BTRS Holdings Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Build Trust's fourth quarter 2020 earnings conference call. At this time, all lines have been placed on mute to prevent any background noise. Following the speaker's remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded. I'd now like to turn the call over to Dara Dirks, Managing Director of ICR, to begin the presentation. Thank you.

Thank you. Before we begin, I'd like to remind you that today's call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC and available in the investor relations section of our website. Actual results may differ materially from any forward-looking statements we make today. These four looking statements speak only as of today and the company does not assume any obligation or intend to update them except as required by law. In addition, today's call may include non-GAAP measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures. Reconciliation to the nearest gap measure can be found in today's earnings press release, which is available on the company's website. Hosting today's call are Flint Lane, Biltrust founder and chief executive officer, and Mark Schiffke, Biltrust chief financial officer. With that, I'd like to turn the call over to Flint to begin.

Thanks, Dara, and thank you, everyone, for joining the call today. Since this is our first earnings call as a public company, I'd like to begin with a brief overview of Biltrust and the market opportunity. i'll then share some financial highlights and updates on our growth initiatives mark will then discuss our fourth quarter results in detail, as well as our outlook before we take your questions. bill trust was started over 19 years ago with a simple premise, the world was going through a massive shift from analog to digital this was going to affect corporate American ways that people were just beginning to imagine. Our big bet was that the accounts receivable department was ripe for transformation, because there were so many manual and paper processes. This is kind of obvious in retrospect. The internet was ushering in a whole new world for accounts receivable department once they realized they could get paid faster and do things more efficiently if they could switch their customers from receiving paper invoices and sending paper checks to a digital interaction. One obvious path to solving this problem was to offer businesses a branded online billing portal where their customers could review, approve, and pay bills online. While this is a key part of the strategy, it alone doesn't solve the problem. Delivering a great e-billing experience is important, but what is far more important is to get end customers to actually use it. In order to do this, a more complete solution was required where we could meaningfully impact the rate of conversion from print to digital. A similar shift occurred in the payroll industry with the advent of direct deposit. The most successful payroll companies didn't offer just direct deposit. They offered check printing, compliance, 401K, and a host of other capabilities that were payroll related. We've done the same in the accounts receivable space, which is also called order to cash. We offer customers an end-to-end solution that includes credit decisioning, e-commerce, invoicing, payments, cash application, and collections. Equally important is we have teams focused on helping our customers to drive the business results that they desire from our solutions. Our total addressable market is enormous. Our software opportunity stacks up against 280 billion global invoices. Our payment opportunity against $120 trillion in global commercial payments. The existing B2B payments ecosystem is highly inefficient. However, there are incredibly strong industry tailwinds as this market continues to move towards electronic payments. a shift which has been accelerated by the pandemic. Given this, we believe the total addressable market will continue to grow, and we're well positioned to own a disproportionate share. Many of you are likely familiar with the accounts payable side, or AP. Accounts receivable, or AR, tends to be more complex. While the goal of AR is to get paid, there are many steps that have to occur before that, starting with establishing credit. Businesses sell to other businesses based on the promise to pay. Each customer first goes through a credit decisioning process, which often involves filling out a form and collecting things like bank statements that are often faxed back to our customer. Once credit is established, which can take weeks, the customer can start placing orders. Those orders are processed and then it's time for invoicing. In many cases, that still means sending a paper bill or faxing it, emailing it, or entering it into an online AP portal. and that's just to get the invoice out, let alone actually getting it paid. Payments can be made in a variety of different ways, including check, wire, ACH, and credit card. More challenging than accepting the various form of payments is properly applying those payments and the associated remittance information to an ERP like SAP or Oracle. Electronic payments in B2B are often extremely difficult and time-consuming to process. When B2B customers get paid, it is critical that they know which invoices are getting paid where they can't clear the customer's account correctly. The problem with electronic payments in B2B is that the remittance data, literally which invoices that are being paid, come separately from the payment, most often via email. If I'm running a large AR department, I'm paying people to sift through thousands of emails that come in each month and matching them to bank account deposits. This is a big reason why so many B2B payments are still on paper check. Electronic payments as they exist today aren't that great. Finally, there is the collections process for invoices that aren't paid on time. This is typically a labor-intensive exercise where customers print out an aging report and work their way down through the list, starting with the highest balances or the most past due. The bottom line is there are many opportunities to drive efficiencies and accelerate payments along the entire order-to-cash process, and BuildTrust is leading the digital transformation to make it easier for businesses to get paid. Our mission-critical SaaS solutions integrate with a number of ecosystem players, including financial institutions, ERPs, and AP software platforms to help our customers accelerate cash flow and generate sales more quickly and efficiently. Our customer sales team go into accounts to diagnose problems, and they spend time learning about the existing processes and figuring out the cause of the pain points before offering a solution. Oftentimes, customers will think they have one problem, and it turns out to be something else. For example, they think they have a collections issue, but it's actually an invoicing and payments problem. Our goal isn't to go into an account and land all of our solutions immediately. Rather, we land and expand, and we do so by delivering great results. Our customers are extremely happy with us and loyal, as evidenced by our 110% net dollar retention in our software and payment segment and very strong net promoter scores. We have customers of varying sizes across a variety of industries, but the common thread is they are all high-volume billers with highly diverse buyer sets, meaning their buyers require them to invoice and collect payment in many different ways. Their needs are complex and our offerings streamline their entire process. We see incredible opportunity ahead to continue to grow our core SaaS offerings aggressively. However, there is another part of our business that is growing even faster, and that's the Business Payments Network, or BPN. B2B payments are fundamentally broken in the U.S. with a significant percentage of payments still on paper check. There are many reasons for this. One of the biggest is that there is no easy way for a business who wants to make an electronic payment to find out how to pay another business electronically. There's no central repository of banking credentials and email addresses. So what they resort to is calling up their vendors to find out the required information, bank account number, routing number, and email addresses, for instance. That's wildly inefficient. A better process is to hire an accounts payable partner who does this regularly as part of their business model. But these AP partners are effectively doing the same thing, and the messy process has just pushed to their business model. That's not the way it works in person-to-person payments. If you want to pay your friend electronically, you can simply pay them through a service like Venmo. You don't call them up and ask, who they bank with, Venmo is both a directory of people who can be paid and also a money movement tool. We created BPN in 2017 as a new framework for B2B payments. The simplest way to describe it is that it is like Venmo, but for B2B payments. It is a directory of suppliers that can be paid and how they want to be paid, as well as a money movement tool. BPN facilitates the flow of payments and remittance information from accounts payable to accounts receivable. BPN is an open network that leverages our underlying AR platform and connects the financial service ecosystem across AP providers, payment card issuers, ERPs, and banks, bringing together suppliers and buyers. We've partnered with Visa as well as many leading banks and software vendors because we recognize that the enormity and importance of this problem requires a comprehensive solution. As our customers and their end customers connect on BPN, we've seen strong network effects driving further growth and adoption. For large businesses transacting with suppliers, including the large AP providers paying on behalf of smaller organizations, we believe BPM will play a central role in the future of B2B payments. Now on to some financial highlights. We finished the year strong and exceeded our net revenue and gross margin goals. We shared with investors back in September during our SPAC process that our 2020 net revenue target was $105 million. We beat that quite comfortably and finished the year at $108.6 million. Because of this and the recurring nature of our business, we will be revising our guidance slightly upwards, and Mark will share those specifics later. On the adjusted gross margin front, we had originally targeted finishing the year at 69%, and again, because of the strong fourth quarter performance, closed the year at 70.3%. We get revenue from a variety of sources that we break out into software and payments, print, and services. Two of the components of software and payments continue to perform well. Subscription revenue grew at 32% year-over-year, and card volume processed through our payment facilitation business, or what's commonly called PFAC, now represents a little less than 30% of our overall card volume. On the business front, we executed well against many of the proof points we articulated during the de-SPAC process. We discussed last fall that our intent is to be more aggressive with sales and marketing. Since September 1st, we've hired 14 quota-carrying sales reps and increased this team's size by nearly 30%. There is a ramp-up time before salespeople start closing deals and generating revenue, but our pipeline is developing as we expected, and we are cautiously optimistic about the benefits to come. We will continue to be aggressive here. We've also made two key executive hires. Greg Hansen joined in December as our chief product officer, and now oversees all of our product initiatives across the entire company. He most recently was SVP of product at Precision Lender, which was acquired by Q2 Software. Gwen Lazar joined Biltrust in December as our SAP of channel development. She manages our growing ecosystem of partnerships, including banks, car brands, system integrators, and ERPs. Gwen most recently was VP of global alliances at Skillsoft. We also made a lot of progress on the product front. The Biltrust email solution, which delivers millions of invoices per year on behalf of our customers, was enhanced last year to include a convenient and secure payment option. We've now turned this on for a small group of customers and are seeing nice payment uptake initiatives like this align with one of bill trust strategic imperatives that we call payments everywhere. The bill trust cash application solution or cash APP also got some major upgrades we launched enhanced machine learning capabilities which have led to substantially higher automation rates and therefore less touches by customers. cash APP also includes a mobile deposit APP that is targeted at field personnel will often have to collect payments in the field, which is capturing additional payment revenue. The Bill Trust e-commerce solution, also known as Second Phase, recently released version 10.0 of this platform, which includes user experience enhancements, a single-page checkout module, and certifications from some of the leading tax processing companies, which makes it even easier for our customers to process online orders. On the BPN front, we have a lot to share. We finished 2020 with year-over-year payment volume growth of 137%, reaching nearly $4 billion in spend. This was composed almost exclusively of commercial credit card spent. We now have five of the top 10 commercial card issuing banks on BPN and expect that to further fuel payments growth through the network. Since announcing BPN 3.0 in August 2020, which includes support for ACH and wire payments, that volume has grown nicely and it accounted for more than 10% of the BPN payment volume for the first two months of 2021. BPN partnerships, which are critical to the network's expansion, also continue to increase. BillTrust now has an expanded partnership with Avid Exchange to provide additional services to suppliers through both the Avid Pay Network and BPN. We've also partnered with Repay, an integrated payment processing solutions provider, to enable them to access our BPN directory of suppliers, increasing the network's reach. Lastly, we extended our partnership with Visa to provide qualified BillTrust suppliers with flexible pricing models. We will use this capability to grow TPV within our PayFac and BPN offerings across markets that have historically lagged in the acceptance of commercial credit cards. Before I end my comments, I'd like to say just a few words on how proud I am of how BillTrust has been navigating this pandemic, which has been so awful for so many people and businesses. A little over a year ago, BillTrust shifted to working from home when it became clear we couldn't safely have people in the office. We implemented temporary pay cuts when we weren't clear on how badly the pandemic would affect our business. We instituted a hiring freeze and clamped down on expenses. A year later, we are doing our first public company earnings call. This is a testament to the resiliency of the build trust culture and our nearly 600 employees who live our values every day. The digital transformation of accounts receivable was already happening. It is now accelerated and we are positioned well to capitalize and drive this transformation with our solutions, people, and maniacal focus on driving outcomes for our customers. I'll now turn the call over to Mark to review our fourth quarter results in detail, as well as our financial outlook.