Sign in

You're signed outSign in or to get full access.

AH

AvidXchange Holdings, Inc. (AVDX)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 revenue rose 21.6% year over year to $105.6M, with GAAP gross margin expanding to 65.5% and non-GAAP gross margin to 72.4%; adjusted EBITDA increased to $17.7M, reflecting yield expansion, transaction growth, and unit cost reductions .
  • Management raised FY24 guidance: revenue to $442–$448M (from $441–$447M) and adjusted EBITDA to $71–$75M (from $67–$71M); float (interest) revenue assumption increased to ~$45M (from ~$44M) .
  • On the call, management cited 11 consecutive quarters of internal outperformance, AI-driven operational automation (IVR) driving 2x bot and 10x human productivity, and early traction in ERP partnerships (AppFolio, M3) to support 2025+ growth .
  • Street estimates: S&P Global consensus was unavailable via our tool this run; however, management indicated Q1 revenue was “about $3M” ahead of consensus, with caution embedded in the FY guide given macro transaction volume choppiness .

What Went Well and What Went Wrong

  • What Went Well

    • Revenue +21.6% YoY to $105.6M; adjusted EBITDA surged to $17.7M, aided by software and payment yield expansion and lower unit costs .
    • Non-GAAP gross margin reached 72.4%, crossing the lower band of the 72–75% target range ahead of 2025 expectations; management emphasized ongoing unit cost initiatives and yield expansion .
    • Strategic progress: AppFolio integration went live (addressable base ~19k customers), M3 hospitality partnership broadened (Accounting Core integration slated 2H24), positioning for 2025 contribution .
    • Quote: “11 consecutive quarters of surpassing internal expectations… resulting in strong growth, gross margin and adjusted EBITDA margin performance.” — CEO Michael Praeger .

  • What Went Wrong

    • Macro headwinds continue to suppress discretionary transaction volumes; top-of-funnel lagged in several verticals (HOA management, construction, financial services) due to a deliberate shift away from lower-yielding trade shows in Q1 .
    • Float outperformance in Q1 (customer balance timing) increased FY float assumption slightly; management still anticipates potential rate cuts in the back half, adding uncertainty to float revenue cadence .
    • Implied near-term cadence is cautious: guidance suggests Q2 revenue roughly flat sequentially given prudence around macro and float variability .

Financial Results

MetricQ3 2023Q4 2023Q1 2024
Revenue ($M)$98.68 $104.06 $105.60
GAAP Net Income (Loss) ($M)$(8.09) $(4.47) $(1.01)
GAAP EPS (Basic & Diluted)$(0.04) $(0.02) $(0.00)
GAAP Gross Margin (%)63.2% 64.6% 65.5%
Non-GAAP Gross Margin (%)70.0% 71.4% 72.4%
Adjusted EBITDA ($M)$11.42 $15.60 $17.67
Non-GAAP Net Income ($M)$5.76 $9.37 $11.26

Segment detail (Q1 2024):

SegmentQ1 2024 Revenue ($M)Mix of TotalNotes
Software$29.7 28.1% Driven by transaction growth and subscription components
Payments$75.2 71.2% Includes interest revenue contribution of $13.1M

Key KPIs:

KPIQ3 2023Q4 2023Q1 2024
Total Transactions (M)19.2 19.1 19.3
Total Payment Volume ($B)$19.6 $19.9 $19.9
Transaction Yield ($/txn)$5.15 $5.45 $5.47

Additional items:

  • Interest revenue contribution included in payments: $13.1M (Q1 2024) .
  • Cash and marketable securities of ~$443.6M (corporate cash) vs total debt ~$75.8M; balance sheet supports reinvestment and optionality .
  • Non-recurring items in Q1 included ~$1.157M restructuring and ~$0.179M cyber incident response costs (in Adjusted EBITDA reconciliation) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2024$441–$447M $442–$448M Narrow raise
Adjusted EBITDAFY 2024$67–$71M $71–$75M Raised
Interest Revenue from Customer Funds (Float)FY 2024~$44M (implied prior) ~$45M Raised
Political Media Revenue (FastPay)FY 2024Not disclosed~$9M (first presidential cycle) New disclosure

Management also indicated a 1H/2H revenue split of ~47%/53% for FY24, reflecting modest back-half weighting and cautious posture on macro and float cadence .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’23 and Q4’23)Current Period (Q1’24)Trend
Yield ExpansionQ3: Yield up 12.7% YoY; raised FY23 guide . Q4: Yield expansion and unit cost drove margin; EBITDA inflected ex-float/political .Transaction yield $5.47, +14.9% YoY; continued software/pay yield expansion .Improving, sustained focus
Gross Margin TrajectoryQ3: Non-GAAP GM 70.0% . Q4: Non-GAAP GM 71.4% .Non-GAAP GM 72.4%, crossing 72–75% target lower band ahead of 2025 expectations .Up and ahead of plan
Macro/VolumesQ3/Q4: Macro headwinds; cautious on discretionary spend .Continued suppression in discretionary transaction volumes; guidance prudence maintained .Persistent headwind
AI/AutomationQ3/Q4: Ongoing unit cost initiatives highlighted .New AI-powered IVR automation: 2x prior bot productivity, >10x human; expands e-pay penetration, esp. small-dollar .Accelerating deployment
ERP/PartnershipsQ3: AppFolio announced; large TAM access . Q4: Partnerships emphasized (AppFolio/M3) .AppFolio go-live (GA to ~19k customers), M3 expansion (Accounting Core 2H24); opportunity pipeline up .Building, 2025+ revenue
Supplier Financing (Payment Accelerator)Limited prior detail.Next-gen product metered launch; frictionless onboarding, auto-funding; targeted for meaningful 2025+ revenue .Early, promising
Political Revenue (FastPay)Midterms 2022 ~$8.5M .FY24 presidential-cycle estimate ~$9M; back-half weighted .Seasonal tailwind H2’24

Management Commentary

  • Strategy and execution: “11 consecutive quarters of financial outperformance… result[ing] in strong growth, gross margin and adjusted EBITDA margin performance.” — CEO Michael Praeger .
  • Margin progress: “Non-GAAP gross margins… 72.4% and crossing the lower band on the 72% to 75%… ahead of our 2025… expectations.” — CEO .
  • AI-driven efficiency: “AI-powered IVR… already demonstrated 2x the productivity of our prior bot technology and over 10x the productivity of humans… enabling increased electronic payment penetration rates…” — CEO .
  • Profitability quality: “Second consecutive quarter of adjusted EBITDA profit, ex-float and political… more than doubled… sequentially ex-float and political to $3.7M in Q1’24 from $1.5M in Q4’23.” — CFO .
  • Partnerships: AppFolio joint invoice/pay API now GA to ~19k customers; M3 opportunity creation up ~4x YoY; Accounting Core integration slated 2H24 .

Q&A Highlights

  • Yield and pricing: Management expects continued, albeit variable, yield expansion supported by digital payment monetization and new levers (e.g., Payment Accelerator) .
  • Demand generation pivot: Q1 top-of-funnel lag tied to shifting spend to higher-ROI events; expecting rebound, with early Q2 inquiry up high single digits; Q1 real estate, education, nonprofit verticals were strong .
  • Float dynamics: Q1 float (~$13M) benefited from customer balance timing; FY float raised modestly amid possible H2 rate cuts; balances and weekday/weekend timing are key drivers .
  • Macro: Ongoing suppression in discretionary spend across buyers; no single vertical driver; embedded caution in guidance .
  • Cadence and prudence: Implied Q2 revenue roughly flat sequentially from cautious posture; FY still back-half weighted .

Estimates Context

  • S&P Global (Capital IQ) consensus metrics were unavailable due to a temporary API limit during this run; therefore, exact Street revenue/EPS estimates for Q1 2024 are not shown. Management indicated Q1 revenue was “about $3 million up” versus consensus, split between float outperformance and underlying yield-driven strength .
  • Given the cautious macro commentary and implied Q2 flat sequential setup, Street models may need to reflect: (1) sustained yield expansion with modest transaction growth, (2) slightly higher FY float (~$45M), (3) raised FY adjusted EBITDA, and (4) back-half political revenue concentration .

Key Takeaways for Investors

  • Durable margin and profitability trajectory: Non-GAAP gross margin hit 72.4% and adjusted EBITDA increased to $17.7M; management continues to emphasize unit cost reduction and operating leverage .
  • Yield expansion remains a core lever, offsetting macro volume choppiness; transaction yield advanced to $5.47 (+14.9% YoY) .
  • Strategic catalysts building for 2025+: AppFolio GA and expanded M3 integration should expand the TAM in real estate and hospitality; Payment Accelerator is positioned as a third revenue leg .
  • AI/automation should further enhance unit economics and e-pay penetration, especially for small-dollar transactions .
  • FY24 outlook raised for revenue and adjusted EBITDA, with float assumption increased; model caution warranted on Q2 sequential revenue and macro-sensitive transaction volumes .
  • Balance sheet strength (cash and marketable securities ~$443.6M vs. total debt ~$75.8M) provides reinvestment and optionality .
  • Trading lens: Narrative centers on consistent execution, ahead-of-plan margin milestones, and 2025+ product/partner ramps; near-term stock reaction likely tied to raised EBITDA guide and visible partnership traction vs. prudence on volumes and float cadence .

Appendix: Additional Q1 2024 Disclosures

  • Income statement detail and reconciliations provided in the Q1 2024 8-K exhibit; non-recurring items included ~$1.157M restructuring and ~$0.179M cyber incident response costs .
  • Other press during Q1: CEO interview highlighted software-enabled payments/AP automation value proposition for middle-market buyers and suppliers .