Paymentus - Earnings Call - Q1 2022
May 4, 2022
Transcript
Speaker 0
Good day, and welcome to Paymentus' first quarter twenty twenty two earnings call. This call is being recorded. All participants are currently in a listen only mode. There will be an opportunity for your questions following management's prepared remarks.
Speaker 1
At this time, I would like to hand the call over to Paul Theeman, VP of Finance and Strategy, for some introductory comments. Please go ahead.
Speaker 0
Thank you. Good afternoon, and welcome to Paymentus' First Quarter twenty twenty two Earnings Call. Joining me on the call today are Vishant Sharma, our Founder and CEO and Matt Parsons, our CFO. Following our prepared remarks, we will take questions. Our press release was issued after close of market today and is posted on our website where this call is being simultaneously webcast.
The webcast replay of this call and the supplemental slides accompanying this presentation will be available on our company's website under the Investor Relations link at ir.pinensis.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 expectations or intent regarding our financial results and guidance, market opportunity, business strategies, impact from acquisitions and other matters. These forward looking statements speak as of today, and we undertake no obligation to update them. 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 Special Note Regarding Forward Looking Statements and Risk Factors in our annual report on Form 10 ks for the year ended 12/31/2021, which we filed with the SEC on 03/03/2022 our quarterly report on Form 10 Q for the quarter ended 03/31/2022, which we expect to file with the SEC in early May twenty twenty two and elsewhere as our other filings with the SEC.
We encourage you to review these detailed safe harbor and risk factor disclosures. In addition, during today's call, we will discuss certain non GAAP financial measures, specifically contribution profit, adjusted gross profit, adjusted EBITDA and adjusted EBITDA margin are non GAAP financial measures. These non GAAP financial measures, which we believe are useful in measuring our performance and liquidity, should be considered in addition to, not as a substitute for, or in isolation from GAAP results. We encourage you to review additional disclosures regarding these non GAAP measures, including reconciliations with the most directly comparable GAAP measures, our earnings press release issued today and the supplemental slides for this webcast, each available on the Investor Relations page of our website and in our filings with the SEC. With that, I'd like to turn the call over to Dushan Sharma, our Founder and CEO.
Speaker 2
Thanks, Paul. We started 2022 with a very strong quarter across all KPIs and saw little to no impact from the geopolitical and economic events that occurred, including events in Ukraine and inflation. We believe we have a clear view of the business and are optimistic about the outlook for the remainder of 2022 as well as the foundation it sets for 2023. We believe one great aspect of our business is that it is extremely resilient because consumers and businesses have to pay their bills, essential bills, regardless of world events or whether the economy enters a recession or not. On a quick personal note, this is our fourth quarterly update since the IPO as we approach our first anniversary.
I'm having a lot of fun building the business, so is my team. I know based on where the markets have been, one more thing that we could be distracted, but we are not. We are laser focused on executing our business strategies as we seek for the long term successful and high growth business. We all understand and remain focused on the effect of long term compounding growth. As a new public company and where I sit today, despite our scale, I view us as a startup public company and believe we are just getting started.
I welcome each and every one of you on our journey and to share in our long term success. Let me now discuss our financial performance, which demonstrates that we are executing and performing well. In the first quarter, contribution profit grew 35%, driven by a 14.9% increase in transactions. From the sales booking perspective, we signed over 60 clients in the quarter, which is about 50% more than the same period last year. These sales numbers are inclusive of direct, partner and JV organizations, which require some sales support to complete.
Relative to the comparable quarter of 2021, our sales were more diverse with less than 40% from the increase of year. The largest areas of increase were city services, insurance and mortgage payments, but we also signed clients as unique as a leading home design company. We crossed an annual run rate of $100,000,000,000 in payments volume during the quarter. We believe very few companies in The U. S.
Are processing at this scale, which is nearly a quarter billion dollars per day on an average. As we have said before, scale creates opportunities to strengthen our network and process relationships because of the unique value we bring in undependent future segments for digital payments. We continue to work to establish additional relationships in our newer segments. In past quarters, we have talked about the expansion of our telecom partnerships. This quarter, we have signed the healthy division of one of the top five U.
S. Banks to expand our footprint in the industry. We expect the partnership to provide us with expanded access to practice management systems. Adding partners in areas such as healthcare, telecom and other under penetrated verticals help our sales efforts and complements our direct selling process. Let's speak for our ability to increase our share of the total addressable market.
In the quarter, we went live with one of the largest owners of apartments in the country. Real estate is outside of the core six verticals that we talk about, but represents a significant opportunity on its own. As you can imagine, the rent payments fall in our sweet spot for both nondiscretionary and reoccurring. We believe this implementation shows the flexibility and the breadth of our platform, which powers industries as diverse as real estate, B2B logistics and home security providers, not to mention our existing core verticals. We are making progress migrating the JPMorgan Chase client base.
We completed our first implementations in the quarter and many more are in flight and scheduled to go live throughout the year. While this added revenue isn't material yet, we expect it to grow over time. In addition, the new deal sales channel JPMorgan Chase continues to build and the relationship continues to be more and more beneficial for both parties. A quick note on our IP and ecosystem. We continue to expand the network and add more and more endpoints including the FIs.
As a reminder, IP and is symbiotic with dealer direct. IP and helps us win more dealer direct deals and dealer direct wins help us add more IT and partners in volume. I'll now turn the call over
Speaker 3
to Matt to discuss our financial results in more detail. Thanks, Dushan. As a reminder, today's discussion includes non GAAP financial measures. Please refer to the tables in our press release and supplemental slides for a reconciliation of non GAAP items to the most directly comparable GAAP financial measure. In the first quarter, we processed 87,900,000 transactions, which equates to a year over year increase of 40.9%.
Transaction volume continues to be driven by strong execution as well as additional IPN transactions, in particular, the Claveras Bank transaction as well as business to business transactions. This transaction growth drove a revenue increase of 26.5% over 2021, which resulted in revenue of $116,700,000 in the quarter. Q1 contribution profit was $47,400,000 representing a 35% increase over the same period last year. Consistent with the last several quarters, contribution profit grew faster than revenue, primarily due to an increased mix of transactions without interchange, specifically IPN transactions, cash based payout transactions and certain B2B transactions. Contribution profit per transaction was in line with 2021 at $0.54 which was consistent with our expectations in previous communications.
Contribution profit for the quarter was ahead of expectations due to certain customers going live earlier in the quarter than was anticipated as well as some favorable mix of payment type. While these items provided a tailwind in Q1, we do not anticipate that tailwind to carry forward in the subsequent quarters. Adjusted EBITDA was $5,400,000 for the first quarter, which represents an 11.3% adjusted EBITDA margin. This was slightly above our internal expectations for the quarter. We only provide guidance for the full year, but we never expected the adjusted EBITDA to be spread evenly throughout the year as we ramped up hiring to end 2021 and had additional fees for completing the 2021 audit.
We expected Q1 adjusted EBITDA to be the low point for the year for these and other reasons, and we are on track to slightly ahead of what we expected. Operating expenses rose $13,500,000 to $36,200,000 for 2022 from the same period last year. Overall, the increase in operating expenses from last year was driven by investments in staff as well as additional operating expenses associated with PayVeris and Senovera, the amortization of identified intangible assets from the acquisitions and stock based compensation. Specifically,
Speaker 0
R
Speaker 3
and D expense increased $2,700,000 or 34.4% from the first quarter in twenty twenty one as we continue to innovate with and for our customers and partners. Sales and marketing expense increased $8,000,000 driven by the PayBeris acquisition, continued expansion of the sales team, adding partnerships to capture our sizable market opportunity and an increase in stock based compensation. Also, and marketing events continue to ramp up relative to Q1 twenty twenty one, particularly with the impact of COVID fading. We experienced an increase in G and A expense of 43.1 percent or $2,900,000 due to our acquisitions, multifold increases in the cost of corporate insurance and ongoing investment in public company infrastructure. Our GAAP net income was $1,700,000 and EPS for Q1 was $01 Non GAAP net income was $3,700,000 and non GAAP EPS was $03 for the quarter.
We had a large tax benefit in Q1, driven by our small loss on pretax income as well as a discrete benefit of $2,600,000 that we recorded related to excess tax benefits on stock based compensation. As of 03/31/2022, we had $163,400,000 of cash and cash equivalents on our balance sheet. Cash decreased primarily due to the timing of certain customer payments as well as increased operating expenses due to the acquisitions. Quarter end, we had approximately 121,000,000 shares of common stock outstanding. Now turning to our 2022 full year outlook.
We're increasing our 2022 revenue outlook to a range of $492,000,000 to $497,000,000 which represents growth between 24.526% year over year. We're increasing our contribution profit guidance to be between $2.00 $6,000,000 and $2.00 $8,000,000 for the year, which is approximately 30% to 31% growth. Our adjusted EBITDA outlook is in the range of 30,000,000 to $33,000,000 with an adjusted EBITDA margin of 14.5% to 16%. As we've indicated previously, we do not believe the current inflationary environment will have a negative impact on our top line. Our current guidance reflects some assumptions around continued inflation and potential for increasing wage pressure.
However, if inflation continues at higher levels than we have assumed, it could have a higher impact on our margins going forward. As you can see
Speaker 1
from the updated guidance, the high end of our
Speaker 3
contribution profit guidance implies growth in the same range as 2021. We believe this level would give us a top decile performance for technology companies on rule of 50 for the past couple of years. We are not slowing down and remain excited about how the business is performing. Finally, as we said last quarter, we anticipate our full year effective tax rate to be around 30%. However, due to the amortization of intangibles associated with the acquisitions, the closer we are to breakeven on pretax book income, the more variation we could see on our tax rate.
I'll now turn the call back over to Yushan for some closing comments.
Speaker 2
Thanks, Pat. To close, I'd like to provide a brief reminder of what we believe makes us different and positions us to win a significant share of the Mastercard's payment plan. Our platform was designed to be flexible and meet the billing and payment needs of virtually any industry. This creates a massive addressable market that's both reoccurring and nondiscretionary in The U. S.
And beyond. AbbVie estimates this at nearly 16,000,000,000 transactions annually in The US alone, and we believe we have the ability to address a sizable portion of them. With our acquisition of Uveris, we also opened up access to bank based payments, and we believe ITN extends our reach to virtually any channel or consumer a consumer wants to pay through. Our platform is known for B2C, but also runs large scale B2B invoicing and payments clients. B2B is outside of the 16,000,000,000 number I just mentioned.
Our platform is known for paying meaningful payments, but can also provide payouts for insurance companies and other industries that need this personal capabilities. Payouts is also incremental to the $16,000,000,000 payment number I talked about. This is why I continue to be extremely bullish on the business and do see us continue to invest in long term growth rather than dropping incremental dollars to the bottom line. I'd like to thank our 1,000 plus employees for their hard work and dedication to make all this possible. With that, I'll now turn the call over to the operator for questions.
Speaker 1
If you would like to ask a question, please press
Speaker 3
star followed by one on the telephone keypad.
Speaker 1
If for any reason you would like to leave a question, please press star followed by 2. Again, to ask a question, press star 1. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. Excuse me. My first question goes
Speaker 2
to Will Mance with Goldman Sachs.
Speaker 1
Will, your line is open. Please proceed.
Speaker 4
Hey, guys. Good afternoon. How are you?
Speaker 3
Good. Good. How are you?
Speaker 4
Good. I wanted to follow-up on the the full year guidance. I think last quarter, you guys signaled that in the back half of the year, you guys could dip below that 30 percent. I think it was a combination of some from the prior year and some conservatism around the pace of onboarding. It sounds like you were a little bit more successful in bringing new clients onboard this quarter.
I'm wondering as we've gotten three months later, have you gotten any incremental line of sight on some pace of onboarding? And is that still your expectation in the second half of the year? And what would it take what would need to happen for that not to occur?
Speaker 3
Thanks, Will. This is Matt. Great question. It's early in the year. I would say we still have nothing fundamental has changed in kind of our view with respect to our guidance and modeling and forecast for the year.
We did have a very good result in Q1 and being able to get things live sooner than we had anticipated modeled. And we're going to continue to work for that as we go through the rest of year. It's something we've always done and we'll continue to do. It's a definite focus of Deshaun, I and the rest of the team. But it's early in the year, and and I think, you know, we're kind of maintaining our view on the rest of the year for at this point in time, and we'll continue to work on it as we go through the year.
Speaker 4
Got it. That's helpful. And then maybe one for Dushan. It's nice to hear about the referral agreement with the health care vertical with a large bank. If we take a step back, you guys have done a lot of expansion in your go to market channel since the IPO.
And I guess when you put together the JPMorgan relationship, PayVerus, the new health care deal, how are you thinking about the tailwinds that drive to the top line? And I guess even higher level, would you consider these partnerships as being potentially additive to that 30%
Speaker 3
you've talked about in the past?
Speaker 2
Good question, Will. Thank you. I was going to say, I was smiling because of the last part of your question. Look, we are very proud of what we have been able to accomplish here. Everything we set out to do as a business, we said we're going to build a platform, which allows us to scale horizontally to any vertical industry and vertically to any size of the customer.
And we have done that. And as a result of the modern age, Biller Direct platform we have created, which not only brings companies live in the ecosystem, which is their direct ecosystem, but also through the IP and ecosystem we have created allows them to go to the any endpoint. It allowing us to bring customers on our platform at a faster clip than we have done before. And in addition to that, we are also seeing tremendous excitement in the partnership ecosystem we have. You named some of the partners and there are many other partners in the mix as well.
So we are seeing tremendous progress there. And this clearly helps us continue to grow and maintain the momentum. And we are not raising our guidance our guidance is what it is, but not a
Speaker 1
day goes by that we
Speaker 2
are not looking at how can we accelerate that even more than what we are already forecasting. So not changing the guidance, but at least from a overall perspective, feel good about where our business is headed.
Speaker 4
Got it. I appreciate that. And thank you
Speaker 3
for taking all my questions. Of course. Thanks, Will.
Speaker 1
Thank you, Will. Our next question goes to Andrew Tout with SMBC Nikko Securities. Andrew, your line is open. Please go ahead.
Speaker 5
Hey, guys. Thanks for taking my question and nice set of results guess first off, Matt, I wonder if you could clarify some of your comments around the first quarter tailwinds around favorable mix and the pace of onboarding. I guess, you give us a better sense of what exactly those payment mix types like what drove that benefit and why that wouldn't carry forward in subsequent quarters? And is the onboarding dynamic really just kind of a timing element? Or is that we would assume that if you're accelerating the rate of these onboards that those tailwinds should continue?
Speaker 3
Yes. Thanks, Andrew. Appreciate the question. So on the implementation onboarding, when we lay out our model for the year, we assume based on all the information that we have from our own team, from the client, a certain go live date for a particular client. And let's say for the some of the accelerations we saw in Q1, they were clients that we had slated to go live, say, at the end of Q1.
They went live in the middle of Q1. So that means that we got an extra one months point of revenue off of them. But when it comes to Q2, we kind of had that revenue in Q2 all along because they were going to go live in our plan at the end of Q1 anyway. So there's no incremental benefit to Q2 from that client going live earlier in Q1. And that's what I was sort of referencing with Will's question is, at this point in time early in the year, we don't want to make assumptions that we'll be able to be successful with additional clients during the implementation pipeline being able to do that same thing because every client is different, all the facts and circumstances are different.
So it's great for Q1 that we were able to do that. We continue to work on doing that every day going forward, and our team is very focused on it. But it's hard to make an assumption that, that can continue through depending on different factors or incentives with different clients. Then on the mix type, really what I was referring to there is we saw some movement, say, from credit, higher cost type of payment to more cash based, lower cost type of payment in Q1. So we got the benefit of additional contribution profit from that.
Main reason we said we're not anticipating that to continue is because Q1 is a little bit of a different animal, as we talked about before, than the other quarters throughout the year in that it's kind of a high point of the year and what we see for our average payment amount, I. E, the bill payment amounts that are getting paid on our platform, largely due to utility payments even higher in Q1 because of the cold winter months. And so this year, that was maybe even fueled a little bit more with some of the macro things we're seeing around energy costs. And so I think people put a little bit of speculation on my part that people may have paid more with different types of payment methods because the bills were higher, they may have split their bills and paid some with cash, some with credit, etcetera. So again, we're not making assumptions that that's going to continue because Q1 has a little bit different profile with respect to the amount of payments we see and the behavior we see out of consumers just because those payment amounts are higher.
And I think if I
Speaker 2
may add a little bit to that, the quarterly dynamic Matt described so well is exactly why sometimes it can be misunderstood that what we are when we are guiding to the year, sometimes quarters things to vary quarter to quarter. But the guidance for the year is what we are focused on as a whole.
Speaker 5
Got it. Very helpful. And then my follow-up for Shashan. I mean, if we're heading into an economic slowdown and potentially a prolonged recession, I mean, is this changing any of your conversations with billers that are looking for solutions to be able to better capture rate of payment and the like?
Speaker 2
Yes, Steve, great question. I can take you back to the last time we saw recessionary environment where it was like 2010, twenty eleven, twelve and so on. We want that transpired into accelerating growth for us in some ways because the business itself, as I talked about at the top of the call that there's a resilient factor in here where I still have to pay my bills as a consumer including the businesses. You have to keep your lights on, you have to pay your insurance, you have to pay your mortgage and so on. And but during these types of times, there is increased focus on improving the efficiencies while also trying to improve the customer experience so that it's easier to collect money from the customers.
And that actually shines even a stronger light or a brighter light on our platform and our capabilities. And as a result, we start to get even more inbound inquiries than we would typically get. And I'm not saying that the recession is actually beneficial to us and how there's a benefit to us. But what I'm saying is that the way we have designed our business and the way we approach the market, we if there is a recession because of the pricing model which we have created, it actually helps our case even stronger in many cases. I hope that answers the question.
Speaker 5
No. It doesn't. That collection rate definitely comes into greater focus for billers. So thank you for the color.
Speaker 3
Thanks, Andrew.
Speaker 1
Thank you, Andrew. Our next question is for Ashwin Shirvaikar with Citi. Ashwin, please go ahead.
Speaker 3
Thank you.
Speaker 2
Hey. Good quarter, guys.
Speaker 1
I was I was hoping you could perhaps address sort of what we should expect with with regards to payments through the year. You know, you're obviously raising raising expectations. Is there a is there a timeline one should expect in in terms of just quarterly layout? And then let me ask the second question, Rachel, as well. You know,
Speaker 2
the expansion opportunities that you talked about, for example, the payment opportunity and so on and so forth,
Speaker 1
is there any could you perhaps specify that?
Speaker 2
I mean, you know, how that sort of flows through your system that that you have to change?
Speaker 3
Okay. Thanks, Ashwin. On the first one, I assume what you mean is does it change anything, just to clarify for me on the quarterly cadence, does it change does the fact that we had the of exceeded the expectations that you want and raise our guidance, does it change kind of our thinking for the rest of the year and how the quarters play out? Is that what the question was?
Speaker 2
Yeah. That's what what the question was.
Speaker 3
Okay. Got it. No. Not really. I mean, as I said, I think the reason we had a well, for a lot of reasons, we had a strong Q1.
I would say the reason that we had a stronger than expected Q1 was the timing of certain implementations happening a bit faster sooner than we expected as well as some of the mix shift. It's early in the year. We don't because of the factors I mentioned, I think, in response to Andrew's question, we're not comfortable sort of carrying that through the rest of the year at this point. But I think the kind of underlying fundamentals for the year are consistent with what we expected and talked about going into Q4. We've got as Deshaun sort of alluded to a second ago, we only provide guidance on an annual basis.
The reason we do that is because there is quarter to quarter variability in our business. When we get into the back half of the year, we've got some of the tough comparisons with some of the acquisition stuff in Q3 and Q4. But fundamentally, we still believe that we're a 30% grower. And obviously, our guidance reflects that. And yeah, I think nothing's gonna change that going into 2023.
So, I think that was the kind of the probably the first one. The second one, could you just repeat the second question?
Speaker 2
I'm sorry. Yeah. I was just gonna, you
Speaker 1
know, obviously, it's kinda similar to
Speaker 2
a previous question, but I wanted to I was wondering if you could actually find some of these opportunities that you've talked about, like, for example,
Speaker 1
when you start rolling in rent payments, right? What does that add
Speaker 3
to the overall pie
Speaker 1
or was that actually included in the overall pie?
Speaker 2
Great question, Ashwin. Mean, this is one of the key advantages of the platform, the way we have conceived it, the way we have built it is that we are able to add. So the bill payment market, which is just B2C payment receivable market itself is the as we talked about it, it's in trillions of dollars of household expense, which goes through just for bill payments. B2B capabilities, which we talk about, is completely outside of that and it's larger in many ways just because of the amount, the dollar amount which are included in B2B invoicing process. And payouts is a pretty significant opportunity as well.
So they're both outside of what we are pursuing here. So what we talked about in the $16,000,000,000 bill payments. So we feel like that this is all of these things we have done, the hard work, the rails, the platform, the capabilities we have built, the workflows we have created, it's all setting a great foundation for us to continue to grow in
Speaker 3
the outer years. The thing I would add to that, and totally agree with all that. The thing I would add to that is we've kind of been thinking
Speaker 5
about it in a little bit
Speaker 3
of a seat pronged way in the sense of when we talk about kind of being a 30% grower, we obviously were thinking about the dual direct business and the platform that we have and our six verticals, but also all verticals, right? We're obviously taking into account kind of all the different types of buildings that can be on it. But what I meant when I said a two pronged approach is the more we can expand that pie and have more opportunities at different types of clients that also applies to the bank network with Tiberius, also applies to some of the IPM stuff. The more kind of certainty you can put around that 30% number because it just gives us more opportunities from which to draw it from. And then if many of them hit, then I think it becomes incremental and kind of on top of that 30% number.
So it's kind of like we've got a we've got a wide net of things that we can draw from to get there. And then if we're successful in many of those different things, then it starts to go up from there, if that makes sense.
Speaker 2
And and that's why we may why would you option
Speaker 3
Yeah. You said that much more succinctly than I did. Yes. Thank
Speaker 1
you. Thank you very much. Thank you,
Speaker 2
Ashwin. Thank you,
Speaker 1
Ashley. Our next question goes from John Davis from Raymond James. John, your line is open. Please go ahead.
Speaker 5
Hey. Good afternoon, Greg. Matt, I've heard you say a couple of times, you expect to continue this 30 plus percent contribution profit growth into '23. But I'm trying to I would that would seem a little bit of an organic acceleration given the the modest impacts from from the acquisitions that you've done. So just I wanted to just confirm that and just kind of understand what the drivers are to that potential accelerated growth in 2023.
Speaker 3
Yes. Thanks, John. Well, 2022 is not done yet. In the sense of like Deshaun said earlier, our guidance is our guidance, but we're certainly working every day to try to continue to drive more in 2022. I mean that's what we're here for and that's what we're paid for is to continue to drive more either.
But with your point, thanks to our current guidance, I definitely understand your point. And I think it's the result of all the things that we're Bouchon talked about that we're working to put in place now. It's the additional partnerships. It's the expansion of opportunities around outside of our core six core verticals industries that we're now getting into like rent payments opportunity. It's B2B potential that we've started off in and continuing to drive additional clients there.
So I think it's really just the bank opportunity with PayBeris. We still are very excited about what that can bring and what inbound interest and conversations are happening on that front. So again, I think really the answer to the question is the way I wrapped up with Ashlyn's question, which is we really widened the net out over the last twelve to eighteen months. And so just having more opportunities at more different, whether it's verticals, partners, banks versus red pillars, on and on, it just gives us more areas and more opportunities to let us drive additional business growth. Absolutely.
And on top of that, we have a customer base. We have signed customers.
Speaker 2
We had last several quarters including this most recent one, sixty deals to 60 deals is nothing to see that. And so all of these contribute to where we could be next year. And so we're excited about the business. And like Matt said that year is not done, but year is also not done from a perspective of adding lots to the mix to make sure 2023 is a good year.
Speaker 5
Okay. No, that's super helpful. And then
Speaker 3
a lot of questions on inflation and trying
Speaker 5
to understand, so you guys are a relatively new public company. Matt or Yashan, maybe just take a second to explain or expand upon how inflation actually runs through. I understand you guys take per bill, but some of your costs could be
Speaker 3
higher in inflationary environment. So I just really want to understand, think Matt,
Speaker 5
you said that inflation is kind of neutral. So maybe just kind of give us a number or so on to pertaining that and how inflation goes through.
Speaker 2
So the way we have engineered our business and the way we have engineered our agreements with the clients actually take care of this very issue and has done that for years now. One of the factors is that for our clients, actually, I don't want to get too technical because it is a very technical question because there are payment methods involved. Different payment methods have different types of fee structures to them. Some of them are flat regardless of the form of payment. Our cost structure is, In some cases, regardless of the payment amount, which is being charged with inflation by the billing company, we still get our fair share.
Our margins don't get affected. But in some cases, there is a change where we are getting a flat fee and while on the back end our cost is variable, that's in a small percentage of those transactions. And there as well, we have ability to raise pricing and because it's very understandable by the clients themselves that if they are getting more benefit by through the inflation that's charging higher for the bills, we want the very company which is making that all happy where they're able to collect the money. We want to be able to raise the rate as well and we have those capabilities in the agreement already. So that doesn't affect us as much as it would appear, actually.
Speaker 3
Okay. That's super helpful. Thanks, guys.
Speaker 2
Thanks, John.
Speaker 1
Thank you, John. Our next question goes to Jeff Cantwell with Wells Fargo. Jeff, your line is open. Please go ahead. Hey.
Thank you for taking my questions, and thanks for allowing me to join
Speaker 3
these calls. You know, one
Speaker 2
thing that stood out on
Speaker 1
the positive side there, and this is being highlighted on this call, facing the guidance, especially given how many other companies have sounded about the quarter. I guess, even though you have the real heart of the economy in many ways, so that many clients you have now, can you sort of list your macro view as you see it? And what I'm really trying to get at is what makes you confident here to raise the tide? Is it any range? Is it something about the operational momentum this quarter?
I just want to see what you can point us to that will help us understand what you're thinking about as far as positives for the remainder of the year.
Speaker 2
Yes. Thanks, Jeff. This is Matt, and
Speaker 3
welcome to the fold. Glad to have you as part of the group here. So on the macro, think Deshaun hit on a little bit earlier. Obviously, things have been a bit tough to start the year on multiple fronts in the macro. But because of the space that we're in and really focused on nondiscretionary essential recurring bill payments, it's a very resilient business.
And we saw it kind of at the beginning of COVID when really the impact to our business at the beginning of COVID was a little bit of a slowdown in signing new business and getting customers live because everybody was focused on their own business. But we did not see any slowdown at all to the payments flowing to our platform because people still had to pay their bills. They need to keep the lights on, they need to keep their insurance and mortgages, etcetera. And so it is a very resilient model, and that's reflected in our results in Q1 and our guidance for the rest of the year that even though the macro may seem a little uncertain, one thing is constant that people need to continue to pay their bills. I think as far as raising the guidance for the year, it's reflected in that, that we have not seen any negative impact.
We don't expect to see any negative impacts from that. In addition to, again, just keep going back to all the things that we've added and continue to announce our ability to execute internally on getting clients live and implemented. And that's actually, again, back to the one of the earlier questions kind of relates on our ability to continue that through the rest of the year or not, what we saw in Q1 and being able to do it faster. There's a huge reliance there on the client. We can't do it alone.
We have to partner with them. It has to be within the pounds of kind of their internal priorities and projects, and they've all got a million things going on. And so if it was completely within our control, I'd be like, full speed ahead, we're going to get them all live tomorrow and figure out how many people we need to hire to do that. We also have to work within the balance of our clients. And so it's definitely a partnership aspect of it.
But we everything that we kind of see from behavior of people paying their bills, from the things we put in place, we feel good about the rest of
Speaker 2
the year. And if I may add to this, to your broader economic question and speaking to the Investor Day broadly. If for example, you are a private company today and you were investors in company and you have 40 other companies in your portfolio, you will look at cement as I think about, but this is a company which is in recurring billing, building the space bills you have to pay these are essential bills. And during turbulent times like these, businesses have even a stronger need to collect money and collect the money efficiently and also improve experience for the customers. Both of those things what our platform is designed to provide, it actually allows you to sleep a little bit better.
And during we had we have gone through a couple of these things. I mean during COVID, we continue to grow as a business. We had the same thing due to the financial crisis. So what I'm trying to really to say is that if you take the public market side of things aside, which is there's a little bit of uncertainty, which we have all experienced, the business inside internally, the business is doing really well.
Speaker 1
Okay. That's great color. Thanks very much, and congrats on the results.
Speaker 3
Thank you. Thank you,
Speaker 1
Our next question is the Tien Tsin Huang with JPMorgan. Tien Tsin, your line is open. Please go ahead.
Speaker 5
Thank you so much. I'm gonna go on to Pete John's question and and ask you from a builder perspective just with inflation and whatnot. Are you seeing sellers want to promote autopay as a reason to to accelerate or raise a sense of urgency to to wanna work with you? I'm just trying to understand the the pillar side of how they're viewing the the uncertainty that people have been asking about. It feels like it could be a big help.
Speaker 2
Yes. I think so if you look at it from the in in situations like like these. And frankly, COVID itself is pretty pretty decent memory. So the billing companies faced with situations like, you know, how do we make it easier for customers to to collect as well as make it, make sure that they have ability to pay multiple times if they have to. The auto pay itself, if you can believe it, is for customers who are who they are least concerned about from a collectability center.
It is the customers who are not on auto pay where they will say, you know, how do I how do I reach to the customers at a faster pace than or or broadly? And and and could I do it in a way that it will cost me a lot more money than it would have otherwise. So everything our platform is designed for. So for example, if you want to build an hour coming to you in a market like this, my pitch would be to take a look at our platform. It is designed for you to not have to change anything on your end.
We will do all the work because we have this advanced integration framework in place and we have hundreds of billing systems we already integrated with. And we can integrate with you while through the integration, we can reach all of the customers you otherwise not being able to reach out to just because of the modern airline shipping ecosystem we have built. So all of that resonates extremely well to the customer and to the billing company. And therefore, with multiple payment options, options wherever the customers are and including giving them ability to pay, including at the last minute, which is very easy for the customers to pay. And that's why there's a gravitation towards us in plans like this.
Speaker 5
Makes sense. Thanks for going through that. Then just a quick follow-up if you don't mind. Just the reinvestments make sense. And then there's a lot of investing in reception partners and verticals.
But how just on the product side in general, are you have you changed your focus on product development given what's happening in the world? Just curious what's
Speaker 0
new from a product
Speaker 5
perspective maybe that you were given about six months ago.
Speaker 2
You know, we we continue to make investments in the product. We we have in some ways, we have set up set the tone for the industry as to how the looking at
Speaker 0
business
Speaker 2
perspective, the staff of the billing company, but also the customers of the billing company. When you look at it from that perspective, it's a never ending pursuit. We have we we exist for two specific goals. How do we improve the customer experience and how do we do it while lowering the cost to collect or cost to serve the customers from a billing company standpoint. And that so all the advancements, all the investments we make are in that area.
The other area we are actually heavily focused on is how do we improve the velocity of onboarding. I'll give you an example. We have almost to Matt's point earlier, if we could actually onboard clients and it was entirely in our control, we could onboard them tomorrow. Like 7080% of our clients, maybe even more could be onboarded without making a single change anywhere in our system. However, it takes time for the clients to get comfortable and go through the process.
What we are making investments in is for the remaining 10%, 20% as well to make sure that these complex enterprise site deployments are also able to get done without making too many changes as the workflows the complex sophisticated workflows could be implemented to work platform without coding. So we're making some changes there as well. So you will see more and more about you will hear more and more about that as we go forward.
Speaker 0
Very good. Thank you for your time.
Speaker 2
Thank you.
Speaker 1
Thank you, Tim Chin. Our final customer is Dave Cunning with Baird. Please leave your line at thirteen, please proceed.
Speaker 2
Yeah. Hey, guys. Thanks so much. And I I just wanted to review contribution profit per transaction. I think you've talked before about as you've gotten bigger clients,
Speaker 3
I know that's naturally gone down a little bit. It actually went down less this quarter. It's been in a a long time. And I've
Speaker 2
been wondering, a, is the mix of business as it
Speaker 3
comes down coming out of the different trends,
Speaker 2
like at different levels, like different verticals, kind of different yields? And then over time, are we at a point where you start to stabilize?
Speaker 3
Yes. Thanks, Dave. I appreciate the questions, Matt. Yes, I think yes to both questions. With the Q4 and I can't remember if we said it on the call or maybe it was in some of the Q and A afterwards.
But I said we saw a pretty good step down in Q4. And there was a lot of questions about it. I said we expect it to stabilize for 2022 and be pretty consistent with where we saw Q4. And there are a couple of reasons that conclusion, and we're seeing them play out. One was, if you recall, the reason for the step down or a reason for the step down in Q4 was a couple of large clients going live at the end of Q3, early Q4 that had a little bit different profile.
One was more B2B, one was included some payouts, which were all cash based. And so they had a different pricing profile than say our typical Bloor Direct clients have. We felt very good because they were very large clients who lost transactions. And so we felt good in the overall economic profile of the client that it caused a step down, and we didn't see anything in our implementation pipeline that looked or felt like those two did. And so we expected to stabilize.
And then also there is a kind of a terminal point you get to once you again, you think about the progression of our growth as organization, we kind of purposely started in Horizon one with small and medium sized clients, and then we moved up to large size in Horizon two and then the network effect in Horizon three. There's a period of time where every new large client you add is pulling down the average just simply because of the nature of size in the total portfolio. We're kind of reaching that point now where addition of a new larger client doesn't really have that big of an impact on the average. It's going to have some and but the rate at which it's going down certainly will slow dramatically. And then the other factor is some of the IPN transactions that we've talked about that are don't have any interchange associated with them.
They are priced in a level that's fairly consistent with sort of what our current contribution profit per transaction level is. So they're not going to be detracting to that overall point. So that's kind of what's behind the scenes driving it, but we still the comments I made, I think, in Q4 are still the same. Nothing's changed change our thinking there, which is the remainder of 2022, we expect to be pretty consistent with Q4 and Q1 and kind of where we are right now.
Speaker 1
Got you.
Speaker 2
And maybe just a quick follow-up.
Speaker 3
Sales and marketing the last few quarters has trended up
Speaker 2
a lot, and it's been more pronounced with really, really good revenue growth. So I I get it. But is there a point where it's supposed to be levered levered a little bit going forward?
Speaker 3
Absolutely. And we're you know, I don't wanna say we're at that point because, we continue to invest in the business. What I will say is between taking on some of the sales and marketing costs of TAYBIRS in particular, as well as we kind of purposely put some investment at the 2021 in the sales and marketing, and you're seeing kind of the first full quarter of that in Q1. We it was higher than what I would say our ongoing level of investment is going be. That was kind of a purposeful push of spend there.
So I expect from this point forward, you will definitely start to see it moderate out and get more leverage over kind of what we saw this this the last couple of quarters. Gotcha. Awesome. Thanks, guys. You too.
Thanks, Dave.
Speaker 1
Thank you, Dave. There are no further questions registered at this time. This concludes the Piedmont's q one twenty twenty two earnings call. Thank you for your
Speaker 2
participation.
Speaker 1
You can now disconnect your line.