AvidXchange Holdings, Inc.

Good morning, everyone, and thank you for joining us for the Avid Exchange Holdings Incorporated first quarter 2024 earnings call. Please note this event is being recorded. Joining us on the call today is Michael Prager, Avid Exchange's co-founder and chief executive officer, Joel Wilhite, 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 forward-looking statements disclaimer that is included at the end of today's press release. This disclaimer emphasizes the major uncertainties and risks inherent in the forward-looking statements the company will make today. Please keep these uncertainties and risks in mind as the company discusses future strategic initiatives, potential market opportunities, operational outlook, and financial guidance during today's call. Also, please note that the company undertakes no duty to update or revise forward-looking statements. Today's call will also include a discussion of non-GAAP financial measures, as that term is defined in Regulation G. Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP Accordingly, at the end of today's press release, the company has provided a reconciliation of these non-GAAP financial measures to financial results prepared in accordance with GAAP. If you require operator assistance, please press star then zero. I would now like to turn the conference over to Michael Prager. Please go ahead.

Thank you, everyone, for joining us today. Joe Willight and I are excited to discuss Avid Exchange's first quarter of 2024 results. This is our 11th reporting quarter since becoming a public company in October of 2021, and we now have delivered 11 consecutive quarters of financial outperformance relative to our expectations. Amid prolonged macroeconomic volatility, our results highlight the relative resilience of our financial model. With the continued choppiness we are seeing in customer transaction volumes, We remain steadfast in executing our strategic playbook. This includes driving our yield expansion to counter the impact of uneven transaction volumes, focusing on expanding our gross margins through unit cost reductions and driving operating leverage through cost discipline and smart investments to expand our adjusted EBITDA margins. The drivers of our success continue to be our middle market customers and the impact of our purpose-built value proposition for middle market companies. More crucially, it entails engineering and executing our various product offerings, technology, go-to-market, and operational value proposition that delivers quantifiable benefits of digitally transforming our customers' back office by automating accounts payable and payments over the differentiated two-sided network that we have today. The payback for our customers is rapid, impactful, and quantifiable on both the efficiency related to labor cost savings and supporting their ability to grow without adding incremental back office headcount. This in turn deepens our competitive advantage as we are a market leader in driving digital transformation strategy for middle market companies. Thanks to our dedicated and talented team members, the runway for value creation for both our customers and investors is still in the very early stages. On today's call, I will touch on the five key priorities we have for this year that we're using to gauge our path of financial and operating progress, in addition to continue to widen our competitive advantage around the middle market. Our key priorities for this year include performance culture, customer obsession, innovation, growth, and scale objectives. Kicking off, we believe that the quick shorthand measure on performance culture is our financial scorecard. In looking at the first quarter of 2024, we delivered solid financial results across the board. Joel will go into more detail on our results later in today's call, but here are some of the highlights. Revenue growth in the quarter was over 105 million, up over 21% year over year. The growth in the quarter was led by a combination of continued yield expansion coupled with transaction growth. Our success around yield expansion is a result of our value proposition related to our various e-payment modalities focused on converting paper check suppliers into electronic payment adopters, as well as continued efficiencies with our processes, automation, and AI improvements around executing these various forms of electronic payments. Non-GAAP gross margins continued their upward trajectory, coming in at 72.4% and crossing the lower band of the 72% to 75% non-GAAP gross margin target ahead of our 2025 gross margin expectations, as we outlined during our Investor Day last June. Along with solid operating expense discipline, our adjusted EBITDA margins in the quarter exceeded 16%. Furthermore, our transaction yield, which is a metric that we focus on across our executive leadership team as it demonstrates the power and effectiveness of our Avid Exchange Business Flywheel model, was up almost 15% to reach $5.47 per transaction. Moving on to our customer obsession metrics, one of the data points we track is our top of funnel prospect activity. The first quarter of 2024 saw some very encouraging trends as well as some adjustments to our marketing initiatives that we believe will be net positive for the year, but negatively impacted us during the past quarter. Overall, the top of funnel activity during the first quarter of 2024 was unchanged year over year with certain verticals leading and some lagging. The real estate vertical, our longest standing vertical market segment, led the pack and was up high double digit percentages on a year over year basis. The growth in the real estate vertical is very encouraging as we have not seen this level of growth in more than a year, led by very strong multifamily activity. We also saw double-digit growth in our education and nonprofit verticals as well. Most compelling of all, our buyer-customer close rates were up almost 50% year-over-year virtually across all of our industry verticals, further demonstrating our increasing sales effectiveness. However, in a handful of our verticals, we did see instances where our top of funnel performance lagged during Q1. In the quarter, those verticals included our new markets, homeowners association or HOA management as we call it, construction and financial services. Let me briefly discuss the reasons for this lag and how the top of funnel has rebounded since. As we continue to onboard new leaders in our sales and marketing group designed to help us scale to our next milestone target of reaching one billion in revenue, they have brought greater discipline, alignment, and allocation mix of our marketing and go-to-market investment dollars. As part of this evolution, we have prioritized our resource allocation mix to focus on slightly fewer but higher-yielding industry user conferences and trade shows that meet our ROI and lead flow targets. As a result, we exited a number of the lower yielding conferences and trade shows during the quarter, and prioritized greater investment in higher yielding conferences and trade shows occurring over the balance of the year. This resulted in a 30% year-over-year decline in trade show traffic during the quarter, with a corresponding impact on our top of funnel metrics during Q1 as we implemented this strategy. We've allocated more of our investment resources for higher yielding trade shows in Q2 and for the balance of the year, which we believe still have an overall higher impact to our overall top of funnel engagement metrics. And the good news is that this strategy is already getting traction as our top of funnel activity is up nicely in the high single digit percentages across the board so far in the second quarter. We believe that the strategic changes we're making to our marketing motions notwithstanding the macro backdrop, are the right moves and highly aligned with our long-term organic growth objectives. With our recent accounting system integration partnerships, we're cautiously optimistic about our top of funnel as we scale off for the remainder of the year. Now turning to our innovation priorities, I'd like to provide an update on Payment Accelerator, formerly Invoice Accelerator 2.0. This product enables the small business supplier customers on our network frictionless access to improving their cash flow by leveraging our robust underwriting analytics, security, and scalability protocols. We're extremely excited about the prospects for Payment Accelerator as it's expected to be a meaningful growth contributor in 2025 and beyond, as we believe that supplier financing and cash flow management offerings will be the third leg of our overall revenue model in partnership with driving additional software, and payment network revenues. Given that this is a credit product, we continue to meter the launch in order to better understand the user experience, given that this next-generation product has an entirely new digital front-end user experience, complete with self-service digital enrollment capabilities. In addition, we also want to ensure that our various third-party integrations that support Payment Accelerator are working and supporting our back-office processes as designed at scale. These include enterprise-grade features such as the data science analytics critical for successful payment interception and support for a new sub-ledgering central repository required for real-time offsets and bifurcation of payments to properly execute the innovative money movement approach. This will enable us to seamlessly leverage multiple third-party financing partners in the future, as well as open this offering to a large proportion of our $1.2 million supplier customer base, many of which fall into the small business segment, even including support for larger middle market suppliers looking to accelerate larger invoices. To put this new generation user experience in perspective, Payment Accelerator compared to its predecessor is designed to onboard a supplier in a matter of minutes versus several days. What makes this process frictionless is that we eliminate the need for a traditional financial review underwriting process which requires historical financial statements from suppliers. However, we leverage supplier and buyer history and transaction data, as well as real-time visibility into the transaction status and approvals inherent in our two-sided network to underwrite and lower the credit risk, as well as provide protective setup provisions across the entire flow of invoices that a particular supplier may have on our network. The rapid onboarding process is also the result of the platform's highly integrated backend that is designed to simultaneously validate the supplier's bank account information along with Know Your Customer and Know Your Bank compliance regulations, real-time, as the supplier completes an online questionnaire of legal entity data and beneficial ownership information. Once onboarded, a supplier is presented with multiple acceleration offers, with transparent pricing and various time-based funding options, including real-time payments. In addition to the payment accelerator offering highlighting the eligible supplier invoices available for acceleration, we also provide an auto-fund option where our intelligent decision engine automatically identifies all the supplier's eligible invoices and funds them automatically, ensuring the fastest access to cash availability every time an eligible invoice is available on our network. We have a growing network of supplier customers currently live using this auto fund option. This includes Charlotte, North Carolina-based supplier JW Home Improvement, which was looking for quick access to receipt of payments for their invoices to support their overall business expansion and found the simplicity of our auto fund feature to be a major plus in our payment accelerator offerings. We are leveraging data science and user experience heat maps to understand and analyze the user behavior as we intend to scale this offering five-fold over the next several quarters. We believe that our payment accelerator product will ultimately bring the intuitive front-end user experience for all of our B2B constituents similar to that of a best-in-class consumer payments application with robust back-end instant decisioning and underwriting capability. Next, I'd like to provide a progress update on some of our major accounting and ERP partnerships that we announced in 2023 as part of our strategic growth priorities. Recall that we announced two marquee partnerships last year, Appfolio in the multifamily vertical industry and M3 in the hospitality vertical. Both of these partnerships are highly strategic in nature for very specific reasons. Let's start with Appfolio, whose strategic rationale stems from its size, scope, and our vertical market experience. Recall the accounting system partnership with Appfolio is our biggest ever with a top accounting system provider focused on the multifamily real estate vertical. We are currently executing our initial go-to-market phase with Appfolio as we went live with our joint invoice and pay API integration a few weeks ago. and is now broadcasted for general availability to all 19,000 Affolio customers through Affolio's Stack Marketplace. As part of our joint go-live motion, Affolio is deploying various marketing outreach initiatives across channels to steer its customers to our offering in its marketplace through email, landing pages, webinars, and joint pipeline reviews. What is truly exciting is the increasing top of funnel activity we have already seen in the lead up to the go live integration announcement, along with high customer engagement. Since the announcement of our partnership in the fourth quarter of 2023, we have tripled the number of new opportunities created in the first quarter. We believe this kind of ramp sets us up nice tone for this partnership for 2024 with meaningful revenue build in 2025 and beyond, as we believe that over 50% of FOLIO's 19,000 existing customers are a strong product market fit for our offering. Moving on to the M3 partnership in the hospitality vertical, where we're seeing similar opportunity dynamics unfold. M3, as you may recall, is the hospitality market leader in cloud-based accounting solutions along with data management platforms tailored specifically for the hospitality industry. M3's customer base exceeds 1,000 hotel management groups and owner-operators, including 50% of the top hotel managers and operators in the United States. M3 is highly strategic for us given that it accelerates our entry into the hospitality vertical through a player with a dominant positioning in the marketplace. We went live with our embedded pay integration with M3's core select accounting solution in the third quarter of 2023. Since our initial launch, we've seen robust opportunity creation with our joint marketing efforts, including dedicated M3 representatives evangelizing partners such as Avid Exchange for our highly integrated and embedded pay offering. These opportunity creations are up four-fold on a year-over-year basis compared to Q1 2023. Given the traction we are seeing, we have jointly decided to broaden our relationship and just signed a contract extension with M3 to provide integration into its flagship accounting core solutions. This accounting core integration is slated to go live in the second half of 2024. We believe that both our AppFolio and M3 partnerships along with several others that are in the pipeline position us well for long-term growth within our large addressable and unpenetrated AP automation market for middle market companies. Finally, on our key priority related to business scale, I'd like to discuss the opportunities for sustained gross margin expansion, a major lever that we've relentlessly been addressing to great success. The success in gross margin expansion perfectly complements the operating expense and investment discipline that we have demonstrated since becoming a public company. To ensure continued expansion of gross margins, we believe that we have significant room to run as we work towards our long-term 80% plus gross margin target. We have continued to engineer new innovative technology, automation, and AI solutions that we believe could work at scale across every component and subcomponent of our operational value chain across our business. The latest arrow in our quiver is our new AI-powered IVR payment automation solution. To put this particular use case opportunity in perspective, currently we employ both follow-the-sun sourcing strategies and chatbots to make payments across our various payment modalities. While the sourcing strategies optimize both unit cost and time zone coverage, Our IPA-driven bots optimize unit costs and time zone coverage at speed and scale. But RPA-driven bot methods of payment execution have certain limitations, given that they need IVR to perform the exact path of execution every time, or they break and need constant remapping work to be done, along with requiring human beings to be inserted at critical junctures for the process to be successful. So anytime anything changes or if there is a latency, bot automation fails and the payment becomes manual or potentially kicked to a paper check. With our new AI-powered IVR automation solution, which is self-learning and self-correcting, optimizing the functionality of what our existing bots currently do along with what our bots cannot do, such as adapting the changes and updates in a particular IVR decision tree, marks a major new innovation milestone for us. During Q1, our new AI payment execution solution which is still in the early stages of deployment, already demonstrated a 2x the productivity of our prior bot technology and over 10x the productivity of humans executing this function. With this capability, we can increase our ability to scale across supplier payments and capture automation of low-volume suppliers where the cost versus benefit is disproportional due to the high cost of automation versus the lower volume and spend of many of these suppliers. driving increased electronic payment penetration rates even further in our business. And most importantly, we believe this solution will scale non-literally as we double and triple our transaction volume on the payment network in the future. In closing, we're off to a very strong start in 2024, and I'm excited with the progress we're making across our five operating priorities for the year, which include continue to develop and recruit key talent to support our performance culture, our customer obsession and continuing to increase the value proposition for both our buyer and supplier customers, delivering on our innovation initiatives and offerings to support our durable long-term 20% organic growth objectives, along with continued scaling of our business towards our next billion-dollar milestone in the coming years. We recognize that the macro backdrop has remained volatile and challenged over the past two years and creates a cautious approach towards discretionary spending across the middle market. However, we remain laser-focused on the operational rigor and execution, along with controlling those elements of our business model that we can control directly, which includes our targeted innovation investments geared towards continuing to expand into customer value proposition and impact we're having on both our buyer and supplier customers, increasing our competitive advantage across the middle market. As we remain on track to deliver our 2024 financial commitments, we believe the robust product payload and integration partnerships that we've announced provide us with an important tailwind building for 2025 and beyond. I want to provide a special thanks to all my AvidX team members for their hard work, dedication, and relentless focus on executing our operational and strategic priorities. We believe we're still in the very early innings of penetrating what is a large and unpenetrated market opportunity to deliver business to business accounts payable and payments automation offerings to middle market companies. Given our product innovation, strong execution, competitive and financial strength, we believe we're well positioned to drive impactful value for customers, create future growth opportunities for our team members, and unlock significant long-term value for our shareholders. With that, I'd like to turn the call over to my partner, Joe Wilhite.

Thanks, Mike, and good morning, everyone. I'm pleased to talk to you today about our first quarter 2024 financial results, which reflect continued execution of our growth strategies amid continued macro uncertainty. Overall, we delivered another quarter of healthy year-over-year financial performance relative to the implied first quarter 2024 business outlook and excluding float and political revenue contributions, first quarter revenues came in higher due to payment and software yield expansion driven by ongoing e-pay conversion. That, together with higher gross margins driven by higher revenues, ongoing progress on unit cost initiatives, software and pay yield expansion, as well as sustained expense discipline, led to significant adjusted EBITDA outperformance. It's worth highlighting that this is our second consecutive quarter of adjusted EBITDA profit, ex-float, and political. Most notably, we more than doubled our adjusted EBITDA profit sequentially, ex-float and political, to $3.7 million in Q1 of 2024 from $1.5 million in Q4 2023 due to higher transaction growth, software and payment yield expansion, lower unit costs, and operating leverage, leaving us incrementally more confident in achieving our financial targets rolled out during our June 2023 investor day. Now turning to year-over-year results. Total revenue increased by 21.6% to $105.6 million in Q1 of 2024 over the first quarter of 2023. It's important to note that the number of business days year-over-year remained unchanged at 63 days. Roughly three quarters of the revenue growth was driven by the combination of the addition of new buyer invoice and payment transactions, coupled with software and pay yield expansion. The remaining revenue growth this quarter was driven by higher year-over-year float and political revenues. Our strong revenue growth also resulted in total transaction yield expanding to $5.47 in the quarter, up 14.9 percent from $4.76 in Q1 of 2023. Of the 14.9 percent increase, more than half of the increase was driven by pay and software yield, coupled with transaction mix skewed towards payments. The remainder was due to float and political revenues. Software revenue of $29.7 million, which accounted for 28.1 percent of our total revenue in the quarter, increased 10.1% in Q1 of 2024 over Q1 of 2023. The increase in software revenues of 10.1% was driven by growth in total transactions of 5.8%, which continues to be impacted by macro choppiness, with the balance driven by growth in certain subscription-based revenues. Payment revenue of $75.2 million, which accounted for 71.2% of our total revenue in the quarter, increased 27.1% in Q1 of 24 over Q1 of 23. Payment revenue reflects the contribution of interest revenues, which were $13.1 million in Q1 of 24 versus $7.1 million in Q1 of 2023. Political media revenue in the current quarter was approximately $800,000 and negligible in the same period a year ago. Excluding the impact of float and political revenues, which represent a third of the 27.1% increase, the remaining roughly two-thirds of the increase in payment revenues was driven by a combination of an increase in pay yield expansion, greater payment mix, and payment transaction volume increase of 8.1%. On a GAAP basis, gross profit of $69.2 million increased by 32.7% in Q1 of 2024 over the same period last year resulting in a 65.5% gross margin for the quarter compared to 60% in Q1 2023. Non-GAAP gross margin increased 510 basis points to 72.4% in Q1 of 2024 over the same period last year with the lion's share of the increase driven mostly by unit cost efficiencies and yield expansion. Now moving on to our operating expenses. On a gap basis, total operating expenses were $79.4 million, an increase of 6.6% in Q1 of 2024 over Q1 of last year. On a non-gap basis, operating expenses excluding depreciation, amortization, and stock-based compensation increased 1.4% to $58.8 million in the first quarter of 2024 from the comparable prior year period. On a percentage of revenue basis, operating expenses excluding depreciation, amortization, and stock-based compensation declined to 55.7% in the first quarter of 2024 from 66.8% in the comparable period last year. The year-over-year percent decline largely highlights expense discipline and significant operating leverage across G&A, sales and marketing, as well as R&D to an extent, even after stripping out the contribution of floats. I'll now talk about each component of the change in operating expenses on a non-GAAP basis. Non-GAAP sales and marketing costs decreased by roughly $300,000, or 1.7%, to $18.6 million in Q1 of 2024 over Q1 of last year, which reflects ongoing yet targeted investments in sales and marketing spend to support our continued growth. Non-GAAP research and development costs increased by $1.3 million, or 6.5%, to $22.1 million in Q1 of 24 over Q1 of last year. The increase was due to continued reinvestment in our products and platform, including spend management, pay offering, and payment accelerator. Non-GAAP GNA costs decreased slightly by roughly $200,000, or 1.2%, to $18.1 million this in Q1 of 2024 versus Q1 of last year due to leveraging public company costs across a larger revenue base. They continued their annualized downward progression as a percentage of revenues as we indicated during our investor day. Our gap net loss was $1 million for the first quarter of 2024 versus a gap net loss of $16 million in the first quarter of 23 with the reduction in losses driven by a combination of strong revenue flow through solid gross profit increase in expense control leading to lower operating losses, coupled with higher interest income and lower interest expense due to reduced borrowing costs and partial debt pay down. On a non-GAAP basis, our net income in the first quarter of 2024 was $11.3 million versus a net loss of $3.4 million in the same period last year, a $14.7 million positive swing driven by the aforementioned factors. On a non-GAAP basis, Q1 2024 adjusted EBITDA was $17.7 million versus $400,000 in Q1 of 2023, largely due to the aforementioned factors. Turning to our balance sheet for a moment, I want to touch on a few key items. We ended the year with a strong corporate cash position of $443.6 million of cash and marketable securities against an outstanding total debt balance of $75.8 million, including a note payable for $13.9 million. We had $30 million undrawn under our credit facility at year end. Corporate cash, meanwhile, was split roughly two-thirds among money market funds, commercial paper, and time deposit instruments, with the remaining third in deposit accounts. The weighted average maturity on the corporate cash was roughly 36 days, while the effective interest rate on our corporate cash position for the first quarter was roughly 5.2%. Customer cash at quarter end was approximately $1.2 billion, with an interest rate of roughly 5% for the quarter. The sequential decline in customer cash was largely due to typical seasonal patterns related to disbursement and settlement of payments in flight from the prior quarter, This, along with average customer cash balances, inch recorder, and shifts in calendar days between weekdays and weekends of receipt and disbursement of that cash impacts float revenue. Turning to our updated 2024 business outlook, we now expect total revenue for the year to be in the range of $442 million to $448 million. Based on the midpoint, we expect approximately 47% of the 24 revenue distributions percent in the second half. Our 2024 revenue outlook reflects approximately $45 million of interest revenue from customer funds, a $1 million increase from our initial 24 outlook versus roughly $41 million earned in 2023. We anticipate approximately 54 percent of the $45 million in interest revenue from customer funds in the first half of 2024 with the remaining approximately 46% in the second half of 2024. Also, we anticipate political media revenue contribution of approximately $9 million, given that this is our first presidential cycle under FastPay. Recall, we acquired FastPay in 2021, and for context, in 2022, during the midterm election cycle, the political arm of FastPay generated roughly $8.5 million in revenues. Similarly, we expect non-GAAP adjusted EBITDA profit ranging between $71 million and $75 million for the year. With that, I would now like to turn the call back over to the operator to open up the line for Q&A. Operator?

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Management has asked that each participant limit their question to one. At this time, we will pause momentarily to assemble our roster. The first question comes from Dave Coning with Baird. Please go ahead.

Yeah. Hey, guys. Great job. And I guess my question, so it looks to me like this is the best growth quarter in maybe a couple years when you exclude float and political, which is great to see. And it reflects a lot of what you talked about, payments yield, which has been up now seven, I think nine straight quarters. What's the shape of that going forward? I know there's puts and takes between interest revenue, between a payment accelerator coming on. does that just step function just up every quarter still, or how should we see that over the next several quarters?

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

Yeah, I mean, just, you know, Dave, to follow up on what Joel said is, you know, across our team, we're laser focused on, you know, kind of the one metric that I like talking about, which is the transaction yield. And certainly, you know, that's up, you know, over 70 cents over last year and, you know, up slightly over last quarter. But that's the one that we kind of lean into in terms of all the different, you know, strategies we're executing across the business to continue to, you know, focus on what we can control. And one of the metrics there is that transaction yield metric.

The next question comes from Darren Peller with Wolf Research. Please go ahead.

Guys, can we just expand a little bit more on the top of funnel comments that I know, Mike, you were commenting on earlier, the conferences and changes to philosophy around it, and maybe what you're seeing in terms of bookings momentum, and just to add on to that, demand for some of the new offerings on the supplier side as well. I know it's a quick update there. I know it's still relatively early, but I think it would be great.

Yeah, Darren, no, I appreciate the question. You were breaking up a little bit, but I think it was around the top of funnel and commentary there. You know, I think, you know, what we saw was, you know, different verticals certainly experiencing, you know, kind of different types of activity. You know, on the positive side, you know, we were really encouraged with what we saw in the real estate vertical that was, you know, best results in probably a couple years related to top of funnel. And then combined with, you know, education and nonprofit being, you know, really strong. and certainly kind of the multifamily piece of multifamily and industrial pieces of the real estate, you know, were very strong for us. Not a big surprise considering, you know, that, you know, that's a key area that we have, you know, strong industry, you know, domain knowledge, experience, and also have lots of partnerships, you know, in that area. On the flip side, you know, certainly, you know, verticals like our HOA management, you know, you know, or associate management verticals, we call it, you know, combined with financial services. And, you know, we experience, you know, some kind of lagged activity. And one of the things that, you know, in terms of, you know, peeling back the onion and reasons why, We also implemented a fairly large just, you know, kind of strategic shift in our approach to, you know, lots of different, you know, kind of industry conferences. And so for, you know, just to give you a sense of it, last year in Q1, we attended about 85 different conferences and industry trade shows. And we were about 30 less this year. And so, you know, rather than spreading kind of the peanut butter pretty thin related to our investment dollars, The team is being much more strategic in terms of, you know, where do we invest in terms of the highest yielding, you know, conferences and events that we can attend, you know, to drive both, you know, ROI yield as well as the activity from these. And so one, you know, kind of result of that is that, you know, we attended less in Q1, but also super encouraging about, you know, some of the segments that did not do as well in Q1. we saw bouncing back in Q2, and overall activity up 9% so far in the quarter. And so we think over the course of the year, those strategies will pay dividends for us, and we're going to be right where we expect to be in terms of driving our overall growth objectives. So that's maybe a little bit of flavor related to top of funnel.

The next question comes from Sandra. Sanjay Sakrani with KBW. Please go ahead.

Thanks. Good morning. I guess I have a question just macro broadly. One is just on the float. I guess you had decent outperformance relative to the quarterly run rate, and it seems like you expect float contribution to come down over the back part of this year. What's the rate outlook in that? And then secondly, just macro in general. I know Mike kind of talked about it still being mixed, but maybe just elaborate a little bit more on sort of what you're seeing. And if there's green shoots, I think you mentioned a little bit in real estate, but would love more elaboration around that. Thank you.

Yeah, you bet. Great questions. I'll take float and macro. On your float question, you know, we did, so 13 million in the quarter. It's a little bit higher than our expectations. And one thing to keep in mind is that, you know, rate is a factor, but also customer balances are a meaningful factor. And in fact, in Q1, rates was not an impact whatsoever. And so those customer balances are really impacted by, you know, just the timing and whether the period end lands on a weekday or a weekend and such. And so that sort of beat in the quarter is kind of what led us to bump up the range for that float beat. In terms of your question about the expectations in the back half, we haven't really meaningfully changed from our initial guidance where we did anticipate a handful of rate cuts in the back part of the year, something like 75 bps. We'll see what actually shakes out, but that's kind of how we think about float revenue, just keeping in mind those customer balances being a huge driver. I think from a macro perspective, I would just kind of go back to what we've been experiencing now for over a year is just some suppression in spending and transactions associated with our buyers on our platform. We attribute that to, in particular, discretionary spending and no one particular vertical, just general caution in spending. And that's continued through the first quarter, even into through the month of April. And so that's you know, that macro impact is something that continues to be baked into our guidance.

The next question comes from Greg Maurer with FT Partners. Please go ahead.

Yeah, hi. Thanks for taking the question. So, appreciate all the commentary around the macro. Is the volatile macro driving any changes in transaction mix between modalities, you know, whether it's VCC, ACH, or other

Yeah, so hey Craig, appreciate the question. What I would say, I think where we see macro impacting our business the most is on the discretionary spend volumes. So I would say it's having less impact on kind of the allocation across different payment modalities. Those are probably very specifically driven by supplier experience and typically find suppliers You know, think about a combination of timing of the payment, you know, the price of the payment combined with the level of data, you know, women's data provided in automation. And those things really drive, you know, kind of a payment modality acceptance, much more so than, you know, macroeconomic type issues is what we've experienced. So, you know, I, you know, typically, you know, in my conversations that I have, it's usually around discretionary spend on overall volume. is where we're seeing the impact.

The next question comes from Andrew Balk with Wells Fargo. Please go ahead.

Hey, thanks, guys. I know you don't guide to a quarterly basis, but I wanted to get a sense of your results this quarter relative to your internal expectations. Revenue came in $3 million to $4 million ahead of what our expectations were, and then You know, on the full year basis, you had the guy come up a million. So just wanted to get a sense on how this all played out and what were the puts and takes around the quarter specifically.

Yeah, I hear your question, and I think you kind of summarized it well. Just to repeat, you know, we had relative to sort of the first quarter, let's just say, you know, using consensus as the benchmarks, about $3 million up. We attribute a couple of that to the float revenue and a couple of that to sort of underlying outperformance in the business, particularly around yield. And our guidance, like I kind of mentioned in the last response, contemplates sort of the continued activity that we see from a volume trend perspective for the rest of the year. We're excited about having another quarter under our belt where we're sort of beating revenue expectations, seeing yield consistently expand, expanding gross margin, and sort of doubling EBITDA profit ex-float quarter per quarter. So that's what we're focused on executing.

The next question comes from Brian Keene with Deutsche Bank. Please go ahead.

Hi, guys. Good morning. Mike, is there anything you can do on your end to try to drive faster transaction growth, or is it just macro-driven that there's not a lot you can do to move that number or grow that number?

Yeah. Hey, Brian, that's a great question, and it's one that I spend a lot of time asking my team about. So when I think of that transaction number, there's kind of two buckets. There's, you know, existing customers that are already on our platform that are implemented, and we're receiving some of the headwinds on discretionary spend, you know, related to, you know, the CFOs across the middle market. That one is, you know, probably, you know, we have less stability to impact in the short term. And, however, the other piece of it is, you know, new transactions that we're adding to the platform. And in that bucket, you know, certainly, you know, there are things that, you know, and strategies that we're deploying. One of the biggest things is kind of the evolution of our sales and go-to-market activity. And one of the things that I highlighted during the call that we're really excited about is the impact of some of the new partnerships that are just in the early stages of being launched, CIRMLE, FFOLIO being a big one, combined with M3. And then just, you know, the continued execution of existing partnerships. So, you know, one of the things, one of the highlights of top of funnel in the last quarter was what we saw in real estate. And that was, you know, certainly a big part of that activity was from the, you know, kind of I'd say the legacy partnerships that we've had, you know, companies like MRI, ResMed, RealPage, you know, examples like that. But we are, you know, really excited about you know, at Folio M3 as new partnership examples. And, you know, right now we feel that we're, you know, kind of on pace to execute those. But certainly, you know, I'm talking to my team every day about, you know, things that we can do to continue to accelerate, you know, those type of partnerships.

The next question comes from Ramsey Ellis out with Barclays. Please go ahead.

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

Hey, Ramsey. I'll take the first part, and Mike will take the second part. So, I wouldn't really call out necessarily an air pocket. I mean, we think, you know, we've got, we like, there's puts and takes overall, but we like our progression of customer ads for the year and feel good about, you know, the guidance set up and certainly then exiting in first strong 25. So, I don't know, Mike, if you want to comment on the M3 and Appfolio.

Yeah. What I would say, you know, Ramsey is... These partnerships, they're different from the standpoint of one is in a vertical that we know really well and that we're a long-term leader in, being the multifamily segment of real estate. And we already have the key integration partnerships with the other competitors in that segment, i.e., like the RealPage, the ResMins of the world. And so that was one that I think has the capability you know ramping faster now having said that you know we had you know kind of you know already plans in place that we expected the ramp faster to some degree and then you know the m3 partnership is one that you know in the same you know we have the same level of excitement about but it's just in you know a new emerging vertical for us big hospitality that we announced last year so we you know don't have the big of a you know existing name recognition and penetration within that vertical as we do in the real estate side. So, you know, I would say, you know, we're right on plan in terms of our, you know, internal expectations and certainly, you know, working hard to have those ramped throughout the year.

The next question comes from Tianxin Huang with J.P. Morgan. Please go ahead.

Thank you. Just a clarification on the question, if you don't mind. Just the The 53% of revenue in the second half, that's unchanged. So the implied second quarter revenue, if we're calculating this correctly, is suggesting it will be flat sequentially when it's usually up. Is that correct? And if so, why? And then just on the, I know Ramsey and others asked it, just the real estate up high double digits, is that a result of portfolio production or is it more macro? Thank you.

Got it. Okay. Good questions, Tingen. I'll go first, and Michael, come after me. So on your first question, yeah, the back end is, in our guidance, the back end of the year is slightly less back-ended with updated guidance, but largely consistent in that sort of 50, 53-ish, 52.5, 53 range. And then your question about what is implied in Q2, of course, we don't guide the next quarter, but But your math isn't wrong. And what we are doing is taking a fairly cautious posture here with guidance as we look out across the rest of the year. I wouldn't say that there's anything significantly different in terms of the activity that we're experiencing, in terms of the macro getting better or worse. But we are exercising an additional measure of prudence as we're giving guidance. And so just kind of keeping the range changed just to that float beat in Q1.

And maybe to follow up on, you know, the second part of your question related to, you know, that top of funnel and the, you know, double-digit growth that we saw in real estate, you know, was it dominated by, you know, one particular partner like AppFolio? And the answer is no. It was really, you know, a nice activity across the board within, you know, kind of real estate, specifically actually, you know, weighted towards multifamily. But within multifamily, we saw a you know, both more mature partners such as RealPage and Resmin contribute nicely along with MRI. And then on the, you know, kind of new partner side, certainly we've, you know, seen the ramp of that folio. But it wasn't, you know, kind of heavily weighted or overweighted, you know, for one particular partner. We saw, you know, nice across-the-board activity within that sector.

The next question comes from James Fawcett with Morgan Stanley, please go ahead.

Great, thank you. I want to follow up on Tinge's question in terms of the seasonality and your indication that you're being prudent here. It sounds like in terms of how you're applying that to the political contribution, that that's also the case. Is that fair? And it seemed like you were kind of laying out that this is your first presidential cycle with that business.

That's right, James. We commented in the February call when we set initial guidance, you know, for that political revenue this year, $9 million. We're sort of holding to that. You know, we're cautiously optimistic. It's our first presidential cycle. It's largely back-end weighted. And there's, you know, could be a range of outcomes in terms of overall spend. So we're being, you know, we're being conservative there as well.

The next question comes from Alex Markgraf with KeyBank Capital Markets. Please go ahead.

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

Yeah, that's a really insightful question, Alex, related to kind of does that increase in automation, especially around the AI tools, and I kind of referenced one of those being our IVR tool that we've now deployed recently. And the answer is it does have an impact. And where it has an impact is on small dollar transactions where we've had very specific ROI models where if a transaction fell underneath the threshold of what it would cost us internally to execute that transaction electronically through either a human being or a bot, then it got kicked out. And now with our AI tools, we're able to process those transactions down to a much smaller dollar amount than we've historically been able to do. And so that means that more, you know, those small dollar amount transactions will be, you know, going out electronically. Now, having said that, you know, they are small dollar amount transactions, so it won't have a big impact on the overall volume. But it certainly, you know, is part of our overall, you know, strategy with customers on how we maximize transactions. you know, moving transactions away from paper check to electronic overall. And it's just, you know, one additional lever of all the strategies that we're deploying.

Again, if you have a question, please press star then one. The next question comes from Rufus Holt with BMO. Please go ahead.

Hey, good morning. Thanks, guys. I wanted to come back to your comments on the EBITDA margin guidance. Looks like it implies just a small step down in margins from the first quarter level through the rest of the year. And I guess lower floating comes a factor here. But I wanted to ask if there was some incremental investment spend that you're now looking to make that's adding to the margins, leveling off, or being just a touch lower through the rest of the year. Thanks.

Thanks, Rufus. Yeah, good question. So, again, we were really pleased with the quarter and the progression of OPEX as a percentage of revenue keeps marching. you know, sort of down as we talked about in Investor Day last year where we're seeing increasing leverage in the business. I would say that there would be some potential variability quarter to quarter if you think about what's implied in the guide. So I can point to, you know, some investments, you know, a couple million dollars sequentially into Q2, particularly around R&D, sales and marketing. And so quarter to quarter, there will be some variability. But over the year and going forward, we expect to continue to see this operating leverage show up in the financials and contribute to EBITDA.

Thank you.

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

Thank you again, everyone, for your interest in Avid Exchange. To wrap up, we delivered another strong quarter. Given our disciplined execution and strong financial performance amid the current macro volatility, we believe our portfolio of product innovations, industry-leading accounting system integration partnerships, along with multiple monetization levers align with our customer needs, creating growth opportunities for our team members and driving long-term value creation for our investors. With that, we look forward to sharing our progress on our next earnings call. You can now close the call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you. Music. Thank you. Thank you. Thank you. Good morning, everyone, and thank you for joining us for the Avid Exchange Holdings Incorporated first quarter 2024 earnings call. Please note this event is being recorded. Joining us on the call today is Michael Prager, Avid Exchange's co-founder and chief executive officer, Joel Wilhite, 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 forward-looking statements disclaimer that is included at the end of today's press release. This disclaimer emphasizes the major uncertainties and risks inherent in the forward-looking statements the company will make today. Please keep these uncertainties and risks in mind as the company discusses future strategic initiatives, potential market opportunities, operational outlook, and financial guidance during today's call. Also, please note that the company undertakes no duty to update or revise forward-looking statements. Today's call will also include a discussion of non-GAAP financial measures, as that term is defined in Regulation G. Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. Accordingly, at the end of today's press release, the company has provided a reconciliation of these non-GAAP financial measures to financial results prepared in accordance with GAAP. If you require operator assistance, please press star then zero. I would now like to turn the conference over to Michael Prager. Please go ahead.

Thank you, everyone, for joining us today. Joe Willight and I are excited to discuss Avid Exchange's first quarter of 2024 results. This is our 11th reporting quarter since becoming a public company in October of 2021, and we now have delivered 11 consecutive quarters of financial outperformance relative to our expectations. Amid prolonged macroeconomic volatility, our results highlight the relative resilience of our financial model. With the continued choppiness we are seeing in customer transaction volumes, we have remained steadfast in executing our strategic playbook. This includes driving our yield expansion to counter the impact of uneven transaction volumes, focusing on expanding our gross margins through unit cost reductions and driving operating leverage through cost discipline and smart investments to expand our adjusted EBITDA margins. The drivers of our success continue to be our middle market customers and the impact of our purpose-built value proposition for middle market companies. More crucially, it entails engineering and executing our various product offerings, technology, go-to-market, and operational value proposition that delivers quantifiable benefits of digitally transforming our customers' back office by automating accounts payable and payments over the differentiated two-sided network that we have today. The payback for our customers is rapid, impactful, and quantifiable on both the efficiency related to labor cost savings and supporting their ability to grow without adding incremental back office headcount. This in turn deepens our competitive advantage as we are a market leader in driving digital transformation strategy for middle market companies. Thanks to our dedicated and talented team members, the runway for value creation for both our customers and investors is still in the very early stages. On today's call, I will touch on the five key priorities we have for this year that we're using to gauge our path of financial and operating progress, in addition to continue to widen our competitive advantage around the middle market. Our key priorities for this year include performance culture, customer obsession, innovation, growth, and scale objectives. Kicking off, we believe that the quick shorthand measure on performance culture is our financial scorecard. In looking at the first quarter of 2024, we delivered solid financial results across the board. Joel will go into more detail on our results later in today's call, but here are some of the highlights. Revenue growth in the quarter was over 105 million, up over 21% year over year. The growth in the quarter was led by a combination of continued yield expansion coupled with transaction growth. Our success around yield expansion is a result of our value proposition related to our various e-payment modalities focused on converting paper check suppliers into electronic payment adopters, as well as continued efficiencies with our processes, automation, and AI improvements around executing these various forms of electronic payments. Non-GAAP gross margins continued their upward trajectory, coming in at 72.4% and crossing the lower band of the 72% to 75% non-GAAP gross margin target ahead of our 2025 gross margin expectations, as we outlined during our Investor Day last June. Along with solid operating expense discipline, our adjusted EBITDA margins in the quarter exceeded 16%. Furthermore, our transaction yield, which is a metric that we focus on across our executive leadership team as it demonstrates the power and effectiveness of our Avid Exchange Business Flywheel model, was up almost 15% to reach $5.47 per transaction. Moving on to our customer obsession metrics, one of the data points we track is our top of funnel prospect activity. The first quarter of 2024 saw some very encouraging trends well as some adjustments to our marketing initiatives that we believe will be net positive for the year but negatively impacted us during the past quarter overall the top of funnel activity during the first quarter of 2024 was unchanged year over year with certain verticals leading and some lagging the real estate vertical our longest standing vertical market segment led the pack and was up high double digit percentages on a year-over-year basis The growth in the real estate vertical is very encouraging, as we have not seen this level of growth in more than a year, led by very strong multifamily activity. We also saw double-digit growth in our education and nonprofit verticals as well. Most compelling of all, our buyer-customer close rates were up almost 50% year-over-year, virtually across all of our industry verticals, further demonstrating our increasing sales effectiveness. However, in a handful of our verticals, we did see instances where our top of funnel performance lagged during Q1. In the quarter, those verticals included our new markets, homeowners association or HOA management as we call it, construction and financial services. Let me briefly discuss the reasons for this lag and how the top of funnel has rebounded since. As we continue to onboard new leaders in our sales and marketing group designed to help us scale to our next milestone target of reaching one billion in revenue, they have brought greater discipline, alignment, and allocation mix of our marketing and go-to-market investment dollars. As part of this evolution, we have prioritized our resource allocation mix to focus on slightly fewer but higher-yielding industry user conferences and trade shows that meet our ROI and lead flow targets. As a result, we exited a number of the lower-yielding conferences and trade shows during the quarter and prioritized greater investment in higher-yielding conferences and trade shows occurring over the balance of the year. This resulted in a 30% year-over-year decline in trade show traffic during the quarter, with a corresponding impact on our top-of-funnel metrics during Q1 as we implemented this strategy. We've allocated more of our investment resources for higher-yielding trade shows in Q2 and for the balance of the year, which we believe still have an overall higher impact to our overall top-of-funnel engagement metrics. And the good news is that this strategy is already getting traction as our top-of-funnel activity is up nicely in high single-digit percentages across the board so far in the second quarter. We believe that the strategic changes we're making to our marketing motions, notwithstanding the macro backdrop, are the right moves and highly aligned with our long-term organic growth objectives. With our recent accounting system integration partnerships, we're cautiously optimistic about our top of funnel as we scale up for the remainder of the year. Now turning to our innovation priorities. I'd like to provide an update on Payment Accelerator, formerly Invoice Accelerator 2.0. This product enables the small business supplier customers on our network frictionless access to improving their cash flow by leveraging our robust underwriting analytics, security, and scalability protocols. We're extremely excited about the prospects for Payment Accelerator as expected to be a meaningful growth contributor in 2025 and beyond, as we believe that supplier financing and cash flow management offerings will be the third leg of our overall revenue model in partnership with driving additional software and payment network revenues. Given that this is a credit product, we continue to meter the launch in order to better understand the user experience, given that this next-generation product has an entirely new digital front-end user experience, complete with self-service digital enrollment capabilities. In addition, we also want to ensure that our various third-party integrations that support Payment Accelerator are working and supporting our back office processes as designed at scale. These include enterprise-grade features such as the data science analytics critical for successful payment interception and support for a new sub-ledgering central repository required for real-time offsets and bifurcation of payments to properly execute the innovative money movement approach. This will enable us to seamlessly leverage multiple third-party financing partners in the future, as well as open this offering to a large proportion of our 1.2 million supplier customer base, many of which fall into the small business segment, even including support for larger middle market suppliers looking to accelerate larger invoices. To put this new generation user experience in perspective, Payment Accelerator compared to its predecessor is designed to onboard a supplier in a matter of minutes versus several days. What makes this process frictionless is that we eliminate the need for a traditional financial review underwriting process which requires historical financial statements from suppliers. However, we leverage supplier and buyer history and transaction data, as well as real-time visibility into the transaction status and approvals inherent in our two-sided network to underwrite and lower the credit risk, as well as provide protective setup provisions across the entire flow of invoices that a particular supplier may have on our network. The rapid onboarding process is also the result of the platform's highly integrated backend that is designed to simultaneously validate the supplier's bank account information along with Know Your Customer and Know Your Bank compliance regulations, real-time, as the supplier completes an online questionnaire of legal entity data and beneficial ownership information. Once onboarded, a supplier is presented with multiple acceleration offers, with transparent pricing and various time-based funding options, including real-time payments. In addition to the payment accelerator offering highlighting the eligible supplier invoices available for acceleration, we also provide an auto-fund option where our intelligent decision engine automatically identifies all the supplier's eligible invoices and funds them automatically, ensuring the fastest access to cash availability every time an eligible invoice is available on our network. We have a growing network of supplier customers currently live using this auto fund option. This includes Charlotte, North Carolina-based supplier JW Home Improvement, which was looking for quick access to receipt of payments for their invoices to support their overall business expansion and found the simplicity of our auto fund feature to be a major plus in our payment accelerator offering. We are leveraging data science and user experience heat maps to understand and analyze the user behavior as we intend to scale this offering five-fold over the next several quarters. We believe that our payment accelerator product will ultimately bring the intuitive front-end user experience for all of our B2B constituents similar to that of a best-in-class consumer payments application with robust back-end instant decisioning and underwriting capability. Next, I'd like to provide a progress update on some of our major accounting and ERP partnerships that we announced in 2023 as part of our strategic growth priorities. Recall that we announced two marquee partnerships last year, Appfolio in the multifamily vertical industry and M3 in the hospitality vertical. Both of these partnerships are highly strategic in nature for very specific reasons. Let's start with Appfolio, whose strategic rationale stems from its size, scope, and our vertical market experience. Recall the accounting system partnership with Appfolio is our biggest ever with a top accounting system provider focused on the multifamily real estate vertical. We are currently executing our initial go-to-market phase with Appfolio as we went live with our joint invoice and pay API integration a few weeks ago. and is now broadcasted for general availability to all 19,000 Affolio customers through Affolio's Stack Marketplace. As part of our joint go-live motion, Affolio is deploying various marketing outreach initiatives across channels to steer its customers to our offering in its marketplace through email, landing pages, webinars, and joint pipeline reviews. What is truly exciting is the increasing top of funnel activity we have already seen in the lead up to the go live integration announcement, along with high customer engagement. Since the announcement of our partnership in the fourth quarter of 2023, we have tripled the number of new opportunities created in the first quarter. We believe this kind of ramp sets a nice tone for this partnership for 2024 with meaningful revenue build in 2025 and beyond, as we believe that over 50% of Efolio's 19,000 existing customers are a strong product market fit for our offering. Moving on to the M3 partnership in the hospitality vertical, where we're seeing similar opportunity dynamics unfold. M3, as you may recall, is the hospitality market leader in cloud-based accounting solutions, along with data management platforms tailored specifically for the hospitality industry. M3's customer base exceeds 1,000 hotel management groups and owner operators, including 50% of the top hotel managers and operators in the United States. M3 is highly strategic for us, given that it accelerates our entry into the hospitality vertical through a player with a dominant positioning in the marketplace. We went live with our embedded pay integration with M3's core select accounting solution in the third quarter of 2023. Since our initial launch, we've seen robust opportunity creation with our joint marketing efforts, including dedicated M3 representatives evangelizing partners such as Avid Exchange for our highly integrated and embedded pay offering. These opportunity creations are up four-fold on a year-over-year basis compared to Q1 2023. Given the traction we are seeing, we have jointly decided to broaden our relationship and just signed a contract extension with M3 to provide integration into its flagship accounting core solutions. This accounting core integration is slated to go live in the second half of 2024. We believe that both our AppFolio and M3 partnerships along with several others that are in the pipeline position us well for long-term growth within our large addressable and unpenetrated AP automation market for middle market companies. Finally, on our key priority related to business scale, I'd like to discuss the opportunities for sustained gross margin expansion, a major lever that we've relentlessly been addressing to great success. The success in gross margin expansion perfectly complements the operating expense and investment discipline that we have demonstrated since becoming a public company. To ensure continued expansion of gross margins, we believe that we have significant room to run as we work towards our long-term 80% plus gross margin target. We have continued to engineer new innovative technology, automation, and AI solutions that we believe could work at scale across every component and subcomponent of our operational value chain across our business. The latest arrow in our quiver is our new AI-powered IVR payment automation solution. To put this particular use case opportunity in perspective, currently we employ both follow-the-sun sourcing strategies and chatbots to make payments across our various payment modalities. While the sourcing strategies optimize both unit cost and time zone coverage, Our IPA-driven bots optimize unit costs and time zone coverage at speed and scale. But RPA-driven bot methods of payment execution have certain limitations given that they need IVR to perform the exact path of execution every time where they break and need constant remapping work to be done along with requiring human beings to be inserted at critical junctures for the process to be successful. So anytime anything changes or if there is a latency, bot automation fails and the payment becomes manual or potentially kicked to a paper check. With our new AI-powered IVR automation solution, which is self-learning and self-correcting, optimizing the functionality of what our existing bots currently do along with what our bots cannot do, such as adapting the changes and updates in a particular IVR decision tree, marks a major new innovation milestone for us. During Q1, our new AI payment execution solution which is still in the early stages of the appointment, already demonstrated a 2x the productivity of our prior bot technology and over 10x the productivity of humans executing this function. With this capability, we can increase our ability to scale across supplier payments and capture automation of low-volume suppliers where the cost versus benefit is disproportional due to the high costs of automation versus the lower volume and spend of many of these suppliers. driving increased electronic payment penetration rates even further in our business. And most importantly, we believe this solution will scale non-literally as we double and triple our transaction volume on the payment network in the future. In closing, we're off to a very strong start in 2024, and I'm excited with the progress we're making across our five operating priorities for the year, which include continue to develop and recruit key talent to support our performance culture, our customer obsession and continuing to increase the value proposition for both our buyer and supplier customers, delivering on our innovation initiatives and offerings to support our durable long-term 20% organic growth objectives, along with continued scaling of our business towards our next billion-dollar milestone in the coming years. We recognize that the macro backdrop has remained volatile and challenged over the past two years and creates a cautious approach towards discretionary spending across the middle market. However, we remain laser-focused on the operational rigor and execution, along with controlling those elements of our business model that we can control directly, which includes our targeted innovation investments geared towards continuing to expand into customer value proposition and impact we're having on both our buyer and supplier customers, increasing our competitive advantage across the middle market. As we remain on track to deliver our 2024 financial commitments, we believe the robust product payload and integration partnerships that we've announced provide us with an important tailwind building for 2025 and beyond. I want to provide a special thanks to all my AvidX team members for their hard work, dedication, and relentless focus on executing our operational and strategic priorities. We believe we're still in the very early innings of penetrating what is a large and unpenetrated market opportunity to deliver business-to-business accounts payable and payments automation offerings to middle market companies. Given our product innovation, strong execution, competitive and financial strength, we believe we're well positioned to drive impactful value for customers, create future growth opportunities for our team members, and unlock significant long-term value for our shareholders. With that, I'd like to turn the call over to my partner, Joe Wilhite.

Thanks, Mike, and good morning, everyone. I'm pleased to talk to you today about our first quarter 2024 financial results, which reflect continued execution of our growth strategies amid continued macro uncertainty. Overall, we delivered another quarter of healthy year-over-year financial performance relative to the implied first quarter 2024 business outlook And excluding float and political revenue contributions, first quarter revenues came in higher due to payment and software yield expansion driven by ongoing e-pay conversion. That, together with higher gross margins driven by higher revenues, ongoing progress on unit cost initiatives, software and pay yield expansion, as well as sustained expense discipline, led to significant adjusted EBITDA outperformance. It's worth highlighting that this is our second consecutive quarter of adjusted EBITDA profit, ex-float, and political. Most notably, we more than doubled our adjusted EBITDA profit sequentially, ex-float and political, to $3.7 million in Q1 of 2024 from $1.5 million in Q4 2023 due to higher transaction growth, software and payment yield expansion, lower unit costs, and operating leverage, leaving us incrementally more confident in achieving our financial targets rolled out during our June 2023 investor day. Now turning to year-over-year results. Total revenue increased by 21.6% to $105.6 million in Q1 of 2024 over the first quarter of 2023. It's important to note that the number of business days year-over-year remained unchanged at 63 days. Roughly three quarters of the revenue growth was driven by the combination of the addition of new buyer invoice and payment transactions, coupled with software and pay yield expansion. The remaining revenue growth this quarter was driven by higher year-over-year float and political revenues. Our strong revenue growth also resulted in total transaction yield expanding to $5.47 in the quarter, up 14.9 percent from $4.76 in Q1 of 2023. Of the 14.9 percent increase, more than half of the increase was driven by pay and software yield, coupled with transaction mix skewed towards payments. The remainder was due to float and political revenues. Software revenue of $29.7 million, which accounted for 28.1 percent of our total revenue in the quarter, increased 10.1% in Q1 of 2024 over Q1 of 2023. The increase in software revenues of 10.1% was driven by growth in total transactions of 5.8%, which continues to be impacted by macro choppiness, with the balance driven by growth in certain subscription-based revenues. Payment revenue of $75.2 million, which accounted for 71.2% of our total revenue in the quarter, increased 27.1% in Q1 of 24 over Q1 of 23. Payment revenue reflects the contribution of interest revenues, which were $13.1 million in Q1 of 24 versus $7.1 million in Q1 of 2023. Political media revenue in the current quarter was approximately $800,000 and negligible in the same period a year ago. Excluding the impact of float and political revenues, which represent a third of the 27.1% increase, the remaining roughly two-thirds of the increase in payment revenues was driven by a combination of an increase in pay yield expansion, greater payment mix, and payment transaction volume increase of 8.1%. On a GAAP basis, gross profit of $69.2 million increased by 32.7% in Q1 of 2024 over the same period last year resulting in a 65.5% gross margin for the quarter compared to 60% in Q1 2023. Non-GAAP gross margin increased 510 basis points to 72.4% in Q1 of 2024 over the same period last year with the lion's share of the increase driven mostly by unit cost efficiencies and yield expansion. Now moving on to our operating expenses. On a gap basis, total operating expenses were $79.4 million, an increase of 6.6% in Q1 of 2024 over Q1 of last year. On a non-gap basis, operating expenses excluding depreciation, amortization, and stock-based compensation increased 1.4% to $58.8 million in the first quarter of 2024 from the comparable prior year period. On a percentage of revenue basis, operating expenses excluding depreciation, amortization, and stock-based compensation declined to 55.7% in the first quarter of 2024 from 66.8% in the comparable period last year. The year-over-year percent decline largely highlights expense discipline and significant operating leverage across G&A, sales and marketing, as well as R&D to an extent, even after stripping out the contribution of floats. I'll now talk about each component of the change in operating expenses on a non-GAAP basis. Non-GAAP sales and marketing costs decreased by roughly $300,000, or 1.7%, to $18.6 million in Q1 of 2024 over Q1 of last year, which reflects ongoing yet targeted investments in sales and marketing spend to support our continued growth. Non-GAAP research and development costs increased by $1.3 million, or 6.5%, to $22.1 million in Q1 of 24 over Q1 of last year. The increase was due to continued reinvestment in our products and platform, including spend management, pay offering, and payment accelerator. Non-GAAP GNA costs decreased slightly by roughly $200,000, or 1.2%, to $18.1 million this in Q1 of 2024 versus Q1 of last year due to leveraging public company costs across a larger revenue base. They continued their annualized downward progression as a percentage of revenues as we indicated during our investor day. Our gap net loss was $1 million for the first quarter of 2024 versus a gap net loss of $16 million in the first quarter of 23 with the reduction in losses driven by a combination of strong revenue flow through solid gross profit increase in expense control leading to lower operating losses, coupled with higher interest income and lower interest expense due to reduced borrowing costs and partial debt pay down. On a non-GAAP basis, our net income in the first quarter of 2024 was $11.3 million versus a net loss of $3.4 million in the same period last year, a $14.7 million positive swing driven by the aforementioned factors. On a non-GAAP basis, Q1 2024 adjusted EBITDA was $17.7 million versus $400,000 in Q1 of 2023, largely due to the aforementioned factors. Turning to our balance sheet for a moment, I want to touch on a few key items. We ended the year with a strong corporate cash position of $443.6 million of cash and marketable securities against an outstanding total debt balance of $75.8 million, including a note payable for $13.9 million. We had $30 million undrawn under our credit facility at year end. Corporate cash, meanwhile, was split roughly two-thirds among money market funds, commercial paper, and time deposit instruments, with the remaining third in deposit accounts. The weighted average maturity on the corporate cash was roughly 36 days, while the effective interest rate on our corporate cash position for the first quarter was roughly 5.2%. Customer cash at quarter end was approximately $1.2 billion, with an interest rate of roughly 5% for the quarter. The sequential decline in customer cash was largely due to typical seasonal patterns related to disbursement and settlement of payments in flight from the prior quarter, This, along with average customer cash balances, inch recorder, and shifts in calendar days between weekdays and weekends of receipt and disbursement of that cash impacts float revenue. Turning to our updated 2024 business outlook, we now expect total revenue for the year to be in the range of $442 million to $448 million. Based on the midpoint, we expect approximately 47% of the 24 revenue distributions 53% in the second half. Our 2024 revenue outlook reflects approximately $45 million of interest revenue from customer funds, a $1 million increase from our initial 24 outlook versus roughly $41 million earned in 2023. We anticipate approximately 54% of the $45 million in interest revenue from customer funds in the first half of 2024 with the remaining approximately 46% in the second half of 2024. Also, we anticipate political media revenue contribution of approximately $9 million, given that this is our first presidential cycle under FastPay. Recall, we acquired FastPay in 2021, and for context, in 2022, during the midterm election cycle, the political arm of FastPay generated roughly $8.5 million in revenues. Similarly, we expect non-GAAP adjusted EBITDA profit ranging between $71 million and $75 million for the year. With that, I would now like to turn the call back over to the operator to open up the line for Q&A. Operator?

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Management has asked that each participant limit their question to one. At this time, we will pause momentarily to assemble our roster. The first question comes from Dave Coning with Baird. Please go ahead.

Yeah. Hey, guys. Great job. And I guess my question, so it looks to me like this is the best growth quarter in maybe a couple years when you exclude float and political, which is great to see. And it reflects a lot of what you talked about, payments yield, which has been up now seven, I think nine straight quarters. What's the shape of that going forward? I know there's puts and takes between interest revenue, between a payment accelerator coming on. does that just step function just up every quarter still, or how should we see that over the next several quarters?

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

Yeah, I mean, just, you know, Dave, to follow up on what Joel said is, you know, across our team, we're laser focused on, you know, kind of the one metric that I like talking about, which is the transaction yield. And certainly, you know, that's up, you know, over 70 cents over last year and, you know, up slightly over last quarter. But that's the one that we kind of lean into in terms of all the different, you know, strategies we're executing across the business to continue to, you know, focus on what we can control. And one of the metrics there is that transaction yield metric.

The next question comes from Darren Peller with Wolf Research. Please go ahead.

Guys, can we just expand a little bit more on the top of funnel comments that I know, Mike, you were commenting on earlier, the conferences and changes to philosophy around it, and maybe what you're seeing in terms of bookings momentum, and just to add on to that, demand for some of the new offerings on the supplier side as well. I know it's a quick update there. I know it's still relatively early, but I think it would be great.

Yeah, Darren, no, I appreciate the question. You were breaking up a little bit, but I think it was around the top of funnel and commentary there. You know, I think, you know, what we saw was, you know, different verticals certainly experiencing, you know, kind of different types of activity. You know, on the positive side, you know, we were really encouraged with what we saw in the real estate vertical that was, you know, best results in probably a couple years related to top of funnel. And then combined with, you know, education and nonprofit being, you know, really strong. and certainly kind of the multifamily piece of multifamily and industrial pieces of the real estate, you know, were very strong for us. Not a big surprise considering, you know, that, you know, that's a key area that we have, you know, strong industry, you know, domain knowledge, experience, and also have lots of partnerships, you know, in that area. On the flip side, you know, certainly, you know, verticals like our HOA management, you know, you know, or associate management verticals, we call it, you know, combined with financial services. And, you know, we experience, you know, some kind of lagged activity. And one of the things that, you know, in terms of, you know, peeling back the onion and reasons why, we also implemented a fairly large just, you know, kind of strategic shift in our approach to, you know, lots of different, you know, And so just to give you a sense of it, last year in Q1, we attended about 85 different conferences and industry trade shows. And we were about 30 less this year. And so rather than spreading kind of the peanut butter pretty thin related to our investment dollars, the team is being much more strategic in terms of where do we invest in terms of the highest yielding conferences and events that we can attend. you know, to drive both, you know, ROI yield as well as the activity from these. And so one, you know, kind of result of that is that, you know, we tended less in Q1, but also super encouraging about, you know, some of the segments that did not do as well in Q1, you know, we saw, you know, bounce back in or bouncing back in Q2. And overall, you know, activity up 9% so far in the quarter. And so we think, you know, over the course of the year, you know, those strategies will pay dividends for us, and we're going to be right where we expect to be in terms of driving, you know, our overall growth objectives. So that's maybe a little bit of flavor related to top of funnel.

The next question comes from Sanjay Sakrani with KBW. Please go ahead.

Thanks. Good morning. I guess I have a question just macro broadly. One is just on the float. I guess you had decent outperformance relative to the quarterly run rate, and it seems like you expect float contribution to come down over the back part of this year. What's the rate outlook in that? And then secondly, just macro in general, I know Mike kind of talked about it still being mixed, but maybe just elaborate a little bit more on sort of what you're seeing. And if there's green shoots, I think you mentioned a little bit in real estate, but Would love more elaboration around that. Thank you.

Yeah, you bet. Great questions. I'll take float, then macro. So on your float question, you know, we did, so $13 million in the quarter. It's a little bit higher than our expectations, and one thing to keep in mind is that, you know, rate is a factor, but also customer balances are a meaningful factor. And, in fact, in Q1, rates was not an impact whatsoever. And so those customer balances are really impacted by, again, you know, just the timing and whether the period end lands on a weekday or a weekend and such. And so, you know, that sort of beat in the quarter is kind of what led us to bump up the range for that float beat. In terms of your question about the expectations in the back half, you know, we haven't really meaningfully changed from our initial guidance where we did anticipate a handful of rate cuts in the back part of the year, something like 75 bps. We'll see what actually shakes out, but that's kind of how we think about float revenue, just keeping in mind those customer balances being a huge driver. I think from a macro perspective, I would just kind of go back to what we've been experiencing now for over a year is just some suppression in spending and transactions associated with you know, our buyers on our platform. We attribute that to, in particular, discretionary spending and no one particular vertical, just general caution and spending. And that's continued through the first quarter, even into, you know, through the month of April. And so that's, you know, that macro impact is something that continues to be baked into our guidance.

The next question comes from Greg Maurer with FT Partners. Please go ahead.

Yeah, hi. Thanks for taking the question. So appreciate all the commentary around the macro. Is the volatile macro driving any changes in transaction mix between modalities, whether it's VCC, ACH, or other?

Yeah. So, hey, Craig, appreciate the question. What I would say, I think where we see macro impacting our business the most is on the discretionary spend volume. So I would say it's having less impact on kind of the allocation across different payment modalities. Those are probably very specifically driven by supplier experience and typically find suppliers, think about a combination of timing of the payment, the price of the payment combined with the level of data, And those things really drive, you know, kind of a payment modality acceptance, much more so than, you know, macroeconomic type issues is what we've experienced. So, you know, I, you know, typically, you know, in my conversations that I have, it's usually around discretionary spend on overall volume is where we're seeing the impact.

The next question comes from Andrew Balk with Wells Fargo. Please go ahead.

Hey, thanks, guys. I know you don't guide to a quarterly basis, but I wanted to get a sense of your results this quarter relative to your internal expectations. Revenue came in, you know, $3 million to $4 million ahead of what our expectations were, and then, you know, on the full-year basis, you had the guy come up a million. So I just wanted to get a sense on how this all played out and what were the puts and takes around the quarter specifically.

Yeah, it's... I hear your question, and I think you kind of summarized it well. Just to repeat, you know, we had relative to sort of the first quarter, let's just say, you know, using consensus as the benchmark is about $3 million up. We attribute a couple of that to the float revenue and a couple of that to sort of underlying, you know, outperformance in the business, particularly around yield. And, you know, our guidance, you know, like I kind of mentioned in the last response, contemplates sort of the continued activity that we see from a volume trend perspective for the rest of the year. So, you know, we're excited about having another quarter under our belt where we're sort of, you know, beating revenue expectations, seeing yield consistently expand, expanding gross margin, and sort of doubling EBITDA profit X float quarter per quarter. So, That's what we're focused on executing.

The next question comes from Brian Keene with Deutsche Bank. Please go ahead.

Hi, guys. Good morning. Mike, is there anything you can do on your end to try to drive faster transaction growth, or is it just macro-driven that there's not a lot you can do to move that number or grow that number?

Yeah, hey, Brian, that's a great question. And it's one that, you know, I spent a lot of time asking my team about. So when I think of that transaction number, there's kind of two buckets. There's, you know, existing customers that are already on our platform that are implemented. And we're seeing some of the headwinds on discretionary spend, you know, related to, you know, the CFOs across the middle market. That one is, you know, probably, you know, we have less ability to impact in the short term. However, the other piece of it is new transactions that we're adding to the platform. In that bucket, certainly there are things and strategies that we're deploying. One of the biggest things is the evolution of our sales and go-to-market activity. One of the things that I highlighted during the call that we're really excited about is the impact of some of the new partnerships that are just, you know, in the early stages of being launched. Certainly, F Folio being a big one, combined with M3. And then just, you know, the continued execution of existing partnerships. So, you know, one of the things, one of the highlights of top of funnel in the last quarter was what we saw in real estate. And that was, you know, certainly a big part of that activity was from the, you know, kind of, I'd say, the legacy partnerships that we've had. You know, companies like MRI, ResMed, real page, you know, examples like that. But we are, you know, really excited about, you know, at Folio M3 as new partnership examples. And, you know, right now we feel that we're, you know, kind of on pace to execute those. But certainly, you know, I'm talking to my team every day about, you know, things that we can do to continue to accelerate, you know, those type of partnerships.

The next question comes from Ramsey Ellis out with Barclays.

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

Hey, Ramsey. I'll take the first part, and Mike will take the second part. So, I wouldn't really call out necessarily an air pocket. I mean, we think, you know, we've got, we like, there's puts and takes overall, but we like our progression of customer ads for the year and feel good about, you know, the guidance set up and certainly then exiting in first strong 25. So, I don't know, Mike, if you want to comment on the M3 and Appfolio.

Yeah. What I would say, you know, Ramsey is... these partnerships, they're different from the standpoint of one is in a vertical that we know really well and that we're a long-term leader in, being the multifamily segment of real estate. And we already have the key integration partnerships with the other competitors in that segment, i.e., like the RealPage, the ResMins of the world. And so that was one that I think has the capability to you know ramping faster now having said that you know we had you know kind of you know already plans in place that we expected the ramp faster to some degree and then you know the m3 partnership is one that you know in the same you know we have the same level of excitement about but it's just in you know a new emerging vertical for us big hospitality that we announced last year so we you know don't have the big of a you know existing name recognition and penetration within that vertical as we do in the real estate side. So, you know, I would say, you know, we're right on plan in terms of our, you know, internal expectations and certainly, you know, working hard to have those ramps throughout the year.

The next question comes from Tianxin Huang with J.P. Morgan. Please go ahead.

Thank you. Just a clarification on the question, if you don't mind. Just the The 53% of revenue in the second half, that's unchanged. So the implied second quarter revenue, if we're calculating this correctly, is suggesting it will be flat sequentially when it's usually up. Is that correct? And if so, why? And then just on the, I know Ramsey and others asked it, just the real estate up high double digits, is that a result of portfolio production or is it more macro? Thank you.

Got it. Okay. Good questions, Tingen. I'll go first, and Michael, come after me. So on your first question, yeah, the back end is, in our guidance, the back end of the year is slightly less back-ended with updated guidance, but largely consistent in that sort of 50, 53-ish, 52.5, 53 range. And then your question about what is implied in Q2, of course, we don't guide the next quarter, but But your math isn't wrong. And what we are doing is taking a fairly cautious posture here with guidance as we look out across the rest of the year. I wouldn't say that there's anything significantly different in terms of the activity that we're experiencing, in terms of the macro getting better or worse. But we are exercising an additional measure of prudence as we're giving guidance. And so just kind of keeping the range changed just to that float beat in Q1.

And maybe to follow up on, you know, the second part of your question related to, you know, that top of funnel and the, you know, double-digit growth that we saw in real estate, you know, was it dominated by, you know, one particular partner like AppFolio? And the answer is no. It was really, you know, a nice activity across the board within, you know, kind of real estate, specifically actually, you know, weighted towards multifamily. But within multifamily, we saw a you know, both more mature partners such as RealPage and Resmin contribute nicely along with MRI. And then on the, you know, kind of new partner side, certainly we've, you know, seen the ramp of that folio. But it wasn't, you know, kind of heavily weighted or overweighted, you know, for one particular partner. We saw, you know, nice across-the-board activity within that sector.

The next question comes from James Fawcett with Morgan Stanley, please go ahead.

Great, thank you. I want to follow up on Tinge's question in terms of the seasonality and your indication that you're being prudent here. It sounds like in terms of how you're applying that to the political contribution, that that's also the case. Is that fair? And it seemed like you were kind of laying out that this is your first presidential cycle with that business.

That's right, James. We commented in the February call when we set initial guidance, you know, for that political revenue this year, $9 million. We're sort of holding to that. You know, we're cautiously optimistic. It's our first presidential cycle. It's largely back-end weighted. And there's, you know, could be a range of outcomes in terms of overall spend. So we're being, you know, we're being conservative there as well.

The next question comes from Alex Markgraf with KeyBank Capital Markets. Please go ahead.

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

Yeah, that's a really insightful question, Alex, related to kind of does that increase in automation, especially around the AI tools, and I kind of referenced one of those being our IVR tool that we've now deployed recently. And the answer is it does have an impact. And where it has an impact is on small dollar transactions where we had very specific ROI models where if a transaction fell underneath the threshold of what it would cost us internally to execute that transaction electronically through either a human being or a bot, then it got kicked out. And now with our AI tools, we're able to process those transactions down to a much smaller dollar amount than we've historically been able to do. And so that means that more, you know, those small dollar amount transactions will be, you know, going out electronically. Now, having said that, you know, they are small dollar amount transactions, so it won't have a big impact on the overall volume. But it certainly, you know, is part of our overall, you know, strategy with customers on how we maximize transactions. you know, moving transactions away from paper check to electronic overall. And it's just, you know, one additional lever of all the strategies that we're deploying.

Again, if you have a question, please press star then one. The next question comes from Rufus Holt with BMO. Please go ahead.

Hey, good morning. Thanks, guys. I wanted to come back to your comments on the EBITDA margin guidance. Looks like it implies just a small step down in margins from the first quarter level through the rest of the year. And I guess lower floating comes a factor here. But I wanted to ask if there was some incremental investment spend that you're now looking to make that's adding to the margins, leveling off, or being just a touch lower through the rest of the year. Thanks.

Thanks, Rufus. Yeah, good question. So, again, we were really pleased with the quarter and the progression of OPEX as a percentage of revenue keeps marching up. you know, sort of down as we talked about in Investor Day last year where we're seeing increasing leverage in the business. I would say that there would be some potential variability quarter to quarter if you think about what's implied in the guide. So I can point to, you know, some investments, you know, a couple million dollars sequentially into Q2, particularly around R&D, sales and marketing. And so quarter to quarter, there will be some variability. But over the year and going forward, we expect to continue to see this operating leverage show up in the financials and contribute to EBITDA.

Thank you.

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

Thank you again, everyone, for your interest in Avid Exchange. To wrap up, we delivered another strong quarter. Given our disciplined execution and strong financial performance amid the current macro volatility, we believe our portfolio of product innovations, industry-leading accounting system integration partnerships, along with multiple monetization levers align with our customer needs, creating growth opportunities for our team members and driving long-term value creation for our investors. With that, we look forward to sharing our progress on our next earnings call. You can now close the call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.