Paymentus Holdings, Inc.

This call is being recorded. All participants are currently in a listen-only mode. There will be an opportunity to ask questions following management's prepared remarks. At this time, I will now turn the call over to David Hanover, Investor Relations. Please go ahead.

Thank you, operator. Good afternoon. Welcome and thank you for joining the webcast to review our third quarter 2025 results. Our earnings release documents are available on the investor relations section of the Paymentus.com website. They include the earnings presentation that we'll make reference to during this webcast. This webcast is being recorded. I hope everyone's had a chance to review those documents. Our founder and CEO, Dushan Sharma, will make some opening comments before Sanjay Khara, our CFO, discusses the details of the third quarter and our guidance. All in our prepared remarks, we'll take questions. I remind you, that we may make forward-looking statements within the meeting of the Private Securities Litigation Reform Act of 1995 and refer to non-GAAP financial measures during the webcast. Forward-looking statements are based on management's current expectations and assumptions that are subject to risks and uncertainties. Factors that may cause our actual results to differ materially from expectations are detailed in our earnings materials and our SEC filings that are available both on the SEC and our websites. Information about non-GAAP financial measures, including reconciliation to U.S. GAAP, can also be found in our earnings materials that are available on the website. With that, I'd like to turn the call over to Dushon Sharma. Dushon?

DUSHON SHARMA Thanks, David. I'm excited to report that Paymentos delivered another strong quarter with the results exceeding our expectations in all key areas of our business and delivering exceptional year-over-year growth. This outperformance is especially satisfying given the backdrop of our strong performance in the third quarter of last year. In addition, we had a phenomenal quarter of onboarding activities, and we ended the quarter with substantial bookings and a strong backlog, giving us visibility and further confidence, not only for the balance of 2025, but also for 2026. As I mentioned in the past, this high level of visibility enables our management team to focus on creating long-term shareholder value by combining innovation with our steadfast execution. We believe this quarter's results are a great illustration of how we are still able to manage and calibrate our business to meet or exceed our long-term CAGR model of 20 percent top-line growth and 20 to 30 percent adjusted EBITDA dollar growth, despite variability of secondary metrics from quarter to quarter. For example, during the third quarter, as our customer mix is shifting more towards enterprise and larger mid-market clients, our revenue and contribution profit per transaction grows significantly. This also helps demonstrate our vertical expansion strategy that led to higher incremental revenue and contribution profit per transaction. And when you combine this with the tremendous operating leverage we enjoined the business. In Q3, we were able to achieve a strong top line growth and a record quarterly adjusted EBITDA margin, along with an incremental adjusted EBITDA margin nexus of 60%. Related to this, it's also important to remember that we remain in market capture mode. As we increase our market penetration and enter new verticals, because we see a tremendous opportunity to gain share in what is an enormous TAM. We also find ourselves in a very fortunate situation where some of the trends in the industry that we were anticipating are actually coming together. For example, we recently onboarded a large B2B client, and this B2B use case is in a vertical that was new to us. On our platform, they're performing very well. Even though it is early in the full year cycle, we are already seeing significant outperformance beyond our internal modeling. Our go-to-market strategy of being vertical agnostic matched by our vertical agnostic platform engineering is proving to be very sound. Likewise, our approach of supporting bidirectional payment rails is also proving to be a good decision and is delivering results. Our clients are choosing us for outbound payments in addition to implementing us as a central nervous system for revenue receipts. Therefore, this opens up further TAM for paymenters with existing and prospective clients. And as I've also shared previously, even the AI and agent in commerce progress is moving the industry in our direction. The platform capabilities we have been building over the years are going to catalyze even further opportunities for time expansion in existing and prospective client base in coming years. Another exciting and high potential area of our business is the opportunity to monetize interchange in outer years. Interchange cost we incur today is big and is getting bigger as we scale. To us, that represents an incremental untapped total addressable market, and a powerful level to drive meaningful adjusted EBITDA and EPS expansion in outer years. In other words, as I look ahead at the next five years, we are feeling great about the foundation we have built and continue to build for an exciting future. With that, let's review our third quarter results. Revenue was $310.7 billion. an increase of 34.2% year over year, largely driven by increased number of billers and higher transaction values. Contribution profit was $98.3 million, up 22.8% year over year. Adjusted EBITDA, which continues to be a primary financial metric for us, was $35.9 million, a 45.9% year-over-year increase and representing a record 36.5% adjusted EBITDA margin. Once again, the majority of our year-over-year growth in contribution profit fell to our bottom line. Also, we exceeded the rule of 40 for the quarter, coming in at 59. This reflects our team's solid execution and our focus on delivering high-quality earnings together with sustained revenue growth. Now I'll review our third quarter business highlights and accomplishments. Regarding bookings, we continue to be pleased with the pace of bookings we have achieved year to date. Similar to previous quarters, in Q3, we once again saw particular strength in the large enterprise and larger end of mid-market segment. is spread across a broad vertical base. We also continue to show the diversity and wide appeal of our platform by signing clients in several industry verticals, including insurance, government agencies, utilities, telecom, property management, consumer finance, banking, credit unions, and educational institutions, among others. Complementing our direct go-to-market strategy during the quarter, we continued to leverage our partnership ecosystem. This quarter, we added new general partners to our portfolio, including government agencies, telecommunications, and property management industries. At the same time, during the quarter, we onboarded several large enterprises. Onboarding our substantial backlog remains a key priority for us, and our onboarding enhancements incremental investments, as well as improving face-to-face client engagement are driving these successful efforts. In the third quarter, we onboarded clients throughout multiple verticals, including insurance, government agencies, utilities, banking, credit unions, telecommunications, financial services, property management, education, and healthcare. Now, let me turn it over to Sanjay to review our financial results in greater detail.

Thanks, Asham, 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 Q3 press release and earnings presentation includes reconciliations of these non-GAAP financial measures to their corresponding GAAP measures. Both of these are available on our website. Turning to slide five, Building on our momentum in the first half of the year, our third quarter 2025 results once again exceeded the top end of our guidance range for all three of our key financial metrics. These results continue to highlight the overall strength of our business model and our team's proven ability to consistently meet and exceed our expectations. Our third quarter results included revenue of $310.7 million up 34.2% year-over-year, contribution profit of 98.3 million, up 22.8%, and adjusted EBITDA of 35.9 million, up 45.9%. We also continue to experience strong customer activity and demand, which fuels bookings and allowed us to exit the quarter with a considerable backlog. Based on our year-to-date results, our expectations for the remainder of 2025 and strong forward visibility. We are once again raising our full year 2025 revenue, contribution profit, and adjusted EBITDA guidance, which I'll discuss in more detail shortly. Now let's review our third quarter financials in more detail. As mentioned, Q3 revenue was 310.7 million, a 34.2% increase. This growth was driven by four key factors. First, the successful launch of new billers as anticipated. Second, increased same-store sales from existing billers. Third, the early launch of several large enterprise customers during the third quarter of 2025, which we had originally expected to launch in early 2026. These early launches were a result of our continued focus and improvement in implementation pace, due mainly to our team's hard work and strong client engagement And fourth, higher activity on our Instant Payment Network, or IPN. Additionally, the number of transactions we process increased to 182.3 million this quarter, up 17.4% year-over-year. Our average price per transaction increased to $1.70 during the third quarter, up from $1.49 in the same period last year. This 14.1% increase was mainly due to the biller mix and the launch of new billers in the quarter. Third quarter 2025 contribution profit increased to 98.3 million, up 22.8% year over year. This growth exceeded the transaction growth as the new billers launched in the quarter generated a higher contribution profit per transaction. Contribution profit per transaction for the quarter was 54 cents, a 3.8% improvement from 52 cents in the prior year period. We believe this highlights our ability to capture market share with improving overall profitability. Contribution margin was 31.6% for the third quarter, a 2.9% reduction compared to 34.5% in the prior year period, reflecting the continued addition of large, high volume enterprise customers. In spite of that, we generated record adjusted EBITDA margins of 36.5% as both our contribution profit per transaction and operating expense margin year over year improved by 3.8% and 3.6% respectively. Furthermore, our improved contribution profit per transaction together with our strong operating leverage also generated a record incremental adjusted EBITDA margin of 61.7%. These results are consistent with our overall growth strategy focusing on profitability, which I will elaborate on shortly. As we continue to grow and diversify our client base and add more of these large clients to the mix, we expect pricing and contribution profit to vary quarter to quarter. It's important to note These larger clients are paying a similar or even increased average selling prices than they are accustomed to with other providers. We believe they value the quality of our services and the solutions we provide, which ultimately saves them money and enables them to provide better services to their customers. Given the growth areas Dushant highlighted earlier, we believe longer term, the growth rates of both revenue and contribution profit will converge to a closer range, also taking into account the inherent operating leverage we have in our business model. As we have discussed in the past, variables that are outside our control, such as an increase in the average payment amount or changes in the payment mix, can substantially affect the contribution profit on a quarter-to-quarter basis. That is why we treat this as a secondary metric, while our gross revenue and adjusted EBITDA remain primary metrics and focus areas on how we drive our business strategies. Moving down to P&L, third quarter adjusted gross profit was $81.1 million, up 22.5% year over year. Third quarter non-GAAP operating expenses were relatively flat on a sequential basis, and increased 8.6% year-over-year to $48.1 million. The increase was primarily due to increased hiring and agency fees for business from our resellers and partners in order to convert our strong pipeline into bookings and an increase in the research and development expenses to enhance our technical strengths. We expect to make similar investments throughout the remainder of the year as we continue to execute our go-to-market strategy. These assumptions are already incorporated into our guidance, which I'll review shortly. This year-over-year expense increase was consistent with our expectations. Third quarter non-GAAP net income was $22.6 million, or 17 cents per share, compared to non-GAAP net income of $14.7 million, or 12 cents per share, in the prior year period. Third quarter adjusted EBITDA was $35.9 million, up 45.9% compared to 24.6 million in the prior year period. Adjusted EBITDA also represented 36.5% of contribution profit for the quarter compared to 30.7% last year. This record adjusted EBITDA performance was driven by the same combination of positive factors I talked about earlier. We believe the stronger adjusted EBITDA margin demonstrates the inherent operating leverage we have in the business and our proven ability to adapt to changing market conditions as we continue to grow. As I mentioned previously, record incremental adjusted EBITDA margin was 61.7% in the quarter. Interest income from our bank deposits was $2.6 million during the third quarter, compared to $2.3 million in the prior year period. This year-over-year improvement was a result of an increased average cash balance and effective cash management. Related to our performance, we once again exceeded the rule of 40 for the quarter, coming in at 59 compared to 56 last quarter and 61 in the prior year period. This marks our 10th consecutive quarter exceeding the rule of 40. Now I'll discuss our balance sheet and liquidity on slide six. We ended the third quarter of 2025 with a total cash of $291.5 million, compared to $270 million at the end of last quarter. The $21.5 million increase is primarily comprised of $35.1 million of cash generated from operations, offset by $10.1 million used in the investing activities, primarily for capitalized software, and $3.4 million spent in the net settlement of employee RSUs. Our daily sales outstanding at the end of third quarter was 31 days, consistent with last quarter. It is noteworthy that while revenues have increased 34.2% this year, our DSO has remained flat sequentially and declined by approximately 30% year over year, which we believe implies that our working capital cycle, which is already operating efficiently, has further improved. Working capital at the end of third quarter was approximately 321.4 million, an increase of approximately 8.1% from the end of the second quarter. We had 129.2 million diluted shares outstanding during the third quarter, essentially flat from 129 million diluted shares outstanding during the second quarter. Now I turn to our non-GAAP guidance for the fourth quarter and full year 2025 on slide seven. Before discussing guidance, I want to mention that we are continuing to follow the same prudent approach to guidance that we have followed over the past two plus years. For the fourth quarter 2025, we expect revenues to be in the range of 307 to 312 million, representing 20% year-over-year growth at the midpoint and 21% at the high end. Contribution profit to range from 99 to 101 million, which represents 16% year-over-year growth at the midpoint, and 17.2% at the high end. Adjusted EBITDA of $34 to $36 million, representing growth of 28.2% year-over-year at the midpoint and 31.9% at the high end. This represents a 35% margin at the midpoint and 35.6% margin at the high end. As a reminder, our fourth quarter guidance is raised from the implied guidance we gave during our last earnings call by approximately $17 million on revenue and $3 million each on contribution profit and adjusted EBITDA. Along with our guidance, I also want to reiterate some items I have noted on past calls related to our outlook for contribution profit growth rates and adjusted EBITDA margins. As our business grows, we are receiving greater inbound interest from larger enterprise customers. Not surprisingly, these customers often request volume discounts, which we are open to where the deal economics support it. Additionally, our substantial operating leverage allows us to attract and book these larger customers. Said differently, volume discounts for large customers are typically more than offset by strong incremental adjusted EBITDA, as we saw in the third quarter. This increases our efficiency as our onboarding time per biller is declining, while our average customer size is simultaneously increasing. Furthermore, we have the ability to recalibrate OPEX spending relative to contribution profit in order to reach a desired adjusted EBITDA. For reference, our incremental adjusted EBITDA margin for the third quarter 2025 was 61.7% relative to adjusted EBITDA margin of 36.5%. Based on our results and progress we have already made year to date in 2025, and our expectations for the remainder of the year, for the full year 2025, we now expect revenues in the range of 1.173 billion to 1.178 billion, up 4.3% from the midpoint of our previous guidance. The updated guidance now represents 34.9 percent annual growth at the midpoint. Contribution profit in the range of 378 million to 380 million, up 2.2 percent at midpoint versus prior guidance. This updated guidance now represents 21.5 percent annual growth at the midpoint. Adjusted EBITDA to range from 132 million to $134 million representing a 6.4% increase at the midpoint versus our previous guidance. The updated guidance now represents a 41.2% annual growth at the midpoint. This represents a 35.1% marginal contribution profit at midpoint and improvement from 30.2% in the prior year. On the rule of 40 scale, this annual guidance implies a score in the range of 56 to 57. In closing, we reported another quarter of excellent results despite a tough comparable. In the third quarter 2025, we continue to build on our solid momentum from the first half of the year, resulting in strong revenue, record adjusted EBITDA, solid bookings, and a sizable backlog. Due to all of this, we have considerable visibility and believe we are well positioned for the rest of 2025 as well as for 2026. 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 summary, our third quarter was another period where we achieved results that exceeded our expectations, including a strong, durable revenue and adjusted EBITDA growth, despite a tough year-over-year comp. We exited the quarter with a strong bookings and backlog with gives us great visibility and confidence in our outlook not only for the rest of 2025 but we are also feeling good about our prospects for 2026 and beyond as i shared earlier when we factor in our current scale of install base of 2000 plus clients including some of the household names tens of millions of users including businesses who pay their bills using our platform Our innovative DNA, along with our ever-growing platform footprint and ecosystem, we feel good about our long-term moat, especially as we champion the change of capitalizing conversion of legacy infrastructure, both in-house and outsourced, to paymentless. With that, I want to thank our entire team for all their efforts and dedication to our success. That concludes our prepared remarks. I'll now open the line up for questions.

At this time, if you'd like to ask a question, it is star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, it is star followed by 2. Again, to ask a question, it is star 1. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking a question. I'll pause briefly here as questions are registered. Our first question comes from John Davis with the company Raymond James. John, your line is now open.

Good afternoon, guys. Deshaun, I wanted to start with the comments around onboarding a new B2B customer in a new vertical. Obviously, the B2B market's huge. Just some context about how this relationship and kind of ultimate signing developed. Do you have many more B2B opportunities in the pipe? And just maybe some broader comments about that opportunity for Paymentus.

Yeah, I think... Thank you, John. So... B2B is a functional area we had developed some time ago on our platform. And as you have shared in the past, we support a lot of complex workflows for a lot of clients. And all of our clients, almost all of our clients who are on our business, they serve consumers as well as businesses. So by default, almost every business we have on our platform, we are receiving payments from both of those cohorts. With B2B specifically, we felt that if we can extend the capability and add some more workflows to our platform, this could be very attractive just for the B2B segment specifically. Those clients are only dealing with B2B. And this is one of many other opportunities we have on our platform. This one specifically was in a vertical we were not targeting, but the client showed interest in our platform. And the reason I wanted to highlight this was that this is exactly the reason why we are taking a very horizontal approach to our platform, the way we have engineered, that we are able to get into different verticals by just having great storytellers who can explain the simplicity that can be gained by moving to our platform. So this is a sizable opportunity. And as we onboarded them on our platform, one of the trends we started to see was that the customers were using more of the services than even we were anticipating. And now it's even a larger client than we were thinking about. So we are excited about this opportunity and we feel like that we can do better in that vertical as well and actually methodically target that as opposed to sporadically. So that's where the excitement is coming in as well. So in some ways, my point was that the way we had designed our platform and the strategy, but also the thoughts we had or the vision we had about our business and where the industry will go, that rather than very niche-y, if you will, it will start to move towards the horizontal platforms is coming to fruition.

Okay, great. And this is a follow-up. Sanjay, I appreciate your comments around volume discounts. But I think one of the most surprising things to me is you've clearly having success moving up market, moving in new verticals. And yes, that comes with higher card mix, higher kind of gross revenue per transaction. But what's more interesting is even contribution profit per transaction is up, I think about 4% year over year, despite moving up market. Just want to understand what's driving that, or maybe you move in some you know, verticals that maybe have a little bit better pricing as you kind of mix away from utilities? Or, you know, are you adding kind of more bells and whistles, products and services that are driving a higher kind of contribution profit per transaction? Just would love to get some more commentary on that.

Thanks, John. This is a very interesting question. We are very excited about the contribution profit per transaction getting up higher year over year, around 3.8%. The biggest reason, if I have to point out, number one, is our platform. The value of our platform is resonating. The success which we have had while marching upwards on a market share gain every year, that's resonating really well. And resonating well not only with the verticals where we really have a strong success, like utilities, for example. And as you know, utilities is 50% of our revenue. But all the other verticals. we are now taking the step into a higher level, or I would say a different level or different segment of customers within those verticals. And that's giving us an edge of better pricing, and we are fortunate enough to generate better contribution profit as well. And as you rightly pointed out, the revenue per transaction could be higher, but it also depends on the interchange cost or the mix of the card payments for the new customers we acquire. And that's one of the reasons for variability quarter over quarter. But at the same time, contribution profit per transaction growing up actually indicates that the new implementations which went live in the third quarter were at a materially higher contribution profit per transaction. And that is a great encouragement for our team, for our sales team who are marching on the path to convert the large pipeline we have in front of us to convert the bookings. And as you know, once you get, as Dushant pointed out, we have some household names as well. You have one, then you have second, and then when you have the second, you have third and fourth and so on. And we are seeing that kind of traction and success in almost every vertical where we are penetrating. So we are very proud of the accomplishment on contribution profit per transaction. And in the end, the answer is the value of our platform is just resonating with everyone. We go and demonstrate our product.

Okay, I appreciate all the color. Thanks, guys. Thank you.

Our next question comes from with the company JP Morgan. Tim, your line is now open.

Hi, thank you. Great results. I want to ask around visibility, if that's okay. Just your visibility today looking ahead to next year, how would you compare it to the same time last year when you were looking ahead? If I recall, there were a lot of questions around enterprise and how those were board and flow through and payment mix. Do you feel like your visibility is better and now is it different?

Thanks for the question. We find ourselves in the exact situation at this time of this year as we were last year, same time. So visibility is very high. We've got a great backlog in front of us, which our implementation team is busy executing. We've got a great pipeline in front of us, which our sales team is busy converting to bookings. And what we have also seen is the past implementations in the last four quarters, which we have delivered, the kind of the quality customers we are having now, they themselves are growing. And that's helping us achieve a better execution or better growth i.e., the good same-store sales we are seeing. So overall, in all directions, the trends have been very positive. Our visibility is very high. At the same time, if I just may digress into, we are not guiding at this time for 2026, but at the same time, I understand there might be a desire to understand how should we model the next year. I would say to model the next year, it will be reasonable to use the similar growth rates at midpoint and high end what we gave during the initial guidance we gave for 2025 using 24 basis, you could use the same midpoint of 25 we gave and apply similar growth rates at midpoint and high end. I think that will be a similar approach and will be reasonable, which kind of indicates the visibility we have for our business and the growth prospects.

Perfect. Thanks for sharing that. That's very reasonable. Great. So let me ask on just my quick follow-up, just on the enterprise pipeline. Both of you expressed that as being very strong. Any change in the type of or who you might be replacing and what systems the incumbent might be looking to be replaced by with Fomentas? I'm just curious if there's any shift in pattern there. Thank you. So who are you replacing potentially with these deals? Thank you, Deshaun.

Thank you, Tingen. Actually, what's driving a lot of excitement for us is that there was a time we thought that, and all of us in the industry thought, including all the legacy providers, that there is some segment of the market which is totally out of reach just because they're too large. And the reason for that was This cohort of clients, they are looking for, number one, they're looking for control, and they also are looking for very specific bespoke configurations and workflows, which they believe that only they can develop. It's not easy to develop on a third-party platform. And I would say the third would be the scale. As Paymentus has started to reach a decent size scale, if I may say it that way, and we are a billion-dollar company at this point, and generating cash, we're a profitable company, strong balance sheet. All of those things are important to a large company, combined with the fact that These clients are able to take a look at, previously we used to sit in some ways the opposite side of the table to their technology leadership team, CIOs, CTOs, who now think of us as a partner in solving key business issues related to payment and customer experiences. So from that perspective, that cohort is very exciting to us because some of these in-house solutions are are now finding a great home in Paymentus. Number one, they believe that this is the type of platform they cannot build themselves, regardless of how many floors of programmers they have. On top of that, the type of business configurations and the business rules and the complexity they desire for our platform to be able to configure, we already do support. Third, the type of control they're looking for we have built our platform with those capabilities as well. So as a result, that cohort is actually very exciting, along with, I would say, the legacy service provider. There's no specific one who we are targeting. Our goal is how do we modernize whatever is out there? And we are getting into clients where they have combination of many solutions, some of them in-house and some of them from third parties, in many cases, multiple.

Got it. Thank you so much. Well done. Thank you.

At this time, if you'd like to ask a question, it is star followed by 1 on your telephone keypad. Again, it is star 1 on your telephone keypad. Our next question comes from Craig Maurer with the company FT Partners. Craig, your line is now open.

Yeah, hi, thanks for taking the question. You listed four key factors earlier in the call that drove the increase in revenue. Can you provide perhaps some sizing in terms of the impact each of these had, and do you expect these benefits to continue into fourth quarter and perhaps early parts of next year? Thanks.

Yeah, we don't generally provide a quantitative breakup of the four factors. Historically, we haven't done. what we can do is we can help you prioritize. And they were listed in the order of priority, I would say. The first one was successful launch of new billers. That's the largest component of the growth. And the second component of growth comes from the same store sales. And third component is the early launch of large enterprise customers during the third quarter. And fourth is our IPN network, which is doing really well. So in these... these four categories would be the ones and in the order of priority, I would say. And to your second part of the question, yes, we expect all these four to continue in Q4 as well as in the outer year, also in 2026. And these four are actually our growth vectors since the past few quarters, and they have been performing really well. And all four of them have done well quarter over quarter as well as sequentially. There could be times when seasonality plays a role and a second factor may become third or the third may become fourth. But overall, that has been our trend, and we are glad it's continuing in the same way, and we feel very good about it.

Okay. Thank you very much. Thank you.

Our next question comes from John Davis with the company Raymond James. John, your line is now open.

Hey, Nishant and Sanjay, just one quick follow-up. It looks like free cash flow conversion of a trailing four quarters is a little over 140%. Sanjay, maybe just the sustainability of that and what's driving that pretty incredible free cash flow conversion over the last year.

Yeah, thanks, John. Cash flow has been really the strength of the business, and it actually stems from the fact that our incremental adjusted EBITDA margin is very high. And that's just a reflection of that in our cash flows. And you're right, in the last four quarters, it has been more than 100% cumulatively. We are very glad that in Q3 itself, it came very similar to what we saw in Q2. So the one way to, like how to forecast it going forward will be, if you exclude the working capital piece, which could be plus or minus a couple of million dollars a quarter, and which is always temporary, as you know, if it goes in, it comes out in a couple of quarters, So if you exclude the working capital, I can give you a model on how to forecast over cash flows. You can start with adjusted EBITDA dollars, adjust that for income taxes. We have provided 25% non-GAAP tax rate for taxes. And then adjust that for interest income. That's approximately $2.5 million a quarter or $3 million a quarter, depending on the interest rates. And adjust that for the GAAP software expense, which is approximately trending at $9 million a quarter as well. So using those trends, you can expect the free cash flow and maybe you make your model of free cash flow more accurate than using a percentage of the last four quarters. And overall, we expect free cash flow to be generated every quarter. And overall, for the whole last year, if we go back 12 months, we have generated 100 million plus cash in the last four quarters. So we feel very good. It's a cash-rich business. And it stems from the fact that operating leverage on the business is very high and majority of the contribution profit dollars fall to the bottom line. And at the same time, I would say one key factor, which has held in the last few quarters, I would say at least last two quarters is our improvement of DSO, which has given us more cash. We are getting very high quality billers or customers in our customer base. They're not a lot of follow-ups are needed, but the invoice and the cash comes in on time. So that's one more advantage we are seeing of our business running not only smoothly in terms of revenues and profitability, but also getting the quality of the customers, which helps improve our balance sheet and gives us the ability to have significant cash, which opens a lot of opportunities for us to make right investments for the investors. So we feel very good about the free cash flow generation, and I think that's one of the strengths of our company today.

Okay. Appreciate all the color. Thanks, guys.

Thank you. Next question comes from romance with the company Goldman Sachs. Will your line is that open?

Hey, thanks for taking the question. Uh, just one here on, uh, the topic of agentic commerce. You know, I know a lot of the value profit payments is around, uh, revolves around kind of meeting the consumer where they're at, when they're ready to, when they're ready to make that payment and making it as easy as possible. off of the agent that commerce has been getting a lot of, uh, a lot of attention from investors recently. Uh, I know you guys have always been close to the brain tree and PayPal. They've got this new partnership with open AI. So just wondering how you guys are thinking about just the technical hurdles of, you know, making it easier for consumers to pay their bills potentially in a more agentic way. And just, you know, where you think that, where are you on the roadmap and how long do you think that extends? So it sort of hits the market and it's a reality for consumers.

Thank you for the question, Bill. I think we have been, AI has been a big piece of our strategy for many years and we have been actually working towards this day in some ways. And part of the commentary in my prepared remarks was around the very same point that We find ourselves in a very fortunate situation that we believe that this day will come and we are preparing the company for it, making a lot of investments towards that model. And I think we will play a big role in AI and agent tech world in not only in bill payments, but overall service commerce. And what I mean by service commerce is taking this opportunity to just explain that. If you think about retail commerce, which is getting highly commoditized, as you can see, where everyone is focused on trying to get the checkout as quickly as possible so that the sale is made, the service world is very different. The work actually starts after a sale is made. Imagine a scenario where a utility gets a customer or the insurance company gets a customer. The work starts after that. So getting the customer is the beginning of the relationship, but then the pursuit is to never lose that customer, continue to provide good quality service to the customer, being responsive to the customer, being always improving or removing all the unwieldy processes in such a way that you can actually service those customers at a high quality without incurring a lot of cost. All of those things actually come together in a way that we believe that Paymentus will play and actually is uniquely positioned to play a big and central role in creating in some way the paradigm shift in the world of service commerce using bill payment platform we have already created, which is actually designed to be a service commerce platform. In the long run, in coming years, you will see increasing adoption of our platform in broader workflows, and agentic service commerce will be a key part of it. So that's all I could share right now, but we'll talk more about it in subsequent quarters.

Awesome. Appreciate you taking the question. Nice results.

Thank you.

At this time, I'd like to pass the conference back over to Deshaunt for closing remarks.

Well, thank you so much, everyone. Really appreciate your time. Have a great day. Thank you. Thank you. Bye-bye.

That will conclude today's conference call. Thank you for your participation, and enjoy the rest of your day.