Michael 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 today. 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.

Also, please note that the company undertakes no duty to update or revise forward-looking statements. 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 from 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.

I would now like to turn the conference over to Michael Praeger. Please go ahead..

James Sutton as our Chief Revenue Officer; and Doug Anderson as our Chief Product Officer, while elevating Dan Drees and John Feldman to the roles of President and Chief Operating Officer, respectively.

Overall, I am very pleased with the leadership team that we have built and feel that we are well positioned as we focus on executing the next chapter of our journey to attain our goal of reaching $1 billion in revenues in the coming years.

With those highlights, I want to spend the remainder of my remarks on our product and platform innovation initiatives in 2024, both of which fall under Gears 3 and 4 of our AvidXchange Business Flywheel. We are excited about the development of our new spend management platform.

Currently, virtually all of our buyers’, customers’ invoice-based expenses are processed through our platform, as we are the system of record for our customers’ invoice transactions with the remainder of the non-invoice-based expense transactions being processed outside of our system, either through manual processes or through other third-party software applications.

Our new spend management offering will tackle those remaining non-invoice expense transactions. However, our approach to spend management is highly differentiated and purpose-built for the middle market.

Whereas traditional spend management programs are focused mainly on travel and entertainment expenses, ours will be focused on managing functional team level procurement first, along with managing travel and entertainment expenses for our customers. It will also be managed at the point of purchase with real-time syncing, coding and approval status.

And most importantly, our spend management module will be highly integrated with our core accounts payable invoice suite, leveraging our GL coding and approval workflow capabilities along with having centralized expense and data reporting for all of our customers expenses in one platform.

Both invoice and non-invoice transactions, which is extremely important in the terms of driving adoption, cross-selling, interoperability and user experience. We expect that our spend management offering should result in high attachment rates and nonlinear growth contributed while driving higher TPV yield in future years.

There are lots of different use cases for the product. One, for instance, could be a property manager employing the card to purchase a faucet and the transaction immediately synchronizes with our AP solution.

This, we believe, will provide finance leaders a holistic view of virtually all expenses that occurs across the company, displacing either displacing either personal cards without proper controls or petty cash.

With our offering, this ensures that their spend – would be in compliance with each customer's business rules, including budgets and expense categories, as we monetize transactions from both virtual and physical card volume. The platform is planned for initial rollout with select customers in the latter half of 2024, and then scaling in 2025.

2024 is also the year when we plan to ramp key functionality of our new payments platform, which is the foundation of our AvidPay network. This is an effort that has been part of our product roadmap for the last several years.

We believe the new capabilities of our payments platform are transformational in the way our customers experience managing their payments and the way we operate.

A critical dependency in our ability to advance ePayment adoption is to create new payment modalities through real-time configuration, combining pricing terms, speed of settlement, access to remittance data and payment acceptance automation as opposed to software development dependencies.

Our new payments platform is designed to unify disparate systems and operational processes within a single platform to deliver the best supplier and buyer customer experiences.

With our new platform, we'll be able to be well positioned to guarantee delivery of critical payments on time, despite potential delays of invoice approval by our buyer customers. Second, we believe that we can expand our payment footprint to non-invoice-based transactions such as loan, leases and various other tax payments.

Third, we will be able to create new payment products real-time, based on speed, remittance data, pricing, automation, et cetera, and therefore drive greater ePayment adoption for our buyers and suppliers.

And finally, with our new payment platform, we believe we'll not only be able to enhance revenue through greater yield, share of payments wallet, but also improve the cost structure in both hard and soft operational costs, including the reduction of paper check payments. In closing, we believe we are well positioned for 2024.

With our 2023 building blocks in place, the five themes which drove our success in 2023 will continue to bear fruit for us in 2024 and beyond, coupling our industry leadership with highly differentiated foundations for our strategic and operating roadmaps in 2024.

In particular, the success we continue to achieve in reducing unit costs and leveraging operational expenses, we believe we are setting up for delivering on our Investor Day targets.

To be sure, we'll be tested along the way, given the macro volatility, and remain focused on controlling those elements of our business that we can directly control ourselves.

But with the strategy and execution rigor, we have set in motion and are delivering on, we believe we're well positioned to drive impactful value for our customers, create future growth opportunities for our team members and unlock significant long-term value for our shareholders.

With that, I'd now like to turn the call over to my partner, Joel Wilhite..

Thanks, Mike, and good morning, everyone. I'm pleased to talk to you today about our fourth quarter 2023 financial results, which reflect continued execution of our growth strategies amid continued macro uncertainty. Overall, we delivered another quarter of healthy year-over-year financial performance.

Relative to the implied fourth quarter 2023 business outlook and adjusting for float and political, fourth quarter revenues came in higher due to payment and software yield expansion driven by ongoing ePay conversion.

That, together with higher gross margins driven by higher revenues, progress on unit cost initiatives, software and pay yield expansion, as well as sustained expense discipline led to significant adjusted EBITDA outperformance.

It's worth noting that we delivered our first ever adjusted EBITDA profit, a major milestone even after stripping out float and political. We believe that by crossing this profit CASM on a core basis underscores not just the power of our business model and disciplined execution, but also our confidence in achieving our Rule of 40 target by 2025.

Now turning to year-over-year results. Total revenue increased by 20.8% to $104.1 million in Q4 of 2023 over the fourth quarter of 2022. More than three quarters of the revenue growth was driven by the combination of the addition of new buyer invoice and payment transactions, coupled with software and pay yield expansion.

The remaining revenue growth this quarter was driven by higher year-over-year float revenue, net of year-over-year decline in political revenues. Our strong revenue growth also resulted in total transaction yield expanding to $5.45 in the quarter, up 13.8% from $4.79 in Q4 of 2022.

Of the 13.8% increase, roughly three quarters of the increase was driven by pay and software yield, coupled with transaction mix skewed toward payments. The remainder was due to the flux between float and political revenues.

Software revenue of $29 million, which accounted for 27.9% of our total revenue in the quarter increased 10.1% in Q4 of 2023 over Q4 of 2022.

The increase in software revenues of 10.1% was driven by growth in total transactions of 6.1%, which continues to be impacted by macro conditions with the balance driven by growth in certain subscription-based revenues.

Payment revenue of $74.2 million, which accounted for 71.3% of our total revenue in the quarter, increased 25.5% in Q4 of 2023 over Q4 of 2022. Payment revenue reflects the contribution of interest revenues, which were $13.7 million in Q4 of 2023 versus $5.8 million in Q4 of 2022.

Recall, our year ago payment revenues also included contribution from political media revenue.

Of the 25.5% increase in payment revenues, more than three quarters was driven by a combination of an increase in pay yield expansion and payment transaction volume increase of 9% with the remaining portion driven by the aforementioned flux between interest and political revenues.

On a GAAP basis, gross profit of $67.3 million increased by 34.8% in Q4 of 2023 over the same period last year, resulting in a 64.6% gross margin for the quarter compared to 57.9% in Q4, 2022.

Non-GAAP gross margin increased 650 basis points to 71.4% in Q4 of 2023 over the same period last year and was driven mostly by unit cost efficiencies and yield expansion. Now moving on to our operating expenses. On a GAAP basis, total operating expenses were $79.5 million, an increase of 1% in Q4 2023 over Q4 of last year.

On a non-GAAP basis, operating expenses, excluding depreciation and amortization, increased 2.6% to $58.8 million in the fourth quarter of 2023 from the comparable prior year period.

On a percentage of revenue basis, operating expenses, excluding depreciation and amortization, declined to 56.5% in the fourth quarter of 2023 from 66.5% in the comparable period last year.

The year-over-year percent decline largely highlights the significant operating expense leverage, particularly across G&A, sales and marketing as well as R&D to an extent even after stripping out the contribution of float. I'll now talk about each component of the change in operating expenses on a non-GAAP basis.

Non-GAAP sales and marketing costs decreased by $1.1 million or 5.7% to $17.5 million in Q4 of 2023 over Q4 of last year, which was driven by a combination of efficiencies in marketing spend, a decrease in performance-based compensation and realignment of resources, coupled with a delay in timing of certain investments.

Non-GAAP research and development costs increased by $2.6 million or 13.1% to $22.1 million in Q4 of 2023 over Q4 of last year. The increase was due to continued reinvestment in our products and platforms, including spend management, pay offering and payment accelerator.

Non-GAAP general and administrative costs remained unchanged at $19.2 million in Q4 of 2024 versus Q4 of last year due to leveraging public company costs across a larger revenue base. They continue their annualized downward progression as a percentage of revenue as we indicated during our Investor Day.

Our GAAP net loss was $4.5 million for the fourth quarter of 2023 versus a GAAP net loss of $25 million in the fourth quarter of 2022, with the reduction in loss is driven by a combination of strong revenue flow-through and expense control leading to lower operating expenses, coupled with higher interest income and lower interest expense, due to reduced borrowing costs and partial debt paydown.

On a non-GAAP basis, our net income in the fourth quarter of 2023 was $9.4 million versus a net loss of $7.5 million in the same year ago period, a $16.9 million positive swing from last year driven by the aforementioned factors.

Similarly, on a non-GAAP basis, Q4, 2023, adjusted EBITDA was a $16.9 million positive swing from an approximately $1.3 million loss in Q4 of 2022. Turning to the balance sheet for a moment, I want to touch on a few key items.

We ended the year with a strong corporate cash position of $451.6 million of cash and marketable securities against an outstanding total debt balance of $77.3 million, including a note payable for $13.9 million. We had $30 million on our credit facility undrawn at year-end.

Corporate cash meanwhile, was split roughly two-thirds among money market funds, commercial paper and time deposits, with the remaining third in deposit accounts. The weighted average maturity on corporate cash was roughly 10 days while the effective interest rate on our corporate cash position for the fourth quarter was roughly 5.25%.

Customer cash at quarter end was approximately $1.6 billion with an interest rate of roughly 5% for the quarter. The jump in customer cash was primarily timing related to funds in transit along with shifts in calendar days between weekdays and weekends of receipt and disbursement of that cash. Turning to our 2024 business outlook.

We expect total revenue for the year to be in the range of $441 million to $447 million. Based on the midpoint, we expect approximately 47% of the 2024 revenue distribution to be in the first half versus 53% in the second half.

Our 2024 revenue outlook reflects the revenue impact of decommissioning our on-premise check printing software Create-A-Check, the buyer customer base and revenue contribution of which was roughly $1,401 million in 2023, respectively.

The outlook also incorporates approximately $44 million of interest revenues from customer funds versus roughly $41 million earned in 2023. Also, we anticipate political media revenue contribution of approximately $9 million, given that this is our first presidential cycle under FastPay. Recall, we acquired FastPay in 2021.

For context, in 2022, during the midterm election cycle, the political arm of FastPay generated roughly $8.5 million in revenues. Similarly, we expect non-GAAP adjusted EBITDA profit ranging between $67 million and $71 million for the year. With that, I would now like to turn the call back over to the operator to open up the line for Q&A.

Operator?.

[Operator Instructions] The first question comes from Ramsey El-Assal with Barclays. Please go ahead..

Hi. This is Shray on for Ramsey. Thanks for taking my question. I was just wondering if you could comment a bit more on the magnitude of macro pressure that's factored into the guide.

Is it contemplating any further deterioration or is it more of a steady state?.

Yes, great question. And just to be real clear, the sort of the macro dynamic that's causing buyers to sort of limit their spend, that subset of discretionary spending has really continued consistently through the year, even to now. Our guide contemplates no change.

We're hopeful that that turns around and we expect those types of spending can't be put off forever. But our guide contemplates continued macro conditions that we experienced in 2023..

Got it. Very helpful. Thanks..

The next question is from Craig Maurer with FT Partners. Please go ahead..

Hi. Thanks for taking the question. I wanted to ask, if you can characterize your assumption on political spend, you said $9 million in political revenue in 2024. In the past, you've outlined that you see 30% to 35% of all political advertising spend and forecasting a $10 billion spend cycle.

So I'm trying to understand the level of conservatism built into that number? Thanks..

Yes. Great question. We are baking $9 million into the guide. We pointed out that this is our first presidential cycle with FastPay. And so it's possible that there's some upside to that in the back half. It's a little less predictable than our core fundamental recurring business, and so we felt like $9 million was a prudent guide..

Yes. Hey, Craig. I think, it's – this is Mike, and I think it's a great question because, as Joel said, it is our first presidential cycle, ourselves managing through it. And I think, we usually take kind of a cautious approach to new things, and this is a good example of that. You're right.

We do control about 35% of all the media-related payments in the industry, but one of the things that's inherited in the industry, although we have the leading market position is there's not a lot of visibility and lead time to when particular advertisers may receive orders for advertising placement.

A lot of it is very last minute and with short lead times. So there's not a lot of visibility we have to it. So that leads us to that dynamic combined with it's our first rodeo through the political cycle, just to take more of a cautious approach to it..

And could you perhaps talk about the take rate in political versus the rest of the business?.

Yes..

I think what we've said in the past is, it's slightly, but I wouldn't say meaningfully higher. It is a little higher given a higher mix of digital payment acceptance..

Yes. And one of the, just as a flavor there, the reason why we have our leading position in political is that we've been on the forefront of that conversion and creating specialized payment types for media-related payments in moving from paper check to electronic because of the short lead times.

So certainly our innovation focus on different payment modalities for media has been kind of a key component of our market position there..

Thanks. I appreciate the color..

The next question is from Dave Koning with Baird. Please go ahead..

Hey. Thanks so much. Congrats. And maybe for my main question, your dollars of core payments growth was about the strongest we've ever seen. And you mentioned it was driven a lot by yield, more ePay – shift to ePay.

But within ePay, are there certain types that suppliers are asking for more? Like, is VCC just as a percentage, like drawing more and more? And if that's the case, maybe what's kind of driving all that?.

Yes. No. Thanks. Great question, Dave, and really strong kind of yield quarter and even excited about the things we have to come from a yield perspective. But to answer your question, we're continuing to sort of march down the path of taking checks out of the system, moving towards digital.

We're also – the discipline around operating is creating opportunities through just reducing exceptions, better offshore management of processes, those things we talk about that drive unit costs down also give us yield opportunities as well..

Got it. Thanks. And maybe just a quick follow-up. Interest revenue was up a lot sequentially, 25%, 30% with rates being, I think, pretty stable.

Was there something to the amount of dollars you're holding? And is that sustainable?.

Yes. No, it's a great question. So you'll notice we finished the year with about $1.6 billion of customer funds on the balance sheet. So a nice uptick there, and it was really that that drove the rate in the quarter. So it was about $13.7 million float revenue in the fourth quarter.

There's – the drivers are really the timing of the funds moving between buyers and suppliers, including things like how much is in transit at a particular, whether it's a weekday cut off or a weekend cut off. So that's really sort of an expansion in customer funds as we finish the year is what drove float.

And I would suggest, and what is historically kind of consistent, is that customer funds would level off over the course of the first quarter in 2024..

Got it. Thanks guys. Congrats..

The next question is from Andrew Bauch with Wells Fargo. Please go ahead..

Hey guys. Thanks for taking my question. Just looking at the incremental margins ex-float, I mean, really impressive that – it looks like based on this guide 60% plus and relative to our estimate of, I think, 29 ex-float in 2023.

So I'm just trying to understand the sustainability of that? And I know that you guys have been making efficiency investments in your cost of goods sold line, but trying to weigh that versus what you've seen on the e-pay front? Just trying to figure out the magnitude of upside there..

Yes. I mean let me just kind of remind you, I would just take us back to the targets that we set out at Investor Day. We said we would be in the 72% to 75% gross margin range in 2025. And we've had great kind of continued margin expansion by doing the things that we've been talking about consistently since the IPO.

And so we said that the way we would get there is a mix of yield and unit cost efficiency; yield, call it two thirds; and unit cost, call it a third though not necessarily linear. And we're just kind of continuing to execute that plan. And so if you strip out float in the fourth quarter, that's a 67% gross margin.

And so six good solid points up year-over-year, but a ways to go, and we've got the levers and the opportunity to do that both on yield and unit cost..

Yes. Andrew, I'd say, I can simply look at it. It's really the blended combination of two things. That efficiency, as Joel says driving yield. And certainly, AI has been a nice component of that expansion as well. And we continue to see that scaling as we go forward.

I think as we've talked about, we have roughly about a dozen different initiatives across the business related to AI, both customer-facing and kind of focus internally. And then, the second piece is on the yield.

And that's where all our strategies and innovation related to monetization strategies, new payment modalities, our straight-through process, pay capabilities with suppliers, all those types of things are taking hold.

And so I think it's the combination of those two, and so we believe we're in an early days of continue to drive that overall margin expansion and expected that to continue over time..

Yes, that makes a lot of sense. If I can just squeeze one more in. The 2024 – in the press release, you said the 2024 outlook reflects accelerating revenue growth. You did 20% in 2023, and the initial guide is for 17%.

So could you just clarify what that accelerating revenue growth language means?.

Yes, you bet. We're addressing ex-float and political..

Great, thank you..

The next question is from Darrin Peller with Wolfe Research. Please go ahead..

Hi, guys. Maybe we just start off, I just want to ask about the supplier growth. I think it was 24% in 2023, which I thought was a great call out.

Just if you could remind us how that compares to the change in prior years, the general timing for suppliers to be more monetized using different methods, whether it's Invoice Accelerator, AvidPay network, et cetera? And then I guess as a follow up to that, I know your goal is potentially going up to 70% monetization of your transactions over time, and I'm assuming that obviously is highly correlated with the supplier network growth and the implementations of different work there.

So maybe help us with a split, if you can, on the kinds of tools on the – between AvidPay Direct or virtual card or other kinds of payment modalities would be great? And thanks again guys. Nice quarter..

Yes. Hi. Thanks, Darrin. Well, that was kind of a multifaceted question, so let me kind of chip away at it. So first of all, the supplier growth question, yes, we're super excited. We broke the 1 million threshold and ended year at 1.2 million suppliers on the network. That is – that 24% growth is consistent than what we've seen in past years.

So we feel like that we're at – continue to be at nice rhythm in terms of growing the network on the supplier side. The – and we see kind of a consistent mix of enrolled suppliers in terms of payment modalities. And so the two big buckets, categories that we have are those that accept a form of virtual card, and I'll come back to that in a second.

And the second one is a form of our AvidPay Direct, which is our ACH plus offering. Back 10 years ago, we had one payment modality in each of those buckets. Today, in virtual card, we have a dozen different payment modalities where we have, partly because of our deep partnership with Mastercard, our ability to manage multiple forms of interchange.

And the combination, what we do is we use the combination of price, which is interchange structure, combined with speed of payment, combined with the data remittance and reconciliation data and then lastly combined with a level of straight-through process.

And so those are like four variables that we have within a payment modality, and different levels within those four create different payment modalities across virtual card that will allow suppliers that maybe don't have acceptance of card from across the industry, to be able to accept a card and stay in a straight-through process with high levels of reconciliation data provided directly to them.

So it's a non-human touch accounts receivable function on their side. And those are all examples that we're using to continue to add suppliers to the network. On the flip side, on the AvidPay Direct, we're doing really the same thing except settling through ACH.

But again, combining speed of payment, different price points, different levels of remittance data along with different levels of straight through process. And so, I think, you ended with kind of the reference to long-term, we expect that we think we can take monetized payments to about 70% of transactions.

And we still believe that, and – but again, it's not going to be on one particular payment modality that kind of saves the day. It's lots of different pay modalities combining different levels of those four factors that we continue to believe is the secret sauce..

That makes sense, Mike. Thanks for this answer. Thanks. I will turn it back to the queue. Thanks again..

Thanks, Darrin..

The next question is from Jamie Friedman with Susquehanna. Please go ahead..

Hi, good morning. I wanted to ask, Michael, about the spend and expense management product launch. You had alluded to that, I believe, last quarter. And it seemed like you were pretty optimistic about the opportunity there. So any context on that or timing or significance would be helpful? Thank you..

Yes. Thanks, Jamie. Yes, I'm glad you asked the question. Certainly, in the past, I was always excited to talk about our Invoice Accelerator, now Payment Accelerator offering and now that that's in the market. I'm spending a lot of energy on our spend management up-and-coming platform.

And so yes, we expect it to be leased to initial customers later in this year, but really have – start having an impact in 2025 and beyond.

However, the reason for my excitement around it is when you think of all the transactions that we manage today, we do a really good job of managing close to 100% of all the expense transactions that have an invoice for our customers, because we're the system of record for all their invoice-related expenses and directly are the feed to their general ledger, get things paid.

However, we think that we're managing overall in terms of a customer's expenses, probably in the 85% range of a customer's expenses relate to an invoice, and then you have 15% that kind of fall outside that which occur into, say, travel, entertainment expense or other kind of functional team level of expenses that they need to make in terms of immediate payments.

And so the mission of our spend management platform is to capture as much of that remaining 15% of a spend that a customer has. They haven't been our platform, but the real thing that makes it unique to AvidXchange is, which our customers are really excited about, is now having all their financial expense data in one platform for reporting.

So one of the thorns in the side of lots of the CFOs of our customers is, Mike, we have 85% of our expense data. That's great for reporting, but then we have to piece together the remaining 15%. It's either a manual process or in third-party, other third-party applications that are not as well integrated to our general ledger.

And it'd be great just to have one place that we can go and have all our expense reporting to better run our business. And so that's the mission that we're on. And we think the spend management product is – long-term going to give us that capability and provide just a really great increase in a value proposition to our buyer customers..

Great. Thanks for the context, Michael. I will drop back..

The next question is from Bryan Keane with Deutsche Bank. Please go ahead..

Hi, guys. Congrats on these results. I wanted to go back to the revenue acceleration that you're expecting this year. I know that's ex-float and ex-political.

Can you just talk about a couple of the drivers there? And then, what might make this guidance conservative or any risk to the top line number? And then just lastly, on EBITDA coming well ahead of our expectations and consensus for this year, any – any thoughts on 2025, the 20% plus EBITDA margin, does that also mean that you're maybe running ahead of kind of original targets for 2025 on EBITDA? Thanks..

Thanks, Bryan. Yes, let me just kind of take those in order.

So a couple of things we're excited about in the guide, particularly in the back half, our yield driven acceleration associated with – we talked already about kind of beginning to see that curve in Payment Accelerator also in terms of the – kind of opportunities to offer increasingly more payment methods, and so to accelerate the digital acceptance there.

We also remember have M3 and AppFolio that are sort of still ramping and so it could contribute from a volume perspective. So feel good about kind of how things are setting up in the back half.

Your second question is like if we were surprised to the upside, what would that look like? I think we already touched on the approach we took in guidance for the political cycle.

I think the next thing I would point to is those new pay methods, like we're really excited about having invested in those, and those could potentially move the needle for us, not to mention Payment Accelerator.

All that said keep in mind the macro backdrop, right? We are continuing to guide and project assuming no change, and we're hopeful that there's change, but of course, that's not contemplated in the guide.

And then, the final question on EBITDA, again, really kind of proud of how we finished the year and setting ourselves up to sort of turn the profitability corner and be meaningfully profitable in 2024.

Your question about 2025, what I would say is that even in – even with the macro backdrop that exists today, we feel like we've got sort of all the levers available to us as gross margin continues to expand, again, we see additional yield and unit cost opportunities to do so plus the leverage that you're seeing in operating expenses.

So we feel good about that Rule of 40 target for 2025..

Awesome, thank you guys..

Thank you..

The next question is from James Faucette with Morgan Stanley. Please go ahead..

Great. Thank you very much. I just wanted to ask generally, most of my questions have been answered in terms of where you're at right now. But I wanted to ask in terms of M&A. You guys have historically done a good job finding opportunities to add additional either end customers and markets or capabilities to the platform.

And so just wondering how you're thinking about that, especially as your profitability improves? How should we think about capital allocation M&A within that? And are you seeing good opportunities in pipeline? Thanks..

Maybe first on capital allocation, then Mike can mention in context of what we are seeing in the M&A pipe. I think we are, again, sort of turning profitable, looking at sort of meaningful free cash flow in our future.

I would say from a capital allocation perspective, M&A is really interesting to us and in terms of our balance sheet kind of looking at all the options that we have available to us..

Yes. Maybe a little bit of a pipeline. We think it's long term, it continues to be a part of our overall kind of growth expansion playbook.

We think in addition to kind of our 20% kind of growth mantra that we expect to deliver consistently on a long-term basis, that there is an inorganic growth lever that we can add to that, should we find the right opportunities. So I think we're very focused on. We're talking to lots of participants.

Typically, they're smaller companies that are in the different nine verticals that we're in. We also have some targets in terms of new verticals that we would look for acquisitions in. And we're having lots of conversations. I think, are still have not seen the kind of private market valuations reflect those that are at the public company level yet.

And so I think we are continuing to be cautious. And however, when the right opportunities present themselves, certainly, with our balance sheet and capabilities are in a great position to execute these. I think the core playbook, however, is around vertical market expansion. We feel really good about our product capabilities.

And so that wouldn't be kind of a key focus for us. It'd be more – continue to grow beachhead of customers within the nine verticals that we're in as well as use it as an opportunity to expand those verticals even further..

Great, thank you..

The next question is from Tien-Tsin Huang with JPMorgan. Please go ahead..

Hello, good morning. Really good results here.

Just on the outlook, I wanted to ask if new product contribution is a meaningful or measurable contributor to fiscal 2024 here relative to your past initial guides to just new product contribution?.

Yes, Tien-Tsin, it’s a great question. I think probably what I would just add is on the supplier side, we talked about the payment – opening up new payment modalities, but otherwise kind of all the products in the bag..

Yes. And I think, even when we think of the new products that we have, Payment Accelerator and then spend management, as I alluded to earlier, those really are – it really factors in, in terms of executing this year. They really set us up nicely for 2025, 2026 and beyond..

Got it. So really build up the momentum, and then we'll feel more of that in fiscal 2025. Okay. Got it. Just on the – just thinking about – I know you got a lot of questions on FastPay and visibility.

I'm just curious when will you get closer visibility on that? Is it really going to be in – just in that third quarter in terms of how real or conservative that outlook that you are setting up will be? I am just curious how quickly you might see that? What the lead time would be based on the past?.

Yes, remember, based on the past is the key word, this is our first political cycle. So, in a non – or I mean, presidential cycle, I should say.

In the kind of interim cycles that we do have some experience with, we saw a smaller level or lower level activity occur earlier in the year, and then obviously it builds up and Q3 is the monster quarter for it.

And so I think, we are taking a cautious approach and expecting a kind of a similar build to the year as we've seen in the non-presidential cycles. But we're probably as anxious to see how everything falls out as you are. We just take a cautious approach to it. But we think we've set ourselves up really nicely in terms of our market positioning.

We've added some really nice political customers since the last cycle, and really like our industry positioning and being the leader in political payments..

Yes. No, it seems set up well. Thank you both..

Thank you..

Our next question is from Alex Markgraff with KeyBanc Capital Markets. Please go ahead..

Hey guys. Thanks for taking my question. Just one for me. Quickly on some of these partnerships, AppFolio, M3, you mentioned the sort of contribution in the second half of 2024 starting to show up.

I am just curious, is that sort of the time to benefit we should start to think of as you sign more of these, or are there some early learnings from the first couple that might kind of accelerate that time to revenue as you add more partners here?.

So first of all, we are super excited about our overall sales motion. I'd say the partnerships is certainly exciting. I'll talk about a second, but remember also that over the last year, it's been a phenomenal year in terms of building the talent in our go-to-market strategies.

The addition of James Sutton as our Chief Revenue Officer earlier last year, and then the addition of Doug Anderson later in the year as our Chief Product Officer. That combination is really powerful in terms of how we kind of really accelerate that organic growth, kind of, formula. And then executing on the partnerships is a key piece of that.

So I think like some of the new product stuff, we typically have a cautious approach to any new partnership until really we begin to see the scaling of it.

However, although AppFolio has the characteristics of being our largest partnership ever in terms of the number of customers that they have 19,000 customers, of which roughly 50%, we think, are right in our sweet spot of core customer profile.

And we have lots of learnings from all the other partnerships that we’ve executed that we are certainly applying to both M3 and the AppFolio partnership. So, we feel really good about our playbook related to executing these partnerships, combined with the talent level that we've assembled to position.

So as Joel indicated, it will certainly more noticeably begin impacting the second half of the year. But again, we feel really good about the setup for 2025, 2026 and the impact of these partnerships long term..

This concludes our question-and-answer session. I would now like to turn the conference back over to Michael Praeger for any closing remarks..

Thanks again, everybody, for your interest in AvidXchange. As the only publicly traded company with really critical mass in the automation of accounts payable and payment automation for the middle market, we believe we're in a really solid position to capitalize on the secular trend around digital transformation of the back office.

And given our disciplined execution in the face of continued kind of macro challenges, along with our financial strength, we believe there's a significant runway for revenue growth, profitability and value creation for investors. With that, we look forward to sharing our progress with you in our next earnings call. Thanks again, everybody..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Goodbye..