Good day, and welcome to Paymentus' Second Quarter Earnings Call. This call is being recorded. All participants are currently in a listen-only mode. The floor will be open for your questions, following management's prepared remarks. [Operator Instructions] At this time, I would like to hand the call over to Paul Seamon, VP of Finance and Strategy for some introductory comments. Please go ahead.

Thank you. Good afternoon. And welcome to Paymentus' second quarter 2021 earnings call, our first as a public company. Joining me in the call today are Dushyant Sharma, our Founder and CEO; and Matt Parson, our CFO. Following our prepared remarks, we will take questions. Our press release was issued after close of market today, and it was posted on our website where this call is being simultaneously webcast. The webcast replay of this call will be available on our company website under the Investor Relations link, ir.paymentus.com. Statements made on this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements use words such as will, believe, expect, anticipate and similar phrases that denote future expectation or intent regarding our financial results, business strategies, impact from acquisitions and other matters. 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 caption Risk Factors. And our final perspective filed with the SEC on May 26, 2021. And our quarterly report on Form 10-Q for the quarter ended June 30, 2021, which we expect to file with the SEC on August 11, 2021, and elsewhere in our filings with the SEC. In addition, during today's call, we will discuss non-GAAP financial measures, specifically contribution profit, adjusted gross profit and adjusted EBITDA, our non-GAAP financial measures. These non-GAAP financial measures, which we believe are useful [Audio Dip] Paymentus’ performance and liquidity, should be considered in addition to, not as a substitute for or an isolation from GAAP results. We encourage you to review additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results. And our earnings press release issued today and available on the Investor Relations page of our website. With that, I'd like to turn the call over to Dushyant Sharma, our Founder and CEO.

Thank you, Paul, and thank you everyone for joining the call today. I'm very excited and it's my pleasure to talk to you for our first earnings call as a public company. I'd like to thank you for your support and trusting us with your capital. I'm also grateful for our clients and partners who put their faith in us every single day. I'd also like to thank each of my colleagues at Paymentus who work very hard to operate our 24/7 business and drive the execution of our strategy. We are very proud of you. Thank you. I'm very pleased with our second quarter results. The progress we have made on IPN, including the signing of definitive agreements to acquire Payveris and Finovera. That puts us at the heart of the bill payment ecosystem for financial institutions of all sizes. Before covering our second quarter highlights and talking more about each of these exciting items, I would like to provide a summary of our business for those who aren't familiar with Paymentus. I founded Paymentus to power the next-generation ecosystem for electronic payments by simplifying them for both consumers and dealers and with an eye to do the same for financial institutions and consumer platforms. We took a very deliberate approach [Audio Dip] strategy over the years in three different horizons. During the first horizon, we built an agent platform and targeted in middle market billers with it. In the second horizon, we moved up market and expanded the functionality of our product, with the recent introduction of our Instant Payments Network, we entered our third horizon, which allows us to put all the pieces in place to create a modern payment ecosystem. The IPN leverages our below network and extends it outside of those billers. To financial institutions,…

Thanks, Dushyant. Let me start by also adding my thanks to our shareholders, clients, partners, and employees. You all are the reason for the strong Q2 financial results that I have the privilege of sharing today. As a quick reminder, today's discussion includes non-GAAP financial measures. Please refer to the tables and our press release for reconciliation from non-GAAP items to the most directly comparable GAAP financial measure. Before I talk about the second quarter’s financial results and our outlook for 2021, let me remind you about our business model. As the [Technical Difficulty] get paid, when our clients get paid, so the key indicator to measure the performance of the business is the number of transactions processed. For the vast majority of our clients, transaction fees are the same, regardless of the payment amounts. For example, we would receive a $1.50 for a utility payment of $50 and the same $1.50 for a payment of $275. Interchange fees may vary by bill or industry and type of payment among other things, but in most cases, we have caps on interchange and payment amounts to help us manage the costs. These transaction fees can be paid by the biller, the consumer, or a combination of both and we generally do not charge for implementation or customization fees for our platform, so professional services revenue is minimal. Now turning to the quarter. We processed $64.2 million transactions, representing a year-over-year increase of approximately 39%. This transaction growth drove a 30.3% increase in revenue over the same period in 2020, which resulted in revenue of $93.5 million. As we've explained before, as we see larger – as we find larger and larger billers, we anticipate the mix shift of fees will continue. Contribution profit for Q2 was $37.4 million, a 24% increase…

Thank you, Matt. Look, overall, we are very pleased with the financial and strategic progress we have made this quarter, especially in the expansion of our IP and ecosystem, deeper into the financial institutions market. We continue to execute across our three horizon strategy and drive organic growth. With Payveris and Finovera, we’ll continue to accelerate the breadth of our IPN offering. We’ll now open the call to questions.

[Operator Instructions] The first question is from the line of Ashwin Shirvaikar with [indiscernible]. You may proceed.

Hey, thanks. It's Ashwin Shirvaikar from Citi.

Hi, Ashwin.

Hi, Ashwin.

Hi, Dushyant, Matt, Paul. Great results, congratulations on the results as well as on your first public call here. I was wondering if you could address on the quantitative standpoint sort of 3Q versus 4Q cadence? Matt, you’ve qualitatively addressed some elements of 3Q, but if you could talk about what to expect both from a top line perspective, as well as contribution perspective.

Yes, sure; happy to. Thanks for the question, Ashwin. So, as I said, and just to give a little more color on that, because of the semi-annual tax payments that we have, as well as the sometimes seeing cold winters, hot summers, Q1 and Q3 are typically higher average payment amounts versus Q2 and Q4. And so as a result of what I said in the prepared remarks, we would anticipate that, that will continue this year, that we'll see higher average payment amounts in Q3. And so from a contribution profit perspective, it would be more challenged than say Q3 or Q4 would be not bad, but definitely a more pressure on the contribution margin – contribution profit line items, simply because of the higher average payment amount in Q3. On a top line revenue basis, we continue to drive additional transactions. We're at - if you look at the number of transactions that we had in Q2, we're over a 250 million transaction run rate annualized for Q2. We certainly expect that goes to continue through some of the same-store sales items that Dushyant talked about, as well as additional implementations of new billers. One thing – one other thing I'll point out there is, we did see – if you look at the over performance on both the top line, as well as contribution profit, we had a couple of – on same-store sales, we saw some expansion faster than we had anticipated, as well as some implementations that went live a little bit earlier than we planned and modeled for. And so that's what drove our over – part of what drove overdues in Q2, that doesn't necessarily train to Q3 and Q4, because we just kind of pulled the counting forward on some of those things. And so it doesn't necessarily translate into overdues in Q3 and Q4, because we'll still have that revenue in those periods. But hopefully that gives you some flavor and certainly happy to go into any more detail you need there.

No, understood, got that. And then the second question if I could. The two acquisitions, if you can talk a little bit about the financial contribution into the outlook and especially to Finovera, if you could kind of talk about maybe a better drill down into the 15,000 billers, do these give you – I mean, actually utilities, credit cards, wireless, all listed, but is there a particular end market that you didn't have before, that it gives you a good step up into?

Great, thanks. I'll take the first part and then I'll pass it over to Dushyant on the second part. So we are not breaking out any of the financial specifics of the acquisitions, neither of them are super material to our overall position, as we said, we're going to – we expect to close them by the end of Q3. So we'd really only be talking about Q4 impact for this year, and it's not material to our full year results, what we expect to see. It's really about – and don't get me wrong, they've got some nice business and nice customers, but we're really excited about the strategic aspect and what this drives for our business going forward. And so with that, I'll it over to Dushyant to talk a little bit more about that piece?

Sure. Ashwin from our perspective, we declined build a modern age ecosystem for bill payments and the main thing these acquisitions ask for us, number one, it started with Payveris. We got 100s of financial institutions on our platform. We are able to reach all the banks we didn't have before, not only from the perspective of originating the payments to our IPN, but also each of these banks and credit unions could potentially be a direct bill on our platform. In case of Finovera, Finovera is actually a company that has built a technology platform that aggregates bill data for all major billers, on most major billers in the country that includes credit cards, that include banks, large telecommunication companies and so on utility et cetera. And what this gives us is basically an ability to capture the bit of data for the customers, the billers we don't have, while we are in the process of prioritizing a sales process to reach out to those billers and onboard them on our platform. So I’d say in some ways there is a network effect where you're trying to monetize the transactions for the billers you don't have while you're in the process of trying to encourage those billers to move to our direct platform. Does it makes sense?

Yes. That makes sense. Thank you. Good. Thanks Matt. Appreciate it.

Okay, thanks Ashwin.

Thank you, Mr. Shirvaikar. The next question comes from the line of David Koning with Baird. You may proceed.

Yes. Hey guys, a great job.

Thank you.

Thank you, David.

Yes, sure. And so I guess my first question, just think about the growth is obviously tremendous in terms of number of transactions. Can you just kind of remind us how to think about like, how much is just from new signings and then how much is kind of existing client growth. When we just look at the 39% transaction growth and maybe how do we see that over the next couple of years?

Yes. Great question. And so none of that is really for new signings in the sense that if you recall, our business model provides very good short and medium term visibility and so for us, we've got the timing of sale with the customer and then we have the implementation timeframe and that can take anywhere from a few months to a year, depending on the size and the complexity of the customer. And so we've got a lot of visibility of what comes out in the short and medium term. And so when we see the results of the transaction growth in Q2, it's almost extensively driven by same-store sales expansion and implementation go live with customers that were already contracted several months earlier and in the implementation pipeline. I’ll turn it over to Dushyant to talk a little bit about our sales performance in the quarter but that really is contributing to where we go next year. If you think about the remainder of this year, pretty much any growth that we see is gong to be coming out of the implementation of pipeline and same-store sales growth. But Dushyant, you want to talk about our sales performance a little bit?

Yes. By the way, we had a great quarter from a sales performance standpoint, I’m very pleased that we are on target for the year. And as Matt said, the results of that sales performance, you will see in coming quarters as opposed to immediately next quarter, as we bring that volume up on our platform and get those customers live but very good performance from a sales perspective.

And I'll just – sorry, I should've said this the first time I spoke, but the thing I would add just slightly to that too, is what I said. It was in part a response to Ashwin’s question, a contributor to the almost 40% transaction growth that we saw in the quarter was really some of the items as far as same-store sales, as well as implementations happening sooner than we had kind of modeled the not anticipated, which is great. Our implementation team is doing a great job. Our customers are excited about working with us. And so we've been able to move up in the current quarter that doesn't necessarily mean we'll continue, every implementation is different, but we had a great result this quarter and being able to get customers live.

Great. Thanks. And maybe just a quick follow-up, it looks like, so in the first half of the year, EBITDA – adjusted EBITDA was $17 million, $18 million or so. And it looks like full year, you're guiding the 25 to 28, which would mean maybe 10 in the back half, why is the back half lower? Is that just IPO costs and just sales efforts and all that stuff, Just maybe walk through that.

Yes. Absolutely. So that's one, it’s a variety of things. One is in Q1 we did not have a public company calls. We had some legal fees and accounting fees starting to flow through, but the bulk of those hit in Q2 along with D&O insurance, et cetera. Then so that's one, continue to operate as a public company. We also – we think that obviously depends on what happens with Delta variant, et cetera. But we do think that there will be some pickup in travel and conferences happening as we get later in the year back to normal, if you will, on that. And we continue to look to hire folks and continue to drive hiring as we're very excited about the opportunity. And then I think the last thing is in particular in Q4, the results of the two acquisitions certainly have an impact on what we think is going to happen on EBITDA for this year.

Got you. Thanks. Great job.

Thank you.

Thanks Dave.

Thank you, Mr. Koning. The next question is from the line of Tien-Tsin Huang with JP Morgan. You may proceed.

Thanks so much. Good afternoon, congrats on the IPO on the first call and the great results. A lot of my questions asked, but I want to ask Dushyant on Payveris just, is there any way to maybe frame how many users or deposit accounts they currently power or have access to amongst the universe and just that the game plan to speed some of these banks, on to IPN now that you own this, is there an expedited way to move them on. And the last question, just the direct biller opportunity for these banks, any idea on how many bills these banks might represent overall, sorry to ask several, but mostly around just the opportunity around Payveris.

Yes. First of all, thank you so much for the kind words, Tien-Tsin. We're not discussing numbers at this point, but I think we can talk to the strategic side of it that as you can imagine, these are when you combine hundreds of financial institutions that includes credit unions and banks of different sizes. You have a decent scale and the capability they have built in terms of a full-service platform for banks for all money movement feeds from fill payments to P2P to A2A. We feel that actually helps us get to other cohort of banks rather quickly. Now we continue to hear the feedback from the banks whether of all sizes, including some of the largest banks that the legacy mainframe based systems they've had [Audio Dip] from suppliers they’ve had, they haven't delivered the innovative aspects they're looking for. We believe the IPN combined with some of the technologies we have acquired here allows us to get after that market rapidly. And in terms of the direct biller opportunity, each of these financial institutions is actually sizeable in terms of the number of payments that receive in the come out. So it's not insignificant. So we feel very good about it.

Yes, sounds like a great way to get a one to many model onto the banks. Thanks for your thoughts.

Thank you.

Thank you, Mr. Huang. There are no additional questions waiting at this time. I would like to pass it back to the management team for any closing remarks.

Well, thank you so much for taking the time. And it was a pleasure to walk you through our results and performance for the second quarter. We would like to wish you all the very best to you and your families, and please stay safe. Thank you.

Thank you all for joining today's Paymentus second quarter earnings call. I hope you all enjoy the rest of your day.