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Operator
Hey, and welcome to Paymentus' fourth quarter and full year 2021 earnings call. This call is being recorded. All participants are currently in a listen-only mode. There will be an opportunity for your questions following management's prepared remarks. If you would like to ask a question, please put star 1 on your telephone keypad. At this time, I would like to hand the call over to Paul Tiemann, VP Finance and Strategy, for some introductory comments. Please go ahead.
Paul Tiemann
Thank you. Good afternoon and welcome to PayMensis' fourth quarter and full year 2021 earnings call. Joining me on the call today are Dushant Sharma, our founder and CEO, and Matt Parson, our CFO. Following our prepared remarks, we will take questions. Our press release was issued after the close of Market Today and is posted on our website, where this call is being simultaneously webcast. The webcast replay of this call and supplemental slides accompanying this presentation will be available on our company's website under the investor relations link at ir.finances.com. Statements made on this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements use words such as will, believe, expect, Anticipate in similar phrases that denote future expectation or intent regarding our financial results, our market opportunity, business strategies, impact from acquisitions, and other matters. These forward-looking statements speak as of today, and we undertake no obligation to update them. These statements are subject to risks, uncertainties, and assumptions that may cause actual results that differ materially from those set forth in such statements. including the risks and uncertainties set forth under the captions, special note regarding forward-looking statements, and risk factors, and our quarterly report on Form 10-Q for the quarter ended September 30th, 2021, which we filed with the SEC on November 10th, 2021, and our annual report on Form 10-K for the year ended December 31st, 2021, which we expect to file with the SEC in early March 2022, and elsewhere in our filings with the SEC. we encourage you to review these detailed safe harbor and risk factor disclosures. In addition, during today's call, we will discuss certain non-GAAP financial measures, specifically contribution profit, adjusted gross profit, adjusted EBITDA, and adjusted EBITDA margin are non-GAAP financial measures. These non-GAAP financial measures, which we believe are useful in measuring Paymentus' performance and liquidity, should be considered in addition to not a substitute for or an isolation from GAAP results. We encourage you to review additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP measures in our earnings press release issued today, and supplemental slides, each available on the investor relations page of our website. With that, I'd like to turn the call over to Dushant Sharma, our founder and CEO.
Dushant Sharma
Thank you, Paul. Look, 2021 was a great year. We accomplished many things that we believe position us well for a strong 2022 and beyond. But before I talk about 2022, let me discuss our Q4 performance first. We closed out our first year as a public company on a high note. Our contribution profit grew 36% in Q4 to $45.3 million. Our transaction volume grew 54% to over 83 million transactions in the quarter. And in 2021, we also increased our number of clients to over 1,700, including billers and financial institutions. And from a user's standpoint, we saw 21 million consumers and businesses use our platform in the month of December 2021. Our payment volume for the full year jumped 68% to over $63 billion. To provide an additional context, it took us 15 years to get to $30 billion in annual payment volume. And we have added more than that in just the last two years. It is pretty remarkable. And as you can see from these numbers, our core strategy of building a network and gaining market share is paying off handsomely. As reflected in our 2022 guidance, we expect continued demand for our platform and the ecosystem, which we believe provides significant momentum for 2022 and beyond. Let me now discuss our expectations for 2022. Based on our current visibility, we believe 2022 will be another year of a strong growth and profitability. We are expecting full-year contribution profit growth to be between 29% and 30%, and adjusted EBITDA margin to be between 14% and 16%. And we feel great about our prospects for 2022, primarily because of the work we have already done during 2021, which we believe has set a great foundation for our 2022 performance. Let me walk you through a few of these items. First, we established a significant partnership with JPMorgan Chase to jointly sell our solution to the biller market. Both teams continue to be excited about the partnership and the momentum we are seeing. Second, we closed two acquisitions, which has strengthened our presence in the financial services market that allows us to begin monetizing payments through the bank channel. And I'm sure you're wondering about the integration. It's going very well. Third, we launched our instant payment network, or IPN, with several of the largest companies in the world, and when combined with nearly 300 financial institutions on our platform, we believe it is a tough combination to beat. And as you know, IPN is unique to Paymentus. Fourth, we signed and implemented a number of key clients that we expect to serve for years to come. We also finished migrations of a large insurance company, a large real estate e-commerce website, and a top 15 U.S. mortgage servicing company. All went live in 2021, each displacing legacy systems. These are among the over 50 clients, billers, and financial institutions that we onboarded in the quarter. Fifth, we have signed additional partnerships, including a new telecom partnership in the fourth quarter that we expect to help grow our biller base and corresponding revenues. In October 2021, we launched an IPN-powered app called Bill Center that modernizes bill payments for banks and credit unions. It has been very well received in the market with several clients signed in the fourth quarter. Bill Center provides consumers with a 360-degree view across all bills. It offers more payment choices with debit, credit, and digital wallet options, and it delivers immediate notification of payment from the biller to the banks and financial institutions. With IPN and BillCenter, consumers have more choice and flexibility about how they pay and when they pay. Finally, our addressable market opportunity is big, and despite our scale, we believe we're just getting started. As a testament to our momentum and leadership position, In a recent comprehensive review of many BillerDirect vendors by IT Nova Rica Group, a leading financial services advisory and research firm, Paymentus was named as the industry's best-in-class vendor. IT Nova Rica reached this conclusion after numerous capability deep dives, feature functionality comparisons, client reference calls, product demos, and due to our innovative BillerDirect platform and our excellence in Biller service and support. As a reminder, our platform and the IPN ecosystem exist to create a flywheel effect where our objective remains to, A, sign as many billers as possible, B, constantly grow the digital payment volume, C, expand IPN reach to as many partners and financial institutions as possible, and D, generate a warm lead list of all billers that are outside of our biller direct platform but process through our IPN network and therefore add them to our sales pipelines. We have done a tremendous amount of work in 2021, including all of the exciting accomplishments I listed. And as a result, we believe we are more drivers of future revenue than we have ever had before. We believe these revenue drivers, combined with our highly visible model, provide attractive upside potential for 2020 and beyond. Our 2022 guidance doesn't change, but hopefully this gives you an understanding as to why we feel good about 2022 and beyond. Many of you are new to Payment as a Story, so let me take a moment to describe how we think about our business. Our strategy is centered around capital efficient long-term growth. We view ourselves as a custodian of your capital, and we take this role very seriously. As a public company, it is never lost on us, in fact, I personally think about it every day, that our long-term performance also impacts children's education plans, family retirement accounts, and vacation funds. Therefore, we will continue to be a responsible executor of our business strategy as we aggressively pursue profitable growth irrespective of the market conditions. Let me now touch quickly on the nature of bill payment market and the industries we serve. If Christopher Bullock's famous line was spoken today, it would likely say something like, it's impossible to be sure of anything except debt, taxes, and bills. We all have bills, and they have to be paid, whether there is a financial crisis or a pandemic. The majority of our clients are recurring services businesses, such as utilities, government, financial services, and insurance companies. Due to the non-discretionary nature of these businesses, they aren't affected like other businesses, by supply chain issues and geopolitical events. We believe this gives us tremendous stability as we execute on our long-term strategy for accelerating the total addressable market through innovative offerings. This is one of the many reasons why we feel confident about our ability to execute and deliver long-term sustainable growth. And before I pass the call over to Matt, let me also touch on inflation for a moment. Our pricing and contracts are structured such that either our pricing increases automatically or we can adjust our pricing if our clients increase their fees to their customers. Therefore, we have protection to maintain margins. This notion is not new at all and has been in our agreements for over a decade now. And I also want to remind you that one reason we grew through the financial crisis way back when and through the pandemic was because people still had to pay their bills. With that, let me pass the call to Matt. Matt?
Paul
Thanks, Deshaun. As a quick reminder, today's discussion includes non-GAAP financial measures. Please refer to the tables in our press release and supplemental slides for reconciliation of non-GAAP items to the most directly comparable GAAP financial measure.
Matt
I echo Deshaun's commentary on the strength of our performance in 2021.
Paul
If you recall Deshaun's four ecosystem objectives from last quarter, we've made progress in each of them, signing and implementing a significant number of billers, rapidly growing our payment volume, expanding the reach of IPN, and expanding our sales pipeline through warm leads. In the fourth quarter, we processed 83.3 million transactions, which represents a year-over-year increase of 53.7%. and an annualized run rate of more. This accelerated transaction volume was driven by a mixed shift as we ramped business-to-business, IPM, inclusive of, and in particular, the Payveris acquisition, and other non-bill or direct products. These transactions are typically priced based on contribution profit because there is no interchange associated with them. We believe we have the opportunity to drive additional revenues with this volume over time as we extend our reach and scale. The transaction growth drove a 31.2% increase in revenue over the same period in 2020, which resulted in revenue of $108.1 million in the quarter and $395.5 million for the year. Contribution profit for Q4 was $45.3 million, a 36.3% increase over the same period last year. For the full year, contribution profit was $158.5 million, which represents growth of 31.5%. Adjusted gross profit for the fourth quarter was $36.1 million, which is a 35.1% increase from Q4 of 2020, and it was $127.4 million for the year. Adjusted EBITDA was $6.3 million for the fourth quarter, which represents a 13.4% increase. For the full year, adjusted EBITDA finished at $29.5 million, or 18.3%.
Matt
We are very proud of our performance across all these metrics.
Paul
Operating expenses rose $12.6 million to $33.4 million for Q4 of 2021 from the same period last year. Overall, this increase in operating expenses from last year was driven by increases in headcount from ongoing investments in our business and its growth, as well as our acquisitions and also
Matt
So the amortization of intangible assets associated with the acquisitions.
Paul
Specifically, R&D expense increased $3.1 million or 47.6% from the fourth quarter in 2020 as we continue innovating with and for our customers and partners. Sales and marketing increased $6.3 million or 73.1% as we continue to add headcount to drive new sales and expand partnerships. given the significant market opportunity we see, also continue to ramp up relative to Q4 of 2020. The cost of corporate insurance and ongoing investment in public company infrastructure. GAAP net income was $4.7 million, and EPS for Q4 was $0.04, and non-GAAP net income was $2.1 million, and non-GAAP EPS was $0.02 for the quarter. Our full year effective tax rate ended up at 10.4%. You may recall that I indicated in our Q3 call to expect a full year effective tax rate of around 55%. But during Q4, we received a discrete tax benefit associated with the deductibility of stock option exercises.
Matt
And like most companies, we don't forecast discrete tax items.
Paul
And without the discrete item, our effective tax rate would have been 52% for 2021. As of December 31st, 2021, we had $168.4 million of cash and cash equivalents on our balance sheet. And this cash decreased primarily due to our acquisitions and the timing of customer payments. At year end, our common stock share account was 120.64 million shares. Now from our key four and four results, let's turn to our 2022 four-year outlook. We are introducing our 2022 four-year guidance based on our historical performance and current expectations for this year. Our revenue outlook for 2022 is in the range of $490 million to $495 million, which represents growth between 24 and 26% year over year. We expect contribution profit to be between $204 and $206 million for the year, which is approximately 29% to 30% growth. We anticipate 2022 adjusted EBITDA in the range of $28 to $33 million with an adjusted EBITDA margin of 14% to 16%. With regard to the adjusted EBITDA, I want to remind you that while we were at 18.6% for 2021, it was a tale of two halves, meaning before we went public, our adjusted EBITDA margin for the first half of 2021 was 24.4%. But for the second half of 2021, it was 13.8% due to the cost of being a public company as well as the impact of the acquisitions. So our guidance for 2022 adjusted EBITDA margin, we are actually including incremental improvement from our current run rates. We believe the combination of our expected growth debt. Finally, we would typically expect our effective tax rate. However, due to the amortization of intangibles associated with acquisitions,
Matt
we expect pre-tax rates in 2022.
Paul
This will cause our effective tax rate to vary from expectations, and accordingly, we are not providing forecasts for the effective tax rate for 2022. This guidance incorporates certain assumptions and does not incorporate the impact of any future acquisitions that we may undertake. Directionally, we expect our contribution profit per transaction to be substantially similar to the level we saw in Q4 throughout 2022. Some of the other assumptions include a consistent rate of growth in same-store sales to what we've seen historically, new customer implementations going live in line with expectations, even though that obviously has a dependency on our clients, and that those newly implemented clients have the transaction volumes and average payment amounts that we expect. It also assumes minimal client attrition, as has been the case historically. As you know, we don't provide quarterly guidance, and one of the reasons we don't is because there can be quarter-to-quarter variations in the growth rate due to changes in average payment amounts, mix of payment type, and other items. But I did want to give you a bit of color on how we anticipate the year may progress, as we do not expect to experience straight-line growth from quarter-to-quarter during 2022. We expect higher year-over-year contribution profit growth in the first half of the year than the second half as we lap our acquisitions in Q3.
Matt
As a result, we expect the second quarter to have the highest sales that will impact 2022 revenue has been closed, and the variance between quarters is driven by variable implementation timing that can generally move a month or two
Paul
earlier or later, depending on client specifications and needs. Specifically with Q1, please keep in mind that we typically see much lower or actually really even zero sequential contribution profit growth in the first quarter due to higher average bill amounts associated with utility clients. With all that said, though, even though we may see fluctuations in growth quarter to quarter, as evidenced by the upper end of our guidance range, we believe we are a 30% growth business on an annual basis. And with that, I'll turn the call back over to Deshaun for some closing comments.
Dushant Sharma
Thank you, Matt. As Matt and I have shared, we feel good about 2022 primarily because of the hard work and the foundation building we did in 2021. Likewise, our focus in 2022 is to continue to deliver the expected performance and to also set a great foundation to deliver similar results for 2023 and beyond. That is the nature of our business, but also for over a decade now, our execution focus is always on a two-year horizon. Where we execute in the current year, our 2021 results and 2022 plans won't be possible without the hard work, build, sell, and take care of our clients every day. I would like to thank each and every member of our team for their hard work. And with that, we'll now open the line to questions.
Operator
Thank you. If you'd like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you'd like to remove that question, please press star followed by 2. Again, to ask a question, press star 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. The first question comes from Darren Peller with Wolf Research. Please proceed.
Darren Peller
Thanks, guys. Congrats on finishing your first year as a public company. You know, I want to start off with when we look at the customer ads you had over the past six to nine months, you started off at 1,300, if I remember correctly. You went up to about 1,400-plus, and now we're showing 1,700. It's just a pretty dramatic move in a pretty short period of time. So if we could just touch on what's driving that, what kind of categories you're adding in, and maybe a little more color on sustainability or what you'd expect to see in the next, call it, 12 to 24 months, that'd be great.
Dushant Sharma
Cool. Well, the 1,700 clients include the pay bearers clients as well that come through the acquisition. That is primarily the financial institutions. And relative to remaining clients, I think, first of all, we remain very bullish. And as you heard us talk about, Our goal and strategy is focused on continuing to build network and gain market share through acquisition of builders and continue to build the IP and ecosystem and bring as much volume as possible. So we see the similar trend, minus the acquisition. We see a similar trend in 2022 and beyond in terms of acquisitions of customers. Now, in terms of where they will come from, utilities, insurance, our key verticals, the core verticals, utilities, insurance, government, consumer finance, telecom, as well as healthcare.
Paul
The only thing I would add is also financial institutions. I think with the addition of Faberis, there will obviously be a focus on financial institutions and continuing to add more and more financial institutions to the stable of clients. Absolutely.
Darren Peller
Okay. Guys, just one quick follow-up, or maybe two parts to it. When thinking about the guide and the outlook for 22 and beyond now, you know, number one, I mean, we're getting a couple of questions on the strength of the customer ads and transactions, but more in-line results on contribution profit, as well as really more in-line trend looking forward. And so maybe just touch on the yield dynamics for a minute and what you're seeing or starting partnership yet, or is it just too early on for that?
Paul
Yeah, so on the first part, on the contract, I might have said it in a fair remark, but we expect in 2022 the contribution profit per transaction to be consistent with what we saw roughly the level in Q4. You know, as we've said before, we continue to add larger and larger clients. We've been very fortunate, and we've worked hard and earned them in winning larger clients than we've ever won. And, of course, with greater volume for a client generally comes better pricing. And so certainly, as we can do to add larger clients, there will be some – continued kind of pressure on the price per transaction line, but we think on the whole we can keep it fairly consistent for 2022 with what we saw in Q4. And some of that also comes from, as I think Deshaun mentioned on the call, from other as we continue to expand our B2B presence and the financial institution business in particular, those are priced on a contribution profit basis. There is no interchange, but that will be more, it will be akin to where we are currently on contribution profit per transaction. And then with respect to the second part on JP Morgan, lots of positive momentum there. But as you said, you know, when we're, there's two pieces of the business, if you remember there, one is a migration of their existing account. The second is of some of their existing clients that they had on the previous platform. The second is to go to market together with them. On the go to market together with them and the winning new clients, as you would imagine, a lot of those clients are on the larger end of the client spectrum. We've had very good results early on, but those are going to take a little bit longer to get up and running simply because of their size. And so there's not a lot of impact in 22 from revenue associated with those clients. That doesn't mean we haven't already won some and we're well underway on winning others, but the revenue impact doesn't really show up in a meaningful way in 22. On the migration, you know, there's time that is required to get prepped and the talk to the clients, get them comfortable with it. So there, again, also there's not a whole lot of impact in 22. There is some in the back half of the year, but not very large.
Andrew
Okay. Sorry, that's helpful. Thanks, guys.
Operator
Sure.
Tinson
Thanks, Darren.
Operator
Thank you, Darren. The next question comes from Andrew Botch with SMBC. Please proceed.
Darren
Hey guys, thanks for taking my question. I want to touch upon the IPN real quick. I know one of the key advantages of the IPN is it gives you a lot more visibility into really the bill payment ecosystem across the country. Can you help us and investors better understand how the IPN dramatically expands your immediately addressable market and the point on the automated biller discovery. I think a little bit more color around that would be helpful.
Matt
Yeah, so, well, first of all, thank you for the question.
Dushant Sharma
Look, as you rightly pointed out, IPN for us is a way to continue to garner insights into how consumers are paying their bills, who they are paying, and whether those billers are so we are now able to serve the existing customers better. But those who are not, they go directly to our sales pipeline, and we are starting to target those customers. So this phenomenon actually opens up doors for us beyond the core verticals we talked about. There are several verticals where we are now seeing payments to where they're starting to look very attractive to us because we are already processing payments and institutions leverage our IPN and bill center. On one hand, they're modernizing their capabilities. On the other hand, using those capabilities and the payment volumes, we are able to garner insights as to what other verticals and what other key features and the capabilities we could add to our platform that allows us to further extend our time. So that is actually happening as we speak. Another thing which is interesting in the whole dynamic is, as you know, one of our key areas of focus is how do we reduce the gap between our gross revenue to the stores for us there as well. So we We see that as a biggest strategy for us. And, Andrew, if you could repeat the second part of your question.
Darren
No, I think you answered it. It was with regard to the automated bill or discovery. I guess my follow-up question would be, just looking at the agency to that guide, 50% margin at the
Matt
at the midpoint seems relatively in line with what we were expecting.
Darren
Are there any changes to your investment strategy there with regards to, you know, tightening supply or labor markets in that vein?
Paul
Not really. You know, I think we – as we've said before – You know, we're letting, to some extent, the strength of our business dictate how we think about spending in the sense of, you know, if we feel like there's opportunity to increase the top line, then we believe it's worth the investment to, you know, obviously to spend the money to do that. You know, we've been continuing to add people. Certainly, as we talked about on a previous call, as everybody's seen, the hiring cycle is maybe a tad bit longer than it was, say, nine or 12 months ago just because of the little bit of tightening labor market, but we've still been able to attract phenomenal people. I mean, some days I'm telling our recruiting team to slow down a little bit because they're finding such great candidates. But, yeah, we're going to continue to, as Deshaun said on the prepared remarks, Our hallmark has been responsible growth, and we think fictional growth. And if not, we're not going to do it. We're going to make sure that we're spending the money responsibly into driving growth to the top line.
Darren
You know what I'm saying? It's been a good first year.
Paul
Yeah, thank you, Andrew. The only thing I was going to say is just keep in mind that because of our implementation timeline, the results in revenue are lagging the investment in the sense that, you know, it takes us six, nine months to get a customer live. We're not going to see the revenue impact of the investments necessarily straight away. It takes a little bit of time to see those. Good point.
Darren
All right, thank you.
Paul
Yep, appreciate it.
Operator
Thank you, Andrew. The next question comes from Don Davis with Raymond James. Please proceed.
Andrew
Hey, good afternoon, guys. First, just want to start on net rev retention. Maybe just comment a little bit, if not an actual number, directionally, how it trended in 21 versus 20 and what kind of is embedded in the 22 guides.
Paul
Consistent with what we've seen Historically, we have not yet disclosed a number or talked about a number for 21, but I would say it's very consistent with what we've seen historically. So let's call it mid to upper one-teens, kind of 115 to 120 range. And so, you know, as we've, I think, laid out previously, when we think about ourselves around about a 30% grower, about roughly in the ballpark of half of that comes from expansion with existing accounts, and roughly about half of that comes from new clients, and 2022 is no different.
Andrew
Okay, great. And then the inorganic contributions. for revenue or, sorry, contribution profit in 4Q? And then how should we think about what's baked in the guide from an inorganic perspective in 2022?
Paul
Yeah, we haven't broken it out because it's not material to the overall numbers. But, you know, it's in there, and it's baked into the guidance for next year, what we expect to do. And there's certainly, you know, when you think about the acquisition, they obviously brought some clients with them, but the real value or a real value is the combination of the companies and what we're able to do as far as providing the bill payment capabilities to the financial institutions, et cetera. So it's included in our guidance, but we haven't broken it out because it's not material.
Andrew
Okay, and I'm going to squeeze one in if I can. Just, Deshaun, you talk a lot about IPN and the preparative marks. Maybe just help us, you know, maybe in 2021, ballpark contribution to revenue, and are you expecting IPN to contribute meaningfully more in 2022? Just kind of curious, an update from a revenue contribution profit perspective for IPNs.
Dushant Sharma
Actually, one of the things we are doing internally now is – we have seen, as you have seen the trends, that the IPN and the core business, they're so intertwined because of the network of factors we were pursuing. We are seeing that already in action. And therefore, we are internally actually not even breaking out exactly how the IPN versus the core business. But as you are seeing from our numbers and the volume and the transaction growth, it is contributing to our growth as well as to, frankly, the network effect we were talking about.
Paul
Do you want to add anything to that? Yeah, I'll just add on the revenue to contribution profit. We've, as we talked about, I think previously, the The revenue line will certainly step down on a per-transaction basis over time as two things happen. One, we sign larger and larger accounts, but also as more of the mix of our business transitions to becoming contribution profit only or business without where we don't carry the cost of the interchange, such as B2B, as you mentioned, the IPN transactions, which includes transactions the financial institutions as part of the pay barriers working with, et cetera. So we will continue to see a, you know, progressive increase in contribution profit as a percentage of revenue. I would not, and, you know, we can talk more about it, obviously, but I would not model a massive step up for that this year. I think it will be a very, you know, kind of slow step up throughout the year as we go through the year.
Andrew
Okay. That's helpful. Thanks, guys.
Operator
Thank you, John. The next question comes from Tinson Wong with J.P. Morgan. Please proceed.
John
Thank you. Great results here. I wanted to ask about the pipeline for billers and partners now versus this time last year. Any big change here? Are your sales targets increasing? that you've set for the sales team quota-wise? Is it higher for 22 versus 21? How does it compare? Just curious. Thank you.
Dushant Sharma
Great question, actually. The reason I'm responding is because some of the discussions are already happening between me, Matt, and Jerry, and the rest of the team. So we are having those discussions. But, yes, the pipeline is stronger than it was before, and the – And it's the combination of all of the things we have been working towards, you know, leading up to this day, if you will, from years past. It's the combination of the partnership framework we have put together, both from the biller side of partnerships, the companies who are helping us build a biller network, as well as on the IT and ecosystem, and then as well as financial institutions partnerships, including IT, JPMorgan Chase. So as a result of all that, combined with the, frankly, the better messaging, the network effect, the clear understanding in the market that there is a need for a platform and ecosystem like Paymentus, as a result, our targets for this year are larger, bigger than they were last year. And the team is very focused on that. And as I talked about in my prepared remarks as well, that we have many sources of revenue, and that's part of that platform we have built here.
John
Yeah, no, it feels that way. It seems like the net is definitely wider, which is why I thought I'd ask. So just my quick follow-up then, just thinking about the revenue drivers this year, versus last year, do you expect it to be meaningfully different? I mean, given what you just said there with a lot more partners in place, I know you've signed a lot of larger, you know, billers as well. I'm just curious if you think the wheel is going to spin a little bit differently to get to where you're targeting.
Dushant Sharma
Yeah, I mean, look, our perspective is we can and continue to expand our network. And That will continue on, and we remain very excited, actually. We are seeing tremendous trends in our favor from all aspects. If you think about it, billing companies are looking for a more unified platform. The banks are looking for a modernized user experience, and we sit right in the middle of it all. And consumers want choice. They want a way to be able to pay whatever they want, whenever they want, however they want. And we are able to do that. So as a result of that, I think the net, as you said, is getting wider. And as a result, I think we are able to target clients in different industries than we were not thinking about. We are able to also watching our trends, you know, the type of billers we are not processing payments for, but we are directly on our direct platform, but we are seeing them through the IP network. We are able to also restructure some capabilities and see, you know, hey, what more could we add? So what you will start to see is, a combination of large clients coming in, whether it's coming through larger partners as well as directly, but also you will see a little bit more diversity of verticals in the go-after as well, initially opportunistically just based on what we are seeing and then eventually pretty in a formal manner.
John
Yeah, that's great. Thank you, Dishant. Thank you, Matt.
Operator
Thank you, Tinson. The next question comes from Jason Kupferberg with Bank of America. Please proceed.
Tinson
Hey, thanks, guys. I'm just curious how to think about cash flow conversion in 2022 based on the adjusted EBITDA that you're forecasting. What do you want to talk about in terms of operating cash flow, free cash flow? Thank you.
Paul
Yeah, thanks, Jason. yeah consistent with what we've seen um uh historically in in 2021 and uh prior um no real changes to the to the drivers in in cash flow conversion um i think you know cap software is a big uh impact if you think about the difference between operating cash flow and free cash flow we do have a lot of capitalized software but um but i don't there's no changes to the to any of the um levers or drivers that would change the cash flow conversion from adjusted EBITDA consistent with what we did in 21.
Tinson
Okay, good. And then just with respect to the balance sheet, obviously in great shape and no debt, and you had a track record of some successful M&A. What does the pipeline look like there? How do you feel like that will be a meaningful part of the story for Paymentus in 2022?
Paul
Yeah, I'll start, and Deshaun, you can add on. We're constantly looking at M&A opportunities. As you can imagine, once we went public, our email inboxes got flooded with things.
Matt
And so, as we've said before, we've been very opportunistic and disciplined in the past with M&A, and we'll continue to be so going forward.
Paul
I think the good news is As you heard Deshaun lay out kind of where we are in the things we accomplished in 2021, when we look at the goals we want to achieve in 2022 and really beyond, there are no big holes in our strategy or our objectives that say we've got to go out and buy something to fill this gap or to plug this hole. So it gives us the ability to be very opportunistic and either expand our TAM or deepen our capabilities in a certain area, but it's all
Dushant Sharma
No, I think I completely agree. I think we'll continue to be selective and very disciplined.
Matt
But doing acquisitions, I won't put it out of the realm of possibilities.
Dushant Sharma
We'll continue to look at opportunities, and if something comes along which we like and you think it could be additive, we'll do it.
Matt
This question comes from Ashwin Sharma.
Ashwin Sharma
Hi, Ashwin. Hi, Matt. Good to hear your voices. Thank you for giving me the call. Hey, I guess, you know, let me start with you have the, you know, 14 to 16 margin range, and if you could kind of Talk about what drives the 14 versus the 16, how much of that is explicit investments versus mix, things like that.
Matt
If you could talk about that, I guess.
Paul
Yeah, absolutely. So some of it obviously is dependent upon where we land on the top line, and to the extent it flows through ultimately the epidemic for sure, and there's a range on the top line, so there's a flow through on that. But it also is one of the things we want to make sure that we give ourselves enough of a range, to be honest, and transparency with you and the investors on, you know, again, we're growing, you know, being able to grow in the 30% range is quite attractive. And to the extent that we have opportunities that can add, potentially add to that growth level, we want to have the ability to make those investments. So I'd say that's really the difference between kind of the 14 and 16 is, you know, throughout the years we see opportunities to invest being in a position to do that.
Matt
And, you know, as you would expect, a good majority of our expenses in the people bucket.
Paul
And so, yeah, I think we're always looking for good people.
Matt
And it's also somewhat dependent upon the timing of hiring and attrition and some of those things you can't control.
Paul
So, you know, kind of with all those factors in, we felt like that was an appropriate range and just gave, again, ourselves a little bit of flexibility as we kind of worked through the year to have additional investment dollars to the extent that we think that there's things that we can invest in that will drive additional top line.
Ashwin Sharma
Got it. Got it. As you added new partners, is there any change observable, I guess, in either payment type or bill amount size that you might be leaning affluent or that you might look at to figure out sort of the partner strategy and hone it? Can you talk a little bit more about that forward-looking perspective as well?
Dushant Sharma
Yeah, I think from what we are seeing is that larger billers are obviously a lot more open to doing partnership with us as a result of the ecosystem we have built and the platform, but also the partnership framework. But we haven't seen a major shift in terms of the payment.
Matt
payment mix or other changes.
Dushant Sharma
In fact, that's what makes this thing pretty attractive. And I think this entire business proposition we're talking about is that we have built what we need to build to get to having more storytellers, more ways to tell the story, and more listeners, and therefore more customers coming on board. because we have the platform, we have the ecosystem, we have the network, all of the components we needed to make it happen.
Paul
I would totally agree. The only thing I would add is we have definitely seen a widening in the payment amounts kind of levels for different clients, meaning if I go back two years ago, you know, before we started adding more and more large builders three years ago, I could have told you our average payment amount across all of our builders was $180, let's say, and it was fairly consistent. There wasn't a wide high and low on that $180, but as we've averaged payment amount is, you know, well over $1,000. And we've got another one that the average payment amount is, you know, $500 or $600 in the auto space. And so I would say, you know, on an average payment amount, it picked up slightly across all billers, but there's a bigger delta between high and low. But there's nothing to necessarily draw from that other than a good thing that we're getting more and more different types of billers and more and more different types of verticals. But, you know, if we price them appropriately, the economic and financial statement output of that is consistent regardless of ultimately the payment type. But there's definitely more divergence in what that looks like just because we've moved into more industries and different verticals.
Ashwin Sharma
Got it. Thank you, guys. Sure.
Operator
Thank you. Ashwin, the next question comes from Will Nance with the Goldman Sachs. Please proceed.
Will Nance
I had a question just on the revenue trajectory over the year, and it sounds like there are a handful of things that may start to kick in in the back half of the year. I think you mentioned some of the JPMorgan partnership will start to contribute towards the end of the year, but really it sounded like more 2023-weighted. I think last quarter you talked about a large client that was supposed to come on board, a larger-than-normal client coming on board towards the second half of this year. I just kind of wanted to understand, like, hearing loud and clear, you guys consider the business a 30% grower. Is it possible that with the addition of these handful of things you guys have talked about, we could be exiting the year with a little bit of tailwind?
Paul
I'm going to not let Deshaun answer that question. No, I'm kidding. Look, I've got to start, guys. I think, yeah, we've certainly said that there's some things coming out of the JP Morgan partnership that will hit late in the year, the client that you referenced we talked about going live late in the year. All of those things, you know, set us up well for, as we said, 2023 and beyond. You know, I would – just reiterate that our guidance is what it is. But we've got a lot of reason to be optimistic for how things shape up towards the end of the year. And we'll see. We've got a lot of work to do. As we talked about, our implementation timeline is such that when we look at 2022, I think I said in my prepared remarks, most if not all that revenue is kind of locked in as far as the clients signed up that will go live this year. Now, there's variability in the timing of when they go live and the volumes of when they go live. But the work that we're doing between now and the end of 2022 is what becomes obviously 2023 revenue. And so we've got a lot of work to do. I think the board is set up well for us with some of the things that are happening late in the year, but There's still a lot of work to do this year to get 2023 where we want it to be.
Will Nance
Got it. That's helpful. If I can ask a follow-up, I just want to try the organic growth question a different way. I realize that you guys are not breaking that out because you don't really consider it too material. I just want to make sure I understand the comments on the quarterly cadence. of growth throughout the year because it sounded like you said that it was material enough that we would notice uh just from a comps perspective in the first half of the year the growth being elevated and then falling off in the back half of the year so i was wondering if you could just help us understand the magnitude of that inorganic you know impact from comps in the prior year as we go from the first half into the second half and i you know i would kind of echo the earlier questions around you know ballpark what the acquisitions from the third quarter are contributing to the current run rate
Paul
Yeah, that's a fair point. And I think really what we were intending was, you know, obviously Q3 and Q4 are tougher comps than Q1 and Q2 is really what we were trying to say. And part of the reason for that is even though not material, there's still some amount of acquisition in there. You know, I would say a couple points. Really what we're trying to essentially say is as we go through the year, it's going to appear, well, it is going to be that Q1 and Q2 growth rates are going to be higher than Q3 and Q4. And so essentially what I was trying to say is don't read into that that growth is slowing down because there's a lot of factors that play into the quarter-on-quarter results that we see. And overall, for the reason we don't give quarterly guidance, overall on an annualized basis, you know, we think we're a 30% grower. And so Even if Q3 and Q4 aren't at that level, that doesn't mean in our minds that we're slowing down the growth because we're still, you know, believing ourselves to be a 30% grower for 2022 and into the future.
Dushant Sharma
I appreciate you taking my question. I just made a quick point here. I may be a single voice here on the table, but I'm actually not very happy with 30% growth. I continue to think about all the innovative ways we could get to, but what can we do to accelerate the growth even further? But the 30% number actually is important from a different perspective also, that we want to remain a rule of 40 company. We want to be a responsible grower of the business. We want to be a profitable company. we feel like that you and the rest of the investment community has trusted us with your capital. And it's not lost on us that families through mutual funds are investing in the public funds and they're investing in our business. And so we want to make sure that we are responsible custodian of the capital. And as a result, we feel like at 30% with the EBITDA margins we have, we have a rule of 40 companies. So that's the key reason why 30% is the number.
Will Nance
Got it. Understood. Appreciate the color.
Operator
Thank you, Will. The next question comes from Dave Conning with Bayard. Please proceed.
Dave Conning
Yeah. Hey, guys. Nice revenue momentum. And maybe my first question, just transaction growth was so strong sequentially. Can you kind of review just how much of that maybe was from acquisitions? How much is kind of just normal existing client growth and how much was kind of newer clients? Just so we can kind of see why it just seemed to diverge quite a bit from normal.
Paul
Yeah, I would say, and again, we haven't broken it out specifically, but I would say it's safe to say that even without the acquisitions, transaction growth was still well north of 40% and approaching the 50% level. And as we said before, our growing share is our number one priority in trying to get more and more transactions on our platform. we uh as we think about um the mix is changing through as we talked about b2b and and some of the ipn stuff with financial institutions etc um the pricing uh then becomes really on a contribution profit basis or the revenue on a contribution product basis because there's no interchange associated with it um uh and so it changes the dynamic a little bit on on revenue versus contribution profit versus uh the transactions but It was still very strong, and we think, you know, as we go down the road, that will continue to pay dividends as we think about, I think, the shot reference ways to minimize the gap between contribution profit and revenue and drive even more contribution profit out of those clients.
Dave Conning
Great. Great. Great. And maybe just as a quick follow-up, gross profit per transaction was a little bit down, too. Is it all the same factors that with contribution profit per transaction? And maybe is that even a worthwhile metric to kind of track?
Paul
For sure. I would look at, you know, personally, I don't know if you're talking about gap gross profit or adjusted gross profit per transaction. I would use adjusted gross profit just because now with the acquisitions, we've got the amortization of intangibles. that are flowing into cost to revenue that kind of just start to distort gross profit a little bit when you think about just the normal business. But I do think it's a good metric. And, you know, the main difference between contribution profit and adjusted gross profit is processing costs and other hosting and data center costs that we use to deliver our platform. which I think is an important way to look at the business as well, but the same drivers at play. Yeah, great. Thanks, guys.
Operator
Thank you, Dave. There are no additional questions registered at this time, so I'll pass the conference back to the management team for closing remarks.
Dushant Sharma
Well, thank you so much for joining the call. Really appreciate it. We'll talk to you soon. Bye-bye. Bye-bye.
Operator
That concludes the payments this fourth quarter and full year 2021 earnings call. Thank you for your participation. You may now disconnect your line.
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