PAY - NYSE

Good day, and welcome to the First Quarter 2024 Paymentus Earnings Conference Call. This call is being recorded. [Operator Instructions]. At this time, I would now like to turn the call over to David Hanover, Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to Paymentus First Quarter 2024 Earnings Call. Joining me on the call today is Dushyant Sharma our Founder and CEO; and Sanjay Kalra, our CFO. Following our prepared remarks, we'll take questions. Our press release was issued after the close of market today and is posted on our website where this call is being simultaneously webcast. The webcast replay of this call in the supplemental slides accompanying this presentation will be available on our company's website under the Investor Relations link at ir.paymentus.com. Statements made on this webcast will 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 expectation or intent regarding our financial results and guidance, the impact of and our ability to address continued economic and geopolitical uncertainty, our market opportunities, business strategy, implementation timing, product enhancements, 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 captions Potential note regarding forward-looking statements and risk factors in our annual report on Form 10-K for the year-ended December 31, 2023, and our subsequent quarterly reports on Form 10-Q, including our Form 10-Q for the quarter ended March 31, 2024, which we expect to file with the SEC shortly and elsewhere in our other filings with the SEC. We encourage you to review these detailed forward-looking statements 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, non-GAAP operating expenses, adjusted EBITDA, adjusted EBITDA margin and non-GAAP net income and earnings per share. These non-GAAP financial measures, which we believe are useful in measuring our performance and liquidity should be considered in addition to and 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 of the most directly comparable GAAP measures in our earnings press release issued today and the supplemental slides for this webcast each available on the Investor Relations page of our website. With that, I'd like to turn the call over to Dushyant Sharma, our Founder and CEO. Dushyant?

Thank you, David. We are off to a strong start in 2024 with a great first quarter. We delivered year-over-year growth in revenue contribution profit and adjusted EBITDA, all ahead of our long-term targets of 20% top line and 20% to 30% adjusted EBITDA growth. We continue to have substantial momentum in 2024, which gives us added excitement about the remainder of the year and our long-term prospects. In the first quarter of 2024, Paymentus again delivered results that exceeded our expectations. First quarter revenue was $184.9 million, up 24.6% year-over-year. First quarter contribution profit was $69.4 million, up 29.6% year-over-year, our strongest growth in 6 quarters. Adjusted EBITDA, which as many of you know, is a significant financial metric for us, was $19.8 million, up 135.5% year-over-year. In addition to these outstanding results, we also exited the first quarter with a strong bookings and a strong implementation backlog that we believe position us quite well for a strong 2024. In the first quarter of 2024, we added $15.9 million in contribution profit over the same period last year. At the same time, we dropped $11.4 million or 72% of that growth to adjusted EBITDA. We are pleased that over the past few quarters, we have continued to drop a significant majority of incremental contribution profit dollars to our bottom line. We believe this demonstrates a key strength of our operating strategy as well as our ability to consistently expand our operating leverage without sacrificing growth or innovation. Execution of our disciplined strategy has once again allowed us to surpass the rule of 40%, doing so by a wide margin this quarter at 58%. As we have shared previously at Paymentus, our goal remains to continue delivering high-quality earnings alongside solid top line growth. We are proud of what we have achieved to date and over the last several quarters, and we expect to continue to execute our strategy and deliver long-term top line and adjusted EBITDA growth. Now I'd like to share some of our key first quarter business highlights and accomplishments. As I mentioned earlier, we finished Q1 2024 with a strong backlog and are very pleased with our year-over-year growth. Of course, all of this continues to be driven by the strength of our technology platform and our IP and ecosystem, which enables our clients to participate in a broad and diverse network by merely integrating onto our platform. Turning specifically to client activity. This was a great bookings quarter for Paymentus, both in terms of aggregate annual contract value and the number of clients signed. During the first quarter, we signed several notable and large new clients in a variety of verticals, including utilities, general services, transportation and logistics, government and financial services. As you can see from these bookings, our omnichannel platform allows us to continue to broaden our customer diversity and gain traction across new industries. Another area we continue to focus on is the implementation and onboarding of our strong backlog to drive even further growth. This effort is progressing well. And in order to support this, we continue to make incremental targeted investments in this area in both staffing and technology. We believe these investments, along with continually improving post-pandemic conditions, allowing for a more in-person collaborative process provide a good tailwind for us in this regard. We are realizing the benefits of our focus strategy and these targeted investments as evidenced by our success in implementing and onboarding new clients during the first quarter, including the launch of several large clients across various verticals, including multiple utilities, insurance, government agencies and financial institutions. We expect to make further progress in this area throughout 2024, consistent with our growth plans and internal targets. In addition to the financial execution of our core business, we continually think about ways to increase long-term shareholder value through what we call a strategic execution. One such example is our recently awarded patent on artificial intelligence. As you know, integration is one of our key strengths, and we have done thousands across a number of industries, resulting in deep experience and integration assets. While before AI was a mainstream buzzword, we conceived and filed a patent for an AI-based integration framework, which when combined with our significant experience in assets can bring tremendous operational efficiencies internally, while at the same time, provide our clients an ability to expand their use of our platform by integrating more of their processes with us. And the reason we are talking about this is threefold. First, we believe this demonstrates our forward-thinking culture looking ahead with a strategic focus on both defensive and offensive market strategies. Second, this AI-based framework, when fully integrated into our mainstream onboarding processes is expected to add additional benefit towards onboarding experience and speed in the outer years. And third, we believe the prudent deployment of AI generally can play a central part of our strategy, both internally by enhancing internal operating efficiencies and externally by enabling our clients to improve their customer experience and efficiencies. We believe that this type of strategic execution is possible primarily because Paymentus has the rare trait that usually exists in large tech companies. Our business has unique in year of visibility to deliver consistent shareholder returns but also allows us to execute strategically to create additional long-term shareholder value. In closing, we are proud to report another period of outstanding results that were ahead of our original expectations. At the same time, we continue to demonstrate our ability to increase operating leverage without sacrificing revenue growth or innovation. We also ended the quarter with a strong backlog and solid sales momentum, giving us greater visibility and confidence in our prospects for the balance of the year. We intend to remain focused and disciplined in onboarding our strong backlog, which we expect to continue to fuel our future growth. Now let me turn it over to Sanjay to review our financial results in greater detail. Sanjay?

Thanks, Dushyant, and thank you all for joining us today. Before I discuss our first quarter results and our second quarter and full year 2024 outlook, I'd like to remind everyone that the financial results I'll be referring to include non-GAAP financial measures. As David mentioned earlier, our Q1 press release and earnings presentation includes reconciliations of the non-GAAP financial measures discussed on this call to the corresponding GAAP measures. Both of these are available on our website. Turning to Slide 5. For the first quarter of 2024, we started off the year with another quarter of very strong financial results, driven by higher transaction activity from both new and existing billers. We believe these results continue to demonstrate the resiliency, stability and strength of our business. Our first quarter results included revenue of $184.9 million, contribution profit of $69.4 million and adjusted EBITDA of $19.8 million. Our results came in higher than we originally expected, and I discussed the drivers of our outperformance and strong business momentum in more detail shortly. This enabled us to once again exit the quarter with a strong backlog and cash position. Now let's review our first quarter financials in more detail. As I mentioned earlier, first quarter 2024 revenue was $184.9 million, up 24.6% year-over-year. This growth was largely driven by increased transactions from existing billers, the launch of new billers and increased activity from our instant payment network or IPM business. The number of transactions we processed grew to $135.3 million in the first quarter, up 24.7% year-over-year, largely in line with our revenue growth. Our average revenue per transaction remained flat at $1.37 year-over-year despite the addition of many large bidders throughout the past year. First quarter 2020 contribution profit increased to $69.4 million, up 29.6% year-over-year. This year-over-year increase in contribution profit reflects higher transactions from existing billers and the launch of new billers. Contribution profit in the first quarter of 2024 surpassed our expectations. In fact, it was our highest quarter in terms of year-over-year growth across the past 6 quarters. This outperformance during the quarter was primarily driven by higher transaction growth than we had initially expected and reflects growth from 3 key factors. First, we saw growth from existing billers who are seasonally strong in the first quarter, primarily due to adoption success. Second, we saw increased transactions from new billers that were launched in the quarter with incremental transactions driven by seasonality. And third, we realized the benefit of improved pricing from some billers as a result of our ongoing pricing review. Contribution profit per transaction for the quarter was $0.51, which was an improvement from $0.49 in the prior year period, primarily due to repricing efforts and biller mix, reflecting that the new implementations during Q1 24 had improved contribution margins versus the prior year period. As we have stated in the past, we view contribution profit as a secondary performance metric. Because it is subject to variables outside of our control, such as an increase in the average payment amount, changes in the payment mix, biller mix, CPI and card network fees, et cetera, that can significantly influence and diminish the utility of contribution profit on a quarterly and per transaction basis. First quarter 2024 adjusted gross profit was $57.6 million, up 31.9% year-over-year, slightly ahead of contribution profit growth as we have started benefiting from economies of scale. First quarter 2024 non-GAAP operating expenses increased as expected to $40.3 million, up 7.2% year-over-year. This increase was primarily due to increased sales and marketing expenses and research and development expenses net of savings realized in general and administrative costs. We expect further increases in sales and marketing expenses throughout the year as we continue to focus resources on the execution of our go-to-market strategy and increased investments to support conversion of our strong pipeline into bookings and onboarding of a strong backlog. These expectations are already incorporated in our guidance, which I'll review in more detail shortly. First quarter 2024 non-GAAP net income was $12.2 million or $0.10 per share compared to non-GAAP net income of $5.1 million or $0.04 per share in the prior year period. First quarter 2024 adjusted EBITDA was $19.8 million, up 135.5% compared to $8.4 million in the prior year. First quarter 2024 adjusted EBITDA represented 28.6% of contribution profit compared to 15.7% of contribution profit in the prior year. This very strong quarterly performance compared to the guidance we previously provided was primarily driven by strong growth in contribution profit and economies of scale. Approximately 72% of our year-over-year growth in contribution profit fell to the bottom line adjusted EBITDA, demonstrating the inherent operating leverage in our business. Related to this, once again, we also exceeded the Rule of 40 for the quarter, coming in at approximately 58%. This is a measure we take very seriously, and our team here monitors it very closely. This is our fourth consecutive quarter exceeding the rule of 40. Now I'll discuss our balance sheet and liquidity position on Slide 6. We ended the first quarter with cash and cash equivalents of $184.2 million compared to $183.2 million at the end of last year. The $1 million increase was primarily comprised of $11 million of cash generated from operations, offset by $9.5 million used in investing activities, primarily internal use capitalized software used to drive growth and innovation. And $0.5 million for financing activities, primarily for settlement of holdback liability for prior acquisitions. Note that the cash generated from operations of $11 million is net of $8.6 million invested in working capital, which is a normal seasonal trend as majority of prior year-end accruals are paid out during the first quarter. The company does not currently have any debt. Our free cash flow generated during the quarter was $1.6 million. Our days sales outstanding at the end of first quarter was 41 days compared to 43 days at Q4 2023, within our expected range. Working capital at the end of first quarter was approximately $217 million, an increase of approximately 5% from the end of Q4 2023. We had 126.9 million diluted shares outstanding for the 3 months ended March 31, 2024, compared to 126.5 million diluted shares outstanding for the 3 months ended December 31, 2023. The increase was largely due to improved average stock price during the quarter and to some extent due to vesting of employee restricted stock units and the exercise of stock options. Now I'll turn to our revised full year 2024 and Q2 2024 guidance for revenue, contribution profit and adjusted EBITDA on Slide 7. Before discussing full year guidance, I want to mention that we are continuing to follow the same prudent approach to guidance that we followed during 2023 as there is still a degree of uncertainty around the larger macroeconomic and geopolitical environments. For the full year 2024, we now expect revenue in the range of $737 million to $755 million, up 1.9% from midpoint of previous guidance. Contribution profit in the range of $281 million to $293 million, up 2.1% from midpoint of our previous guidance. And finally, adjusted EBITDA in the range of $71 million to $79 million, up 7.1% from midpoint of our previous guidance. As reflected on the right side of the slide, for Q2 24, we now expect revenues in the range of $178 million to $183 million. Contribution profit in the range of $68 million to $70 million and adjusted EBITDA in the range of $17 million to $19 million. During our past few earnings calls, we have provided long-term growth targets for both revenue and adjusted EBITDA over 2 primary financial metrics. We stated that our goal was to grow revenue at approximately 20% annually and to grow adjusted EBITDA dollars between 20% to 30% annually. The guidance we have provided today for the full year 2024 reflects the expected achievement of these long-term targets. Regarding contribution profit and operating expenses, which we consider secondary financial metrics. We plan to actively manage our operating expenses dialing them up or down as necessary, depending upon how contribution profit is trending throughout the year to enable us to remain a rule of 40 companies on an annual basis. We managed this quite well in 2023 and in the first quarter of 2024, and we believe we are well suited to manage this again in the current year, given our strong operating leverage. In summary, we reported exceptional first quarter 4 results. Throughout the past 4 quarters, we have consistently demonstrated our ability to generate strong revenue contribution profit, adjusted EBITDA, cash and bookings growth. This enabled us to end the first quarter with a substantial backlog. Based on the solid footing and strong visibility, we continue to believe we are well positioned for 2024. Thank you, everyone, for your attention today. And now I'll turn it back to Dushyant for final remarks before we open up the call for questions.

Thanks, Sanjay. In closing, we entered 2024 with a solid momentum from last year. And once again, I'm extremely proud that our team is clearly ahead of our original expectations. I believe this performance illustrates the strength of our operating model, our innovative technological platform and the resilience of our business despite the difficult macro and geopolitical environment. Sanjay just covered our guidance for the full year and the second quarter 2024. As I shared earlier, we feel very good about this guidance based on our performance to date and the strength of our backlog. And as I reflect on the overall business, especially as an investor, I feel great about where we are headed. We believe we have all the pieces necessary for long-term success and that we are just getting started. In essence, we are built and we are building something very special here. On that note, I also want to thank all of my team members for their continued efforts and dedication. And that concludes our prepared remarks. I'll now open up the line for questions.

[Operator Instructions]. Our first question comes from John Davis with the company Raymond James.

Sanjay, I wanted to start on EBITDA margins. It came in nicely ahead this quarter and expanded about 1,300 basis points year-over-year. I understand comps get tougher throughout the rest of the year, but the guide implies margins will kind of be down year-over-year and the back 3 quarters, if you will. So maybe talk a little bit about some of the stuff you're spending money on, and I appreciate some of those conservatism, but just trying to understand the puts and takes on margins through the rest of the year, given the full year guidance.

John, I would say that adjusted EBITDA margin, they definitely came very strong in Q1 at 28.6%. And for the full year as well, at the midpoint, you'll see we are at 26.1%. That's what the guidance would imply. This is still an improvement from last year what we delivered for the full year. I would say during the quarter, things could move around. And I would say in Q1, while in operating expenses, which is one of the reasons which you will see that is slightly changing, Q1, we have still not caught up with our operating expense plan. We are up only 7.2% year-over-year. Last year, for the full year, we got up 6.8% on OpEx year-over-year. And as we guided earlier, just 2 months ago, operating expenses planned for the whole year was to go mid-teens percent up year-over-year. So we have some catch-up to do in the remaining 3 quarters. That said, we are assuming we will be able to catch up for the entire OpEx plan in the year. We will have to make progress there, and we are actively seeking candidates to fill the right positions, which is mainly in sales and marketing. So that's, I would say, the biggest piece, which where you see a slight softness compared to Q1 in the outer 3 quarters. But again, the whole guidance is prudent based on all the macroeconomic factors and the geopolitical climate we all are in. So it's prudent, I would say. That said, we are marching on full plan to execute and deliver a strong year.

And Sanjay just one other quick guidance modeling question. So the 300 basis point decel in the 2Q revenue guide, I think makes sense given your historical practices around revenue guidance. but it also implies about a 1,400 basis point decel, I think from 30% to 16% in CP growth. I'm just curious what are the moving pieces there? Or why is the contribution profit growth so much slower in 2Q versus the revenue decel for the second quarter?

John, I think there are 2 questions. One, on the revenue and one on contribution profit. Let me take one at a time. I would say revenue, generally, when you look at Q1 and Q2 trends over the past years, Q1 and Q2 are pretty much similar because Q1, we get benefit due to seasonality. But in Q2, seasonality is not there, but we pick up due to implementations. They said, Q1 and Q2 are generally similar on top line, i.e., revenue. This year, what we experienced was our seasonality in Q1 was much better than expected. And hence, Q2 looks like it's a small few basis points drop. But had that have the strong seasonality not happen, you would have seen Q2 growing. That said, Q2 guidance is still up year-over-year at midpoint more than 20%, and we feel pretty good about how we are going on that. And still, we are not factoring a lot of implementations, which are in outer part of the year. But if things go well, the way it went in Q1, we might see an upside there. We're falling a prudent approach. Let me go on the second part of the question on contribution profit. And this stems basically from why we call contribution profit as our secondary metric. And the reason is, John, and as we tried to explain earlier, quarter-over-quarter, contribution profit could bounce around a little bit due to multiple factors. And that's one of the things which is not totally under our control. There's increase in average payment amount, changes in payment mix, biller mix, all these primarily business mix, I would say. This could make it happen that one quarter looks strong as the other quarter does not. And while I'm on the topic, I'd also like to say in Q1, we saw approximately 30% contribution profit growth year-over-year, which is higher than the revenue growth of 25% approximately. This has happened in the past as well. In fact, last year in Q3, it happened and Q1 and Q2 of '22, it happened. So at times, it could be higher than revenue at times it could be lower. But to end the topic, I would say for the whole year, revenue and contribution profit both are more than 20%, and they both are pretty much lowly aligned, and we are trying to still take a conservative posture in the calculation of contribution profit.

And at midpoint, we are on the route of 40 scale in the mid-40s.

We are 45% and 45.

And one quick one, last one for Dushyant . The IP you guys called out in the prepared remarks is a contributor to growth. Just curious of a quick update there, and just show are you guys willing to share what percentage of revenue that is today? It was noticeable you guys called it out in the prepared remarks as a contributor. So just curious for an update there.

The IP continues to actually fuel our sales momentum. As you can see, we have a strong bookings backlog. We had a strong bookings quarter in Q1 as well, actually, a very strong bookings quarter. And billing community, in general, wants to participate in the platform and the ecosystem by simply doing one integration with our platform and having access to it very diverse and broad set of network access points so that they can reach the entire customer body. So that's actually contributing to our growth. IP in itself is growing and growing well. And it still is not over 10% of our business, but it's going well and contributing well to our business.

Our next question comes from Dave Koning with the company Baird.

My first question, your net revenue per transaction was up nicely year-over-year. I know it was a pretty easy comp, but historically, the last few years, usually, net revenue per transaction has come down as you've grown. What's the reason behind that? And maybe as part of that network fees have been down, which is nice. Does that continue and keep helping that net revenue per transaction.

Dave, I would say there are 2 pieces to it. One is that the new billers we have launched in the quarter, which had a good seasonal impact. They were signed up at better ARPUs or said differently, a better revenue per transaction which kept the revenue per transaction also flat. Otherwise, generally, you see that becomes softens as well given we are signing large transactions. So that was one contributor. And the other 2, as you correctly pointed out, the network fees was a little low as well. That came a little soft. And given all the activities we have done in the last 1 year to manage that better. So overall, I think both these factors are contributing, which are helping getting the net contribution profit per transaction better year-over-year.

And then one other thing I just noticed, for several quarters, you've had a very low tax rate. It looked like this quarter, it was about 33% or so. Is that the number to think through now that you're like really profitable? Or is there some other rough tax rate we should be using?

Dave, I suggest for modeling purposes, please use our 25% of non-GAAP net income as the tax rate going forward.

Our next question comes from Darrin Peller with the company Wolfe Research.

Can you touch a bit even qualitatively on the customer mix and how it's looking today versus this time last year, just given the growth in new verticals in both the SMBs and across SMBs and enterprises. And then maybe just a little more on how implementations with large banks are going, what's your pulse on the desire for adoption. I know you touched obviously on the IPM, but in some larger partners like JPMorgan and others.

From the customer mix itself actually -- before I go there, I was alluding to earlier, that we are seeing great momentum and demand for our platform and the ecosystem and across the board and across the board even in terms of the industry, the size of the customers, utilities remains a very important vertical for us and a key vertical, but we are making progress in great progress in many, many other verticals, whether it's insurance, government services, consumer finance, banking and so on. And the customer mix itself, actually, the actual customer size is also increasing. The type of customers we are able to attract now to the platform would be those many times, they never thought that they would be outsourcing just because they couldn't find a platform as sophisticated and, frankly, as capable as our platform as they review the alternatives. So we are seeing some of the larger companies as well. In addition to that, I would say, as we shared in the prepared remarks, in this quarter, not only we were excited about the bookings we did in terms of the average or the total contract value or the annual contract value, we also saw the number of clients being pretty robust as well just because the variety of clients who are signing for our services. And in terms of our large bank partnerships, they're doing really well. And we are very proud of the partnership we have with JPMorgan and the JPMorgan Chase. And in terms of the IP in itself, it continues to remain strong, and the demand continues to remain strong especially in the mid-tier bank and the credit union markets.

Real quick follow-up on the merchant settlement, the MDL just regarding interchange. I mean any flow-through impact on you guys, we should just keep in mind? We didn't think it was as much, but if there was any of colitis worth asking.

I think your assessment is correct. First of all, let me just say this that we have great relationship with all card networks, whether it's Visa, whether it's MasterCard, American Express or Discover and frankly, other partners like PayPal. So we are very fortunate to have those cool relationships. In terms of this is specific settlement itself, I think the only thing I would say is anything that actually helps even slightly to improve our interchange rates is beneficial to us. But we haven't quantified anything in that regard.

Our next question comes from Will Nance with the company Goldman Sachs.

I just wanted to ask about your thoughts on capital allocation going forward, and I asked this in the last 2 quarters, you guys have had pretty strong performance, you're running well ahead of the rule of 40. And you've made several comments today about the strength in pipeline. I know this is a fragmented industry. And what are your thoughts on the opportunities for M&A longer term more broadly? And more specifically, you've done a little bit of bolt-ons in the past. And if you were to go down that route, would they be more focused on sort of complementary type M&A like Pavers back in the day? Or is there an opportunity for more scale-driven rollout?

Capital allocation priorities for us remain unchanged since what we've communicated in the past, very similar. We have a very good pipeline ahead of us. We operate in a very strong TAM business. We believe that our business growth is in investing in our own business, i.e., getting organic growth. So we want to invest our extra cash or capital allocation in our own business. So we are spending money in hiring sales and marketing and even working with resellers. So direct or indirect sales as far as that improves, that's where we think is the right place to spend money and get growth on. So that is our first priority. Second point I'd like to make on this is we do not currently have any technological gap. So we are not seeking any specific M&A initiative right now. That said, we get in by a lot of investment banks, we get teasers. And if anything seems interesting as far as that's accretive to the overall business and add shareholder value, we will definitely look at it and reach out to the Board and give it a serious thought. But we are not seeking anything right now. I think we are heavily focused on executing. And I think that's where our capital allocation strategy lies.

And then maybe just a question on some of the pipelines that you guys have mentioned several times. Could you guys maybe dive in a little bit on just the composition of the pipeline in terms of vertical mix and the size of the billers. It sounds like vertical mix contributed to maybe slightly better unit economics on the ones that were implemented this quarter. So just curious on if there's any kind of notable affirmations you would make about the implementation pipeline that you see today.

Our pipeline composition, I would say, is very similar to the way we see our backlog composition and which is very similar to the way we see our revenue composition as well. Said differently, our largest segment is utilities or vertical, and that which is still more than 50%. And the remaining 50% is made up of a bunch of verticals, insurance being one, government being the other. And we are seeing a lot of these new verticals we are trying to enter into, and we are very pleased with the diversification of that. And we are seeing it across the board. In fact, our pipeline is giving us much more comfort for the outer period as we think about our long-term plans for the company. So overall, our pipeline is strong, composition is great. I would say that we are seeing a good diversification on that mix. And in terms of implementation, I'd like to cover as well, the implementation pace actually is getting better. In fact, as we saw in Q1, our revenues came in ahead of what we were expecting. So implementation pace is doing really well. I think the Coridier is behind definitely and we are seeing the tailwind of that now catching up.

Our next question comes from Tien-Tsin Huang with the open JPMorgan.

It sounds like the repricing strategy is working quite well there. Is there more repricing across the book going forward? Have you addressed most of that relative to your plan? I'm just curious. I know you commented on retype transaction and better rates on or ARPU on new billers, but how about the overall book?

Overall, I would say it has now become a part of our regular process. Repricing, it was discussed pretty much at length when the company was going through inflationary pressures, and we were working with all the billers and we had to pass those increased costs to them. So it was kind of a separate process on its own. And I believe that was a pretty interesting topic in 2023 and even exiting 2022. But now the processes have streamlined so much that the repricing is now a part of our regular process. We review pricing, whether it's due to inflation or due to margins or due to many other factors. So I think it's a part of regular process. I would not call that as one-off pricing activity anymore. But at the same time, I'll say we are caught up in our process. And as you saw in Q1 itself, we saw some benefit of repricing, which is a part of internal initiatives, nothing to do with inflation.

My second question was just on the -- I know Will asked about composition on your wins. You talked about strong bookings, substantial backlog. Is there any issue or concern around replenishing that pipeline and backlog? I know Dushyant , we talked about that in the past. It sounds like there's a lot of deals to still win. Just want to make sure that's the case given where you are in the calendar year.

We are feeling good about our pipeline. We are feeling good about the long-term prospects of the business. The demand remains strong, and we are seeing great momentum actually in the market.

Our next question comes from Andrew Bauch with the company, Wells Fargo.

I know it's been hit on in prior questions, but I'm just trying to better understand the interplay here between the execution you guys delivered 4 straight quarters, pretty consistent growth with a more stable macro environment potentially leading to better implementation times and conversations with that replenishing that front book. So maybe if you could just give us a sense on the 2 to 3 things that you've done over the last year that's driven this consistent execution. And maybe if we were able to understand how much of the growth you're seeing now is part of that catch-up in demand.

Actually, I would say it is not a catch-up. Let me take the last part for us. It is more like we are still catching up to the type of demand or type of execution we used to see prior to the pandemic. So after the pandemic what transpired is that we are back to the way the business used to be where we were able to send our storytellers in front of our clients to educate the market on how they can improve their cost to serve and improve their customer experience using our platform and the ecosystem. And that is going well. As a result of that, we are signing clients of various verticals. In addition to that, our partnership ecosystem has started to produce for us and bring us new deals, new verticals and as a result of that, we have a very strong backlog. So front book is getting replenished. We are also implementing a lot of customers, which you also saw that during pandemic, we were somewhat affected, but now we are seeing that we are back to normalcy. So I wouldn't think that this is like a short-term success we are seeing. What we are seeing is return to our long-term trends, which we used to see prior to going public as well as -- and frankly, prior to the pandemic. And now we are back to what we expect to be a normal cadence here. And in terms of your other question, what 2 or 3 things you have done, I would say we have been very focused on making sure that we are able to get in front of as many customers as we can sign as many partnerships as we can, that's on the front side. And then on the back end, implement as many customers as we can and make sure that we listen and learn and understand what the post-pandemic world looks like and how do we need to adjust ourselves and our processes and our toolkits to make sure we can onboard the customers as well. And basically being very, very focused on making sure that the financial execution of the business from top line growth as well as the bottom line, improving on the operating leverage, we are able to continue to do that very successfully. So that's what has been the focus.

And so you throw the AI teaser in your prepared remarks, so I'll bite. What efficiencies are you anticipating, albeit as you said, in the out years that can come from our investments. And I think that, that patent really does show that testament.

This is still missing, the patent was just awarded like a few weeks ago publicly issued. So we plan to integrate those capabilities in our system. The reason we were trying to bring this out was if you're an investor in the business or thinking about investing in our business, you're looking at first of all, what is behind the current financial performance? And what's the long-term prospects of the business, what the strategy looks like for the business. And we just wanted to explain that despite the difficult macro the company was dealing with and the whole world was dealing with, Paymentus was still strategically executing and thinking through what are the different challenges and risks we see and implementation and integration was one of them. And then we were focused on how do we convert that into a great opportunity for us. And that is AI is one of the key factors there. So we believe that you will continue to see improving implementation performance from the company, and AI will be part of it.

Our next question comes from

My first question here is around the guide. Last call, you said that you were in a position to achieve the top end of the guide without signing any new clients. So with the new updated guide, can we assume that, that top end is also achievable in no new clients? Or was that some of the 1Q outperformance driven by new clients? Just how to think about that? And then I just have a follow-up.

So

And then just on the contribution profit dollars per transaction, I know the revenue per transaction was asked earlier, but I know it came up year-over-year, but it did step down a bit Q-over-Q. And just looking at 1Q last year, it was the trial in terms of contribution profit per transaction. So is it fair to think about this quarter as a low watermark and then see that step up through the rest of the year?

Well,

That concludes our question-and-answer session. At this time, I would like to pass it back to our management team for any closing remarks.

Thank you, everyone, for your time today, and have a great day. Thank you all.