Good afternoon, everyone, first of all. It is the afternoon now. My name is David Koning. I'm a senior analyst at Baird. I cover financial tech and in payments. I'm very pleased to introduce AvidXchange, a fast-growth B2B payments company, and I think widely known as an industry, as one of the fastest themes in payments for the next many years. We have CEO Michael Praeger, he was also the founder, then we have Joel Wilhite, the CFO. Maybe what I can do is just kinda kick it off with asking, you know, what really do you do? What's the value proposition, and kinda we'll go from there. Right. It's always fun doing kind of the lunch, you know, fireside chat here. What we do at AvidXchange, we describe ourselves as a software company that automates the accounts payable and payment process for middle-market companies. We like to say we're purpose-built for the middle market. What that means is that we design a very specific feature set, as well as go-to-market strategy, combined with a payment network that's purpose-built for to serve middle-market customers. Simply speaking, we eliminate the paper invoice and the paper check for our customers and, headquartered in Charlotte, North Carolina, and certainly hosted, you, Dave, and a number of investors, last week at our first Investor Day. Yeah. Yeah. Well, thanks. It was a great time. You know, maybe a third of your revenue, when I think about is software, right? You talked about the mid-market. I think we looked once, the average company does about 8,000 transactions per year, if I'm remembering that right. It's a pretty big number. Why is that the target group that you go after? Yeah, well, it probably goes back to kind of how we got started. Like, you know, a lot of companies, how they get started, you start by, you know, solving a very specific business problem, either for a sort of subset of, you know, customers or for a particular customer. In our case, we had started by solving, you know, the accounts payable process for a handful of real estate companies, that were headquartered in Charlotte at the time, and it turned out that they were just middle-market real estate companies. There wasn't a big design around the middle market. We kind of got started by solving a very specific problem, a business problem for a set of real estate customers, from there, it grew, and we kind of, you know, really started to realize that we were really onto something related to the business problem that we're solving. We said, "What are the characteristics of this problem compared to other companies?" That really led us then to say, "Oh, it's actually a middle-market problem that we're solving." That led us now to grow from our first vertical being real estate to nine verticals, most recently, hospitality, which we announced on our last earnings call. Yeah, you know, you have about 2% of the market. You often talk about you have about 9,000 clients- Yeah. ...out of 435. We're getting a little feedback. Thank you. 15 years. Why have businesses taken a while longer, you know, TAM is still unpenetrated? Yeah, it's probably the number one thing that keeps me up at night, you know, thinking about, you know, what, you know, we can do and what's our role in that overall industry adoption. I think, there's two things going on. One is there's just the... You know, what I've come to learn in business process is, it takes a lot, over a much longer time for companies to change business process than you think it, intuitively, you think it should. It's easier for consumers to change what they do because there's not a lot of process involved. There's not a lot of accounting, you know, implications. Like you and I, Dave, when we, you know, go online to our bank and do, you know, personal bill pay, you know, we're managing a handful of transactions. Usually, it's a stack of mail that, you know, that's, you know, sitting on our kitchen table. Then there's not an accounting system that we have to integrate it to. We just go online, log in, and select, you know, pay the landscaper, pay the utilities, and, you know, the cable bill, and we're kinda done for the month. We get to business, there's a whole very substantial business process around how expenses get managed, which then relates to on the, you know, on the payment, the cash flow process and how payments get managed. I think companies are very, careful to, and cautious to changing processes that impact their expenses or the cash flow. You know, in a lot of ways, you know, it may be more expensive, it may be more manual, paper-based, but it kinda works. You know, they kinda still get people paid, right? It's just that it could be a lot more efficient. What we find is that, you know, one of the biggest kind of catalysts for, you know, changing that adoption is, one is, I refer to it as, you know, generational change, and that's when you have, you know, some of the older generation, finance leaders, CFOs, and, controllers that are being... You know, they're retiring, and they're being replaced by younger, the younger digital native generation. They're asking, like, you know, when they show up, and they have to sign 1,000 checks every Tuesday and Thursday, like: "Why are we doing this? I don't do this in my personal life. Why am I doing it in my business, you know, capacity? You know, there must be a better way," you know, versus that question was being asked before. Then, you know, kind of the, you know, what I'd say, kind of the cloud, you know, kind of evolution is another certainly big adopter that people kind of quickly realized if you didn't have these type of solutions in the cloud, in March of 2021, it was really hard to support a work-from-home environment. I think there's a lot of, you know, kind of catalysts that are, you know, like, say, just tailwinds, right? These adoption markets kind of, you know. It takes longer to change than you think it should. The best analogy I think I can, you know, give is, we've been at this since 2000, in the first eight years, the number one sales objective that we have was people said, "Mike, love what you're doing, but I'm not sure if we feel comfortable having our financial data in the cloud. If we could put it, you know, on-premise, behind our own firewall, on our network, you know, that's a solution that we need." We walked away from a lot of deals in the early years because of that dynamic. If I went back to those same companies today and said, "Good news, I have a solution that's, you know, on-prem, that can run behind your firewall, you know, in your closet over there," they'll be like, "Mike, it has to be in the cloud," right? Very quickly, over a 10, you know,-ish year period, that whole dynamic changed overnight, and I see something very similar happening with this type of dynamic. Yeah, that's great to hear. When we think about the sales pipeline, or you often talk about the top of funnel, and I put that into context, you just were talking about five years of kind of 20% growth CAGR. I mean, is it that sales kind of funnel that you see that gives you a lot of confidence in this growth? Yeah. It's interesting, one of the really unique dynamics of AvidXchange is that we have. I've never been involved in a business as many growth levers as we have. What I mean by that is, we kind of describe our business in terms of a flywheel. We have kind of, you know, four gears that drive our flywheel, and each one of those has specific kind of growth levers attached to it. The first one is just around adding new, you know, buyer customers, you know, growing that 9,000 number, as you said. Well, there's two pieces of that, and that is, one, yes, continue to add net new customers, which, you know, certainly we have the tailwinds on. The second thing is, we have this significant opportunity within our install base of customers that only about a third of our customers have adopted payments. We still have two-thirds of our customers who are using us for invoice automation, but they've not yet adopted the AvidPay Network. You know, continues to be a big cross-sell opportunity within the existing base. That's kind of the first, you know, set of levers. The second one is related to the whole paper check dynamic. That is still, you know, Yes, we're monetizing about 40% of transactions that go through our platform, but still, you know, kind of 55% or so, plus, are still paper check. That's a significant monetization opportunity as well, because although we generate software revenue from every transaction that goes through our platform, on the supplier side, if it's a paper check, we get zero revenue, and we're at relative high expense. Any time we convert that transaction to be an electronic payment, it goes from zero revenue to $10 plus. That's a nice, you know, accretive action for both revenue growth as well as gross margin expansion. That's the kind of second set of levers. The third set of levers is, you know, our ability to continue to monetize the same transaction in multiple ways. The, you know, our new Invoice Accelerator offering is a great example of that, is now we kind of take that same transaction that we got a software revenue fee from the buyer on, we're getting kind of an electronic payment fee by the supplier, and then the supplier's choosing the accelerator for next -day payment, we get an additional acceleration fee of a couple hundred basis points. You know, all three of those kind of, you know, strategies, you know, kind of are all working together, and I think, you know, that's why we have a lot of confidence around our 20% annual growth, kind of mantra. Yeah. Gotcha. The payments business, two-thirds of revenue is from the suppliers getting paid, and them- Yeah ... paying you a fee to get paid. What gives kind of the confidence that that's gonna grow from, what is it? 58% check. I'm kind of doing the inverse now. Yeah. 58% checks down to only 45% checks or whatever that number is. Like, are they asking you to get paid that way, or are you calling them? Yeah. A little bit of both. One of the things that, you know, makes us unique and the reason why we kinda have best in class, you know, monetization already, is that we made a decision early on, when we launched the AvidPay Network, that we're gonna actually have two sets of customers. That if we're gonna build a two-sided network, we had to think of the supplier as a core customer, just like we think of the buyer. What does that mean? It actually means then that you have to do some, in the short term, expensive things like, you know, create a value proposition and a product offering for the supplier. You have to support them with a dedicated sales force, dedicated support, dedicated customer success. Now that we've done that, we've really seen the ability for those suppliers to see the value proposition that we're delivering, and they're actually choosing to be part of our network, not just because they're receiving a payment, because of the value proposition that they're getting in terms of better insights into their outstanding invoices and payments, ability to manage their business rules, how they want to receive payments, as well as now getting access to cash flow management tools like Invoice Accelerator. I like to think about it as you have to create a value proposition, and that's not easy, and that's expensive. Certainly, now that we're kind of, you know, 12 years into our work there, we're starting to see the flywheel effect of having a true network, and that's what's driving our margin expansion as well as, you know, gives us a lot of confidence on revenue growth. Are some suppliers just not even able to accept a credit card or ACH payment? Last night we were talking to Jack Henry a little bit. It just sounded like they were kind of saying, like, there are some suppliers that are probably pretty small, that only can almost handle a check. Is that? Yeah, I mean, it's really interesting. Certainly kind of enterprise suppliers for the most part, you know, have now adopted, you know, the ability to receive electronic payments. Kind of the enterprise supplier piece is in good shape. Actually, the small business piece, we actually have pretty good success with, because for small businesses, it's all about just they're focused on cash flow, right? Mm-hmm. If you're receiving paper checks, it's kind of a seven to 10-day cash flow cycle between, you know, mailing time, printing, mailing, and then actually, you know, kind of, you know, cashing the check. If you move to electronic payment, it kind of, you know, saves maybe, you know, seven days of cash flow, you know, for that supplier. Most small businesses are actually very in tune to that dynamic, and they'd rather have the money today, and even if it costs them a couple of 100 basis points to get it. You know, we do have pretty good success with small business. It's actually probably more the middle market, you know, more substantial small business and middle market that is somewhat the laggards, and the reason being is because they've actually invested a lot of business process on how to get really good at accepting check and applying checks, payments, you know, operating a lockbox for payments and things like that. Because they have this, you know, defined business process that they, you know, think they perfected around, you know, acceptance of check, those are typically the hardest ones to move. Yeah. Okay. What do you think over the next five years or so, the yield within payments, right? You have the volumes and then the yield. I think it's been running 32, 33 basis points now, but if we get a nice mix shift, I mean, can that be 40 basis points, 50 basis points? Yeah, well, we expect it to continue to kind of increase, and, you know, kind of the overall metric that at least is the, you know, one that, you know, is the first number I look at, you know, every time Joel sends me a reporting package, and that's our transaction yield. To me, that's the one that best represents the overall health of our business model and our flywheel, and that is the revenue that we're generating on all the transactions that are going through, because we want that number to continue to escalate. Currently, you know, last quarter was $4.79, and it really demonstrates our ability to continue to monetize these transactions, you know, both from a software as well as a payments perspective. You know, inherently in that number, it also, you know, is that, you know, that number is not going to grow if we're not doing a good job of, you know, continuing to, you know, retain our, you know, both our buyers and suppliers, and deliver, you know, a really good software experience for them. I, you know, to me, it brings it all together in terms of if there is one number, that's the health of AvidXchange, I think it is that transaction yield number, is the one that I focus on, and underneath that, there's, you know, lots of subcomponents that make up that number. Yeah, and the experience, so that's one kind of bringing back to even software clients. It seems like you have such high retention. Once a client is on, they almost never leave. Yeah. Is that because once they load all the data onto your system, just to try to ever move that away would be so difficult? Yeah. I think it's a, it's a combination of the data and also I think the integration experience. You know, one of the fireside chats that we did at Investor Day last week is we actually had the CEO of MRI Software, which is a large, one of the leading, ERP providers in the real estate segment, you know, kind of talk about, the importance of AvidXchange to his ERP system, right? What it does is, you know, we've now kind of migrated... You know, when we kind of started this business, a kind of, information was shared through kind of file sharing, and then it could move to kind of, you know, you know, kind of the initial, you know, kind of generation of APIs. Then it moved to kind of next generation APIs, and each progressively, you know, the data move faster, more seamless, better user experience. Now we're in a, what we call kind of a built-in experience, where, from a user experience, the average user doesn't even realize when they're in AvidXchange or when they're in the core ERP system. It looks and feels like the same experience. Mm. When somebody gets to that place, they have all their expenses running through this process, highly integrated to their core, you know, back office, it's really hard to do something else. Now you have your, all your data, all their suppliers are part of our payment network, and we're highly integrated to their daily process. You know, I call it the stickiness factor, it certainly shows up in our high retention numbers. Do suppliers ever, like, Somehow, is there almost a benefit for a supplier to be on your payment network? The buyer's like: "You know what? I like to just pay that way, it's super easy. Like, I would rather do more with that supplier," so you can convince that supplier to get- The answer is we definitely think so. Yeah. We have some future strategies around even being able to promote that and actually monetize that. A good example of that is by creating, you know, kind of vertical marketplaces. You know, the amount of spend that we have on our platform, you know, is over, you know, $200 billion. Significant spend going through that we're capturing in terms of invoice and payment-related transactions, but why can't we also provide value in the underlying purchase of that transaction since it's already on our platform, right? I think that's a, you know, natural extension of, you know, how we can provide more value, you know, to the supplier and actually help the supplier then increase their business. Yeah. I mean, that's fascinating, but I get it. Invoice Accelerator, you talk about 2.0, right? It's gonna be a catalyst for growth. Can you explain a little how that works, why you need to do Invoice Accelerator 2.0, and yeah, maybe the economics, why it's so much better? What is Invoice Accelerator? We kinda think of it as, you know, kind of an extended, another payment type, and that simply allows a supplier that has an outstanding invoice, rather than waiting, say, net 30 days to get paid, they can say, "I want my payment tomorrow," and they can raise their hand, and they can accelerate it for next -day payment for those invoices that are eligible. What's unique about, you know, this offering is that we have both parties on our network, so both the buyer and supplier on our network, and we have perfect visibility into the history of all their historical transactions together. In terms of, you know, invoices that routinely get paid, invoices have characteristics of things where the amount gets edited or changed, that we know about timing of payments. We have all that history, right? It gives us a really unique opportunity to underwrite that transaction, to make it available for next -day payment, as well as, one of the biggest costs of other people that are trying to, you know, factor or lend to this market is: how do you collect the money? In our case, all the money flows through our network, right? It's an automatic kind of collection process related to when these payments get made. We charge an incremental on average about 200 basis points to the supplier to have it be accelerated. We've been in the market for the last couple of years with our first version, we feel like we're ready for, you know, kind of the version 2.0 of making available to all our suppliers in kind of prime time because of the learnings we've had in over the last two years around two specific areas. One is all the data science of how we underwrite these transactions to make sure that we have that correct, as well as our ability to recapture these payments as they flow through our network. We feel that we're in really good shape on those two pieces, now we're in the middle of our 2.0 build that'll automate all those processes into a highly automated platform that they can scale from, you know, servicing, you know, million of our suppliers today. really excited to have that in the market the second half of this year. Yeah, it doesn't take much to move the needle. I mean, you know, I think it was $67 billion last year volume or something like that. $68 billion. $68 billion. All right, close. If you even get $1 billion on that's an extra $20 million of revenue- Yeah with that extra 2%. That's a lot. That's what I tell our team every day. Yeah. Absolutely. I mean, again, I go back to, you know, the most exciting thing for me, and I've been at this a long time, is I'm more excited about the business today than I've ever been, and largely because of the opportunities that we have in all the different growth levers of the business, combined with, you know, kind of, I think, the talent that fortunately I've been able to kind of, you know, recruit and curate, you know, at AvidXchange. One of the things that, you know, we like the Investor Day for, is, you know, the all of you get to hear, you know, kind of me and Joel talk at these investor conferences. There's a whole, you know, incredibly talented team at AvidXchange that's actually executing the business- Mm. ...that typically people don't have visibility to. Hopefully, that gave you some visibility last week. Yeah, it was. Yeah, it was great. If, if we think, you know, like, what could drive hypergrowth, right? 20% plus is very big growth, but what would be a couple things that could drive maybe 25%, 30% CAGR for the next five, 10 years? As a segue to that question, Visa, Mastercard, Global Payments, I think they all call B2B the biggest theme in payments. Ibuki, we hosted him in a meeting recently. Yeah. They all kinda say this is the best theme in payments the next five, 10 years. What could drive it to, like, some hypergrowth? I believe, you know, again, go back to there's two things. There's those things that we can control in terms of the value proposition, and then there's the natural evolution, the market, and maybe some inflections that happen. Probably, you know, one of the biggest things that can occur is this adoption, you know, kind of increase of adoption levels for B2B payments. Just like my example on the adoption of SaaS software, and overnight, people, you know, weren't comfortable with having data in the cloud, also now became like you had to have their data in the cloud, right? That dynamic switch happened very fast. I think a very similar dynamic switch is gonna happen here, except it's very hard to pinpoint, like, you know, what quarter, what year, you know, those things are gonna happen. While we're evangelizing those things, we're, you know, working hard at, you know, what we can control is the value proposition and continue to increase value at every step. Every, you know, the four years of our flywheel is, you know, quarter in, quarter out, how can we continue to increase the value proposition? Just make this overwhelmingly a no, you know, brain or decision for both the buyers and suppliers to want to adopt, you know, within the middle market. Gotcha. Maybe, Joel, we can ask a few questions on. Yeah, you feel left out here. Yeah, I mean, you're just driving revenue. I give moral support. Yeah, Mark, there we go. You've got to make the numbers work from, like, make actual, like, the profits, right? He's been doing a good job with that, though. Yeah, it's been really good lately, so yeah, thank you. Gross margin, 64% in 2022, 75%+ by five years out, 2028, whatever. What are the drivers? Is it mostly just revenue growth drives that, or are there some costs you're working on, too? Yeah, a little bit of both. Yeah, we've, you know, a year plus ago, we were in the low 60s. Q1, 67% non-GAAP gross margin. About a year ago, we began to talk about the path to profitability, and we sort of guided the expectation that as we get into that 70% zip code, the business becomes profitable. We saw that in the first quarter. We've kind of reiterated our, you know, mid-70s, 75%+ long-range gross margin targets, but articulated more clearly last week that we're looking at about 72%-75% gross margins in 2025. We've, you know, consistently expanded that gross margin and expect to continue to do so. How is really a mix of, you know, continuing to, you know. How we've characterized it, is roughly two-thirds of revenue yield expansion, and about one-third of just continued improvements in our underlying operating unit costs. Those two working together, not necessarily linearly, but as we sort of move through between now and 2025. Hopefully last week at Investor Day, we shared a number of those levers of where we can get those unit costs. Mm-hmm. We've already talked a little bit today already about where we get revenue yield expansion, whether it's Invoice Accelerator or continued penetration of digital payments. Yeah. Yeah, that's great. Like just the cost reduction of checks by itself helps out a lot. EBITDA 30% plus by 2028, that kind of implies 45% of revs are G&A, S&M, and R&D. Those three, they're each about the same today. Right. I mean, are those each going to be about 15% in the future? If I were to sort of stack up the relative, you know, contribution, G&A would kind of be lowest, closer to sort of that lower teens. Yeah. You know, R&D, mid to high, and then, sales and marketing, maybe a tick above R&D as a percent of revenue. Yeah. When we talked about the path to profitability and the 70% zip code on gross margin, we also talked about when and how we would begin to see scale in operating expenses, starting with G&A shortly thereafter, sort of more towards 2024, seeing it from an R&D perspective, and then sales and marketing as well on the path to 2028. Yeah. Gotcha. Kind of a two-part question: your cash, you know, you've got $430 million in cash, debt and leases of $150 million. Why not pay it off? Just pay off the debt with all that cash, maybe secondarily, are you kind of waiting for the right M&A opportunity with that cash? Yeah. It's like, you can't delete my cash reserve here for M&A. The answer to the first question is in the premise to your second question. Yeah. I think keeping all options on the table is the way I would answer that. Yeah. Are we close to being able to refinance some of the higher-yielding debt? I mean, you're getting so close to profitability now. You already are at EBITDA profitability. Could we maybe get lower rates? Possibly. It might be that we did this in December. Yes. We. Right We did a big refinancing in December. Right. We took a, call it $110 million of reasonably expensive debt and replaced it with, you know, sort of an a 65 fixed and a flexible line at basically half the cost of capital. It still does leave us with, you know, some debt outstanding, and I think, you know, we've talked about that EBITDA profitability in Q1. We've sort of managed expectations that three or four quarters later, you're into free cash flow positive. We are at a point where we're beginning to think about what those options are for us, you know, including debt recapitalization and other things in terms of use of capital. Also, an M&A market that's been largely Yeah frozen, is beginning to loosen up. Again, just kind of keeping all our options on the table. Yeah. That's good. We've got about one minute left or so, but anything that we missed? I mean, it seems like this is such a big TAM, big opportunity. Yeah. You know, what might have we missed in the Q&A? I mean, I just think it kind of goes back to people, middle market is the hard part of the market. It is not a big surprise that kind of the whole market got started with enterprise. It went to small business. Because small business, you have simple business process, one accounting system. The middle market is hard from a lot of dynamics. You have all the verticalization. You have lots of all these accounting systems that are specific to each vertical you have to integrate to. You have a hard business process. You have to go kind of one CFO at a time, right? I think appreciating kind of what we built over the last 20 years and the moat that we have around kind of that middle market, is I think, probably the thing that, investors are starting to realize. Yep. Yeah, no, it's great. That's about all the time that we have, but please join me in thanking Joel and Mike, and AvidXchange.