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.