Good afternoon, everyone, and thank you for joining us for the AvidXchange Holdings, Inc. Fourth Quarter 2021 Earnings Call. Joining us on the call today is Mike Praeger, AvidXchange's Co-Founder and Chief Executive Officer; Joel Wilhite, AvidXchange's Chief Financial Officer; and Subhaash Kumar, AvidXchange's Head of Investor Relations.

Before we begin today's call, management has asked me to relay the forward-looking statements disclaimer that is included at the end of today's press release. This disclaimer emphasizes the major uncertainties and risks inherent in the forward-looking statements the company will make this afternoon.

Please keep these uncertainties and risks in mind as the company discusses future strategic initiatives, potential market opportunities, operational outlook and financial guidance during today's call. Today's call will also include a discussion of non-GAAP financial measures as that term is defined in Regulation G.

Non-GAAP financial measures should not be considered in isolation form or as a substitute for financial information presented in compliance with GAAP. Accordingly, at the end of today's press release, the company has provided a reconciliation of these non-GAAP financial measures to financial results prepared in accordance with GAAP.

With that, I will now turn the call over to Mike Praeger..

Thank you, everyone, for joining us today. Joel Wilhite and I are excited to share AvidXchange's fourth quarter 2021 results and the continued momentum we are experiencing across our business, driven by our middle market focus and the four growth gears of our AvidXchange Business Flywheel.

Overall, we delivered another solid quarter of both operational and financial performance. Furthermore, we outperformed nearly every key metric we use to measure the progress of our business, both in Q4 as well as for the full year relative to our previous guidance.

These positive results reflect our middle market's steady demand for AvidXchange's industry-leading and differentiated business-to-business accounts payable automation software and payment solutions. As we advance our key growth initiatives, we are optimistic and excited about AvidXchange's future as we enter 2022 with a strong business outlook.

With that, I'll begin my formal remarks and key highlights from the fourth quarter and full year 2021 results. Our total net revenue for the quarter was over $69 million, an increase of 31% over Q4 of 2020. And we processed over 16 million transactions for the quarter, an increase of roughly 15% compared to Q4 of 2020.

Total payment volume was up in excess of 37% to over $15 billion in the fourth quarter of 2021 alone over the same comparable period. And our total transaction yield for the fourth quarter of 2021 increased more than 14% to $4.21 versus $3.68 per transaction in the comparable period last year. Turning to the full year 2021.

Our total net revenue for the full year was over $248 million, an increase of approximately 34% from a year ago. And we processed over 62 million transactions during the year, an increase of over 18% from a year ago. Total payment volume increased approximately 38% to exceed $52 billion in 2021 versus roughly $38 billion in 2020.

In addition, we processed over $180 billion of spend under management during the year, which was an increase of over 24% over 2020. And finally, in 2021, we saw a solid 13% increase in our total transaction yield of $3.98 versus $3.52 per transaction in the comparable period.

As a B2B accounts payable automation software and payment solutions leader targeting the large middle market segment of over 435,000 companies just in the U.S. market alone, our competitive advantage is fueled by a strategic framework, encompassing our AvidXchange Business Flywheel.

As a reminder, the first growth year of our flywheel outlines our delivery of great AP automation software solutions to our buyer customers. Proof of our gear one success can be seen in AvidXchange's continued dedication to enhancing our industry-leading vertical and horizontal accounting software integrations as well as our referral partnerships.

In 2021, we increased the number of customer referral partnerships by 50% to have over 180 partners today versus 120 partners a year ago. Over the same period, we broadened our accounting software integrations to 220, up from 210 a year ago. The second gear of the Business Flywheel maximizes the transactions managed on our platform.

In 2021, we reached $180 billion of spend under management, an increase of 24% from 2020. This was primarily due to increase in the number of AvidXchange buyer customers, which rose to over 8,000 in 2021, which is up from 7,000 in 2020 as well as our enrolled supplier customers, which increased to 825,000, up from 700,000 a year ago.

The buyer customer growth was driven by the strength across all eight of our industry verticals, highlighted by a strong performance in our real estate and financial services verticals, along with our bank channel partnerships, while we saw the green shoots of recovery in our homeowner association or HOA management market as we call it.

The third gear of our AvidXchange Business Flywheel is focused on further maximizing our industry-leading e-payment monetization and converting suppliers to begin acceptance of one of our various forms of electronic payment on the AvidPay Network.

In 2021, suppliers using e-payments on the AvidPay Network grew by 18%, which mirrors the growth of the addition of total suppliers in our network. This data highlights the rapid adoption of e-payments by suppliers and deepens our overall value proposition of the AvidPay Network for our suppliers.

The fourth gear of the AvidXchange Business Flywheel enables us to leverage data to drive increased value proposition of our existing products to both our buyer and supplier customers as well as develop new data-driven offerings altogether.

Examples include existing products such as AvidUtility, which further enhances our clients' ESG initiatives through advanced energy consumption analysis along with the utilization of data analytics to deliver invoice accelerator and cash flow manager offerings for our supplier customers.

In addition, we're really excited about the launch of our new AvidPay Network cross-border payment capabilities that we'll be releasing over the course of this year. Now let me take a step back and give you an idea of how uniquely purpose-built value proposition solutions address a significant pain point for our middle market customers.

I'd like to highlight a few customer case studies from three of our newest vertical markets, which include health care facilities, education and our media vertical markets, about how our solutions have positively impacted our customers' accounts payable and payment processes through driving increased efficiencies, visibility and cost savings.

In the health care facilities vertical, Risas Dental and Braces is a perfect illustration of the power of AvidXchange's AP automation software, coupled with our AvidPay Network. Risas Dental and Braces provides general dentistry and orthodontics for patients at more than 23 locations throughout Arizona, Colorado, Nevada and Texas.

The controller at Risas historically executed a very manual accounts payable process by printing paper checks or creating PDF pay stubs in the company's accounting software before manually reentering each of these invoice and ACH payments into their banking portal.

This cumbersome manual process took the controller and accounts payable specialist several days to complete. After implementing AvidXchange to automate and streamline their AP and payment processes, Risas was able to cut the time needed to manage its AP process by over 75%.

In the education vertical, we support Mountainland Applied Technology College with an enrollment of over 3,000 students located in Orem, Utah. Mountainland uses AvidXchange for their supplier invoice processes and payment execution.

The biggest driver for their automation was eliminating their use of paper, which dramatically reduced their paper handling, filing and storage costs. In addition, AvidXchange addressed one of the biggest challenges in the post-secondary educational space, which is compliance.

As a state-regulated entity, the college was able to follow their purchasing and payment processing policies electronically through AvidXchange, thereby ensuring high compliance and audit standards. And finally, AL Media is a politically-focused media agency.

As the consumption of media by voters continues to evolve, the challenge for AL Media was determining which media advertisements actually ran on air, with reconciling payments after the election was over, which historically was a very tedious manual and time-consuming process.

The solution AL Media turned to was FastPay, an AvidXchange offering designed specifically for the media vertical, to help pave the way for the 2022 political season.

FastPay Political+ was built specifically for political media agencies to better manage their reconciliation and refund process, providing an enhanced ACH or ACH+ payment solution and driving significant operational efficiencies by addressing the manual and time-consuming payment processes, which can significantly slow down the operations of running a political campaign and making timely payments.

I would now like to discuss our long-term growth, margin expansion and future profitability of our business before I turn it over to Joel.

Based on the size, growth, market leadership and long-term profit opportunities we see in the middle market segment, we believe we can compound our top line growth organically at a rate of 20%-plus over the next several years.

With less than 1% share of the total addressable market of around $40 billion served by AvidXchange today, we're still in the early innings of tapping the overall market opportunity.

Further accelerating our market penetration will require we continue to build out our horizontal software solutions and continued release of new integrations as well as we develop new industry verticals and international expansion.

In addition, we plan to complement this organic growth sales strategy with the selective use of strategic acquisitions as we've been successful in doing in the past. Moving in lockstep with our investments, we're highly confident in our gross margin expansion levers along with our path to profitability.

We believe that we'll achieve profitability by continuing to advance our invoice payment automation initiatives as well as continue to convert thousands of paper check suppliers to e-payment-accepting suppliers on the AvidPay Network.

This will further be complemented by revenue scale and operating expense leverage, resulting in steadily improving of our EBITDA as we move towards our long-term EBITDA margin of over 25%.

Starting with gross margin, we expect our non-GAAP gross margins to steadily improve from the low 60% range today to over 75% by continued reduction in unit costs through automation and expansion of our revenue yield. Given the current pace of progress, we're expecting to be approaching over 70% milestone by the end of 2024.

Key levers in our unit cost reduction include the use of AI, machine learning and straight-through processing to reduce manual efforts in invoice processing and payment execution. For example, in 2021, we automated 75% of the delivery of e-payments, which was up from 60% in 2020 and have high confidence in our continued automation initiatives.

Moving on to our operating expenses. Increased economies of scale will drive EBITDA margin expansion towards our targeted level of 25%. After 2022, our first full year as a public company, we also expect meaningful leverage on the G&A expense line.

Our significant investments in R&D for future growth and product initiatives, development will also taper off as a percentage of revenue as we enter in 2024. In wrapping up my prepared comments, 2021 was an extraordinary year for AvidXchange.

Apart from solid financial and operating results, we completed our transition to be a public company, along with bringing the significant amount of strategic capital to fuel our future growth.

We also completed a strategic acquisition that expanded our market coverage to include the media vertical while winning several different industry awards for our AP and payment solutions. 2021 also continued our path of progress with strategic partnerships.

We forged a new strategic commercial virtual card processing relationship with WEX to provide us with what we believe is best-in-class pricing and execution for virtual card processing.

This relationship will enable our two teams to collaborate together in driving overall e-payment adoption and deployment of dynamic payment offerings to increase supplier acceptance of e-payments. Also noteworthy, we renewed our existing relationship with Fleetcor, whose subsidiary Comdata has been a processing partner for us since 2013.

Additionally, we formed several new partnerships which provide significant benefit to AvidXchange, including our strategic customer distribution relationship with Bank of America, which is now marketing a branded AvidXchange AP automation and payment solution to their middle market customers.

Lastly, our AvidXchange culture continues to be a key competitive advantage for us in attracting and retaining the talent we need across the business to execute our growth and innovation priorities. This includes executive team leaders such as Joe Fox, our new Chief Product Officer, who we recruited in Q4 to lead our overall product strategy.

In addition, we added 20 other senior leaders to our business - in our business in 2021 as we prepare to become a successful public growth company.

We believe this combination of talent, market opportunity and our balance sheet capital will further deepen our leadership position in delivering innovative accounts payable and payment automation solutions to middle market companies, not only in 2022 but for many years to come.

As always, I look forward to updating you on our progress during future earnings calls. I will now turn the call over to Joel to provide more detail on our financial performance, key metrics our full year 2022 guidance.

Joel?.

Total revenue for the year is expected to be in the range of $296.5 million to $301.5 million. At the midpoint, this would represent a growth of over 20% on a year-over-year basis. Non-GAAP adjusted EBITDA loss in the range of $42 million to $48 million.

We expect roughly 47% of 2022 revenues in the first half, with the remaining 53% in the second half. We expect almost 55% of EBITDA losses to occur in the first half versus second half of the year, skewed by the factors Mike stated.

In summary, we delivered strong fourth quarter 2021 financial and operating results, and our momentum heading into 2022 is very encouraging. I'd now like to turn the call back over to the operator to open up the line for Q&A.

Operator?.

[Operator Instructions] Our first question comes from the line of Ramsey El-Assal at Barclays. Your line is open..

I wanted to ask about profitability. Profitability came in better in the quarter. The EBITDA guidance also exceeded our expectations. Give us your updated thoughts on the path to profitability.

Do you think given how things are stacking up, you could get there sooner than you anticipated?.

Maybe I'll start off, and Mike, feel free to jump in. Ramsey, hopefully, you can hear me okay. Just do a quick audio check..

Yes, I can hear you just fine, yes..

Perfect. Yes, great question, and we were happy with the quarter from a profitability standpoint. I think in Mike's comments, we sharpened up kind of the outlook so that it's understood that as we kind of exit 2024, we're flipping that EBITDA breakeven point.

And I think the key factors driving that includes our sort of steady consistent expansion of gross margins and the scale that we expect to see in G&A after the '22 year and then R&D on a go-forward basis as well. So altogether, we feel good about that path. And this past quarter was a good indication of our ability to sort of deliver that..

Got it, okay.

And a follow-up for me is what - is there any contribution or can you kind of characterize the contribution from newly launched products that you have baked into your fiscal '22 guidance? I'm trying to get a - form a better opinion about whether that would represent sort of upside those products kind of ramping faster than anticipated or how much is in there?.

Yes. Look, I'll start. Really, the '22 year for us is based on products we have in the bag today. And so - and you know how our revenue model works. What we've sort of sold as we finished the year of '21 really constitutes that revenue growth in '22, so we feel like we've got good line of sight, highly recurring revenue model.

And in terms of new products, we're at work investing around the flywheel. But in terms of revenue dependency in '22, that would be sort of de minimis..

Our next question comes from Will Nance of Goldman Sachs. Your question please..

I wanted to ask a question on payment volume. You've continued to kind of exceed our expectations. I think last quarter, you talked about inflationary impacts driving up payment volume beyond your expectations. I'm just wondering if you could talk about the drivers you've seen more recently.

And have you continued to see higher average order values? And as it relates to the 2022 guidance, how much of an upside bias could that put on your numbers if you were to kind of continue to see a continuation of these trends?.

Yes. So let me kick it off, and Mike, feel free to sort of come behind me. But overall - so you're right, Will. TPV for us was a good grower in the fourth quarter, 37%. Last quarter, we also had really strong TPV growth. There's a number of variability sort of drivers in that.

We did - we pointed to a little bit of a creep-up in average payment size in Q3. And what I would say is as we've kind of looked at the data, there's a wide sort of range of mix drivers across verticals, sort of the mix of payments as a percentage of that total sort of payment - or the actual payment mode within there.

And finally, there's a mix shift as payments grow as a percentage of total. So the - I wouldn't rule out the possibility of inflation in certain pockets here and there, but it's - we're sort of only a few months into this.

Wouldn't really call it a trend and wouldn't really call that we've meaningfully changed our estimates around average payment size as it goes forward into '22. So I really wouldn't point to a sandbag per se, right, or purposeful conservatism.

We really have a pretty predictable model based on the trends that we see in the business and we've used those trends to project '22.

So I'm not sure, Mike, if you want to add anything to that?.

Yes. Maybe add a little bit more color, Will, to get through Joel saying about the mix. We saw a different mix shift across the different verticals and one of those being the media vertical, which, as you know, is a new vertical for us, and some of the increase in payment size related to some of the political spending that we've been seeing.

So that would be an example of a little bit of a change in mix shift across the different verticals. And so it's hard to tell exactly how much of that is inflationary-based versus just in mix across the different industry verticals that we have. But certainly watching it closely..

Got it. Super helpful. And then just as a follow-up on the new questions I think was asked - sorry, the new products question that was asked previously. As it relates to invoice accelerator, I think you guys were in the market with roughly 10% of the suppliers.

How do you see that pilot progressing? And what sort of contribution do you think that could drive to the results over time?.

Yes. Maybe I'll start and I know Joel will probably try to add some context to it. So it's one of our fastest-growing parts of our business but still a small piece of the business. As it relates to kind of growing the number of suppliers, there's a couple of things that we're working on.

One is overall, just what I'll say is the - we're getting across the different gears of our flywheel to look at kind of the scalability as well as how we're using the data across all the different ways that we generate invoices to really get good at the data science and the analytics related to how we determine the eligibility of invoices.

And so that is - continues to be kind of a work in process that we're testing on different pockets of suppliers. So we will anticipate increasing that pool across the - over the course of the year.

The other element that we're just really excited about is the impact of the FastPay acquisition from a talent perspective of bringing us more talent related to D&A related to factoring lending based on the historical FastPay business. And we're really excited to have that talent of those teammates deployed in our business.

I think they're going to be value added to think about how we grow invoice accelerator over time..

Our next question comes from Brad Sills of Bank of America Securities. Your line is open..

Wanted to ask about the upsell motion. I know that bank telling core associates were software-only businesses with an opportunity to upsell digital payments.

How is that effort going over the course of the year? And just how would you classify that? And kind of a go-forward basis, is that still an opportunity?.

Yes, yes. Maybe I'll just comment briefly and then pass it to Mike. We - remember that there is an opportunity for us not just from the sort of the software-only customers that come to us via acquisition but also those legacy software customers that were acquired in the years before pay was introduced in 2012, 2013.

So good opportunity for us and steady progression. So we're kind of pleased with the ability to continue to sell back to that base.

So Mike, anything you want to add to that?.

Yes. And I think just in the last quarter, we saw really good growth related to some of those upsell opportunities across both, continue to see in real estate as well as within the financial services vertical.

And I think one of the green shoots, as we referred to it, from a recovery perspective is starting to see the acceleration of the HOA vertical, which really has been one of our eight verticals, probably the number one vertical impacted during COVID and now seeing more momentum across that vertical, and we expect that to continue throughout 2022..

Great to hear. One more, if I may, please. We're calculating a take rate here on payments around 30 basis points, which is right around where you've been tracking recently.

With the introduction of cross-border coming, should that change that or could that change that? Could we see the take rate go up? Just any color you can provide on what cross-border could do to that take rate over time..

Yes. I think that's a great question, Brad. So one of the things, just to remind everybody, is today, across the value change business in our eight verticals, we don't have large pockets of cross-border demand within our existing customer base.

And so this has really positioned us for future international expansion as well as other verticals and attracting customers that do have that cross-border need going forward. So it's not like we're sitting on a large stack of transactions that we're not monetizing today. We expect that there will be some of that but not a meaningful number.

So it's really about our future vertical expansion strategies where we'll see the benefit of having our cross-border product offering. And so the - what I would say is that we expect to see continue to be kind of a slow buildup driver to our overall growth over time.

But I would not expect the kind of a significant kind of onetime kind of monetization once we release the product is we're not expecting that..

Our next question comes from Darrin Peller of Wolfe Research. Please go ahead..

Congrats on finishing up your first year as a public company. Mike, I want to touch on the customer adds going from 7,000 to the 8,000 number. And just maybe you can help us, first of all, be clear on what was organic versus any inorganic contribution of that.

And then really the driving force between last year and this year and what we can expect going forward in customer adds.

What's embedded in your guidance? And what are the biggest drivers in your mind and the value proposition that you're seeing the most traction with in terms of customers?.

It's Joel. Maybe I can some of those numbers questions and then kick it to Mike. So yes, we did publish our update, which we plan to do on an annual basis. Our total count of buyer customers increased from 7,000 last year to 8,000 at the end of this year.

And again, when we look back over the year, we saw strength in real estate, financial services, also our bank channel and beginning to see kind of green shoots in the HOA vertical as we kind of get on the other side of some of the caution exercised across the middle market, given the pandemic.

Your question about organic contribution, the core buyer count was included in the starting point and the FastPay, just given the nature of the size of the customers added, think of like less than 10% of that increase attributable to FastPay.

Mike, anything else you want to add to that?.

Yes. So I think in terms of kind of drivers, one of the things that we're just really excited about is historically, about 60% of our new prospect demand gen was driven by in-person pre COVID and these big industry trade conferences, user conferences, things like that. And then, obviously during COVID, it moved to 100% digital.

But we do know that across the middle market, that CFOs have been probably more slow than the small business market to adopt new transformative technologies for their back office. And we are excited about seeing the return to in-person events again this year.

Pretty much every one of the accounting systems that we're deeply embedded with is to have an in-person event this year. And so those are really positive for us in terms of kind of that demand gen focus.

And so although we had a great year in terms of customer adds, we think that dynamic of demand gen of getting back to more of a normal cycle, of balance between kind of in-person and digital demand gen is going to pay dividends for us as we come out of the COVID cycle..

All right. That's helpful, Mike. I just want to follow up with the algorithm that's embedded in your outlook.

When we think about the forecast for your 20% revenue growth rate, the building blocks, including, again, going back to customer adds and maybe what you're thinking about from that perspective versus where you are now on payment monetization versus where that can be by the end of the year or any other major drivers you think worth calling out..

Yes. Darrin, I'll start off, and Mike, feel free to mop up. But I mean, so - the question about the growth algorithm. So we've talked about fairly consistently, we feel like this is a good solid 20-plus percent grower over time. We have a number of levers available to us.

This past quarter, we expanded our revenue yield in addition to adding meaningful volume year-over-year. Keep in mind, I think we've laid the groundwork when we gave guidance that Q4 was a little bit more of a tough compare in the year-ago period because of kind of the COVID recovery.

So if you're comparing kind of what underlying growth rates we're using for '22 versus what we saw in the fourth quarter. But I would just step back and say we've got great revenue visibility when we entered the year. Most of that business is already sold.

We understand those volume characteristics and feel really good about the guidance we've put out..

Yes. And I think when we think of kind of at least the metrics that we're driving in the business, it starts with continue to increase that transactional yield number that Joel referenced and then combined with just focus on total spend on management.

So that's a combination of both new buyer customers we're adding as well as the new supplier customers that we're adding that kind of makeup that number. And then probably the last one is then just kind of that net retention number of ended being 107%. And how do we to increase that number as we move forward.

So those are the three kind of, I'd say, big metric drivers that we're focused on internally in terms of driving that growth up..

And it's a mix among them, I guess, and it's pretty balanced..

Our next question comes from Andrew Bauch of SMBC Nikko. Your line is open..

Just wanted to check in on some of the underlying health of the verticals that you operate in or the verticals that you serve. Obviously, there's clearly some supply chain dynamics that they're probably facing.

So anything you're hearing from your customers on the ground as far as economic trends as we enter a pretty uncertain period for inflation and the like?.

Yes. Maybe so let me just make sure I got the question.

So just what's going on in our verticals? What conditions do we find here? And how might that impact our business as we move into '22? I think if anything, one thing that comes to mind is sort of the - to the extent that inflation is playing a role in these verticals and the need to kind of find ROI and efficiency in the back office, that we think that could be a catalyst.

But apart from that, Mike, anything vertical-specific that you'd comment on?.

Yes. I mean, I think each vertical has its own little kind of cycles that they operate in. But kind of going back, our four most mature verticals has been real estate, HOA, construction, financial services. We expect these really solid contributors. And then really excited about media. And it's a new vertical for us to FastPay acquisition.

And one of the unknowns for us this year is the impact of kind of the political cycle and the impact that may have within that media vertical, which is going to be one that we're going to watch closely.

And then our other three emerging verticals that are new in the last, call it, 12 to 18 months, being health care facilities, social services and education, I think we're certainly seeing some good growth opportunities but they're emerging verticals and they're new.

So I think we have a healthy balance of going deeper within our mature verticals along with the opportunities that we see in the emerging verticals. And probably the most interesting one is going to be watching what happens in our media vertical and any impact that the political cycle has on the media spending they're going to see..

Great. And then one more question. Operating in the middle market obviously requires a different level of sophistication than the SMB or customization for larger customers.

Could you speak to how you guys are differentiated within those verticals and are able to help deliver a more robust and complete solution to clients that may need additional type of features?.

Yes. So I kind of think of it as that we're purpose-built for the middle market. And what does purpose-built for the middle market mean? It's kind of firm, I got to think that it's kind of five buckets. The first is our feature set.

And I think the feature set is different for middle market than for a small business or enterprise related to the dynamic kind of approval workflow, support for more sophisticated cost center allocations, coding. Most of our customers operate with multiple accounting systems as an example.

So the feature set related to the product itself is different and, in many cases, it's somewhat nuanced for the different verticals of the middle market.

The second big one is the integrations, right? And you guys have probably heard me say this before, but I'm like the kid around at different industry conferences with both the Bill.com and the Coupa team because they really have it easy from the standpoint of small business where they have to integrate to QuickBooks and Enterprise has to integrate Oracle, SAP, maybe some JD Edwards and Workday.

And meanwhile, in the middle market, we're supporting over 220 different accounting system integrations today and growing, focused on the different verticals. The third one being the payment network.

And so the payment network is, again, very focused in the middle market of supporting really, what I'd say, supporting the buyer customers of the middle market and the suppliers that they use. So again, it's kind of custom purpose-built for the middle market. And then you have kind of the - when I say go-to-market strategies.

And within the middle market, CFOs want to understand how it works for their particular business process within their industry vertical and historically have attended user conferences and industry trade conferences to kind of interact with partners such as ourselves.

And so that's a very different dynamic than, say, a small business where it's a virtually 100% digital process. Now our demand gen comes digitally and most of our sales process is virtually through an inside model, but you typically have more of a demo solution consulting type of sales process.

And then the last one is just around the setup and configuration of the different dynamic workflow processes, testing all the integration in our base, things of that nature that are very different.

So I think one of the best kind of stats or metrics that I think gets at the complexion between the different markets is just the average revenue per customer. And so within the middle market, we see an average of a little over $50,000 of average revenue per customer.

And I think would say that number for them is about 1,500 and certainly for the enterprise side, the Coupas of the world, it's probably north of $500,000. So I think that gets at some of those differences between the middle market segment versus small business and enterprise..

Your next question comes from Tien-Tsin Huang of JPMorgan. Your question, please..

Just listening to your answers, everything has been really helpful. I was just curious thinking about the outlook, client growth, that kind of thing with inflation here.

How does that - or how might that change the buying decision for some of your prospects? Could it - I'm just thinking about sales cycles and the sense of urgency for these mid-market companies to automate with Avid. Does it change the storyline at all in your mind, Mike? Just curious..

The - I think it's a great question and one that we talk about a little bit internally. I think it actually helps our process from a standpoint of it puts more pressure on companies thinking about where they're adding people. And if they can eliminate future adds through automation, that's a positive driver.

And so we believe that the increase of expense controls, things of that nature, specifically comes with more inflationary environment, we think, is going to be helpful in terms of evangelizing our story of doing more with less.

And one of the biggest characteristics that we have across our entire client base of now 8,000-plus customers is that they're able to grow without adding back office staff. And so that message is one that we're certainly evangelizing in the marketplace..

Yes, that makes great sense. I appreciate that. Just my quick follow-up, and just thinking about your own expenses and your thinking around investing here. I noticed that the EBITDA loss that you're projecting is a little bit wider than revenue.

Are you contemplating some discretionary investing here? What puts you on the high or low end of that based on what you can control?.

Yes. Tien-Tsin, maybe I'll just add a little bit of color to what you're seeing in our guidance. And again, we were kind of pleased to deliver better-than-expected EBITDA results in the fourth quarter. We do have a little bit of a widening loss to better than what we had previously anticipated.

And really what we have in our first full year as a public company is a couple of dynamics.

One, sort of that full first load of sort of public company readiness costs, whether it's the SEC reporting side, compliance side, a number of other things that we're sort of kind of put in place late in - midway through '21, where there's really meaningful scale as you sort of leave '22.

And the other thing that I would say is we really have a number of important investments that have been building from an R&D perspective, back to investing all around the flywheel for the buyer and the supplier, our platform readiness for invoice accelerator and things that drive down operating costs or unit costs in support of that expanding margin.

So hopefully, that gives you a little bit of sense of kind of the investments we have on tap for '22..

Your next question comes from Bryan Keane of Deutsche Bank. Please go ahead..

Just want to ask on transaction yield, Joel. When we look at it for the first three quarters of the year, it accelerated really actually last - at least the last four quarters, just looking at the slide. And then this quarter, the growth sequentially didn't grow as much. It just moderated slightly.

And I'm thinking about next year as we build our models.

How much can we expect - what's a more normalized kind of growth rate for transaction yield? And any puts and takes when we look at it sequentially that move the numbers around, especially when we went from Q3 to Q4?.

Sure, Bryan. Let me kind of take a crack at that question from a couple of different angles. So we were pleased for Q4, to your point, sequentially, we saw a nice uptick in that yield as about $0.15 or $0.16 in the sequential period.

Most of that was based on just continued steady improved organic sort of yield on the software and the payment side, so call it, $0.10 or $0.11 of those pennies and then a smaller contribution through the combination of overall mix and then an inorganic contribution as well. So that's kind of the sequential.

On a year-over-year basis, we did have about 53 points of expansion, about half of that being mix and pay yield. Some of that is a little bit of recovery from the COVID year, keep in mind, as you're thinking about the outlook for '22. The other half of that would be inorganic contribution.

So again, what we would guide is sort of steady transaction yield expansion over time. Just keep in mind, a portion of our expansion this year, a little bit of COVID benefit in the full year, year-over-year and then some inorganic but good, steady organic expansion, both on the software and on the payment side. Hopefully, that helps..

No, that's great. And just as a follow-up, I noticed that the suppliers jumped paid via the network. I think it's 825,000. I think the last time we saw that number was 700,000-plus.

So just thinking about how much of that is organic and then growing that going forward, is that still something that can scale at the kind of rate we've just seen up to 825,000?.

Yes. So Bryan, good question. I'm glad you asked that question because I didn't have a chance to comment on that earlier. It's all 100% organic. So one is the supplier growth is all organic.

And I think it's a real testament to our strategies that we're using to how do we continue to penetrate the pool of paper check acceptance suppliers and to accelerate that conversion to have them begin accepting electronic payment methods.

And so one of the things that we're really working to do this year, and it's a benefit of some of these new partnerships that we put in place with WEX, KeyBank, Comdata as it relates to giving us more flexibility to create new payment types as well as configurations of different forms of, say, virtual card as well as our AvidPay Direct create unique value propositions that may be particular to a subset of suppliers that we can continue to dynamically manage.

And so we're very focused on what's the right value proposition compared to - along with the right price point to allow suppliers to make that move from paper check to electronic. And I think we're certainly seeing the impact of that in the growth of our supplier base.

So we expect that we're going to have more tools at our arsenal going forward as part of some of these new partnerships and new marketplace..

No, that's great. Congrats on the execution..

Our next question comes from Josh Beck of KeyBanc. Your question, please..

I wanted to ask a little bit about sales cycles and what you're seeing there. Mike, earlier, you mentioned that as you go back to in-person, that's been a really important lead gen in prior years pre COVID. So I'm just kind of curious if that could help the sales cycle, if you could bring in more leads.

Just what could be some of the tailwinds from seeing more in-person..

So maybe I'll answer in kind of two buckets. One is when somebody raises their hand and says, hey, we want to be part of your sales process at AvidXchange. That has remained remarkably consistent across really a lot of verticals that's typically a 60- to 90-day sales process that we've seen be executed and that's been fairly consistent.

Where the big opportunity is that we see going forward is getting back to the - where the lead originally comes from and having it move more towards a balance of in-person events compared to being 100% digital. I think we delivered the results that we did last year in a 100% digital environment for the most part.

And for example, pre COVID, we attended about 100 in-person events on an annual basis. And during COVID, that went to close to 0. And this year, the team anticipates covering about 80 of those type of events.

So that return to kind of more of an in-person balance, we think, is going to pay dividends in terms of accelerating the top of the funnel and increasing our demand gen efforts by having a nice balance between digital and these in-person events..

Really good to hear about the calendar for this year. I wanted to maybe a follow-up question for Joel. Just thinking about the 24 breakeven. It doesn't sound like this year has a lot of newer product contribution, if you will and when we think about invoice accelerator and cross-border.

I think once we start to look out further, perhaps that's a bigger factor.

So should we be thinking about those types of products as additive to the contribution margins, given that it's probably already an existing customer? Or any color you can offer us on those points?.

So here's the way I would sort of take a crack at answering that, Josh. We pointed to kind of exiting '24 on an EBITDA breakeven basis. We also talked about '22 largely good visibility and not meaningfully dependent on new products.

But as we move from here through the next few years, we expect to see continued revenue yield and unit cost improvement as we move from kind of lower 60s to upper 60s, approaching that 70% gross profit. And some of that is driven by investments we're making around the flywheel.

So for example, we do expect to continue to add value to both buyers and suppliers. We expect that e-payment mix to continue sort of step up. I think over the sort of multiyear view, we think of sort of a steady growth in that TPV yield is reasonable. Things like IA to your point, small today, but we expect growing in the next few years.

So those things add - continue to support revenue growth but also add kind of gross margin expansion as well. And those new products that you referenced play a more meaningful role as you get into '23 and '24..

Your next question comes from Brent Bracelin of Piper Sandler. Please go ahead..

I guess Joel, we'll start with you here. Relative to the 20% growth outlook for the coming year, how should we think about the growth trajectory across payments versus software? I asked because I think software grew faster than payments in 2020. Payments grew faster than software in 2021.

And so what are you kind of baking into the guide? It looks like slightly tougher comps on payments in the coming year ahead.

But love any color you can give us as you think about what grows faster in 2022, just given the two different trends we saw in '20 and '21?.

You bet. Yes. No, that's a fair callout. And it's safe to say that we do expect to see payments growth to slightly outpace that software growth. Again, a number of opportunities to drive that, including some of the important partnerships that drove that shift, whether sort of RealPage, Concur and otherwise.

And so we sort of see that continued sort of payment growth being slightly ahead of - on the software side..

Super helpful there. And then Mike, as a follow-up, you talked a little bit about one of the levers being this conversion from paper-based checks to digital e-payments.

What are the levers that you're thinking about that could accelerate the conversion? I know in the past, you talked about the mid-market customer actually using the paper check as part of the workflow, part of the business process. And those are hard things to change, but was just curious.

Are you thinking about the levers there that potentially help customers accelerate that conversion from paper to digital? Any thoughts there would be helpful..

Yes. No, that's a great question, Brent. And so first of all, within kind of our product investment area, we have kind of our new, we call it, cash flow manager tools that are being released this year. And with that, it provides a focus on increasing the value proposition for those supplier customers.

And so that incorporates tools to provide better visibility to their both invoice and payment status as well as access to the invoice accelerator. So that will be a continued kind of focus for us.

But the - probably the biggest component is going to be us continuing to create new different types of payment modalities both in virtual cards as well as our [pay directs] where we have different types of delivery of data in formats that suppliers are looking for at different price points.

And I think you have that combination of increased number of payment modalities focused on finding that right mix of value proposition. So kind of a combination of those factors is what we are excited about, what we're seeing kind of the impact on growing the number of suppliers that we have on the network..

Our next question comes from Timothy Chiodo of Credit Suisse. Your line is open..

I wanted to touch on some - you've mentioned this a few other times that might relate to some of the strong supplier growth that you've seen. You talked about with Mastercard, your relationship with them, and the ability to create more custom or more flexible interchange structures. I was hoping you could just talk around the mechanics of that.

How does that come up? Is it a certain vertical of suppliers that maybe have really high ticket sizes? What does the discussion sound like? And then, of course, I'm assuming the result is more electronic payments volumes for you, more willingness to accept the interchange rate from the supplier and it's sort of a win-win all around..

Yes. I think you've got the punchline right. Kind of the tactics are looking at what would be the characteristics in which the supplier would move from kind of paper check acceptance to an electronic payment that they pay for and have it be offset with a value proposition.

And one example is that we just recently worked with a large freight company who historically, the 250, 260 basis point standard interchange didn't work for their cost structure, but we were able to agree at 140 basis points to create a straight-through process that it was 100% kind of auto-reconciled, sort of straight-through process.

It didn't require any human intervention on their end to accept the payment and for that efficiency of the pay 140 basis points for it.

And so that is a perfect example on how we're working to configure different interchange levels along with value proposition in terms of how suppliers need to receive their electronic remittance data to create an efficient process on their side.

And we're seeing great examples of that across different segments of suppliers and believe it's going to be one of those levers that we use to continue to try. Today, we're roughly at 40% of all the transactions that go through the AvidPay Network, where it will monetize and how do we continue to drive that upwards over time..

Okay, excellent. And if I could squeeze in just one, last one. I know this stuff came up numerous times around inflation.

I just wanted - did you guys put a finer point on just around your inflation assumptions for the fiscal 2022 guide? Or should we just assume that it's not much and if you continue to see inflation, then perhaps there's a degree of conservatism baked in?.

I would - Tim, I would say the latter, maybe to the exclusion of that final phrase. So like - again, it's - we do see some variability in the average payment sizes and we have seen some very recently. We can - there's a number of drivers.

Mike mentioned the inclusion of FastPay, given the media segment with higher payments and some shift around payment modes, et cetera. So to some degree, it may be at play. And to that degree, it would be factored in our aggressions that give us the projections for volumes for next year.

So it's - but I just wouldn't point out that it is meaningfully significant at this point..

And at this time, I'd like to turn the call back over to Mike Praeger for any closing remarks.

Sir?.

Thank you. I just want to say thanks to kind of our analyst community. Great questions, and we're excited to complete not only our second earnings call as a public company but also our first full year.

And looking forward to 2022 as we move out of the COVID overhang and starting back to more of a normalized business environment for our middle market customers. And excited to spend time with you on a quarterly basis going forward. So with that, operator, I think we're ready to close the call..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..