Paymentus Holdings Inc

Previous wording

We are a leading provider of cloud-based bill payment technology and solutions. We deliver our next-generation product suite through a modern technology stack to more than 2,200 biller business and financial institution clients. Our platform was used by approximately 34 million consumers and businesses in North America in December 2023 to pay their bills, make money movements and engage with our clients. We serve billers of all sizes that primarily provide non-discretionary services across a variety of industry verticals, including utilities, financial services, insurance, government, telecommunications, real estate management, and healthcare. We also serve financial institutions by providing them with a modern platform that their customers use for bill payment, account-to-account transfers and person-to-person transfers. By powering this comprehensive network of billers and financial institutions, each with their own set of bill payment requirements, we believe we have created an enviable feedback loop that enables us to continuously drive innovation, grow our business and uniquely improve the electronic bill payment experience for participants in the bill payment ecosystem.

Current wording

We are a leading provider of cloud-based bill payment technology and solutions. We deliver our next-generation product suite through a modern technology stack to more than 2,200 biller business and financial institution clients. Our platform was used by approximately 34 million consumers and businesses in North America in December 2023 to pay their bills, make money movements and engage with our clients. We serve billers of all sizes that primarily provide non-discretionary services across a variety of industry verticals, including utilities, financial services, insurance, government, telecommunications, real estate management, healthcare and education. We also serve financial institutions by providing them with a modern platform that their customers use for bill payment, account-to-account transfers and person-to-person transfers. By powering this comprehensive network of billers and financial institutions, each with their own set of bill payment requirements, we believe we have created an enviable feedback loop that enables us to continuously drive innovation, grow our business and uniquely improve the electronic bill payment experience for participants in the bill payment ecosystem.

Previous wording

We define transactions processed as the number of revenue generating payment transactions, such as checks, credit card and debit card transactions, automated clearing house, or ACH, items and emerging payment types, which are initiated and generally processed through our platform during a period. The number of transactions also includes account-to-account and person-to-person transfers. The number of transactions processed during the three months ended March 31, 2024 increased approximately 24.7% as compared to the same period in 2023. The increase was primarily driven by the addition of new billers and financial institutions and increased transactions from our existing billers and financial institutions.

Current wording

We define transactions processed as the number of revenue generating payment transactions, such as checks, credit card and debit card transactions, automated clearing house, or ACH, items and emerging payment types, which are initiated and generally processed through our platform during a period. The number of transactions also includes account-to-account and person-to-person transfers. The increase in the number of transactions processed during the three and six months ended June 30, 2024 as compared to the same periods in 2023 was primarily driven by the addition of new billers and financial institutions and increased transactions from our existing billers and financial institutions.

Previous wording

Although inflationary pressures lessened to some extent in the second half of 2023, we did experience more normalized inflationary increases during the quarter ended March 31, 2024. However, the economic uncertainty and inflationary conditions continue to remain high and could have an adverse impact on our performance during the remainder of 2024. Inflationary pressure is resulting in higher average bills, particularly in the utility sector, and increased interchange fees. Where appropriate, we seek to adjust our prices to address the inflationary pressures, however our ability to do so typically lags behind the impact of inflation on our clients. While we made several price adjustments in 2023 as a result of the inflationary impacts on our business, we will continue to monitor and manage the economic environment in 2024 by working closely with clients on implementations and further price adjustments as necessary.

Current wording

Inflationary pressures continue to be volatile, and although we have experienced a general overall improvement and more normalized inflation in comparison to the trailing annual trends, the economic uncertainty and inflationary conditions continue to remain high and could have an adverse impact on our performance during the remainder of 2024. Inflationary pressure is resulting in higher average bills, particularly in the utility sector, and increased interchange fees. Where appropriate, we seek to adjust our prices to address the inflationary pressures, however our ability to do so typically lags behind the impact of inflation on our clients. While we made several price adjustments as a result of the inflationary impacts on our business, we will continue to monitor and manage the economic environment for the remainder of 2024 by working closely with clients on implementations and further price adjustments as necessary.

Previous wording

In general, contribution profit is driven by the number of transactions we process offset by network fees associated with processing those transactions. The amount of contribution profit per transaction may vary due to a variety of factors substantially outside of our control, including client size, type and industry as well as whether the client is a biller, financial institution or other partner. Contribution profit for the three months ended March 31, 2024 increased approximately 29.6%, as compared to the same period in 2023. The increase was primarily driven by growth in transaction count and volume driven by the addition of new billers and financial institutions and increased transactions from our existing billers and financial institutions, together with pricing improvements from customers related to our inflation management and the implementation of certain cost improvement measures.

Current wording

In general, contribution profit is driven by the number of transactions we process offset by network fees associated with processing those transactions. The amount of contribution profit per transaction may vary due to a variety of factors substantially outside of our control, including client size, type and industry as well as whether the client is a biller, financial institution or other partner. Contribution profit for the three and six months ended June 30, 2024 increased approximately 28.3%, and 28.9%, respectively, as compared to the same periods in 2023. The increase was primarily driven by growth in transaction count and volume driven by the addition of new billers and financial institutions and increased transactions from our existing billers and financial institutions, together with pricing improvements from customers related to our inflation management and the implementation of certain cost improvement measures.

Previous wording

Adjusted gross profit for the three months ended March 31, 2024 increased 31.9%, as compared to the same period in 2023. Adjusted gross profit improved in line with contribution profit. Adjusted gross profit as a percentage improved as a result of economies of scale. Adjusted gross profit is driven primarily by the same factors that impact gross profit with the exception of excluding the amortization and stock-based compensation recorded in cost of revenue. The increase in amortization was driven by additional capitalization of software costs.

Current wording

Adjusted gross profit for the three and six months ended June 30, 2024 increased 28.1% and 29.9%, respectively, as compared to the same periods in 2023. Adjusted gross profit improved in line with contribution profit. Adjusted gross profit as a percentage of contribution profit was stable for the three months ended June 30, 2024 and as a result of economies of scale, improved for the six months ended June 30, 2024. Adjusted gross profit is driven primarily by the same factors that impact gross profit with the exception of excluding the amortization and stock-based compensation recorded in cost of revenue. The increase in amortization was driven by additional capitalization of software costs.

Previous wording

(1) Other non-recurring income consists of a remeasurement adjustment relating to the purchase price of a prior acquisition.

Current wording

(1) Other income consists of a remeasurement adjustment relating to the purchase price of a prior acquisition.

Previous wording

Adjusted EBITDA is a measure of profitability and generally is expected to move in line with revenue, contribution profit, gross profit and adjusted gross profit. Adjusted EBITDA increased 135.5% in the three months ended March 31, 2024, as compared to the same period in 2023. The increase was primarily driven by growth in transaction count and volume driven by the addition of new billers and financial institutions and increased transactions from our existing billers and financial institutions, together with pricing improvements from customers related to our inflation management, the implementation of certain cost improvement measures and lower general and administrative expenditures primarily driven by lower insurance premiums.

Current wording

Adjusted EBITDA is a measure of profitability and generally is expected to move in line with revenue, contribution profit, gross profit and adjusted gross profit. Adjusted EBITDA increased 58.6% and 87.2% in the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023. The increase was primarily driven by growth in transaction count and volume driven by the addition of new billers and financial institutions and increased transactions from our existing billers and financial institutions, together with pricing improvements from customers related to our inflation management and the implementation of certain cost improvement measures.

Previous wording

The increase in free cash flow for the three months ended March 31, 2024 was primarily as a result of increases in cash generated from operations.

Current wording

The decrease in free cash flow for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily as a result of decreases in cash generated from operations.

Previous wording

(2) Other non-recurring income consists of a remeasurement adjustment relating to the purchase price of a prior acquisition.

Current wording

(2) Other income (expense) includes of a remeasurement adjustment relating to the purchase price of a prior acquisition.

Previous wording

The increase in cost of revenue was driven by the increase in revenue and transactions processed, as it consists primarily of interchange fees and processor costs, as well as other direct costs associated with making our platform available to our billers. These higher costs were partially offset by certain cost improvement initiatives.

Current wording

The increase in cost of revenue was driven by the increase in revenue and transactions processed, as it consists primarily of interchange fees and processor costs, as well as other direct costs associated with making our platform available to our billers.

Previous wording

The increase in sales and marketing expenses was primarily due to increased activities in sales and marketing and increase in reseller commissions including amortization of warrants.

Current wording

The increase in sales and marketing expenses was primarily due to increased employee-related costs as a result of increased hiring, including higher stock-based compensation expenses, reseller commissions including amortization of warrants and increased activity for go to market events and trade shows.

Previous wording

The changes in other income (expense) were primarily due to the increase in interest income, net as a result of higher cash balances held with banks for the three months ended March 31, 2024 compared to the same period in 2023 together with increases in the Federal Reserve rates.

Current wording

The increase in interest income, net was a result of higher cash balances held with banks for the three months ended June 30, 2024 compared to the same period in 2023, together with increases in the Federal Reserve rates.

Previous wording

The change in provision for income taxes as well as the increase in the Company's effective tax rate, which was 32.8% for the three months ended March 31, 2024 as compared to (57.9)% for the same period in the prior year, was primarily the result of permanent differences for disallowed stock-based compensation pursuant to IRC Section 162(m), state taxes and the impact of the full valuation allowance. In 2023, it was primarily the result of near break-even pre-tax income from operations, state taxes and the impact of the full valuation allowance and other permanent adjustments in addition to a return to provision benefit recorded in connection with a change in estimate of costs required to be capitalized under IRC Section 174.

Current wording

The change in provision for income taxes as well as the increase in the Company's effective tax rate, which was 24.9% for the three months ended June 30, 2024 as compared to 7.0% for the same period in the prior year, was primarily due to an increase in income before income taxes as well as the results of permanent differences for disallowed stock-based compensation pursuant to IRC Section 162(m), state taxes and the impact of the full valuation allowance. In 2023, it was primarily the result of near break-even pre-tax income from operations, state taxes and the impact of the full valuation allowance and other permanent adjustments in addition to a return to provision benefit recorded in connection with a change in estimate of costs required to be capitalized under IRC Section 174.

Previous wording

The increase in revenue was primarily driven by an increase in the number of transactions processed, which was driven by the implementation of new billers and increased transactions from our existing billers. Revenue increase was also driven by pricing improvements related to inflation management.

Current wording

The increase in revenue was primarily driven by an increase in the number of transactions processed, which was driven by the implementation of new billers and increased transactions from our existing billers. Revenue increase was also driven by pricing improvements.

Previous wording

Gross margin increased due to lower cost of revenues for other direct costs associated with making our platform available to our billers by certain cost improvement initiatives and economies of scale.

Current wording

Gross margin slightly increased due to lower cost of revenues for other direct costs associated with making our platform available to our billers by certain cost improvement initiatives and economies of scale, offset to some extent by a reduced margins due to the addition of large high volume enterprise billers to our customer base.

Previous wording

The increase in research and development expenses was primarily due to increased amortization of capitalized internal-use software development costs and an increase in employee-related costs, including benefits due to increased headcount and merit increases in annual compensation.

Current wording

The increase in research and development expenses was primarily due to increased amortization of capitalized internal-use software development costs and an increase in employee-related costs, including an increase in stock-based compensation.

Previous wording

The marginal decrease in general and administrative expenses was primarily due to lower cost of insurance premiums for our directors and officers and commercial and general liability insurance premiums, which were offset by increased stock-based compensation expense associated with employee equity grants and professional fees.

Current wording

The marginal increase in general and administrative expenses was primarily due to professional fees, legal fees and lease expenses, which were offset by lower cost of insurance premiums for our directors and officers and commercial and general liability insurance premiums.

Previous wording

As of March 31, 2024, we had $180.1 million of unrestricted cash and cash equivalents. We believe that existing unrestricted cash and cash equivalents will be sufficient to support our working capital and capital expenditure requirements for at least the next 12 months. Since inception, we have financed operations primarily through the sale of equity securities and revenue from payment transaction fees and subscriptions. Our principal uses of cash are funding operations and capital expenditures.

Current wording

As of June 30, 2024, we had $188.8 million of unrestricted cash and cash equivalents. We believe that existing unrestricted cash and cash equivalents will be sufficient to support our working capital and capital expenditure requirements for at least the next 12 months. Since inception, we have financed operations primarily through the sale of equity securities and revenue from payment transaction fees and subscriptions. Our principal uses of cash are funding operations and capital expenditures.

Previous wording

Our primary source of operating cash is revenue from payment transaction fees. Our primary uses of operating cash are personnel-related costs, payments to third parties to fulfill our payment transactions and payments to sales and marketing partners. Net cash provided by operating activities for the three months ended March 31, 2024 was $11.0 million. Net income was $7.2 million, adjusted for non-cash charges of $12.4 million consisting primarily of depreciation and amortization, stock-based compensation, amortization of contract assets and non-cash lease expense, which contributed positively to cash provided from operating activities. This was decreased by net cash outflows of $8.6 million used by changes in our operating assets and liabilities.

Current wording

Our primary source of operating cash is revenue from payment transaction fees. Our primary uses of operating cash are personnel-related costs, payments to third parties to fulfill our payment transactions and payments to sales and marketing partners. Net cash provided by operating activities for the six months ended June 30, 2024 was $29.0 million. Net income was $16.6 million, adjusted for non-cash charges of $26.0 million consisting primarily of depreciation and amortization, stock-based compensation, amortization of contract assets and non-cash lease expense, which contributed positively to cash provided from operating activities. This was decreased by net cash outflows of $13.6 million used by changes in our operating assets and liabilities.

Previous wording

Net cash provided by operating activities for the three months ended March 31, 2023 was $4.8 million. Net income was $0.7 million, adjusted for non-cash charges of $10.4 million consisting primarily of depreciation and amortization, stock-based compensation, amortization of contract assets and non-cash lease expense, which contributed positively to cash provided from operating activities. This was offset by net cash outflows of $6.4 million provided by changes in our operating assets and liabilities.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2023 was $31.2 million. Net income was $6.5 million, adjusted for non-cash charges of $21.3 million consisting primarily of depreciation and amortization, stock-based compensation, amortization of contract assets and non-cash lease expense, which contributed positively to cash provided from operating activities. This was increased by net cash inflows of $3.4 million provided by changes in our operating assets and liabilities.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2024 consisted of $9.3 million of capitalized software development costs, $0.1 million of purchases of property and equipment and $(0.1) million of net change in interest-bearing deposits.

Current wording

Net cash used in investing activities for the six months ended June 30, 2024 consisted of $18.4 million of capitalized software development costs and $0.3 million of purchases of property and equipment, which was offset by $0.1 million of net change in interest-bearing deposits.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2023 consisted of $8.2 million of capitalized internal-use software development costs and $0.1 million of purchases of property and equipment.

Current wording

Net cash used in investing activities for the six months ended June 30, 2023 consisted of $16.6 million of capitalized internal-use software development costs and $0.4 million of purchases of property and equipment.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2024 consisted of $0.5 million of settlement of holdback liability relating to a prior acquisition, which was offset by $0.1 million of proceeds from exercise of stock-based awards by employees.

Current wording

Net cash used in financing activities for the six months ended June 30, 2024 consisted of $0.5 million of settlement of holdback liability relating to a prior acquisition, which was offset by $0.1 million of proceeds from exercise of stock-based awards by employees.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2023 consisted of $1.0 million of payments on other financing obligations and $0.1 million of payments on finance leases.

Current wording

Net cash used in financing activities for the six months ended June 30, 2023 consisted of $1.7 million of payments on other financing obligations and $0.1 million of payments on finance leases.