Paymentus Holdings Inc (PAY) (Q1 2024) Earnings Call Transcript Highlights: Strong Start with ...
Revenue: $184.9 million, up 24.6% year-over-year.
Contribution Profit: $69.4 million, up 29.6% year-over-year.
Adjusted EBITDA: $19.8 million, up 135.5% year-over-year.
Net Income (non-GAAP): $12.2 million, or $0.1 per share.
Free Cash Flow: $1.6 million generated during the quarter.
Transaction Volume: 135.3 million transactions processed, up 24.7% year-over-year.
Average Revenue per Transaction: Remained flat at $1.37.
Adjusted Gross Profit: $57.6 million, up 31.9% year-over-year.
Operating Expenses (non-GAAP): $40.3 million, up 7.2% year-over-year.
Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Paymentus Holdings Inc reported a strong start to 2024 with significant year-over-year growth in revenue, contribution profit, and adjusted EBITDA.
The company experienced its strongest growth in six quarters, with first quarter revenue up 24.6% year-over-year to $184.9 million.
Adjusted EBITDA saw a substantial increase of 135.5% year-over-year, demonstrating effective cost management and operational efficiency.
Paymentus Holdings Inc ended the first quarter with a strong bookings and implementation backlog, positioning the company well for continued growth in 2024.
The company successfully executed its strategy, surpassing the Rule of 40 with a score of 58, indicating robust financial health and operational performance.
Negative Points
Despite strong financial performance, Paymentus Holdings Inc faces ongoing challenges from the broader macroeconomic and geopolitical uncertainties.
The company's contribution profit and revenue per transaction metrics are subject to fluctuations due to factors outside of management's control, such as changes in payment mix or network fees.
Paymentus Holdings Inc's operating expenses are expected to increase throughout the year, particularly in sales and marketing, which could impact profit margins if not managed effectively.
The company's tax rate increased to approximately 33%, which could affect net income and shareholder returns if it continues to rise.
While the company has a strong pipeline, the competitive landscape remains intense, requiring continuous innovation and strategic execution to maintain market position.
Q & A Highlights
Q: Can you discuss the EBITDA margins which expanded significantly this quarter but are expected to decline in the upcoming quarters? A: Sanjay Kalra, CFO, explained that the adjusted EBITDA margin was exceptionally strong in Q1 at 28.6%. For the full year, the guidance implies a margin of 26.1%, which is still an improvement from the previous year. The variation in quarterly margins is due to the planned increase in operating expenses, particularly in sales and marketing, as part of their strategy to enhance go-to-market efforts and support the conversion of their strong pipeline into bookings and onboarding.
Q: What are the reasons behind the slower growth in contribution profit compared to revenue in Q2? A: Sanjay Kalra, CFO, noted that while Q1 benefited from seasonality, Q2 does not, but it picks up due to implementations. The guidance for Q2 still shows a year-over-year increase of over 20% at the midpoint. The variability in contribution profit is influenced by factors like payment mix and biller mix, which are not entirely under the company's control.
Q: How is the Instant Payment Network (IPN) contributing to growth? A: CEO Dushyant Sharma highlighted that the IPN continues to fuel sales momentum, contributing significantly to a strong bookings quarter in Q1. The billing community's desire to integrate with Paymentus's platform for broad network access is driving this growth, although IPN still constitutes less than 10% of total business.
Q: What is driving the improvement in net revenue per transaction? A: CFO Sanjay Kalra attributed the improvement to better revenue per transaction from new billers signed at higher rates and a reduction in network fees due to effective cost management strategies.
Q: Can you provide insights into the customer mix and how it has evolved with the growth in new verticals? A: CEO Dushyant Sharma explained that while utilities remain a key vertical, Paymentus is seeing progress across other verticals like insurance, government services, and banking. The customer base is diversifying, and the company is attracting larger clients who previously might not have considered outsourcing.
Q: What are your capital allocation priorities, especially regarding M&A? A: CFO Sanjay Kalra stated that their priority is to reinvest in their own business to drive organic growth, particularly through sales and marketing. While they are open to accretive M&A opportunities that add shareholder value, there are no immediate plans for acquisitions as they do not currently see any technological gaps.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
