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Paymentus Holdings, Inc. (PAY)·Q2 2024 Earnings Summary

Executive Summary

  • Record Q2 performance with revenue $197.4M (+32.6% YoY), contribution profit $76.5M (+28.3% YoY) and adjusted EBITDA $22.5M (+58.6% YoY); transactions rose to 140.4M (+28.2% YoY) .
  • Results materially exceeded Q2 guidance (Q2 guide from May: revenue $178–$183M, CP $68–$70M, adj. EBITDA $17–$19M); management raised FY24 outlook to revenue $770–$780M, CP $293–$298M, adj. EBITDA $81–$85M and introduced Q3 guide (revenue $188–$193M, CP $71–$74M, adj. EBITDA $18–$20M) .
  • Operating leverage remains a highlight: adjusted EBITDA margin reached 29.5% (vs 23.8% a year ago), Rule of 40 ~58 for the quarter (fifth consecutive quarter) .
  • Stock reaction catalysts: broad-based demand (same-store growth, new billers, IPN activity), ARPU lift ($1.41 vs $1.36 YoY) and a substantial FY24 guidance raise, partially offset by ongoing large-enterprise volume discounts that can pressure contribution margin mix near-term .

What Went Well and What Went Wrong

  • What Went Well

    • Broad-based growth across drivers: higher transactions from existing billers, new biller launches, and higher IPN activity pushed revenue and CP above expectations; ARPU increased to $1.41 from $1.36 YoY .
    • Operating leverage and execution: almost half of incremental CP dollars dropped to adjusted EBITDA; Rule of 40 ~58 with adj. EBITDA margin of 29.5% .
    • Bookings/backlog strength and faster onboarding: strong bookings and sizable backlog; onboarding velocity improved, including large enterprise implementations across diverse verticals .

  • What Went Wrong

    • Mix and volume discount headwind to CP margin: contribution margin was 38.7% (vs 40.0% YoY) due to larger enterprise mix and volume discounts; management reiterates CP is secondary given controllable OpEx and EBITDA focus .
    • Seasonal variability: despite strong backlog, CP can be down sequentially due to biller seasonality; management emphasizes YoY comparisons and EBITDA calibration .
    • Non-GAAP reliance: many key profitability metrics (adj. EBITDA, CP, non-GAAP EPS) are non-GAAP; company does not reconcile forward-looking non-GAAP guidance due to variability of reconciling items .

Financial Results

Metric (USD)Q2 2023Q1 2024Q2 2024
Revenue ($M)$148.9 $184.9 $197.4
GAAP Diluted EPS ($)$0.05 $0.06 $0.07
Non-GAAP Diluted EPS ($)$0.08 $0.10 $0.12
Contribution Profit ($M)$59.6 $69.4 $76.5
Adjusted EBITDA ($M)$14.2 $19.8 $22.5
Adjusted EBITDA Margin (% of CP)23.8% 28.6% 29.5%

KPIs

  • Transactions processed (millions): 135.3 (Q1 2024) → 140.4 (Q2 2024) .
  • Contribution margin: 38.7% in Q2 2024 (vs 40.0% in Q2 2023) .
  • ARPU per transaction: $1.41 in Q2 2024 vs $1.36 YoY; Q1 2024 remained ~$1.37 YoY .

Estimates (S&P Global) vs Actuals

  • We attempted to retrieve Q2 2024 S&P Global consensus EPS and revenue; the feed was unavailable due to access limits today. As a result, estimate comparisons are not shown. Values were unavailable from S&P Global at time of analysis.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)FY 2024$737–$755 $770–$780 Raised
Contribution Profit ($M)FY 2024$281–$293 $293–$298 Raised
Adjusted EBITDA ($M)FY 2024$71–$79 $81–$85 Raised
Revenue ($M)Q3 2024N/A$188–$193 New
Contribution Profit ($M)Q3 2024N/A$71–$74 New
Adjusted EBITDA ($M)Q3 2024N/A$18–$20 New

Notes: The company does not reconcile forward-looking non-GAAP guidance due to variability of reconciling items .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023, Q1 2024)Current Period (Q2 2024)Trend
Pricing/repricing & ARPUImproved pricing upon renewals (Q4), repricing integrated into regular process; Q1 ARPU ~flat YoY at $1.37 ARPU rose to $1.41 (from $1.36 YoY); large enterprise volume discounts noted, managed via OpEx to protect EBITDA Improving monetization; mix pressures CP% but neutral to EBITDA trajectory
IPN (Instant Payment Network)Growth driver alongside new/existing billers; <10% of rev but rising; strong bank/credit union momentum (JPM partnership highlighted) “Higher IPN activity” aided outperformance; central to sales differentiation and long-term interchange strategy Expanding network utility and differentiation
Onboarding/implementationPost-pandemic normalization and targeted investments improved velocity (Q4/Q1) Best implementation pace in six quarters; multiple large enterprise go-lives across verticals Accelerating throughput
Operating leverage/Rule of 40Consistent focus and outperformance (Q4/Q1) Rule of 40 ~58; 29.5% adj. EBITDA margin; ~49% incremental EBITDA in Q2 Sustained efficiency
Backlog/pipeline & 2024/25 flow-throughTop-end guide achievable without new clients; strong backlog (Q4/Q1) Backlog improving; 2024 pipeline principally benefits 2025+; FY24 raised Increasing visibility beyond 2024
AI / technologyAI integration patent for onboarding efficiencies highlighted in Q1 Less emphasized in Q2; focus on platform/IPN differentiation and onboarding velocity Execution focus; AI as longer-term enabler

Management Commentary

  • CEO: “Record revenue, contribution profit and adjusted EBITDA grew 32.6%, 28.3% and 58.6% year-over-year… We exited the quarter with strong bookings and backlog” .
  • CFO: “Average price per transaction increased from $1.36 to $1.41 year-over-year… Contribution margin was 38.7%… Adjusted EBITDA represented 29.5% of contribution profit” .
  • CEO on strategy: Targeting market share capture with differentiated platform and IPN; willing to accept volume discounts for large wins while growing adjusted EBITDA via operating leverage .

Q&A Highlights

  • Contribution profit variability and seasonality: Sequential CP can dip due to seasonal biller cohorts; management calibrates OpEx to deliver desired EBITDA margins despite CP variability .
  • Pricing and ARPU vs volume discounts: Repricing is now a disciplined, ongoing process; large enterprise discounts affect CP mix more than ARPU, with EBITDA protected by leverage and OpEx calibration .
  • Investment posture: Strong pipeline/backlog supports increased S&M and partnerships to drive bookings conversion; prioritizing organic growth while preserving EBITDA objectives .
  • Same-store sales and implementations: Strong same-store growth and improved implementation cadence (best in six quarters) underpin transactions outperformance .
  • Pipeline timing: Pipeline is an upside driver for 2025 and beyond; not in 2024 models .

Estimates Context

  • S&P Global consensus estimates were not retrievable at time of analysis due to access limits; therefore, we do not present EPS/revenue consensus comparisons for Q2 2024. Values were unavailable from S&P Global.
  • Relative to internal guidance, Q2 results were above the top end on revenue, contribution profit, and adjusted EBITDA .

Key Takeaways for Investors

  • Strong, broad-based demand and improved ARPU alongside faster onboarding and IPN traction are driving sustained top-line acceleration, with Q2 delivering a clear beat vs prior guidance .
  • Operating leverage is durable: adj. EBITDA margin expanded to 29.5% and Rule of 40 held near 58, reinforcing ability to pursue large enterprise deals while expanding profitability .
  • FY24 guide raised across revenue, CP, and adj. EBITDA; Q3 outlook implies continued growth with prudent calibration for mix and seasonality .
  • Watch CP margin mix from volume discounts and large enterprise wins; management views CP as secondary and manages to EBITDA through OpEx control .
  • 2025 setup improving: strengthened backlog and pipeline likely to benefit outer periods; continued S&M and partner investments should support bookings conversion .
  • Near-term trading lens: narrative centered on sustained growth, operating leverage, and raised FY guide; risk is margin mix/seasonality optics, but EBITDA trajectory remains favorable .

Additional Documents Reviewed

  • Q2 2024 earnings press release and attached financials (also furnished as 8-K Exhibit 99.1) .
  • Q2 2024 earnings call transcript, including Q&A .
  • Prior quarters for trend analysis: Q1 2024 8-K/press and call ; Q4 2023 call .

Segment disclosure: Paymentus does not report segments; revenue is presented on a consolidated basis .