Paya Holdings Inc.

Good morning, ladies and gentlemen, and welcome to the Paya Holdings Incorporated Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. If anyone should require operator 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. 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 Pius 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 earning press release and form 8K filed with the SEC for information about forward-looking statements that may 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 read 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 form 10-K filed with the SEC in March of 2022 and the subsequent periodic reports that the company files with the SEC. Also during this call, we will be discussing certain non-GAAP measures of our performance. GAAP to non-GAAP financial reconciliations and supplemental financial information are provided in the earnings press release and the 8-K filed with the SEC. This call is available via webcast. You can find all the information I have described, including a supplemental second quarter 2022 presentation on the investor relations section of the PIAS website. Now joining us on this call today are PIA's CEO, Jeff Hack, and CFO, Glenn Renzulli. Following their prepared remarks, we will open the call for your questions. With that, now I'll turn the call over to Jeff.

Thank you, operator, and good morning, everyone. Thanks for joining us today as we review PIA's second quarter 2022 financial results and efforts underway to further accelerate our growth. At the conclusion of my remarks, Glenn will cover detailed financial results, and then we'll take questions. Paya reported strong financial results again this quarter, led by our integrated solution segment and our proprietary ACH offerings. These two growth engines, which continue to capitalize on the secular shift in our markets towards payments agnostic software-led commerce, represented nearly 80% of total Paya revenue in the quarter. In the second quarter, payment volume grew 15% to over $12 billion, driven by card volume growth of 7% and ACH volume growth of 27%. Total revenue grew over 13% to $72.5 million, and adjusted EBITDA grew 14% to $19.2 million. Better than our expectations, and these results also reflect the previously discussed incremental investment in our go-to-market and innovation efforts. Before I expand on our 2022 growth drivers and outlook, I will recap our strong competitive positioning and the secular tailwinds that drive growth in our business. Paya is a leading independent integrated payments platform serving software partners in attractive middle market verticals such as B2B goods and services, healthcare, government, and nonprofit. These verticals are all high growth and underpenetrated for integrated payments. Our strong quarterly volume trends clearly demonstrate the powerful combination of software and payments in very attractive verticals that have also proven resilient during periods of macroeconomic uncertainty. We have demonstrated exceptional capabilities by providing an end-to-end commerce experience to our software partners from order management to invoicing to receipt of goods to payment and then post back to business management and accounting systems. All of these solutions enrich the value of the entire software suite, generating very material incremental economics for our software partners, while improving cash flow and providing expense savings for end customers. In particular, the pandemic has highlighted the importance of automation and omni-channel integrated payments as a mission critical value proposition, supporting work from home and hybrid workforce models. Turning to the highlights for the first half of 2022, We significantly expanded our marketing efforts, which has led to a solid increase in our sales pipeline for more qualified and larger opportunities. We have also added considerable support to our hunters through additional technical sales and customer success resources, and have added resources to capitalize on the massive penetration opportunity within our existing partners. In the second quarter, we signed a new partnership I'm particularly proud of. Promise is a SaaS-based government solutions company which enables government agencies to provide payment accessibility and flexibility to citizens who are unable to pay their bills in full. I see this partnership as a great example of doing good business and doing good at the same time. We also signed a new partnership with OfficeAlly, a leading U.S. provider of electronic clearinghouse services, revenue cycle management, and healthcare software solutions. Key selection criteria included Paya's fast and frictionless boarding, streamlined recurring billing and text-to-pay functionality, as well as our reputation for excellent partner and end customer support. In the second half of 2022, we expect strong growth to continue in our integrated solutions business, led by our valuable ISV partners, including those that came to Paya via our Paragon acquisition in the spring of 2021. We expect strong growth in ACH to continue, driven by the secular trend of paper checks converting to electronic payments. We are also on track to deliver on our 2022 technology investments, enriching our B2B solutions, enhanced citizen and muni facing solutions for our government vertical, continued enhancements of our partner portal UX UI, as well as key enhancements to our proprietary ACH platform. which continues to be a strong growth lever for Paya. The launching of Paya Payables this year significantly expands our addressable market by incorporating accounts payable solutions. We believe we are well positioned to drive cross-sell here due to our deep integrations with existing clients on the accounts receivable side. We are leveraging these investments to accelerate growth in key areas, which will allow us to continue to capture a strong share of a multi-trillion dollar fast-growing TAM. M&A remains a key focus area for us as we see a diverse pipeline of targets, and we have started to see more moderated valuation expectations from some sellers. We continue to target businesses of all sizes that extend our distribution and solution suite, both in core verticals and in attractive adjacencies. We remain both enthusiastic and disciplined in our evaluation of inorganic opportunities. Before turning it over to Glenn, I want to reiterate a key point I have shared on previous calls. We entered 2022 in a great position to deliver strong top and bottom line growth, both of which we have continued to achieve, while at the same time making incremental investments to support our growth trajectory next year and beyond. With that, I'll turn it over to Glenn to walk you through the financials in a bit more detail. Glenn? Thanks, Jeff, and good morning, everyone.

Pi delivered strong financial results in the second quarter. Total payment volume was $12.3 billion, an increase of 15% year-over-year, led by card volume growth of 7% and ACH volume growth of 27%. Integrated solutions and ACH were the larger drivers of volume growth this quarter. Second quarter revenue was $72.5 million, growing over 13.5% versus last year. Integrated solution revenue was $46.6 million, up 18%, led by the strength in B2B and growth from Paragon, which we acquired in April of last year. Payment services revenue was $25.9 million, up 6% year-over-year, with ACH revenue growing 18%. We continue to see strong attach rates for proprietary ACH offerings with our new software partnerships. Gross profit in the second quarter was $36.7 million, up 9%, with gross margin of 50.6%. Gross margin was down versus the prior year, driven by strong growth from some of our larger integrated partners, partially offset by gross margin expansion in our payment services segment. Integrated Solutions gross profit of $23.1 million was up 9%, with gross margin of 49.6%, down versus the previous year, primarily driven by the growth of certain large ISV partners and Paragon. Payment services gross profit was $13.6 million, up 8%, with gross margin of 52.6%, with ACH continuing to drive year-over-year gross margin expansion in this segment. Adjusted operating expenses were $17.5 million in the quarter, up year-over-year, as expected, as we ramped our growth investments to expand and enhance our go-to-market efforts. Adjusted EBITDA in the quarter was $19.2 million, up 14% versus the prior year. Gap in net income for the quarter is $1.7 million versus a loss of $3.1 million in the prior year, with earnings per share of $0.01 in the quarter. Adjusted net income for the quarter was $12.2 million, with adjusted EPS of $0.10 per share. Net cash provided by operating activities was $17 million over the first half of the year. Regarding our balance sheet, we had $147 million in cash and $248 million of gross debt, with a net leverage ratio below 1.5 times on a trailing basis. Our share count at the end of the second quarter was 126.6 million diluted shares outstanding. You can reference an illustrative walkthrough of our share count in our earnings presentation. Turning to our full year guidance. We are raising the low end of our revenue and adjusted EBITDA guidance to reflect the strong first half, along with our outlook for the remainder of the year. We are slightly lowering the range of our gross margin guidance due to the strong growth in our larger integrated partners, as mentioned earlier. We expect that revenue will fall within a range of $279 million to $283 million, gross profit margin in a range of 51% to 51.5%, and adjusted EBITDA in a range of 73 to 74 million. That concludes my prepared remarks. I'll turn the call back over to Jeff to close out.