Okay, welcome everyone. Again, we are here at the afternoon session for the 27th Annual Global Technology Conference. It's great to have AvidXchange with us. Today, I wanna thank and acknowledge Mike, Joel, and also Subhash, who is head of IR, who is also with us here in Arizona. So Mike and Joel, CEO and CFO, I think many of you in the audience know Mike and Joel. We're gonna get started with some Q&A, and I think we'll hopefully have some time at the end to allow the audience to ask a few questions. So Mike and Joel, again, thank you for being here. You bet! So, so first of all, I have to say, like, this is a great stage setup. I'm used to like, you know, like two, like, big blue chairs that you sink into. And now I feel like I'm like, you know, in Miami Beach or something. This is kinda... This is a nice setup. It is nice up here. Mm-hmm. I would agree. All right, great. We're gonna talk about payments monetization to get started here and the future runway there. Let's talk a little bit about just for recapping for the audience, the portion of your transactions that you're currently monetizing, and talk about the two means that you have of doing that from a payments perspective, whether it be the virtual credit card or via AvidPay Direct. Yeah, so great question. So one of the things that has been kind of... I'll refer to as kind of our secret sauce at AvidXchange, is our ability to monetize payments, and this is something that we, you know, began leaning into in 2012, when we launched the AvidPay Network. And it started really on, and it was actually the catalyst was a discussion that Sachin Mehra and I had for Mastercard. At the time, Sachin was actually running B2B payments before he became, you know, the ultimate CFO at Mastercard. And kind of his coaching was, "You know, Mike, everybody's trying to, you know, thinks that the only customer they have is the buyer. But if you're gonna build a true network, you actually have to think that the supplier is also a customer." And that really kinda resonated with me, and we kind of launched the AvidPay Network. We said: "We're gonna kinda declare that the supplier is a core customer along with our buyer." And, you know, it's easier said than done because, if you're gonna truly think of the supplier as a core customer, you have to, you know, actually build a value proposition for them. You have to actually build products for them. You have to create a sales organization that's dedicated to the supplier side, customer success in all the different functions. And, that was expensive to do early on, but then, today, we're seeing the benefits of it. To go back to kind of the question, as part of that setup, so today, you know, we're monetizing about 40% of all the transactions that are going through our platform, and that's typically what we see as kinda 2, 3, sometimes 4x, you know, others that we, that we see in the industry. And I believe it's because of that value proposition of thinking about, you know, the supplier as a core customer. So what does that mean in terms of payment modalities? So today, we have two kind of, you know, big kinda categories of what I would say, monetized payments. One, are virtual card-related transactions, and the other ones are what we, I call, you know, AvidPay Direct, which is kind of our private, network that we settle through ACH, but we wrap a data layer around that transaction. One of the other, you know, kind of, you know, kind of secrets to our success is our ability to create lots of different dynamic payment modalities. When we think about payment modality, it's kinda defined as, a combination of a particular price point, for the transaction, combined with the level of automation or straight-through process, combined with the data, the remittance data, you know, for that transaction. Then the last element is the timing and the speed of the payment. And so we play around with the combination of those four elements to create different payment modalities. So in the case of virtual card today, we're up to about 12 different virtual card payment modalities that have different combinations of interchange, combined with different levels of straight-through process automation, combined with different, levels of remittance data. That's been part of our secret sauce of, you know, getting the monetization, and we do the exact same thing on the AvidPay Direct side, where we settle through ACH, but we combine different price point with data and timing, and straight-through processing. So that's kind of been the secret of our, you know, success in terms of kind of go-to-market and working really with the supplier to determine how they want to receive their payments. Because everybody else in the industry thinks that the buyer dictates payment. Our belief is that works for enterprise, you know, in the Walmarts of the world, they can dictate those type of things. But when you get to Middle Market, we don't think true market adoption happens that way, and it happens through value proposition. Excellent. Thank you, Mike. And in terms of the unit economics on those two different types of payment methods, virtual card and AvidPay Direct, and you mentioned numerous forms and- Yep ... interchange rates and whatnot for Avid- for the virtual card. On a net basis, or maybe let's think about it on a gross profit dollars per unit of volume basis, are you relatively indifferent? Is one a little bit better than the other? Yeah. How do you think about that? Well, what's kind of interesting about it is they kinda net to be equal, but, you know, we think of it as, on average, we're generating about 200 basis points on a virtual card transaction at the different kind of price points we have on average. AvidPay Direct, we're averaging about 100 basis points. Now, having said that, what we're finding is that the average ticket sizes for AvidPay Direct are about double those of virtual card. So net economics AvidXchange, we're really indifferent because they end up being about the same. On a per transaction basis? Yeah. Okay, great. Okay, let's move on to, and then you kind of alluded to this in terms of a lot of the value being more in sort of the, the automation and the processes and less so in the payment method, but let's talk about some of the savings that are generated. So at the Investor Day, you talked about the $12 number, the savings per transaction- Mm-hmm ... around workflow automation. Maybe just expand upon that and where that $12 of savings come, savings comes in, and how it's so important to what you can deliver to the ecosystem. ... Yeah, so I mean, so I think when we think out of that savings equivalent, so first of all, for this business process, one of the things that benefited us from a new customer acquisition, this is a really rapid ROI. Typically in year, very rapid ROI for our buyer customer. And, you know, it, that savings comes from, you know, we think of kind of just the labor and the paper handling expense. A paper invoice comes in, somebody has to open up the mail. They then have to determine, okay, this invoice is related to this business unit, or, and then we have to send it to the field to get approvals. We actually have customers, you know, in, like, you know, some of the bigger cities, like New York City, who actually created their own courier service internally, to, you know, take, you know, invoices around to the different property managers in New York City to get the right signatures for approval. You know, all these, you know, crazy things that they did. And it's a very manual... And then when it comes back to corporate, after it has all these, you know, kind of approvals and coding on it, then somebody has to data enter it into an accounting system. And then once it goes in the accounting system, that, you know, you know, a paper check gets created, and then it goes through the same thing, you know, a check signing process, a mailing process before the vendor actually gets paid. So in our world, we kind of eliminate both all the paper handling and all the labor to have it be really intelligent. There's some AI incorporated, obviously, in terms of reading these invoices, determining how they get coded, how they get routed for approvals. Everything happens electronically based on the business rules of that particular customer. And then when it becomes a fully approved invoice based on the business rules, all the data automatically flows right into the ERP system. No one has to do any data entry, and then the ERP system, rather than, you know, creating a check file and paper checks being printed, that file comes back to our platform, and then we execute the payments based on the business rules of the supplier. And so when you take into account, you know, eliminate, you know, those labor steps, paper handling steps, you get to a very rapid ROI, you know, typically, you know, kind of, you know, $12+ per transaction. All right. Thank you, Mike. Let's move a little bit towards your focus on the Middle Market. First, we'll do a little bit of a macro question, and then we'll move later into more of the verticals that you focus on. But macro-wise, the resiliency of your customer base, if you can comment on what you've been seeing, not necessarily quarter to date. If you'd like to make those comments, that's welcome, but in general, your customers' resiliency versus the broader macroeconomy. Well, first of all, I congratulate you, 'cause usually that, you know, these sessions start with the macro. So, you know, it was good to start with something other than the macro as the first question. And Joel probably will say, "You know, Mike, you know, I should comment on the quarter." But you know, the macro for us, remember, we're a 23-year-old software company. We've been through multiple cycles in the past, and this cycle is playing out pretty much how we expected it to be based on our experience in past cycles. And what I mean by that is, there's both headwinds and there's tailwinds related to kind of the impact. So first of all, in terms of our ability to add new customers, the current environment is actually really positive, in terms of new customer additions, adding new volume to the platform. And the reason being is because it's actually easier to get the attention of CFOs and controllers, finance leaders in the current environment than it was a couple of years ago when it was all about revenue growth. And people are very focused on automating their back office, expense controls, making their operations more efficient, all those kind of things. You know, so that's, you know, a big one. And then the second one is, you know, where we have some tailwinds, and that's on existing customer volumes, where we're seeing kind of the impact of, you know, kind of discretionary spend. So one of the things, you know, that I, I tried to do in our last earnings call, and you guys will tell me whether it, it resonated or not, was, you know, really, you know, some education on the differences between small business and the middle market. We're purpose-built for the middle market. Middle market customers are... These are, you know, substantial companies, typically between $5 million and over $1 billion in revenue, typically a lot of them are market leaders in their particular segments. And, in a down market, these companies don't go out of business. What they do is they kind of curtail some of their discretionary spend. And, we've seen that show up in our business over the course of, you know, the last year through... I think that the best, you know, kind of metric that we use to kind of measure it is what we call Transactions Retained on Network. We think in a kind of normal state, that number should be about 104-105%. In the current environment, it's, you know, closer to 100%, and we think that's the impact of that discretionary spend. So, we also know that, you know, from past cycles, when, you know, finance leaders start having confidence on the other side of the cycle, that discretionary spend comes back pretty quickly. And so, you know, but we're, you know, kind of, we're pleased in terms of kind of managing through it. We think, you know, we've continued to demonstrate really strong financial results as we're navigating through some of the macro headwinds, and those are the things that we can control. All right. Great. Thank you, Mike. Let's... Now, we talked a little bit more, or at least alluded, that we'd get to the verticals. So nine major verticals for the company. Yep. They're all pretty low-penetrated. Maybe just talk about some of the newer ones that might even have the most runway and talk about maybe what those penetration levels are. Yeah, yeah, so, you're right. So a little to back up, you know, what makes, you know, built for the middle market, you know, unique to us is I indicated that, you know, kind of our expanded definition are companies between $5 million and $1 billion. And with that, in the U.S., there's roughly 435,000 of these middle-market companies. However, what's interesting about it is, we believe about 50% of that 435,000 companies actually highly align themselves to an industry vertical that has a unique either business process or accounting system process to it that requires an industry-specific accounting system. So these are different than like the NetSuite or Microsoft Dynamics, or Sage Intacct of the world, that are considered what I call more horizontal. That 50% of the market is very vertically specific. That's a really, you know, interesting dynamic of the middle market, and it means that when we go to market, we actually today have 9 verticals, as you referenced, that we go very deep in, and then we cover the kind of the horizontal lens really through our partnership channels. So of those 9, you know, we got started in real estate, so that's our oldest one. Still single-digit penetration. It's crazy, right? You know, we're just excited. We talked about our new AppFolio partnership that we just, you know, announced at, on last earnings call, where they have, like, 19,000, you know, customers within real estate, of which we believe about 50% of them are actually kind of in our sweet spot. And here we are in a vertical that we started 23 years ago, and we're still single digits. And then you kind of contrast that to maybe our newest vertical, which is hospitality, and we talked about that a quarter ago, and one of our, you know, kind of our playbooks in launching a new vertical is, you know, full disclosure, we don't sit around in a conference room thinking about what verticals we should go into. We actually look at our platform and say, "Where are we naturally, organically attracting customers that have certain characteristics?" And, you know, when we started getting about 50 hospitality companies coming to us, we took note of it. And then, when we got to about 100 hospitality companies, we started saying, "Let's put some energy on this. What are the characteristics of these companies? Why are they coming to us? What's the value proposition?" And then we kind of determined, okay, this has the characteristics of an industry that we wanna have a dedicated go-to-market strategy for. And part of that playbook is we would be highly aligned with the top accounting ERP systems that support that vertical. And so, you know, we were able to announce not only moving into hospitality as a new vertical, but also our partnership with M3 as a great example of supporting that strategy. So, you know, some of the other new verticals that we've launched in the last several years have been healthcare facilities, our education, nonprofit verticals, as well as hospitality. But then, you know, you look at even some of our, you know, most long-standing verticals being real estate, construction, financial services, as an example, you know, we're still single-digit penetration. So, you know, one thing I love about not only AvidXchange, but the market that we're in, is there's so many growth levers to grow this business. Excellent, Mike. I think we tackled some of the payment methods. We've tackled mid-market verticals. Let's move to gross margins. So they've been expanding, so gross profit growing faster than revenue. It sounds like a great transition to Joel, too. I think it is a great one. Joel, take this one. So we'll take this one over to you. So gross margins, you talked about the 75%+ long-term margin. You're on that pathway. Maybe you could just break down the components, the cash to... Sorry, the check conversion, some of the other scale benefits, and how do we get to 75? Yeah, you bet. So we've talked about this path to profitability coming out of the IPO. We've been focused on that since, you know, obviously early 2022. We've talked about profitability, starting with getting gross margins into the 70% ZIP code. We got there a little sooner than we expected, and please, in the third quarter, put up a 70% gross margin number. In the Investor Day, like you mentioned, we talked about this business as a 75%+ gross margin business, and well on our way. We talked about the way that we get there being a mix of the yield benefits coming through revenue, and unit cost efficiencies. About roughly, and not necessarily in linear fashion, but about two-thirds of that expansion over time, based on the yield opportunities we have through revenue, and then just consistent, the rest, the other third being consistent unit cost discipline. If I click into that a little bit, you're asking about, you know, kind of really where's the yield coming from, and how should we think about that? You know, probably the biggest yield opportunity ahead of us is that e-payment conversion, that should really, you know, add meaningful gross margin points, even on constant volume. And that's the things that Mike talked about, right? Additional payment modes, additional inducement of, of moving from check to electronic. On top of that, we haven't talked much about Invoice Accelerator, but we're excited to have launched that this most recent quarter and gradually see that ramp. But that gives us an opportunity to add revenue and yield on existing volume, so another gross margin enhancer. And then the unit cost is just, you know, blocking and tackling on the process on the invoice side, you know, delivering AP automation increasingly in an automated fashion, and where we have opportunities to outsource or optimize in various different ways, and in like fashion, on the payment execution side. So no one thing to point to on the unit cost, just sort of discipline across all of those workflows. Thank you, Joel. Going from down the income statement a little bit more, let's talk about some of the operating leverage you'll see below cost of revenue and what that means for medium-term EBITDA margins. Yeah, absolutely. I mean, we've... You know, again, on an almost $100 million quarter with 70% gross margins, we put up an $11 million, you know, 10% EBITDA margin. And so we're hopeful that, you know, this is a proof point to sort of what we- the target we painted for ourselves in Investor Day. And, you know, it's coming through some of the scale that we said we would see, so first on the G&A line, right? So we built, you know, we built sort of a leadership structure and a public company framework in order to shoulder a much bigger business, and so there's really no need to grow that meaningfully going forward, so we're starting to see that scale. Also, in sales and marketing, though, there were some timing dynamics between Q3 and Q4, but still good scale there. And over the course of 2024, we'll see kind of some R&D scale as well. So, feel good, even in kind of the environment where the macro is somewhat impacted but feel good about what we can control and with that focus on being a Rule of 40 business in 2025. ... Very nice. Rule of 40, 2025, 2025. Okay, let's move on to another topic that is an important one for the business in terms of a new growth driver. So Invoice Accelerator 2.0. So launched in October, started processing transactions. Maybe just talk a little bit about the goals for the mix of revenue that you've disclosed, and also just a recap on what the main differences are versus the 1.0. Yeah, maybe I'll start, and you can fill in some of the details. So Invoice Accelerator, when we go to think of the value proposition for the supplier, one of the things that suppliers have told us is, "In addition to helping us manage our payment modalities and give us the remittance data, it'd be great if we had some tools to help us manage our cash flow and hopefully accelerate the timing of getting paid." So Invoice Accelerator is designed to do exactly that. And, you know, I was fortunate in the sense that I had a Nigel Morris from QED, the original founder of Capital One, join my board in 2015. And at the time, he's like, "Mike, you're sitting on this goldmine of data to actually provide a financing offering to the supplier, because you have structurally, you know, some advantages that we could never, you know, have at Capital One, and that is it's really hard at Capital One to underwrite, you know, kind of the supplier, small business supplier, because there's no really good financial data. And then the second thing, it's really hard to collect the money because you're kind of chasing these small business suppliers." And on AvidXchange is, you actually have all the data to know the relationship between these buyers and suppliers, use a data analytics approach to underwriting versus financial analysis, because you're actually getting paid by the buyer, who's a middle-market company, and we have a lot of history with. And then the second thing is, all the money flows through our network, so we don't have to chase, you know, receivables, you know, going to a supplier. And so our first 1.0 offering been in the market the last couple of years, you know, and, had really good learnings related to the data science, combined with, our ability to recapture, you know, the invoices or the payments as they're flowing through our network, combined with the user experience. So now, with our 2.0 offering that we launched about a month or so ago, it's really designed to take, you know what... You know, during 1.0, we only made it available to about 50,000 suppliers, and we'll be able to make it available to all 1 million suppliers with our 2.0 offering. We're going a little bit slow this quarter to make sure it's working as designed, but then certainly be able to ramp it, as we go into next year. And so, you know, maybe this is a good transition to bring Joel into discussion. This, I believe, is our next $100 million business at AvidXchange, but, you know, we've, you know, kind of, made some, you know, commentary around how big we expect it to be in the next, you know, several years. Yeah. All I'll add is that at Investor Day, we painted sort of a five-year target of this being about a $50 million component of a billion-dollar top-line business. And again, we feel like it has all the promise that Mike talked about. 5% or so. Okay, great. All right, why don't we move to, I want to see if we can squeeze in a question from the audience, but let's get one more in if we have a chance here on acquisitions. So you've done a handful over the years, right? Yeah, BankTel, Core Associates, FastPay, just to name a few. Maybe, Joel, you can remind us on just the criteria that you're looking at when you evaluate these, and then also kind of where you stand in terms of your ability to do more. Yeah. Yeah, maybe on the second question first, right? Like we all options are on the table. We like that model as a growth driver. There's some value disconnects in the marketplace. We would make an acquisition only if it were you know accretive, and so we're. We continue to be watchful and look for opportunities, but haven't seen one since FastPay in the summer of 2021. What's worked for us is seeing opportunities to acquire you know a software business offering similar value in a different vertical, so the opportunity to acquire a new vertical and potentially to get unmonetized payment flows with that acquisition. And that's you know that that was sort of the Core Associates and BankTel model, and those have worked very well for us. And so that's maybe the sweet spot target. But we've done, you know, small tuck-ins around the edges. And so, you know, it'll, it'll play a role in our growth going forward, but we're in sort of a season of, you know, some dislocation in value. Okay, excellent. So the main, the main reason would be to add a new vertical, but there are others. Right. Add a new vertical and pick up an unmonetized payment opportunity. Yeah, yeah. We think it's a great, you know, playbook that really, you know, as you said, you know, go deeper in the verticals already in with a beachhead of customers, as well as launch new verticals. So, you know, we intend that that's probably going to be a playbook we stick to. Perfect. Okay, great. We have a few more here, and we have a few minutes. Would anyone in the audience like to ask a question of Mike or Joel? Okay, well, maybe we'll circle back, but why don't we just keep going then? So let's talk about the political spend. So in terms of modeling the company, we need to think about how this will pick up in the second half of next year. Think about it lapping the following year and then picking up again. Yeah. Maybe, Joel, you can just help us out with that a little bit. Yeah, yeah, I'll, I'll make some comments. I know Mike will want to jump in as well. So maybe just to step back and provide some context. So when we bought FastPay, which is, which is we entered into the media business, we acquired the media vertical through that acquisition. A portion of the FastPay business includes, the political media business, and so that was about a 8.5 million dollar business, in 2022, during the midterm elections. It's, it's, it's largely nothing this year, and then we'll, you know, we expect it to return in a meaningful way during a presidential election. What else would we add to that, Mike? Yeah, I think, you know, one of the things is, you know, today we, you know, control about 30% of all the, you know, political media payments in the industry. And, you know, it's one of these businesses that's hard to forecast because purchasing decisions and political media, again, are very reactionary based on, you know, kind of the circumstance of what a candidate may have done the day before or, you know, on a particular issue. But, what we find is about 50% of the payments relate to candidates, another 50% relate to the ballot issues. And we expect next year to be probably a pretty robust political cycle on both fronts. And the industry is expected to be the first $10 billion, you know, kind of political spend cycle. So we'll see. It's one of those, you know, kind of, you know, businesses that we weren't necessarily focusing on, that we naturally, organically became the leader in, and certainly looking forward to, you know, you know, next year's political cycle. All right, excellent. You'll continue to disclose what those contributions are so that we can kind of back out the underlying? Absolutely. Okay, great. All right, I think we have time to squeeze in just one more. Let's just talk a little bit about international. So oftentimes this comes up when people talk about cross-border payments, but there's domestic payments in other markets, and that's more where I wanted to hit, which is the business is currently U.S. Yeah. What are the potential prospects for doing what you do, but in other countries? Yeah, great question, and, you know, we get asked that question a lot, and one of the, you know, challenges that, you know, just we talk about internally is, you know, kind of focus and allocation of resources. Go back, today, we're pretty much exclusive to the U.S. and Canadian markets. And, you know, when we look at kind of that market opportunity today, you know, within the middle market, still 70% of that market is using paper invoices and paper checks. So with this massive, you know, built-in runway in the, you know, in the North American market that we're ready to leader in. And so it makes us really efficient to add customers and execute our business in North America with a massive runway, especially in single-digit penetration across all nine verticals. So having said that, though, we do get asked by partners, especially the ERP partners, to say, "Okay, Avid, you're the main, you know, AP automation payment platform for our customers in the U.S. Why? You know, when are you gonna be able to support our European customers or other international, you know, customers?" And so we think that's, you know, probably, you know, it's definitely part of our playbook. You know, I wouldn't say it's something that we're gonna execute in 2024, but as we look to kind of 2025 and beyond, absolutely. Especially, I think, we look at it as the international opportunity is more of a software opportunity than a particular, you know, payment, you know, necessarily opportunity. You know, we launched our, you know, cross-border offering about maybe a year ago, and, but, you know, one of the things I was trying to warn people about is, our verticals today and where our customers are, these aren't, you know, industries that have large degrees of international payments, the markets that we're in today. But where we see it is in the horizontal lens, supporting, for example, NetSuite channel, Microsoft Dynamics channel, is where we see more international opportunities. So I would expect that, not, you know, in 2024, but as we go into kind of 2025 and beyond, we'll be, you know, opportunistically looking to support some of our partners in, with some of their, you know, overseas customers. Great. Thank you, Mike. All right, Mike, Joel, Subash, thank you for making the trip here to join us in Arizona. It's a pleasure having you on stage, and- Thanks for having us. Thanks for being at the conference. Thank you. You bet.