Q4 2024 Paymentus Holdings Inc Earnings Call
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Operator: All participants are currently in a listen-only mode. There will be an opportunity to ask questions following the management's prepared remarks. If you would like to ask a question, please press star 1 on your telephone keypad.
Please press star one on your telephone keypad.
David Hanover: At this time, I will now turn the call over to David Hanover, Investor Relations. Please go ahead. Thank you, operator. Good afternoon.
Speaker Change: At this time I will now turn the call over to David Hangover Investor Relations. Please go ahead.
David Hangover: Thank you operator good afternoon.
David Hanover: Welcome and thank you for joining the webcast to review our fourth quarter and full year 2024 results. Our earnings release documents are available on the Investor Relations section of the Paymentus.com website. They include the earnings presentation that we'll make reference to during this webcast. This webcast is being recorded. I hope everyone's had a chance to review those documents.
Speaker Change: Welcome and thank you for joining the webcast to review, our fourth quarter and full year 2024 results.
Speaker Change: Our earnings release documents are available on the Investor Relations section of the Peninsula Com website. They include the earnings presentation that will make reference to during this webcast. This webcast is being recorded.
Speaker Change: I hope everyone's had a chance to review those documents are founder and CEO Vishal Sharma will make some opening comments before Sanjay Kalra, our CFO discusses the details of our fourth quarter and full year guidance.
David Hanover: Our founder and CEO, Dushyant Sharma, will make some opening comments before Sanjay Kalra, our CFO, discusses the details of the fourth quarter in full year and our guidance.
Speaker Change: Following our prepared remarks, we'll take questions. Let me just remind you that we may make forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, and we refer to non-GAAP financial measures starting to Whatsapp.
David Hanover: Following our prepared remarks we'll take questions.
David Hanover: Let me just remind you that we may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and we refer to non-GAAP financial measures during the webinar. forward looking statements are based on management's current expectations and assumptions that are subject to risks and uncertainty. Factors that may cause our actual results that differ materially from expectations are detailed in our earnings material and our SEC filings that are available on both the SEC and our website.
Speaker Change: Forward looking statements are based on management's current expectations and assumptions that are subject to risks and uncertainties.
Speaker Change: Factors that may cause our actual results to differ materially.
Speaker Change: Current expectations are detailed in our earnings materials in our SEC filings that are available on both the SEC and our websites.
David Hanover: Information about non-GAAP financial measures, including reconciliations to U.S. GAAP, can also be found in our earnings materials that are available on the website.
Speaker Change: Information about non-GAAP financial measures, including reconciliations to U S. GAAP can also be found in our earnings materials are available on the website.
David Hanover: With that, I'd like to turn the webcast over to Dushyant Sharma. Dushyant? Thanks, David.
Speaker Change: With that I'd like to turn the webcast over to finish all Sharma you thought.
Speaker Change: Okay.
Sharma: Thanks, David.
Speaker Change: Well, even before it was an outstanding year for payment this.
Dushyant Sharma: 2024 was an outstanding year for Paymentus Hldg. and based on the vast stem of non-discretionary bills. and our continued market momentum. We believe our best is yet to come and we are just getting started. As I've shared in the past.
Speaker Change: And based on the vast span of non discretionary bills and our continued market momentum.
Speaker Change: We believe our best is yet to come and we are just getting started.
Speaker Change: As I've shared in the past.
Dushyant Sharma: We operate our business on a two-year horizon. And it is quite satisfying to see how well we have executed over the last two years. Likewise, we're just as excited about our next to your horizon and beyond.
Speaker Change: We will operate our business on a two year horizon.
Speaker Change: And it is quite satisfying to see how well we have executed our.
Speaker Change: Over last two years.
Speaker Change: Likewise, we're just as excited about over the next two year horizon and beyond.
Dushyant Sharma: And this view is based on five factors. First. Our continued sales momentum.
Speaker Change: And this view is based on five factors.
Speaker Change: First.
Speaker Change: Our continued sales momentum.
Dushyant Sharma: Second. Our strong bookings in 2024. Third, our significant exit backlog, net of large client launches in the third quarter. Our continued onboarding success, and fifth, our phenomenal innovation framework that will continue to be disruptive in the broader FinTech market.
Speaker Change: Second.
Speaker Change: Our strong bookings and try it on before.
Speaker Change: Third our significant exiting backlog.
Speaker Change: Net of large client launches in the third quarter.
Speaker Change: Fourth.
Speaker Change: Our continued onboarding success and fifth our phenomenal innovation framework that will continue to be disruptive in the broader fintech market.
Speaker Change: Despite the what are you gonna before our performance we remain committed to our CAGR model.
Dushyant Sharma: Despite our 2024 outperformance, we remain committed to our Kager model of 20% top line and 20 to 30% adjusted EBITDA growth for 2025. And based on our guidance philosophy that has served us very well over the last couple of years. I'm pleased to report that we believe we can deliver the top end of our 2025 guidance.
Speaker Change: 20% topline and don't need a 30% adjusted EBITDA growth for 2025.
Speaker Change: And based on our guidance philosophy that has served us very well over the last couple of years.
Speaker Change: I'm pleased to report that we believe we can deliver the top end of our 2025 guidance.
Dushyant Sharma: The Sanjay will cover shortly without signing any new clients. provided, of course, we deliver implementations as planned.
Speaker Change: Sanjay will cover shortly without signing any new clients.
Speaker Change: Provided of course, we delever implementations as planned.
Speaker Change: With that context.
Dushyant Sharma: With that context.
Dushyant Sharma: Let me now discuss our fourth quarter and full year 2024 results. We ended the year on a strong note with fourth quarter results that exceeded our expectations across all areas of our business. Fourth quarter 2024 revenue was a record $257.9 million, up 56.5% year-over-year. Fourth quarter contribution profit was $86.2 million, up 30% year-over-year. Our adjusted EBITDA, which as many of you know, is a significant financial metric for us. was $27.3 million for the quarter, up 36.9% year-over-year. And on a rule of 40 scale, we saw a sequential increase in the quarter to 62. For the full year 2024, revenue increased 41.9% over last year to $871.7 million.
Speaker Change: Let me now discuss our fourth quarter and full year 'twenty 'twenty four results.
Speaker Change: We ended the year on a strong note with fourth quarter results that exceeded our expectations across all areas of our business.
Speaker Change: Fourth quarter, four revenue was a record $257 $9 million.
Speaker Change: Up 56, 5% year over year.
Speaker Change: Fourth quarter contribution profit was $86 $2 million up 30% year over year.
Speaker Change: How about just an EBITDA, which as many of you know is a significant financial metric for us.
Speaker Change: Was $27 $3 million for the quarter up 36, 9% year over year.
Speaker Change: And on the rule of 40 scale, we saw a sequential increase in the quarter to 62.
Speaker Change: For the full year 'twenty 'twenty, four but revenue increased 41, 9% over last year to 871 $7 million.
Dushyant Sharma: far exceeding our long-term target of 20% top line growth. Adjusted EBITDA increased 62.2% for the year to $94.2 million, once again well ahead of our long-term target of 20% to 30% growth. Contribution profit for 2024 was $312.1 million. going 29.5% annual. We also saw a great year for bookings in 2024. The multi-year commitments under our typical agreements from these bookings. gives us a lot of confidence in our ability to achieve our Kager model.
Speaker Change: Far exceeding our long term target of 20% top line growth.
Speaker Change: Adjusted EBITDA increased 62, 2% for the year to $94 $2 million.
Speaker Change: Once again, well ahead of our long term target of 20% to 30% growth.
Speaker Change: Contribution profit forthright on before was $312 $1 million.
Speaker Change: Growing 29, 5% annually.
Speaker Change: Yeah.
Speaker Change: We also saw a great year for bookings in 'twenty 'twenty four.
The multiyear commitments under work typical agreement from these bookings gives us a lot of confidence in our ability to achieve our target model.
As a reminder, our cable model is one of our primary metrics of revenue and adjusted EBITDA, only and should not be confused with secondary matrix such as contribution profit in opex.
Dushyant Sharma: As a reminder, our CAGR model is for our primary metrics of revenue and adjusted EBITDA only and should not be confused with secondary metrics such as contribution profit and OPEX. As we have done very effectively so far, we will continue to use our strong operating leverage to calibrate contribution profit and OPEX as necessary to achieve these targets.
Speaker Change: As we have done very effectively so far we will continue to use our strong operating leverage to calibrate contribution profit in opex as necessary to achieve these targets.
Speaker Change: In addition to the numbers we reported today.
Dushyant Sharma: In addition to the numbers we reported today, As noted on our last earnings call, there is a specific business strategy in play here. While today interchange only serves as a cost center for us, over time our strategy is to have the interchange economy and associated life cycle flow through our P&L as we capture more market share. This will increase our scale, which also creates tremendous opportunities for modernization and cost reduction. So longer term, we will work to expand our margins by pursuing products and solutions that offer the ability to convert part of the interchange from a cost center to a revenue center.
Speaker Change: As noted in our last earnings call.
Speaker Change: It was especially thinking business a strategy in play here.
Speaker Change: While today interchange only serves as a cost center for us over time, our strategy is to have the interchange economy and associated lifecycle flowed through our P&L as we capture more market share.
Speaker Change: This will increase our scale, which also creates tremendous opportunities for modernization and cost reductions.
Speaker Change: So longer term, we will work to expand our margins by pursuing products and solutions that offer the ability to convert part of them to change from a cost center to a revenue center.
Dushyant Sharma: Said differently, we think of interchange as a potential new expansion of the total addressable market for our business.
Speaker Change: Said differently, we think of interchange as a potential new expansion of the total addressable market for our business.
Speaker Change: Even though this is a long term play we wanted to make sure that investors are aware of the strategy behind our execution.
Dushyant Sharma: Even though this is a long term play, we want to make sure that investors are aware of the strategy behind our Now I'll review some of our key fourth quarter business highlights in the company. As I mentioned earlier, we finished 2024 with a strong backlog and solid top line growth as a result of our technology platform and our IPM ecosystem. During the fourth quarter, we signed clients in various industry verticals. including insurance, government agencies, utilities. Banking and Credit Unions, Consumer Finance Organizations, and Educational Institutions, among others. We believe this extensive mix of new customers demonstrates the diversity of the businesses and the multiple industry verticals our platform can serve.
Now I'll review some of our key fourth quarter business highlights and accomplishments.
Speaker Change: As I mentioned earlier, we finished only 24 with a strong backlog.
Speaker Change: And solid topline growth as a result of our technology platform and our IP and ecosystem.
Speaker Change: During the fourth quarter, we signed clients in various industry verticals, including insurance government agencies.
Speaker Change: Utilities.
Speaker Change: Banking and credit unions, consumer finance organizations and educational institutions among others.
Speaker Change: We believe this extensive mix of new customers demonstrates the diversity of the businesses and the multiple industry verticals our platform can support.
Speaker Change: In addition, we signed several new channel General partners in various industry verticals to deepen our partner ecosystem.
Dushyant Sharma: In addition, we signed several new channel partners in various industry verticals to deepen our partner ecosystem. These verticals include government services. Insurance, and Healthcare. Our diverse and ever expanding partner network is an excellent companion to our direct go to market strategy.
Speaker Change: These verticals include government services.
Speaker Change: As utilities.
Speaker Change: Insurance and health care.
Speaker Change: Our diverse and ever expanding partner network is an excellent companion kilowatt direct go to market strategy.
Speaker Change: And in addition to this our strategy we continue to focus on on boarding of a strong backlog.
Dushyant Sharma: And in addition to this strategy, we continue to focus on onboarding our strong back. Our Onboarding Enhancement targeted incremental investments, as well as constantly improving face to face client engagement. continue to be a tailwind for us. As part of this effort, like we have mentioned on past calls, we have continued to ramp up hirings in order to support our continued growth. During the quarter, we onboarded clients across multiple verticals, namely insurance, property management, government services, utilities, banking and credit unions, and telecommunications.
Speaker Change: Our onboarding enhancements.
Speaker Change: So I was going to be incremental investments as well as constantly improving face to face client engagement.
Speaker Change: To be a tailwind for us.
Speaker Change: As part of this effort like we had mentioned on past calls we have continued to ramp up hiring in order to support our continued growth.
Speaker Change: During the quarter, we on boarded clients across multiple verticals, namely <unk>.
Speaker Change: Insurance property management government services utilities banking and credit unions and telecommunications.
Sanjay Kalra: Now let me turn it over to Sanjay to review our financial results in greater detail.
Speaker Change: Now, let me turn it over to Sanjay to review our financial results in greater detail.
Vishal Sharma: This is vishal.
Sanjay Kalra: Thanks, Dushyant. And thank you all for joining us today.
Vishal Sharma: And thank you all for joining us today.
Sanjay Kalra: Before I discuss our quarterly results and outlook, I'd like to remind everyone that the financial results I'd be referring to include non-GAAP financial measures. Our earnings press release and presentation includes reconciliations of these non-GAAP financial measures to their corresponding GAAP measures. Both are available on our website.
Vishal Sharma: Before I discuss our quarterly results and outlook I'd like to remind everyone that the financial results I'll be referring to include non-GAAP financial measures.
Vishal Sharma: Our earnings press release and presentation include reconciliations of these non-GAAP financial measures to their corresponding GAAP measures.
Vishal Sharma: Both are available on our website.
Vishal Sharma: Turning to slide five.
Sanjay Kalra: Turning to slide 5. We ended 2024 with another quarter where we exceeded the top end of our guidance range across all our key financial metrics. Our fourth quarter results included record revenue of $257.9 million, up 56.5% year-over-year, contribution profit of $86.2 million, up 30%, and adjusted EBITDA of $27.3 million, up 36.9%. On a rule of 40 basis, we came in at 62, our highest level to date, and our seventh consecutive quarter of exceeding the rule of 40. During the quarter, we also continue to experience strong customer activity and demand, consistent with what we experienced throughout 2024.
Vishal Sharma: Okay.
Vishal Sharma: For another.
Vishal Sharma: Another quarter, where we exceeded the top end of our guidance range across all our key financial metrics.
Vishal Sharma: Our fourth quarter results included record revenue of $257 9 million up 36, 5% year over year contribution profit of $86 2 million up 30%.
Vishal Sharma: Adjusted EBITDA of $27 3 million up 36, 9%.
Vishal Sharma: On the rule of 40 basis, we came in at 62, our highest level to date and our seventh consecutive quarter of exceeding the rule of 40.
Vishal Sharma: During the quarter. We also continued to experience strong customer activity and demand consistent with what we experienced throughout 2024.
Vishal Sharma: This drove a robust bookings and we exited the ear with solid momentum and a significant backlog and a greater cash position to support our continued growth strategies and don't need only five.
Sanjay Kalra: This drove robust bookings and we exited the year with solid momentum and a significant backlog and a greater cash position to support our continued growth strategies in 2025.
Vishal Sharma: Yeah.
Vishal Sharma: Now, let's review, our fourth quarter financials in more detail.
Sanjay Kalra: Now let's review our fourth quarter financials in more detail. As mentioned earlier, fourth quarter revenue grew 56.5% year-over-year to $257.9 million. This higher-than-anticipated growth was driven by two key factors. First, The successful launch of new billers, including the first full quarter benefit from large enterprise customers that launched during the third quarter. and second, increased same store sales from existing billers. In the fourth quarter, we derive more revenue from these newly launched large enterprise customers with higher average payment amounts, contributing to higher revenues. And while our original fourth quarter guidance contained some upside, we took a prudent approach because at that time, the precise magnitude of this beneficial impact was uncertain.
Vishal Sharma: As mentioned earlier fourth quarter revenue growth of six 5% year over year to $257 9 million.
Vishal Sharma: This higher than anticipated growth was driven by two key factors.
Vishal Sharma: First.
Vishal Sharma: The successful launch of <unk>, including the first full quarter benefit from large enterprise customers that launched during the third quarter.
Vishal Sharma: And second increased same store sales from existing builders.
Vishal Sharma: In the fourth quarter, we did more revenue from these newly launched large enterprise customers with higher average payment amounts.
Vishal Sharma: Built into higher revenues.
Vishal Sharma: And while our original fourth quarter guidance contains some upside we took a prudent approach because at that time the precise magnitude of this beneficial impact was uncertain.
Sanjay Kalra: And you can see it was quite substantial. Complimenting this, in the fourth quarter, the number of transactions we processed grew to 166 million, up 33% year over year. Our average price per transaction increased during the fourth quarter to $1.55, up over 17% from $1.32 in the prior year period. This was mainly due to the biller mix, or more specifically, the large enterprise billers that launched in the third quarter with higher average payment amounts. Fourth quarter 2024 contribution profit increased 30% year over year to $86.2 million. This increase was also higher than expected and reflects increased transactions from existing billers, the launch of new billers, and the change in biller mix I mentioned earlier.
Vishal Sharma: And you can see it was quite substantial.
Vishal Sharma: Complementing this in the fourth quarter the number of transactions, we process grew to 166 million up 33% year over year.
Vishal Sharma: Our average price per transaction in Greece during the fourth quarter to $1.55 up over 17% from $1.32 in the prior year period.
Vishal Sharma: This was mainly due to the better mix or more specifically the large enterprise pillars that launched in the third quarter with higher payment amounts.
Vishal Sharma: Well, let's go to donate or default contribution profit increased 30% year over year to $86 2 million.
Vishal Sharma: This increase was also higher than expected and reflects ingredient selections from existing builders the launch of new builders and the champion builder mix I mentioned earlier.
Vishal Sharma: Contribution margin was 31, 4% for the fourth quarter compared to 34, 5% last quarter and 43% in the prior year period.
Sanjay Kalra: Contribution margin was 33.4% for the fourth quarter compared to 34.5% last quarter and 40.3% in the prior year period. The 6.9% contribution margin reduction year over year reflects the continued addition of large, high volume enterprise billers to our growing customer base. This was substantially upset by benefits from the economies of scale and year-over-year reduction in operating expense margins. both of which resulted in an improved adjusted EBITDA margin and a record rule of 40 at 62.
Vishal Sharma: The six 9% contribution margin reduction year over year reflects the continued addition of large.
Vishal Sharma: Volume enterprise builders to our growing customer base.
Vishal Sharma: This was substantially offset by benefits from the economies of scale and year over year reduction in operating expense margin.
Vishal Sharma: Both of which resulted in an improved adjusted EBITDA margin and a record rule of 40 at 62.
Vishal Sharma: This is consistent with our continued focus on profitability, which I will elaborate on shortly.
Sanjay Kalra: This is consistent with our continued focus on profitability, which I will elaborate on shortly. Contribution profit per transaction for the fourth quarter 2024 was $0.52. similar to 53 cents in the prior year period. Demonstrating our ability to expand market share with comparable contribution profit per transaction. As we've noted in the past, variables that are outside of our control, such as an increase in the average payment amount or changes in payment mix, can affect contribution profit on a quarter-to-quarter basis. And therefore, we treat this as a secondary metric, while our gross revenue and adjusted EBITDA remain primary metrics for us.
Vishal Sharma: Contribution profit per transaction for the fourth quarter don't you only four well 52 sense similar to 53 cents in the variety of immediate.
Vishal Sharma: Demonstrating our ability to expand market share with comparable contribution profit per transaction.
Vishal Sharma: As we've noted in the past variables that are outside of our control such as an increase in the average payment amount or changes in payment mix can affect contribution profit on a quarter to quarter basis.
Vishal Sharma: And therefore, we're treating this as a secondary metric viola growth revenue and adjusted EBITDA. The main primary metrics for us.
Vishal Sharma: Fourth quarter adjusted gross profit grew 32, 4% year over year to $71.8 million.
Sanjay Kalra: Fourth quarter adjusted gross profit grew 32.4% year-over-year to $71.8 million. We experience adjusted gross profit growth greater than our contribution profit growth. Due to the economies of scale we can achieve by reducing other costs of goods sold. Fourth quarter non-GAAP operating expenses were up 28.8% year over year to $47.3 million. primarily reflecting higher sales and marketing expenses, as well as research and development expenses. These increases were consistent with our expectations and were mainly driven by increased hiring and increased agency fees for businesses from resellers in order for us to convert our strong pipeline into bookings and also to enhance our technical strength.
Vishal Sharma: We experienced gross profit growth greater than our contribution profitability.
Vishal Sharma: Due to the economies of scale, we can achieve by reducing other cost of goods sold.
Vishal Sharma: Fourth quarter non-GAAP operating expenses were up 28, 8% year over year to $47 3 million.
Vishal Sharma: Primarily reflecting higher sales and marketing expenses as well as research and development expenses.
Vishal Sharma: These increases were consistent with our expectations and were mainly driven by increased hiring and increased agency fees for businesses from resellers in order for us to convert our strong pipeline into bookings and also to enhance our technical strengths.
Vishal Sharma: Yeah.
Vishal Sharma: Regarding taxes, we have determined that our non-GAAP tax rate of 25% for the fourth quarter of tornado LIBOR is appropriate based on our current expectation of our long term projected tax rate.
Sanjay Kalra: Regarding taxes, we have determined that a non gap tax rate of 25% for the fourth quarter of 2024 is appropriate based on our current expectation of our long term projected tax rate. The rate is reflected in our 2025 guidance, which we will cover shortly. For comparative purposes, we have recast our fiscal 2024 and 2023 non-GAAP net income to reflect this tax rate. which is available in the tables included in our earnings release. Please note, this non-GAAP tax rate reflects currently available information and could be subject to change. Fourth quarter non-GAAP net income was $16.3 million or $0.13 per share compared to non-GAAP net income of $11.8 million or $0.09 per share in the prior year period.
Vishal Sharma: There it is reflected in our current 75 guidance, which we will cover shortly.
Vishal Sharma: For comparative purposes, we have regressed over fiscal 'twenty 'twenty, four and 'twenty at only three non-GAAP net income to reflect the tax rate.
Vishal Sharma: Make it available in the tables included in our earnings release.
Vishal Sharma: Please note that non-GAAP tax rates reflect currently available information and could be subject to change.
Vishal Sharma: Fourth quarter non-GAAP net income was $16 $3 million or 13 cents per share compared to non-GAAP net income of $11.8 million.
Vishal Sharma: <unk> per share in the prior year period.
Vishal Sharma: Fourth quarter adjusted EBITDA.
Sanjay Kalra: fourth quarter adjusting EBITDA. grew 36.9% to $27.3 million compared to $19.9 million in the prior year period. HSDBeta also represented 31.6% of contribution profit for the quarter. compared to 30% in the prior year period. The strong adjusted EBITDA performance was due to the same combination of positive factors I talked about earlier, all of which came together in the quarter. We believe the stronger adjusted EBITDA margin demonstrates the inherent operating leverage we have in the business. Interest income from our bank deposits was $2 million in the fourth quarter consistent with the prior year period. Related to our performance, as mentioned earlier, we once again exceeded the rule of 40 for the quarter coming in at 62 compared to 61 last quarter and 53 in the prior year period.
Vishal Sharma: It was 36, 9% to $27 $3 million compared to $19 9 million in the variety of immediate.
Vishal Sharma: I guess it would be the also they presented at 31, 6% of contribution profit for the quarter.
Vishal Sharma: Compared to 30% in the prior year period.
Vishal Sharma: The strong adjusted EBITDA performance was due to the same combination of positive factors I talked about earlier.
Vishal Sharma: All of which came together in the quarter.
Vishal Sharma: We believe the stronger adjusted EBITDA margin demonstrates the inherent operating leverage we haven't done business.
Vishal Sharma: Yeah.
Interest income from bank deposits was $2 million in the fourth quarter consistent with the variety of immediately.
Vishal Sharma: Related to our performance as mentioned earlier, we once again exceeded the rule of 40 for the quarter coming in at <unk> 62, compared to 61 last quarter and 53 in the prior year's period.
Vishal Sharma: Now turning to slide six.
Sanjay Kalra: Now turning to slide 6. I will summarize our full year 2024 financial results, which also came in higher than we originally expected. Revenue for the full year increased 41.9% to $871.7 million, driven by a 30.3% increase in the transactions, primarily from new billers. as well as transaction growth from existing billers. Contribution profit increased 29.5% to $312.1 million, primarily due to increased transaction Lastly, adjusted gross profit increased 30.4% to $259.6 million. Non-GAAP operating expenses increased to $175.9 million, up 17.3% year-over-year. primarily due to higher sales and marketing expenses. As we continue to focus resources on the execution of our go-to market strategy.
Either summarize our full year 2024 financial results, which also came in higher than we originally expected.
Vishal Sharma: Revenue for the full year increased 41, 9% to $871 7 million driven by a 33% increase in the transactions primarily from new business.
As well as transaction growth from existing builders.
Vishal Sharma: Contribution profit increased 29, 5% to $312 1 million, primarily due to increased transactions.
Vishal Sharma: Lastly, adjusted gross profit increased 34% to $259 6 million.
Vishal Sharma: non-GAAP operating expenses increased to $175 9 million.
Vishal Sharma: Up 17, 3% year over year.
Vishal Sharma: Primarily due to higher sales and marketing expenses.
Vishal Sharma: We continue to focus resources on the execution of our go to market strategy.
Vishal Sharma: non-GAAP net income was $56 2 million or 44 per share compared to non-GAAP net income of $32 2 million or 26 cents per share in the prior year.
Sanjay Kalra: Non-GAAP net income was $56.2 million, or $0.44 per share, compared to non-GAAP net income of $32.2 million, or $0.26 per share in the prior year. Adjusted EBITDA increased 62.2% to $94.2 million primarily due to increased adjusted gross profit, net of increased non-GAAP operating expenses. We exceeded the rule of 40 for the full year, coming in at 60 for 2024, compared to 2023 when we ended at 44. We are also proud to report that in fiscal year 2024 36.1 million of over 71.2 million contribution profit increase flowed through to adjusted EBITDA representing a 51% incremental adjusted EBITDA margin.
Vishal Sharma: Okay.
Vishal Sharma: Adjusted EBITDA increased 60, 212% to $94 $2 million, primarily due to increased adjusted gross profit net of increased non-GAAP operating expenses.
We exceeded the rule of 40 for the full year coming in at $64 74, compared to 23, when we ended at 44.
Vishal Sharma: Okay.
Vishal Sharma: We are also proud to report that in fiscal year, 2024, or $36 1 million of our $71 2 million contribution profit in Greece.
Vishal Sharma: So to do adjusted EBITDA, representing a 51% incremental adjusted EBITDA margin.
Vishal Sharma: Now I'll discuss our balance sheet and liquidity position on slide seven.
Sanjay Kalra: Now I'll discuss our balance sheet and liquidity position on slide 7. We ended the fourth quarter 2024 with total cash of $209.4 million. compared to $190.8 million at the end of last quarter and $183.2 million in the prior year period. The $18.6 million sequential increase is primarily comprised of $27.9 million of cash generated from operations. offset by $9.1 million cash used in investing activities, primarily for capitalized software.
Vishal Sharma: We ended the fourth quarter and only 24 with total cash of $209 4 million.
Vishal Sharma: Compared to $198 million at the end of last quarter and $183 2 million in the prior year period.
Vishal Sharma: $19 6 million sequential increase is primarily comprised of $27 9 million of cash generated from operations.
Vishal Sharma: Offset by $9 1 million cash used in investing activities primarily for capitalized software.
Vishal Sharma: The company does not have any debt.
Sanjay Kalra: The company does not have any debt. The free cash flow generated during the quarter was $19 million. For the full year 2024, we invested 36 million in capitalized software and 26 million in working capital as we scale the business. We paid $14.4 million in income taxes as we are now profitable. and also generated $8.7 million from interest.
Vishal Sharma: The free cash flow generated during the quarter was $19 million.
Vishal Sharma: For the full year got it on before we invested $36 million in capitalized software and $26 million in working capital.
Vishal Sharma: As we scale the business.
Vishal Sharma: We paid $14 $4 million in income taxes, as we are now profitable.
Vishal Sharma: And also generated $8 7 million from interest income.
Vishal Sharma: In 2025, our cash deployment priorities are unchanged.
Sanjay Kalra: In 2025, our cash deployment priorities are unchanged. driving organic growth remains our primary focus. Our strong cash position enables us to maintain financial flexibility to keep room for working capital investments as we scale. Additionally, our strong balance sheet enables us to explore attractive M&A opportunities that may arise in order to further increase our growth prospects.
Vishal Sharma: Driving organic growth remains our primary focus.
Vishal Sharma: Our strong cash position enables us to maintain financial flexibility to keep loan for working capital and restaurants as we scale.
Vishal Sharma: Additionally, our strong balance sheet enables us to explore attractive M&A opportunities.
That may arise in order to further increase our growth prospects.
Vishal Sharma: Our days sales outstanding at the end of fourth quarter was 43 days compared to 44 days last quarter.
Sanjay Kalra: Our days is outstanding. At the end of fourth quarter was 43 days compared to 44 days last quarter. We had 128.7 million diluted shares outstanding during the fourth quarter compared to 127.6 million diluted shares outstanding during the third quarter.
Vishal Sharma: We had $128 7 million diluted shares outstanding during the fourth quarter compared to $127 6 million diluted shares outstanding during the third quarter.
Vishal Sharma: Now I'll turn to our non-GAAP guidance for the first quarter and full year 295 on slide eight.
Sanjay Kalra: Now I turn to our non-GAAP guidance for the first quarter and full year 2025 on slide 8. Before discussing our 2025 guidance in detail, as mentioned on our last earnings call, we are continuing to follow the same prudent approach to first quarter and full year guidance that we followed when we provided our initial 2024 guidance around the same time last year. which I believe has served us quite well.
Vishal Sharma: Yeah.
Vishal Sharma: Before discussing our 2025 guidance in detail as mentioned on our last earnings call. We are continuing to follow the same prudent approach to first quarter and full year guidance that we followed when we provided our initial 2024 guidance around the same time last year.
Vishal Sharma: Which I believe has served us quite well.
Vishal Sharma: Turning now to details for the first quarter at only 25.
Sanjay Kalra: Turning now to details for the first quarter 2025. We expect revenues to be in the range of $241 million to $249 million, representing a 32.5 percent year-over-year growth at the midpoint and 34.7 percent at the high end. This growth rate range is an improvement from prior year's first quarter growth rate of 24.6%. Contribution profit to range from $84 to $86 million. which represents 22.5% year-over-year growth at the midpoint and 23.9% at the high end compared to the prior year's first quarter growth rate of 29.6%. This year over year change reflects our expanding market share and a more diversified customer base, which includes a growing number of large enterprise customers.
Vishal Sharma: We expect revenues to be in the range of 241 to 249 million, representing a 32, 5% year over year growth at the midpoint and 34, 7% at the high end.
Vishal Sharma: This growth rate range is an improvement from prior year's first quarter growth rate of 24, 6%.
Vishal Sharma: Contribution profit to range from $84 million to $86 million.
Vishal Sharma: This represents a 22, 5% year over year growth at the midpoint and 23, 9% at the high end.
Vishal Sharma: Compared to the prior year's first quarter growth rate of 29, 6%.
Vishal Sharma: This year over year change reflects our expanding market share and a more diversified customer base, which includes a growing number of large enterprise customers.
Vishal Sharma: Adjusted EBITDA of 24 to 26 million representing growth of 26, 3% year over year at the midpoint and.
Sanjay Kalra: Adjusted EBDA of $24-26 million, representing growth of 26.3% year-over-year at the midpoint and 31.3% at the high end. This represents a 29.4% margin at midpoint and 30.2% margin at the high end.
Vishal Sharma: And 31, 3% at the high end.
Vishal Sharma: This represents a 29, 4% margin at the midpoint and 32% margin at the high end.
Sanjay Kalra: An improvement to the prior year's first quarter adjusted EBITDA margin of 28.6%. On a rule of 40 basis for the first quarter of 2025, our guidance implies a range of 50 to 54.
Vishal Sharma: An improvement to the prior year's first quarter adjusted EBITDA margin of 28, 6%.
Vishal Sharma: On the rule of 40 basis for the first quarter of 2025, our guidance implies a range of 50 to 54.
Vishal Sharma: Before moving to the details for our full year guidance.
Sanjay Kalra: Before moving to the details for our full year guidance, I want to provide further insight into our outlook for contribution profit growth rates and adjusted EBITDA margins. As our business continues to grow, we are receiving more inbound inquiries from large enterprise customers. As we've mentioned on prior calls, as expected, these customers often request volume discounts. This is standard within our industry, and we are open to this, we are the Deal Economics supporters. Our tremendous operating leverage allows us to do this, as volume discounts for larger customers are typically more than offset by strong, incrementally adjusted EBITDA.
Vishal Sharma: Wanted to provide further insight into our outlook for contribution profit growth rates and adjusted EBITDA margin.
Vishal Sharma: As the business continues to grow.
Vishal Sharma: We are receiving more inbound inquiries from large enterprise customers.
Vishal Sharma: As we've mentioned on prior calls as expected these customers often request volume discounts.
Standard within our industry and we are open to this where the deal economics supported.
Vishal Sharma: Our tremendous operating leverage allows us.
Vishal Sharma: To do this as volume discounts for larger customers are typically more than offset by strong incremental adjusted EBITDA.
Vishal Sharma: We saw this in the second half of <unk> for.
Sanjay Kalra: We saw this in the second half of 2024. This increases our efficiency as our onboarding time per biller is declining, while our average customer size is simultaneously increasing. Furthermore, our operating model enables us to recalibrate OPEX spending relative to contribution profit. in order to reach a desired adjusted EB-DAM. For reference, our incremental adjusted EBITDA margin for the fourth quarter 2024 was 37% relative to adjusted EBITDA margin of 31.6%.
Vishal Sharma: This increased level of efficiency as our Onboarding time per biller is declining.
Vishal Sharma: Our average customer size is simultaneously increasing.
Vishal Sharma: Furthermore, our operating model enables us to recalibrate opex spending relative to contribution profit in order to reach a desired adjusted EBITDA.
Vishal Sharma: For reference our incremental adjusted EBITDA margin for the fourth quarter ago literally four was 37%.
Vishal Sharma: Relative to the adjusted EBITDA margin of 31, 6%.
Vishal Sharma: Turning now to specific details for the full year 2025, we now expect revenue in the range of 1.04 billion to 1.06 billion.
Sanjay Kalra: Turning now to specific details for the full year 2025, we now expect revenue in the range of $1.04 billion to $1.06 billion. which represents 20.4% growth from the prior year at the midpoint and 21.6% growth at the high end. This top line growth at the midpoint is higher than the initial top line growth guidance we provided for 2024 around the same time last year. Contribution profit in the range of $358 million to $366 million. This guidance represents 16% year-over-year growth at the midpoint and 17.3% at the high end. It also reflects the same factors I mentioned earlier when discussing our first quarter 2025 guidance.
Vishal Sharma: This represents 24% growth from the prior year at the midpoint.
Vishal Sharma: And 21, 6% growth at the high end.
Vishal Sharma: This topline growth at the midpoint is higher than the initial topline growth guidance. We provided for 2024 around the same time last year.
Vishal Sharma: Contribution profit in the range of $3 $58 million to $366 million. This guidance represents 16% year over year growth at the midpoint and 17, 3% at the high end.
Vishal Sharma: It also reflects the same factors I mentioned earlier when discussing over first quarter 235 guidance.
Sanjay Kalra: such as the increasing number of large enterprise customers in our client base. Favourable Deal Economist. and our substantial operating leverage. Our expected 2025 contribution profit growth at midpoint is consistent with what we initially guided for 2024 contribution profit growth around the same time last year. Adjusted EBDTA to range from $112 to $116 million. This guidance represents 21% year-over-year growth at the midpoint. and 23.2% at the high end. an increase versus the initial adjusted EBITDA growth guidance we provided for 2024 at midpoint around the same time last year. This guidance also represents a 31.5% margin on contribution profit at midpoint.
Vishal Sharma: Such as the increasing number of large enterprise customers in our client base phase.
Vishal Sharma: Favorable economics.
Vishal Sharma: And there were substantial operating leverage.
Vishal Sharma: Our expected only 25 contribution profit growth at midpoint is consistent.
Vishal Sharma: What we initially guided for 2020 full contribution profit growth.
Vishal Sharma: And at the same time last year.
Vishal Sharma: Adjusted EBITDA to range from $112 million to $116 million.
Vishal Sharma: This guidance represents 21% year over year growth at the midpoint.
Vishal Sharma: And 23, 2% at the high end.
Vishal Sharma: An increase versus our initial adjusted EBITDA growth guidance, we provided for $20 four at midpoint around the same time last year.
Vishal Sharma: This guidance also represents a 31, 5% margin on contribution profit at midpoint.
Vishal Sharma: Our non-GAAP tax rate of 25%.
Sanjay Kalra: A non-GAAP tax rate of 25%. and on a rule of 40 basis for the full year 2025. Our guidance implies a range of 46 to 49 higher than the implied rule of 40 initial guide we provided for 2024 around the same time last year.
Vishal Sharma: And on a rule of 40 basis for the full year 2025, our guidance implies a range of 46 to 49.
Vishal Sharma: Higher than the implied rule of 40 initial guide we provided for Tony guarantee for around the same time last year.
Vishal Sharma: We believe based on the strong exit backlog and solid sales momentum, we have considerable visibility and we are well positioned to deliver solid growth in 2025.
Sanjay Kalra: We believe based on the strong exit backlog and solid sales momentum, we have considerable visibility, and we are well positioned to deliver solid growth in 2025. Our business continues to run on all cylinders.
Vishal Sharma: Our business continues to run on all cylinders.
Vishal Sharma: Lastly, I am pleased to report.
Sanjay Kalra: Lastly, I'm pleased to report We significantly improved our internal controls over financial reporting during 2024, resulting in the remediation of the material weaknesses we previously reported in our SEC filing. And I would like to thank the team members that made it possible to accomplish that important objective.
Vishal Sharma: <unk> significantly improved our internal controls over financial reporting during 2024.
Vishal Sharma: Resulting in the remediation of the material weaknesses, we previously reported in our SEC filings.
Vishal Sharma: And I would like to thank the team members that made it possible to accomplish that important objective.
Speaker Change: Thank you, everyone and now I'll turn it back to <unk>.
Dushyant Sharma: Thank you everyone and now I'll turn it back to Dushyant. Thanks Sanjay. In closing, we are very proud of our fourth quarter and full year 2024 results, which were ahead of our original expectation. We ended the year with a strong backlog, which gives us confidence in our 2025 guidance. and of course, We intend to remain focused. and disciplined in onboarding our strong backlog, which we expect to keep fueling our growth. will also give us confidence. is our track record of performance. In the three years since our IPO, we have more than doubled our revenues and more than tripled our adjusted EBITDA.
Andrea: Thanks Andrea.
Speaker Change: In closing.
Speaker Change: We are very proud of our fourth quarter and full year growing 24 results, which were ahead of our original expectations.
Speaker Change: We ended the year with a strong backlog, which gives us confidence in over 2025 guidance.
Speaker Change: Of course.
Speaker Change: We intend to remain focused.
Speaker Change: And disciplined and Onboarding of our strong backlog, which we expect to keep fueling our growth.
Speaker Change: We're also gives us confidence.
Speaker Change: As our track record of performance.
And the three years since our IPO, we have more than doubled over revenues.
Speaker Change: And more than tripled our adjusted EBITDA.
Speaker Change: As you May know our performance even prior to IPO is also very exciting.
Dushyant Sharma: As you may know, our performance even prior to IPO is also very exciting. We believe this performance illustrates the strength of our operating model and the historical resilience of our business and our ability to respond to macroeconomic headwinds and recessionary pressures.
Speaker Change: We believe this performance illustrates the strength of our operating model and the historical resilience of our business and our ability to respond to macroeconomic headwinds and recessionary pressures.
Speaker Change: On that note I also want to thank all of my team members for their continued efforts and dedication to <unk> success.
Dushyant Sharma: On that note, I also want to thank all of my team members for their continued efforts and dedication to Paymentus' success.
Dushyant Sharma: The conclusion of prepared remarks, I'll now open up the line for questions. Thank you so much.
Speaker Change: That concludes our prepared remarks I'll now open up the line for questions.
Speaker Change: Thank you so much will now be moving into a Q&A session. So if you'd like to ask a question. Please press star followed by one on your telephone keypad.
Operator: We'll now be moving to our Q&A session. So if you'd like to ask a question, please press star followed by one on your telephone keypad. To remove your question, press star followed by two. Again, to ask your question, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will briefly pause here if questions are being registered.
Speaker Change: A question Press Star followed by chance again to ask a question press Star one.
Speaker Change: A reminder, if you are using a speakerphone. Please pick up your handset before asking your question. We will briefly pause here as questions are being registered.
Speaker Change: We have a question from Dave Koning of Baird.
David Koning: We have a question from Dave Koning of Baird. Yeah, hey guys, tremendous results again. And I guess my first question, when I look, I guess I look at Q1 guidance, you're guiding gross revenue down kind of mid-single digit sequentially. Historically, I think the lowest sequential growth we can see in Q1 was up 6% and more quarters like up 12 or 10.
Speaker Change: Your line is now open yet.
Speaker Change: Tremendous results again.
Speaker Change: And I guess my first question when I look I guess I look at Q1 guidance you're guiding.
Speaker Change: Gross revenue down kind of mid single digit sequentially. Historically I think the lowest sequential growth. We can see in Q1 was up 6% and more quarters like up 12 or 10 am.
Dushyant Sharma: And I'm just wondering, was there anything non-recurring in some of the large billers that joined that would create a sequential fall off? Or is it just guidance to try to make sure you hit numbers and continue to execute?
Speaker Change: I'm just wondering was there anything nonrecurring in some of the large builders that that joined that would create a sequential fall off or is it just.
Speaker Change: <unk> tried to make sure you hit numbers and continue to execute.
Speaker Change: Dave Thanks for the question appreciate it.
Dushyant Sharma: Dave, thanks for the question. Appreciate it. You know, Q1, it's interesting. We are in a very similar situation where we were just a quarter ago when we were guiding Q4. Because these new large enterprise customers have just newly been onboarded. It's been like just two quarters, you know, they came in the middle of Q3 and Q4 was the first full quarter. So we still actually have to go through a full cycle, one year cycle, I would say, to fully understand the trends before we start baking in, you know, in the full year, or maybe the quarterly guidance.
Speaker Change: Q1, it's interesting we are in a very similar situation, where we were just a quarter ago. When we were guiding Q4, because these new large enterprise customers have just nearly being onboard. It is really like just to go out and as you know the game in the middle of Q3, and Q4 was the first full quarter. So there's still actually have to go through a full cycle one year.
Speaker Change: Cycle, I will say to fully understand the trends before we started begging for it in the full year or maybe the quarterly guidance, but again, given Q1 and you know.
Dushyant Sharma: But given Q1, and you know, two months are kind of behind us, although the books don't get closed until after a few days, as you will know. So we've got some visibility into Q1, how they will trend. But we are not being very aggressive in terms of what we saw in Q4, I would say, because that could be just a short period of time to analyze trends. So we've taken a prudent view in coming up with the guidance for the full year for sure, especially for these large customers. But even for Q1, we've been prudent in terms of how the quarter may shape up.
Speaker Change: Two months are kind of behind us, although the books don't get closed until after a few days as you well know so if you got some visibility into Q1, how they will trend, but we are not being very aggressive in terms of what we saw in Q4, I will say because that could be just a short period of time to analyze trends. So we've taken a prudent view and coming up with the guidance for the full.
Speaker Change: Yeah for sure, especially for the large customers, but even for Q1 <unk> bin.
Speaker Change: Brought in in terms of how the quarter may shape up.
Dushyant Sharma: That's the only variability. And other than that, I would say the business is doing great. Our sales momentum is going really well. Our exit backlog is strong. The pipeline actually is also pretty strong. And more large customers are also there in the pipeline. So, you know, the trends could vary year over year, and quarter over quarter as we ramp and as we scale. But overall, I would say gross margin is one metric is not the only one. Whether you count gross margin or contribution profit, they all have to be considered together with the operating leverage we have in the business.
All the variability and other than that I would say the business is doing great. Our sales momentum is going really well our exit backlog is strong the pipeline is a pipeline actually also pretty strong and more large customers are also they are in the pipeline. So you know the trends good vary year over year and.
Speaker Change: And quarter over quarter, as we ramp and as the scale, but overall I would say gross margin as one metric is not the only one.
Speaker Change: Whether you go because our gross margin all contribution profit they all have to be considered together with the operating leverage we have in the business.
Dushyant Sharma: And at the end of the day, our adjusted EBITDA should be better year over year. And I'll not go more on this. I think it's a long winded answer to your question. But we exited the year with 30.2% for the full year adjusted EBITDA margin. And our next year guidance itself is 31.5 at midpoint. So even in this prudent guidance, we've taken a step ahead on improving the adjusted EBITDA margin. Yeah, no, that's that's great.
Speaker Change: At the end of the day, our adjusted EBITDA should be better year over year.
Speaker Change: I Love to go more on this I think it's a long winded answer to your question but.
Speaker Change: We exited the year with.
Speaker Change: 32%.
Speaker Change: For the full year adjusted EBITDA margin and over the next two year guidance itself is 31 five at the midpoint. So even in this prudent guidance.
Speaker Change: We've taken a step ahead on improving the adjusted EBITDA margin.
Speaker Change: Yeah, no that's great.
Dushyant Sharma: And I guess, secondly, just macro sensitivity. I mean, we're looking at a lot of potential, I guess, volatility in the macro. How resilient is your consumer base? I mean, it seems like utility payments, other monthly bills, it seems very recurring. Could you if we'd go into macro like slowdown, could you even benefit if gas prices like basically utility prices came down at the same time as your payment streams were stable, it would actually be a net benefit potentially, but maybe walk through your macro sensitivity.
Speaker Change: And I guess secondly, just macro sensitivity in the we're looking at a lot of potential I guess volatility in the macro.
Speaker Change: How how resilient is your consumer base I mean, it seems like utility payments other monthly bills. It seems very recurring.
Speaker Change: If it go into macro like slowdown could you even benefit if gas prices like basically utility prices came down at the same time as your payment streams were stable it would actually be a net benefit potentially but maybe walk through your macro sensitivity.
Speaker Change: Yes.
Dushyant Sharma: Yeah, actually, thank you, David. That's one of the reasons why we actually wanted to call out our historical resilience of our business relative to macro economic headwinds, as well as recessionary pressure. We have been operating the business for quite some time and we have dealt with different headwinds, and frankly in each of those, even though each macroeconomic environment or event has its own personality, but we have been able to grow the business during each of those primarily because of the non-discretionary nature of the household bills. Every industry we are operating in has a non-discretionary part of the household economy involved.
Speaker Change: Thank you David that's one of the reasons why we actually wanted to call out our historical resilience of our business.
Speaker Change: <unk>, two macro economic headwinds as well as a recessionary pressures.
Speaker Change: We have been operating the business for <unk>.
Speaker Change: For quite some time and we have dealt with different.
Speaker Change: Headwinds and frankly in each of those even though each macroeconomic environment or <unk>.
<unk> has its own personality, but we have been able to grow the business during each of those primarily because of the non or non discretionary nature of the household bills every industry. We are operating in.
Speaker Change: As.
Speaker Change: Non discretionary.
Speaker Change: Part of the household economy.
Speaker Change: Involved.
Dushyant Sharma: In terms of your question, there are certain scenarios where your question related to the benefits. There are certain scenarios where we could see some benefit. Of course, if consumers start making payments which are smaller but more frequently, that changes the dynamic for us. But we're not factoring any of that in. We are simply focused on trying to make sure our investors understand that you're investing and you have invested in a business that is dealing with non-discretionary household bills. People still need to have a roof over their heads. They still need to use electricity, water, gas to prepare food, and so on, or go to work in the car, et cetera.
Speaker Change: In terms of your question there are certain <unk>.
Speaker Change: Scenarios, where you have a question related to the benefits.
Speaker Change: There are certain scenarios.
Speaker Change: We could see some benefit of course of consumers to start making payments, which are smaller but more frequently.
That changes the dynamic for us.
Speaker Change: But we're not factoring in any of that and we are simply focused on trying to make sure investors understand that.
Speaker Change: We are investing and you have invested in a business that is dealing with non discretionary household.
Speaker Change: Bills people still need to have a roof on their.
Speaker Change: Over their heads it's truly too.
Speaker Change: Use electricity water gas to prepared food and so on.
Speaker Change: Go to work in the car.
Speaker Change: Et cetera, so all of that non discretionary side of the economy is still needs to continue on regardless of what's happening in the macroeconomic environment.
Dushyant Sharma: So all of that non-discretionary side of the economy still needs to continue on regardless of what's happening in the macroeconomic environment.
Speaker Change: Yes, yes.
David Koning: Yeah, thank you guys. Good job. Thank you, David. Thank you.
Speaker Change: Thank you guys good job.
Speaker Change: Thank you David.
Speaker Change: Thank you.
Speaker Change: Our next question comes from <unk> Wang of Jpmorgan.
Timson Swain: Our next question comes from Timson Swain of J.P. Morgan. Your line is now open. Thank you so much. Terrific results.
Speaker Change: Your line is now open.
Speaker Change: Thank you so much terrific results I wanted to ask.
Dushyant Sharma: I want to ask, for both of you, just thinking about the comment of your confidence to grow without New Sales, is that comment more from the strong backlog that you have and confidence in converting the backlog? Or are you also seeing Higher penetration of on-network e-payments. Is that part of the equation as well? Just trying to better understand what's evolving. It's a combination of both. It's a combination of both the same store sales, as well as the backlog. And as we pointed out, actually, we are very proud of the year we have had in 2024, because of the foundation it sets, not only for what we were able to achieve in 2024, but, frankly, our next two-year horizon.
Speaker Change: For both of you just thinking about the comment of cotton.
Speaker Change: And your confidence to grow without.
Speaker Change: New sales is that comment more from the strong backlog that you have in confidence in converting the backlog or are you also seeing.
Speaker Change: Higher penetration of our network.
Speaker Change: E payments is that part of the.
Speaker Change: To your question as well just trying to better understand what's what's evolving.
Speaker Change: It's combination of booked it's combination of both the same store sales as well as the backlog and as we pointed out actually we're very proud of the year. We have had in 2024 because of the foundation et cetera, not only for what we were able to achieve in 'twenty 'twenty four but.
Speaker Change: Frankly, our next two year horizon so.
Dushyant Sharma: So, we are very excited about that. And the strong backlog, which was net off the billers which went live in the 3Q, also gives us tremendous confidence. So, we just wanted to make sure that we follow the same prudence, same grounded guidance methodology, which has served us very well. That we want to be able to give the view to our investors that we can deliver the top-end of our guidance without signing a new client. And obviously, provided we implement, we continue to onboard our backlog. If I may just add together with the backlog and the same store sales, I would also say our pipeline, you know, we see that very strong.
Speaker Change: We're very excited about that and the strong backlog, which was net of the boilers, which went live in the <unk> also gives us tremendous confidence. So we just wanted to make sure that we follow the same prudent same.
Speaker Change: Grounded.
Speaker Change: Guidance methodology, which has served us very well that we want to be able to.
Speaker Change: Give the view toward our investors that we can deliver the top end of our guidance without signing a new client.
Speaker Change: Yes.
Speaker Change: And obviously.
Speaker Change: Provided we implement we continue to onboard our backlog and saw.
Speaker Change: I Wonder if if I may just add together with the backlog and the.
Speaker Change: Same store sales I would also say our pipeline, we see that very strong.
Dushyant Sharma: And the pace at which we have seen the pipeline converting to backlog over the past one year has been moving at a very, very good pace. Assuming those trends continue, we will be in good shape. I think we are confident because of all these factors.
Speaker Change: And the pace at which we have seen the pipeline converting to backlog over the past one year has been moving at a very very good pace.
Speaker Change: Assuming those trends continue BV and we will be in good shape I think we're confident because of all these sectors.
Speaker Change: Yeah, and just client decision, making on the dealer side too.
Dushyant Sharma: Yeah, and just client decision making on the biller side. to board in a timely way.
Speaker Change: <unk> board in a timely way I know the stock market is obviously generating a lot here is there any influence or is it helped hurt it doesn't sound like you're seeing any any change in decision, making but just just wanted to check on most of the sensitivity there.
Dushyant Sharma: I know the stock market is obviously gyrating a lot here. Is there any influence? Does it help her? It doesn't sound like you're seeing any change in decision making, but just wanted to check on the sensitivity there. We are not seeing anything in that regard. Sometimes it can be actually, these type of uncertain times can be beneficial because people are looking for efficient workflows and modernization to be able to bring about more efficiencies and reduce their costs to serve their customers while also improving their customer experience. Thank you, Dushyant, thank you. Thank you.
Speaker Change: We are not seeing anything.
Speaker Change: In that regard.
Speaker Change: Sometimes it can be actually.
Speaker Change: Type of uncertain times can be beneficial because people are looking for.
Speaker Change: Efficient workflows and modernization to be able to.
Speaker Change: Bring about more efficiencies and reduce their cost to serve their customers, while also improving the customer experience.
Speaker Change: Thank you Sean Thank you.
Speaker Change: Thank you Tien tsin.
Speaker Change: Thank you.
Speaker Change: Our next question comes from John Davis of Raymond James.
John Davis: Our next question comes from John Davis of Raymond James. Your line is now open. Hey, good afternoon, guys. Sanjay and Dushyant, it looks like there's been a pretty big step function change in your success with large enterprise billers over the last couple of quarters. So just curious what you guys think have driven that? Is that an industry change? Is that something you guys are doing? And then maybe highlight what verticals you're having success on the enterprise?
Your line is now open.
John Davis: Hey, good afternoon guys.
Speaker Change: Sanjay and Sean it looks like Theres been a pretty big step function change in your success with large enterprise builders over the last couple of quarters. So just curious what you guys think has driven that is that an industry change is that something you guys are doing and then maybe highlight what verticals you are having success on the enterprise side.
Speaker Change: Thank you John.
Dushyant Sharma: Thank you, John. I think the main thing I would say is that what what's transpiring right now is that The level of advancement that are taking place or the level of sophistication of the workflows the clients need to automate. What's happening is they're not able to do that in-house. Previously, some part of the biller segment, especially on the larger end, was beyond reach for any third-party service provider, and we used to think about legacy providers as the primary go-get for us. And now we are looking at actually legacy infrastructure, legacy install base, regardless of who it is.
Speaker Change: I think the main thing I would say is that what.
Speaker Change: What's transpiring right now is that.
Speaker Change: The level off at.
Speaker Change: Advancements that are taking place.
Speaker Change: All the level of sophistication of the workflows that clients need to automate.
Speaker Change: What's happening is and not able to do that in house previously some part of the Biller segment, especially on the larger end was beyond our reach for any third party service provider and we used to think about legacy providers are the primary go back for us and now we're looking at.
Speaker Change: Actually as legacy infrastructure, regardless of legacy installed base, regardless of who it is it.
Dushyant Sharma: It could be in-house. It could be a combination of in-house and other providers. And what we are seeing is, as a result of that, combining our platform with our IP and ecosystem, it's not easy to create that type of a reach for any company, whether it is a player in a similar space to Paymentus or actually our own potential clients, prospective clients. And that's what we are seeing. And other part which is also very important is… As the digital adoption is taking place and is becoming more and more a bigger part of a given client's payment ecosystem, there is a pressing need to look at the entire efficiency, the workflows and the efficiencies throughout those workflows, throughout those organizations, throughout the organization, whether it's inbound, whether it's outbound flows of payments.
Speaker Change: It could be in house, it could be combination of in house and other providers.
Speaker Change: And what we are seeing is as a result of that.
Speaker Change: Combining our platform with our IP and ecosystem.
Speaker Change: It's not easy to create that type of a reach for any.
Speaker Change: The company.
Speaker Change: Whether it is.
Speaker Change: A player in similar space to pay mentors or actually over one potential clients prospective clients and Thats, what we are seeing and other part which is also very important is <unk>.
Speaker Change: As the digital adoption is taking place and is becoming more and more.
Speaker Change: Part of a given clients payment ecosystem. There is a pressing need to look at the entire efficiency the workflows and the efficiencies on.
Speaker Change: Throughout those workflows throughout those organizations throughout the organization, whether it's inbound whether it's outbound flows of payments. So all of that combined gives.
Dushyant Sharma: So all of that combined gives us a pretty strong leg up, actually, because we start on the revenue side of the house, and then we can also help all of the other workflows. So that is what is causing the shift in how clients feel that they now have a partner who can deliver. cost efficiencies through innovation, but also improve the workflow through innovative framework as well.
Speaker Change: As a pretty strong leg up actually because we start on the revenue side of the house and then we can also help all of the other workflows. So that is what is causing.
Speaker Change: The the shift in how clients feel that they now have a partner who can deliver.
Speaker Change: Cost efficiencies through innovation, but also improve the workflow through innovative framework as well.
Speaker Change: Any color on verticals is a broad based kind of across the board or is it like one or two specific verticals, where you're having success with enterprises.
Dushyant Sharma: Okay, any color on verticals is a broad base kind of across the board? Or is it like one or two specific verticals where you're having success? across the board, actually, all of our verticals are doing very well. We have been one of the key decision points we made early on as an organization was that we want to design our platform, which can scale to any vertical and any size of the biller. And you're seeing combination of both right now in action, where large, no biller is too large for us, no companies too small, and no vertical is too far from from our ability to implement.
Speaker Change: Across the board actually all of our verticals are doing very well we have been one of the key decision point. We made early on as an organization was that we wanted to design or platform.
Speaker Change: Can scale to any vertical and any size of the biller and youre seeing combination of both right now an action where large nobler is too large for us no companies too small and no vertical is too far from our ability to implement them.
Speaker Change: Okay, Great and just as a quick follow up thanks, Sanjay had mentioned M&A on the prepared remarks first time in a while I've heard you guys kind of mentioned M&A, obviously know that 200 plus million dollars of cash on the balance sheet. So maybe just remind us kind of what would make sense what would you target.
Dushyant Sharma: I agree.
John Davis: And this is a quick follow up.
John Davis: I think Sanjay mentioned M&A on the preparator marks. First time in a while I've heard you guys kind of mention M&A, obviously no debt, 200 plus million dollars of cash on the balance sheet.
Dushyant Sharma: So maybe just remind us kind of what would make sense, what would you target from an M&A plan? Thank you, thank you, John. I think that's one of the things, the reason we called out M&A in the opening remarks was that there is just a lot of activity, a lot of books we get to see. And we're in a very fortunate situation that there is no functional gap, there is nothing really we need to go get, there are no gaps per se. And we are also operating with a pretty strong balance sheet and generating cash.
Speaker Change: From an M&A perspective.
Speaker Change: Thank you. Thank you John I think that's one of the things.
Speaker Change: The reason, we called out M&A in the opening remarks was that there is just a lot of activity a lot of books, we get to see.
Speaker Change: And we are in a very fortunate situation that there is no functional gap there is nothing really we need to.
Speaker Change: To go get.
Speaker Change: No gaps per se.
Speaker Change: And we're also.
Speaker Change: Operating with a pretty strong balance sheet and generating cash.
John Davis: So all of those combination actually gives us the ability to be very selective. And one of the things which we are taking a look at is, are there entities out there where we could be opportunistic and that are accretive, both on the top line or bottom line, or at least one of them, if not immediately, but in a short order. So that's what we are looking at. Okay, appreciate it. Thanks, guys. Thank you.
Speaker Change: All of those comp.
Speaker Change: Combination actually gives us the ability to be very selective.
Speaker Change: And one of the things, which we are taking a look at it all of it.
Speaker Change: Entities out there.
Speaker Change: Where we could be opportunistic and that are accretive both on the topline or bottom line or at least one of them.
Speaker Change: If not immediately but in the short order.
Speaker Change: Those are that's.
Speaker Change: That's what we that's why we're looking at.
Speaker Change: Okay I appreciate it thanks guys.
John Davis: Thank you John.
Speaker Change: Yeah.
Speaker Change: Thank you.
Operator: And as a reminder, if you would like to ask a question, please press star one or your telephone keypad. To remove your question, press star two.
Speaker Change: And as a reminder, if you would like to ask a question. Please press star one on your telephone keypad to move your question Press Star two.
Andrew Bauch: We'll now be moving on to our next question. Our next question comes to Andrew Bauch of Wells Fargo. Your line is now open. Hey guys, nice set of results. And thanks for taking the question. Sanjay, you kind of teased this with the interchange, potentially becoming a revenue center. I was hoping you kind of just expand upon that a little bit more. Is it, would that come in the form of, of new products, new partnerships? Is it a restructuring of, you know, how the existing model is organized today? Just want to better understand, you know, your bullishness around interchange.
Speaker Change: Moving on to our next question. Our next question comes from Andrew Bock of Wells Fargo.
Speaker Change: Your line is now open.
Speaker Change: Okay.
Speaker Change: Hey, guys I set of results and thanks for taking the question.
Speaker Change: Sorry that you're kind of cheese.
Speaker Change: The interchange.
Speaker Change: Centrally becoming a revenue center I was hoping you could kind of just expand upon that a little bit more is it would that come in the form.
Speaker Change: Of new products.
Speaker Change: <unk> ships is it a restructuring.
Speaker Change: How the existing model is organized today just wanted to better understand.
Speaker Change: Your bullishness around interchange.
Speaker Change: Thank you Andrew visit the shop.
Dushyant Sharma: Thank you, Andrew. This is Dushyant. I think the primary reason we wanted to bring this out in the open was we wanted to make sure our investors have a clear view, what is the strategy behind our business and why we have chosen the top line and the bottom line as our two primary metrics, while OPEX and CP are the secondary. Well, in addition to that, I think all of the things you highlighted, the production solutions, as we talked about in our opening remarks, we are looking at those, even though this is a outer ear, not immediate opportunity, but we are thinking through what production services and solutions we could be offering that can help monetize interchange.
Speaker Change: I think the.
Speaker Change: The primary reason we wanted to bring this out in the open was we wanted to make sure of our investors have a clear view how were what what is the strategy behind.
Speaker Change: Our business and why we why we have chosen the top line and the bottom line is there were two primary metrics while.
Speaker Change: Opex in CPE.
Speaker Change: The secondary.
Speaker Change: Well in addition to that I think all of the things you highlighted the production solutions as we talked about in our opening remarks, we are looking at a dose.
Speaker Change: Even though this is a outer year not immediate proportionately, but we are thinking through what products and services and solutions, we could be offering that can help.
Speaker Change: Monetize interchange partnerships as the other angle you talked about absolutely and third is the.
Dushyant Sharma: Partnerships is the other angle you talked about. Absolutely. And third is the flows of payments, the outbound payments, and even for inbound, are there other opportunities for partnership and, frankly, production solutions?
Speaker Change: The flows of payments.
Speaker Change: The the outbound payments.
And even for inbound are there other opportunities for partnership.
Dushyant Sharma: So more to come on that, but that's where we see the opportunity in multiple dimensions. Great, thank you. And then my follow up question is, I don't know if we've spoken about this before, but does DOJ have any impact on your business? I know that you guys are more exposed on the local level than the federal level. But then again, too, budgets are kind of being shifted around and moved pretty rapidly. So maybe, is there any kind of risk there? Or isn't there even maybe an opportunity as Elon and the team kind of find, you know, government legacy systems that a lot of these agencies are being run on?
Speaker Change: And frankly production solutions, so more to come on that but that's where we see the proportionately.
Speaker Change: In multiple dimensions.
Speaker Change: Great. Thank you and then my follow up question is.
Speaker Change: Don't know if you've spoken about this before but does does that have any impact on your business I know.
Speaker Change: You guys are more exposed on the local level than the federal level, but then again two budgets are kind of being shifted around in pretty pretty rapidly. So maybe is there any kind of risk there or is there even maybe an opportunity as ilan and the team kind of find.
Speaker Change: Government legacy systems that a lot of these these agencies are being run off.
Speaker Change: Yes first of all there is no no risk to us we don't deal with we don't have any contracts with federal government.
Dushyant Sharma: Yeah, first of all, there is no, no risk to us. We don't deal with, we don't have any contracts with federal government yet. But obviously, there could be opportunities as they look for modern systems versus the legacy solutions they've been operating with. In terms of the local municipalities and so on, which is where our focus has been, we actually are in a pretty unique situation where we are the source of revenues. For all of these agencies, so we feel very good about which part of the economy we are serving, and which part of the workflow we are serving for them.
Speaker Change: Yet.
Speaker Change: But obviously there could be a portion of these as they look for modern systems.
Speaker Change: Versus the legacy solutions, they've been operating with.
Speaker Change: In terms of the local municipalities and so on which is where our focus has been.
Speaker Change: We actually are in a pretty unique situation, where we are the source of revenues.
Speaker Change: For all of these.
Speaker Change: Agencies, so we feel very good about which part of the economy be or something and which part of the work will be of solving for them.
Speaker Change: So we feel good about you still have to pay your bills.
Dushyant Sharma: So we feel good about you still have to pay your bills. So whether it is water bills or property taxes. Great, thank you. Thank you.
Speaker Change: So.
Speaker Change: Whether it is water bills of property taxes and so on.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Matt O'neill of Ft partners.
Matt O'Neill: Our next question comes from Matt O'Neill of FT Partners.
Speaker Change: Your line is now open.
Matt O'Neill: Your line is now Yeah, good afternoon, gentlemen. Just curious to confirm, I believe the sort of methodology and philosophy around guidance is exactly the same as it's been in prior years. Dushyant, I know you mentioned at the beginning of this call, before Sanjay went through the guide, just that you'd be confident in your ability to hit the top end of the range without any new signings. I believe that's how you guys have contextualized the guide in prior years. If you could just confirm that first. Yes, that's absolutely right, Matt. We, we are following the very similar guidance, same philosophy of coming with quarter and annual guide as we follow in the prior year.
Speaker Change: Yeah, Hi, good afternoon, gentlemen, just.
Speaker Change: Just curious to confirm I believe the sort of methodology and philosophy around guidance is exactly the same as its been in prior years.
Speaker Change: I know you mentioned at the beginning of this call, but first Sanjay I went through the guide just that you'd be confident in your ability to hit the top end of the range without any new signings I believe that's how you guys have contextualize the guide in prior years, if you could just confirm that first.
Sanjay Kalra: Yes, that's absolutely right Matt.
Speaker Change: We are following the very similar guidance theme philosophy of coming with go offer an annual guide as he following the prior year.
Dushyant Sharma: We want to be prudent in our approach, we want to remain grounded and execute well. And with the benefit of hindsight, this approach of guidance has served us well. And when we say top end is achievable, which means we don't need any new customer bookings to get there, but definitely we have to continue doing the implementations as planned. So, yeah, we remain committed to our Kagan-Nance model, and that's the best.
Speaker Change: We want to be prudent in our approach to all of them and grounded and execute well and.
Speaker Change: With the benefit of hindsight. This approach of guidance has served as well and when we say it all blended achievable.
Speaker Change: Which means we don't need any new customer bookings to get there, but definitely we have to continue doing the implementations as planned.
Speaker Change: So yes, we remain committed to all of gigabyte of intermodal and that's the basis.
Speaker Change: Understood I appreciate that.
Matt O'Neill: Understood, appreciate that.
Sanjay Kalra: And just two questions sort of around the evolving mix of the business as it goes into larger enterprise. And you mentioned in the prepared remarks, larger builders seeking volume based discounts, we still saw, you know, the observable revenue per transaction tick higher. So is it just that, you know, volume based discounts are being more than offset by a mix of, you know, more card funded payments by consumers at newer partners? I just want to unpack kind of those dynamics. Thank you. Yeah, Matt. So what's happening is as we are adding these large enterprise customers, their revenue per transaction is higher than what we had before we started onboarding these large customers.
Speaker Change: And just two questions here of around the evolving mix of the business as it goes into larger enterprise and you mentioned in the prepared remarks.
Speaker Change: Larger builders seeking volume based discounts, we still saw the observable revenue per transaction take higher. So is it just that volume based discounts are being more than offset by a mix of more card funded payments by consumers at newer partners.
Speaker Change: And just wanted to unpack kind of those dynamics. Thank you.
Speaker Change: Yeah, Matt So what's happening is as we are adding these large enterprise customers.
Speaker Change: Revenue per transaction is higher than what we had before we started onboarding. These large customers. So all our average.
Sanjay Kalra: So our average revenue per transaction for the entire company is now increasing as you saw it, like 155. Our contribution profit per transaction is very similar, $0.52 per transaction as it came in Q4 versus $0.53 per transaction in the prior year, same period. So overall, what we are seeing is we are getting the benefit of volume. Our profitability is further helping, sorry, our profitability is growing because the contribution profit per transaction is very similar. And because we have very good operating leverage, we are able to increase our adjusted EBITDA and margins both. So the revenue is higher, maybe you'll say the network fees is also higher, but contribution profit per transaction is coming similar.
Speaker Change: Revenue per transaction for the entire company is now increasing as you saw like 155.
Speaker Change: Other contribution profit per transaction is very similar 52 cents per transaction as it came in Q4 versus 53 cents per transaction in the variety of the same period.
Speaker Change: So overall, what we are seeing as we are.
Speaker Change: Getting the benefit of volume, although profitability is further helping oh, sorry of our profitability is growing because the contribution profit per transaction is very similar and because we have very good operating leverage we are able to increase our adjusted EBITDA.
Speaker Change: And margins book So the revenue is higher maybe you will say the network fees those are higher but contribution profit per transaction is coming similar. So this dynamic could change and shift as we onboard not only large sized clients, but mid size and small size because we have a large bam to capture as Sean mentioned in his opening remarks.
Sanjay Kalra: So this dynamic could change and shift as we onboard, you know, not only large size clients, but mid size and small size, because we have a large TAM to capture, as Dushyant mentioned in his opening remarks. And on our journey to market capture, we could be getting clients of different sizes, different verticals, and they could change our per transaction dynamics. And although we think per transaction is more of an output of our model rather than an input, our goal still remains that can we deliver a good growth and provide a decent profitability. Rule of 40, which came to a record 62 is kind of indicative of our strategy that the contribution profit is not really meaningful in itself, unless and until it's combined with operating leverage.
Speaker Change: On our journey to market capture we will be getting clients of different sizes different verticals and they could change all are large transaction dynamics and although we think per transaction is more of an output of whole model rather than an input. Our goal still remains that Gan will deliver good growth and provide a decent profitability.
Speaker Change: Rule of 40, which came to a record 60 do is kind of indicate they are of our strategy that.
Speaker Change: The contribution profit is not really meaningful in itself unless and until it is combined with the operating leverage and that's the message we want to bring home in the past few quarters. We've tried to do that we want to make sure that is well understood by the anti investment investor base that our adjusted EBITDA growth and margin is a mix of contribution profit.
Sanjay Kalra: And that's the message we want to bring home. In the past few quarters, we've tried to do that. We want to make sure that's well understood by the entire investor base that our adjusted EBITDA growth and margin is a mix of contribution profit and operating leverage, which all starts from getting higher revenues. Hence, they are our primary metric.
Speaker Change: And operating leverage which all starts from getting higher revenues, hence the out of our primary metrics.
Speaker Change: Understood. Thank you for the commentary I appreciate it.
Matt O'Neill: Understood. Thank you for the commentary. Appreciate it.
Speaker Change: Sure.
Thank you.
Operator: Thank you.
Speaker Change: They seem to be no questions waiting at this time, so I will now pass it back over to the management team for any closing remarks.
Operator: There seems to be no questions waiting at this time, so I'll now pass it back over to the management team for any closing remarks. Thank you, everyone. Have a great day. Thanks, bye-bye. Thank you.
Speaker Change: Thank you everyone.
Have a great day.
Speaker Change: Bye bye.
Speaker Change: Thank you Doug.
Operator: That will conclude today's call. Thank you for your participation.
Conclude today's call. Thank you for your participation you may now disconnect your lines.
Operator: You may now disconnect your line.