Paymentus Holdings, Inc.

Good day and welcome to Paymenta's first quarter 2023 earnings call. This call is being recorded and all participants are currently in a listen-only mode. There will be an opportunity to ask questions following management's prepared remarks. If you would like to ask a question, please press star on your telephone keypad. At this time, I will now turn the call over to David Hanover, investor relations. Please go ahead.

Thank you. Good afternoon and welcome to Paymenta's first quarter 2023 earnings call. Joining me on the call today is Dushant Sharma, our founder and CEO, and Sanjay Khara, our chief financial officer. Following our prepared remarks, we'll take questions. Our press release was issued after the close of Market Today and is posted on our website, where this call is 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.paymentus.com. Statements made on this webcast include forward-looking statements within the meaning of the Private Security Litigation Reform Act of 1965. 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 enhancement, 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 10k for the year ended December 31st 2022 which we filed with the SEC on March 3rd 2023 and our quarterly report on form 10q for the quarter ended March 31 2023 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 forward-looking statement 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. These non-GAAP financial measures, which we believe are useful in measuring our performance and liquidity, should be considered in addition to and not as a substitute for or in isolation from GAAP results. We encourage you to review additional disclosures regarding these non-GAAP measures, including reconciliations of 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 Dushan Sharma, our founder and CEO. Dushan?

Thank you, David. As you can see from slide three, We once again had a very successful quarter with top line growth and adjusted EBITDA ahead of our expectations. Revenue increased 27.1% on year-over-year basis to reach $148.3 million. Our first quarter adjusted EBITDA was $8.4 million, which was 56.4% higher than Q1 of last year. Contribution profit for the quarter was also higher than we had originally expected at $53.5 million, despite the ongoing macro. These numbers are especially exciting to me from a profitability standpoint and demonstrate our continued progress. On a year-over-year basis, our adjusted EBITDA grew by $3 million, or 56.4%, which means 50% of incremental contribution profit dollars dropped to the adjusted EBITDA line. We believe this is even more compelling if we factor in the macro environment. Between Q4 and Q1, we had about 400 to 500 basis points of macro and seasonality related inflationary impact, meaning on an inflation neutral basis, we would have expected to drop the vast majority for contribution profit to adjusted EBITDA as OPEX did not increase on a relative basis. As we continue to make pricing adjustments to address inflation, Over time, we believe these adjustments will become a tailwind for us when energy prices move closer to the pre-inflationary levels. We are also encouraged that our core biller business has been growing well and is scaling profitably. Again, as more of our incremental revenue dollars drop to adjusted EBITDA. Parallel to this, we continue to make investments in complementary offerings in our Instant Payment Network, or IPN, and to small and medium-sized businesses or SMBs. IPN remains an exciting part of our strategy and is growing well. On SMB, we are receiving positive feedback from our partners and seeing encouraging early signs from the SMBs. As a reminder, IPN, which is still under 10% of our overall revenue, is growing faster than our core business, even though IPN and SMB are currently dilutive to our adjusted EBITDA margins. Said differently, Cuban adjusted EBITDA from our core biller business was meaningfully higher than the reported number of 15.7%, taking into consideration the financial impact of strategic investment we are making to drive our future growth. Key highlights from the quarter as listed on slide four. From a bookings perspective, we had a very strong quarter, our best ever, which resulted in a strong backlog at the quarter end. This is especially important for us. Having these substantial bookings at the end of the first quarter gives us a great deal of runway to get our clients implemented for revenue recognition in 2024. To add some additional color here, our bookings for the quarter included several large-scale clients across diverse verticals. We expect that most of these new clients will not be affected by inflation once they go live. both the way we price these transactions with variable fees and the underlying industry segment itself. These new clients included a large estate agency, a sizable property management company, an extensive healthcare system, multiple large insurance companies, and a large utility. As a reminder, the biggest impact from inflation has been from the energy utilities and not from the other industry verticals. In addition to bookings, we remain laser focused on onboarding speed and related customer engagement. Our successful client launches in Q4 contributed to our better than expected Q1 performance. A subset of these clients also have seasonally higher volumes in Q1 versus other quarters. We are pleased that we were able to get these clients live before Q1 to recognize the benefit. We similarly remained focused on client onboarding during Q1 and are happy with improving post-pandemic conditions that allow for increased face-to-face large client engagements. We expect these high-touch engagements during the first quarter will lay the groundwork for us to bring additional Q2 clients live in Q2, and we are off to a good start. During the quarter, we expanded our long-term relationship with Oracle by certifying with Oracle Cloud in addition to the on-prem solution. This allows Oracle CIS Cloud clients to easily integrate with our platform. We continue to see growth in our Oracle CIS client base. During the quarter, we also expanded our relationship with Guidewire, a software platform for more than 500 property and casualty insurers. As part of this, we have launched an integrated billing center app that is available to Guidewire customers and allows insurance companies to keep pace with rapidly evolving customer need for a streamlined payment and billing experience. We also completed and launched another implementation of our billing and payment platform for a large municipal utility, adding another state capital to our list of growing customers. Ranked as a top tier municipal utility in the nation, the city leaders identified three primary objectives for this project. First, to drive more on-time payments. Second, lower customer service costs And third, increase customer satisfaction by letting the city's customers pay how, when, and where they want with innovative payment methods and inclusive payment channels for their entire customer base. We upgraded the city with our platform to achieve all these objectives and position the city well for the future. Let me now touch base on implementation backlog and how it relates to our expected growth trajectory and ability to deliver expanded adjusted EBITDA margins in 2024. From where we sit today, with the strength of the implementation backlog exiting 2024, coupled with Q1 2023 performance, we have a lot of confidence in our ability to deliver growth in 2024. At the same time, our first quarter results also demonstrate our improving ability to deliver incremental adjusted EBITDA margins, and dollars to the bottom line. We believe all these factors leave us well-positioned to continue growing revenues and to expand profitability even further next year. In summary, I will reiterate what we said on the last call, on our last call, that we remain very confident regarding the long-term growth prospects of the business. This is especially true given the expanding IPN ecosystem we are building, which we believe allows us to reach a broader TAN and leverages the entire spectrum of interchange from a cost center in our biller business to interchange neutral and IPN business to interchange being a revenue source in our SMB offering and beyond. We are already off to a good start, as indicated by our first quarter results, and we look forward to updating you on our progress in future calls. Now let me turn it over to Sanjay to review our financial results in greater detail.

Thanks, Ashant. I'm very excited to be a part of Pimentas, and thank you all for joining us today. Before I discuss our quarterly results and outlook, I'd like to remind everyone that the financial results I'd be referring to include non-GAAP financial measures. As David mentioned earlier, our Q1 press release and earnings presentation includes reconciliations of non-GAAP financial measures to GAAP that are discussed on this call. Both of these are available on our website. Turning to slide five, for the first quarter of 2023, we delivered solid financial results that were above the top end of our guidance ranges. We believe these results demonstrate the strength of our business, which continues to perform well, despite macroeconomic challenges still at play. Our first quarter results included revenue of $148.3 million, contribution profit of $53.5 million, and adjusted EBITDA of $8.4 million. We continue to experience solid business momentum in the first quarter, which drove robust bookings. enabling us to exit the quarter with a solid backlog. Based on our strong quarterly performance and the positive market trends Dushant mentioned earlier, and our expectations for the remainder of 2023, we are modestly raising our full year 2023 revenue, contribution profit, and adjusted EBITDA guidance, which I'll talk about shortly. Now let's review our first quarter financials in more detail. As I mentioned, Q1 revenue was $148.3 million, up 27.1% year over year. This growth was largely driven by increased transactions from existing billers and launch of new billers and increased activity in our instant payment network or IPN business. Transactions grew to $108.5 million in the first quarter, up 23.4% year over year. First quarter 23 contribution profit increased to $53.5 million, up 13% year over year. Contribution margin was 36.1% for the first quarter, compared to 40.6% in the prior year period. Contribution profit per transaction for the quarter was $0.49, down from $0.54 in the prior year period. Contribution profit growth lagged revenue growth primarily due to continued inflation in the utility sector and biller mix with larger billers coming on board. As we've noted in the past, variables outside our control, such as an increase in the average payment amount or changes in the payment mix, can influence contribution profit on a quarterly basis. To offset some of the impact of continuing inflationary conditions, We are currently engaged in active repricing conversations with our customers and are encouraged by what we have already achieved to date. Adjusted gross profit was $43.7 million for the first quarter, up 16.9% year over year. Operating expenses increased to $41.1 million, a 13.4% increase year over year. The increase is primarily due to increased sales and marketing expenses as we continue to focus resources on our go-to-market strategy. During Q1 2023, we made a change to the employee merit and compensation cycle. In the previous years, raises were given on the employee's anniversary, more or less evenly distributed throughout the year. In 2023, all raises were effective from January 1, 2023. Adjusted EBITDA for the first quarter was 8.4 million or 15.7% of contribution profit, up 56.4% compared to 5.4 million or 11.4% of contribution profit in the prior year. This annual growth is a result of our repricing and continued expense management actions. I believe this also demonstrates the inherent operating leverage we have in the business and our ability to adapt to changing market conditions as we continue to grow. Other income was $1.4 million during the first quarter, reflecting increased interest income from our bank deposits and effective cash management. Non-GAAP net income was $2.9 million, or 2 cents per share, compared to non-GAAP net income of $3.7 million, or an EPS of 3 cents in the prior year, largely due to higher income tax benefit in the prior year. We now discuss our balance sheet and liquidity position. We ended Q1 with unrestricted cash of $143.6 million compared to $147.3 million at the end of 2022. The $3.7 million decrease is primarily comprised of $4.8 million of cash generated from operations, offset by $8.3 million cash used in investing activities. The company does not have any debt. Our day sales outstanding at the end of Q1 was 46 days, consistent with DSO at the end of 2022. Working capital at the end of Q1 was approximately 181 million, an increase of approximately 3.8 million from the end of 2022. We had 123.3 million shares outstanding at the end of Q1, compared to 123.2 million shares outstanding at the end of 2022. The marginal increase was due to wasting of employee restricted stock units. Now I share some brief observations since joining Paymentus as its CFO, then review our updated outlook for Q2 and the full year 2023. Since I joined the company two months ago, my initial focus has been on two main priorities. First, acquainting myself with everything Paymentus does. its business model and diverse operations, our strategy, meeting the entire team, learning as much as possible about what has transpired since the IPO, and second, doing a deep dive into the financials in order to gain a better understanding of our 2023 budget and 2024 financial goals. On the first point, now that I am more familiar with the inner workings of the company, I am even more amazed than I was originally by the expanding and compelling opportunities that I believe lie ahead for Pimentas. We are well positioned to capitalize on the attractive industry trends in the end markets that we serve. I'm also excited by the depth of talent and experience of my team members and look forward to working with them and contributing to Pimentas' future growth. As I now turn more attention to Pimentas' long-range financial model and targets, I'm also considering how we can best provide investors and analysts with greater color on the performance of our business. This includes evaluating our current KPIs and non-GAAP disclosures. While this process is still underway, one specific metric which has drawn my attention is exit backlog. I believe our new bookings in Q1 demonstrate the robust demand for our technology solutions, And our strong exit backlog gives us further confidence and visibility in the growth trajectory for the company. Now I'll turn to our non-GAAP guidance for Q2 23, beginning on slide six. In Q2 23, we expect revenues to be in the range of 142 to 148 million, representing 21% year-over-year growth at midpoint. Contribution profit to range from 54 to 56 million, which is 13% year-over-year growth at the midpoint. And adjusted EBITDA of $8 million to $9 million, representing a growth of 70% year-over-year at the midpoint. Given the progress we have already seen in Q1 and our expectation for the remainder of the year, for the full year 2023, on slide seven, we now expect Revenue in the range of 591 to 606 million, up 2% from the midpoint of our prior guidance. Contribution profit in the range of 225 to 237 million, also up modestly versus our prior guidance. And adjusted EBITDA to range from 34 to 38.5 million, representing a 3.6% increase at the midpoint versus our prior guidance. In summary, we had a strong first quarter where we continue to build on our solid momentum from 2022, which we have carried into 2023. As a result, we believe we have positioned ourselves well for the balance of 2023. Thank you everyone for your attention today, and now I'll turn it back to Dushant for final remarks before we open up the call for questions. Thanks, Sanjay.

In closing, based on our first quarter results and the strength of our backlog, We believe we are extremely well positioned for the balance of 2023 and into 2024. We also are laser focused on bringing more and more of these new customers live on our platform to continue to expand profitability and adjusted EBITDA margins. Our strategy remains simple and in this order. First, sign as many clients as possible to grow the network. This includes larger clients. Second, onboard those clients as quickly as possible and simultaneously deliver best-in-class service. And third, improve operating efficiencies and manage costs in order to drive margin expansion and bring more to the bottom line. I want to take this opportunity to thank each of my colleagues at Paymentus who work tirelessly to serve our clients. Thank you. That concludes our prepared remarks. I'll now open the line up for questions.

Absolutely. If you'd like to ask a question, please press star followed by one on your telephone keypad. To remove your question, press star followed by two. Again, to ask a question, it's star one. And if you're using a speakerphone, please remember to pick up your handset before asking your question. Our first question comes from John Davis with Raymond James. Please proceed.

Good afternoon, guys. Deshaun, you talked a lot about, you know, kind of the pricing changes that you were going to make headed into this year given inflation. Just curious how those conversations have gone, you know, in the unexpected attrition. Obviously, numbers were good, you know, good to see the increase in guide for the full year. But just curious how those conversations have gone with your customers as you've implemented pricing changes that you talked about late last year.

Hey, John. Thank you for the question. The conversations are going extremely well, actually. Clients are very understanding, and we're not the only ones who are talking to them about the challenges in their vendor network, if you will. So we are receiving positive feedback. Some of the conversations have resulted into actual meaningful pricing increases. which we will continue to deploy throughout the year. But one thing I do want to highlight to you and the rest of the analyst community and the investor base that as we are seeing the trend, what we are doing now is as an account management team or account management function, we are just including the pricing discussions as an ongoing framework. So we think that until then, inflation is completely behind us. we'll continue to have these discussions as we are seeing positive trends here.

Okay, I know that's helpful. And then just quickly on, I think when you set out the initial 2023 outlook, you assumed kind of no incremental new wins in the contribution profit outlook and even the outlook for the full year. You mentioned numerous wins here in the first quarter. So just Have you started to put those into the guide? Are you still excluding new wins from the guide? Just help us think about where the guide is today versus 90 days ago.

John, this is Sanjay. Thanks for the question. When we guided earlier versus when we are guiding now, the major increase we are seeing is based on the activity we have seen from the growth with the existing billers and also increased transactions. We did launch some big billers in Q4 last year. And we have seen a decent grow over from them as well, so all that's coming from that all the growth, I mean the increased growth in outlook is coming from these. These things we have seen, we have not been in any significant revenue from the new wins that remains the same what we said last time.

Okay, appreciate the color thanks guys.

Thank you for your question. Our next question comes from Dave Tony. We'll get there. Excuse me. Please proceed.

Yeah. Hey, guys. Thanks. And nice quarter. And maybe a couple questions. My first one, just implementations. I remember that was part of a little bit of the weakness kind of mid-year last year and through the end of last year. You talked about implementations being a little slower. Have those picked up? Are they according to plan? Are they actually maybe ahead of plan now? Or how are you seeing those?

Actually, David, that's a great question, and I was trying to allude to in my prepared remarks. The post-pandemic conditions is now actually helping us a little bit, especially in the large deals. That's where we saw more of the stretching of the implementation timelines. We are now able to see customers, first of all, both in the sales cycle, but also in the implementation phase as well. So those high-touch engagements are giving us a lot of confidence that we will be able to keep within the timelines we anticipate. So the implementation as a whole is actually on a better footing than we were last year.

Okay. Now that sounds great. And I guess my second question is a numbers question around the gap between gross and net revenue, really. It was reasonably small in Q4, I think a few percent gap. This quarter, it's about a 14% gap, right? Gross grew 27, net grew 13. And next quarter, you're guiding for that gap to be cut in half, basically. What are the dynamics? I understand the inflation impacts, but what are the dynamics of that gap kind of moving around?

Yeah, so great question. You know, the growth of revenue as 27 and the growth of contribution profit at 13 definitely brings a question. So Let me give some perspective around what we are seeing and what we expect to happen. First of all, both these are going to converge as time passes. We are seeing this as a temporary phase. And one of the reasons, as we said, is inflation we are seeing. And then, in fact, seasonality is a part of it as well. But we have also started adding, to some extent, larger billers in the mix. And what larger billers means is, you know, billers with heavy volume of transactions, you know, where the contribution margin on these are slightly lower than the corporate contribution margins. So it's giving a temporary impact where the contribution margins seem low. But as time passes and as we scale more, we expect this gap to converge. And overall, we should realize economies of scale, which should ultimately improve our contribution margin together with contribution profit dollars. In fact, if you look at what we delivered in Q1 and compared with the guidance of Q2 and the guidance for the full year, in all the three scenarios, you will see that this gap is already converging. And in the outer years, we expect this to converge even more. So we think it's temporary phase. And eventually, this will be behind us. And right now, it's a great opportunity for us to... to see how we can scale the business and eventually get a better contribution profit and margin in the long run.

Thanks, guys. Great job. Thank you. Just a quick point I would add to that is that even Q1 bookings give us a lot of encouragement in that regard as well. Yeah. Awesome. Thanks. Thank you so much.

Thank you for your question. Our next question comes from Jason Kupferberg with Bank of America. Please proceed.

Good afternoon, Dushant and Sanjay. This is Tyler Dupont on for Jason. Thanks for taking the questions. First, I just want to start by looking at the EBITDA margins. I mean, they came in pretty healthy this quarter. Can you maybe just speak to what in particular drove that upside surprise and sort of how we should be thinking about margins going through 2023 as well? Is it still the right idea to think about quarterly expansion on a year-on-year basis? And I guess going off that point as well, where are you anticipating the most margin efficiencies to come from throughout the year? Is it mostly G&A or any color there would be helpful?

Yeah, Jason, I'll say that, you know, when we guided, we were expecting close to 40% growth year-over-year, and we came at 56.7%. So we definitely are all very encouraged about the results. And the thing that Dushan pointed out, I will just – remind that. You know, the company's objective is to drop as much as possible the contribution profit dollars we generate to the bottom line. You know, there's a significant inherent operating leverage in the business. We don't really need to spend the money if the contribution profit is increasing. So I would say the increase is mainly coming from operating expenses not increasing in the same line or in the same ratio as the contribution profit is increasing. So overall, I think the operating leverage exists and in future where that will come will also be from the same. Right now we are putting some investments in Q2 in our sales and marketing and also in Q3 but over time we expect that the operating leverage would be more than what we see this year. In fact for the whole year you are seeing EBITDA up by 27% year over year at the midpoint and Q2 we are seeing good growth there as well. So we are encouraged by what we delivered and we believe that this growth is going to come And on the top line, just to mention as well, on the contribution profit line, the growth is coming from, it's mainly organic growth and increase in transactions from the existing builders. And we are also seeing traction on IPN as well, which we will talk more as it grows significant, but we are seeing good increases there as well. So I think everything is contributing in the right direction, helping us grow the EBITDA dollars.

Okay, that's helpful. Thank you for that. And then just curious as a follow-up on Booking's growth, it looks like you had a pretty robust increase in that as well as the number of transactions. But maybe if you could just spend a minute or two parsing out how much of that growth was from new versus existing clients, and if there's any vertical concentration that's worth mentioning. And then I guess also jumping from that as well, just sort of how we should think Paymentis is anticipating revenue conversion. Just curious if we should be thinking, like how we should be thinking about average conversion rates given the current macro backdrop.

I think we have not shared in the past the new versus existing. But you could actually, it is safe to assume that we work very hard towards the tail end of the year to bring as many customers live as possible to actually beat over 2022. Our top line guidance, which we did, and then also set ourselves up for 2023 as we exit the year with a healthy backlog. So we have done that. We're also seeing some same store sales, which Sanjaya alluded to earlier. So I think all of those are pointing in the right direction. In terms of the Conversion itself, I think we'll continue to take a look at whether we can start to share some of that information, the backlog, and how that converts over time. But I can tell you, as I said earlier, we are seeing positive trends in the implementation area in the overall business just because we are able to interact with our clients, especially the large ones, in the high-touch engagement that is needed. to bring them live.

Okay, great. Very helpful. Thanks, and congrats on the quarter.

Thank you.

Our next question comes from Andrew Essie, Oracle Spring Search. Please proceed.

Hey, guys. It's Andrew on for Darren. Just a few on the strategy side. Can you maybe talk about the Oracle CIS client base and the opportunity that exists within, especially with the updated implementation? And then with regards to the IPN, just remind us where you are with respect to executing on the third horizon of that strategy. Thanks.

Sure. Thank you, Andrew. In terms of Oracle, Oracle is a great partner, has been a great partner. We have been doing a lot of things together with them in the sense our Oracle customer base continues to grow. This cloud integration actually helps us where an Oracle Oracle CIS Cloud client would find it very easy to integrate with Paymentus through the certification or the integration we have achieved. So we are very excited about that. In terms of the IPN itself, look, IPN to us is a multi-dimensional strategy. First, on its own, you're trying to bring in, or we are trying to bring in the participants who have been left behind, if you will, through the platform we built for the billers. So what I mean by that is the banks and other fintechs who were left behind. They wanted to play in the bill payment space but just couldn't get in just because of the strength of the services you provide directly to the billers through our platform. So with IPN, now we are able to bring those in, and we are seeing tremendous progress there, a lot of interest in the market. But the second thing about IPN, which I think will become a lot more clear as we continue to execute our strategy, is a very efficient distribution model for us, or channel for us. We have banks as partners, we have fintechs as our partners, and we also have Dhanushka Samarakoon, Distribution to lot of businesses to our payment network and many of which could utilize our increasing functional footprint of receivable payment payables expense management and accounting and so on, especially in the SMB space. So we're very excited about that. And so far we're seeing great progress.

Dhanushka Samarakoon, Great. Thanks. Great quarter. Okay.

Thank you.

Our next question comes from JPMorgan. Please proceed.

Hey, thanks. Good afternoon. A lot of the good stuff I wanted to ask was asked already. I wanted to get a little bit more maybe, Deshaun, on the SMB push with the payables discussion you had last time as well. Just any surprises there in terms of momentum and sort of connect closer to the SMBs?

Yeah, thank you, Tenzin. Good question. I was smiling about the word surprises. We are seeing a lot of positive excitement about the product. And it's early stages and a lot of discussions early on and getting a lot of positive feedback, as well as from the SMBs themselves. Folks are using the product, giving us feedback. And we are seeing a lot of encouraging signs there. We believe that the whole SMB strategy and our strategy to build SMB in a way that all of that functionality is available for enterprise clients as well, especially those who use our receivable capabilities can now leverage payables and expense management and all of that that comes with it. I think gives us a lot of confidence that we are setting ourselves up for a great future ahead. So that's all I'm able to share right now, but we will share more as we see more progress.

Okay, great. Just my quick follow-up, just to expand or dig deeper into what's going on the bank partner side, given all the stresses in the banking system and all the turmoil, et cetera, have you noticed any change in terms of existing relationships or even prospective partners on the banking side?

Actually, some of our large bank partners, they're getting even stronger, so we are very excited about that. But in terms of the overall, our bank network, we are not seeing any negative change. We remain just as bullish as we were before. about the entire ecosystem of our platform, whether it's on the bank side or the credit union side or the biller side.

Great. Great. Thanks for the update. Thank you.

Our next question comes from Will New with Goldman Sachs. Please repeat.

Hey, guys. Appreciate you taking the question. I wanted to maybe follow up on some of the backlog commentary, Sanjay. It sounded like that was sort of what was catching your eye early on from kind of digging into some of the numbers. Wondering if there's any kind of quantification or perspective you can give us on kind of how the current level of backlog compares to maybe a year ago and how that might actually translate towards an acceleration of top line as we go into 2024.

Sanjay Gupta So we'll appreciate the question. You know, I am a little reluctant at this point to share the numbers. I'll be honest. I'm very excited about looking at the backlog and various other KPIs, which I'm still trying to understand that, you know, once we develop a good process around them, then I'll be happy to share them on a going forward basis. So that's why the number is not out yet. But I'm excited, and hence, at least qualitatively, I'm sharing that the backlog is very robust and our bookings are very solid as well. That gives us a lot of confidence in not only this year, but outer year's trajectory is pretty visible to me based on how the implementation goes, but we have a very strong backlog. That said, I can provide some comfort that how much it has grown year over year. Again, quantification is not something I like to go here, but I would say it's a significant increase year over year.

If I may add to that is that where we sit today and we are looking at where we want to be next year, based on how well we have executed against the implementation backlog to bring customers live, especially in the Q4 and then how hard we worked during Q1 to bring some of the customers live in Q2. Combine that with the backlog and the early success in Q1, we feel good about where we are relative to 2023 and 2024. And one of the things which I think I just want to highlight is that when we measure the backlog, we take out all of these same store sales uh from it so uh said differently let's say if i book a client for a million dollars in uh second half of 2022 and that client goes live uh in sometime in 2023 uh there is uh some tailwinds uh the digitization tailwinds that take place and then by the time uh over a period of time that customer continues to rise with us as well the same store sale so when you factor that in, it even becomes more impressive, especially with the size of the backlog. But we will take a look at, as Sanjay mentioned, what we could share as the time goes by.

Got it. Makes a lot of sense. Appreciate that. And then I guess as a follow-up question, When you guys think about EBITDA conversion over the next couple of years, obviously you've had a lot of investment priorities, whether it's the IPN, the small business platform, some of the acquisitions. But when we look at kind of CapEx and capitalized software, it is running around close to 100% of EBITDA. So just wondering how you're thinking about the level of the investment in the business, what the outlook is for that, and whether we could see you know, the very strong top line growth contribute towards, you know, more cash flow conversion as we get into 2024?

I think that I would say this is actually one of the key points you want to get across. And that was that we have always been a relatively profit profitability centric organization. Obviously, being public has some costs associated with it that challenge some of the profitability dimensions we had or the metrics we used to have, and then obviously the macro and so on. But one of the things we wanted to get across was that we have the ability to drop a lot of the top line and the contribution profit dollars to the EBITDA line. And we are already doing... a lot with our core biller business, save and accept the IPN and the SMB, some of those new initiative investments we are making. But we feel good about generating, dropping more to the cash line, if you will, in 2024, just because even as we are making the investments, we feel good about where we sit today with our current OPEX itself. Sanjay, you want to add something?

I'll just add that, you know, appreciate the question. You know, you see 8.4 million EBITDA, and then in the cash flow, you see 8.1 million software capex, and hence the question. But if you look at our cash flow statement, you know, even though the cash might have dropped by around 3.8 million in the quarter, but overall, our working capital has significantly increased. So a lot of cash is sitting in accounts receivable, which we plan to turn around in the next quarter. Next quarter, the cash should go up. That's the expectation. And while we don't guide for cash, but going forward, our planning for cash is, you know, either to stay neutral or maybe slightly negative, depending if the software development increases. But overall, all that investment is happening for future growth for the projects for which we don't see revenue yet. And that is basically going to drive, you know, more growth. And that's where all this investment is going. So that's outer years revenue growth. uh which which is invested today and i think we are on track in terms of uh managing cash well as cash as well for the whole year got it appreciate all the color thanks for taking my questions thank you bill thank you for your question there are no further questions waiting at this time so i will pass the conference back over to the management team for any closing remarks

Well, thank you, everyone. Thank you for being here with us today, and have a great day, and stay safe. Thank you all.

That concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.