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spk12: the OEM that we won a few years ago. Last quarter in Q4, we announced a private auto captive. So it's not technically an OEM, but it's a large privately held captive auto finance company. And then in Q1, we announced another large, what I would consider an OEM to be more comparable to Mercedes. So very large, you know, household brand. And we're not expecting a large contribution for the remainder of 23, but we do expect a meaningful contribution to growth in 24 as the business ramps throughout this year and will be fully ramped to next year. And so it will be meaningful for us in future years.
spk08: Okay, that's great to hear. And then just any additional comments that you can provide in terms of how you're talking to your customers on the lending side? both personal and auto, like what type of changes they might be making in terms of their appetite or pricing that may or may not impact originations?
spk12: Yeah, very similar trends as we mentioned last quarter. And as we've heard from some of the lenders that are reported already this quarter and some of our conversations with, you know, private lenders, they're still focused on managing their credit performance. They're still, you know, they're cautiously optimistic on loosening tightening, loosening underwriting standards was still pretty tight. So not opening up originations. But again, we've said this before that there's a lot of demand for this type of credit. And so the demand being there is one of the more critical points for us. And as lenders get more visibility and feel a little bit more comfort, we think they'll open up to originations and to fund that demand. So not really different from last quarter. And again, And, you know, we had a large win in the personal loan space that we talked about last quarter that ramped up in Q1, and that's been really positive as well.
spk08: That's great. That's great. Just one housekeeping item for the second quarter for Blue Cow. Would that be about $2.5 million in revenue in the prior year period?
spk12: Yes, roughly $2.5 that we'd have to pull out of Q2 of 22.
spk04: That's right. All right. Thank you. Our next question comes from the line of Andrew Schmidt with Citi. Please proceed. Hey, John. Hey, Tim.
spk05: Good evening. Thanks for taking my questions. I wanted to just drill down for a second on the business payment segment. The large, the client roll-off, maybe you could just talk a little bit more about the situation there and whether you think that was relatively unique and kind of a one-off or you know, is it possible that other clients could follow suit? Just a little more color around that situation would be helpful. Thanks a lot, guys.
spk03: Hi, Andrew. It's John. We think it's unique. Obviously, it's an account that got acquired, so kind of out of our control. And so we really think that's unique. And then we obviously feel great about the pipeline of what we have and the opportunities in the business side of it. That's just... as wide open a space as I've seen in payments. So those are all true for all the reasons we want to be in that space and all the reasons we want to invest in that space. And then obviously we mentioned a couple of things on our implementation pipeline slipping on us, but we did see some of that activity pick up in April. So we feel good about executing on the remainder of our year on our implementation pipeline.
spk04: Got it. Thank you very much, John.
spk05: And then just on the consumer payments segment, pretty strong growth there. I understand you're still baking in a mild to moderate recession. Just to be clear, have you seen any signs of that yet? And what's the current assumption in terms of how you're expecting the growth rate to progress throughout the year, just with the understanding that you know, maybe there is more macro moderation to come. Any help on those fronts would be helpful. Thanks a lot.
spk12: Yeah, absolutely. We were very pleased with the consumer payments growth in the quarter. Really strong. And, you know, we have seen strength continue into early Q2. But, you know, we do want to stick with the planning assumption of a mild to moderate recession. You know, we are seeing, you know, I think we talked about this before. In some of our end markets, like auto, for example, has probably already been in that type of macro environment for a few quarters. And so that's why we think it's prudent to just remain conservative. That being said, we do think that, you know, growth, there could still be nice growth in consumer next quarter. But, you know, the back half of this year is the years where you may see that macro come into play. And so we're just maintaining conservatism around that.
spk04: Understood. Thank you very much, Jim. Thank you both for the comments.
spk06: Our next question comes from the line of Sanjay Sekharani with KBW. Please proceed.
spk07: Hi, this is actually Steven Clocks going in for Sanjay. Thanks for taking my question. I guess just first question I have was just follow up around the last question in terms of the assumptions around a tougher environment. If conditions were to remain the same as current, How much of a differential would there be between your current outlook and where it could potentially be?
spk12: Yeah, I mean, I think we, you know, we're monitoring closely. You know, I think we, if things do continue to stay as they are and don't deteriorate, I think we could become incrementally more positive on the outlook for the year and would update folks as we report each quarter. And, you know, I think like we've said in the past that a mild increase Our moderate recession is probably, you know, high single digits, low double digits, and mild is more like low to mid-teens. So, you know, we could see potentially us moving somewhere in the middle of that range if we became incrementally positive just with more visibility into the macro. Got it.
spk07: And then the follow-up I had was just around the take rate, just kind of dive a little bit deeper. Because if we take a look at your four-year guidance, it works out about 105 basis points versus 113. That was in the first quarter. Like, what are the puts and takes that gets us to that 105 range?
spk12: Yeah, that's a good question. So, you know, it will come down, and a lot of it is due to seasonality related to tax refunds. There was some dynamics I just described that caused the take rate to be higher. Also, we just ramped a very large enterprise customer in Q1 that, like we talked about when we provided the guidance originally, just naturally enterprise customers could be at a lower take rate. So as that becomes a bigger contributor, it could bring the take rate down. And then there's, you know, there's the potential for, you know, B2B has become a bigger part of the mix and that take rate is slightly lower. So those are some of the items we would look at that basically bridges from the 113 to the full year 105 or 106. Got it.
spk04: Thanks for taking my questions.
spk06: Our next question comes from the line of Andrew Jeffrey with Truist Securities. Please proceed.
spk13: Hey, guys, appreciate you taking the question. And great to see the enterprise momentum. John, can you just comment on whether or not, as you go after some of these bigger customers, sales cycles are extending? I mean, it sounds like you have a good ramp with this big captive in auto next year. But just generally, does the business get lumpier in your estimation? Is that something we need to think about? Or is this all upside?
spk03: Hi, Andrea. It should be upside. As you, you know, we just had a large win that implemented the first quarter of this year. We would hope just because of implementation cycles with large enterprises, it takes time to win them and implement them. So that'll contribute in 24, which will help offset against what's happening in 23. So I would suspect if we continue to execute, which I expect us to, and obviously I see our sales pipeline's we should continue to be able to execute there. But enterprise, as we mentioned in the past, it takes time for us to, just for those things to roll around if they actually are under contract. But we have more at bats. We're investing in more at bats. We see the opportunities for that. And we think that's obviously going to deliver. We see evidence of those things in both the consumer payments and the business payments.
spk13: Okay. helpful. Um, and then just, um, on RCS, can you kind of characterize the type of business you're winning there? Is it mostly traditional ISO? I recognize it's all, uh, incremental, um, and, and it seems like it's helping, it's helping margin, but can you, can you just talk a little bit about what that looks like and maybe how it might impact your consolidated EBITDA margin going forward?
spk03: Yeah, so what it looks like, I'll talk about that part, and Tim can talk about margins. So it's unique processors that we are able to give them several capabilities that makes their ability to execute on their strategies unique. Specifically, they may have their own technology, their own gateway, and we're just helping them clear and settle with all the money movement and money flows. And then... Many in that world are potentially in various different types of e-commerce verticals, the areas that we're not specifically in. So we've been fortunate that we've built an amazing platform that we think is state-of-the-art from a modern platform for 2023. And we're getting lots of inbound interest there. We're able to strategically partner with the ones that we think have high value for growth and great partners. And I'll let Tim talk about as far as contribution and margins.
spk12: Yeah, I'll add to that. I mean, what we typically see is a mid-sized to larger ISO type of customer that is working through one of the larger processors and wants more control of their own ecosystem. And they want to become more of a full-service processor. They want access to banks and they want access to the ability to run their own businesses and have more control of that. And so we were able to customize that, provide that to them and with redundancies. And so that's what we typically see. And then what happens is they'll come, they'll bring volume and transactions to us as part of a conversion. And then eventually, hopefully we get all the business. So that also takes some time to convert. That's kind of, that's the typical type of customer and the typical type of conversion. And it is really nice margin business. And, It's been performing very well, and we were just at the Electronic Transactions Association and had a really nice pipeline coming out of that. And so it's been a really nice growth driver for us.
spk04: Thank you. I appreciate that. Our next question comes from the line of Bob Napoli with William Blair.
spk06: Please proceed.
spk02: Great. Thank you. This is Adib Chowdhury on for Bob. Thanks for taking our questions. You touched on it a bit in some of the earlier questions, but just directionally, could you provide some comments on business trends more broadly in the month of April and May so far? Thank you.
spk12: Yeah, April in the consumer space particularly started strong. I think some of the tax refund dollars maybe fell over into April, which is not overly surprising with late filers. That helps the consumer side. Like I said, we have fully implemented the large personal lender, and that will benefit us for a full quarter in Q2, which has been good. So we've seen positive trends on the consumer side. And then in business payments, we have completed implementations of some of the larger wins that we talked about that provided strength exiting the quarter and into early Q2. So we're seeing positive trends with that as well. And then there's a very strong sales and implementation pipeline in business payments that will continue to ramp throughout the quarter into next quarter.
spk03: Just a reminder on two things as we talked about as well. We do have some political media we're lapping and obviously Blue Cow will be out of second quarter numbers. And then obviously all of you know, we've mentioned before in the past, specifically on the consumer payment side, first quarter is our high seasonal quarter for us and second quarter can obviously seasonally, um, you know, be less than the first quarter from a overall volume perspective. Um, just want to mention a couple of those things. Yeah.
spk02: Uh, thanks for those comments. I appreciate that. And just as a quick fall, I guess, bigger picture, um, you know, Ruth has made a bunch of acquisitions on the B2B payment side. Could you just kind of more broadly talk about some of your learnings as you've integrated these deals and kind of going back to your confidence in terms of ability to deliver 20% plus growth in B2B longer term. Thanks so much.
spk03: Absolutely. So if you look at a normalized growth less than the political media spend us every even year, we think that obviously is still there. And we're seeing it. We're seeing it in the wins that we're looking at. We're seeing it in our pipelines. The evidence of what we thought is still absolutely true, and we're excited about that part of our business. Obviously, it's, consumer's still a large part of our business, and you can see how it's growing fast. So it's hard to catch it from that overall total volume mix, but we really like the business. The verticals we're driving down, and you heard me talk about on the call, and the hospitality vertical, as well as municipalities, as well as hospitals. We're still seeing lots of opportunities there. It's a large addressable market that is still well underserved with the entire digital transformation as it's happening. And we think we have one of the best in class technology solutions with our total pay solution in the marketplace. We'll continue to expand on that. We'll continue to expand on the different ways people want to pay and get paid and our ability to truly execute on that by truly understanding money flows and understanding the ability to move those funds as well as give them the state of the art financial technology to do that. We think we have a winning formula there.
spk04: Appreciate the comments.
spk06: Our next question comes from the line of Timothy Scioto with Credit Suisse. Please proceed.
spk11: Great. Thank you for taking the question. I wanted to circle back to an announcement you guys made a few years back, and it's featured on your growth plan slide 17. I know it's a smaller part of the business, but I was hoping you could give a brief update of your partnership with Veeam in B2B cross-border and how it's helped your business, whether in winning clients or winning volumes, or just a broader update on that partnership, and then have a quick follow-up on that. the gross profit guide?
spk03: Yeah, sure. So obviously Veeam is a nice company and we have a really strong relationship with them. Marwan, they do a good job. Specifically for us, we do not have significant cross-border activity with a lot of our specific large enterprise clients. They're more domestic than international. And that's why we haven't seen a tremendous amount of growth in the cross-border side of that. But it is a piece of our product suite. It does allow us to be extremely competitive in the marketplace. As some of our large enterprise clients continue to expand, we'll see more and more opportunities of that. We obviously are seeing some of those opportunities specifically into Canada. But overall, it's still not significantly meaningful, meaning cross-border is not.
spk11: Absolutely. Okay. Thank you, John. And then this one is for Tim. This is a follow-up. So just on an absolute basis on the reported numbers, not adjusted for the media spend comp that's tougher in Q4, is it fair to assume that the guide right now, maybe conservatively and because of the macro impacts that you're embedding, the absolute growth is more in the low single digits? And then if we added in the media impact, it would imply an underlying... exit rate and maybe the high single digits for this year. And again that is in the more moderate or mild recessionary scenario. Is that a fair recap or would you correct me on anything there.
spk12: Yeah. So if you look at slide 12 there's three ways to think about growth. There's the reported number which is probably mid single digits and that's the top section of that chart on the top of that page. And then there is the organic number which excludes blue cow which gets us to high single digits. Then there's the normalized organic, which excludes flu cow and the political media impact, which gets us to low double digits. So that's still what the guidance implies, and that's how we build up to it, if you look at that slide, which is similar to when we reported guidance originally.
spk11: Completely, Tim, I appreciate that, and this slide is really helpful. I was actually talking more just specifically about Q4 and the exit rate, not the full year. My apologies.
spk12: Okay. Yeah, so we think that the Q4 exit rate would probably be, I would say, high single digits and then normalized for political below double digits. Then we add, for example, the large captive auto client that will be rolling out next year, which we think will be incremental to those numbers. And then we add the political contribution. So that's what gets us excited about next year and with a big, large captive auto when we know it's incremental even to that exit rate in Q4.
spk11: Great. All right. That's exactly the kind of cover I was hoping for.
spk04: Thank you so much.
spk06: Our next question comes from the line of Joseph Baffey with Canaccord. Please proceed.
spk00: Hey, guys. Good afternoon. Thanks for taking the questions. Maybe we just circle back to the auto vertical. You've had some good success there kind of consecutively over the last few quarters. I mean, it just kind of begs the question on how your solutions, I mean, how penetrated are the types of solutions that you're providing into the auto OEM space? kind of broader auto sector, and should we be thinking there are potentially more of these in the pipeline than all the follow-up?
spk03: Yeah, so we are winning. This is John. Hi, Jeff. We are winning based on our technology and our product and our solutions. Our omni-channel experience, our omni-modality experience, which will continue. You heard us talk about adding the digital wallets last year and continue to add Venmo, PayPal, just the various different ways you can pay anywhere, anyway, anytime. And delivering that solution, the consumer is demanding it. The end consumer expects an ease of use and a high-quality financial experience. And we're able to deliver that technology as well as the expertise by vertical and the expertise for payments. That is part of our winning formula. Obviously, we have to be competitive from a pricing perspective, but because we own our own clearing and settlement engines, if we want to win, we can win. And we see there are more opportunities out there. They're the very, very largest. It usually takes some time, but we do see more opportunities out there in overall consumer payments as well.
spk00: Great, thanks for that. And then just maybe just drilling down again a little bit more on this, you know, on the PayPal and Venmo integrations and how you're doing that and, you know, obviously you're partnering with PayPal to a certain degree here. You could talk about how unique that is potentially in the market versus competitors and, you know, how customers are receiving
spk03: integration of those wallets thanks very much sure so if as you've heard me speak about we're continuing to enhance all of our existing loan management system integrations in our consumer payments area we think that will give us great organic growth opportunities we know that as we expand several of our product features and functionalities that being our digital wallets that being Venmo PayPal We know that the consumer would like, it doesn't mean that that will be the only way they wanna pay, but we know that our consumers would like multiple ways to pay how they wanna pay. And so we see goods consumer demand wanting those features, and we think that's gonna lead to additional new organic opportunities, but also we think that'll, as we've always talked about, our ability to continue to convert In a digital transformation convert existing clients into more of a digital solution We see really good demand there on that side of it as well But that we're barely scratching the surface there as we're rolling out and enhancing some of those features and functionalities As you can imagine we have to get on everybody's technology roadmap and some of the things we're doing there We're still early and in some of that but yet we see really positive results We build these solutions because we know there's demand there and consumers want to do it competitively. If you think about it, it's just another payment feature and a payment option at checkout. So another way to pay, and we think that ultimately what that drives is a high-quality end-consumer experience as we help them engage there, but also... You get paid more, and you get paid more. That's a high-quality experience across the entire ecosystem.
spk04: Sure, great. Thanks for that call, John.
spk06: Our next question comes from the line of Charles Nabhan with Stevens. Please proceed.
spk10: Hi, good afternoon, and thank you for taking my question. So some of the more recent wins in auto, particularly Mercedes, would imply more of an upmarket skew from a credit standpoint. So with that in mind, I was wondering if you could comment on the overall exposure within auto across the credit spectrum. Not looking for specifics around subprime, prime, et cetera, but just any high-level comments I think would be helpful given the uncertain macro environment.
spk12: Yeah, thanks for the question. We're clearly trying to go upmarket. We have been for several years, and we're winning deals there now. We have a pipeline in the captive space. We have more enterprise reps on our team, and so we are seeing success there. We do process for lenders, auto lenders across the entire spectrum, but we have focused more of our efforts on the enterprise accounts, which would naturally, like you said, lean toward more of a prime type of borrower. So that's where the focus has been. But historically, we've sold accounts across that entire spectrum. So we do have a good mix there. But going forward, the mix will lean more toward prime, super prime.
spk10: Got it. And as a follow-up, I know you broke out the gross profit impact from Blue Cow. But in terms of volume impact within business, Could you give us a sense for the impact of the client acquisition as well as Blue Cow and how we should think about organic growth from a volume standpoint within that business, or normalized growth rather?
spk12: So Blue Cow is on the consumer side, so that when we broke that out, that's what contributed to the difference between the 15% reported and the 17% organic. So that's on the consumer side, and again, As we mentioned, there will be about $2.5 million of revenue in Q2-22 that we would pull out. So you're thinking about consumer organic growth. That's how we factor that in. And then we don't want to get too specific on the large account, but it would probably be at least a few points of growth that we lost as a result of that. And so you can see how that would impact the exit rate going into Q2.
spk04: Got it. Thank you for the call. Appreciate it.
spk06: Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 on your cell phone keypad. Our next question comes from the line of James Fawcett with Morgan Stanley. Please proceed.
spk09: Hey, good afternoon, gentlemen. Thanks for taking a few minutes here today. I had a couple of follow-up questions on topics that I've already addressed, at least on this call and in the press release. First on B2B technology. Obviously, you talked about a large client rolling off, and it seems to be having a little bit bigger impact on the BBB segment than at least I would have guessed. Can you remind us what your customer concentration might look like, and how should we think about the risk of additional churn there?
spk12: Yeah, thanks, James. We're pretty diversified there, so there's not really concentration risk. This just happened to be a unique situation where, you know, a private equity firm bought a few of these companies and basically brought them all together and consolidated processors. And so, like we said earlier, it was pretty unique in it. But it was, you know, several points of business payments growth that we lost as a result of that. But there's not significant concentration and we're not aware of other losses like this.
spk09: Got it. Got it. Thank you. Credit unions, you mentioned in the press release that you were seeing continued strength with credit unions. It was quoted up 20% or so. You mentioned last quarter that credit union strength may be partially due to softness within some other verticals. Can you remind us a little bit like what the relationship is between verticals and strength in credit unions and give us an update on what you're seeing within credit unions and how we should think about momentum?
spk12: Yeah, so I think that comment was related to some of the auto lending moving out of the traditional auto space and into credit unions, just credit unions having, you know, generally lower rates. They were benefiting from rates rising and them being able to provide competitive financing. So I think that, you know, we still see that happening where they're winning some auto financing business away from traditional lenders because of that dynamic. And Credit unions have generally been strong. I think even through the last six weeks or so, as we've seen issues with regional banks, we've seen real strength in credit unions because of their member deposit base and because of the loyalty the members have to them, which I would help with the originations for new loans to those members as well. So I think the biggest tie-in is probably between credit unions and auto.
spk09: Got it, got it.
spk04: That's really helpful, Colin. Thanks for that, gentlemen. Yep, absolutely.
spk06: Our next question comes from the line of Mike Grondahl with Northland Securities. Please proceed.
spk01: Hey, guys. Thanks. Two things. One, any changes on the competitive front to call out or any increased intensity? And then secondly, you did mention M&A. Have you seen valuations come down in the private market where that's more interesting or a lot more interesting? Thanks.
spk03: Yeah, so on the M&A side, obviously, we have a strong balance sheet. We continue to be very profitable in building our cash position, positioning ourselves well for multiple types of opportunities in the event that we find them to be very strategic. On the valuation side, on the M&A side, we have seen a few entries back into the market, and we're also seeing Multiples come down some we think we'll continue to see more opportunities as the year comes around and we also think the private side will will obviously Adjust to some of the public multiples as well and in it and we've said this before we have a very high bar we obviously understand where we are in the market and And that makes it a very strategic high bar for us. But yet we do think there's will be well positioned for the exact right opportunities that we find in the marketplace.
spk12: I think from a competitive standpoint, it's not really changed much. I mean, we see some similar names on the consumer side. We've mentioned before, you know, as we enter new sub verticals within B2B and the AP side, we may see new competition just because there's players already there in those sub verticals. And really the way we'd win there is by gaining software relationships in the AP sub-verticals and then building the supplier network within those verticals. But that's where we may see new competition is if we're entering new sub-verticals, particularly within B2B and AP.
spk04: Got it. Got it. Thank you. Thank you.
spk06: Ladies and gentlemen, this concludes the question and answer session. I'd like to turn the call back to John Morris for any closing remarks.
spk03: Thank you. We are very pleased with our first quarter results. We remain focused on executing our strategy as we see incredible amounts of organic growth opportunities, and we'll continue to invest in those. We will continue to execute our operational efficiencies as we expand our sales pipelines and We'll continue converting on our implementation pipelines as well. Look forward to speaking with you in the next coming weeks here.
spk04: Thank you very much.
spk06: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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