AvidXchange Holdings, Inc.

Avid Exchange's Chief Financial Officer, and Subhash Kumar, Avid Exchange's Head of Investor Relations. Before we begin today's call, management has asked me to relay the four looking statements disclaimer that is included at the end of today's press release. This disclaimer emphasizes the major uncertainties and risks inherent in the four looking statements the company will make this afternoon. Please keep these uncertainties and risks in mind. as the company discusses future strategic initiatives, potential market opportunities, operational outlook, and financial guidance during today's call. 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 form or as a substitute for financial information presented in compliance with GAAP. Accordingly, at the end of today's press release, the company has provided a reconciliation of these non-GAAP financial measures to financial results prepared in accordance with GAAP. With that, I will now turn the call over to Mike Prager.

Thank you, everyone, for joining us today. Joe Willard and I are excited to share Avid Exchange's fourth quarter 2021 results. and the continued momentum we are experiencing across our business, driven by our middle market focus and the four growth gears of our Avid Exchange business flywheel. Overall, we delivered another solid quarter of both operational and financial performance. Furthermore, we outperformed nearly every key metric we used to measure the progress of our business, both in Q4 as well as for the full year relative to our previous guidance. These positive results reflect our middle market's steady demand for Avid Exchange's industry-leading and differentiated business-to-business accounts payable automation software and payment solutions. As we advance our key growth initiatives, we are optimistic and excited about Avid Exchange's future as we enter 2022 with a strong business outlook. With that, I'll begin my formal remarks and key highlights from the fourth quarter and full year of 2021 results. Our total net revenue for the quarter was over $69 million, an increase of 31% over Q4 of 2020. And we processed over 16 million transactions for the quarter, an increase of roughly 15% compared to Q4 of 2020. Total payment volume was up in excess of 37% to over $15 billion in the fourth quarter of 2021 alone over the same comparable period. And our total transaction yield for the fourth quarter of 2021 increased more than 14%, to $4.21 versus $3.68 per transaction in the comparable period last year. Turning to the full year of 2021, our total net revenue for the full year was over $248 million, an increase of approximately 34% from a year ago. And we processed over 62 million transactions during the year, an increase of over 18% from a year ago. Total payment volume increased approximately 38% to exceed $52 billion in 2021 versus roughly $38 billion in 2020. In addition, we processed over $180 billion of spend under management during the year, which was an increase of over 24% over 2020. And finally, in 2021, we saw a solid 13% increase in our total transaction yield of $3.98 over versus 3,052 cents per transaction in the comparable period. As a B2B accounts payable automation software and payment solutions leader targeting the large middle market segment of over 435,000 companies just in the U.S. market alone, our competitive advantage is fueled by a strategic framework encompassing our Avid Exchange business flywheel. As a reminder, the first growth gear of our flywheel outlines our delivery of great AP automation software solutions to our buyer customers. Proof of our year-one success can be seen in Avid Exchange's continued dedication to enhancing our industry-leading vertical and horizontal accounting software integrations, as well as our referral partnerships. In 2021, we increased the number of customer referral partnerships by 50% to have over 180 partners today versus 120 partners a year ago. Over the same period, we broadened our accounting software integrations to 220 up from 210 a year ago. The second gear of the business flywheel maximizes the transactions managed in our platform. In 2021, we reached $180 billion of spend under management, an increase of 24% from 2020. This was primarily due to increasing the number of ad exchange buyer customers, which rose to over 8,000 in 2021, which is up from 7,000 in 2020, as well as our enrolled supplier customers, which increased to 825,000, off from $700,000 a year ago. The buyer-customer growth was driven by the strength across all eight of our industry verticals, highlighted by a strong performance in our real estate and financial services verticals, along with our bank channel partnerships, while we saw the green shoots of recovery in our homeowner association, or HOA management market, as we call it. The third year of our Avid Exchange business flywheel is focused on further maximizing our industry-leading e-payment monetization and converting suppliers to begin acceptance of one of our various forms of electronic payment on the Avid Pay network. In 2021, suppliers using e-payments on the Avid Pay network grew by 18%, which mirrors the growth of the addition of total suppliers on our network. This data highlights the rapid adoption of e-payments by suppliers and deepens our overall value proposition of the Avid Pay network for our suppliers. The fourth year of the Avid Exchange business firewall enables us to leverage data to drive increased value proposition of our existing products to both our buyer and supplier customers, as well as develop new data-driven offerings altogether. Examples include existing products such as Avid Utility, which further enhances our clients' ESG initiatives through advanced energy consumption analysis, along with the utilization of data analytics to deliver invoice accelerator and cash flow manager offerings for our supplier customers. In addition, we're really excited about the launch of our new Avapay network cross-border payment capabilities that we'll be releasing over the course of this year. Now let me take a step back and give you an idea of how uniquely purpose-built value proposition solutions address a significant pain point for our middle market customers. I'd like to highlight a few customer case studies from three of our newest vertical markets, which include healthcare facilities, education, and our media vertical markets, about how our solutions have positively impacted our customers' accounts payable and payment processes through driving increased efficiencies, visibility, and cost savings. In the healthcare facilities vertical, Reese's Dental Embraces is a perfect illustration of the power of Avid Exchange's AP automation software coupled with our Avid Pay network. Reese's Dental Embraces provides general dentistry and orthodontics for patients at more than 23 locations throughout Arizona, Colorado, Nevada, and Texas. The controller at Resa historically executed a very manual accounts payable process by printing paper checks or creating PDF pay stubs in the company's accounting software before manually reentering each of these invoice and ACH payments into their banking portal. This cumbersome manual process took the controller and accounts payable specialist several days to complete. After implementing Avid Exchange to automate and streamline their AP and payment processes, Resa was able to cut the time needed to manage its AP process by over 75%. In the education vertical, we support Mountainland Applied Technology College, with an enrollment of over 3,000 students located in Orem, Utah. Mountainland uses Avid Exchange for their supplier invoice processes and payment execution. The biggest driver for their automation was eliminating their use of paper, which dramatically reduced their paper handling, filing, and storage costs. In addition, AVID Exchange addressed one of the biggest challenges in the post-secondary educational space, which is compliance. As a state-regulated entity, the college was able to follow their purchasing and payment processing policies electronically through AVID Exchange, thereby ensuring high compliance and audit standards. And finally, AL Media. is a politically focused media agency. As the consumption of media by voters continues to evolve, the challenge for AL Media was determining which media advertisements actually ran on air, with reconciling payments after the election was over, which historically was a very tedious, manual, and time-consuming process. The solution AL Media turned to was FastPay, an Avid Exchange offering designed specifically for the media vertical to help pave the way for the 2022 political season. FastPay Political Plus was built specifically for political media agencies to better manage the reconciliation and refund process, providing an enhanced ACH or ACH Plus payment solution and driving significant operational efficiencies by addressing the manual and time-consuming payment processes, which can significantly slow down the operations of running a political campaign and making timely payments. I would now like to discuss our long-term growth, margin expansion, and future profitability of our business before I turn it over to Joel. Based on the size, growth, market leadership, and long-term profit opportunities we see in the middle market segment, we believe we can compound our top-line growth organically at a rate of 20% plus over the next several years. With less than 1% share of the total addressable market of around $40 billion served by Avid Exchange today, we are still in the early innings of tapping the overall market opportunity. Further accelerating our market penetration will require we continue to build out our horizontal software solutions and continue release of new integrations as well as we develop new industry verticals and international expansion. In addition, we plan to complement this organic growth sales strategy with the selective use of strategic acquisitions as we've been successful in doing in the past. Moving in lockstep with our investments, We are highly confident in our gross margin expansion levers, along with our path to profitability. We believe that we will achieve profitability by continuing to advance our invoice payment automation initiatives, as well as continue to convert thousands of paper check suppliers to e-payment accepting suppliers on the Avapay network. This will further be complemented by revenue scale and operating expense leverage, resulting in steadily improving of our EBITDA as we move towards our long-term EBITDA margin of over 25 percent. Starting with gross margin, we expect our non-GAAP gross margin to steadily improve from the low 60 percent range today to over 75 percent by continued reduction in unit cost through automation and expansion of our revenue yield. Given the current pace of progress, we expect it to be approaching over 70 percent milestone by the end of 2024. Key levers in our unit cost reduction include the use of AI, machine learning, and straight-through processing to reduce manual efforts in invoice processing and payment execution. For example, in 2021, we automated 75% of the delivery of e-payments, which was up from 60% in 2020, and have high confidence in our continued automation initiatives. Moving on to our operating expenses, Increased economies of scale will drive EBITDA margin expansion towards our targeted level of 25%. After 2022, our first full years of public company, we also expect meaningful leverage on the G&A expense line. Our significant investments in R&D for future growth and product initiatives development will also taper off as a percentage of revenue as we enter in 2024. In wrapping up my prepared comments, 2021 was an extraordinary year for Avid Exchange. Apart from solid financial and operating results, we completed our transition to be a public company, along with raising a significant amount of strategic capital to fuel our future growth. We also completed a strategic acquisition that expanded our market coverage to include the media vertical, while winning several different industry awards for our AP and payment solutions. 2021 also continued our path of progress with strategic partnerships. We forged a new strategic commercial virtual card processing relationship with WEX to provide us with what we believe is best-in-class pricing and execution for virtual card processing. This relationship will enable our two teams to collaborate together in driving overall e-payment adoption and deployment of dynamic payment offerings to increase supplier acceptance of e-payments. Also noteworthy, we renewed our existing relationship with FleetCorp, whose subsidiary Comdata has been a processing partner for us since 2013. Additionally, we formed several new partnerships which provide significant benefit to Avid Exchange, including our strategic customer distribution relationship with Bank of America, which is now marketing a branded Avid Exchange AP automation and payment solution to their middle market customers. Lastly, our Avid Exchange culture continues to be a key competitive advantage for us in attracting and retaining the talent we need across the business to execute our growth and innovation priorities. This includes executive team leaders such as Joe Fox, our new chief product officer who we recruited in Q4 to lead our overall product strategy. In addition, we added 20 other senior leaders during our business in 2021 as we prepared to become a successful public growth company. We believe this combination of talent, market opportunity, and our balance sheet capital will further deepen our leadership position in delivering innovative accounts payable and payment automation solutions the middle market companies, not only in 2022, but for many years to come. As always, I look forward to updating you on our progress during future earnings calls. I will now turn the call over to Joel to provide more detail on our financial performance, key metrics, and our full year 2022 guidance. Joel?

Thanks, Mike, and good evening, everyone. I'm excited to talk to you today about our strong Q4 financial results, which reflect continued execution of our growth strategies and to provide guidance for the full year 2022. Before I discuss Q4 versus last year, let me go over Q4 21 actuals versus our guidance. The midpoint of our implied revenue guidance for fourth quarter 2021 was $65.9 million. We came in at $69.3 million, beating our guidance midpoint by $3.4 million, or about 5%. We also exceeded the top end of the implied revenue guidance range. Higher total payment volumes and higher transactions contributed to revenue outperformance relative to our implied guidance. The higher than expected revenue growth largely fell through, contributing to a lower than anticipated EBITDA loss in the fourth quarter of 21 versus our implied guidance. Now turning to Q4 2021 versus Q4 2020 financial results. Total revenue increased by 31% to $69.3 million in Q4 of 2021 over the fourth quarter of 2020. Organic revenue growth, which excludes the contribution of our core associates and fast pay acquisitions, which closed in December 2020 and August 2021 respectively, was 20.5%. Organic growth was primarily driven by the addition of new buyer invoice and payment transactions, which increased e-payments to suppliers. Our strong revenue growth also resulted in total transaction yield expanding to $4.21 in the quarter, up 14.4% from $3.68 in Q4 2020. Roughly half of the increase was associated with improvements in each of software and payments yields, and to a lesser extent, a mixed shift towards pay, with the remaining half being inorganic. Software revenues of $23.5 million, which accounted for 33.9% of our total revenue in the quarter, increased 31.3% in Q4 of 2021 over Q4 of 2020. Core Associates contributed $2.5 million of revenue to the quarter, or close to half the software revenue growth rate. The increase in software revenues was driven primarily by the growth in total transactions of roughly 15% in Q4 of 2021. Payment revenue of $45.1 million, which accounted for 65.2% of our total revenue a quarter, increased 33.4% in Q4 of 21 over Q4 of 2020, of which FastPay represented 9.2 points of growth, or $3.1 million. The increase in payment revenues was driven by the growth in total payment volume of 37%, or 33% excluding FastPay. On a GAAP basis, gross profit of $35.2 million increased by 32.8% in Q4 of 2021 over the same period last year, resulting in a 60 basis points improvement in gross margin for the quarter to 50.8%. Non-GAAP gross margin increased 400 basis points to 62.2% in Q4 of 2021 over the same period last year, with two-thirds of the increase driven by increased total transaction yield in the quarter and continued operational efficiencies. The remaining third was margin contribution from the previously discussed acquisitions. Moving on to our operating expenses. On a gap basis, total operating expenses increased by 76.6%, in Q4 of 21 over Q4 of last year, primarily driven by the impact of recognition of non-cash stock-based compensation costs resulting from completing our IPO in Q4 2021. On a non-GAAP basis, operating expenses increased 35.5% or $13.4 million to $51.2 million in the fourth quarter of 2021 from the comparable period. I will now talk about each component of the change in operating expenses on a non-GAAP basis. Non-GAAP sales and marketing costs increased by $3.8 million to $16.2 million in Q4 of 2021 over Q4 of last year, with the increase driven by the continued investment in our direct and channel strategies to acquire new buyers and suppliers, as well as the consolidation of core associates and fast pay results. Non-GAAP research and development costs increased by $5.5 million to $17.7 million in Q4 of 2021 over Q4 of the prior year. The increase was due to continued investment in our products and platform along with the inclusion of Core and FastPay. Non-GAAP general administrative costs increased by $4.1 million to $17.3 million in Q4 of 2021 over Q4 of of the prior year, driven largely by expenses in preparation and transition to become a public company, along with the inclusion of core and fast pay. Our gap net loss was $72.1 million for the quarter versus a gap net loss of $32.6 million in the prior year period and was driven by a combination of the recognition of non-cash stock-based compensation and deal costs associated with completing our IPO in Q4 2021, together with a mark-to-market adjustment for convertible common stock liability prior to conversion upon the IPO, and the previously discussed investments and inclusion of core and fast pay. On a non-GAAP basis, our net loss in the fourth quarter of 2021 was $17.7 million, up only $1.5 million compared to the year-ago quarter on solid organic revenue growth. On a non-GAAP basis, adjusted EBITDA was a loss of $8.2 million in Q4 of 21 compared to a loss of $7 million in Q4 2020. While we expanded our transaction yield and the non-GAAP gross margins, our investment in our growth and platform initiatives continued. We ended the quarter with cash and cash equivalents of $562.8 million. I'll now move on to guidance. As we mentioned in our press release, we are providing the following guidance for the full year 2022. Total revenue for the year is expected to be in the range of $296.5 million to $301.5 million. At the midpoint, this would represent a growth of over 20% on a year-over-year basis. non-GAAP-adjusted EBITDA loss in the range of $42 million to $48 million. We expect roughly 47% of 2022 revenues in the first half with the remaining 53% in the second half. We expect almost 55% of EBITDA losses to occur in the first half versus second half of the year skewed by the factors Mike stated. In summary, we delivered strong fourth quarter 2021 financial and operating results, and our momentum heading into 2022 is very encouraging. I'd now like to turn the call back over to the operator to open up the line for Q&A. Operator?