Paymentus Holdings, Inc.

Good day and welcome to Paymentesis' fourth quarter 2022 earnings call. This call is being recorded. All participants are currently in a listen-only mode. There will be an opportunity for questions following management's prepared remarks. At this time, I'd like to hand the call over to Paul Seaman, interim chief financial officer, for some introductory comments. Please go ahead.

Thank you. Good afternoon and welcome to Paymentesis' fourth quarter 2022 earnings call. Joining me on the call today is Dushant Sharma, our founder and CEO. Following our prepared remarks, we will take questions. Our press release is issued after the close of Market Today, and it's posted on our website, where this call is being simultaneously webcast. The webcast replay of this call and the supplemental slides accompanying this presentation will be available on our company's website under the Investor Relations link at ir.dimentis.com. Statements made on this webcast 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, and similar phrases that denote future expectation or intent regarding our financial results and guidance, the impact of, and our ability to address continued economic uncertainty and inflation. Our market opportunities, business strategies, implementation timing, product enhancements, 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 to 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 in our annual report on Form 10-K for the year ended December 31st, 2021. which we filed with the SEC on March 3rd, 2022, and our annual report on Form 10-K for the year ended December 31st, 2022, which we expect to file with the SEC shortly, and elsewhere in our other filings with the SEC. We encourage you to review these detailed Safe Harbor and risk factors closures. 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 our performance and liquidity, should be considered in addition to and not a substitute for or in isolation from GAAP results. We encourage you to review additional disclosures regarding these non-GAAP measures, including reconciliations with the most directly comparable GAAP measures in our earnings press release issued today and the supplemental slides for this webcast, 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.

Thank you, Paul. We're a strong quarter that was successful, both financially and strategically. On the financial front, we exited the year ahead of our initial annual top line expectations that we set at the beginning of 2022. On the strategic front, among other milestones in the quarter, we recently launched a product for small and medium-sized businesses, commonly referred to as SMBs, over our IP and ecosystem that we expect to expand over time and enhance our ability to change a portion of our model from interchange being a cost center to a revenue center. Let me discuss the financial highlights first. As you can see on slide three, we finished 2022 with stronger than anticipated results in the fourth quarter. Our revenue for the quarter was $132.2 million, up 22.2% year over year, and contribution profit was $54.1 million, up 19.4% year over year. We also expanded margins sequentially. Our adjusted EBITDA was $10.2 million for the quarter, with a corresponding margin of almost 19%. On slide four, we show our performance for full year 2022, our first full year of being public. We finished with revenues of $497 million, which represented growth of almost 26%, and was higher than our expectations that we shared with you at the beginning of 2022. Contribution profit was $201.3 million, representing 27% growth, which was within our updated range of expectations. Adjusted EBITDA finished at $28.6 million with a 14.2% margin, which was within our initial range of expectations. On a full-year basis, our dollar volume increased over 70%, which reflects our continued move to serve larger and larger clients and increased scale in payment ecosystems. In the quarter, we achieved several milestones as outlined on slide five. First, we signed a large bank citizens financial group for consumer bill payment with our bill center product. We believe this is a very good sign of things to come for bill payment sales to financial institutions as we have larger and larger institutions evaluating our modern product to replace the legacy solutions. In the quarter, we expanded the reach of the instant payment network through a partnership with Green Dot to accept cash payments at over 90,000 retail locations across the U.S. We continue to support consumer choice of payment channels and methods and are working to add more and more partners to the network to capture additional payment volume over IPM. Third, we partner with a large real estate platform to be one of its payments offering for rent payments. Additionally, we completed the implementation of a loan payment client that was a cross sale of our biller direct platform into our bank bill payment customer base. We expect to see continued penetration in the banking and credit union markets for our loan payment offering. In addition, we also launched a large mortgage services company towards the end of Q4. As I mentioned a minute ago, we are also pleased to announce the launch of our SMB platform that combines the features of our current platform with a new product offering and team that we acquired in the quarter. Our SMB product is a full-service financial offering to SMBs and offers complete self-onboarding with no implementation involved. It starts with automating business banking and attaches to it a full-service SMB operating system that automates payables, receivables, and expense management using the Paymentless platform. As I shared last quarter, we send out millions of payments to over a million payees, many of whom are SMBs. All of these are outside of our direct billing network, yet they participate in our ecosystem and receive payments. We believe this presents a very efficient distribution channel for us, which we plan to leverage to attract such customers. As you know, there are over 6 million SMBs and millions more small offices and home offices in the U.S. alone. In addition to the expansion of our TAM, with this offering, we seek to change the economic model by generating interchange revenues. In other words, in contrast to Billard Rec, in this offering, interchange is no longer a cost center. Instead, it's a revenue center for us. With that background, let me turn to our 2023 guidance on slide seven. In 2023, we expect our revenues to be in the range of $575 million to $600 million, which is 16 to 21% growth. We expect contribution profit from $224 million to $237 million, or 11 to 18% growth. We expect adjusted EBITDA of $32 million to $38 million, and adjusted EBITDA margin range of 14 to 16%. As you can see, we have initially provided a broad range for contribution profit guidance, which somewhat diminishes its utility. In an inflationary environment and given its related dependence on factors outside of our control, we believe initial contribution profit guidance requires more flexibility. However, we have a high degree of confidence regarding our ability to deliver on the guidance measures we are most focused on in 2023. The top and the bottom line, much like how we executed in 2022. Let me now talk briefly about our expectations for the first quarter of 2023 on slide eight. For the first quarter of 2023, we expect revenues to be between $136 million and $140 million, contribution profit to be between $51 million and $53 million, and EBITDA to be between $7 and $8 million. But before I turn the call over to Paul, let me address the guidance itself. If I'm you, I'll be wondering, is the business slowing down? Why isn't the growth higher? And the short answer is no. I don't believe the business is slowing down. The best way I can describe the business from my vantage point is that to hit the top end of each of our guidance range provided in 2023, I believe that we do not need to sign a single additional client in 2023 and only implement the existing backlog of currently signed clients. The reason for our broad range is is the macroeconomic environment we are operating in. Our growth in bookings continues to accelerate, but the timing of implementation and onboarding is primarily controlled by the clients, which is impacted by the macro. I believe our platform itself is capable of launching engaged clients swiftly. I would also add that my team and I are excited about the future for business and where we are strategically taking it. I believe that great businesses achieve great things during challenging times and use it as an opportunity to innovate and set the stage for future disruptive models, as we are doing here at Tenantis. With that, Paul will provide more color on our 2022 results and each of the guidance numbers.