: First beginning with our sales and marketing prioritize go to market strategies and focusing on our highest yielding channels.
Speaker Change #155: Second is our positive gross margin expansion driven by our automation aided by the impact of AI and continued to reduce our invoice and payment unit costs.
Speaker Change #155: And finally third is our continued overall operating expense rigor combined with ROI decision, making process across every functional business group.
Speaker Change #155: Joe will go into more detail later on today's call, but here are some of our second quarter highlights.
Joe: Revenue growth in the quarter was over $105 million up over 15% year over year the growth in the quarter was led by a combination of transactional volume and transactional yield growth.
Speaker Change #164: non-GAAP gross margins. Meanwhile, continued their upward trajectory coming in at 72, 6%, we're up quarter, and 30 basis points and crossing the lower band of our 72% to 75% non-GAAP gross margin target ahead of our 2025 gross margin expectations that we set over a year ago during our <unk>.
Coming in at 72.6%, we're up 430 basis points and crossing the lower band of our 72% to 75% non-GAAP gross margin target ahead of our 2025 gross margin expectations that we set over a year ago during our investor day. Our initiatives around automation, artificial intelligence, sourcing, and standardization, which are still somewhat in the early stages, continue to bear fruit. Along with solid operating expense discipline, our adjusted EBITDA margin in the quarter was 16.6%.
Speaker Change #155: Yesterday.
Speaker Change #155: Our initiatives around automation artificial intelligence sourcing and standardization, which are still somewhat in the early stages continue to bear fruit.
Speaker Change #155: Along with solid operating expense discipline, our adjusted EBITDA margin in the quarter was 16, 6% transactional yield. Meanwhile, was which is a metric that we focus on across our leadership team as it demonstrates the power and effectiveness of our Abbott exchange business flywheel was up more than 10% to reach $5 33.
Transactional yield, meanwhile, which is a metric that we focus on across our leadership team, as it demonstrates the power and effectiveness of our Avidxchange business flywheel, was up more than 10% to reach $5.33 per transaction. With that overview, on today's call, I'm excited to cover three topics that will shed insights into our various initiatives that will drive our future growth and margin expansion. First, our top of funnel activity and other key sales metrics, which provide insights into the sales setup for 2025.
Speaker Change #155: Per transaction.
Speaker Change #155: With that overview on today's call I am excited to cover three topics that we'll shed insights into our various initiatives that will drive our future growth and margin expansion.
Speaker Change #155: First our top of funnel activity and other key sales metrics, which provides insights into the sales setup for 2025.
Discussing two new strategic software integration partnerships, which will further drive both Gears 1, 2, and 3 of our AvidXchange business flywheel. And third, highlight innovation around strategies to automate the execution of electronic payments. Starting with our customer obsession metrics, I wanted to update you on our top of funnel and other underlying indicators driving our go-to-market motion. For the six months ended June 2024, our overall top of funnel was down around 4% compared to the same period last year.
Speaker Change #155: Discussing two new strategic software integration partnerships, which will further drive both gears, one two and three of our avid exchange business flywheel.
Speaker Change #155: And third highlight innovation around strategies to automated execution of electronic payments.
However, various key underlying indicators improved, which adds a nice plot twist to the top of funnel narrative and highlights our strong sales execution against a choppy macro backdrop. Before I discuss those, I'd like to call out areas of strength and weakness within the top of funnel. On the positive side, we saw our real estate, media, education, and non-for-profit verticals, which comprise almost half of our new opportunities, grow anywhere from high single to mid-double digits on a comparable basis. HOA, Construction, Financial Services.
Speaker Change #155: Starting with our customer obsession metrics I wanted to update you on our top of funnel and other underlying indicators driving our go to market motion.
Speaker Change #155: For the six months ended June 2020 for the overall top of funnel is down around 4% compared to the same periods last year. However, various key underlying indicators improved which adds a nice plot twist to the top of funnel narrative and highlights our strong sales execution against a choppy macro backdrop before I discuss those I'd like to call out.
Speaker Change #155: Areas of strength and weakness within the top of funnel.
Speaker Change #155: On the positive side, we saw a real estate media education, and non for profit verticals, which comprise almost half of our new opportunities grow anywhere from high single to mid double digits on comparable basis.
Speaker Change #155: HOA construction financial services. Meanwhile, we're down high double digits. The net decrease in our top of funnel was largely due to a more targeted approach we called out last quarter around our go to market motion. In addition to increasing our investment and focus on our various partner channels to drive new highly qualified sales opportunities versus.
Meanwhile, we're down high double digits. The net decrease in our capital funnel was largely due to a more targeted approach we called out last quarter around our go-to-market motion, in addition to increasing our investment and focus on our various partner channels to drive new, highly qualified sales opportunities versus a historically larger focus on electronic demand generation programs, which we have seen softening over the last quarter and producing fewer qualified opportunities. As I referenced earlier, amid these puts and takes in our top of funnel, there have been some promising trends in other sales-related indicators that are trending positive year to date with the potential to continue for the remainder of this year.
Speaker Change #155: Quickly larger focus on electronic demand Gen programs.
Speaker Change #163: Which we have seen softening over the last quarter and producing less qualified opportunities.
Speaker Change #155: As I referenced earlier amid these puts and takes in our top of funnel there've been some promising trends in other sales related indicators are trending positive year to date with the potential to continue for the remainder of this year.
First, sales cycle time on average for the six months of 2024 versus 2023 on a comparable basis was shortened by roughly one-third. Second, close rates for the six months ended June 2024 on a comparable basis remain strong.
Speaker Change #155: Sales cycle time on average for the six months of 2024 versus 2023 on a comparable basis shortened by roughly one third.
Speaker Change #155: Second close rates for the six months ended June 2024 on a comparable basis remains strong both sales cycle time and close rates reflect a higher quality pipeline with interest levels that are actionable, which are the fruits of our more disciplined targeted go to market motion.
Both sales cycle time and close rates reflect a higher quality pipeline with interest levels that are actionable, which are the fruits of our more disciplined and targeted go-to-market motion. And finally, our buyer customer new logo customer count, a metric we furnish annually for the six months of 2024, outpaced levels comparable for 2023, leaving us optimistic on the potential for higher net new logo ads for 2024 relative to 2023. Now I'd like to talk about the four years of our business, Flywheel.
Speaker Change #155: And finally, our buyer customer new logo customer account metric, we furnished annually for the six months of 2024 outpace levels comparable for 2023, leaving us optimistic on the potential for higher net new logo adds our 2024 relative to 2023.
Speaker Change #165: Now I'd like to talk about the four years of our business flywheel.
We recently signed some notable new integration partnerships, which advanced Gears 1, 2, and 3 of our Avidxchange business flywheel. Starting with the real estate vertical, we deepened our competitive advantage further with Bill Neal. This AP integration partnership with Buildium extends our relationship with RealPage, one of our biggest ERP partners. As a cloud-based property management software company, Buildium targets various verticals, such as condo association management and real estate, including sub-verticals such as multifamily, student housing, affordable housing, et cetera, with approximately 15,000 customers.
Speaker Change #165: We recently signed some notable new integration partnerships, which advanced gears, one two and three of our our exchange business flywheel, starting with the real estate vertical we deepen our competitive advantage further with build them.
Speaker Change #165: This AP integration partnership with <unk> extends our relationship with real page one of our biggest ERP partners.
Speaker Change #167: As a cloud based property management software company building targets various verticals, such as Condo Association management, and real estate, including sub verticals, such as multifamily student housing affordable housing et cetera.
Speaker Change #165: With approximately 15000 customers.
Roughly 3,500 of which are in our product fit sweet spot. What is just as significant about the building and partnership is that we leverage generative AI in building out the integration. As a result, we are not only able to compress development cycle times by 30% to around 2 months, but we believe that the end user experience will prove to be substantially better given that we're able to train the AI inherent within our existing library of integrations to simulate pain points and test various use cases, including edge cases that deliver the best user experience.
Speaker Change #165: Roughly 3500 of which are in our product fits sweet spot.
Speaker Change #165: What is just a significant about the building in partnership is that we leveraged generative AI and building out the integrations as a result, we are not only able to compress development cycle times by 30% to around two months, we believe that the end user experience will prove to be substantially better given that we're able to train the AI inherent within our existing <unk>.
Speaker Change #165: Prairie of integrations to simulate pain pain points and test various use cases, including edge cases that deliver the best user experience.
This referral partnership, which is slated to go live in the third quarter of 2024, initially starts out with our AP automation invoice solutions. Additionally, it also represents a significant payments opportunity by potentially adding billions of new payment volume, driving the third gear of our Avidxchange business flywheel, which is the monetization of payment transactions and eliminating paper checks. We believe this partnership highlights not only the large total addressable market but also how much runway for growth that still exists in just the real estate vertical alone.
Speaker Change #170: This referral partnership which is slated to go live in the third quarter of 2024 initially starts out with our AP automation invoice solutions. Additionally, it also represents a significant payments opportunity by potentially adding billions of new payment volume driving the third year of our avid exchange business flywheel, which is the monetization of payment.
Speaker Change #165: Actions and eliminating paper checks.
Speaker Change #165: We believe this partnership highlights not only the large total addressable market, but also how much runway for growth that still exists and just the real estate vertical alone. The initial vertical segment that we launched our business in 2000.
The initial vertical segment that we launched our business in in 2000, and whereas the industry leader, our penetration rate is still in the single digits. Another ERP partnership of note showcases our first invoice solution for the media vertical under gears one and two of the flywheel. This integration highlights how we are extending our strategic advantage and success in media-related payments within the media vertical, which we launched through the FastPay acquisition into media AP automation.
Speaker Change #155: And where is the industry leader our penetration rate is still in the single digits.
Speaker Change #155: Another ERP partnership showcases our first invoice solution for the media vertical under gears, one and two of the flywheel. This integration highlights how we are extending our strategic advantage and success in media related payments within the media vertical, which we launched through the fast pay acquisition into media AP automation.
This AP automation solution leverages our existing tech stack and is built on our cloud invoice automation platform. Our target customer profiles are agencies that process several hundred invoices per month, and the first integration partner we have identified to go live with is WorkamaJig. Founded more than three decades ago, WorkamaJig is a leader in project management software that's designed specifically for marketing teams and creative agencies.
Speaker Change #155: This AP automation solution Leverages, our existing tech stack and is built on our cloud invoice automation platform.
Speaker Change #168: Our target customer profiles are agencies that process several hundred voices per month, and the FERC integration partners. We have identified to go live with US where can majid founded more than three decades ago working with <unk> is a leader in the project management software that space designed specifically for marketing teams and creative agencies.
Spanning a portfolio of over 3,500 customers, Workamajib is a dominant leader in the marketplace targeting those traditional agencies. Through our invoice automation solution, WorkmanJigs customers will be able to digitally transform their AP workflow with a robust end-to-end capability. These range from our AI-centric invoice ingestion in the front end to an intelligent workflow routing and approval engine to resolve invoice discrepancies, as well as leverage our broad payment modalities and our media payment network on the back end.
Speaker Change #169: Spanning a portfolio of over 3500 customers working with <unk> is a dominant leader in the marketplace targeting those traditional agencies through our invoice automation solution for <unk> customers will be able to digitally transform their AP workflow with our robust end to end capabilities.
Speaker Change #169: These range from our AI centric invoice ingestion and the front end to intelligent workflow routing and approval engine to resolve invoice discrepancies as well as leverage our broad payment modalities and our media payment network on the backend.
This integration partnership went live and became generally available in the second quarter. These end-to-end invoice and payment solutions, we believe, not only differentiate our market positioning but also solidify our advantage in selling our payment platform to these targeted media agencies. Turning now to our operations, we continue to make strides on our automation initiatives by leveraging artificial intelligence as a way to further optimize existing automation processes with human agents in the loop.
Speaker Change #155: This integration partnership went live and became generally available in the second quarter.
Speaker Change #155: Our end to end invoice and payment solutions, we believe.
Speaker Change #155: Not only differentiate our market positioning, but also solidify our advantage in selling our payment platform to these targeted media agencies.
Speaker Change #155: Turning now to our operations, we continue to make strides on our automation initiatives by leveraging artificial intelligence as a way to further optimize existing automation processes with human agents in Duluth.
One area in which our success is very tangible and serves as an early win is around payment automation for virtual card payments. To name just a few areas of process automation initiatives we've embarked on. This is important as we position ourselves to deliver on our near-term gross margin target of 75% and set our sights on our long-term margin exceeding 75%, as outlined during our 2023 Investor Day. The latest initiative around payment automation is executing virtual card payments through online portals. There are six ways we execute virtual card payments today for our suppliers, by a straight through process, direct API connections, online portals, IVR systems, email, and over the phone.
Speaker Change #155: One area in which our success is very tangible and serves as an early win is around payment automation and virtual card payments to name just one of many lanes of process automation initiatives, we've embarked on.
Speaker Change #155: This is important as we position ourselves to deliver on our near term gross margin target of 75% and set our sights on our long term margin exceeding 75% as outlined during our 2023 Investor day.
Speaker Change #155: The latest initiative around payment automation is executing virtual card payments through online portals.
Speaker Change #155: There are six ways, which we execute virtual card payments today for our suppliers.
Speaker Change #166: By a straight through process direct API connections online portals IV, our systems E mail and over the phone just as with E mail or virtual card information is sent automatically to a supplier. When the payment is created there are many supplier customers such as plumbers brokers landscapers et cetera that has stood up online.
Just as with email, where virtual card information is sent automatically to a supplier when a payment is created, there are many supplier customers, such as plumbers, roofers, landscapers, etc., that have set up online payment portals through their relationship with various merchant acquirers or third-party website developers to take in these payments. The challenge has been to automate the delivery and application of these virtual card payments to numerous supplier-specific online portals at scale, given the explosion of these online portals along with unique user interfaces that are costly and labor intensive to scale.
Speaker Change #166: Payment portals through their relationship with various merchant acquirers or third party website developers to take in these payments.
Speaker Change #166: The challenge has been to automate the delivery and application of these virtual card payments that numerous supplier specific online portals at scale given the explosion of these online portals, along with unique user interfaces that are costly and labor intensive the scale.
Currently, we are doing over a million of these online portal payments, approximately 80% of which are executed through humans and the remainder being RPA bots. We believe we're at a tipping point where we could transform this process through artificial intelligence and deliver virtually all these online payments without manual intervention, taking our current levels of overall electronic payment automation of around 85% today to well over 90%. What this should enable is not only lower unit costs as we lower headcount growth and lower overall software license fees but better leverage around future costs as we grow our business, driving gross margin.
Speaker Change #166: Currently we're doing over 1 million of these online portal payments, approximately 80% of which executed through humans and the remainder being RPI bonds.
Speaker Change #166: We believe we are at a tipping point, where we could transform this process through artificial intelligence and deliver virtually all of these online payments without manual intervention, taking our current levels of overall electronic payment automation of around 85% today to well over 90%.
Speaker Change #166: What this should enable us not only lower unit costs as we lower head count growth and lower overall software license fees, but better leverage around future costs as we grow our business driving gross margins, but equally impactful. We believe is the control visibility and certainty over virtual card payment execution. This provides as we test this.
But equally impactful, we believe, is the control, visibility, and certainty over virtual card payment execution this provides as we test this capability through the remainder of this year and look to scale it further in 2025. In closing, we are proud to deliver our first ever gap net income profitability driven by our continued gross margin expansion, along with disciplined execution across the operations of our business. However, we're more excited about the future.
Speaker Change #166: <unk> through the remainder of this year and look to scale. It further in 2025.
Speaker Change #166: In closing we are proud to deliver our first ever GAAP net income profitability driven by our continued gross margin expansion along with disciplined execution across the operations of our business. However, we're even more excited about the future.
We believe the innovation investments we have made across our product portfolio, coupled with the large and marquee integration partnerships we have executed, position us well to accelerate our growth, build on our margin expansion and momentum, and achieve our Rule 40 objective in 2025 and our Rule 50 plus target by 2028. We recognize the choppy macro backdrop and believe the upcoming election is certainly not helping in the near term.
Speaker Change #166: We believe the innovation investments, we have made across our product portfolio, coupled with the large mark key integration partnerships, we have executed.
Speaker Change #166: <unk> as well to accelerate our growth build on our margin expansion momentum and achieve our rule 40 objective in 2025, and our rule of 50 plus targeted by 2028 were recognized the choppy macro backdrop and believe the upcoming election, certainly is not helping in the near term however, those too shall pass.
However, those two will pass as we work towards a significant long-term growth opportunity in front of us across the middle market. Furthermore, while overall top of funnel saw some softness, some of which was a function of our long-term strategic trade-offs, our stronger buyer customer logo cadence year to date 2024 compared to the same timeframe last year leads us to encourage around the sales and revenue trends for 2025. Meanwhile, we remain laser focused on our operational rigor and execution, controlling those elements of our business model that we can directly control, as evidenced by our ongoing unit cost reduction and operating leverage.
Speaker Change #166: As we work towards the significant long term growth opportunity in front of us across the middle market.
Speaker Change #166: Furthermore, while overall top of funnel saw some softness some of which was a function of our long term strategic tradeoffs are stronger buyer customer logo cadence year to date 2024 compared to the same timeframe last year leaves us encouraged around the sales and revenue trends for 2025.
Speaker Change #166: Meanwhile, we remain laser focused on our operational rigor and execution controlling those elements of our business model that we can directly control as evidenced by our ongoing unit cost reduction and operating leverage. Furthermore, with our new payment platform payment accelerator to point out in our spend management offering.
Furthermore, with our new payment platform, Payment Accelerator 2.0, and our spend management offerings being sequenced for rollout over the next 6-18 months as our new accounting system and ERP partnerships begin to gain traction, we believe we are set up for a nice growth roadmap for 2025 and beyond as we strive for a strong close in 2024. I want to provide a special thanks to all of our Avidx team members for their hard work, dedication, and relentless focus on executing our operational and strategic priorities that drive value for our customers, create scope for their professional growth, 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.
Speaker Change #166: The sequence for rollout over the next six to 18 months as our new accounting system and ERP partnerships begin to gain traction. We believe we are set up for a nice growth directory for 2025 and beyond as we strive for a strong close in 2024.
Speaker Change #171: I want to provide a special thanks to all of our avid <unk> team members for their hard work dedication and relentless focus on executing our operational and strategic priorities that drive value for our customers.
Speaker Change #171: Great scope for their professional growth and unlock significant long term value for our shareholders.
Speaker Change #166: With that I'd like to turn the call over to my partner Joel Wilhite.
Joel Wilhite: Thanks, Mike and good morning, everyone. I am pleased to talk to you today about our second quarter 2024 financial results, which reflect disciplined execution of our growth strategies amid continued macro choppiness.
I'm pleased to talk to you today about our second quarter 2024 financial results, which reflect disciplined execution of our growth strategies amid continued macro choppiness. Overall, we delivered another quarter of healthy year-over-year financial performance across the board. I will expand on that in a moment, but let's see how we track relative to implied expectations. Relative to the implied second quarter 2024 business outlook and excluding the float and political revenue contribution, revenues came in a touch below our expectations with slightly better total transaction volume tempered by slightly lower transaction yield. Gross margin performance remains strong due largely to ongoing progress on unit cost initiatives coupled with software yield expansion.
Joel Wilhite: Overall, we delivered another quarter of healthy year over year financial performance across the board.
Joel Wilhite: I will expand on that in a moment, but lets see how we track relative to implied expectations.
Speaker Change #166: Relative to the implied second quarter, 2024 business outlook, and excluding the float and political revenue contribution rep.
Speaker Change #174: Revenues came in a touch below our expectations with slightly better total transaction volume tempered by slightly lower transaction yield.
Speaker Change #166: Gross margin performance remained strong due largely to ongoing progress on unit cost initiatives, coupled with software yield expansion.
Speaker Change #166: Coupling that with sustained operating expense leverage we drove significant adjusted EBITDA outperformance relative to expectations.
Speaker Change #166: It's worth pointing out that this continues our streak of delivering adjusted EBITDA profit expansion, excluding float and even political contribution.
Speaker Change #166: Most notably as Mike mentioned, we achieved a significant milestone as we delivered our first ever GAAP net income since going public in 2021.
Coupling that with sustained operating expense leverage, we drove significant adjusted EBITDA outperformance relative to expectation. It's worth pointing out that this continues our streak of delivering adjusted EBITDA profit expansion, excluding float and even political contribution. Most notably, as Mike mentioned, we achieved a significant milestone as we delivered our first ever GAAP net income since going public in 2021. Now, turning to year-over-year results. Total revenue increased by 15.3% to $105.1 million in Q2 of 2024 from the second quarter of 2023.
Mike: Now turning to year over year results.
Speaker Change #173: Total revenue increased by 15, 3% to $105 $1 million in Q2 of 2024 over the second quarter of 2023, most 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.
Most 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 for this quarter was driven by higher year-over-year float in political revenue.
Speaker Change #166: <unk>.
Speaker Change #166: The remaining revenue growth for this quarter was driven by higher year over year float and political revenues.
Our strong revenue growth also resulted in total transaction yield expanding to $5.33 in the quarter, up 10.1% from $4.84 in Q2 2023. Most of the increase was driven by pay and software yield coupled with a transaction mix skewed toward payments, with the remainder due to float and political revenues. Software revenue of $29.9 million, which accounted for 28.5% of our total revenue in the quarter, increased 9.8% in Q2 of 24 over Q2 of 2023.
Speaker Change #166: Our strong revenue growth also resulted in total transaction yield expanding to $5 33 in the quarter up 10, 1% from $4.84 in Q2 2023.
Speaker Change #166: Most of the increase was driven by pay and software yield coupled with transaction mix skewed towards payment with the remainder due to float and political revenues.
Speaker Change #166: Software revenue of $29 $9 million, which accounted for 28, 5% of our total revenue in the quarter increased nine 8% in Q2 of 24 over Q2 of 2023 the increase in software revenues of nine 8% was driven by growth in total transactions.
The increase in software revenues of 9.8% was driven by growth in total transactions of 4.8%, which continues to be impacted by macro choppiness with the balance driven by growth in certain subscription-based revenues. Payment revenue of $74.2 million, which accounted for 70.6% of our total revenue in the quarter, increased 17.3% in Q2 of 2024 over Q2 of 2023. Payment revenue reflects the contribution of interest revenues, which were $11.8 million in Q2 of 24 versus $9.2 million in Q2 of 2023. Political media revenue in the current quarter was approximately $800,000 and negligible in the same period a year ago.
Speaker Change #166: A four 8% which continues to be impacted by macro choppiness with the balance driven by growth in certain subscription based revenues.
Speaker Change #166: Payment revenue of $74 $2 million, which accounted for 76% of our total revenue in the quarter increased 17, 3% in Q2 of 2024 over Q2 of 'twenty three pay.
Speaker Change #166: Payment revenue reflects the contribution of interest revenues, which were $11 $8 million in Q2 of 24 versus $9 $2 million in Q2 of 2023.
Speaker Change #166: Political media revenue in the current quarter was approximately $800000 and negligible in the same period, a year ago, excluding the impact of float and political revenues from both comparable periods payment revenues grew 14, 6% with most of that increase driven by a combination of an increase in pay yield.
Excluding the impact of float and political revenues from both comparable periods, payment revenues grew 14.6%, with most of that increase driven by a combination of an increase in pay yield, a greater payment mix, and a payment transaction volume increase of 8.6%. On a gap basis, gross profit of $68.7 million increased by 23.6% in Q2 of 2024 over the same period last year, resulting in a 65.3% gross margin for the quarter compared to 61% in Q2 2023.
Speaker Change #166: Greater payment mix and payment transaction volume increase of eight 6%.
Speaker Change #166: On a GAAP basis gross profit of $68 $7 million increased by 23, 6% in Q2 of 24 over the same period last year, resulting in a 65, 3% gross margin for the quarter compared to 61% in Q2 2023.
Non-GAAP gross margin increased 430 basis points to 72.6% in Q2 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. Now moving on to operating expenses. On a gap basis, total operating expenses were $76.8 million, a decrease of 5.7% in Q2 of 2024 over Q2 of last year. On a non-GAAP basis, operating expenses, excluding depreciation and amortization and stock-based compensation, decreased by 0.6% to $58.9 million in the second quarter of 24 from the comparable prior year period, which was helped by the timing of headcount additions and certain third-party expenses across R&D and sales and marketing expense categories.
Speaker Change #166: non-GAAP gross margin increased 430 basis points to 72, 6% in Q2 of 24 over the same period last year, but the lion's share of the increase driven mostly by unit cost efficiencies and yield expansion.
Speaker Change #166: Now moving onto operating expenses.
Speaker Change #166: On a GAAP basis total operating expenses were $76 8 million a decrease of five 7% in Q2 of 2024 over Q2 of last year on a non-GAAP basis operating expenses, excluding depreciation and amortization and stock based compensation decreased as well by <unk>.
Speaker Change #166: 6% to $58 $9 million in the second quarter of <unk> 24 from the comparable prior year period, which was helped by the timing of head count additions and certain third party expenses across R&D and sales and marketing expense categories on a percentage of revenue basis operating expenses, excluding depreciation and amortization.
On a percentage of revenue basis, operating expenses, excluding depreciation and amortization and stock-based compensation, declined to 56% in the second quarter of 2024 from 65% in the comparable period last year. Overall, absent certain timing factors, the year-over-year percent decline largely highlights expense discipline and significant operating expense leverage across G&A, sales, and marketing, as well as R&D to an extent, even after stripping out the contribution of I will now talk about each component of the change in operating expenses on a non-GAAP basis.
Speaker Change #166: And stock based compensation declined to 56% in the second quarter of 2024 from 65% in the comparable period last year.
Speaker Change #166: Overall absent certain timing factors the year over year percent decline largely highlight expense discipline and significant operating expense leverage across G&A sales and marketing as well as R&D to an extent, even after stripping out the contribution of float and political revenues.
Speaker Change #186: I will now talk about each component of the change in operating expenses on a non-GAAP basis.
Non-GAAP sales and marketing costs decreased slightly by $184,000, or 1%, to $18.5 million in Q2 of 2024 over Q2 of last year, which, absent the aforementioned timing benefits, reflects ongoing yet targeted investments in sales and marketing spend to support our continued growth. Non-GAAP research and development costs increased slightly by $291,000, or 1.3%, to $22 million in Q2 of 2024 over Q2 of last year.
Speaker Change #177: non-GAAP sales and marketing costs decreased slightly by $184000 or 1% to $18 $5 million in Q2 of 24 over Q2 of last year, which absent the aforementioned timing benefit reflects ongoing yet targeted investments in sales and marketing spend.
Speaker Change #177: To support our continued growth.
Speaker Change #166: non-GAAP research and development cost increased slightly by $291000 or one 3% to $22 million in Q2 of 24 over Q2 of last year.
The increase, which was also helped by timing factors, was due to continued reinvestment in our products and platform, including spend management, our pay offering, and payment accelerator. Non-GAAP general and administrative costs decreased slightly by $455,000, or 2.4%, to $18.4 million in Q2 of 2024 versus Q2 of last year due to leveraging public company costs across a larger revenue base. These expenses continue their annualized downward progression as a percentage of revenue, as we indicated during our investor day. Our gap net income was $436,000 for the second quarter of 2024 versus a gap net loss of $18.8 million in the second quarter of 2023.
Speaker Change #166: The increase which was also helped by timing factors was due to continued reinvestment in our products and platform, including spend management or pay offering in payment accelerator.
Speaker Change #166: non-GAAP general and administrative costs decreased slightly by $455000 or two 4% to $18 $4 million in Q2 of 2024 versus Q2 of last year due to leveraging public company costs across a larger revenue base.
Speaker Change #166: These expenses continue their annualized downward progress progression as a percentage of revenue is as we indicated during our investor day.
Speaker Change #166: Our GAAP net income was $436000 for the second quarter of 2024 versus a GAAP net loss of $18 $8 million in the second quarter of 2023.
The reduction in losses was driven by a combination of strong revenue flow-through, solid gross profit increase, expense control, and timing of certain expenses leading to lower operating losses, coupled with higher interest income and lower expenses due to reduced borrowing costs and partial debt pay-down. On a non-gap basis, our net income in the second quarter of 2024 was $10.7 million versus a net loss of $500,000 in the same year-ago period.
Speaker Change #166: With the reduction in losses, driven by a combination of strong revenue flow through solid gross profit increase expense control and timing of certain expenses, leading to lower operating losses, coupled with higher interest income and lower interest expense due to reduced borrowing costs and partial debt paydown.
Speaker Change #166: On a non-GAAP basis, our net income in the second quarter of 2024 was $10 $7 million versus a net loss of $500000 in the same year ago period.
Approximately $11.2 million positive swing from the year-ago period driven by the aforementioned factors. On an on-gap basis, Q2 2024 adjusted EBITDA was $17.5 million versus $3 million in Q2 of 2023, largely due to the aforementioned factors. Turning to our balance sheet for a moment, I want to touch on a few key items. We ended the quarter with a strong corporate cash position of $465 million in cash and marketable securities against an outstanding total debt balance of $76.5 million, including a note payable for $13.9 million. We had $30 million on our credit facility undrawn at quarter end.
Speaker Change #166: Approximately $11 $2 million positive swing from the year ago period, driven by the aforementioned factors.
Speaker Change #166: On a non-GAAP basis, Q2, 2024, adjusted EBITDA was $17 $5 million versus $3 million in Q2 of 2023.
Speaker Change #166: Largely due to the aforementioned factors.
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 22 days, while the effective interest rate on our corporate cash position for the second quarter was roughly 5.2%. Customer cash at quarter end remained unchanged sequentially at approximately $1.2 billion, with an interest rate of roughly 5% for the quarter.
Speaker Change #166: Turning to our balance sheet for a moment I want to touch on a few key items.
Speaker Change #166: We ended the quarter with a strong corporate cash position of $465 million of cash and marketable securities against outstanding total debt balance of $76 $5 million, including a note payable for $13 $9 million.
Speaker Change #166: We had $30 million on our credit facility Undrawn at quarter 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 the weighted average maturity on the corporate cash was roughly 22 days, while the effective interest.
Speaker Change #166: Our corporate cash position for the second quarter was roughly five 2% customer cash at quarter end remained unchanged sequentially at approximately $1 $2 billion with an interest rate of roughly 5% for the quarter.
Turning to our updated 2024 business outlook, we now expect total revenue for the year to be in the range of $436 million to $439 million. Our 2024 revenue outlook reflects approximately $49 million of interest revenues from customer funds, a $4 million increase from our previous 2024 outlook versus roughly $41 million earned in 2023. Also, we anticipate political media revenue contribution of approximately $9 million given that this is our first presidential cycle under FastPay.
Speaker Change #166: Turning to our updated 2024 business outlook. We now expect total revenue for the year to be in the range of $436 million to $439 million or 2020 for revenue outlook reflects approximately $49 million of interest revenues from customer funds a.
Speaker Change #166: $4 million increase from our previous 2024 outlook versus roughly $41 million earned in 2023.
Speaker Change #166: Also we anticipate political media revenue contribution of approximately $9 million given that this is our first presidential cycle under fast pay 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.
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 revenues. Similarly, we expect non-GAAP-adjusted EBITDA profits ranging between $73 and $75 million for the year. With that, I'd now like to turn the call back over to the operator to open up a line for Q&A. Operator? We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change #166: <unk>.
Speaker Change #166: Similarly, we expect non-GAAP adjusted EBITDA profit ranging between 73 and $75 million for the year.
Speaker Change #204: With that I'd now like to turn the call back over to the operator to open up the line for Q&A operator.
Speaker Change #218: We will now begin the question and answer session.
Speaker Change #187: To ask a question you May Press Star then one on you touched on some.
Speaker Change #197: If you are using a speakerphone please pick up your handset before pressing the keys.
If at any time your question has been answered and you would like to withdraw your question, please press star and two. In the interest of time, please limit yourself to one question. At this time, we will pause momentarily to assemble our roster. The first question today comes from Dave Koning with Baird. Please go ahead. Hey guys, thank you. And maybe just to kick off the so the guidance for the back half is about 5% lower, the revenue guidance is about 5% lower than before. And it seems like two components, you know, you called out macro headwinds.
Speaker Change #187: If at any time. Your question has been addressed and you would like to withdraw your question.
Speaker Change #187: Please press star Thank you.
Speaker Change #166: In the interest of time, please limit yourself to one question.
Speaker Change #166: At this time, we will pause momentarily to assemble our roster.
Speaker Change #195: We started with.
And then you talked a little bit about yield in payments missing Q2. So are there some dynamics there at play to maybe, maybe talk about those two components? And you know, how that's affecting your guidance this year, and then if that should have any impact on next year as well. Yeah, thanks, Dave. Great question.
Speaker Change #166: The first question today.
Speaker Change #166: Dave Koning with Baird. Please go ahead.
Dave Koning: Hey, guys. Thank you.
Speaker Change #175: Maybe just to kick off the <unk>.
Speaker Change #182: So the guidance for the back half is about 5% lower the revenue guidance about 5% lower than than before and it seems like two components, you've called out macro headwinds and then and then you talked a little bit about yield.
Speaker Change #184: In payments missing Q2 site are there some dynamics there are clients, who maybe maybe talk about those two components and how thats affecting your guidance this year and then.
Speaker Change #236: If those should have any impact on next year as well.
And you're reading it right. I think what we're pointing to, in our guidance for the back half of the year, at a high level, is essentially, you know, projecting forward what we experienced in the second quarter. So we're guiding what we're seeing, and what we're seeing is a continuation, even maybe a tick worse on the overall total transaction volume, which was a 4.8% grower in Q2, down a little from that 5.8% in Q1.
Speaker Change #184: Yes, Thanks, Dave Great question, and you're reading it right I think what we're pointing to.
Speaker Change #185: Our guidance for the back half of the year at a high level is essentially projecting forward what we experienced in the second quarter. So we're guiding what we're seeing and what we're seeing is a continuation even maybe a tick worse on the overall total transaction volume that was a four 8% grower in Q2.
Speaker Change #185: Down a little from that five 8% in Q1, so really kind of continuing that forward.
So, really kind of continuing that forward, and an incremental additional element that I'd point to, Dave, this quarter, was something that we're seeing in our yield dynamic. So again, really continued really strong TPV yield, certainly relative to the industry, and down a basis point if you think about the progression from Q1 to Q2. But I'd offer up a couple dynamics that we did begin to see and stand out for us in this quarter. And let me just go through them real quick to get it out there.
Speaker Change #166: An incremental additional element that I'd point to date. This quarter was something that we are seeing in our yield dynamics. So again overall continued really strong PPV yield certainly relative to the industry and down a basis point. If you think about the progression from Q1 to Q2, but I'd offer a couple of dynamics that we.
Speaker Change #166: Did.
Speaker Change #166: Begin to see and stand out for us.
Speaker Change #166: In this quarter and let me just go through them real quick to get it out there. So really three things I point to first off we have seen some larger payments with existing suppliers shift away from the higher monetized right number two we've seen a mix shift with new suppliers as we're continually.
So really, three things I point to. First off, we have seen some larger payments with existing suppliers shift away from higher monetized rates. Number two, we've seen a mixed shift with new suppliers as we're continually adding suppliers to the Avid Pay Network through new buyers or new suppliers that show up in payment files. And we're seeing a shift to other payment modalities with variable take rates, you know, below kind of the full rack rate interchange.
Speaker Change #166: Adding suppliers to the habit pay network through new buyers or new new suppliers that show up in payment files and we're seeing.
Speaker Change #166: A shift to other payment modalities with variable take rates below kind of the full rack rate.
And number three, and finally, and I think I mentioned this in the first quarter a little bit, is that we are seeing greater monetization of smaller payment files. Driven by that, you know, continued sourcing, and automation. In standardization, you know, we're able to monetize incrementally smaller payments to monetize, but on a weighted basis and taken all together, we are seeing a little lighter overall TPV yield, and we've extended both that volume and the TPV yield assumptions forward through the end of the year while we're navigating this macro environment. We're not expecting that to get meaningfully better or meaningfully worse.
Speaker Change #166: And number three and finally and I think I mentioned this in the first quarter a little bit as we are seeing greater monetization of smaller payment sizes driven by the continued sourcing automation.
Speaker Change #166: And standardization, we're able to monetize incrementally smaller payments to monetize but on a weighted basis and taken all together, we are seeing a little lighter overall TPB yield and we've extended both that volume and the TPB yield assumptions forward through the end of the year, while we're navigating this.
Speaker Change #166: Macro environment, we're not expecting that to get meaningfully better or meaningfully worse this year.
Gotcha. Thanks, guys. And great EBITDA progress, too, by the way. Thanks, Dave.
Speaker Change #222: Got you, thanks, guys and great EBITDA progress too by the way thanks.
Dave Koning: Thanks, Dave.
The next question comes from Ramsey El Assel with Barclays; please go ahead. Hi guys, thank you for taking my question. I wanted to ask you to kind of give us your updated thoughts on revenue visibility in this environment. I guess it's another way of asking the question about the degree to which you have confidence in your guidance, Avidxchange Hldg. Yeah, again, I would just reinforce what I've said before, what we're guiding is kind of what we're seeing now. I think we are, you know, kind of running the same, you know, high-discipline, high-rigor process we do when we forecast our business.
Dave Koning: The next question comes from Ramsey Al.
Speaker Change #172: Paul with Barclays. Please go ahead.
And we have a, you know, meaningfully consistent, you know, sort of recurring visibility in our overall total transactions. And so, great question, Ramsey, one that I spend time thinking about. We feel good about the guidance. All right, fantastic. The next question comes from Sanjay Sakhrani with KVW. Please go ahead. Hey, this is Dr. Stephen Glock filling in for Sanjay.
Speaker Change #201: Hi, guys. Thank you for taking my question.
Speaker Change #200: I wanted to.
Speaker Change #228: To ask you to kind of give us your.
Speaker Change #180: Your updated thoughts on revenue visibility in this environment and I guess, it's another way of asking the question about the degree to which you have confidence that your guidance is.
Speaker Change #172: Sort of sufficiently risk adjusted here.
Speaker Change #191: Maybe accounting for a range of macro outcomes is that something that youre confident you can kind of see at this point.
Speaker Change #190: Outcomes. Is that something that you're confident you can kind of see at this point?
Speaker Change #235: Yeah, again, I would just reinforce what I said before, what we're guiding is kind of what we're seeing now. I think we
Speaker Change #190: We are, you know, kind of running the same, you know, high discipline, high rigor process we do when we forecast our business. And we have a, you know, meaningfully consistent, you know, sort of recurring visibility in our overall total transactions. And so, great question, Ramsey, one that I spend time thinking about. We feel good about the guidance that we've provided.
Ramsey El: All right. Fantastic. Thanks.
Speaker Change #196: The next question comes from Sanjay Sakhrani with KVW. Please go ahead.
Thanks for taking my call. I guess I just want to drill down on sub-revenue, slow down, and talk about the sequential change that was seen within the quarters. Was there any noticeable difference between when you started the second quarter and the end of the second quarter and also any color around it, like was it from discretionary versus non-discretionary? Thank you. Yeah, great question. I would just point you back to kind of the volume side, certainly whether year-over-year sequential, we're seeing just continued pressure from a discretionary standpoint, but we are still maintaining, you know, consistent and really high kind of overall retention of our buyers and our suppliers.
Speaker Change #181: Hey, this is Dr. Steve McLaughlin filling in for Sanjay. Thanks for taking my question.
Speaker Change #203: I guess I just want to drill down around the revenue slowdown. Could you just talk about the sequential change that we're seeing within the quarters? Was there any noticeable difference between
Speaker Change #188: when you started the second quarter to the end of the second quarter and also any color around like was it from discretionary versus non-discretionary? Thank you.
But we just see the continued sort of caution and moderation on the part of buyers in their spending, and it is still limited. We see limited to discretionary spend types, things like advertising, professional services, travel, you know, significant, you know, kind of capital projects and improvements. And it hasn't really widened outside of that discretionary bucket, maybe just gone a little bit deeper relative to what, and then just touching on some of the key initiatives, such as Payment Accelerator and the Spend Management side.
Speaker Change #181: [inaudible]
Could you talk about the progress around that? You know, how much are they expected to contribute this year and how fast? Bullup in 2025 and beyond. Yeah, this is Mike, and I can certainly comment on that. So first of all, Payment Accelerator 2.0 is kind of the new version of our historic invoice accelerator offering.
Speaker Change #193: Spool up in 2025 and beyond. Thanks.
Really excited, you know, about the progress of that offering, and we indicated, you know, this year, we're kind of taking it slow to prove out all the different kinds of functionality of the product that we've improved on over the prior version. And, you know, we continue to kind of, you know, scale it prudently, but certainly, you know, 2025 will be the year that we're seeing, you know, kind of the. Turning to kind of spend management, spend management is, you know, a year or so behind, you know, kind of that payment accelerator.
We expect to introduce it to our first customers at the end of this year, later in Q4. And again, we expect to initially have an opportunity to make that product available to our existing customers throughout 2025 as we also introduce it. The focus on pay-to-spend management is really to capture the payment volume and transactions that we don't see today. But what we see is that transactions that don't have an invoice many times fall outside our system, and that number could be up to 80% of a company's spend.
Speaker Change #198: Turning to kind of spend management, spend management is a, you know, a year or so behind, you know, kind of that payment accelerator, we expect to introduce it to our first customers at the end of this year timeframe, later in Q4. And, again, we expect to initially, you know, have an opportunity to make that product available to our existing customers, you know, throughout 2025, as we also introduce it to new customers.
Ramsey El: The focus on pay and spend management is really to capture the payment volume and transactions that we don't see today that fall outside of an invoice. So today we do a really good job of capturing all transactions that have an underlying invoice related to them. Because typically we're the system of record for all our customers in terms of all expenses that have an invoice as we feed their general ledger. But what we see is that transactions that don't have an invoice many times fall outside our system and that number could be up to like 15%.
So spend management is really designed to, you know, how do we get all the spend that a customer has related to their in our platform so they can have better reporting, visibility to expense, and cash flow management. Avidxchange Hldg. So there's a little bit of commentary around both payment accelerators. Great, thanks for taking my call. The next question comes from Jamie Friedman with Susquehanna. Please go ahead.
Speaker Change #189: as part of our platform of which they're asking us to do. So there's a little bit of commentary around both Payment Accelerator and Spend Management.
Speaker Change #221: Great, thanks for taking my question.
Ramsey El: The next question comes from Jamie Friedman with Susquehanna. Please go ahead.
Hi, good morning, guys. A lot of hard work here. I just want to ask one for Joel and one for Mike. Are you still comfortable with the 20% plus revenue CAGR through 2025 and the, I think, 20% plus EBITDA margin, Joel? And then, Mike, maybe if you could talk about the rule of 40 or 50 for the long term that you articulated at the analyst today. Thank you.
James Eric Friedman: Hi, good morning guys. A lot of hard work here. I just want to ask one for Joel and one for Mike.
James Eric Friedman: Are you still comfortable with the 20% plus revenue CAGR through 2025 and the, I think, 20% plus EBITDA margin?
Ramsey El: Joel, and then Mike, maybe if you could talk about the rule of 40 or 50, long, long term that you'd articulated at the analyst today. Thank you.
Yeah, great, great questions, Jamie. I'll start off, I guess, the first way I would sort of answer that question is, you know, we still feel like we're in the early days of a really big opportunity. And we've got a lot of levers, both, you know, to grow revenue and to be a more efficient business. And the evidence is in the gross margin expansion, the profitability, etc. I would say that in the short run, you know, we need the macro to turn around, you know, back to that kind of whether you're talking about 20% or the rule of 40, we're operating in a sort of environment of caution and moderation on the part of buyers.
Joel Wilhite: Yeah, great questions, Jamie. I'll start off. I guess, you know, the first way I would sort of answer that question is, you know, we still feel like we're in the early days of a really big opportunity, and we've got a lot of levers.
Mike: both to grow revenue and to be a more efficient business and the evidence is in the gross margin expansion, the profitability, etc. I would say that in the short run, we need the macro to turn around. Back to that kind of whether you're talking about 20% or Rule 40, we're operating in a
And so I would temper short-term expectations, but I'd say those who want that long-term opportunity are certainly still there. Yeah, maybe to kind of pick up on what Joel said, Jamie, related to kind of that, you know, you know, Rule 40, Rule 50. As Joel indicated, certainly, you know, we didn't expect that the discretionary spend from customers would rebound at some point in time.
Mike: sort of environment of caution and moderation on the part of buyers, and so I would temper short-term expectations, but I'd say that long-term opportunity is certainly still there.
We're hopeful that once we get past, you know, the election cycle, and customers just have more clarity on policies, including, you know, the rate environment, that we'll start seeing some return of their discretionary spend, prevent a main, you know, as we've seen in other Avidxchange Hldg Avidxchange Hldg Avidxchange Hldg Avidxchange Hldg Avidxchange In terms of the partnerships that we've added over the last year, certainly AFOLIO is a big piece of that, you know, with their 40... I'm sorry, 20,000 customers, which? M3 and then, most recently, Buildium.
Speaker Change #172: Yeah, maybe to kind of pick up on what Joel said, Jamie, related to kind of that, you know...
James Eric Friedman: You know, Rule 40, Rule 50. As Joel indicated, certainly, you know, we, you know, need and expect that the discretionary spend from customers will rebound at some point in time. We're hopeful that once we get past, you know, the election cycle and customers just have more clarity on policies, including, you know, kind of the rate environment that will start seeing some return of their discretionary spend, preventive maintenance projects, things of that nature, you know, as we've seen in other cycles. But the other, you know, kind of there's three other things that give us a lot of confidence related to, you know, not only kind of returning to kind of that 20% growth number, but also, you know, kind of delivering on the Rule 40. And that's the innovation, you know, products we have driving future growth, being, you know,
James Eric Friedman: The Payment Accelerator Adoption and then Relief and Spend Management that I just commented on.
Speaker Change #172: But that combined with our new, you know, kind of buyer sales channels in terms of the partnerships that we've added over the last year, certainly Outfolio is a big piece of that, you know, with their $40,000.
Speaker Change #172: I'm sorry, 20,000 customers, which we expect, you know, roughly half of those, you know, fit within our product market fit, you know, M3, and then most recently Buildium. So kind of the new, you know, kind of sales channels, we're really excited about in terms of driving new buyer sales.
So kind of the new sales channels we're really excited about in terms of driving new buyer sales, and then kind of the last levers around that conversion to paper checks. We've been kind of commenting on that we believe that our ability to manage, you know, multiple payment modalities across our platform that combine, you know, combinations of speed of payment, price, Unknown Executive, and Rufus Hldg is kind of the key in terms of continuing to drive that conversion from paper chuck to.
Speaker Change #172: And then, kind of the last levers around that conversion to paper checks to electronic, as, you know, we've been kind of commenting on that we believe.
Speaker Change #172: that our ability to manage, you know, multiple payment modalities across our platform that combine, you know, combinations of speed of payment, price of payment, levels of remittance data, along with levels of automation, are kind of the, you know, the key in terms of continue to drive that conversion from paper check to electronic.
And so those are kind of the building blocks for that 20%, you know, kind of growth mantra. And then, you know, as it relates to Group 40, we continue to have, you know, kind of those levers, as Joel indicated. Certainly, you know, AI had a nice impact and will continue to do so, as we drive gross margin and our various other automation strategies continue to build our gross margin. And then, you know, I think we've been able to demonstrate that we have, you know, kind of strong and disciplined execution of the business and especially around the processes that we have and how we run the business. Achieve that objective of Row 40 and then, you know, go on for longer.
Joel Wilhite: and so those are kind of the building blocks for that 20% you know kind of growth mantra that we have and then you know as it relates to growth forwarding we continue to have you know kind of those you know levers as Joel indicated certainly you know AI's had a nice impact that will continue you know as we drive gross margin in our various other automation strategies continue to build our gross margin and then you know I think we've been able to demonstrate that we have you know kind of strong and disciplined execution of the business
Speaker Change #179: And especially around the expense discipline that we have and how we run the business to, you know, achieve that objective of Role 40 and then, you know, longer term Role 50.
Speaker Change #209: Got it. Thank you both.
Got it. Thank you both. The next question comes from Andrew Bauch with Wells Fargo. Please go ahead. Hey, good morning.
James Eric Friedman: Thanks, Jamie.
Speaker Change #194: The next question comes from Andrew Bauch with Wells Fargo. Please go ahead.
Thanks for taking the question. I just want to dig into the dynamics around suppliers being more discerning around higher monetized payment offerings. This is something that was called out by one of your closest peers, I think in like the middle of last year, and they basically chalked it up to the macro, but said that when the macro turns, you know, those higher monetized payment methods should see greater adoption.
Andrew Thomas Bauch: Hey, good morning. Thanks for taking the question. Just want to dig into the dynamics around the suppliers being more discerning around the higher monetized.
Speaker Change #206: Payment Offerings. This is something that was called out by one of your closest peers.
Speaker Change #211: I think in like the middle of last year, and they basically chalked it up to the macro, but said that when macro turns, you know, those higher monetized
Speaker Change #202: Payment methods should see greater adoption. And so my question to you is, are you kind of expecting the same thing? And what's the risk that we should be thinking about that, you know, each quarter that goes by where they're electing for lower monetized payment methods, that those behaviors become more sticky?
And so my question to you is, are you kind of expecting the same thing? And what's the risk that we should be thinking about that, you know, each quarter that goes by where they're electing for lower monetized payment methods, that those behaviors become more sticky? Yeah. Great question. Let me start.
Mike might add a little context, but what I would point out, maybe it's a little bit of a difference than the example that you referenced, is that we've always been focused on suppliers as customers, and there's a value proposition and sort of, you know, remember the speed, data, and automation, and then the notion of price depends on that level of speed, data, and automation. So what I pointed out when we were talking about those yield dynamics is some mixed shifts, for sure, but not a wholesale, you know, kind of retreat from monetized payments, just, you know, continuing to seek speed and data and automation, but at, you know, some different price points.
Speaker Change #220: Yeah, great question. Let me start, and Mike might add a little context. But what I would point to, maybe it's a little bit of a difference than the example that you referenced, is we've always been focused on suppliers as customers, and there's a value proposition and sort of remember the speed, data, automation, and then kind of the notion of price depends on that level of speed, data, and automation. So what I pointed to when we were talking about those yield dynamics is some mixed shifts for sure, but not a wholesale kind of retreat from monetized payments, just continuing to seek the speed and the data and the automation.
So we're encouraged about our yield today, again, it's 30 bets on approaching 100 billion TPV. We believe we have an, you know, industry-leading yield and we'll continue to see that, but we'll also continue to meet suppliers where they are and deliver the value that they're seeking at different prices. Mike, do you want to add anything to that?
Mike: Automation, but at, you know, some different different price points. So we're encouraged about
Mike: Our yield today, again, it's 30 bets on approaching 100 billion of TPV. We believe we have an industry-leading yield and we'll continue to see that, but we'll also continue to meet suppliers where they are and deliver the value that they're seeking at different prices. Mike, you want to add anything to that? Yeah. Just to reinforce, the key element is thinking of the suppliers as a core customer and building a value proposition around them. One of the things that we're seeing is that we don't have suppliers leaving our network. We have super high retention rates and high 90% range.
Yeah, just to kind of reinforce, the key element is thinking of the suppliers as a core customer and building a value proposition around them. So one of the things that we're seeing is that we don't have suppliers leaving our network. We have super high retention rates and very high 90% retention rates.
Related to our supplier. But what we do see, especially as you continue to go deeper to convert those paper check suppliers to electronic, is that at the different price points that we have, it's a value proposition that kind of meets what they're looking for to make that kind of happen. And so, you know, we continue to see, you know, a high volume of new suppliers being added to the network. However, we think the key is and how we drive this over time to get to our, you know, kind of next milestone of 50% monetized. [inaudible] Thank you guys. The next question comes from Darrin Peller with Wolf Research. Please go ahead.
Speaker Change #192: Related to our supplier customers, but what we do see, especially around, you continue to go, you know, deeper to convert those paper check suppliers to electronic, is that, you know, at the different price points that we have, it's a value proposition that kind of meets, you know, what they're looking for to make that conversion.
Speaker Change #192: And so, you know, we continue to see, you know, high volume of new suppliers being added to the network. However, we think the key is, and how we drive this over time, you know, to get to our, you know, kind of next milestone of 50% of monetized payments and greater over time, is that continued delivery of new payment modalities that combine speed, price, remittance data, along with automation.
Speaker Change #183: Thank you, guys.
Speaker Change #183: The next question comes from Darrin Peller, Wolf Research. Please go ahead.
Guys, hey, um, you know, I think there's a couple of things that we just want to dive into a little bit. One of them is just the transaction growth rates versus the overall volume growth rate, just on a more technical matter. If any way, you can help us guide us around what you expect there and transaction size.
Darrin David Peller: Guys, hey, um...
Darrin David Peller: You know, I think there's a couple of things we just want to dive into a little bit. One of them is just the transaction growth rates versus the overall volume growth rate, just on a more technical matter.
Speaker Change #219: Anyway, you can help us guide around what you expect there and transaction size, but more than that, I really want to understand a little bit more around, you know, what you're seeing in terms of the dynamic of Top of Funnel, customer ads, Mike, you know, last quarter we talked about different strategy on conferences.
Mike: So maybe just give us a little more update on what you're seeing in terms of net new additions and your strategy and is it market or the markets coming to you with what how proactive you're being in different ways?
But more than that, I really want to understand a little bit more around, you know, what you're seeing in terms of the dynamic of Top of Funnel, customer ads. Mike, you know, last quarter, we talked about a different strategy for conferences. So maybe just give us a little more update on what you're seeing in terms of net new additions and your strategy, and is it the market, or the market's coming to you with how proactive you're being in different ways? Thank you, Darrin. I got it.
Speaker Change #243: Thanks, Darrin. Got it. I'm going to take the front end of your question, and then Mike will take the back part. So just to add a little context, and I think your question is, help us understand kind of growth rates in overall total transactions and then overall
I'm going to take the front end of your question and then Michael will take the back part. So just to add a little context, and I think your question is going to help us understand the kind of growth rates in overall total transactions and then overall total payment volume. Remember that our total transaction Metric is the sum of all the transactions on the platform. That is, all the invoices and all the payments.
Mike: Total Payment Volume. Remember that our total transactions...
Mike: The metric is the sum of all the transactions on the platform, that's all the invoices.
And the subset of the transactions that are payments is smaller but incrementally faster growing. And I would just say that we still see a pretty direct correlation between the growth in payments and the growth in overall total payment volume. And I wouldn't point to anything meaningfully different in terms of overall average payment sizes across our verticals. And so, finally, I would just say that we're continuing to see that, you know, caution exercised by buyers. You know, we talk about the overall total transaction retention rate as a number that we provide annually last year. You know, in the 103 range; normally it's in the 104, 105.
Mike: And all the payments and the subset of the of the transactions that are payment
Mike: is a smaller but incrementally faster growing, and I would just say that we still see pretty direct correlation between the growth in payments and the growth.
Mike: And I wouldn't point to anything meaningfully different in terms of overall, you know, average payment sizes across our verticals. And so, finally, I would just say, you know, we're continuing to see that, you know, caution exercised by buyers. You know, we talk about overall total transaction retention rate as a number that we provide annually last year.
Mike: You know, in the 103 range, normally it's in the 104-105. In this season we're in, you know, we're, you know, right around the 100 zip code, even, you know, plus minus. And so we're optimistic that as we get through this economic season that that returns, but that overall total transaction growth rate is indicative of what we're experiencing.
In this season, we're in, you know, we're right around the 100 zip code, even, you know, plus minus. And so we're optimistic that as we get through this economic season, that will return, but that overall total transaction growth rate is indicative of what we're. Yeah, and Darren, maybe you can turn it to your question on top of funnel activity. So I think, you know, there's kind of, you know
One is, as I talked about last quarter, a more disciplined approach around, you know, our investments in the highest ROI marketing initiatives. And this has certainly been put in this practice and put in place with, you know, how we think about, you know, all the trade show conference, user conference type activity around all our, Avidxchange Hldg, The second thing, which was, you know, probably more evident this quarter, is around also change of mix in terms of how we think about historically maybe more investment in electronic demand gen versus, you know, supporting our partners and certainly move that mix to our partner channels.
Speaker Change #210: Yeah, and Darrin, maybe you turn it to your question on top of funnel activity. So I think, you know, there's kind of, you know, two elements. One is, as I talked about last quarter, a more disciplined approach around, you know, our investments in the highest ROI marketing initiatives. And this has certainly been put as practice and put in place with, you know, how we think about, you know, all the trade show conference, user conference type activity around all our partners.
Speaker Change #210: Making sure we're focused on the highest ROI initiatives.
Mike: The second thing, which was probably more evident this quarter, is around also a change of mix in terms of how we think about, historically, maybe more investment in electronic demand gen versus supporting our partners, and certainly move that mix to our partner channels, certainly the new partnerships that we've added, like at Folio.
Certainly, you know, the new partnerships that we've added like at Folio, M3, Buildium are good examples where we wanted to increase our investment as we're seeing really high qualified, you know, leads coming from these channels versus maybe, you know, higher volume but lower qualified coming from the historical, you know, demand gen. Unknown Executive, Rufus Hone, Joel Wilhite, Shray Gurtata, Avidxchange Hldg, So seeing those improving and faster close cycles combined with the maintaining.
Mike: M3, Buildium are good examples where we wanted to increase our investment as we're seeing really high qualified, you know, leads coming from these channels versus maybe, you know, higher volume but lower qualified coming from the historical, you know, demand gen, you know, routes. And so, we're, you know, and we think that strategy is actually playing off as we see, you know, overall results are, you know, new logo growth is up over last year. Combined with strong close rates, but one of the things, you know, we did see which is really encouraging are, you know, average sales cycle has been, you know, cutting by a third. So, we're seeing nice improvement and faster close cycles combined with, you know, maintaining strong close rates.
So I think that demonstrates that, you know, by executing these two strategies, we're seeing higher-quality leads coming through the top of the funnel, even though the overall volume may be lower. So you're saying when you're adding at a rate that's faster for new logo growth, that's overall new customer ads, in other words, the rate of growth of additions of new customers this year versus last? Exactly, exactly.
Mike: So I think that demonstrates that, you know, by executing these two strategies, that we're seeing, you know, higher qualified leads coming through the top of the funnel, even though the overall value may be slightly lower.
Speaker Change #254: So you're saying when you're adding at a rate that's faster for a new logo growth that's overall new customer ads, in other words the rate of growth of additions of new customers this year versus last?
Kind of, you know, new logo growth, halfway through the year compared to last year, we're up over. Alright, that's good to hear. Thanks, guys. The next question comes from James Faucette with Morgan Stanley. Please go ahead.
Speaker Change #214: Exactly, exactly. Kind of, you know, new logo growth, you know, halfway through the year compared to last year. We're up over last year.
Speaker Change #239: Alright, that's good to hear. Thanks guys.
Mike: Thank you.
Mike: The next question comes from James Lawson with Morgan Stanley . Please go ahead.
Great, thank you so much. I wanted to kind of continue to work on the P&L. And given some of the top line softness, it was definitely constructive to see you flex OPEX down year over year in order to get to your projected adjusted EBITDA to protect that. And how are you thinking about the right level of OPEX growth for the business over the near to medium term to the extent that revenue growth is a bit more muted? Yeah, James. A good question.
James Lawson: Great, thank you so much. I wanted to kind of continue to work on the P&L and given some of the top-line softness, it was definitely constructive to see you flex OpEx down year-over-year in order to get to your projected adjusted EVA doc.
Speaker Change #232: How are you thinking about the right level of op-ex growth for the business over the near to medium term to the extent that revenue growth is a bit more muted?
And I just go back to some of the things that Mike talked about in his prepared remarks and reinforced in his commentary. We're really focused on running a disciplined business. We're also very focused on the growth opportunities ahead of us at the same time. So we continue to balance that.
Speaker Change #213: Yeah, James, good question. And I can just go back to some of the things that Mike talked about in his prepared remarks and reinforcing it in his commentary. We're really focused on running a disciplined business. We're also very focused on kind of the growth opportunities ahead of us at the same time. So we continue to balance that. You know, what I would say is that, you know, you'd likely, you know, baked into our guidance, there is a little bit of an incremental investment that we're contemplating in our OPEX. And again, that's focused on, you know, finishing strong and getting launched, payment accelerator, spend management, our overall pay platform, etc. So, so again, I don't know that there's an optimal number to give you, but we're very focused on
You know, what I would say is that, you know, baked into our guidance, there is a little bit of an incremental investment that we're contemplating in our OPEX. And again, that's focused on, you know, finishing strong and getting launched, payment accelerator, spend management, our overall pay platform, etc.
So, again, I don't know that there's an optimal number to give you, but we're very focused on profitability. You can see that in the gross margin expansion that continues. I'll tell you that even in kind of the shift in our guidance in the back half, we're still really focused on the gross margin that's contemplated there. Maybe the rate of expansion moderates a bit, but we don't expect to go backwards, and so we're continuing to focus on investing in growth and running a discipline.
Speaker Change #216: Profitability, you can see that in the gross margin expansion that continues.
Speaker Change #216: I'll tell you that even in kind of the, you know, the mute, the shift in our guidance in the back half.
James Lawson: We're still really focused on the gross margin that's contemplated there. Maybe the rate of expansion moderates a bit, but we don't expect it to go backwards, and so we're continuing to focus on investing in growth and running a disciplined business.
And then from a business development standpoint, as you know, kind of the choppy economic environment continues to persist. Are there other incremental opportunities to further expand the reach and abilities of Avid through acquisition or looking at adjacencies? How should we be thinking about kind of your, you know, what the right approach to investment is strategically in the current environment for you? Yeah, I think that's a really good question.
James Lawson: And then from a business development standpoint, as you know, kind of the choppy economic environment continues to persist.
Speaker Change #212: Are there incremental opportunities to further expand the reach and abilities of Avid through acquisition or looking at adjacencies, how should we be thinking about kind of your...
Speaker Change #199: What the right approach to investment is strategically in the current environment for you.
Certainly, the kind of inorganic and tuck-in acquisitions have been, you know, kind of part of our historical growth as we've added new vertical channels, and many of them have happened through, you know, acquisitions. We believe that that's going to be, you know, continue to be part of our, you know, future strategy. We've had, you know, a couple of years of not having any activity on the M&A side. I think that's really a combination of, number one, not really seeing anything that we felt was super strategic that could really, you know, move the needle for us strategically in terms of that growth. And the second thing is, I think the valuation kind of spectrum of, you know, kind of private companies versus public companies has been a little bit challenging.
Speaker Change #256: Yeah, I think that's a really good question. Certainly the kind of inorganic and providing tuck-in acquisitions has been, you know, kind of part of our historical kind of growth.
Speaker Change #199: as we've added new vertical channels, and many of them have happened through acquisitions. We believe that that's going to continue to be part of our future strategy. We've had a couple years of not having any activity on the M&A side. I think that's really a combination of, number one, not really seeing anything that we felt was super strategic that could really move the needle for us strategically in terms of that growth. The other thing is, I think the valuation spectrum of private companies versus public has been a little bit challenging. But I think those elements, or that element, we're going to see, we are seeing a change and we're seeing more activity than we've seen in recent years in terms of opportunities
But I think, you know, those elements, you know, or that element, we're going to see, you know, kind of change. And we're seeing, you know, more activity than we've seen in recent years in terms of, you know, opportunities to continue to do, you know, tuck-in acquisitions, move into adjacencies, you know, like you referenced, which is, you know, what we've done So, I expect that we will, you know, kind of get back to having a routine cadence around some tuck-in acquisition. Great, thanks.
Speaker Change #199: continue to do, you know, tuck in acquisitions, move into adjacencies, you know, like you referenced, which is, you know...
Speaker Change #199: You know what we've done historically and have a really developed playbook on how we execute these effectively. So I expect that we will You know kind of get back to you know, having a routine cadence around some talking acquisitions as we go forward
Speaker Change #225: Great, thanks.
As a reminder, please limit yourself to one question. The next question comes from Craig Maurer with FT Partners. Please go ahead.
Speaker Change #215: As a reminder, please limit yourself to one question.
Speaker Change #215: The next question comes from Craig Maurer with FT Partners. Please go ahead.
Yeah, hi, thanks for taking the questions. First, over the long term, perhaps your new origination volume shifts toward partners and away from self-generated leads, or that mix shifts. How should we expect that to impact the yield, as I assume you're sharing economics there? And second, you know, I'm a little perplexed by the maintained guideline on political revenue at 9 million, which was effectively what you did in 2022 during the midterms. I mean, all fundraising and activity points to a massive upswing in spend from certainly that midterm number.
Craig Jared Maurer: Yeah, hi, thanks for taking the questions.
Craig Jared Maurer: First, over the long term is perhaps your new origination, volume shifts,
Craig Jared Maurer: or that makes shifts. How should we expect that to impact the yield as I assume you're sharing economics there? And
So I'm curious if you're forecasting share loss or yield compression or something that's keeping that guidance flat. Thanks. Thanks, Craig. I'm going to take the political question and then I'll have my, Take care of the first part.
Speaker Change #248: Second, you know, I'm a little perplexed by the...
Speaker Change #253: Maintained guide on political revenue at $9 million, which was effectively what you did in 2022 during the midterms. I mean, all fundraising and activity points to a massive
Speaker Change #237: upswing in spend from certainly that midterm number. So I'm curious if you're forecasting share loss or yield compression or something that's keeping that guidance flat. Thanks.
Speaker Change #240: Thanks Greg. I'm going to take the political question and then I'll have Mike take care of the first part.
Great question. And I think, you know, let me kind of reset the table around politics. We're sort of reaffirming the $9 million that we've talked about since the beginning of the year. You know, we are seeing consistent patterns with the presidential election. Now, granted, we didn't own fast pay back in 2020.
Speaker Change #255: Great question. And I think, you know, let me let me kind of reset the table around political. We're sort of reaffirming the $9 million that we've talked about since the beginning of the year.
Mike: You know, we are seeing consistent patterns with the presidential election. Now, granted, we didn't own fast pay back in 2020, but when we look at the first half, second half distribution, you know, that, that, we're very consistent.
But when we look at the first half, second half distribution. You know, that, we're very, I'd also sort of repeat, you know, we don't have a lot of visibility there, it's meaningfully back-ended spin. And so if there was an area that, you know, surprised us for the good, it could possibly be this political number. And so that said, we're also seeing the same, you know, kind of dynamics that we're seeing across the business in our traditional media and political media business as it relates to, you know, volume and rate.
Mike: I'd also sort of repeat, you know, we don't have a lot of visibility there, it's meaningfully back-ended spin, and so if there was an area that, you know, surprised us to the good, it could possibly be, you know, this political number, and so that said, we're also seeing the same, you know, kind of dynamics that we're seeing across the business in our traditional media and political media business as it relates to
So a degree of uncertainty, not the same visibility we have in our normal business, and, you know, we're hoping we're on the conservative side and we really see it move in the back half, but we're not calling that in our guidance. Yeah, maybe to continue on, you know, what Joel says, remember, you know, kind of, we expect to see the majority of all activity happen after Labor Day. So it makes it harder to have visibility into, you know, what may happen.
Speaker Change #241: Michael Wilhite, Michael Praeger
Certainly, we're encouraged by some of the Avidxchange Hldg. But Craig, I wanted to kind of come back to you. I think your first question was related to, you know, kind of long-term impact and some of the jargon of leveraging, having greater leverage within our partner channels. The way we think about it is that we think the net contribution is consistent in terms of, you know, our direct sales efforts. Certainly, the majority of partnerships that we have are more referral partnerships where our direct sales force still leverages those partners, although we're, you know, sharing some of that revenue.
Speaker Change #226: Yeah, maybe to continue on, you know, what Joel says, remember, you know, kind of, you know, we expect to see the majority of all activity happen after Labor Day, so it makes it, you know, harder to have visibility to, you know, what may happen. Certainly, we're encouraged with some of the, you know, forecasts and spend levels, you know, for not only the presidential cycle, but all the, you know, ballot initiatives and the state-run elections.
Speaker Change #249: But Craig, I wanted to kind of come back to you. I think your first question was related to, you know, kind of long-term impact and some of the makeshift of leveraging, having greater leverage within our partner channels. The way we think about it is we think the net contribution is consistent in terms of, you know, our direct sales efforts. Certainly, the majority of partnerships that we have are more referral partnerships where our direct sales force still leverages those partners. Although we're, you know, sharing some of that revenue, we kind of look at it as it's kind of an investment, you know, similar to what we make in marketing-related expense to drive our internal leads. So we, you know, you know, kind of our models, you know, show that it's really kind of a net.
We kind of look at it as it's kind of an investment, you know, similar to what we make in marketing-related expenses to drive our internal leads. So we, you know, our models, you know, show that it's really kind of a net-net. You know, kind of an equal type of opportunity in terms of all.
Speaker Change #199: and that kind of equal type of opportunity in terms of overall net impact.
And we think it's a really kind of a, you know, the beauty of our demand gen funnels is we have, you know, lots of different sources that make them up. And so as we're seeing softness, for example, in electronic demand gen, and in really high, you know, kind of activity through our partner channels, we can make these types of funnels. I think from an execution perspective, we're happy to be working on high-quality leads that are having the impact that they have, and the net result is, our net logo growth is up over last year, and our team is working on higher quality leads through that. Thank you, Mike. Thanks, Joe.
Speaker Change #199: and we think it's a really kind of a you know the beauty of our demand gen funnels is we have you know lots of different you know sources that make it up and so as we're seeing softness for example in electronic demand gen and in really high you know kind of activity through our partner channels you know we can make these type of adjustments and I think from a execution perspective we're we're happy to be working on you know high-quality leads that are having the impact that they have and the net result is or you know our net logo growth is up over last year and and where our team is working on higher quality leads through that change in strategy.
Speaker Change #199: Thank you, Mike. Thanks, Joel.
The next question comes from Timothy Chiodo with UBS. Please go ahead. Great, thank you for taking the question. I want to talk a little bit about interchange credit, interchange rates in the industry. So the recently rejected settlement, the original agreement was seven basis points on a blended basis and four basis points for essentially every category. Clearly, that is in the process of being reworked.
Mike: You bet.
Speaker Change #199: The next question comes from Timothy Chiodo with UBS. Please go ahead.
But I was hoping you could touch on what you think the implications could possibly be for, number one, commercial interchange rates in general for the industry, and then maybe more specifically, any of the more custom interchange rates that Avid has on the commercial side. Yeah, Tim, good question. And I think, you know, I, you know, I think it was a quarter or two ago, you know, fielded a number of questions on this topic.
Timothy Edward Chiodo: Great, thank you for taking the question. I want to talk a little bit about interchange, credit interchange rates in the industry, so the recently rejected settlement, the original agreement was
Timothy Edward Chiodo: Seven basis points on a blended and four basis points for essentially every category. Clearly, that is in the process of being reworked. But I was hoping you could touch on what you think the implications could possibly be for number one, commercial interchange rates in general for the industry, and then maybe more specifically any of the more custom interchange rates that Avid has on the commercial side.
So how do we think about it? First of all, I think, you know, the biggest impact is certainly going to be on the consumer side, where you typically have, you know, kind of, standardized, you know, interchange rates. One of the things that the dynamic on the business side, and we've been kind of leading the charge here, which is reflected in our, you know, industry-leading, electronic payment adoption rates, is creating multiple payment modalities.
Timothy Edward Chiodo: Yeah, Tim, good question, and I think, you know,
Speaker Change #238: I think it was a quarter or two ago, fielded a number of questions on this topic.
Speaker Change #238: So how do we think about it? So first of all, I think, you know, the biggest impact is certainly going to be on the consumer side, where you typically have, you know, kind of, you know, standardized, you know, interchange rates. One of the things that's a dynamic on the business-to-business side, and we've been kind of leading, you know, the charge here, which is reflected in our, you know, industry-leading, you know, electronic payment adoption rates.
In fact, even on virtual cards today, we go to market with roughly a dozen different virtual card type offerings that can find again, you know, different interchange price points, Avidxchange Hldg. So, you know, when we look at kind of, you know, our Avid Pay Network, we're actually very proactive in terms of providing kind of the right structure to price product offering or payment modality to what suppliers are looking for in terms of that value And the second element is, I think, you know, in our case, MasterCard is our primary exclusive provider for the execution of virtual card payments.
Speaker Change #238: is, you know, creating multiple payment modalities. In fact, even on virtual card today, we go to market with roughly a dozen different virtual card type offerings that combine, again, you know, different interchange price points with different levels of remittance data, different levels of automation and speed of payment.
Speaker Change #238: So, you know, when we look at kind of, you know, our Avid Pay Network, we're actually really proactive in terms of providing kind of the right, you know,
Speaker Change #199: structure to price product offering or payment modality, you know, to what suppliers are looking for in terms of that value proposition.
Speaker Change #199: and the second element is I think you know in our case you know MasterCard is our primary exclusive provider for execution of virtual card payments.
You know, with their different data rates, we've been on the forefront of supporting our supplier customers with all the remaining data they need so they can take advantage of that. And so we've already been, you know, on the forefront of helping our suppliers get the best economics they can get by, you know, providing them with the data, making transactions more secure, less fraud, all those things. And we think, long-term, that adds to a sticky customer, and it certainly shows up in our, you know, industry-leading retention rate.
Speaker Change #207: With their different data rates, we've been on the forefront of supporting our supplier customers with all the remains data they need so they can take advantage of the different data rates.
Speaker Change #207: And so we've already been, you know, on the forefront of, you know, helping our suppliers, you know, get the best economics they can get by, you know, providing them the data, making transactions more secure, less fraud, all those type of things.
Speaker Change #207: And we think long term that, you know, adds to a sticky customer and it certainly shows up at our, you know, industry leading retention rates that we have for suppliers.
So we kind of view on the commercial side that, you know, we've already been, you know, kind of proactive in terms of how do we get the right price product for suppliers to be, you know, electronically acceptable.
Speaker Change #207: So we kind of view on the commercial side that, you know, we've already been, you know, kind of proactive in terms of how do we, you know, get the right price product for suppliers to be, you know, electronic acceptance on the long term.
Excellent. Thank you, Mike. The next question comes from Alex Markgraff with KeyBank Capital Markets. Please go ahead.
Mike: Excellent. Thank you, Mike.
Mike: The next question comes from Alex Markgraff with KeyBank Capital Markets. Please go ahead.
Hey guys, thanks for taking my question. Mike, maybe one for you first just to expand on the top of the funnel comment. I mean, I understand sort of some of the comps you provided there.
Alexander Wexler Markgraff: Hey guys, thanks for taking my question. Mike, maybe one for you first, just to expand on the top of funnel comments.
It sounds like some benefits to you from a sales cycle standpoint, maybe a win rate standpoint as well. Just kind of curious, like, what the net effect of all of this is versus what your expectations were prior to some of this resource reallocation. I mean, I'm assuming it's better, and I hear you on the net ads expectation for 24.
Alexander Wexler Markgraff: versus what your expectations were prior to some of this resource reallocation. I mean I'm assuming it's
So maybe just from like a new customer revenue contribution standpoint, how does that compare to what you were expecting prior to this resource allocation? Yeah, so I think, so first of all, the objective of Top of Funnel is to, you know, hit our sales plan and our, you know, new customer ad, you know, kind of objectives for the year. So I think from that perspective, you know, halfway through the year, we feel that we're on pace to, you know, we're running ahead of last year related to, you know, adding new customers.
Speaker Change #231: It's better and I hear you on the net ads expectation for 24 so maybe just from like a
Speaker Change #233: New Customer Revenue Contribution standpoint, how does that compare to what you were expecting prior to this resource allocation?
And so we're treading towards, you know, that, you know, overall. But at the same time, we're not spending less on top of the funnel. Our kind of investment has stayed the same; it's just a different asset. And so I think, you know, the beauty of having multiple dynamics in our top of funnel that are driven by many different types of sources. As we see, you know, the strength and weakness of different sources, we can adjust our, our spend accordingly.
Speaker Change #223: Yeah, so I think, so first of all, the objective of Top of Funnel is to, you know, hit our, you know, our sales plan and our, you know, new customer ad, you know, kind of objectives for the year. So I think from that perspective, you know, halfway through the year, we feel that, you know, we're on pace to, you know, we're running ahead of last year related to, you know, adding new customers. And so we're treading towards, you know, that, you know, overall sales plan objective. But at the same time, it's not, we're not spending less on Top of Funnel, our, you know, kind of investment has stayed the same, it's just a different allocation.
Speaker Change #223: And so I think, you know, the beauty of having multiple dynamics of our top of funnel that are driven by many different types of sources, as we see, you know, the strength and weakness of different sources, we can adjust our spend accordingly. And so, you know, one of the adjustments that we made this last quarter is, you know, moving away from, you know, typically some of that electronic demand gen that produces, you know, lots of leads, but lower quality, and we've seen this kind of softness in that particular channel is to, you know, move to where we're seeing strength, which is around supporting our growing number of partners.
And so, you know, one of the adjustments that we made this last quarter is, you know, moving away from, you know, typically some of that electronic demand gen that produces Avidxchange Hldg and the higher quality leads that partners are generating for us.
Speaker Change #223: and the higher quality leads that partners are generating for us.
Again, these are typically existing customers of ours, typically accounting. So there's an existing customer relationship, and they're raising their hand, and they want to automate this business, you know, in partnership with their, you know. And so those are really high-qualified leads, and we're seeing them show up in terms of, you know, shorter sales, which we maintain really strong. So, I think, you know, overall, I think we're being more efficient, and certainly, you know, we pay close attention to all the different lead sources we have, and we'll continue over time to make adjustments where we're seeing, you know, strength and weakness. You know, kind of like that. Thanks, and if I could just squeeze one more in on yield, I just wanted to get a bit more color.
Speaker Change #223: Again, these are existing customers of our typically accounting system and ERP partners. So there's an existing customer relationship and they're raising their hand and they want to automate this business process, you know, in partnership with their, you know, ERP accounting system partner.
Speaker Change #223: And so those are really high qualified leads and we're seeing it, you know, show up in terms of, you know, shorter sales cycles while we maintain really strong, you know, close rates.
Speaker Change #223: So I think you know overall I think we're being more efficient and certainly you know we pay close attention to all the different lead sources we have and we'll continue over time to make adjustments where we're seeing you know strength and weakness across you know kind of that overall spectrum.
The dynamic that you're seeing is it's sort of, is it occurring really across the entire supplier base? Is it more narrow in scope with certain suppliers or certain verticals? Any color there? Yeah, you bet. I think it's fairly broad across the vertical. I wouldn't call out any...
Speaker Change #260: Thanks, and if I could just squeeze one more in on yield. Just wanted to get a bit more color. The dynamic that you're seeing, is it sort of, is it occurring really across the entire supplier base? Is it more narrow in scope with certain suppliers or certain verticals? Any color there would be helpful.
Speaker Change #230: Yeah, you bet. I think it's just fairly broad across the vertical. I wouldn't call out anything specific there, Alex.
Okay, thanks, Joel. Thanks, bye. The next question comes from Rufus Hone with BMO Capital Markets. Please go ahead.
Speaker Change #230: Okay, thanks Joel. Thanks Mike.
Speaker Change #230: The next question comes from Rufus Hone with BMO Capital Markets. Please go ahead.
Hey, good morning, guys. Thanks. Sorry, if this is maybe covered by an earlier question, I joined a little bit late, but I wanted to ask about the full-year revenue guide. How much of the reduction is this macro getting tougher?
Rufus Hone: Hey, good morning guys. Thanks. Sorry if this is maybe covered on an earlier question. I joined a little bit late, but I wanted to ask about the full year revenue guide. How much of the reduction is this macro getting tougher? And
Speaker Change #257: I don't know, any kind of related incremental changes you're seeing in customer behavior? How much of the reduction in the guide was due to that?
Speaker Change #207: And then also, how much of the reduction was from incremental lead generation headwinds that you're seeing? I don't know if you can break it up into those buckets.
And any kind of related incremental changes you're seeing in customer behavior? How much of the reduction in the guide was due to that? And then also, how much of the reduction was from incremental lead generation headwinds that you're seeing? I don't know if you can break it up into those buckets.
Thanks. Yeah. Let me tackle those, Rufus, one at a time.
Speaker Change #259: Thanks. Yeah, let me tackle those, Rufus, one at a time. So the first question, I think I alluded to it, but I'll just revisit, you know, our guidance contemplates in the back half what we saw in the second quarter, both from an overall total transaction volume that continues to be impacted by moderation and middle, you know, our customer spending, and also the yield dynamic that we pointed to on this call and that we began experiencing in Q2.
So the first question, I think I alluded to it, but I'll just revisit our guidance contemplates in the back half, what we saw in the second quarter, both from an overall total transaction volume that continues to be impacted by moderation in our customer's spending, and also the yield. Think of it as roughly 50-50, you know, balance in terms of what's driving it. It's those two dynamics that are driving the shift, revenue, and then from an overall sales funnel perspective, I think your last question, I would just say that we're selling for next year and the future. So not so much an impact on what we sell this year and this year's revenue, but that would impact next year and going forward. Yeah,
Rufus: Think of it as roughly 50-50, you know, balance in terms of what's driving it. It's those two dynamics that are driving the shift.
Speaker Change #208: In revenue. And then from a from an overall, you know, sales type of funnel perspective, I think your last question, I would just say that, like, you know, we're selling for next year and the future. So so not not so much an impact on on what we sell this year. And this year's revenue that would impact, you know, next year and going forward. Yeah, when we get to, you know, kind of the second half of the year, really argue, you know, buyer sales activity drives, you know, you know, next year, in this case, 2025.
When we get to the second half of the year, really, our new buyer-sales activity drives next year's, in this case, 2020 results. So, you know, we've got pretty good visibility to, you know, kind of the activity of our existing customers, but certainly some of the macro. Got it, thank you. The next question comes from Clark Jeffrey with Piper Sandler. Please go ahead. Hello.
Speaker Change #208: Results. So, you know, we have pretty good, you know, I think visibility to, you know, kind of the activity of our existing customers, but certainly some of the macro discretionary spend has been, you know, some of the headwinds that we've seen.
Speaker Change #244: Got it. Thanks.
Speaker Change #242: The next question comes from Clark Jeffries with Piper Sandler. Please go ahead.
Thank you for taking the question. I wanted to ask about the raise in float revenue. And I suspect it's related to the customer preference for payment modality, but I wanted to clarify that and ask that. To say it another way, you're not expecting a change in the yield, the float yield, or the volume as much as a change in the balance of those funds through the year. Thank you. Yeah, good question.
Clark Jeffries: Hello, thank you for taking the question. I wanted to ask about the raise to float revenue, and I suspect that's related to the customer preference on payment modality, but I wanted to
Clark Jeffries: Clarify that and ask that. To say it another way, you're not expecting a change in the float yield or the volume as much as a change in the balance of those funds through the year. Thank you.
Here's the way I would frame the change in the float. And so just to recap, the last time we gave guidance for full year float revenues of around $45 million; we've increased that to $49 million. And the things that I would point to are, you know, previously, we did factored in rate reductions in the back half of the year; we've reduced the impact of that; I think we have one late-year quarter point, and so there's an incremental lift there.
Speaker Change #250: Yeah, good question. Here's the way I would frame the change in the float, and so just to recap, the last time we gave guidance for full-year float revenues in the around $45 million, we've increased that to $49 million, and the things that I would point to are, you know, previously we did have factored in rate reductions in the back half of the year. We've reduced the impact of that. I think we have one late-year quarter point, and so there's an incremental lift there. We also have seen somewhat, you know, marginally higher customer balances, and we've experienced that throughout the year. We've just made an assumption in our projections that we would continue to experience that. Again, nothing underlying different in the budget.
Speaker Change #208: And the customer experience and the operational funds flow, but just slightly higher customer balances are contemplated in the back half.
We also have seen somewhat, you know, marginally higher customer balances, and we've experienced that throughout the year; we've just made an assumption in our projections that we would continue to experience that. Again, nothing underlying different in the customer experience and the operational funds flow, but just slightly higher customer balances. Thank you very much. The next question comes from Kim Jin Wong with J.P. Morgan. Please go ahead.
Speaker Change #246: Thank you very much.
Clark Jefferies: Thank you. Thanks, Clark.
Speaker Change #217: The next question comes from Kim Jin Wong with J.P. Morgan. Please go ahead.
Hi, thanks. Good morning to you guys. I know it's been asked a lot, but I just want to understand or get your view here on..., on the payment monetization of suppliers. Choosing, on the acceptance side, the lower cost solutions, is that more cyclical or secular? Do you think that as the cycle shifts, you'll see a shift back, or are the suppliers just smarter around cost optimization? Yeah, I think it's a good question. I don't think it's really cyclical.
Speaker Change #247: Hi, thanks, and good morning to you guys. I know it's been asked a lot, but I just want to understand or get your view here on...
Speaker Change #251: Choosing on the acceptance side the lower cost for solutions, is that more cyclical or secular? Do you think that as the cycle shifts that you'll see a shift back or are the suppliers just smarter around cost optimization?
I think it's, you know, really around, you know, a value proposition. And typically, when they make a decision on a particular payment modality, we see really strong retention of that payment modality, you know, for the life of that supplier. Now, you know, certainly, the big opportunity that we have is that, you know, roughly 50% of our overall suppliers are still pay-per-check acceptors. So we're really, you know, working contingent on providing a value proposition that's appropriate for that, you know, that 50%.
Speaker Change #252: Yeah, I think it's a good question. I don't think it's really cyclical. I think it's
Speaker Change #252: You know, really around, you know, a value proposition and typically, you know, when they make a decision on a particular payment modality, we see really strong retention of that payment modality, you know, for the life of that supplier.
Speaker Change #252: Now, you know, certainly, you know, the big opportunity that we have is that, you know, roughly 50% of our overall suppliers are still paper check acceptors.
And, you know, again, combining speed of payment, the price, the remits data, and the level of automation, And what we're seeing is, you know, certainly, you know, to get certain suppliers to move off of paper checked electronic, you know, sometimes, you know, the price is an element And so especially, you know, we believe that again, with a strong value proposition at the right price point, we get that supplier to be an electronic acceptor and be on our network for a long, And so I think that's, you know, part of our overall strategy that we'll continue to see is, you know, as we grow, you know, that, you know, percentage of 40% of, you know, monetized payments, you know, 45 to 50% plus over time, it's going to happen at, Got it. Thanks, Mike. Appreciate your thoughts on that.
Speaker Change #247: So we're really, you know, working to get and providing, you know, a value proposition that's appropriate for that, you know, that 50%. And, you know, again, combining speed of payment, the price, the remit state and the level of automation.
Speaker Change #217: And what we're seeing is, you know, certainly, you know, to get certain suppliers to move off of paper checked electronic, you know, sometimes, you know, the price is an element of it.
Speaker Change #217: And so, especially, you know, we believe that, again, with a strong value proposition at the right price point, we can get that supplier to be an electronic acceptor and be on our network for a long period.
Speaker Change #217: And so I think that's, you know, part of our overall strategy that we'll continue to see is, you know, as we grow, you know, that, you know, percentage of 40% of, you know, monetized payments to, you know, 45 to 50% plus over time, it's going to happen at different price points.
Speaker Change #217: Got it. Thanks, Mike. Appreciate your thoughts on that.
This concludes our question and answer session. I would like to turn the conference back over to Mike Praeger for any closing remarks. Thanks, everyone, for your interest in Avidxchange. Amid the current macro choppiness, I'm proud of our disciplined execution and healthy financial performance, along with strong profitability. As I said before, I'm particularly excited about the future given the pipeline of product innovations and the industry-leading ERP integration partnerships in progress that should propel all four gears of our business flywheel and drive long-term value creation for our customers. With that, I look forward to sharing our progress with you on our next earnings call. Operator, you can close. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change #217: This concludes our question and answer session. I would like to turn the conference back over to Mike Praeger for any closing remarks.
Michael Praeger: Thanks everyone for your interest in Avidxchange. Amid the current macro choppiness, I'm proud of our disciplined execution and healthy financial performance, along with strong profitability results.
Michael Praeger: As I said before, I'm particularly excited about the future given the pipeline of product innovations and the industry leading ERP integration partnerships in progress that should propel all four gears of our business flywheel and drive long-term value creation for our investors.
Speaker Change #217: With that, I look forward to sharing our progress with you on our next earnings call.
Speaker Change #224: Operator, you can close the call.
Speaker Change #258: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.