Good afternoon. Thank you for joining us here. My name is Brent Bracelin. I'm the Co-Head of Tech Research here at Piper Sandler. I'm really pleased to have the CEO of AvidXchange, Mike Praeger. Thank you for joining us in Nashville, Mike. Thanks. It's always good to be back in Nashville. It's always good to be at a place other than New York or San Francisco for an investor conference. Absolutely. Absolutely. Well, listen, we've covered a lot of ground today, everything from who's gonna potentially win the election with the policy folks- Yes ... to artificial intelligence and the opportunity there. Hold on here, we're having a... Oh! Thank you. Okay, we'll try this again here. Okay, we're good? Perfect. But let's start out maybe talking about this business model. It's unique. I see these software plus business models emerging, where- Yep They start out with software, right? And then all of a sudden, as you become part of this embedded workflow, you have a right- Yeah to now upsell B2B payments on top of it. So maybe walk through the history of AvidXchange. Yeah the software focus, layering in payments, and kinda how that—that's changed the opportunity set for you. Yeah. So, really good question. So we got started actually in 2000, so we've been at this for a while. Yep. Certainly experienced a few cycles already, so we have some of that experience. We were a software-only company focused on automating the accounts payable process for real estate companies, is how we got started. And then, we, you know, from there, we grew to, you know, started adding additional vertical markets as we kinda grew. When we got to the 2010 timeframe, about 10 years into the business, customers began asking us about payments. And at first, I was like, "You know, it doesn't make any sense. Why are they asking us? Like, shouldn't they ask their bank? bank? Shouldn't they ask their accounting system?" It's like, you know, it didn't... At the time, didn't seem like we were the logical person to ask. And then we kept getting the request, and so I remember, you know, saying: "Okay, let's bring 30 of these customers who've been asking us to Charlotte, and get to the bottom of like, you know, what's their business problem that no one else can solve, and why they keep asking us?" And, the, you know, the quick story is, we had a CFO of a large real estate company in Seattle, said, you know, he stands up and he says: "Mike, you need to solve for my problem." And, you know, every company has some, you know, challenging customers that make you a better company, and he was one of those always. And then I'm like: "Oh, boy, here we go." But what he said was became the poster child of what we're trying to solve for, and he said: "Mike, I have, you know, 300+ office buildings scattered across the country, and we are paying bills out of, you know, roughly, I think it was like 320 different operating accounts. Because of mortgages, we're at 26 different banks. And because of acquisitions, I'm running seven different accounting systems, and I want to run one bill payment process across all seven accounting systems, across all 26 banks, and across all 320 operating accounts." And then all kinds of the light bulbs went off for me. I said, "Now I get it, why one bank can't solve it, why one accounting system can't solve it." And we were in a unique position to solve that problem. And so- That's a really fascinating insight as we think forward through who will continue to solve this problem because you have Intuit's- Yeah They're gonna try to layer in payments. You know, the banks- Yeah It doesn't feel like we're gonna go into an environment where we're gonna have fewer banks that we rely on. We think we tried that with the Silicon Valley- Yeah Right? So that seems like- Yeah Bank diversity is gonna be there. Accounting system, maybe we can solve- Yeah - consolidate. Well, yeah- But it feels like this is the new normal. Yeah, I think so. And then, you know, kind of the other kind of piece, which I think is really important, that we kinda continue to recognize, you know, kinda how important the nuance is, is being purpose-built for the middle market. Yeah. And that difference is really significant from the standpoint that there's, you know, across the overall segment of B2B payments, you have really three distinct, very distinct markets that are hard to kind of transcend into one versus the other, you know, or, you know, go to one if you're already in another one. And that's because you have the enterprise, you have middle market, and you have small business. But within the middle market, what makes it unique is there's, in the U.S., there's 435,000 middle-market companies, the way we describe it, companies between $5 million revenue and $1 billion. What makes it interesting is that, we believe that just over 50% of those companies highly align themselves to an industry vertical that has unique either business process or accounting system process for that, for those verticals, and they're supported by vertical-specific accounting systems. Mm-hmm. And so today, you know, we're, you know, integrated over 200 different accounting system platforms that support all the different verticals, and our team's got a long list of, you know, new ones that we want to continue developing. And that makes the middle market really unique versus small business, where, you know, every time I see René from BILL, I joke, I said: "You have it easy. You just basically integrate the QuickBooks- Yeah and you have the small business market covered for the most part," right? And meanwhile, we're at nine verticals and already have over 200 accounting systems that we have to support, from an integration perspective. But, what we like about that is that, that creates complexity. Also, these nine verticals have a unique kind of business process, you know, for them that we solve for. And so the value proposition that we're delivering to these customers is really significant. And, it's not hard to rep- I mean, it's hard to replicate for the time being. You have to go kind of vertical by vertical, right? And so the moat that we keep building around the middle market is significant, and we like that. If you think about those nine verticals... Is Is there a catalyst or a tipping point where you've reached a certain penetration that then all of a sudden you see an acceleration? Or is it a, I don't know, regulatory catalyst- Yeah that drives a need? I wish I could say really yes, but, you know, here's the reality is, you know, we've been at this, you know, now 20 years, and- Yeah We're nine verticals, and we're still single-digit penetration in all nine, with the exception maybe financial services. We have about 2,000 banks that actually use us as their internal AP payment offering for the bank. And so maybe there we're, you know, kind of double digits, but otherwise, we're still single digits, even in real estate, where we got started, and that's the crazy part about it is. I personally believe that we haven't gone to kind of the tipping point of that market adoption yet. And, you know, and I have a bias. I think it happens, when we have the kind of transference of, I call it the generational shift, and that's, I'll be political here, correct. That maybe the current, you know, kind of vintage of CFOs, controllers- Mm when they kind of... You know, it's like a fine wine, right? When they kind of age out, and they're replaced by the, you know, digital native next generation, and they kind of look at it like: Well, I didn't grow up writing personal checks, you know, in my personal life. Why am I signing 1,000 checks twice a week in the business? That doesn't make sense to me. You know, there's a better way, right? And versus the current, current vintage, it's like: Well, this is the way it's always worked. You know, they're not thinking there's a better way. And I see examples of it every day across our business, playing out. I think when that, you know, kind of becomes norm, and I think that's going to occur in the next five years- Mm-hmm is what we're gonna do. I think that's when kind of the tipping point of this acceleration really happens. And the only corollary I have, you know, kind of, that I'm reminded about, you know, quite often these days is, in the early days of AvidXchange, we got started in 2000. We were a pure multi-tenant, so, you know, SaaS platform in 2000, and we built our first version on kind of the beta version of.NET. So it wasn't even called SaaS at the time. And, for the first, you know, six, seven years, the biggest sales barrier that we had was companies saying: "Mike, love what you're doing, but unless it runs on premise behind my firewall, you know, in my data center, I don't feel comfortable having my financial data in the cloud." Going back to those same customers today, saying: "Guys, great news, we have an on-premise version. You can put in your, you know, in your data center, behind your firewall." They're like: "Mike, non-starter. It has to be in the cloud. Yeah. Right? And so but that took about 15 years, right? Yeah, yeah. And so I think the same type of dynamic is occurring here, and we're probably within five years, I think, of seeing kind of that tipping point. Got it. So been at this for 20 years, you know, complexity, you're addressing kind of one by one- Yeah Changing these workflows, layering in B2B payments. Let's double-click into thinking about potential company-specific accelerators to the business. Yeah. Um- Well, that's why, you know, you know, it seems like come to these here, these conferences, I get asked lots of questions about the macro, and I'm like, you know, it's, it's interesting. I can answer the questions, but it's like, you know, we don't control that, right? We're in for the most part. Let's talk about the things that we can control, right? And that's the value proposition that we deliver to our customers. And one of the biggest, you know, things that, you know, we're releasing this year is a product called Invoice Accelerator. We call it 2.0, because we've been kind of in the market with our kind of first product testing to make sure that we have kind of the business model right for the last couple of years. And now we're ready to kind of release it to our entire pool of supplier customers, which numbers about 1 million suppliers. Now we have on our network. And that's a great example of what customers were asking for, from the standpoint of suppliers have told us early on: Hey, AvidXchange, you know, if you can help me gain visibility to my invoices, my payments, if you can help me, you know, kind of manage my own business rules on types of payments I want to receive, along with the data that I need for reconciliation, and then last thing, help me get paid faster. So we've been working through that, and kind of the first four, we've already kind of built into the platform, from a value proposition, and this is kind of that fifth one, which is: Help me get paid faster. And what it is, is Invoice Accelerator 2.0, it allows the supplier to say: Okay, I have an invoice. Typically, it's a net 30 invoice. I have to wait 30 days to get paid. Rather than waiting 30 days, I want to get paid today, or tomorrow, and they can accelerate it for next day payment. And what makes it unique for us is that we have both parties on our network. We have perfect visibility into these transactions. What everybody else in the industry has to, you know, from a, you know, traditional factoring standpoint, have to focus on is they have to underwrite the supplier because that's where the money is going, and then they have to figure out how to collect the money. From our standpoint, it's data science because we understand the history. It's a great example for some, you know, AI as well. But the big thing is, we actually don't focus as much on the supplier because they're getting paid by the buyer who's on our network. So we really care about the buyer because they're the ones that are paying the bill. Yeah. We're in the middle of the money, so we can recapture it, so we don't have the collection risk of collecting it as it's flowing through our platform. So we're in a really unique way to execute this, you know, at scale, and we're excited about it. It adds, you know, about 200 basis points per transaction, it gets accelerated. The average outstanding, you know, you know, payment is outstanding, maybe 25 days on average. So we're excited about it. It's going to be a great value proposition, especially in the current economic conditions, you know, to really support that small business supplier. What's the incentive to pay faster? You mean for the, for the buyer? Yeah. Well, so the buyer, the beauty of it is, we're accelerating it, but the buyer still pays it in normal course. So although we're accelerating it, you know, then we capture the payment when the buyer pays it, right? So that's why we're getting paid the 200 basis points for that, you know, we're basically worth running the money for 20-25 days on average. Got it. So, we're doing it on our own balance sheet right now. Yeah. But we'll be moving it off balance sheet. We already have a great group of bank partners that we meet with every quarter. So you've had it... The 1.0 you've had for a while- Right. How broadly was it distributed, and then how broadly will 2.0 be distributed? Yeah. So we picked a pool of about 50,000 suppliers- Yeah ... that we did our 1.0 testing with. And, the 2.0 product will be available to all 1 million suppliers. Now, not all 1 million suppliers are really good fit for the product. Our belief is, of our total supplier base, maybe, about 10% are enterprise suppliers, and about 30% are mid-market suppliers. They're probably not the right fit for this product, but the remaining 600,000 + suppliers are a good fit for it. And so we're really excited about, you know, opening it up. Certainly, we're gonna be careful as we roll it out to make sure it's working as designed, before we make it available, you know, on a full-scale basis to all our suppliers. When does it launch? It's around the corner. It's, we said it's gonna be this year and over the next couple of months, so it's right around the corner. Interesting. Well, that's certainly something to watch. One of the questions we get, just from a debate standpoint, it is in the spend management category. Yep. That's a new category. Yep. Today, you don't really address spend management. I think, BILL didn't address, in the SMB space, didn't address spend management until they bought an acquisition- Yeah in that space. Walk me through, in the mid-market, what are the options in spend, spend management, and- Yeah ... and what hurdles would you need to overcome to address- Yeah that incremental opportunity? Yeah. So first of all, one of the things we, you know, kind of gave a preview on during our investor day of what, you know, kind of the innovation pipeline in terms of, you know, kind of big platform-type innovations and what's coming after Invoice Accelerator. Mm-hmm. The AvidXchange version of spend management is that. It's currently in development. Think of it as kind of the Divvy, Brex, Ramp kind of version for the AvidXchange customer base. The number one thing that our customers are asking for, they're like, "Today, we..." You know, customer will say, "Mike, I have about 90% of my expenses in your platform. Everything that has an invoice is in your platform, but I have maybe 10% of our expenses that don't have invoices. Maybe it's T&E, other types of spend, that we're putting on Amex or something else, and it's not in your platform. And then it's really kind of includes you to do kind of full analysis around all our expenses, things like that. You know, and so we're solving for getting that, you know, other 10% in our platform. So it's a single user experience, whether it be a T&E transaction or an invoice transaction, and now they have all their expenses in one place, leveraging the deep integrations we have to our 200+ accounting systems. And so that product is, we'll, you know, be releasing, you know, second half of next year. And you know, super excited about, you know, kind of what that means. Just, you know, kind of ironically, the number one product that our customers are pretty much using today, or the most common, I should say, is Concur. But we're gonna be bringing more of an integrated card experience and certainly leveraging, you know, kind of the latest, you know, best-in-class features. We decided to build it internally. Mm-hmm. We looked at kind of the industry and kind of because it, it's so unique to being. In order to make it, you know, meet what our customers are asking for, which is kind of an integrated experience of having only one platform, we looked at, you know, potentially buying something, the work involved, and then rebuilding it in our platform. Just, you know, we said it's actually easier just let you build. And the feature set, this isn't rocket science, right? Yeah, we know exactly the feature set that our customers are asking for. Great. So as you think about the environment we're in, the macro, you get a lot of questions on the macro- Yeah. We see a lot of views in the macro, but it feels like we've had, you know, mid-market customers deal with a pandemic, a Great Recession 10 years ago, highest rates, right, hikes, and we've seen in 20+ years. This is the new normal, but what else? What, what, what keeps you up at night as you think about- Yeah ... next year? What's the biggest kind of hurdles and risks that you see facing your business? Yeah, yeah, first of all, I think, you know, hats off to, you know, any of my peer group, you know, CEOs that have kind of navigated business over the last, you know, three-four years. Yeah. 'Cause it certainly hasn't been easy in the pace of change. And, you know, kind of just when you think you got your hands around navigating through the pandemic, you have a kind of a choppy, you know, kind of macro environment, and that it has its own, you know, kind of challenges. But what I believe and what I've seen in past cycles, I'm probably showing some of my age here, is that, you know, companies that just stay focused on executing their business, investing in innovation, not getting caught up in all the macro, you know, not running your business per se, based on kind of the macro, you know, which way the wind's blowing, but stay true to kind of delivering for customers, investing in the business. When you come out of the cycle, they always accelerate, right? And usually gain market share faster, all those type of things. And so that's kind of more the, you know, the approach that we took, and, you know, we're taking in this. What keeps me up at night is, I don't worry as much about the macro because I can't control it. You know, I kind of- Yeah ... focus on what can I control? And, and so for me, the biggest thing probably is on our innovation pipeline. Yeah. Right? You know, it's gonna, you know, continue to, you know, making sure we're investing in the right things for customers, being really, smart about, you know, capital allocation, the things that, you know, have the highest, highest ROI for the business. Those are the things that, you know, I spend my calories thinking about. I let. You know, I come to the conferences, I let, you know, guys like you, and the economists, and everyone else think about, you know, kind of the, the macro environment. Whether, you know, we'll see tomorrow what, you know, rates do, right? But, you know, those type of things, yeah, you know, I can't control. But, what I'd say, you know, kind of, you know, we have seen, you know, kind of macro headwinds have, you know, slight, you know, impact on our business with some of the discretionary spend categories. And, you know, what's interesting is that's exactly what happened in some of the past cycles we went through. Mm-hmm. What we've seen is when CFOs and, you know, finance leaders have visibility to the other side, those, you know, discretionary spend categories come back really quickly. Mm-hmm. Along with usually there's a slight makeup period because they've been putting things off, right? So, I expect the same thing's gonna happen. It's, you know, operating, you know, pretty consistently. The other thing that, you know, these environments do for the business on the positive side is actually a really good environment to sell our solutions to customers. You know, a couple of years ago, it was actually hard to get the attention of a CFO- Mm. -on, you know, you know, making their back office more efficient. Today, it's easy to get their attention. Our top-of-funnel activity is up, you know, over 17% over last year. And so, and that's another example of what we've seen in past cycles. It's a really good environment to add new customers. Excellent. Well, we made it to the 20-minute mark without talking about generative AI. Ah! So- I was waiting for that. There's not a conference you go to, that's not a topic. You know, it is happening and moving very fast. And because it's democratized, everyone has access to it. So the AvidXchange team has access to these, Yep ... models, as your competitors do. How are you thinking about it? Let's talk- Yeah First about the internal potential. Yeah to improve activity. Yeah, I'd say, you know, there's kind of the internal, and then there's some, you know, external kind of pieces. Yep. You know, certainly, you know, we've been leaning into it. We're a big Microsoft consumer. We standardize on Azure and use a lot of the Microsoft, the kind of AI tools- Mm-hmm ... and Copilots. Certainly, you know, a couple of the areas that we're, you know, already seeing benefit is around the whole support function- Yeah ... in how we support our customers. You know, engineering has lots of interesting use cases as well as our, you know, kind of our sales market team. And so, those are, you know, kind of some of the big areas, you know, that from an internal efficiency standpoint. The other thing is around then, what I, you know, say kind of, you know, kind of really executing the business. And the two areas that we've And these are kind of somewhat customer interfacing, are, you know, two that we've actually been at for a while, so they're not new. We just didn't kind of promote them as, you know, kind of AI-related. Maybe we should have, right? And one is on, you know, kind of the front end of the process on how invoices come into our system. So it's actually interesting, we're now about three years into a unique kind of partnership that we did with Microsoft, in which we took their latest OCR platform, combined it with their machine learning and AI platforms, and for the last, like, 18 months, have been tuning it on, like, you know, 15+ years of AvidXchange invoices. So it becomes really good at reading invoice documents. We kind of now have deployed that to about 60% of our customers. By the end of the year, it'll be deployed to 100% of our customers. That's a great example where that front-end process, which we started, you know, a long time ago, 20 years ago, it was a lot of human beings keying in invoices, right? Mm-hmm. So now, some of that's, you know, been replaced by, you know, getting, you know, data in a very automated way into the platform. The second kind of piece is about delivering payments, and this is where, you know, we're now, you know, kind of three-four years into, you know, deployment of, you know, robotics, RPA technology, which now is being significantly enhanced with AI as well, around how we deliver payments based on a supplier may say: "Okay, I'll take, say, a virtual card payment from the AvidPay Network, but, you know, we want you, you know, AvidXchange, to log into our billing system, apply that payment to the right invoices. If you do that work, so my team has to do it, we'll accept a virtual card payment from you. Everybody else in the industry hears that, and they're like, "Ah, we can't do that. Too much work. We'll kick them a check." What we say is: "No, we can actually automate that through, you know, starting with RPA- Mm-hmm now with AI, to execute that transaction. So those are kind of the two areas that we've been already leaning into that are really highly customer impacting. Interesting. And then, do you think from a monetization standpoint, AI can help drive some new products, or do you think it's gonna really- Yeah ... maybe help the take rate and accelerate, reduce friction? Just trying to- Yeah, no, Uh- Well, I think definitely with new products, and new products, I think, drive take rate. Okay. And so they kind of go hand in glove together. So, new products, for example, Invoice Accelerator that we've been talking about. Yep. There is a lot of, you know, data science and AI that's being deployed, and how do we determine which invoices are eligible and the characteristics around those invoices? So that's one example where it's allowed us to create actually a new product, right? And the second one is, we launched it last year, on a product called Avid Analytics, for customers to have more insights into their own data around spending, you know, kind of characteristics, trends, vendor analysis, things like that. And we're now, you know, on the front end, you know, thinking how do we incorporate AI into that analytics platform for customers? Mm-hmm. And that'll be kind of another thing that we'll be, you know, you know, you know, incrementally adding as we go forward. Well, Mike, we're out of time, but thank you so much. Yeah ... for sharing your- Yeah ... your thoughts here. Well, I thought you were going to ask me about the election. You know, you heard it here first. I think if they, Well- ... The Rock and Chris Hart could be the winning ticket. Well, here's what I would say is, actually, it's interesting because, I have no insights on the election, but what I do have insights on, it'd be really good for AvidXchange to have lots of candidates... because we control about 30%-35% of the political advertising payments. So the more advertising there is, the better for AvidXchange. It sounds like you're a yes for Rock, Chris Hart ticket, so. As long as they spend, I'm good. Thank you so much. Thank you.