Paya Holdings Inc.

Good day, ladies and gentlemen, and welcome to the PIA Holdings, Inc. Fourth Quarter and Full Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. If anyone should require operator's assistance, please press star, then zero on your touchtone telephone. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would like to turn the conference over to Mr. Matt Humphreys, Head of Investor Relations at PIA. You may begin.

Thank you, operator. And good morning, and welcome to the PIA fourth quarter 2020 earnings conference call. Before we begin, let me remind everyone that today's discussion will contain forward-looking statements based on our current assumptions, expectations, and beliefs, including financial guidance, the growth of PIA's business, our objectives and business strategies, as well as other forward-looking statements. Please refer to the disclosure at the end of the company's earnings press release and Form 8-K filed with the SEC today for information about forward-looking statements that will be made or discussed on this call. All statements made today reflect our current expectations only, and we undertake no obligation to update any statements to reflect the events that will occur after this call. You can learn more about the specific risk factors that could cause our actual results to differ materially from today's discussion in the risk factor section of the company's final prospectus and definitive proxy statement filed with the SEC on September 23rd, 2020, and in subsequent periodic reports that the company files with the SEC. Also during the call, we will discuss certain non-GAAP measures of our performance. GAAP to non-GAAP financial reconciliations and supplemental financial information are provided in the earnings press release in the 8-K filed with the SEC. This call is also available via webcast. You can find all the information I have just described on the investor relations section of PIA's website. Please note that we have posted a supplemental fourth quarter 2020 presentation to the investor relations section of our website. Joining us on the call today are CEO Jeff Hack and CFO Glenn Renzulli. Following their prepared remarks, we will open the call to your questions. With that, let me turn the call over to Jeff.

Thank you, Matt, and good morning, everyone. Thank you for joining us today as we discuss our fourth quarter and full year 2020 financial results, which continue to highlight the powerful combination of integrated payments in our high growth vertical end markets. I'm proud of what we've accomplished, including the demonstrated resilient nature of our business, despite the impacts faced this past year from the COVID-19 pandemic. These accomplishments position us well as we focus on our growth initiatives to further expand our business in 2021 and beyond. Let's begin with a few highlights. Payment volume grew 15.7% in the fourth quarter to $9.2 billion, a notable acceleration as we exited the year as our proprietary ACH solution, which was up 41% year-over-year, continues to scale. Revenue was up nearly 6% to $54 million, and adjusted EBITDA grew 17.6% to $14.7 million. Additionally, adjusted EBITDA margins expanded 280 basis points year-over-year to 27.2%. This growth and our momentum leading into 2021 is driven by our five key pillars as we seek to extend our market leadership in middle market integrated payments. As a reminder, these pillars are, one, fundamental execution across our business, Two, penetrating the installed base of our exceptional roster of software partners. Three, driving new software partnerships. Four, leveraging our proprietary ACH solution. And five, pursuing strategic M&A. First, fundamental execution in the business. At the onset of the pandemic, we were able to seamlessly transition our workforce from the office to work from home, by leveraging our substantial technology investments and strong operational discipline, which included rigorous pre-pandemic planning and testing. We delivered innovative new products and offerings, such as enhanced digital invoicing and quick pay capabilities, continued expansion of our suite of ERP integrations, and additional reporting and self-service portal capabilities that allow our software partners and clients to easily adapt to a world where omni-channel payments became more necessary than ever. As you've heard me say many times, the quality of the end-to-end experience of capabilities is just as important as the capabilities themselves, and this is a key differentiator for Paya, and we weave it into everything we deliver. Combined with new solutions, we provided excellent service and support to our clients throughout the year while delivering the financial results we just touched on and which Glenn will cover in more detail shortly. Second, penetrating the installed base of our software partners. We had record new boardings with our largest ISV partners with notable strength in our B2B and nonprofit verticals. Additionally, in the fourth quarter, we saw growing production across our partners, particularly in the integrated solution segment. Our key partners are in attractive end markets, and there remains significant white space in their installed base of software clients to enable payments and drive further growth. Our next key pillar is driving new software partnerships. We had some nice wins recently with companies such as Central Square, Agent 511, and RevIO. The RevIO partnership is a great example of how our differentiated offering is resonating in the markets we serve. Specifically, as a premier SaaS-based billing platform in the B2B vertical, RevIO was looking for a partner who could provide a tailored integrated payments experience, collaborative go-to-market strategy, and superior service and support, which allows RevIO to focus on their core software offerings. Having these capabilities as a core element of our offerings is a key component of what differentiates Paya in the market. Next is leveraging our proprietary ACH solution. We posted record ACH volumes in the quarter, which were up 41% over the prior year and up 21% sequentially. This was partly driven by a large ACH win, in fact, the largest ACH win in PIA's history, with a conversion that was completed in the latter part of the fourth quarter. Furthermore, we saw record attach rates of ACH in new partnerships, creating meaningful cross-sell opportunities. Offering a payment-agnostic unified experience with a fixed point of integration is a powerful differentiator, and we are confident that this will provide continued growth opportunities for PIA. Lastly, we're committed to executing strategic M&A. Our approach to M&A is the same as our approach to our organic channels. We manage a pipeline of strategic opportunities in attractive end markets and support this with a dedicated and experienced team. Furthermore, we pride ourselves on having a deliberate and focused integration process post-acquisition. In October, we closed an exciting new acquisition in the municipal court space called the Payments Group. This is highly strategic as it expands our existing government end market presence into new geographies, broadens our addressable market into smaller municipalities, which are underserved by incumbent providers, and rounds out our municipal suite by adding court payments and other departments to our utilities tax capabilities. As most of you know, this is a high growth end market driven by increased adoption of electronic payments. While we don't need M&A to drive pious growth, we are excited about our robust pipeline and ability to continue to execute strategic M&A. With that, I'll turn the call over to Glenn to walk you through the financials in more detail, as well as cover our outlook for 2021. Glenn?

Thanks, Jeff.

We are pleased to close out the year with strong financial performance, as we saw accelerating volume trends in the fourth quarter, combined with favorable revenue and EBITDA performance. Total payment volume in the fourth quarter was $9.2 billion, an increase of 15.7% from the fourth quarter of 2019. Growth was driven in large part by ACH, with volume up 41% year over year, and ACH transactions growing 19% year over year. Card volume growth accelerated in the quarter, up 4% versus the prior year. As a note of reference, typically card volumes are down sequentially in Q4 versus Q3, given the lower number of business days in the quarter. For the full year, payment volume was up 6% to $33.3 billion, driven primarily by ACH volume growth of 21%. Total revenue in the quarter was $54 million, an increase of nearly 6% versus last year. In terms of our segments, integrated payment revenue was $32.4 million, up 7% year over year. Payment services revenue was $21.6 million, up 4% year over year, aided by ACH revenue growth of up 13% year over year. For the full year, total revenue was up 1.3% to $206 million versus full year 2019. Integrated payments revenue was up 2% year-over-year driven by our B2B and nonprofit verticals, and payment services revenue was up to $83.7 million. Gross profit for the quarter was $27.2 million, up 6% year-over-year, and gross profit margin was 50.4%, up 20 basis points versus prior year. Integrated Solutions gross profit of $17.3 million was up 9%, and gross profit margin expanded 110 basis points versus prior year. Payment Services gross profit of $10 million was up 2% year-over-year, and gross profit margin of 46.3% was down 80 basis points, primarily driven by NICs. Adjusted EBITDA in the quarter was $14.7 million, up 17.6% over prior year. Adjusted EBITDA margin expanded 280 basis points versus 2019. I think this is a great reminder of the natural operating leverage inherent in our business as volumes continue to grow. Finally, gap net loss for the quarter was $2.1 million versus a loss of $5.1 million in the prior year. Adjusted net income was $10.4 million versus $6.2 million in 2019. It is important to note that given the recency of PIA becoming a public company, there were certain one-time transaction and public company costs associated with our business combination. Regarding our balance sheet and statement of cash flows, as of the end of the fourth quarter, we had $24 million of cash and $229 million of gross debt. Net cash provided by operating activities was $5 million in the quarter and $21 million for the full year. Finally, our share count was 116.7 million shares outstanding, inclusive of approximately 5.7 million earn-out shares that have not yet met issuance thresholds. Now I'd like to wrap up by discussing our outlook for 2021. Our expectations for 2021 remain in line with what we previously communicated to the investor community, despite the continued impact that COVID-19 has had on the global economy. We cannot forecast the length or duration of any lingering effects that COVID-19 may or may not have on the broader economy, but instead remain focused on what we can directly control and influence. Taking this together for full year 2021, we're targeting total revenue in a range of $234 million to $242 million, gross margin in a range of 50.5% to 52%, and adjusted EBITDA in a range of $64 million to $68 million. Our performance against these targets may be influenced by the pace of global economic recovery, and finally, our outlook assumes no further unanticipated impacts from the pandemic. With that said, I'll turn the call back over to Jeff.

Thanks, Glenn. As you can see, our recent results and outlook for 2021 continues to demonstrate the power of integrated payments in our high-growth vertical end markets. By focusing on and delivering against our growth initiatives, we see tremendous opportunity to continue to grow and scale our business. Lastly, I want to say thank you to all of our employees, our partners, clients, and shareholders for your continued support. With that, operator, we're ready to take questions.

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes in the line of Mark Palmer from BTIG. Your line is now open.

Thank you. Good morning. I have a couple of questions. The first one has to do with ACH, where the company had a very strong quarter. With regard to the 2021 financial guidance, what are your expectations for ACH in 2021, and where does that fit into the guidance?

Hey, Mark. This is Glenn. Thanks for the question. Yeah, no, I mean, I think the ACH is certainly a good quarter. You know, we started to see the benefit of the large partner when layering in. We actually only saw that benefit in December. So it was the latter part of the quarter. So we're excited to get the full benefit in Q1. But yeah, no, those assumptions are layered in. We're not going to, you know, give you the ACH growth exact amount for 2021. But that certainly is a good part of our growth for next year, or this year, sorry. And, you know, we're excited about it, and it's an area that we've, you know, already kind of brought into the business, right, when you think about that conversion that's occurred. But certainly a good portion of that growth rate for this year.

Thank you. Just one more. If you could... Walk us through your thoughts on the cadence of 2021 with regard to seasonality, the impact of COVID in the earlier part of the year, how you see the quarters playing out to add up to that 2021 guidance.

Yeah, happy to. This is Glenn again. So a couple of things. One, yeah, I mean, we are business day driven given our heavy B2B mix, right? So not as much on the consumer side when you think about that calendar. And if you were to look at a business day calendar, you know, Q1 typically ends up being similar business days to like a Q4. And then Q2 and Q3 are typically the larger business days. So always something just to keep in mind. And then from a ramping standpoint, yeah, no, certainly, You know, Q1, we'll see some benefit from this, you know, full ACS conversion. But at the same time, you don't have any kind of uplift in business days. So, you know, maybe slightly above where we are in Q4 and then ramping throughout the year. And then when you think about kind of the impact that we're getting in from some of these other partner wins, those are also, you know, layering in as we go through the year. So there's definitely a ramping process that happens throughout the year. Just one other point of reference on the cost side, we do have a full quarter of kind of the public company cost layering in in the first quarter. And there's some seasonal payroll taxes in the first quarter that tend to be a little higher. So we will probably see a slightly higher expense in the first quarter versus the fourth quarter due to those two things. But think of it for the year from a revenue standpoint as kind of a gradual build, you know, acceleration as these implementations continue to layer in. We have, you know, pricing actions, which always help as well as those get layered in. And then I think we're still, you know, the macro environment. We should see steady continued improvement, I would expect, throughout the year.

Very helpful. Thanks very much.

Thank you. Our next question comes from the line of Mike Grondahl from Northland Securities. Your line is now open.

Yeah, thanks, guys. Any high-level comments just on how some of the major verticals are kind of performing and kind of are they ahead of plan, behind plan, just due to the environment?

Yeah. Hey, Mike. Happy to take a shot at that. This is Glenn. And then, you know, Jeff, you can certainly chime in as well. I mean, you can see it in our industry mix. We did provide in the presentation that's on our website the updated vertical mix, right, which we provided, you know, mid last year as well. So what you'll see in that is kind of the similar trends we've been talking about, B2B, you know, good year from a, But one, stability, and then also just growth this year, you know, as you think about COVID and what we went through, but then also coming out of COVID, it's been, you know, a stronger vertical. You know, the nonprofit and government and utility side was also favorable this year. So you'd see some good trends if you look at that chart from the two different periods. You know, good stability in both, and then nonprofit actually saw some acceleration this And then we've talked about before, healthcare just was a little slower to get back. You know, we continue to see improvement there, but still slightly down on a year-over-year basis. So that one's been, if I were to call it a, you know, more challenging one, it's definitely been that vertical. But the other three of the four large verticals we've seen good performance in.

Got it. Got it. Okay. In terms of the M&A pipeline, how would you kind of characterize that today? I know you guys put a lot of time and effort into it, and it's one of your five pillars. Sort of how does that look?

Hey, Mike, this is Jeff. I'll take that. The M&A pipeline looks very strong, so we are working a range of opportunities in all various stages. And I think the reason for that, Mike, you know, is there are a lot of great smaller businesses out there that really need to be part of a company like Paya to fulfill their potential, you know, very much akin to the transactions you've seen us do today, stewardship, first billing, and TPG.

Great, great. And maybe just last question. You kind of called out Rev.io, Agent 551. Is the sales environment for you guys getting new customer wins, is that getting better at a pace you would have, you know, kind of predicted four or five months ago? How is kind of the new customer engagement going, if you will?

Yeah, Mike, it's Jeff again. Great question. You know, I would say on the one hand, folks, and we've all observed this, have adapted to a virtual environment for almost everything we do, including the sales process. So, you know, in some examples, I think that in fact has accelerated progress. And at the same time, there are areas like key conferences and events, you know, and other things that drive top-line growth that are not quite as effective. So it's not, you know, one or the other. but it's a bit of both.

Got it. Okay. Thank you.

Thank you. Our next question comes in the line of Craig Moore from Autonomous. Your line is now open.

Yeah, good morning. Thanks. I was hoping you could break down, if you didn't already, I'm sorry if I missed it, but the growth and card volumes separating out the old ISO business versus integrated cards, if you wouldn't mind.

Yeah, thanks, Greg. How are you? This is Glenn. Yeah, so we're not breaking out card by segment, but what we can tell you is kind of what's in the material. So card volume for the quarter was up 4%. So when you think about, you know, getting back to the revenue growth of the quarter, you can think about that, plus ACH transactions, which we also kind of reference in our earnings supplement, above 19%. So when you think about kind of the mix of our business from a revenue standpoint of card versus ACH, the 4% and the 19% are kind of the applicable figures to get, you know, pretty close to that revenue growth for the quarter. But, you know, what I can say about card is, and, you know, will continue to be, you know, led by integrated. So when you think about the growth of one segment versus the other, the integrated growth is going to be above that 4%, and the payment services card growth would be below that number.

Okay, thanks. And a question about the healthcare vertical. Was the sluggishness in healthcare driven by distracted institutions obviously dealing with the pandemic rather than opportunity, or was there something else to think about?

Yeah, Craig, it's Jeff. And Glenn, please correct me if I don't get it exactly right. Most of our health care is tied to elective medical. And, you know, as you would imagine, for obvious reasons, folks are not consuming those services at the same levels. you know, given, you know, the lingering effects of COVID.

Okay, that's helpful. Thank you.

Thank you. Our next question comes from the line of Joseph Vossi from Canaccord. Your line is now open.

Hey, guys. Good results. Good morning. Just interested to get your perspective on the sales process now, being a public company versus, you know, say, last year. Has there been any change? Has it helped you maybe especially in larger deal activity and then how it's been followed?

Joe, good morning. You know, the first thing I would say is, you know, being a public company has been a very clear positive for Paya. As we continue to court and win bigger and better partners, the level of visibility and transparency that's provided to them about the strength of our business is very helpful to us. And the other thing that I would add, Joe, is that by and large, our strategy is isn't any different as a public company, as a private company. You know about our vertical end markets, where we focus in the middle markets. And so in that regard, being public, you know, is not much different. And, of course, it provides added flexibility for the inorganic or M&A portion of our strategy as well.

Sure, that makes sense, Jeff. And then just on that M&A strategy, again, it feels like there's a lot of chatter out there amongst other peer companies of yours, similar size and perhaps similar go-to-market strategy as well. I was wondering, how do you look at the competitive environment for M&A now versus perhaps earlier and maybe that now being a little bit more front and center and how the strategy changes, how the lens changes, how the funnel changes, et cetera. Thanks a lot.

Yeah, it's Jeff again, Joe. You know, first of all, our pipeline really comes in two flavors. One, our proprietary opportunities that we pursue and nurture over time. So those really are not any different today than they were before. And then obviously there are competitive processes as well. And there too, we feel very confident in our hands. for the right opportunities, for the right strategic fit where we can add the most value, we feel very good about our ability to do the work and be successful in those opportunities as well. Great.

Thanks a lot, Jeff.

Thank you. Our next question is from the line of Bob Napoli from William Blair. Your line is now open.

Thank you. Good morning, Jeff and Glenn. And Matt, just on the guidance for 2021 and then just thinking longer term as well, the integrated solutions versus the payment services segment, I think the ACH revenue is all in the payment services segment, correct? And what are your thoughts around the growth rates over the next, not only for 21, any color you could give would be helpful, but over the next three to five years for growth by segment.

Yeah, no, happy to take that. So this is Glenn. So, yeah, the ACH revenue is in payment services. That is correct. And then as far as overall, you know, guidance on longer-term growth rates, you know, we've shared kind of low to mid-teens as a top-line growth, you know, 20% plus on EBITDA. And then when you think about how that breaks down by segment, integrated would be above that low to mid-teens and payment services would be below that low to mid-teens.

Okay, and for 21?

So 21, we're not kind of breaking out segment guidance, but I think you could still think about the same trends when you look at that overall business growth rate versus segments.

Okay. And I guess on the EBITDA, I mean, you have some pretty good EBITDA margin expansion expectations, I think, over the next few years. Do you remain confident in that, and are you able to invest in the business to the extent that you want to while still achieving those EBITDA margin expansion targets?

Yeah, this is Glenn. I'll take a shot at it, and I'm sure Jeff has some thoughts as well. But, yeah, look, I think we feel very confident about EBITDA expansion. You know, we've made the investment in the business from a technical, you know, development standpoint with our platforms. So, you know, we feel very confident there. You know, this year is a little bit unique with the public company cost layering in, right? So, you know, we have some nice expansion happening even with that, but that's really the – The only thing tempering it this year really is that. But we have a great team set up. You know, we feel like we have the resources to really scale and, you know, volume as that continues to layer in should, you know, a healthy portion of that should continue to drop down to the bottom line. So I feel very good about that. Jeff, I don't know if you have any comments.

Yeah. Good morning, Bob. Thanks for the question. The one thing I would add, and you all have seen this before, is we have steadily increased our margins while we've been investing in the technology, in sales, in marketing, in support. So we are very clear that we need to continue to nurture those. We think that largely is reflected in the business we operate today. And you've heard me say before, If I ever thought there was a place I needed to spend another dollar, I would. But we feel very good about the natural inherent operating leverage, and we've demonstrated it, I think, very well to date.

Thank you. Last question. Just on, you know, you highlight the penetration of the installed base as the, you know, probably the single most important growth driver over the long term. What are your expectations for revenue from installed companies going into a year versus new customers? And what type of net revenue retention rate are you getting out of your integrated customers?

Yeah, Bob, it's Jeff again. You know, a couple things. In any given year, most of the incremental revenue will come from penetrating the base of existing partners. As you know, new software partners layer on over time. And in some cases, they have multiple platforms, so you're even working your way through the platforms of a new partner. So more of penetrating the base in the moment. But as you know, new partners are very important for the latter half of this year and for next year as well. And to the last part of your question, the net revenue retention in the integrated segment is excellent. It's in the low 90s, and it speaks to the power and durability and strength of quality integrations. It's inherent in the business model and our execution against it.

Yeah, and this is Glenn. And just to clarify on the retention side, yeah, we're 93% we were for this past year on overall volume, net volume retention. And then when you layer in pricing and other revenue actions, you get to the mid to high 90s from a revenue standpoint overall across the business. And then, as you can imagine, the integrated component is better performing than the payment services component, so that tends to be a little bit better as well. Great. Thank you.

Appreciate it.

Thank you. Our next question comes from the line of David Toggett from Evercore ISI. Your line is now open.

Thank you. Good morning. Could you comment on the spread between payment volume growth and revenue growth in the quarter given the 41% volume growth in ACH? What I'm really getting at is on a like-for-like basis, are take rates, you know, staying pretty similar year over year?

Yeah. No, thanks for the question, David. This is Glenn. Happy to provide a little color there. Yeah, no, we obviously look at this a lot in our business. And, yeah, if you look at the overall, take great math on the business, right, you see compression, right? But what's within that is it's ACH spread, right? So when we look at card spread, it was actually up slightly year over year and then up sequentially pretty well from Q3 to Q4. So, you know, still let's call it solid to favorable numbers. spread dynamics on the card side. And then, yeah, ACH with our larger win and growth, you can see it, right, which we don't really look at as much ACH spread. We look at per transaction, which is still very healthy. But what we've done is we've taken on a partner that has some lower dollar transactions, or I'm sorry, higher dollar transactions. But, you know, we're getting, you know, still great revenue lift from it and will continue to this year. So we're not really concerned about that on the ACH side. It fits the business model and what we're doing. But that would be kind of the dynamics at play for the quarter. And really, as you look into this current year as well, similar dynamics where card will be stable to up and, you know, ACH from a top line or from a headline standpoint will show, you know, spread reduction. However, we're comfortable with it based off the fact that our revenue is still growing and we have good visibility into it for ACH. Hey.

Hey, David, it's Jeff. Let me just add one thing, which is a very important point, is ACH growth in our middle market verticals is expanding the addressable. So it is not, generally speaking, displacing card volume. So if you're getting high volume, very profitable ACH business, that is very good for the company because notwithstanding an aggregate from wide revenue versus volume number that may move down due to mix.

Understood and appreciate the insight on that. Just to follow up on earlier comments, for 2021 stable uptake rates on a like-for-like basis, are you assuming any price increases in 2021?

Yes, we are. This is Glenn again. So there is some price assumption in our numbers for 21.

Got it. And then just a quick final question. Any call-outs in terms of 2021 outlook on revenue share? Is that coming down year over year versus what you saw in 2020?

Yeah, this is Glenn again. You know, I don't think we're going to be as specific to that exact line, but you see it's kind of embedded to some extent in our gross margin guidance, right, which is, you know – slightly up compared to where we are today. So we don't see any margin compression. So, you know, we should be stable to favorable from a gross margin perspective.

Got it. Thanks so much.

Thank you. Our next question comes from the line of Peter Heckman from Davidson. Your line is now open.

Good morning, gentlemen. Thanks for taking the question. You had mentioned Central Square earlier in the call, which I believe was the municipal software provider that you had talked about in the fall about a relatively more significant ISV ramping up. Can you talk about the ramp schedule for that, and would you expect that to be fully ramped by maybe the end of this calendar year?

Peter, it's Jeff. We are very proud of that partnership. I think you all know they're an industry leader in municipal ERP. They, too, have many different platforms, so it's not a single moment in time, but it's more of a gradual migration and expansion of the offering. We don't obviously provide specific guidance at the individual customer level, But we're very excited about the potential of this deal, and we will be working, you know, with our partner to build and grow it for a long time.

Great, great. And then, Jeff, while I've got you, can you talk a little bit about the trends that you're seeing within ACH, traditional ACH versus same-day versus enhanced ACH, and how you see that mix changing within your business over time?

Yeah, Peter, great question. You know, the first thing I would say is the most important thing around ACH and the growth of ACH in our market is that it is integrated ACH. That's the main value prop in terms of efficiency, omnichannel experience, back-end reconciliation, cost savings, et cetera. The specific timing of the funding, and of course we support all flavors of it, are really less significant in the middle markets than it might be, you know, if you were talking about a coffee shop trying to manage cash flow or something like that. So, you know, our view is to support all payment methods and all time horizons in whatever way meets the needs of the given end market.

Got it. Got it. Okay. And if I could just get one last one, just in terms of the TPG acquisition, in terms of that contribution in the quarter, something along the lines of, a little over $2 million maybe is what I was thinking. Is that in the ballpark?

Yeah, this is Glenn. So from a revenue standpoint, only about $1 million in the quarter.

Got it. Okay, thanks much.

Yeah.

Thank you. Our next question comes from the line of John Davis from Raymond James. Your line is now open.

Hey, good morning, guys. I just wanted to hit a little bit on the sequential acceleration of From 3Q to 4Q, obviously, spiking COVID cases probably weighed on your growth a little bit. But just how material was the ACH when I think it would then come on until December? So was that a big driver of the sequential improvement in volumes or any specific verticals to call out? And then along those lines, year-to-date trends, was the inclement weather towards the end of February material? And just how should we think about kind of 1Q growth rates off of 4Q?

Yeah, look, I think, you know, we do reference the year-over-year growth rates in the presentation on our website, so you can certainly look at those in our Q4 segment breakdown. Integrated Solutions was up 7% in the quarter, so it's still healthy there, and that does include, right, ACH, so separate from the large ACH wins. So we, you know, saw good acceleration in the fourth quarter there. And then, yeah, certainly ACH revenue, you know, we do reference up 13% in the quarter, in the fourth quarter. um so also good acceleration there and you know i mentioned we'll continue to see some benefit from uh that you know conversion where we only saw actually partial benefit in q4 in that ach partner when um only in december actually so should be a nice lift for ach into q1 as well okay and then jeff maybe just talk a little bit about m&a and maybe i'll ask it a little differently if i were to look at your pipeline

what is the mix kind of by vertical? Is there any specific vertical that you're going after? Obviously TPG was nice in public sector or government, but are there any specific kind of needs or wants? I mean, does it make sense to go after an education business? Just maybe give us a little bit of flavor for what the pipeline looks like by vertical.

Yeah. So the pipeline is strong in each of the verticals. And to be honest with you, it's not quite as, you know, scientific, you know, as you might describe. We pursue opportunities in all of our core verticals and in the adjacent verticals or sub-verticals. And obviously, you've got to have a combination of, you know, finding the opportunities and having willing sellers. So I wouldn't say that we rate the relative enthusiasm. We pursue all of the sectors that make sense for us enthusiastically.

Okay, there's no specific product or, you know, that you may be after. It's just kind of opportunistic in the verticals that you're in. And I would assume that you would kind of keep it to the verticals that you're in. You don't have any interest in going outside into new verticals?

So generally speaking to your question, yes. You know, in terms of working on adjacent verticals or, by the way, the sub-verticals, for the verticals we're in. You know, we do work on both of those sides as well. And TPG is a great example of that because obviously we are already strong in municipal and utilities, but TPG brought us a much broader market opportunity and proprietary product capabilities in a vertical we're already strong in.

Okay. All right. That's it for me, guys. Thanks.

Thank you. Our next question comes from the line of Bob Napoli. Your line is now open.

Hi. Thank you for the follow-up question. Just wanted to dig a little bit more into your largest vertical, the B2B goods and services, and just any color you can give on what's stronger there, how the competitive environment looks in the B2B space. Are you seeing any changes? And what's most differentiated about Paya? in the B2B vertical.

Yeah, happy to take that. Oh, sorry. You want to take it, Jeff, or you want me to? Yeah, sure. Yeah, look, I think, you know, we sit in a good place in B2B, right, when you think about we have a pretty diverse set of businesses when you think about wholesalers, distributors, manufacturers, you know, contractors, OEMs, you know, so it's a good mix of diversity of end merchant. And then we've been fortunate to really have some strong partners in that space as well that are growing and really, you know, have some great software offerings that we're able to kind of piggyback and integrate with, which has also helped us. So I think those two things together are helping us there and really will continue to help us as we continue to work with them, and they're having great trends on the partner side, which ultimately is a win-win for us and our partner. So both the macro environment and some really favorable partners, I think, contribute to that.

Hey, Bob, it's Jeff again. I'll just add two points to what Glenn said. The first is that many of our great partners in B2B, are acquisitive in their own right. So that presents a tremendous opportunity to us. And to the other part of your question, you know, about our competitive strength, you know, and I've said this before, having a great modern flexible tech stack is of course essential, but you need to add to that a great go to market that can be tailored and tuned working with the software partners. and a great technical and operational support model working hands-in-glove with the software partners and their end customers. So it's really those three things in unison that we think differentiate Paya and has been helping us win bigger and better partners.

Great. Thank you. Appreciate it.

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Jeffrey Hack for closing remarks.

Great. Thank you very much. Thanks, everybody, for joining us so early on a Monday morning. We'll look forward to spending more time with you going forward and hope you have a great rest of the day. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.