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spk_0: the morning and welcome to the priority technology holding fourth quarter and four year twenty twenty two earnings conference call all participants will be and look and only mode should you need assistance sleep with no a conference specialist by parking authority followed by be well after today's presentation there will be an opportunity to ask questions to ask the question in a parked car than one on your touched on phone to withdraw from the questions you prefer start to do we this event is being recorded i would now like to turn the conference over to chris kaman we go ahead
spk_1: the morning and thank you for joining up with me today are contrary german and chief executive after a party technology holding and familiar chief financial officer before we give up prepared remarks i would like to remind off bridges and that are coming today will include forward looking statements which involve a number of risk and uncertainty that may cause actual results to differ materially from a forward looking statements the company undertake no obligation to update or revise the forward looking statements whether a result of new information future events or otherwise we provide a detailed discussion of the berries risk factors in are a few feet violence and we encourage you to review the fire alex additionally we may refer to non gaap measures including but not limited to eat it up and adjusted eat dog during the call reconciliation that are now yeah performance and liquidity measure to the appropriate got measures can be found in a press release and ftp filings available in the investors section of our website with that i would lie
spk_2: to turn to call of richard sherman and ceo tom preorders
spk_3: thank you chris and thanks to everyone for joining us for a fourth quarter and full year twenty twenty two earnings call before going into our financial results i would like to highlight a few key take ways that the current business trends as you absorb the coupon for performance and projected into twenty twenty three first and foremost the businesses performing the way we anticipated consistently growing market share and smb acquiring and producing strengthening result in be to be an enterprise payments while other companies appearing back in response to answer macro economic conditions and the recent bank turmoil were driving forward on the strength of our counter cyclical business life that were positioned to benefit from higher interest rates and the current economic environment becker
spk_4: not only are we are performing our peers but the key metrics in our business have continued to improve
spk_3: or full year twenty twenty two great traits and margin expansion a representative of the first quarter trance we have seen to date in twenty twenty three last our decision and twenty twenty two to accelerate investment in passed away are unified commerce a p i combining full featured payments and banking is a service is proving somewhat prescient given the recent struggles the banking sector and the general crisis of confidence in banks among businesses of all sizes i'll speak in more detail on this topic toward the conclusion of our call but suffice to say that the current pace of new partners adoption a passport to collect store and send money will fuel results into quarters and years ahead with the as a backdrop let's dig into the numbers i just on a heinz release we continued our positive momentum with an exceptionally strong fourth quarter to close out a strong twenty twenty two or fourth quarter revenue increased twenty three percent from the prior year to a record one hundred and seventy seven point six million which led to a twenty five percent increase in gross profit to sixty one million and a twenty one percent improvement in a just leave it up to thirty nine point eight million for the year revenue increased twenty nine percent to six hundred and sixty four million growing organically by twenty three percent in the fourth quarter and nineteen point one percent in twenty twenty two bull year adjusted gross profit and the bit of both grew forty six percent with adjusted gross profit reaching two hundred twenty six point nine million and just a bit of coming in within our target at one hundred forty point three million for the full year twenty twenty two adjusted gross margin of thirty four point two percent increase four hundred and ten basis points from twenty twenty one demonstrating the operating leverage of our purpose built platform and an earlier noted we anticipate that are strong fourth quarter performance and established trends in our business channels will continue as such we're expecting to deliver consistent double digit top line and bottom line road projecting revenue and seven hundred forty two seven hundred fifty five million and adjusted ebitda of one hundred and sixty to one hundred sixty five million for for the full year twenty twenty three for those of you who are new to the company slight seven highlight the architecture of our proprietary unified commerce platform that is purpose built to collect store and send money combined robust payments and banking functionality to monetize the merchant networks we serve or customers and the current market conditions continue to reinforce our belief that systems combining features of boat payments and banking to celery cash flow and distribute funds to multi party environments will be critical as businesses put greater demand on software and payments solution providers we're committed to meeting their growing demand by simplifying the customer experience for our partners
spk_5: and making working with priority as easy as one two three
spk_3: partners simply choose the application that best fits their business whether that is a small business operator choosing from mx merchant and the mx pos week an empire middle market customer adopting cps for automated payables or an enterprise partner connecting to us by are a p i
spk_6: they select a passport financial told that best in their need and begin to move money at this point i'd like to handed over to tim who provide further insight into our segment level performance during the fourth quarter and full year along with current trends that each that in for more guidance for the upcoming you
spk_7: thank you tom and good morning everyone
spk_6: it every year the full year and fourth quarter financial results including a segment level contribution to the consolidated results please refer to the supplemental slides where the indian a for further details are indeed a is included in the form ten k that was followed with the as you see this morning and provide the discussion of a comparative for your results i'll link to that falling can also be found that our website as tall mention we had strong financial performance across all business segments and bought the fourth quarter and for the full year i want reiterate the financial highly to come out he spoke to for both of those time periods but before i go to the segment little details i do want to provide a few other key metrics as it relates to the for your consolidator results
spk_7: where the full year we had almost fifty percent growth and bank card dollar volume across all segments to roughly sixty two billion dollars we attended a half percent growth and bank card transaction count to six hundred and forty million transactions and just under four percent growth in average ticket size to ninety six dollars and fifty cents
spk_6: if you include a ch debit and other volumes the total payment volume for the year was a hundred and twelve point eight billion dollars again those metrics or all for the consolidated business i'll go into more detail any to the business segments results for the fourth quarter let's start with us and be payment on slide ten for the fourth quarter that segment revenue of approximately one hundred and fifty million dollars which was an increase of twenty three percent over the prior years fourth quarter
spk_7: this strong growth was almost entirely organic and was driven by a combination of over seven percent growth and bank card dollar volume to roughly fourteen point nine billion which included nine percent growth and bank card transaction count it was slightly offset by a decline average ticket size to ninety two hours sixty one sense from just over ninety four dollars in the fourth quarter of twenty twenty one
spk_6: we faced the quarter with your fifty nine thousand merchants would represent an increase of seven percent from the prior year the average merchant account for the quarter was just over two hundred and fifty seven thousand which is also seven percent growth from que four of twenty twenty one this growth emerging count was driven by continued strong boarding trends were new monthly merchant board average forty six hundred per month throughout the quarter that compares to an average of thirty six hundred per month in the fourth quarter of twenty twenty one and an average of about forty seven hundred per month for all of twenty twenty two continuing with us and be on the next page that movie down the pan out of focus on profitability we also saw strong performance with adjusted gross profit increasing eighteen percent to thirty six million dollars despite or hundred and twenty bases point decrease in adjusted gross profit margins as discussed empire cause we've continued to see some margin compression across the acquiring portfolio as a result of are larger reseller partners driving more of the growth but those partners also generally receive higher residual commissions lastly for us be quarterly operating income increased by forty two percent thomas fifteen million dollars as a result of operating leverage within the business segment
spk_8: moving to be to be payments we had revenue of two point eight million dollars in the fourth quarter of two thousand twenty two which was a decrease of forty eight percent for the fourth quarter of twenty twenty one
spk_6: this decrease was the result of the previously discussed reduction in revenue from managed services due to the final line down of certain programs with a large customer to help with that line down and context managed services generated on average over two point seven million dollars of quarterly revenue in the first half of twenty twenty two
spk_7: that compares to just over three hundred thousand dollars in the fourth quarter as the program for put it it's wind down in october
spk_6: going forward we expect to see a nominal amount of managed services revenue that will be generated by some smaller legacy programs
spk_7: focusing on the cps business with a be to be revenue for the quarter was relatively flat the two and a half million dollars but it was negatively impacted their the timing of certain incentives
spk_6: normalizing for that cp x would have grown almost nine percent in the poor the growth and cp acts was fueled by just under a percent growth and a ch via from que four or twenty twenty one to queue for and twenty twenty two and eleven percent growth and issue and volume
spk_9: with respect to be the be profitability and thirteen adjusted gross profit declined by thirty five percent as a result of the managed services wind down but you can also see how the adjusted gross profit margin increased by over twelve percentage points during the quarter as the lower margin managed services business rolled off
spk_6: but a quarter the be to be segment operating loss at one point one million dollars as certain costs related to the man services program or able to we follow removed from the penology for but have since been reduced moving to the and if i say well next page q for revenue of twenty four point nine million dollars was an increase of seven point seven nine dollars or forty six percent from seventeen point one million and que for twenty twenty one
spk_7: as a reminder cfp pay was acquired a september of twenty twenty one so the strong year over year growth and queue for is entirely organic and not the result any girl or from the acquisition timing
spk_6: favorable trains a new enrollments and increased in the number of build clients and the benefit of rising interest rates all contributed to the fourth quarter revenue growth i would also highly that the queue for performance represents almost fifteen percent sequential growth from the third quarter of two thousand twenty two as shown in the next page adjusted gross profit so the enterprise segment increased by fifty percent to twenty three point three million dollars and adjusted gross profit margins expanded by three hundred basis points to ninety three point six percent
spk_7: operating income for the segment also benefited from operating leverage as exemplified by the hundred and twenty one percent growth compared to revenue growth the forty six percent
spk_6: we remain excited by the revenue and ortiz opportunities inherent in enterprise they've gone for operating expenses are shown up eight sixteen and told forty two point eight million for the quarter an increase of twenty percent from the prior year this change is primarily driven by increased expenses in the business resulting from investments made in both personal and technology to support the strong growth experience and twenty twenty two
spk_7: salaries and benefits of sixteen point nine billion increase forty one percent from key for twenty twenty one as a result of both an increase in headcount and wage increases which is consistent with industry and broader macro trends
spk_6: the had can increase is supported growth across the company and were added in both the us and that are development center in india we finish queue for with approximately eight hundred and seventy employees including roughly three hundred in india compared to just under eight hundred at the end of twenty twenty one
spk_7: i do all the highly that the sixty point nine million of salaries and benefits and queue for was only a modest increase from sixteen point four million a que three as we remain focused on extracting operating leveraged from the vestments that have been made to date and both the team and technology
spk_6: as dna have some point nine million increased to twenty seven percent from six point two million and queue for twenty twenty one again continued investment in the business expansion drilled that level of growth but consistent with my comments on salaries and benefits we will continue to focus on our costs structured in order to drive operating efficiencies i would have later the queue for spend was almost three million dollars lower think you three levels due to the roll off of certain are recurring expenses
spk_3: combined with lower marketing expenses falling a priority power conference that we hosted in september
spk_6: depreciation and amortization of eighty nine hours with quarter increased modestly from last year
spk_7: moving to the next slide adjusted he beat the air for the quarter was thirty nine point eight million which was an increase of twenty one percent for thirty two point nine million and queue for twenty twenty one
spk_6: working down the the dow walk on the slide i'll start with you for but also discuss the for your results
spk_7: the largest i added back to consolidated that income or obviously interest expense and depreciation and amortization interest expense of sixteen point three million for the quarter is an increase of four point four million from que for twenty twenty one levels given the impact of rock the rising interest rate environment and the forty right nature of our existing debt on that topic i would reiterate from fire calls that we do have a natural head in place for almost ninety percent of the fourteen rate that given the interesting com were able to generate on the deposits in the enterprise segment
spk_6: if you include the forty rate component of our preferred stock the natural head from the deposits cover about sixty percent for forty my liabilities
spk_7: the further adjustments to rabbit adjusted he beat the a for queue for include non cast are compensation of to two million and approximately one point three million of other adjustments which consist of certain noncash were not recurring expenses
spk_6: but the full year adjusted he with the a one hundred forty point three million including add that of fifty three and a half million branches expense six point two million noncash thought compensation expense and six point seven million other non cash or nonrecurring expenses moving to the us any debts slide on page eighteen your noted our debt levels declined you have a year and we finish the quarter was six hundred and twenty three point two million of gross debt and six hundred to four point seven million of that that this reduction is net have continued investments in the business and also after repurchasing one point seven million appear to have shared during the fourth quarter and five point nine million during the full year i'm a liquidity standpoint we had twenty seven and a half million dollars bara capacity on a revolving credit facility and addition to eighteen and a half million dollars of unrestricted cash on the balance sheet a quarter and i would also note that subsequent acute fourth quarter and we've paid on another six million dollars on the revolver
spk_7: i fly nineteen the preferred stock our balance sheet total two thirty five point six million a december thirty first and as net of twenty one point one million on agree to discounts and issuance costs
spk_6: the fourth quarter prefer dividend attend a half million is comprised of five point three million paid in cash and four point three million have a pet component that it's supplement it on our income statement with the accretion of discounts and issuance cost of just over eight hundred thousand
spk_7: before turning the call back over to tom i wanted to further address or revenue and adjusted ebitda guidance for the full year twenty twenty three which can be found and slide twenty the presentation based on continued strong growth and trends in the business we are forecasting twelve the forty percent growth the revenue to range of seven hundred and forty to seven hundred fifty five million for the year
spk_6: as i mentioned previously on the call we're focused on leveraging the investment already made in a team and technology throughout twenty twenty two which leads overall margin expansion during twenty twenty three as a result we are forecasting adjust the dog growth of fourteen to eighteen percent which will result in a range of a hundred and sixty two hundred and sixty five million for the full year
spk_7: if you break that grow the part forecasting continued double digit growth and revenues from as and be but we also expect to continue to see some modest margin depression of the portfolio as a larger reseller partners continue to drive more of the growth in the business be to a top my growth will be skewed by have an anniversary the run off for managed services but we expect cvx to show continued growth that should also result in margin expansion for the segment given the higher margin profile of x compared to men services lastly enterprise is forecast to continue with strong growth all the we have temper expectations of better at twenty twenty three to count for the growth already experience in the second half a twenty twenty two
spk_10: further we expect the margin profile near by simon to remain consistent with it's exit right for twenty twenty two
spk_3: with that a the trying to call back over to tom for his closing and thanks to them for wrapping up at like to speak to one of the more significant point we made during her keys three discussion
spk_11: during if we call our decision to accelerate investment in our banking product initiatives in the back half twenty twenty two
spk_3: that would lead slightly lower bottom line guidance stating that we believe accelerating feature development or native party passport offering to deliver a full suite of proprietary payment and banking solutions into the snb and be to be markets
spk_2: as well and enterprise partners will result in outside benefit
spk_3: to our shareholders in the coming years
spk_12: we also highlighted research firm leading research farms mckenzie in maine
spk_3: that the friends and payments and banking commonly referred to as invented finance your conclusions reflected that small businesses starting up they may never interact with a conventional back by logging into their ecommerce or accounting platform they can open a deposit account order a debit card and meet most of their financing needs to embed financial products into a single seamless convenient and easy to use customer experience they predict that the winners will likely provide a whole suite of services including some regulatory oversight compliance origination of fulfillment enablers the take the half a lot of embedded finance for platforms through easy integration and great servicing should hold the upper hand they can choose high volume self service model or higher touch operation across fewer vigor black vote well the current crisis of confidence in the banking system will certainly drive more businesses to alternative solutions that offer greater transparency speed of careful recognition
spk_13: regulatory support and diversification of banking system risk that traditional platforms cannot deliver
spk_3: our systems are built for this future and are proving ready for the current test under fire in addition the handling all forms of payments credit debit a ch checks yes even lockbox capability and wires
spk_5: and robust security in compliance
spk_3: passport self directed account opening process only be the email for customers to get started or fast k y c and and am l process
spk_12: can set up an account in less than thirty minutes
spk_3: in fact during the weekend of the sv be and signature failures new account set up time average seven minutes once established customers can set their own virtual accounts near instantly importantly as a license money transmitter regulated by benson and all states the funded passport or syndicated to our partner banking institutions and maintain and fully radical at the i see insured accounts albert einstein famously said that in the midst of every crisis lines great opportunity we're confident that we prepared well for the president turmoil in the banking system and will emerge stronger just as we did following the height of the coven pandemic and the recent pressures from inflation and economic downturn as many of our peers reduce investment in the wake of worrisome macro economic conditions and the igniting banking system for years
spk_12: we remain confident in our investment into the convergence payments and banking and even more keenly focused on our execution
spk_3: where position of benefit from opportunities emerging from the current uncertainty by providing friends' parents and secure unified palmer solutions that they'd businesses need and clothing i want to acknowledge my passion and calling their priority who are fully committed to our mission and continued to deliver market leading results thank you for your unwavering focus and the exceptional work you continue to deliver day in and day out
spk_14: there's no power greater than human passion and you're passing to deliver great products and customer experience is the power that driving priority
spk_3: we appreciate you all think the time to participate in today's call and the ongoing support of our investors and analysts
spk_0: operator we don't like the open the call for questions oh now begin the question and answer session you ask a question in april five and one on your couch ten pounds if you're using a speaker phone please pick up your hands before passing a kid
spk_1: to withdraw your question please entail the first question or from fine in flanker of alliance global partners faithful had
spk_15: i guy thanks for taking all my questions and yeah thanks for all the details on unified palmer's platform to believe that's what i've been calling them thinking that his service platform so i'm assuming that's right can we talk about
spk_16: does this product launch she talked about it was imminent as of last quarter and how's early adoption gone outside the initial beta customer and then what the customer acquisition process for this you know new a new platform offering
spk_3: sure by doing that so far
spk_17: you know it's it's a it's been all smooth it were being very judicious about how are rolling it out bomb it's been more focused on our ah enterprise ah and be to be customers initially i'm and will be hitting yes and be segment where we've already launched beta
spk_3: into as and be gathering more intel you know and focused on ah on having that ah wants more fully on the latter part of may and june into or ill just a broad base into the smb acquiring segment on the yeah you know it's it's been a really good test quite honestly ah because of the reason turmoil and in the banking sector so ah yeah just give you a couple examples yeah gonna stated there we we had a lot of a folks who were you know just needed to get account set up and and move on that of that ah se be your signature ah i'm and i'm you know they were average set up time for them to get established do okay like see a male checks
spk_18: get them permission with credentials was seven minutes
spk_3: so ah i'm you know and from it's pretty bad i don't know her and i a platforms are equipped to operated that at that level i'm we had done
spk_15: folks they chose instead of let's say setting up physical accounts ah i'm through our portal
spk_3: would dumb do it through the a p i n dumb were integrating to are a p i for all of their payment operations and these were your multi billion dollar players in forty eight hours
spk_19: they were set up an e testing transactions and moving volume so i'm it's you know it's it's ready for prime time on it is our ah got a robust pipeline of of them enterprise partners either integrated or already or in the process of integrating ah i'm and dumb and it's fast process
spk_3: is it relates to those things internet be beaten had challenges and you had companies that were able to track and seven minutes without customers that were already familiar and working in your a backlog one hundred the on come from the have to move so quickly
spk_20: i'm a date they would we be were they were relationships ah i'm that dow were familiar to us from were
spk_19: more familiar with what we're doing on but they were not existing customers and then am
spk_1: switching gears to cps think you are clear that you expect growth by the ceiling put on nine percent growth on but i always from how i personally expect the i thought it wouldn't be grown faster over the years maybe talk about
spk_5: what what's going on there in terms of on boarding a bit and payments volume what if any of the bottleneck in house and investors think about this
spk_3: i am when it might become much larger scale ah i'm sure look at the i'm we saw very good wallet chair growth rp think of like growth an existing logos during the last couple of years so sales and had been made folks had been on the platform you know did more volume which year which was great
spk_17: and anticipated where we've seen slower cell cycle is harvesting some of the relationships that we've already
spk_3: you know set up ah premier health care for instance and you know the g there are gpl ah i'm
spk_15: the i'm while some of our allies that you know we have contracted and are converting portfolios ah i'm those implementation sale cycles have then longer than i'm certainly we're satisfied with
spk_3: tom and that's not a so did a technology so much is due to are you know it will get a break some of the inertia
spk_15: i'm at customer level and up and then look the other thing we've done is on we are we just brought in
spk_3: three new salespeople i'm so we went expanding arms sales and the yeah we we um we felt we needed to put some a few more technological components in place so that sales people could be highly effective in a we did that as think we noted not not the least of which is the banking as a service
spk_15: i'm component right i mean think about the experience of of a buyer and your supplier network and you can permission supplier wallets are in i'll call it our supplier accounts on passport ah i'm instantly i take all your supplier information upload him into our system ah
spk_3: i'm take all the information they have on on their w nine ah and i'm run an alan kay y c checks ah i'm
spk_19: in minutes i that's a vastly different experience going out to sell then you know oh god the old school way of gathering at information supplier by supplier so i'm we we waited to have that complete to expand sales we've now done that and we're in elite
spk_1: we're very optimistic about the success of those selling efforts on with this platform being available broadly and be to be
spk_6: on is quickly on march in acquiring a think if department but just to be clear
spk_1: the gate in the first quarter a trying you had seen the last two to three years or even longer of merging acquiring a generally unchanged that right
spk_19: that's correct that we've seen we've installed strong volumes through the first he to four months of the the corner and expect that it to continue to the other balancer and pen and you become much larger in my take more markings to sustain the growth are you making investments on the sale side of you know what what do you do too
spk_3: the eventual you have to like zeller are a number of motion acquired a merchant york like
spk_21: well the a couple things that are going to influence ah that segment and the the revenue in that segment right on selectors first all talk about the merchant base we have
spk_22: we'll start rolling out embedded finance last banking into the segment
spk_3: might we don't need to invested
spk_23: any money to roll that out these are all things that are built for set to go
spk_15: every single merchant it's on our platform will have a passport account
spk_3: ah i'm
spk_24: no call within the next month to six weeks
spk_3: so we're reading that account will be there our just need to be activated guy as it gets activated i'm will offer them the ability to receive funds instantly
spk_23: ah i'm a we call fund and five if you're processing on our gateway as soon as you authorize transactions and you elect have instant funding you get your money and five minutes of authorization through the gateway
spk_3: if you're not a gateway customer but you're on our ah mx merchant sweet ah i'm you'll get money same day when you close your batch and if you leave that money in your passport account and you spend from they're using a debit card there no costs if you sweep it to an external account they'll be a fee i see these are things that they're i'm ah look their your what businesses need and in this particular particularly in this environment
spk_25: they want cash acceleration they want transparency and you know i would submit to you given the current banking environment i'm having
spk_3: modern reporting that clear and transparent which we have ah i'm is gonna be you know we we think i have a pretty high value add particularly sense that money than enough the i see insured route a bull account so that's just one example and of course will keep building on from there you know the ability to ah i'm ah to borrow funds ah you know from from approved lenders ah i'm you know through that account and your host of other things that again just become additive to margin without us having the arm
spk_21: to do a whole lot so in i think that's the future of smb acquiring is the things the to happen in one place where position to make that happen
spk_3: the investments have already been made on they've been made very profitably as you can see you know from our from our overall performance ah i'm and now we have an opportunity to both ourselves then and with our distribution partners you know i'm provide more services which it you know lead to wallet share growth ah i'm in profit billy per merkin growth in that segment so how did that that's really phase one the other arrow where we're just winning arm and you can see this in the trends of our merchant boards i work consistently out above five at or above five thousand new merchant boards month well because we have a lot of new boarding partners
spk_26: because what the realizing his he might my margins are just my much proposes worth more a priority the better tools a more software based ah tools that are specific to the verticals that i'm serving whether that
spk_3: yeah healthcare real estate
spk_27: hospitality salons ah i'm retail trade
spk_3: we have very tailored vertical software's for these business lines so merchant stick around longer and now you start adding the ability to inject ah i'm wait for them to
spk_28: enrich their portfolio value with
spk_29: fees from banking services
spk_30: they're marching proposal is just worth more at priority so they see that and
spk_1: we drive more reseller partners
spk_19: at last a man that that is what's happening right now right
spk_1: i'm make
spk_6: two two numbers questions you highlighted gallery and benefits of forty one percent and she's action in revenue growth do i assume from there and me the guy guidance that that and will change in an your salary and benefits expenses will grow slower than revenue growth and then
spk_31: unrelated with the rising interest rates can you
spk_7: hope by
spk_6: with kind of what you expect interest expense to be for two thousand and twenty three
spk_7: yes so on the sorry about that sides are they mentioned on a call your we're going to continue to monitor and really manage investments with already made today tried so no different than a sequential growth he saw from key for over two three by that was pretty modest only about your farmer thousand hours of an increase yeah we're going to
spk_3: continue to your really keep those sorry about his levels you were they finished out the year so i think you'll see growth there in a much lower rate than the the top line is we want more more of that growth the flow down to the bottom line so i think your your viewers is accurate obviously we didn't provide new detail projections on that is for the guidance but
spk_31: are you can see the margin expansion that's happening between he buddy and growth
spk_0: and the influx
spk_30: yes on it as expense to have are dead today is all floating rate arms we got that the natural head as i mentioned but yeah from interest expense on the that itself
spk_32: the penny aware he had the fed via tops out this year and where you live or sell for finishes i think we're estimating yeah somewhere in the yet load and sixty million of interest expense for the year
spk_7: he obviously some of that is offset by and large part by the deposit balance i'd so with the with the rising rates we got the benefit of interesting come off of the the float try we've got him roughly five hundred and thirty nine herself deposits are that sit out there at the end of the year that number is gone since then but that that upsets lot of interest expense from ahead standpoint and him if you think about each quarter point of increase in rates are that's about three hundred and fifty thousand per quarter of it's additional interesting come by service who saw the bump you're late near last year i give more rates are today we should see ya meaningful increase your every year and interest income wait and you i didn't have a question please i start and one the next question can turn matthew how it with be widely read i had oh hey guys thing for taking my question to discern what the what the margin guidance and with the did did he say it contemplates need an uprising and i'm running rare wasn't the fourth quarter but ninety percent and if if so me what and i am i trying to get twenty you know of for guidance area but and why would that margin that kicks in continue to do
spk_33: just six i'm a seller is this or what the company wide something where you can get left so what's the point three sort of a transitional year are you holding back
spk_1: the oh come on plumber plywood some rollout scope is going to more that that marking guy doesn't and the integral part payment the i know having a man preset you don't cough so i think there's there's a couple factors there that work against each other i saw of the enterprise will continue to grow you expect those margins tuesday pretty consistent with
spk_32: where they finished out that year i think that business had a lot of growth in the second half of last year i compared to the first half of the year as a lot of the government stimulus money's ah were depleted from consumers accounts and a had to go into debt settlement processes that really expanded your part of that effort
spk_3: citing the he had the growth they are really accelerated the second half of the year mom's i think you'll see some of that growth you continue into twenty twenty three hour but not maybe the same rate is often first have to second half of last year and then ill offsetting that is some of the margie compression we continue to expect within the smb portfolio right so as though as the larger reseller partners continue to grow faster than the the balance of the the portfolio you'll see some of that compression they're given a extract higher residual so those to offset and then i was he beat a be managed services rolling off is a gross profit dollar impact but he should help the margins in that business the albion on a smaller dollar amount in that segment and twenty three appreciate that a bit of the what would you see the long term margit company young when you ill when you look when when you get really ramped with that the banking as a service product the enterprise your mom bridge is adopted what's
spk_34: how do we measured look at it it felt like the veto the thirty either it was pretty good be held back a bit as a that i'm beside a bit by looking longer term is only reason other than that marching could be forty fifty percent
spk_3: yeah at located we're i'm
spk_35: were taken a judicious approach and your arm
spk_3: you know and kind of from your mouth the god's ears in our you well i'm because we'll we'll have better ah clarity on the impact as we see the adoption within those two segments but you know to your observation right that all just blows to the bottom line
spk_36: so you know if were making and i'll call an extra you know ten fifteen dollars per month per merchant because they're using you know banking services were you know funds are making into their passport account in their spending on a debit card that you know generate interchange on that
spk_1: you know we're collecting as the issue or i that's that's gonna change the dynamic of you know that profitability per merchant so i'm we think there's a lot of inherent you know operating leverage in the business ah we've got the products to deliver on it now we have to dry
spk_32: i've adoption ah i'm and you know add that occurs will have a better ah you know very analytically driven answer to your question
spk_3: because it will
spk_5: you know what will have metrics it'll it'll move beyond ah i'm you know i'll say it a theoretical arm evaluation at that point tell that's why we're trying to be a bit judicious about you know representing what it is
spk_3: at this time not for shit that you feel live in l it just a you verify you're a soda confirm what are you know that that emerges will gladly the just explode at some point when when the on monday and buys you know him and really kicks in it sounds like you're holding back a little bit with the guidance here in twenty three may be investors should be looking at twenty four hour instead by a certainly impressive a potential there in and is an update on the cfc pay a if a list of the terms of and people are on and would you look at signing up new lab
spk_37: ah new card companies and meet you get off that some people just any update on the fifty pay more that going
spk_3: i'm sure so located it's i'll i'll put it in relative terms if you were to look at trends within you know are caught consumer wellness ah prior or let's say at the outset of it ah i'm the boarding trends of consumers electing to move into a consumer wellness program basically help them consolidate that help them you don't negotiate resolutions to debt ah i'm it doubled said it's i get a double you know called it a year ago i don't know that and that to tim's common like do we think it doubles again this year
spk_32: probably not i'm there's incremental upside for sure
spk_3: i'm but you know it's a it's a pretty healthy rape and dumb you look just being very candid about the segment we are ah i'm we're very considerate of who you know sit on our platform because unlike others that operate in the states we are
spk_0: a license money transmitter which is a benefit ah but we want to be you know
spk_35: ah
spk_3: considerate of who we have on the platform on and out you know there's certain participants in a space that they're just not they're not potential customers for us you know because of the ah i'm you know their distribution models so i think you'll see in a modest but some kyle logo growth but you know what we have seen as by picking the right integrated partners in that segment who are leveraging you know our banking is a service technology they tend to be the winners overtime so we see the the growth from from those partners i really appreciate thank you course thank you
spk_30: that concludes our question and answer session i would like to turn the conference back over to palm pre like for closing remarks
spk_28: all right well
spk_0: have one or to say thank you everyone for taking the time to you know to join the call your ongoing support to priority and i'm just to reinforce that dumb
spk_1: a we are we're built for these times ah and ah we're very excited about what the future holds you know particularly given some of the dislocation ah that we're seeing in you know not just aspect of the economy that we think we can be a better solution provider to businesses and need you know but also the the growing opportunity that that dumb the transitional nature of the transitional nature of of our the banking industry they were going to see you know probably enough in the next year that you know that we can capitalize on it's why we built the platform we didn't and now we want to put it to work so thank you to everyone and and thanks to all the priory colleague listening
spk_2: let's go let's go get the job done
spk_3: think everybody i can't think of now concluded thank you for attending today presentation he may now that connect the morning and welcome to the priority technology holding fourth quarter and four year twenty twenty two or at a conference call all participants will be and look and only mode should you need assistance preferred know a conference nationalist by parking authority followed by be well after today's presentation there will be an opportunity to ask questions to ask the question you may pet star than one on your touched on phone to withdraw from the questions you prefer start to do we have the advantage being recorded i would now like to turn the conference over to chris kattan please go ahead the morning and thank you for joining up with me today are contrary german and chief executive after a party technology holding and familiar chief financial officer before we give up prepared remarks i would like to mind off offered has been that are coming today will include forward looking statements which involve a number of risk and uncertainty it may cause actual results to differ materially from are forward looking statements the company undertake no obligation to update or revise the forward looking statements whether a result of new information future events or otherwise we provide a detailed discussion of the berries risk factors in are a few feet violent and we encourage you to review the fire thanks additionally we may refer for non gaap measures including but not limited to eat it off and it just to be got during the call reconciliation them are now yeah performance and liquidity measure to the appropriate got measures can be found in a press release and ftp filings available in the industry section of our website with that i would like to to
spk_4: call of richard sherman and ceo tom preorders
spk_3: thank you chris and thanks everyone for joining us for a fourth quarter and full year twenty twenty two earnings call before going into our financial results i would like to highlight a few key take ways that the current business trends as you absorb the queue for performance and projected into twenty twenty three first and foremost the businesses performing the way we anticipated consistently growing market share and smb acquiring and producing strengthening result in be to be an enterprise payments while other companies apparent back in response to answer macro economic conditions and a recent bank in turmoil were driving forward on the strength of our counter cyclical business lines that were positioned to benefit from higher interest rates and the current economic environment becca not only are we are performing our peers but the key metrics in our business have continued to improve or full year twenty twenty two great traits and margin expansion a representative of the first quarter trans we have seen to date and twenty twenty three last our decision and twenty twenty two to accelerate investment in past or unified commerce a p i combining full featured payments and banking is a service is proving somewhat prescient given the recent struggles the banking sector and the gentle crisis of confidence in banks among business of all sizes i'll speak in more detail on this topic toward the conclusion of our call but suffice to say that the current pace of new partners adoption a passport to collect store and said money will fuel results and quarters and years ahead with that as a backdrop let's dig into the numbers i you saw heinz release we continued our positive momentum with an exceptionally strong fourth quarter to close out the strong twenty twenty two or fourth quarter revenue increased twenty three percent from the prior year to a record one hundred and seventy seven point six million which led to a twenty five percent increase in guy most profit to sixty one million and twenty one percent improvement in just leave it up to thirty nine point nine for the year revenue increased twenty nine percent to six hundred and sixty four million growing organically by twenty three percent in the fourth quarter and nineteen point one percent in twenty twenty two
spk_5: pull year adjusted gross profit and a bit of both grew forty six percent
spk_3: with adjusted gross profit reaching two hundred twenty six point nine million and adjusted be done coming in within our target at one hundred forty point three million for the full year twenty twenty two adjusted gross margin of thirty four point two percent increased four hundred and ten basis points from twenty twenty one demonstrating the operating leverage of our purpose built platform
spk_6: and an earlier noted we anticipate that are strong fourth quarter performance and established trends in our business channels will continue as such we are expecting to deliver consistent double digit top line and bottom line road
spk_7: projecting revenue and seven hundred forty two seven hundred fifty five million and adjusted ebitda of one hundred sixty to one hundred sixty five million for for the full year twenty twenty three
spk_6: for those of you who are new to the company slide seven highlight the architecture of our proprietary unified commerce platform that is purpose built to collect store and send money combining robust payments and banking functionality to monetize the merchant networks we serve or customers and the current market conditions continue to reinforce our believe that systems combining features a boat payments and banking to with celery cash flow and distribute funds to multi party environments will be critical as businesses put greater demands on software and payments solution providers we're committed to meeting their growing demand by simplifying the customer experience for our partners and making working with priority as easy as one two three partners simply choose the application that best fits their business whether that is a small business operator choosing from mx merchant and the mx pos week and at by our middle market customer adopting cps for automated payables or an enterprise partner connecting to us
spk_7: by our a p i
spk_6: they collect the passport financial tools that best in their need and begin to move money at this point i'd like the handed over to tim who provide further insight into our segment level performance during the fourth quarter and full you along with current trends that each that in for more guidance for the upcoming you thank you tom and good morning everyone it every view the full year and fourth quarter financial results including a segment level contribution to the consolidated results please refer to the supplemental slides where the indian a for further details
spk_7: are indeed a is included in the form ten k that was followed with the as you see this morning and provide the discussion about comparative for your results
spk_6: a link to that falling can also be found that our website as tall mention with strong financial performance across all business segments and bought the fourth quarter and for the full year i want reiterate the financial highly the tom are he spoke to for both of those time periods but before i go to the segment little details i do want to provide a few other key metrics as relates to the for your consolidated results
spk_7: with a four year we had almost fifty percent growth and bank card dollar volume across all segments are roughly sixty two billion dollars we had a half percent growth and bank card transaction count to six hundred and forty million transactions and just under four percent growth and average ticket size and ninety six dollars and fifty cents
spk_6: if you include a ch debit and other volumes the total payment volume for the year was honored and twelve point eight billion dollars again those metrics or all for the consolidated business
spk_7: i'll now go into more detail any to the business segments results for the fourth quarter
spk_8: let's start with smb payments on slide ten
spk_6: for the fourth quarter that segment revenue of approximately one hundred fifty million dollars which was an increase of twenty three percent over the prior years fourth quarter this strong growth was almost entirely organic and was driven by a combination of over seven percent growth and bank card dollar volume to roughly fourteen point nine billion which included nine percent growth and bank card transaction camp and was slightly offset by the client average ticket size to ninety two hours sixty one sense from just over ninety four dollars in the fourth quarter of twenty twenty one
spk_7: we finish the quarter with your fifty nine thousand merchants would represent an increase of seven percent from the prior year
spk_6: the average merchant account for the quarter was just over two hundred fifty seven thousand which is also seven percent growth from que four of twenty twenty one
spk_7: this growth emerging count was driven by continued strong boarding trends were new monthly merchant boards average forty six hundred per month throughout the core that compares an average of thirty six hundred per month in the fourth quarter of twenty twenty one and an average of about forty seven hundred per month for all of twenty twenty two
spk_6: continuing with us and be on the next page that will be down the pan out of focus on profitability we also saw strong performance with adjusted gross profit increasing eighty percent to thirty six million dollars despite on hundred and twenty bases point decrease in adjusted gross profit margins as discussed empire cause we've continued to see some margin compression across the acquiring portfolio as a result of are larger reseller partners driving more of the growth but those partners also generally receive higher residual commissions
spk_9: lastly for us and be
spk_6: quarterly operating income increased by forty two percent thomas fifteen million dollars as a result of operating leverage within the business segment moving to be to be payments we had revenue of two point eight million dollars in the fourth quarter of two thousand twenty two which was a decrease of forty eight percent for the fourth quarter of twenty twenty one this decrease was the result of the previously discussed reduction in revenue from managed services due to the final line down of certain programs with a large customer help with the wind down and context
spk_7: managed services generated on average over two point seven million dollars of quarterly revenue in the first half of twenty twenty two that compares to just over three hundred thousand dollars in the fourth quarter at the program for put it it's wind down in october
spk_6: going forward we expect to see a nominal amount of managed services revenue that will be generated by some smaller legacy programs focusing on the cps business with him be to be revenue for the quarter was relatively flat the two and a half million dollars but it was negatively impacted due to the timing of certain incentives normalizing for that cp x would have grown almost nine percent in the poorer
spk_7: the growth and cp acts was fueled by just under a percent growth in a ch via from que four or twenty twenty one to queue for twenty twenty two and eleven percent growth an issue in volume
spk_6: with respect to be the bees profitability and side thirteen adjusted gross profit declined by thirty five percent as a result of the managed services wind down but you can also see how the adjusted gross profit margin increased by over top percentage points during the quarter as the lower margin managed services business rolled off for the quarter the be segment of operating loss at one point one million dollars as certain costs related to the man services program or able to be for removed from the piano lucky for but have since been reduced moving to the and if i said saigon next page
spk_7: two for revenue of twenty four point nine million dollars was an increase of seven point seven million dollars or forty six percent from seventeen point one million and que for twenty twenty one
spk_6: as a reminder cfp pay was acquired a september of twenty twenty one so the strong you have your growth and queue for is entirely organic and not the result any grover from the acquisition timing favorable transit new enrollments and increased in the number of build clients and the benefit of rising interest rates all contributed to the fourth quarter revenue growth i would also highly that the queue for performance represent almost fifteen percent sequential growth from the third quarter of twenty twenty two
spk_7: as shown on the next pace adjusted gross profit for the enterprise segment increased by fifty percent to twenty three point three million dollars and adjusted gross profit margins expanded by three hundred basis points to ninety three point six percent
spk_6: operating income for the segment also benefited from operating leverage as exemplified by the hundred and twenty one percent growth compared to revenue growth the forty six percent
spk_3: we remain excited by the revenue and ortiz opportunities inherent in enterprise they've gone for
spk_6: operating expenses are shown up age sixteen and totaled forty two point eight million for the quarter an increase of twenty percent from the prior year
spk_7: this change is primarily driven by increased expenses in the business resulting from investments made involve personnel and technology to support the strong growth experience and twenty twenty two
spk_6: salaries and benefits of sixteen point nine billion increase forty one percent from key for twenty twenty one as a result of both an increase in headcount and wage increases which is consistent with industry and broader macro trends
spk_7: the had can increase is supported growth across the company and were added in both the us and that are development center in india
spk_6: we finish queue for with approximately eight hundred and seventy employees including roughly three hundred in india
spk_7: compared to just under eight hundred at the end of twenty twenty one
spk_6: i do want the highly that the sixty point nine million of salaries and benefits and queue for was only a modest increase from sixteen point four million in que three as we remain focused on extracting operating leverage from the vestments that have been made to date and both the team and technology as they have some point nine billion increased to twenty seven percent from six point two million into for twenty twenty one again continued investment in the business expansion drilled that level of growth but consistent with my comments on salaries and benefits we will continue to focus on our costs structure in order to drive operating efficiencies i would
spk_7: highlight that the queue for spend was almost three million dollars lower think you three levels due to the roll off of certain are recurring expenses combined with lower marketing expenses falling a priority power conference that we hosted in september
spk_6: depreciation and amortization of eighty nine hours with quarter increased modestly from last year moving to the next slide adjusted he beat the air for the quarter was thirty nine point eight million which was an increase of twenty one percent for thirty two point nine million and into for of twenty twenty one working down the the dow walk on the slide i'll start with you for but also discussed the for your results the largest items out of active consolidated that income or obviously interest expense and depreciation and amortization interest expense of sixteen point three million for the quarter is an increase of four point four million from que for twenty twenty one levels given the impact of rock the rising interest rate environment and forty right nature of our existing debt
spk_7: on that topic i would reiterate from fire calls that we do have a natural head in place for almost ninety percent of the fourteen rate that given the interesting com were able to generate on the deposit in the enterprise segment
spk_6: if you include the forty or a component of our preferred stock the natural head from the deposits cover about sixty percent or forty my liabilities the further adjustments to rabbit adjusted ebitda for queue for include noncash stock compensation up to two million and approximately one point three million of other adjustments which consist of certain noncash cash or nonrecurring expenses but a four year adjusted he beat the a one hundred forty point three million included add back of fifty three and a half million french a expense six point two million noncash thought compensation expense
spk_7: and six point seven million other non cash or nonrecurring expenses
spk_6: moving to the have any slide on page eighteen your noted our debt levels declined you have a year and we finish the quarter with six hundred twenty three point two million of gross debt and six hundred to four point seven million of net debt
spk_7: this reduction is net have continued investments in the business and also after repurchasing one point seven million appear to have shared during the fourth quarter and five point nine million during the four year from a liquidity standpoint we had twenty seven and a half million dollars borrowed capacity on a revolving credit facility and addition to eighteen and a half million dollars of unrestricted cash on the balance sheet a quarter and also note that subsequent to cute fourth quarter and we've paid on another six million dollars on the revolver i fly nineteen the preferred stock our balance sheet total two thirty five point six million a december thirty first and as net of twenty one point one night on agree to discounts and issuance costs
spk_10: the fourth quarter prefer dividend attend a half million is comprised of five point three million paid in cash and four point three million have a pet component that it's supplement it on our income statement with the accretion of discounts and issuance cost of just over eight hundred thousand
spk_3: before turning the call back over to tom i wanted to further address or revenue and adjusted ebitda guides for the four year twenty twenty three which can be found inside twenty the presentation based i continued strong growth and trends in the business we are forecasting twelve the forty percent growth the revenue to range of seven hundred and forty to seven hundred fifty five million for the year as i mentioned previously on the call we're focused on leveraging the investment already made in the team and technology throughout twenty twenty two which leads overall margin expansion during twenty twenty three as a result we are forecasting adjust the dog wrote of fourteen to eighteen percent which will result in a range of a hundred and sixty two hundred and sixty five million for the full year if you break that grow apart were forecasting continued double digit growth and revenues from as a be but we also expect to continue to see some modest margin depression of the portfolio as a larger reseller partners continue to drive more of the growth in the business
spk_2: be the bees top my growth will be skewed by have an anniversary the run off for managed services
spk_3: but we expect cvx to show continued growth that should also result the margin expansion for the segment given the higher margin profile of cp x compared to men services
spk_12: lastly enterprise is forecast to continue strong growth all the we have temperate expectations of better at twenty twenty three to count for the growth already experienced in the second half a twenty twenty two
spk_3: are there we expect the margin profile near by simon to remain consistent with it's exit right for twenty twenty two with that a knocked the trying to call back over to tom for his closing comics thanks to him for wrapping up at like to speak to one of the more significant point we made during our que three discussion during if we call our decision to accelerate investment in our banking product initiatives in the back half of twenty twenty two that would lead slightly lower bottom line guidance stating that we believe accelerating feature development of our native party passport offering to deliver a full suite of proprietary payment and banking solutions into the snb and be to be markets as well and enterprise partners will result in outside benefit to our shareholders in the coming years we also highlighted research firm leading research farms mckenzie in vain that the friends and payments and banking commonly referred to as invented finance your conclusions reflected that small businesses starting up for they may never interact with a conventional back by logging into their be commerce or accounting platform they can open a deposit account order a debit card and the most of their financing needs to embed financial products into a single
spk_13: seamless convenient and easy to use customer experience
spk_3: they predict that the winners will likely provide a whole suite of services including some regulatory oversight compliance origination or fulfillment enablers the take the half a lot of embedded finance for platforms through easy integration and great servicing should hold the upper hand
spk_5: they can choose high volume cell service model or higher touch
spk_3: operation across fewer vigor black lot well the current crisis of confidence in the banking system will certainly drive more businesses to alternative solutions that offer greater transparency
spk_12: speed of careful recognition
spk_3: regulatory support and diversification of banking system risk that traditional platforms cannot deliver our systems are built for this future and are proving ready for the current test under fire in addition the handling all forms of payments credit debit a ch checks yes even lockbox capabilities and wires and robust security and compliance passport self directed account opening process only be the email for customers to get started or fast k y c and and am l process
spk_12: can set up an account in less than thirty minutes
spk_3: in fact during the weekend of the f b b and signature failures new account set up time average seven minutes once established customers can sell their own virtual accounts near instantly importantly as a license money transmitter regulated by benson and all states
spk_14: the funded passport or syndicated to our partner banking institutions and maintaining and fully radical at the i see insured accounts
spk_3: albert einstein famously said that in the midst of every crisis lines great opportunity
spk_0: we're confident that we prepared well for the present turmoil in the banking system and will emerge even stronger just as we did find the height of the coven pandemic and the recent pressures from inflation and economic downturn
spk_1: as many of our peers reduce investment in the wake of worrisome macro economic conditions and the igniting banking system for years we remain confident in our investment into the convergence of payments and banking and even more appealing focused on or execution
spk_19: where position of benefit from opportunities emerged from the current uncertainty by providing friends' parents and secure unified palmer solutions that they'd businesses need
spk_3: and clothing
spk_15: i want to acknowledge my passion and calling their priority who are fully committed to our mission and continued to deliver market leading results
spk_3: thank you for your unwavering focus and the exceptional work you continue to deliver day in and day out there's no power greater than human passion and your passing to deliver great products and customer experience is the power that driving priority
spk_23: we appreciate you all taken to time to participate in today's call and the ongoing supporter of our investors and analysts
spk_17: operator
spk_3: we don't like open the call for questions oh now begin the question and answer session he like a question in a tag on one on your touchdown ten if you're using a speaker phone please pick up your hands before passing a kid
spk_25: to draw your question please file and to the front question or some fine conflict or of alliance global partners with by had
spk_3: i guy thanks for taking all my questions and get thanks for all the details on unified palmer's platform to believe that's what i've been calling them thinking with his service platform so i'm assuming that's right can we talk about does this product launch she talked about it was imminent as of last quarter and how's early adoption gone outside the initial beta customer and then what the customer acquisition process for this you know new a new platform offering
spk_18: sure by binary the ah i'm so far
spk_3: you know it's it's a it's been all smooth i'm in were being very judicious about how are rolling it out on it's been more focused on our ah enterprise ah and be to be customers initially i'm and will be hitting yes and be segment where we've already launched beta into as and be gathering more intel you know and focused on ah on having that ah wants more fully on the latter part of may and june into our ill just a broad base into the smb acquiring segment
spk_15: ah i'm
spk_3: the yeah
spk_15: you know it's it's been a really good test quite honestly ah because of the reason
spk_3: turmoil and in the banking sector so
spk_19: yeah just give you a couple examples
spk_1: yeah gonna stated there we we a lotta folks who were in i'm just needed to get account set up and and move on that of at ah se be or signature ah i'm and i'm you know they were average set up time for them to get established do okay like see a male checks on get them permission with
spk_3: credentials was seven minutes so ah i'm you know and from it's pretty
spk_20: i don't know where
spk_19: and i a platforms are equipped to operate at that at that level on we had done
spk_1: folks they chose instead of let's say setting up physical accounts ah i'm through our portal
spk_19: would dumb do it through the a p i n dumb were integrating to are a p i for all of their payment operations and these were your multi billion dollar players
spk_1: in forty eight hours
spk_5: they were set up and he testing transactions and moving volume so on it's you know it's it's ready for prime time on it is our ah got a robust pipeline of of them
spk_3: enterprise partners either integrated or already or in the process of integrating ah i'm and dumb and fast process as it relates to those things internet be beaten and challenges and you had companies that were able to threaten seven minutes
spk_17: without customers nobody familiar and working in your backlog one hundred the on come from iowa to move so quickly and they they they would we they were they were relationships ah i'm that thou
spk_3: we're familiar to us from were ah ah more familiar with what we're doing on but they were not existing customers and then am
spk_15: switching gears to cps think you are clear that youths that growth by the ceiling you put on nine percent growth
spk_3: long but i believe from how i personally expect the i thought it wouldn't be grown faster over the years many talk about
spk_30: what what's going on there in terms of and boarding and didn't payments volume what if any of the bottle nothing house and investors think about this
spk_21: and when it might become much larger slow
spk_38: ah i'm sure look at the i'm
spk_15: we saw very good wallet chair growth rp think of like growth and existing logos during the last couple of years
spk_3: so sales and had been made folks had been on the platform you know did more volume which year which was great and anticipated where we've seen slower cell cycle is harvesting some of the relationships that we've already i'm you know set up ah premier health care for instance and you know the g there are gpl ah i'm
spk_23: the i'm
spk_3: some of our allies that you know we have contracted and are converting portfolios ah i'm those implementation sale cycles have then longer than certainly we're satisfied with ah i'm and that's not a so did a technology so much is due to our in a week will get a breakthrough some of the inertia
spk_19: i'm at customer level and up and then look the other thing we've done is on we are we just brought in
spk_6: three new salespeople ah i'm so we went expanding arms sales
spk_1: and ah yeah we we am we felt we needed to put some
spk_3: a few more technological components in place so that sales people could be highly effective in a we did that as think we noted not not the least of which is the banking as a service i'm component right i mean think about the experience of of a buyer and your supplier network and you can permission supplier wallets
spk_21: or in all call it our supplier accounts on passport i'm instantly i take all your supplier information upload him into our system on take all the information they have on on their w nine am and i'm run am alan kay y c checks
spk_22: ah i'm
spk_39: in minutes i that a vastly different experience going out to sell then you know i'll call the old school way of gathering at information supplier by supplier so ah
spk_3: we we waited to have that complete to expand sales we've now done that and we're in elite were very optimistic about the success of those selling efforts on with this platform being available broadly and be to be at is quickly i'm marching acquiring i think if department but just to be clear to gate in the first quarter a train you had seen the last two to three years or even longer of merging acquiring of generally unchanged that right
spk_23: that's correct now we've seen we've seen strong volumes through the first he had to four months of the the corner and expect that it to continue to the other balance here
spk_15: and pen and you become much larger in my take more markings to sustain the growth are you making investments on the sale side of you know what what do you do too
spk_3: get you know eventually have to accelerate the number of motion acquired a much york
spk_24: well the a couple things that are going to influence ah that segment and the the revenue in that segment right
spk_3: i'm so let us first all talk about the merchant base we hat we'll start rolling out embedded finance last banking into the segment might we don't need to
spk_23: invested
spk_3: any money to role that out these are all things that are built for set to go every single merchant it's on our platform will have a passport account ah i'm no call within the next month to six weeks so we're reading that account will be there our just need to be activated guy as it gets activated i'm will offer them the ability to receive funds instantly
spk_25: ah i'm a we call fund and five if you're processing on our gateway as soon as you authorize transactions and you elect have instant funding you get your money and five minutes of authorization through the gateway
spk_3: if you're not a gateway customer but you're on our ah mx merchant sweet ah i'm you'll get money same day when you close your batch
spk_21: and if you leave that money in your passport account and you spend from they're using a debit card there no costs
spk_3: if you sweep it to an external account they'll be a fee i see these are things that they're i'm ah look their your what businesses need and in this particular particularly in this environment they want cash acceleration they want transparency and you know i would submit to you given the current banking environment i'm having modern reporting that clear and transparent which we have ah is gonna be you know what we think i have a pretty high value add particularly sense that money than enough the i see insured route a bull account so that's just one example
spk_26: and of course will keep building on from there you know the ability to ah i'm ah to borrow funds ah you know from from approved lenders ah i'm you know through that account and your host of other things that again just become additive to margin without us having the i'm
spk_25: to do a whole lot so in i think that's the future of smb acquiring is the things the to happen in one place where position to make that happen the investments have already been made on they've been made very profitably as you can see you know from our from our overall perform
spk_3: it's ah i'm and now we have an opportunity to ah both ourselves then and with our distribution partners you know i'm provide more services which it you know lead to wallet share growth ah i'm in profit billy per merkin growth in that segment
spk_27: so how did and that's really phase one the other arrow where we're just winning
spk_3: hum and you can see this in the trends of our merchant boards i work consistently out above five at or above five thousand new merchant boards month us because we have a lot of new boarding partners what the realizing his he might my merchants are just my much proposes is worth more a priority they better tools a more software based ah tools that are specific to the verticals that i'm serving whether that
spk_16: yeah
spk_30: healthcare
spk_40: real estate
spk_1: hospitality salons ah in retail trade
spk_19: we have very tailored
spk_1: vertical software's for these this lines so merchant stick around longer and now you start adding the ability to inject
spk_7: ah i'm wait for them to enrich their portfolio value with
spk_19: fees from banking services
spk_7: they're marching proposal is just worth more at priority so they see that and we drive more reseller partners at last a man at that is what's happening right now right i'm late
spk_3: two two numbers questions you highlighted gallery and benefits and forty one percent and the sheath factored in revenue growth
spk_0: do i assume from there a just need the guy guidance that that from will change in an your salary and benefits expenses will grow slower than revenue growth and then
spk_30: unrelated with the rising interest rates can you
spk_32: help us
spk_7: with kind of what you expect interest expense to be for two thousand and twenty three sure yeah so on the sorry benefit sides are they mentioned on a call yeah we're going to continue to monitor and really manage the investments with already made today tried so no different than the sequential growth he saw from key for ah over que three by that was pretty modest only about your farmer thousand not have an increase yeah we're going to continue to your really keep those sorry about his levels you were they finished out the year so i think you'll see growth there in a much lower rate than a the top line is want more and more of that growth the flow down to the bottom line so i think your your view is is accurate obviously we didn't provide new detail projections on that is partly guidance but are you can see the margin expansion it's happening between ah he buddy and growth
spk_6: nanny and expense
spk_33: yes on it expense to rbc are dead today is all floating rate so we got that the natural head as i mentioned but yeah from interest expense on the death itself
spk_1: the the penny aware he had the fed the tops out this year and where you live or sell for finishes off yeah i think we're estimating yes somewhere in the yet low to mid sixty million of interest expense near for the year
spk_32: he obviously some of that is offset by and large part by the deposit balance i had so with the with the rising rates we've got the benefit of interesting come off of the the flow try we've got him roughly five hundred and thirty nine herself deposits are that sit out there at the end of the year that number grown since then
spk_41: but that that upsets law that interest expense from ahead standpoint and yeah
spk_28: if you think about each quarter point of increase in rates ah that's about three hundred and fifty thousand per quarter of an additional interesting income by service who saw think bump guilt late in the last year i get more rates are today we should see ya meaningful increase you have a year and interesting come
spk_3: thank you i don't really have a question please i died and one the next question comes from matthew how it would be like er hat oh hey guys thing for taking my question to discern what the what the margin guidance of he did you did you say it contemplates need an uprising when i'm running rare was in the forecourt about ninety percent and it is so me what and i am i trying to get twenty in a lab for a died in italia but and why wouldn't margin is that kicks in continue to get six i'm a seller is this or what the company wide something where you can get less so what's the twenty three sort of a transitional year are you holding back yes some i'm a plywood some rollout scope just going to more that that marching addison and the integral part payment the are know having a man preset you don't call so i think there's there's a couple factors there that work against each other i saw it as the enterprise will continue to grow you expect those margins to stay pretty consistently where they finished out that year i think that business had a lot of growth in the second half of last year i compared to the first half of the year as a lot of the government stimulus money's ah were depleted from consumers accounts and a had to go into debt settlement processes that really expanded your part of that effort so i think the he had the growth they are really accelerated the second half of the year so i think you'll see some of that growth you continue into twenty twenty three hour but not maybe the same rate is often first have to second half of last year
spk_35: and then peel offsetting that is some of the margin compression we continue to expect within the smb portfolio right so as though as the larger reseller partners continue to grow faster than the the balance of the the portfolio you'll see some of that compression they're given a extract higher residual so those to offset and then i was he beat
spk_3: to be managed services rolling off is a gross profit dollar impact but you should help the margins in that business the albeit on a smaller dollar amount in that segment and twenty three appreciate that
spk_36: fair bit of the what would you see the long term margins of company young when you ill when you look when when you get really ramped with that the banking as a service product the enterprise your mom bridge is adopted what's
spk_1: how do we better look at it it felt like the veto the thirty either it was pretty good be held back a bit as a that i'm beside a bit by looking longer term is only reason other than that marching could be forty fifty percent
spk_32: yeah that's located we're i'm
spk_3: were taken a judicious approach and your arm
spk_5: you know kind of from your mouth the god's ears our view well i'm because we'll we'll have better ah clarity on the impact as we
spk_3: see the adoption within those two segments but you know to your observation right that all just blows to the bottom line so you know if were making and i'll call an extra you know ten fifteen dollars per month per merchant because they're using you know banking services were you know funds are making into their passport account in their spending on a debit card that you know generate interchange on that you know we're collecting as the issue or i that's that's gonna change the dynamic of you know that profitability per merchant so i'm we think there's a lot of inherent you know operating leverage in the business ah we've got the products to deliver on it now we have to draw
spk_23: i've adoption ah i'm and you know add that occurs will have a better ah you know very analytically driven answer to your question
spk_37: because it will
spk_3: you know what will have metrics it'll it'll move beyond ah i'm you know i'll say it a theoretical arm evaluation at that point tell that's why we're trying to be a bit judicious about you know representing what it is on at this time not for shit that you feel live in l it just a you verify you're a soda confirm what are you know that that margins will get the just explode at some point when when the on monday and buys you know him and really kicks in it sounds like you're holding back a little bit with the guidance here in twenty three may be investors should be looking at twenty four hour instead by that certainly impressive that potential there in and is update on the cfc pay up there if a list of the terms of and people are on and would you look at signing up new lab ah new card company to meet you get off that some people just any update on the hippie pay more that going i'm sure so located it's i'll i'll put it in relative terms if you were to look at trends within you know are caught consumer wellness ah prior
spk_32: or let's say at the outset of covered
spk_3: ah i'm the boarding trends of consumers
spk_0: electing to move into a consumer wellness program
spk_42: basically help them consolidate that help them you don't negotiate resolutions to death
spk_3: ah i'm it doubled said it's i get a double you know called it a year ago i don't know that and had to tim's common like do we think it doubles again this year probably not on there's incremental upside for sure i'm but you know it's a it's a pretty healthy rape and dumb you'll look just being very candid about the segment we are ah i'm we're very considerate of who you know sit on our platform because unlike others and that operate in the states we are a license money transmitter which is a benefit ah but we want to be you know ah
spk_24: considerate of who we have on the platform on and out there certain participants in a space that they're just not they're not potential customers for us you know because of the ah i'm you know other distribution models so i think you'll see in a modest but some
spk_28: got a logo growth but you know what we have seen as by picking the right integrated partners in that segment
spk_0: who are leveraging you know our banking is a service technology
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