Good day and welcome to the Fourth Quarter and Full Year 2025 Paymentus Earnings Conference Call. This call is being recorded. [Operator Instructions]. 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 fourth quarter and full year 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, Dushyant Sharma, will make some opening comments before Sanjay Kalra, our CFO, discusses the details of the fourth quarter and full year and our guidance. Following our prepared remarks, we'll take questions. Let me just remind you that we may 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 our SEC filings that are available on both the SEC and our websites. Information about non-GAAP financial measures, including reconciliations 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 webcast over to Dushyant Sharma. Dushyant?

Thanks, David. We had a phenomenal fourth quarter and full year 2025. We are looking forward to a great 2026 and feeling even better about our business beyond that based on the durability of our growth algorithm and the broad spectrum of our innovation framework. Now that we have been public for about 5 years, I will provide additional color on how we are feeling about the next 5. 2025 was a significant milestone year for us, where for the first time, we delivered top line revenue exceeding $1 billion. I think that's particularly inspiring because if you recall, we exited 2023 with just over $600 million of top line revenue. And if you look back just 5 years ago to our IPO, we had a little over $300 million of revenue for 2020. So that would imply 100% revenue growth over 3 years. And if you then put our 2025 top line of $1.2 billion against our 2023 revenue, that's another instance of 100% revenue growth, but this time in just 2 years. This was done despite the backdrop of unprecedented inflation and other macroeconomic factors. In other words, we have quadrupled -- quadrupled of our business in the last 5 years, far ahead of our long-term CAGR model of 20% top line growth. And if I go back 10 years, we have grown the business 25x. The reason I'm sharing this context is because I believe this type of growth is possible due to our innovative DNA and thoughtful execution of a long-term business strategy. In the process of achieving this scale and strategic position, I want to point out the level of disruption already caused by Paymentus to the status quo of legacy infrastructure through our ever-growing innovation footprint. At our inception, the vast majority of all…

Thanks, Dushyant, and thank you all for joining us today. Before I discuss our quarterly and full year 2025 results as well as our outlook for 2026, I'd like to remind everyone that the financial results I'll be referring to include non-GAAP financial measures. Turning to Slide 5. We ended 2025 with fourth quarter and full year results that again surpassed the top end of our guidance range across our key financial metrics. Our fourth quarter results included record revenue of $330.5 million, up 28.1% year-over-year. Contribution profit of $106.9 million, up 24%, and adjusted EBITDA of $39.9 million, up 46.3%. On the Rule of 40 basis, for Q4, we came in at 61%. During the quarter, we also continued to experience strong customer activity and demand, consistent with what we experienced throughout 2025. This solid momentum drove strong bookings and we exited the year with a significant backlog and strong free cash flow generation to support our continued growth strategies in 2026. Now let's review our fourth quarter financials in more detail. As mentioned earlier, fourth quarter revenue grew 28.1% year-over-year to $330.5 million. This higher-than-anticipated growth was driven by 2 key factors: first, the successful launch of new billers. The fourth quarter was the first full quarter where we realized the benefits from large enterprise customers that launched in the prior quarter. And second, increased same-store sales from existing billers. In the fourth quarter, we derived more revenue from these newly launched large enterprise customers with higher average payment amounts, contributing to higher revenues. While our original fourth quarter guidance did contain some upside, we took a prudent approach because it was still a bit early to gauge the precise magnitude of this beneficial effect. As you can see, it was quite substantial. Complementing this, in the fourth…

Thanks, Sanjay. In closing, we ended 2025 with another quarter of outsized performance that exceeded our expectations. We ended the year with a substantial backlog, giving us considerable visibility as we look forward to 2026 and beyond. In addition to our results, I remain confident in Paymentus continued success due to a number of factors, including our strong business model, which has repeatedly shown our ability to meet or exceed our long-term CAGR model of 20% top line growth and 20% to 30% adjusted EBITDA dollar growth. Our unique and ever-growing technology footprint and our ecosystem, our large, diversified and growing customer base, and the vast nondiscretionary and is still relatively untapped bill payment market that we serve. With that, I want to recognize and thank all of my team at Paymentus who have helped to make all of our success possible. That concludes our prepared remarks. I'll now open up the line for questions.

[Operator Instructions] The first question comes from the line of Madison Suhr with Raymond James.

I just wanted to start at a high level around AI, given the market dynamics. Can you just touch on where you see potential opportunity for AI, but then also where you see potential risks related to AI.

Thank you, Madison. Great question, by the way. And I think given all what's transpiring in the market, I think it's good to talk about it. We feel great about what AI represents for Paymentus. We actually believe if we are going to be the ultimate beneficiary of the AI revolution in some ways, in our space anyway. The key factors are very simple. Our business is designed -- our business model is designed in a way where we offer a world-class platform to our clients, which handles all their security compliance 24/7 state-of-the-art necessity of being a central nervous system for revenue collection for our clients where they are putting very high premium on making sure that they are not trying to save pennies to lose dollars. And we provide all this platform at no cost to our clients. On top of that, right from the very beginning, we also -- our -- we designed our business model in some ways for this day actually, where a client can use the entire -- use the entirety of our platform and get the full benefit of it in their existing infrastructure as it is present today aligning Paymentus' platform to their entire existing workflows in a way that they don't have to change anything on their end, the entirety of the work is done at Paymentus, and we don't charge anything for it. So in some ways, since a company doesn't have any revenues associated with software or software components, there's no hourly income we are generating from our clients, we are only getting paid for consumption of our platform, we feel very good about where this is headed. In fact, in some ways, we believe the world is moving more towards us, where the old-school software and SaaS models…

Okay. That's awesome. I appreciate all the details there. Just a quick follow-up on numbers. The 2026 guide implies an incremental margin of just over 40% at the midpoint. You guys just said 61% in the quarter, 58% for the year. Totally appreciate the conservative outlook. But just anything to call out in terms of incremental investments? Or why you think incremental margins would kind of decelerate from here?

So Madison, I'll point out 2 things. Number one, in Q3, we launched large enterprise customers, and we had experience of half a quarter approximately for Q3 and full quarter for Q4. We have kind of 1.5 quarters of experience with these large billers, and we follow a prudent approach that not to make the same run rate for 1.5 quarters for the next full year. We want to see seasonality. We want to see how the trends move. We really need an experience for 4 full quarters before we can bake into our guidance and forecast properly. And as you know, from historical trends, we don't count eggs before they hatch. So we need proper experience. Hence, our guidance is prudent. At the same time, at the high end, which we have guided today that can be achieved without booking any new customer. I understand your question is mainly on the incremental adjusted EBITDA margins, we also are factoring in decent operating expense for sales and marketing at this point in time because the opportunity in front of us is massive. The pipeline is massive for us. We are diversifying into more verticals than we were. In fact, there are a couple more new verticals, which we have not named it yet, but we have seen an entry into that in this quarter. So we want to expand our horizons there as well and see how more, how quickly we can scale. We are already disrupting the market at a very decent pace. In fact, achieving 37.3% growth annually in top line, despite of improving margins. I think that's remarkable. But we want to see if we can continue this trend. So on the guidance side, we remain prudent. Although at the same time, we have raised the guidance from what we proactively provided in the previous call, especially on adjusted EBITDA margin. But we stay grounded when it comes to guidance. Second thing I said was operating expense, we are also prudent in planning for more because we want to expand our horizons on a few other vertical. Otherwise, we remain committed to deliver great results and maintain the momentum of what our trends indicate.

Next question comes from the line of Darrin Peller with Wolfe Research.

Congrats on the good year. I guess I want to follow up for a minute on guidance because I know you always try to be somewhat conservative around it just the way you -- the nature of your guide. But just given the recurring revenue nature of your business and the magnitude of how much you see every exiting the year, especially on the bookings front, I'd love to hear a little bit more on just where you've embedded some conservatism? Is it around transaction growth, enterprise ramp timing perhaps or payment mix or margin and then obviously, on the other side of that, what would need to go right operationally or commercially for you to outperform the guidance as the year progresses. We'll just start there, and then I have a follow-up on the enterprise side, if that's okay.

Yes, Darrin. So it entails a lot of things. I would say it's a confluence of multiple factors on why we are prudent and why we feel bullish at the same time on how the business is. I'll start with bookings. The bookings are very good. In fact, the composition of bookings is more intriguing to us because we are diversifying into multiple verticals. That is helpful. At the same time, the pipeline is also very big. And you already know we operate in a very large TAM. And we have around 4.3% market share at the end of 2025. So a pretty small share and a large market to capture and the pace at which we are, I think things are looking very good. The visibility is very high. But we remain grounded as I said to earlier question from Madison. But at the same time, I think delivering good results is our goal. And at the end of the day, the free cash flow generation we have, which we have seen especially in the last quarter and last year has given us a further boost to stay grounded and execute, and that's where this confidence is coming from.

Okay. Understood. Can I follow up on -- in the past, you've outlined, I think it's really about 4 different growth vectors. When we think about new biller launches, same-store sales, enterprise, go-lives and then the IPN. Could you just maybe rank order the contributors you're seeing this quarter? And then which of those do you expect to be the primary drivers going forward to '26, especially those that you exited the year with the most momentum around?

Yes. So new implementations is generally the largest vector and will continue to remain the same. I would say the second vector would be same-store sales, which actually is doing really well. And in fact, as we have launched the new large enterprise billers since past few quarters, we are analyzing their trends as well. And that also the same-store sales continues to be very strong. And early implementations is one thing which could provide an upside. At the same time, any new customer bookings if they happen. And if they get long, the timing works in a way, that could provide an upside. But at the same time, IPN continues to be a strong vector as well. We have actually done really well in the past few years on IPN, and that also is a very important vector. So upsides could are possible, but we keep fingers crossed, and we don't count the egg before the hatch, as I said.

Next question comes from the line of Tien-Tsin Huang with JPMorgan.

Great results. Just following up on Darrin's question with same-store sales, maybe on the penetration side. I'm curious how much more room is there left for say, AutoPay amongst your larger billers that are in the -- more in the back book than the recent additions. It sounds like there's still a lot more to go, but I just wanted to get an update there.

Yes. Actually, thank you, Tien-Tsin, for the question. We see tremendous opportunity there. In fact, as we have shared publicly, we could more than double our business in our existing customer base and it's still not be done 100%. There's a lot of opportunities still left. So same-store sales remains a big focus for us, continued adoption. So if you think about it from the way to look at it is, we have only recognized 4.3% of the revenues from the customers we have -- of the total TAM, but there is a lot more TAM to be captured even in our existing customer base as we go from here. So that, combined with all of the open opportunities and the wide open market as the way we think of it. And frankly, in some ways, the ever growing TAM based on all the areas you're expanding into, it gives us a lot of confidence that our best is very much ahead of us.

Great. And just my follow-up, just on the -- I know I always ask about the pipeline, but I'm just curious about where that stands today versus this time last year. I know large enterprise has been a big contributor to growth. How does that look today versus last year when you qualify the pipeline?

We're feeling great. Pipeline is looking great. Backlog is strong. I think all of the aspects you would want to see in a business which is doing well and growing and it's all moving in the right direction. We are feeling great.

The next question comes from the line of Will Nance with Goldman Sachs.

I wanted to follow up on a couple of comments you made around the large enterprise billers. I think at several points, you talked about that being one of the drivers between the increased revenue per transaction. And I was hoping you could unpack that. I think when most people think about more enterprise in that market, they think about kind of revenue compression. But I think the way you're characterizing it, you're speaking more about, I don't know, higher -- larger transaction sizes, driving higher revenues. So I was wondering if you could maybe unpack that a bit. What is driving that? What verticals are maybe contributing to the growth that's causing the average transaction sizes to increase? And just how do you think about the mix shift embedded in kind of outlook or pipelines today from like a vertical perspective?

Yes. Well, I'll start with -- we are -- we feel really good about how the revenue per transaction is trending, achieving an 11% growth year-over-year is very interesting to us. And actually, that's reflective of the disruption we are causing in the marketplace by increasing our market share and gaining large enterprise customers. Some of them are household names. The average price per transaction for some of them is actually high, as you alluded to in your question, and that's also contributing to increase in revenue price -- revenue per transaction. And that's boiling down to contribution profit also per transaction, which, as you noted, that's also improved year-over-year by 5.8%. So all headed in the right direction. In terms of breakup, it's many verticals, I would say, definitely, utilities is our backbone. Utilities is there. Insurance is there. So there are a few verticals, which actually, in a combination get to this revenue per transaction improvement.

Got it. That's helpful. And just maybe following up on the AI discussion. I think you did a nice job addressing some of the concerns out there from a software perspective. Just from a payments perspective, I was hoping you could talk a little bit about how you guys see agentic payments. It would seem that bill pay could be a good candidate for more agentic transactions over time. They're fairly low risk. They're highly recurring in nature. So just how have you guys engaged with the Googles, the Stripes and the other kind of sponsorships of sort of agentic protocols? And how do you -- how far off do you think we are from seeing more agentic penetration in the bill pay space?

I think we see agentic AI playing a big role in bill payments for all the reasons you talked about. Our approach is going to be very much customer-centric. It will be about innovating around customer experience and providing customers a totally unique and differentiated experience using the help of AI. So we'll have more to come more to say on that later on. But I think we -- the key message I could just simply provide here is our approach is not frankly, brochure wear or press releases or putting a bunch of stuff on the website for the name sake. Our approach has always been very substantive improvements to customer experience and value creation there by improving the customer experience itself and through innovation. So we feel -- we believe bill payments, representing a majority of a typical household spend will be a big factor when it comes to improving the lives of customers and frankly, even businesses as well. As I shared in my opening remarks, we serve tens of millions of -- a big portion of actually, a substantial portion of U.S. households and businesses, they're already interacting on our platform. So it's top of our mind, and we will -- we are making progress in that area. We'll talk more about that in the future.

Next question comes from the line of Craig Maurer with FT Partners.

Just a quick modeling question. OpEx was a little higher than we had expected, and you mentioned that was consistent with spending to convert the pipeline. So I was just hoping you could help us with thinking about cadence for the year. in terms of how you expect that spending to progress through '26?

Sure, Craig. I would say if you look at the trends of the past quarters, say, '24 and '25. And I think using that particular trend will be useful to draw a line, if you want kind of the quarterly trend, I'm understanding for 2026, how does the OpEx grow from Q1 to Q4, I think if you make a gradual improvement over the quarters, that would be reasonable. We definitely always analyze how the pipeline is at any end of -- particular end of the month and where we want to deploy the resources of sales and marketing. So that could fluctuate, but that kind of fluctuation, I think, is reasonable. But at this point in time, at the beginning of the year, it's fair to use the past trends to analyze the quarterly growth.

There are currently no questions registered. [Operator Instructions] There are no further questions waiting at this time. I would now like to pass the conference back for any closing remarks.

Well, thank you, everyone. I appreciate your time. Have a great day.

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