AvidXchange Holdings, Inc.

Good day and welcome to the AVID Exchange third quarter 2021 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Ryan Stahl, General Counsel. Please go ahead.

Good afternoon, everyone, and thank you for joining us for the Avid Exchange Holdings third quarter 2021 conference call. With me today is Mike Prager, Avid Exchange's co-founder and chief executive officer, and Joel Wilhite, Avid Exchange's chief financial officer. Before we begin today's call, I'd like everyone to please take note of the safe harbor paragraph that is included at the end of today's press release. This paragraph emphasizes the major uncertainties and risks inherent in the forward-looking statements we will make this afternoon. Please keep these uncertainties and risks in mind as we discuss financial guidance, operational outlook, future strategic initiatives, and potential market opportunities during today's call. 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 and in the investor supplement, each found on Avid Exchange's investor relations website, we have provided reconciliation of these non-GAAP financial measures to the company's financial results prepared in accordance with GAAP. With that, I will now turn the call over to Mike Prager.

Thank you everyone for joining us for Avid Exchange's first earnings call as a public company. It's great to be connecting with all of you today. Our transition to a public company was a significant milestone for Avid Exchange, and we were able to celebrate that occasion by ringing the NASDAQ bell from our campus here in Charlotte, North Carolina, just a few weeks ago. We achieved this through a lot of hard work, and I want to thank all my Avid Exchange teammates for making this a reality. I'm so proud of all we've collectively accomplished in the last 20 plus years in building our business. Joe Willight and I are excited to share our third quarter results as well as an overview of our business, future growth strategies, and where we are seeing momentum and continued success in driving our Avid Exchange business flywheel. With that, I'll begin my remarks with our third quarter highlights. Total revenue for the quarter was over $65 million. an increase of 37% from Q3 of 2020. And we processed over 16 million transactions during the quarter, an increase of over 17% from Q3 of 2020. Overall, our third quarter results reflect continued strong demand for our software and payment solutions, along with solid execution against our key growth initiatives. The strong momentum we are seeing in the business gives us confidence in our full year 2021 financial outlook, which Joel will discuss in more detail later in the call. Now, before I talk about some recent and exciting new business developments, since it's the first time we are discussing our quarterly results in a conference call format, I thought it would be helpful to drill down deeper into how our business works. Avid Exchange is a software company that is purpose-built to help middle market companies automate their accounts payable and payment processes. In addition, I'd like to spend more time discussing our long-term growth plan through the lens of our Avid Exchange business flywheel, along with our strategies to capture the significant greenfield opportunity that we believe exists in the middle market. Approximately 42% of U.S. business-to-business payment volume is still paid by using paper checks, and we believe that number of middle market companies manually approving invoices and utilizing paper checks is actually much higher. With that, let me start off by articulating the market opportunity that we see in front of us. We believe that the middle market segment is the largest portion of the overall accounts payable automation and business to business payments market. In addition, this large and growing market is facing unique challenges such as inefficient legacy solutions that are manual and paper intensive, complex integration requirements supporting various vertical industries, unique business process requirements, and supporting ERP or accounting software solutions, high cost related to manual complex accounts payable workflows, and finally, a status quo mindset of traditional long tenured finance leaders being reluctant to change. As companies continue to automate complex accounts payable workflows and replace paper checks with alternative electronic payment methods, we estimate more than $20 billion in addressable annual revenue opportunities across both accounts payable automation solutions and business-to-business payment transactions for the middle market. In addition to providing B2B payments, we see a large unmet need in supplier financing, which we believe is an additional 20 billion of white space opportunity, bringing our total estimated addressable market to over 40 billion. To take advantage of this opportunity, we've created Avid Exchange, which is purpose-built to deliver a significant value proposition by seeking to make inefficient and expensive paper-based B2B payments and invoices obsolete for middle market companies. We seek to deliver further value to our mid-market buyer customer by automating their accounts payable invoice and payment process, managing their complex business rules and supporting multiple general ledger systems, and converting paper-based checks into intelligent electronic transactions. Simply speaking, our mission is to eliminate both the paper invoice and the paper check for our customers. We also seek to deliver value to our supplier customers by providing payments efficiently and securely, managing their business rules for their preferred digital payment acceptance methods, and providing rich for men's data along with visibility into their invoice and payment statuses. In addition, we provide value-added invoice financing services through our emerging invoice accelerator offering, which is a key feature of our AvidPay network designed to enable suppliers to better manage their cash flow through directly controlling when they receive payment. This two-sided network that we built, serving both buyers and suppliers, generates a tremendous flywheel effect for our business. Our Avid Exchange business flywheel shows how we work to create value for our buyer and supplier customers, and it reinforces and accelerates other value we generate, driving continued growth by delivering a great customer experience for our 7,000 buyer customers and over 700,000 supplier customers on the Avid Pay network. Our Avid Exchange flywheel begins with gear number one, which is delivering great accounts payable automation and payment software. We believe our ability to deliver a great software automation experience draws buyers to our platform. Our product removes the paper, automates business rules and workflows, along with reducing payment fraud risk, bringing all invoices and payments into one cloud-based platform that can be accessed anytime, anywhere by all of our customers. To accelerate the first year of our flywheel, we're working to maximize our go-to-market strategies horizontally across the middle market, along with focusing on eight specific core verticals, which include real estate, the homeowner association or HOA market, financial services, which includes tier two and tier three banks, along with credit unions, construction, media, healthcare facilities, social services and nonprofit organizations, along with education. Through our hybrid go-to-market strategy utilizing both direct and indirect channels. Our direct sales force leverages our deep domain expertise in these verticals and over 120 referral partner relationships to identify and attract buyers that would benefit from our accounts payable software solutions along with automating their payment process via the AvidPay network. On the indirect channel side, our strategy is built on key accounting system integrations, reseller partners, and other strategic relationships, such as our exclusive strategic partnership with MasterCard through their MasterCard B2B hub, which includes Fifth Third Bank, along with Bank of America, and other financial institutions, such as KeyBank and third-party software providers, such as MRI Software, RealPage, and SAP Concurb. New customers in the third quarter spanned across Avid Exchange's core verticals, including Goodwin & Company within our HOA vertical, Case & Associates Properties, and Robert High Development within our real estate vertical, along with Fusion Transport and BPS Supply Group, just to name a few. Customers across each of our verticals are looking to add both Avid Invoice to automate their accounts payable process, along with Avid Pay to automate their supplier payment process. One recent example in Current Holdings, a Florida real estate firm, had a history of incorrect and delayed payments to its vendors due to a flawed accounts payable system that was costing them several thousand dollars a month. Using Avid Exchange software, they're able to achieve three key objectives. First, they're able to customize their workflow approval functions to automate their invoices and payments. Second, they wanted to reduce incorrect payments and non-approved payments, and third, They wanted to have real-time, anywhere access to their accounts payable data. We're seeing good traction in our financial services vertical. As an example, the pace of credit union customer additions has expanded by 38% year-to-date, with credit union additions more than doubling. By drawing buyer customers to our AP automation software platform, we enable the second flywheel gear, which is maximizing the number of transactions we manage on our platforms. By combining our business model to be the system of record for all buyer AP transactions, along with managing the entire payment file for their payments, we're able to maximize the overall number of invoice and payment transactions that we manage for our customers. Furthermore, we strive to provide a great customer experience through integrations between our buyer customers' accounting systems and our invoice management platforms in our AvaPay network. Today, we manage over 210 integrations with the most widely used accounting and ERP systems, and we support a variety of payment methods depending on the supplier's preference, including virtual card, or VCC, enhanced ACH, or our avid pay direct offering, and physical checks, while delivering rich for mince data to streamline the reconciliation process, supporting the middle market and the various industry verticals that make up the middle market. We view these strategies and integrations as critical key differentiators for Avid Exchange. Our competitors don't necessarily want all their customers' volume, whereby they focus on only specific transaction types, which we believe creates a real long-term advantage for us as we want both the own, the buyer, and the supplier customer experience and deliver an industry-leading and unique long-term value proposition to our customers. The development of channels and partnerships for distribution is is also key to enabling the growth of transactions on our platform. Further proof of our continued progress in maximizing the number of transactions under management is that we processed over 16 million transactions in the third quarter, up approximately 17% year over year. Once a customer's invoice and payment volume is on our platform, we seek to create additional value by utilizing the Avapay network to facilitate the conversion of paper checks to intelligent e-payments. which is our third gear. We have over 700,000 suppliers that we pay through the Avipay network. We combine specifically designed business process with technology to dynamically manage the various business rules, along with managing the preferred payment methods for these suppliers. By managing their payment business rules, we also manage how they would like to receive their electronic remittance data so they can apply the payment to the correct supplier account and invoice number. along with enabling suppliers to more efficiently reconcile their outstanding invoices. We're excited to see continued growth in the number of enrolled e-payment suppliers receiving electronic payments from the AvaPay network. E-payment suppliers are defined as those suppliers that we've enrolled in one of our various AvaExchange virtual card payment offerings, as well as our AvaPay Direct modalities. AvaPay Direct is our version of ACH+. where we settle through ACH but wrap the transaction with electronic remits data the supplier needs to automatically apply and reconcile each payment, giving them the payment speed, security, and remits data that they require. We consider our Abbott Pay Network to be our secret sauce and is a significant competitive advantage versus others who have primarily outsourced their supplier payment engagement and settlement efforts. We've made a large investment each year since we launched the Abbott Pay Network in 2012 and anticipate significant future return on our investment given that we expect our Avid Pay network to be a long-term differentiator and driver of future margin expansion as we own the entire supplier experience from invoice submission through the payment acceptance by systematically automating each supplier's unique business rules for payment, acceptance, and delivery of remittance data. Our Avid Exchange business flywheel, Accelerant, is a continued focus on automating key business processes to improve the speed and reliability of our payment offerings, along with additional monetization features created for our fourth gear. Our fourth gear is designed to leverage the data of our network to further increase the value proposition we are delivering to both our buyer and supplier customers, which leverages the 20-plus years of data that we've captured detailing each buyer and supplier transaction. Our single cloud-based platform for invoices and payments enables us to abstract all the learnings from these buyer and supplier relationships, and use it to target new verticals for expansion, as well as new innovations, such as advanced spend management analytics, as well as data related to specific invoice types, such as utility bills, insights into the management of their cash flow, and financing features for our customers. A great example of this today is our emerging invoice accelerator offering, in which we utilize the data of our Avid Pay network along with the historical payment trends between buyers and suppliers to underwrite specific invoices that are eligible to be advanced for next day payment, creating a very unique and differentiating value proposition for our supplier customers, enabling them to get paid when they want to get paid. Focusing on how we can invest in accelerating our Avid Exchange business flywheel not only provides us with increased transactional monetization opportunities, but also serves as a source for continued innovation, growth, and market leadership across the middle market. So to summarize, we believe we built a powerful flywheel business model that is well positioned to capitalize on this massive growth opportunity and the adoption catalyst propelling our business by executing on our focus, key strategic growth drivers, which include, number one, the driving the number of overall transactions processed by acquiring new buyers and suppliers, along with increasing the number of transactions processed between each of our existing buyers and their suppliers. Number two, increasing conversion of paper checks to electronic payments. We believe there is a significant opportunity to increase the penetration of electronic payments as paper checks is still comprised over 42% of overall businesses to business payments in the United States today across all sectors of the middle market, and we estimate that the number of companies predominantly using paper checks across the middle market to be significantly higher. Avid Exchange is the leader in driving ePayment adoption through our innovative products and processes. Number three, innovation and delivery of new products. We'll continue to leverage the rich data and business insights that we've accumulated across buyer and supplier transactions, enabling us to strategically leverage this data to develop new innovations and capabilities. Number four, entering new vertical markets. We'll continue to supplement our organic growth by pursuing strategic mergers and acquisitions to expand new verticals and horizontal capabilities. For example, in Q3, we entered the media vertical by acquiring FastPay, a leading provider of payments automation solutions for the media vertical industry. Number five, cross-border and international expansion. We're currently developing a cross-border payments offering targeted generally available for customers across multiple software releases over the course of 2022. On top of our unique market opportunity, flywheel effect, and moat that we've already developed within the middle market, we're in the early days of seeing four catalysts unfold that we believe will be accelerators across the middle market for our offerings, which include, first, the pandemic highlighted the importance of automation for business continuity and support work from home, and hybrid workforce models. Second, there have been growing concerns over fraud risk and data privacy with paper invoices and paper checks. In fact, the majority of payment fraud in the middle market occurs with paper checks. Third, familiar technology with users having experienced benefits of cloud-based solutions for automation in other back-office processes. And fourth, which long-term may be the most impactful of all the catalysts, is the generational shift or millennial effect, as I like to call it, with tech savvy younger generation finance leaders taking on increased leadership roles in middle market companies. We are certainly excited about the future of Avid Exchange, and I look forward to updating you on our progress during future calls. So in closing, we delivered strong third quarter 2021 financial and operating results, and our momentum heading into 2022 is very encouraging. We continue to drive success for Avid Exchange and our customers by growing and enhancing our offerings, services, and talent to help more businesses transform and automate their accounts payable and payment processes. We believe our results and continued progress against our key growth initiatives are indicative of our commitment and focus on creating long-term value for all of our stakeholders for many years to come. Now I'll turn the call over to Joel so he can provide a review of our financial results from the third quarter and review our 2021 full year guidance. Joel?