Paymentus Holdings, Inc.

Good day and welcome to the first quarter 2026 Paymentus Earnings Conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. David Hanover, Investor Relations. Please go ahead.

Thank you, operator. Good afternoon. Welcome and thank you for joining the webcast to review our first quarter 2026 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, Dushant Sharma, will make some opening remarks before Sanjay Khara, our CFO, discusses the details of the first quarter and our guidance. Following our prepared remarks, we'll take questions. Let me just remind you that we will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and we 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 in our SEC filings that are available on both the SEC and our websites. Information about non-GAAP financials, including reconciliations to US GAAP, can also be found in our earnings materials that are available on the website. With that, I'd like to turn the webcast over to Dushan Sharma. Dushan?

Thanks, David. We had a tremendous start of 2026 with record revenue and a strong growth exceeding our CAGR model across all key metrics. We believe these results underscore the durability and long-term growth potential of our business model. That strength is driven by our platform, our ecosystem, our expertise and scale, our quality of service with support security, availability, and compliance frameworks, along with a broad and continuously evolving innovation framework. In addition to our very strong financial results, we also announced an important product launch today that we believe will transform how service providers interact with their customers. Today's agenda will proceed as follows. First, I'll provide a brief overview of our results. Sanjay will then provide a detailed financial review and discuss our outlook. And I'll then come back and discuss the strategic product announcement we have made today. We'll then answer any questions. Let me start with financial highlights as shown on slide three. First quarter revenue was a record, $358.4 million, an increase of 30.2% year over year. At the same time, contribution profit was $109.7 million, up 25.2% year over year. Adjusted EBITDA was a record $42.4 million in the quarter, representing 41.5% growth year over year and a 38.7% margin. Once again, a majority of our year-over-year growth in contribution profit fell to our bottom line. And we exceeded the rule of 40 for the quarter again, coming in at 64 versus 61 in Q4. This reflects our team's solid execution and our focus on delivering consistent revenue growth alongside high-quality earnings. These results are exciting for multiple reasons. Let me speak to two that will likely be on top of mind. First, they speak to the vertical diversification and our enhanced pricing strategy over the years, whereby the impact of elevated energy price index on our numbers has been materially reduced. As we have shared in the past, we operate on a two-fiscal year horizon. Therefore, this outperformance is not just about one quarter. It actually gives us confidence and additional visibility for the rest of the year, and then combined with our backlog and bookings, we are also feeling good about 2027 with our additional visibility. Now onto our business results on slide four. We continued our strong momentum in the first quarter with robust bookings and a very substantial pipeline. We also continued to expand and diversify our customer base by signing new clients in several industry verticals, including utilities, insurance, telecommunications, government agencies, property management, consumer finance, banking, education, and healthcare. Complementing this, we find channel partners in education and telecommunications of verticals. And likewise, onboarding of a substantial backlog remains a priority for us. Our team continues to demonstrate solid execution when it comes to onboarding activities. We also saw better than expected seasonal performance in the first quarter, largely from the large cohort of new customers that we added in the second half of last year. In addition, during the first quarter, we onboarded clients throughout multiple verticals, including utilities, consumer finance, government agencies, telecommunications, banking, insurance, and education. With that, I'll turn it over to Sanjay to review our financial results in more detail. Thanks, Vishal. And thank you all for joining us today. Before I discuss our first quarter results and outlook, I'd like to remind everyone that the financial results I'd be referring to include non-GAAP financial measures. Our Q1 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, we delivered a strong start to the year with the first quarter results that came in much stronger than we had anticipated, driven by a higher transaction activity from both new and existing builders. This helped drive strong double-digit growth for revenue, contribution profit, and adjusted EBITDA. This combined with our strong bookings, sizable backlog, and strong pipeline at quarter end supports our positive outlook for 2026. Our first quarter 2026 results included revenue of 358.4 million, contribution profit of 109.7 million, and adjusted EBITDA of 42.4 million. On a rule of 40 basis, we came in at 64, which we consider a solid result and a record for the company. We are encouraged by this achievement, especially given the macro backdrop we are operating in. I'd like to also call out that we saw a sequential acceleration in the year-over-year growth rate for the number of transactions, revenue, and contribution profit despite tough year-over-year comps and a challenging macroeconomic environment. Moreover, the sequential growth rate we saw for all of these three metrics in Q1 was greater than the sequential growth rate we saw during the same period last year. Simply put, Both our annual and sequential growth rates accelerated in Q1 2026, boosting our confidence for the full year 2026 outlook. I'll discuss the drivers of our outperformance and strong business momentum behind them shortly. These strong results also enabled us to once again exit the quarter with a much stronger cash position and gave us the flexibility to allocate capital with a continuous focus on longer-term growth. which also contributed to robust bookings. Now let's review our first quarter financials in more detail. As I mentioned earlier, first quarter 2026 revenue was $358.4 million, up 30.2% year over year. This growth was largely driven by the launch of new billers over the past year, as well as increased same-store sales from existing billers. We also processed a higher number of transactions during the first quarter, reaching $203.4 million, up 17.4% year-over-year. Our average revenue per transaction increased by approximately 11% to $1.76 in the first quarter, compared to $1.59 in the prior year period. Continuing our robust trend of double-digit annual growth rate of revenue per transaction over the past seven quarters. This was mainly due to the biller mix, or more specifically, the large enterprise billers that we launched during the second half of 2025 with higher average payment amounts. The first quarter guidance we previously provided did consider some of the anticipated upside from large enterprise accounts, but as you can see, it still exceeded our expectations. First quarter 2026 contribution profit increased 209.7 million up 25.2% year-over-year. This increase also reflected the launch of new billers and higher transactions from existing billers. Contribution margin was 30.6% for the first quarter compared to 31.8% in the prior year period. The year-over-year reduction reflects the increased mix of large, high-volume enterprise billers in our growing customer base. This change in contribution margin was largely offset by a year-over-year reduction in operating expense margin, which resulted in a record adjusted EBITDA margin of 38.7%. This is consistent with our continued focus on profitability. Contribution profit per transaction for the quarter was 54 cents, an improvement from 51 cents from prior year period, demonstrating our ability to expand market share without sacrificing comparable contribution profit per transaction. As we have noted before, variables that are outside of our control, such as an increase in average payment amount or changes in the payment mix, can affect contribution profit on a quarter-to-quarter basis. And therefore, we treat this as a secondary metric, while our gross revenue and adjusted EBITDA remain primary metrics for us. First quarter, 2026 adjusted gross profit was $92.4 million, up 27.3% year-over-year. and ahead of our contribution profit growth rate as we achieve operational economies of scale. As we anticipated, the first quarter 2026 non-GAAP operating expenses increased 16.3% year-over-year to $53 million. This increase was primarily due to higher sales and marketing expenses. You may notice our OPEX year-over-year growth rate increased this past quarter. This is a positive leading indicator for our business as it means we are aggressively converting our substantial pipeline to bookings. We expect to make similar investments throughout the year as we continue to execute our go-to-market strategy, calibrate operating expenses with contribution profit expansion, and deploy our growing cash balance to support further organic growth. These expectations are already incorporated into our guidance. which I'll review in more detail shortly. First quarter 2026 non-GAAP net income was 26.9 million, or 21 cents per share, compared to non-GAAP net income of 17.6 million, or 14 cents per share in the prior year period, reflecting an annual EPS growth rate of 50%. This EPS incorporates a non-GAAP tax rate of 25%, which is based on our current expectation of our long-term projected tax rate and is also reflected in our 2026 guidance. First quarter 2026 adjusted EBITDA increased 41.5% to 42.4 million compared to 30 million in the prior year period. Adjusted EBITDA also represented a record 38.7% of contribution profit, an annual improvement of 450 basis points compared to 34.2% in the prior year period. We believe the stronger adjusted EBITDA margin demonstrates the inherent operating leverage we have in the business. Please note, our incremental adjusted EBITDA margin was approximately 56%. Related to this, once again, we also exceeded the rule of 40 for the quarter, coming in at 64, a record. Now I'll discuss our balance sheet and liquidity position on slide six. We ended the first quarter with total cash and cash equivalents of 342.1 million compared to 324.5 million at the end of 2025. The 17.6 million sequential increase was primarily comprised of 30.5 million of cash generated from operations, partially offset by 9.4 million used in investing activities, primarily for capitalized software, and 3.3 million spent in net settlement of employee RSUs. The company does not have any debt. Pre-cash flow generated during the quarter was 20.9 million. This was primarily driven by strong adjusted EBITDA in the quarter, offset by investments in working capital, primarily in accounts receivables. Driving organic growth continues to be our primary focus. Having said that, our strong cash position enables us to maintain financial flexibility to keep room for working capital investments as we scale. In addition, our ample liquidity allows us to explore attractive M&A opportunities that may arise in order to expand our growth prospects. Our day sales outstanding at the end of the first quarter was 29. comparable to 28 days at the end of the prior quarter, and much better than our expected range. Working capital at the end of the first quarter was approximately 365.4 million, an increase of approximately 6.7% sequentially. We had 129.3 million value to share outstanding during the first quarter, pretty much comparable to the prior quarter. Now I'll turn to slide seven to discuss our second quarter and full year 2026 raised guidance for revenue, contribution, profit, and adjusted EBITDA. Before discussing full year guidance, I want to mention that we are continuing to follow the same prudent approach to guidance that we have followed for the past three years, which has proven to be successful for us. As shown on the slide, for Q2 26, We expect revenues in the range of $340 to $350 million, contribution profit in the range of $108 to $111 million, and adjusted EBITDA in the range of $38 to $40 million. On the rule of 40 basis for the second quarter of 2026, our guidance implies a range of 51 to 55. For the full year 2026, we now expect revenue in the range of 1.425 billion to 1.44 billion, an increase of 2.3% from midpoint of our previous guidance. This guidance now represents a 19.7% annual growth at midpoint and 20.4% annual growth at the high end. Contribution profit in the range of 450 to 457 million, up 1.5% from midpoint of our previous guidance, And now representing 17.4% annual growth at midpoint. And 18.3% annual growth at the high end. Adjusted EBITDA in the range of $165 to $172 million. Up 4% from midpoint of our previous guidance. And now representing 22.6% annual growth at the midpoint. And 25.2% annual growth at the high end. And a non-GAAP tax rate of 25%. On the rule of 40 basis, our guidance implies a range of 53 to 56 for the full year 2026. During our past few earning calls, we provided long-term growth targets for both revenue and adjusted EBITDA, our two primary financial metrics. We stated that our goal was to grow revenue at approximately 20% and grow adjusted EBITDA between 20 to 30%. The full year updated 2026 guidance range we have provided today reflects the expected achievement of these long-term targets. In summary, we are very pleased with our strong start to 2026, reflecting the continued momentum we've shown across the past several quarters. During this time, we have consistently demonstrated our ability to generate profitable growth. This enabled us to end the first quarter with a substantial backlog and pipeline. Given our solid footing and strong visibility, We continue to believe we are well positioned for further growth in 2026 and beyond. 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. After seeing the impact of our state-of-the-art platform and the ecosystem on the broader service economy, we find ourselves at an exciting juncture. similar to what we experienced at our inception. As we looked at the economy broadly, we realized that almost all investments in commerce have gone towards product or retail commerce, with a focus on how to sell more to customers and having them check out quickly. This product commerce paradigm is also retrofitted in service commerce, which, at its core is not transactional, but instead relational. This mismatched paradigm has left service commerce to lag behind as enterprises spend millions of dollars on a myriad of mismatched components and tools. At Paymentus, we realize that to truly solve the issue, we needed to bring about a paradigm shift with a full-stack purpose-built, AI-native platform with service-native components. Even before our IPO, employing our proactive thinking, we wanted to make sure that we not only build a platform with full-stack components, but also we incorporated AI, which we even knew then would become mainstream. Additionally, we also knew that we would need to seek patent protection on all major components, thereby creating a long-term moat and ecosystem. In line with all what I've just talked about, today we announced that we are establishing a new category, AI native service commerce, where every service interaction becomes intelligent, secure, and outcome driven. And as you can see from slide nine, there are three key gaps in service commerce. First, there is no native payment method that preserves the service provider customer relationship and identity. Second, static service and transactional documents must become intelligent and interactive. Third, there is a lack of intelligent orchestration across fragmented systems. To address all these three pain points, as you can see on slide 10, we have created a new paradigm called BILIO that has four key components, all of which have been patented. First is Bill Wallet. A purpose-built digital wallet designed specifically for bill and service payments. Unlike traditional retail wallets that store cards for one-time purchases, Bill Wallet establishes a persistent, secure relationship identity between the customer and service provider, linking accounts service relationships, and payment credentials into a unified layer. Bill Wallet is designed to reduce time to complete a payment by approximately 75% and to work across all dimensions, agentic, digital, social, physical, and vocal. Second, Billio, which transforms static bills invoices, and statements into intelligent, interactive experiences. Billio enables consumers to understand charges, resolve issues, and take actions directly within the document itself. And third, AI360, an AI-based integration orchestration and data intelligence framework that powers both Billio and BillWallet and enables systems to automatically interpret, connect, and operate across disparate data sources. AI360 also provides data visualization and business intelligence capabilities, replacing third-party BI tools. Fourth, all interactions are secured through paymentless as patented PCI compliant secure service framework. which we believe will ensure end-to-end protection, trust, and compliance across every single, every service interaction and payment flow. Putting this all in context, in the past we have mentioned the exciting opportunity to monetize interchange in the outer year, in the outer years. By design, the interchange cost we incur today is big and getting bigger as we scale. To us, that represents an incremental untapped 10 total addressable market. Additionally, we have also shared that with the advent of generative and agentic AI, the industry is predictably moving in our direction and has opened up opportunities far beyond bill payments with our existing and prospective clients, users of our platform, and in all of our current and prospective verticals. Let me discuss both in detail. Bill Wallet is an IPN-native wallet, purpose-built for bill payments and service commerce. As a result of Bill Wallet, a customer visiting the insurance company's website can complete their premium payment in seconds rather than minutes with their Bill Wallet ID. We believe that Bill Wallet will also significantly improve security and reduce fraud, whether the interaction takes place through an agent in a self-driven car, wearable technology, or any other traditional self-service or assistive channels. It's also intended to work well in a physical context. For example, at a government or utility walk-in center, a customer can pay their bill simply by providing the bill wallet ID. No card swipe, no manual entry, no POS terminals. This establishes a new paradigm for service commerce away from the retail commerce paradigm. We believe that this will result in a massive improvement in convenience, speed, and security, and also create a more direct link between service providers and their customers. As Bill Wallet scales in the next several years, we also intend for it to include native funding capabilities, enabling us to participate in interchange economics while increasing transaction frequency and depth of engagement for our clients. And Bill Wallet works in all aspects of the service economy, B2C and B2B. Let me now discuss early success. As you know, we reported that in December 2025, users on our platform numbered 53 million, which we believe represents approximately 40% of U.S. households and possibly businesses. Out of that customer base, we have made Bill Wallet available to a mere fraction of our end user base, but across various cities. Early Bill Wallet results are very impressive. Within a few quarters, we have already enrolled 100,000 users across more than 1,000 cities with a very high conversion rate, and no marketing is spent. I mean, not a single dollar of marketing from Paymentus. We believe that these results speak to the pervasive nature of our platform, the power of the network effect, and the ease of use unlocking an additional dimension to the durability and profitability of our longer-term growth algorithm. After seeing this early success, we are getting increasingly excited about exploring how Bill Wallet can be fully rolled out over the next several years. In addition, we recognized years ago that with the advent of AI, Actual service documents like policies, bills, invoices, and other transactional documents such as bank, credit card, loyalty, or mutual fund statements themselves must evolve to become more intelligent. As a result, we patented our technology called Billio that transforms traditional bills, invoices, and statements into AI-powered interactive experiences. With Billio, a utility customer can simply ask Billio, why is my water bill higher this month? Or a customer can interact with any other bill wallet and Billio-powered enabled service provider, such as a plumbing or HVAC service provider, and automatically schedule a visit and pay for it in advance based on rules set by the user. or a customer can interact with the Billio-powered mutual fund statement and ask why their portfolio returns are trending lower than the indexes. Billio is designed to answer, resolve, and execute, eliminating friction, driving faster payments, and reducing support costs for billers and other service providers. Billio is also a full-stack service commerce platform, and with the help of BillWallet, It has the potential to transform legacy websites into multimodal Billio sites, potentially ending the era of retail paradigm-based old school portals and replacing them with secure, interactive, and agentic Billio sites. Once a customer is recognized using Bill Wallet, the entire Billio-enabled website is hyper-personalized and the payment can be made, but more importantly, Many questions can be asked and answered whether the interaction is from your car, your personal agent, wearable technology, or any other traditional mainstream channels such as your computer or mobile phone. These are not just patents, but rather families of patents. All patent families referenced have granted patents in the U.S. and some international jurisdictions. With additional patent applications pending, in domestic and many major international markets. And as exciting as the depth and breadth of our further expanded moat is with our patent families, we want investors to know that this success is not an accident. We have a carefully crafted business strategy executed over the past several years emanating from our mindset that the proverbial technological puck will be at a specific place in the future, and we want to take full advantage of it. We believe this strategy will augment our already very strong growth algorithm, further helping Paymentus attain its goal of becoming a multi-billion dollar business and ensuring that our efforts are patent protected so that our customers, our partners, our employees, and of course our investors are able to enjoy the benefit of their trust in Paymentus. That concludes our prepared remarks. I'll now open up the line for questions.