Go ahead and get started here. My name is Clarke Jeffries. I'm a Senior Research Analyst here at Piper Sandler. I'm very pleased to have Mike Praeger, Co-founder and CEO of AvidXchange. Yeah, thanks for having me. Excited to be here. It's always fun to get to go to, you know, a conference that's not New York or San Francisco. Yeah. So- We aim to bring the Nashville flavor, so hopefully you'll get some. Maybe to kick things off, we can just talk about, you know, where Avid came from as an idea. Yeah. Where was the mission of the business? Yeah, no, it's a great question. So yes, we are a twenty-four-year-old software company. And the original kind of idea was, I had a, you know, successful exit of another software company that I founded back in November of 1999, we had our exit. And I was having dinner with a good friend of mine that runs a real estate company in Charlotte. And he was telling me about his accounts payable problem, and his name was Daniel Levine. And I'm like: "You know, Daniel, I don't know, you know, anything about accounts payable." But he's like: "Mike, you had extra time on your hands. Can you just come spend some time with my CFO?" And so I did that and recognized this is a really screwed up process. It's probably just Daniel's that's screwed up, you know, research and then realizing there weren't any really good solutions back in 2000, and that led to founding AvidXchange in 2000, and so we spent, you know, kind of our 1st couple of years focused exclusively on the real estate vertical, specifically one accounting system, which was MRI Software, which was a software system that, you know, that this guy, Daniel Levine, used, and then from there, grew to other real estate accounting systems, and then we started expanding to vertical markets, and then down forward in 2012, we launched the AvidPay Network. That was really, you know, kind of the game-changing moment for us, because what we then realized is the combination of AP software, AP automation software for the business process, managing the invoice. When you combined it with the payment network for managing the payment of the invoice, that was kind of the sweet spot of the solution that customers were looking for. And then our growth really, you know, kind of trajected from there. And we went public, and we're the famous class of 2021 IPOs, and went public in 2021. And we really have a long-term view focused on the overall market opportunity. So it's hard to believe, you know, I've been doing this now 24 years, and still today, about 95% of our new customer adds each year are greenfield. They're doing it for the 1st time. And we look at the overall market, and this is why I, you know, still have so much, you know, energy and passion for what we're doing. Seventy percent of the market is still processing paper invoices and paper checks. And so there's, you know, a big runway ahead. And, you know, today, you know, how we define our kind of go-to-market approach is that, you know, we're purpose-built for the middle market. The middle market segment, in just the U.S. alone, is about 435,000 companies. What's really interesting, about 50% of those middle market companies highly align themselves to an industry vertical that has either a unique accounting process or business process to it, that requires an industry-specific accounting system. That's what really differentiates the middle market. Today, we're integrated to over 240 different accounting systems that cover, you know, today, for us, nine different industry verticals in the middle market, and then what we call the horizontal. The horizontal segment is really defined as the NetSuite, Microsoft Dynamics, Sage Intacct, and maybe Acumatica market that is more kind of horizontal in nature. That's the sandbox that we play in. Yeah, absolutely. Great to hear about that amount of greenfield. That's category creation, you know- Yeah ... when it looks like that. Yeah, let's maybe talk about the verticals. You know, maybe let's give a kind of an overview of what those verticals are. Yeah. You've already kind of touched on differentiating by way of data integration. Yeah. And then maybe, you know, any particular verticals that are exciting right now as you look to the year ahead? Yeah, so really, I'm excited about all nine verticals from the standpoint of, again, even the real estate vertical we started in 20, you know, over 20 years ago. We're still single-digit penetration. And that's really remarkable, so you know, yes, we're approaching 10,000 customers, but you know, that market opportunity we're looking at is 435,000. So we're still single-digit penetration in all nine verticals. And even the 1st vertical we started in, you know, that we generally call real estate, that vertical in itself is fairly dynamic because there's probably five subsectors of it being, you know, real estate, you know, multifamily housing, student housing, industrial, retail, and commercial office. So even, you know, in today's world, maybe you have some, you know, kind of a stagnation about related to commercial office, but multifamily, student housing, industrial, you know, those have been on fire, right? And really, you know, kind of driving, you know, kind of new customer adds for. So to, you know, even that one vertical is fairly dynamic. A couple, you know, that I'm, you know, when I look at our newest verticals that we've launched: facilities and hospitality are, you know, kind of the two newest ones. And what we're seeing there is just, you know, continued, you know, kind of robust growth related to new vertical markets. And what kind of defines a new vertical for us is when we have a natural influx of these customers coming to us, and then we kind of pay attention to the business problem that we're solving, and we're saying: Yes, it's it creates we should have a dedicated sales force and dedicated go-to-market strategy related to that vertical. And that's how, you know, kind of the you know, we call it healthcare facilities, and you know, that was led by you know, lots of long-term care, Alzheimer's you know, type of you know, kind of you know, companies coming to us and looking and adopting our solution that made us take advantage of creating that new vertical. And then the same thing with hospitality, and one of the things we like to do in all new verticals is to highly align and partner with the leading ERP systems of that vertical. And that led to the partnership with M3 that we're super excited about as we continue to kind of penetrate that hospitality vertical. So, so the business is really kind of dynamic related to, you know, across these nine verticals, but, you know, single-digit penetration still in all nine today. Yeah, absolutely. Well, maybe let's turn to, you know, the financial framework and, you know, how investors should think about things like, you know, the long-term growth algorithm, margin profile. Yeah. Let's maybe start on, you know, growth. Yep. Can we walk through what your growth algorithm is, what contribution you generally expect from customer growth? Yeah ... from transaction growth, and then, you know, the monetization angle with yields? Yeah. No, it's a great question. So we define our really our business as really I think as a flywheel. And kind of there's four gears of that flywheel that drive our business and also drive the you know kind of economic engine of our business. And it starts with you know kind of the transactions the invoice and payment transactions of our buyer customer. So that's you know it's all about starting with adding new buyer customers looking to automate their AP and... And so then it goes to kind of the 2nd kind of lever, and that's kind of the integration side of being integrated to lots of accounting systems to maximize the adoption of those transactions on our network. And then the 3rd gear is really related to how we could do that conversion from paper to electronic. And that's, you know, we'll come back to that monetization piece. And then the 4th is data, and how we incorporate data to either create a larger value proposition for either the buyer or supplier. Now, going back to kind of that, we generate revenue on both sides of the equation from both the buyer and the supplier, so multiple forms of monetization on the same transaction. So we generate a software subscription, you know, kind of fee for every transaction, every purchase order, every invoice, every payment, different components like analytics. And typically, the buyer pays those software fees. And then on the payment network, we generate economics from the supplier based on the payment modality and the pricing related to payment modality for how that supplier receives a payment. And that's what's really separated us from a strategy perspective, a reason why we today, we're monetizing over 40% of all the transactions going through our network, which is, you know, typically two, three X what we see, you know, on the competitive front of our monetization. So why is that? I go back to, I think it starts with the number one reason is that we consider the supplier a core customer, just like the buyer. It's really expensive at the beginning because it means you have to create, you know, a product value proposition for the supplier. You have to create, you know, you have to have dedicated sales, dedicated customer success, support. But now we're seeing kind of the benefits of it, and we're seeing kind of an outsized adoption. And so we... You know, that value proposition that we kind of define for the supplier, there's three things that we do to the supplier that drives our adoption. The 1st one is, we give them access to lots of different payment modalities, that they choose from, in terms of how they want to receive their payments. So today, we go to market with 25 different payment modalities, 12 of them related to forms of virtual card, 12 of them is related to forms of ACH, enhanced ACH or ACH Plus, which we call our AvidPay Direct. And then the 25th is the good old-fashioned paper check. Now, we define a payment modality as a combination of four things: the speed of the payment, the price of the payment, level of remittance data, and the level of automation. So we kind of package these in terms of creating that value proposition. So that's the 1st, you know, thing that we do for the supplier, and then they can choose which of those twenty-five are the best payment modalities for them. The 2nd thing we do is we give them tools on how they can manage their business rules on our network. So for example, they can say, "Okay, I'll take a virtual card for all transactions up to 10,000, but if it's over 10,000, I want, you know, an AvidPay Direct transaction, or, you know, maybe potentially even a paper check for certain, you know, say, it's a $1 million-dollar payment." So that'd be an example of managing business rules. And then the third thing that we do is we make, give, you know, kind of what I call cash flow management tools, so the suppliers are better managed for cash flow, and the leading product there is Payment Accelerator. We're super excited about it. Made, you know, comments. I believe it's our next $100 million business, and really excited about, you know, kind of that 2.0 version that we released, you know, late last year, that we've been kind of scaling and, you know, with our, you know, suppliers this year and be able to be available to all suppliers as we go into next year. Yeah, perfect. And you know, just to maybe touch on that supplier story, you know, the growth of suppliers in the network has been pretty substantial. It's been a four X growth over the last seven years, over one point two at the end of last year. Yeah. You know, this is all with 8,000 buyers. Yeah. Right? And so that seems like a very tremendous one-to-many kind of relationship. Is that all natural in terms of the average buyer is really connecting with hundreds of- Yeah ... suppliers? Or have you gone out with a distinct go-to-market to touch the suppliers? Yeah. No, well, our strategy is, really is, we're touching those suppliers. Right. And so what we find is our average, you know, customer actually has 300 to 400 core suppliers on average. And now, having said that, you know, yes, we're up to 1.2 million, but, you know, how we kind of think of that overall network, roughly 10% are what we call enterprise suppliers. Mm-hmm. Maybe another 30% will be middle-market suppliers, and then 60% are small business suppliers. We pretty much have most of the enterprise suppliers already on our network. Got it. Right? That 10, top 10%. You know, it's, you know, the Staples, the Grainger, HD Supply of the world, all the utilities, as example. They're, they're already on our network. So what we're working on is that kind of remaining, you know, middle market, and then the small business supplier, and that's where we're so excited about Payment Accelerator, because that's the perfect value proposition to have, that small business supplier move to taking electronic payments, because they have to move to take electronic payments if they want to use Payment Accelerator. Yeah. So maybe we can talk about that scope of what the experience looks like today and what the value is on the software side for a supplier in the middle market and SMB, and then the Payment Accelerator, what's that additional functionality, kind of framing what, you know, that vision of that is? Yeah. So I mean, so, again, the value proposition for our supplier beyond our network is they get access to our tools to manage their payment modalities, their business rules of thresholds. They want to take a payment, you know, you know, again, like, you know, I want a different type of payment if it exceeds a certain dollar amount. But then, and with the Payment Accelerator, this is a great where, a great you know, kind of experience in terms of they can choose either all their invoices or, you know, individual invoices to be accelerated, through, you know, kind of a user experience, that, you know, they can, you know, easily just, you know, use it to manage their cash flow. And today, and this is where, you know, it's. We're going to continue to kind of expand the offerings. You know, it's on average, it's an incremental 200 basis points for the next. You know, take, say, a net 30-day invoice and accelerate it for next day payment, and we generate about 200 basis points for that transaction. The average, you know, invoice is outstanding for 25 days. So we're, you know, invoice amount is between $1,500 and $2,000. So, you know, lots of, you know, individual, smaller, you know, kind of transactions that we're kind of accelerating, and they can manage it through, you know, a simple, you know, user interface, whether it be, you know, on their phone or, you know, on their desktop. And so what we're finding is that, one of the metrics that we're paying, you know, close attention to is once a supplier uses it for a single advance, how often they come back for ongoing advances. And currently, it's running in the low 80% that within 90 days, they're coming back for ongoing advances. So that makes us really excited about, you know, the opportunity that we have, you know, with Payment Accelerator. Yeah, it's very interesting to think about this space in, like, an evolution where, you know, the 1st stage was building the software muscle and the integration- Yeah ... automating the workflow. 2nd stage was layering payments- Yeah ... and then the 3rd phase is speed and network effects, making strategic- Yeah ... decisions about cash flow. You know, are there any other big holes in simplifying this procure-to-pay, order-to-cash- Yeah ... process? It's sort of we've already kind of hit on the fact that a lot of this is greenfield, even at the 1st stage- Yeah ... even at the software digitization. You know, what do you believe is next for this space? Yeah, so great question. What we believe is next is something that we're already working on, and it's going to be released to, you know, later this year to our initial MVP-type customers, and that's our spend management platform. Yeah. And so what, you know, customers have come back and said is, "Mike, you know, we have roughly. You know, we have 100% of all our invoices going through your platform, but maybe the invoice expenses that have an associated invoice to them are maybe, you know, 85% of our total expenses. We have 10-15% of our expenses that don't have invoices. Might be T&E travel, might be, you know, kind of emergency purchases, things like that, and we're using kind of either, you know, Excel, manual process, or, you know, some other third-party applications to manage that, to those 10-15 expenses. But how do we get those in the AvidXchange platform, so we have one system of record for all our expenses?" So that's our mission behind spend management, is to capturing that additional 10%-15% of expense that doesn't go through our platform today. And you know, if you think about it, it's the Divvy, the Brex, the Ramp version for AvidXchange. So it's geared towards middle-market customers with highly you know kind of integrated to our platform. So for users, there's one user experience, which they manage an invoice you know related expense just like they manage a non-invoice related expense. And obviously, all the analytics and reporting are in one place. Yeah, absolutely. Well, let's maybe talk about, you know, the macro environment, because this is related to commercial spending, and then- Yeah ... there's, you know, you can have this tailwind of continuing to add customers, but you may be fighting against the fact that, you know, these customers may be in a contracting level of spend and, for them- Yeah ... at this moment. So, you know, what are the opportunities to capture more spend, even in the face of maybe their overall spend contracting? Yeah. So good. So one of the things that we, you know, how we measure, you know, a little bit of that macro impact is kind of a metric that we, you know, kind of use and we publish. It's called Transactions Retained on the Network. Mm-hmm. That's kind of the equivalent to our same source sales type metric, and so we believe in normalized, you know, kind of macro times, that number is about 105, so about we get about 5% growth from existing customers on our platform each year. Last year, you know, that number was down to kind of 103. In the current environment, it's running at 100. There's slightly sub 100, so that roughly 5-6 percentage points is what we view as the macro impact, and it's geared very specifically to discretionary-type spend buckets. You know, marketing, professional services, some preventive maintenance, capital projects, things of that nature, and we've seen this, you know, play out multiple times in our history. When, you know, kind of people start having confidence in the overall market, that discretionary spend comes back pretty quickly. One of the things is, you know, middle market companies in a down market typically don't go out of business. Mm-hmm. They cut back on discretionary spend, and it's a really stable, you know, customer base, but they, you know, just like, you know, AvidXchange, we're, you know, aggressively managing our expenses in the current environment, you know, just like our customers are. Yeah. And so that's what we're seeing in terms of kind of that macro. What we're, you know, focused on are the things that we can control, and that is continuing to deliver a great value proposition. How do we keep, you know, kind of investing in our products, like spend management, so we can capture that additional 10%-15% of expenses that aren't in our platform today? Combined with, you know, continuing to see our automation and AI initiatives really starting to take hold. You're seeing in our gross margin expansion. You know, we're approaching that 75% target of gross margin, and certainly seeing some, you know, kind of nice delivery ahead of schedule of our EBIT numbers. Yeah, certainly. Yeah, and, you know, certainly 105 to 100, like, these are still high retention numbers of that transaction. Yeah. To turn to that, the margin and through the process of within your own operations becoming more automated and getting more efficient, you know, you've set out targets of, you know, the goal of 20% EBIT margins- Yeah. Rule of 40. Let's maybe start with gross margin- Yeah ... and what you kind of already touched on in terms of gross margin benefits and improving unit costs. Yeah. Can we talk about the initiatives there, and- Yeah and how, you know, is this a twenty twenty-five kind of timeline for some of the benefits here? Yeah. Well, I think in terms of gross margin, you know, we, you know, last quarter, we're roughly just over 72%. That's up over, you know, 10 percentage points since our IPO- Yeah ... s90ince 2021. We've been really leaning in on how we've been kind of growing that number. You know, and I think our midterm target has been, you know, 75%, kind of long term, you know, approaching 80%. So we think we're well on our way of, you know, that gross margin expansion. The 2nd thing is, you know, that EBIT expansion, and, you know, we think we're, you know, ahead of schedule there. Certainly, you know, for 2025, we talked about, you know, 20% EBIT margins, and, certainly we're, you know, well on our way, you know, to meet or exceed those numbers as well. All right, perfect. And then, you know, another discussion point that we've talked about is partnership benefits- Yeah and the idea of sales and marketing kind of getting leverage from ecosystem and partnerships that, you know, are kind of the output of having a vertical approach. Yeah. So what's interesting, I made some kind of commentary in our last, you know, call about this, is that, we've, you know, kind of purposely made some mixed shift changes in terms of our go-to-market. And what we're seeing is some really robust, you know, lead generation coming from our partner channels. So these are typically, you know, examples of partner channels include, you know, our bank partners, our accounting system, ERP partners, and then kind of, you know, other software partners in the industry. And specifically around accounting, ERP partnerships, we're seeing really robust, lead generation there. You know, one of the, well, you know, ones I've talked about recently are, you know, AppFolio, as an example. If you think about it, what we did is we turned a dial from our digital demand gen, you know, say, Google AdWords, you know, searches, things like that, to kind of our partner, allocate more of those dollars to our partner channels. But if you think of the quality of lead coming in, of, say, an AppFolio customer who uses AppFolio to run their business, and they're saying: "Okay, I'm using AppFolio to run my business. AppFolio, I want to more... I want to automate my accounts payable and payment process now, you know, in an integrated way to AppFolio, can you help me?" We're the partner already there to help. They've already raised their hand. It's a really qualified lead, and, just last quarter, we've taken 20 days off of our average, you know, sales cycle. We used to be running about seventy days, now we're down to fifty days. And it's directly attributed to the quality of leads coming in are, you know, greater just because of that dynamic. It's a much more qualified lead having that AppFolio customer raise their hand than a Google AdWords coming in or a search coming in. Yeah, absolutely. We've kind of, you know, turning more investment dollars in our go-to-market strategies to supporting our partnership channels, and it's, you know, we're seeing it pay off. Yeah, absolutely. Well, last few minutes here, two questions. One, you know, what are you most excited about for the coming year? Yeah. Two, you know, it's technology conference. I'd be remiss if I didn't ask about your AI initiatives. Yeah, yeah. What's the most exciting implementation so far in the portfolio for AI within the AvidXchange? Yeah. So maybe I'll start there. You know, it's interesting because it got all kinds of fanfare in the last couple of years, right? And we're like: "Okay, we've been working on this for a while." But that's okay. But what you one of the things that we're we today, we have, like, 12 core initiatives across the business. Maybe kind of 5 of those are kind of customer-facing, and then maybe 7 are just internal efficiency. But on the customer side, some really exciting things happening on our front-end capture process, where we already had a robust platform that we partnered with Microsoft on in terms of taking their latest generation OCR technology, combining it with machine learning. And then now applying kind of the AI, you know, kind of, you know, Microsoft technology to that front-end process. And in terms of how we're reading non-standard invoice documents, so that's been really impactful for new customers or for customers overall. And then the kind of another example is in you know workflows and making kind of workflows, you know, kind of really, you know, more intelligent related to general ledger coding, cost center allocations, things of that nature, that you know it can understand, okay, this transaction historically has been allocated and managed this way. Let's kind of apply those as a default type thing. And then the kind of the third bucket I'll talk about is, you know, how we're supporting them in terms of, you know, using AI, you know, within our chatbots and things like that. And what we're finding is that it's just a more robust, you know, quick questions like status of a transaction or status of an invoice, status of a payment, and available, you know, have those now be answered through an AI bot really efficiently, you know, versus waiting for, you know, kind of a support, you know, person to handle those type of requests, right? So that's kind of, you know, customer-facing. You know, internally, this is where we're seeing the impact on, you know, gross margin and just OpEx, all kinds of, you know, really, whether it be, you know, engineering our products. But one of the fun ones is around, that I, you know, talked about on, the last call, is, there are certain types of payments, specifically virtual cards, where suppliers will say, "Avid, I'll take a card-based payment from you, but you have to call it into my IVR system," right? Yeah. So we started back in the day with having, say, human beings calling these cards, you know, into an IVR system, say, to pay a utility bill, right? And then they got replaced through you know, and at that level, we are kind of, we got it down to, like, $400. So you know, up to $400, anything over $400, we executed through humans. Well, then, RPA bots kind of took over, and we reduced that threshold from $400 to $200. So, you know, everything above $200, we could, you know, execute through an RPA bot. Now, with our AI agents, we've taken it down to, like, $10. So now we're, you know, able to execute many more efficiently, and that's a great example then, you know, in terms of that internal efficiency, you know, that we're seeing. So those are just some examples that we're certainly leaning into. All right. Perfect. Michael, I think we're out of time, but thank you very much. Thank you! -from Nashville.