Happy to have EngageSmart. It's my first time spending time with the team in person. We've got Bob Bennett, the CEO founder, Cassandra Hudson, as well as CFO. We're gonna do fireside chat. Hopefully get through some of the questions. I've collected a lot of these through the investment community, but welcome. Thank you both for being here. Oh, thank you. Thanks for having us. Great to be here. Yeah. It's in Boston. I live in Boston. Yeah. It's quite convenient. The commute is easy. I'll take it. Yeah. I figure we start. I always like to start from a founder's perspective 'cause always love to hear the story. Would you mind, Bob, just going into the story of the founding of the company and how it's evolved, what pivots have you made, that kind of thing, as you've gone public here? Sure. yeah, thanks for that, and again, thanks for having us here. Originally, you know, I was in the electronic payment business had built a company up to a decent size. We had sold that company to Sage Software that became Sage Payments, which has gone a separate route to become other things, Paya, now Nuvei, I guess. Nuvei or Nuvei. Nuvei, yeah. You know, I loved the electronic payment world. I got involved in that, was there for close to a decade and wanted to stick with something in that realm when I was still with Sage. Left Sage to form InvoiceCloud to digitize, you know, the electronic billing, payment, and customer communications business around for billers, where I recognized, 'cause we had done a lot of business with Card-not-present and a lot of billers when I was with Sage Payments, that wanted to get more than just payments. They wanted to actually simplify the customer and client engagement around billing. They wanted to have paperless billing. They wanted to have autopay. In fact, billers wanted to have 100% autopay and 100% paperless, if they could get there. We recognized that opportunity to simplify customer and client engagement. We ended up taking money from a private equity partner that's nearby, Summit Partners, here in Boston, actually. They kind of convinced, you know, my team and me that, you know, we could take their money, buy other companies in other verticals outside of our government, utility and financial services businesses that InvoiceCloud was in, buy some other entities where we could help them drive deeper digital payment and digital emailing, paperless billing and customer communication. We ended up building this customer communications engine that became really the secret sauce to driving very high adoption. When we recognized that we had higher adoption than our competitors, we started to take that learning and that system and that sort of flywheel that drove high adoption to these other solutions, got them more successful than they were when we purchased them. I mean, when you purchase a company, you're kinda paying market value by definition, right? Unless you can grow them more quickly than they can grow them themselves, you probably shouldn't bother. We took our domain expertise around payments and around go-to-market product leadership and started to drive higher growth there. That's kinda how we got into it. We ended up buying, you know, a company called HealthPay24, SimplePractice, DonorDrive, and a few other tuck-ins for InvoiceCloud and, you know, realized that what we do is simplify customer and client engagement. You know, we recapped with General Atlantic, you know, created a, you know, sort of a parent a little bit with this, I called it EngageSmart because that's what we do, we drive digital engagemen to the. Really, you know, from a we were, you know, sort of a payments company, became a software company, and it's really the software that drives the value here. Payments are pretty much a commodity. You can get them pretty inexpensively everywhere. Not everywhere, but in a lot of places. As a result, the software drives our value. Payments is used as a, as a mechanism to monetize the value that we provide there. That's what we do. There's a lot of foresight, right? To bridge and bring in the software front, building off of the bill pay piece and what you've learned from a Sage perspective. Just curious, the thesis and the benefits of keeping now the large, I think, of SimplePractice with the enterprise bill pay business. Talk about that. Two different go-to markets. you know, one being SMB and one being enterprise, in a sense, we run the same flywheel. We are simplifying customer and client engagement. We're driving digital self-service. I mean, as consumers, we've all become used to Google, Facebook, you know, Apple, Amazon, the ease, the modern interfaces. The customer information systems and the industries that we deal with are typically not at that level of friendliness, of ease of use. We take advantage and leverage the desire for consumers to have that modern digital experience. We bring that to the table to legacy industries and to legacy software companies that can't build that sort of front-facing, user-facing UX that drives really high adoption of paperless billing, online payment, and so forth. SMB, SimplePractice is a, you know, high growth, you know, practice management software, really end-to-end business management for everything from scheduling an appointment online all the way through a collection, you know, card on file and, you know, really easy to use, and it enables our clinicians, which are primarily behavioral health, but we've got speech-language pathologists, occupational therapists, chiropractors and, you know, physical therapists and so forth, using the solution. Mostly mental health, which has been Kind of a big growing industry and continues to grow really, really attractively. SimplePractice eliminates most of the administrative burdens for a clinician, so they can be a successful soloist or small group and not have to worry about somebody creating an appointment by answering the phone and trying to align schedules 'cause appointments or schedules, calendars are all online. You know, submit your request for an appointment, get an immediate confirmation, the calendar invite that you could drop into your schedule, reminder the day before, automated online, you know, patient onboarding, all the way through the collections and the billing. You know, credit card on file, you're gonna get dinged at the end of the session, and so forth. Really easy to use. We do the same thing really for InvoiceCloud and for our enterprise solutions. InvoiceCloud is 80% of enterprise, so it's the sort of the big dog there. For InvoiceCloud, same thing. You know, we get the email address. Once you get the email address, people sign up for paperless billing, autopay, scheduler payments, and so forth, and we become really the front-facing, the customer-facing environment for those billers. Perfect. That's a good explanation. I'm glad you went through it that way. Let's dig in on each piece, and forgive me, I'm gonna start with InvoiceCloud and Bill Pay, if that's okay. I don't know if I told you this, but the first company I covered was on my own, was CheckFree. A lot of, you know, good memories around learning about the Bill Pay space. I'll start there. It feels like when I look across the coverage and what we learned this earnings season, Bill Pay actually held up pretty well for maybe a lot of different reasons. love to hear from you, sort of what the billers are saying, how important is it in terms of it being a strategic priority to modernize and get towards modern Bill Pay and autopay and, you know, are you seeing any impact from the cycle? Highly resilient markets, right? Utilities, tax billers, insurance. I mean, these are bills that you typically have to pay or you're gonna lose coverage or you're gonna lose water or gonna lose electricity. We do have a high degree of resilience and, you know, sort of the actual experience for the consumer from our billers, the one thing that they all have to do is pay a bill. It's almost the only touch point that you can rely on. If you think about an insurance company, very few claims, right? A lot of, you know, policies and a lot of payments that have to be made frequently, monthly or quarterly. You know, it used to be annually, but they're expensive now, so typically more monthly payments now. A utility, it's the only touch point with most utilities ever is just through the billing, right? If that's a bad experience, your only touch point is a bad experience, that's a bad thing, right? These are, I mean, they're utilities, so they're kind of monopolies, right? They want to improve the customer experience so that they get high ratings, customer satisfaction ratings, but also reduce staff levels. If you've got 100% of your customers paying online, preferably through AutoPay and going paperless, you don't need much staff. I mean, nobody's coming into the office. You're not getting a call saying, "Hey, did you get my check? I just sent it this morning." I mean, you know, this happens or the next morning, they call again. I mean, so people are paranoid about their payments. If it's online, you get an immediate receipt, you're done, right? I think it's really important to billers. I know it's really important to billers. The pipeline, I think you talked about it being good and consistent funnel's been strong. Tell us a little bit, why do you win, right? Who do you compete against? The pricing philosophy overall. I know there's a lot of different pricing models around this business. What can you share? Yeah. We are leaders, product leaders in all of our verticals. For InvoiceCloud, which we're talking about right now. Yeah. We win because we will get a biller's customer base to 100% paperless and 100% online payment faster than anybody else. Now, we only have one customer that's at 100% online payment and 100% paperless. It's actually in Massachusetts. Most of our customers are. Our average customer is really only at 46%. 45% of the payers are actually paying through us on average, which is an opportunity because we have many customers that are over 80%. We know we can get them to 80% voluntarily. We've got one that's 100%. They're at 100% because if you pay with a paper check, they're gonna charge you $25 to deposit it. Right. If you want a paper. New fees. I f you want a paper bill, they're gonna charge you $25 to get a paper bill. That's a little bit onerous for most of our customers, but that one we love. You know, so we're actually at that point where we're trying to move everybody up to that 80%, which is, you know, we know we can do because, you know, demographically, we've done it in many locations. We win because we have that value. We're gonna get them there faster than anybody else. We do compete with lots of companies in the space that we respect them all, the Paymentus, KUBRA, ACI are all out there, competitors. We can prove to our prospects, if you will, that we can get them to that 100% level faster than anybody else because we've replaced everybody so many times, we can show them the graphs of what their adoption was, what our adoption is, and that just drives higher operating efficiencies. We are product leaders as measured by adoption and by customer retention, and I think that's an important distinction. We also feel like we're product leaders because we have value, enough value that we can have a margin advantage over our competitors as well. We don't have to give it away. We're perfectly happy to have a customer say, "Well, if you can't come down to this price, we're not gonna be able to do business." Say, "Well, this is the value that we provide you. We can show you the return on investment. You know, we are the true SaaS solution in the space, and that's unique in our space, so that when you're looking at two different platforms, they both look good on the day that it's being demoed. Our platform three years from now is gonna look a lot different because it's true SaaS. Not just for you, but for everybody that uses it. If you're a hosted stack, which our competitors are hosted stacks, it's gonna look the same way three years from now unless you do a new install. No, you know, doing a new install is painful. You gotta run two systems in parallel, or you gotta do extensive patches, downloads. None of that for us. True SaaS, that is a major differential, particularly for InvoiceCloud, because we don't have to deal with it against anybody else. Is the implementation a big burden? Most of our implementations are cookie cutter. We've already done it, but we still have to align schedules with our customers. Our sales cycles are typically, let's say, three to nine months. Our implementation cycles are typically three to nine months as well, depending on the size of the customer. If they need it faster, you know, we've done implementations with virtually every customer information system out there for utilities, tax billers, you know, insurance companies and so forth, so, you know, core billing systems. We can implement quickly when needed, but we're always replacing, almost always replacing something else, so there's really generally not a mad rush other than expiration of a contract. Got it. To get to the 80% from the 45%, what needs to happen there? Is it driving education? Is it adding maybe alternative payment methods that are preferred by certain consumers? Talk about that plan to move that up. It's actually really simple stuff, shockingly. For us, you know, I mean, something as simple as putting a teaser on the outside envelope of a bill that's getting mailed, a paper bill, that says, "Please pay online" Yeah. Or, "Please go paperless," actually drives a lot of lift in adoption. Sweepstakes to say "Enroll in paperless billing," and you get enrolled in the ability to win, you know, an iPhone or an iPad or something like that, drives adoption. Placement of the pay button on the biller's website makes a big difference. There's 10 things that we know drives adoption, and we, over the past, you know, let's say 18 months, we've assembled a customer success team that is now working on our customer base, starting with the largest customers, of course, to try to help them, educate them on how to drive higher adoption because it's a win-win. Okay. One more question if you don't mind. The growth algorithm, if you build it all up, same-store growth, driving payment, paperless adoption, of course, new wins, maybe losses, what's the growth formula? Yeah. For us, you know, new customers going live and ramping up on our solutions really is the largest contributor to growth. That's, you know, today and, you know, I think for the next several years as well. You know, that would be followed by the digital payment adoption continuing to increase. That's a big driver of our net revenue retention. Lastly, I would say price. Price, you know, has always been an element of our strategy. For enterprise, it's more customized because, you know, we don't have one price that everybody is paying. Every biller is different. The pricing is different. We're kind of constantly assessing our revenue per transaction and, you know, adjusting on an as-needed basis. Okay. Just to close out on InvoiceCloud, anything on the product side to talk about with innovation, sort of roadmaps? It sounds like it's in a good place, but. We're dedicated to and committed to long-term product leadership. We have it now as judged by adoption and customer retention. We think that's a good place to be. We feel. We're believers that technology leads are temporary states, right? You know, you just look, I mean, what's happened over history, right? We need to be disrupting ourselves and obsoleting ourselves and consistently investing. That's a must-do. We have to consistently invest in product leadership. Enhancements are regular. I mean, we're. You know, we do. As each time you move into a new vertical, for example, insurance. I mean, insurance, you know, our systems had invoices. You know, now it's a policy. It's not an invoice anymore. You've got to relabel your infrastructure, and that ripples through a true SaaS. We're true SaaS, so single instance, multi-tenant. The same solution's being used by somebody that's billing for utility, water bills, electric bills, as well as insurance policies. You've got to create configurations and switches that allow you to be, you know, be able to adapt to each one of these industries. You know, we've got a handful of consumer finance customers now. As we move into consumer finance, we now are adjusting and creating the nuances that actually accommodate that vertical. A lot of that, and plus, you know, user constantly lifting up the user interface. You know, when we added Pay By Text, we got a lift. Everybody got it simultaneously. That's the beauty of true SaaS. You know, I think just consistent enhancements. Certainly, on the servicing and infrastructure side within InvoiceCloud and all of our solutions, we're looking at opportunities for using, you know, ChatGPT, AI. You know, our SimplePractice solution, which is SMB, the vast majority of tickets and customer requests are answered and satisfied in a very high level, over 95% CSAT, without any human intervention at all. It's all done through AI. We've created a library of video, how-to videos for how to do everything, and all you need to do is just navigate to it. Don't take phone calls. It's all online and incredibly efficient and really all driven through AI. Great. Yeah. We can dig in a little bit more, but I wanna make sure we hit SMB and SimplePractice. As we've done work on it, you know, the feedback on the software has been great. Obviously, the need is certainly there, and I'm sure the pandemic made that more apparent. Same question. Can you maybe unpack the growth between, you know, net new ads and I know pricing has been a little bit of a story as well, transaction revenue growth. How would you unpack that? Sure. You know, again, similar to what we see on the enterprise business, new customer ads is the number one contributor to our growth, and that was true in Q1 for SimplePractice as well. We had really strong gross customer ads in the quarter, you know, we saw growth within behavioral health and the other new markets. On a year-over-year basis, you know, there was, I would say, more growth in gross customer ads and net customer ads. The driver there is really just the timing of the pricing and packaging that happened last year. You know, we did see a little bit of an elevated churn in Q1 of last year, on a year-over-year basis, you know, that's driving the change. You know, customer ads still strong, number 1 contributor to our overall growth. We did have a partial uplift in the quarter from the pricing and packaging from a year ago, given that it was implemented about halfway through the first quarter of 2022. You know, strong growth in transactions processed and also, you know, a slight benefit from the pricing and packaging change that we made on the payment side. We increased the payments offering by about 20 basis points effective March first. That had a little bit of a flow through to revenue as well. Right. I know there's been a lot of questions, I know, around targeting group practices. I know sole proprietors have been finding the solution. Explain to us, 'cause I'm still trying to understand it better myself, sort of the challenge and the difficulty to go after that market. It feels like it would be quite large, and maybe it could come in bursts, but tell us the plan? Well, our solution lends itself to eliminating administrative burdens for solo practitioners. While if I'm a clinician, while I'm seeing patients and, you know, you know, all day, other patients are scheduling their appointments online without me knowing it, right? I get a. I can. Behind the scenes. Behind the scenes. It's all online, and you know, they're getting. If it's a new patient, they're automatically receiving new patient forms and, you know, onboarding forms and so forth. Because of that, they fill up their schedules very quickly. I mean, there's a, you know, very strong demand, and a shortage of supply, and we have a very long tail of, you know, the 80% of clinicians probably in the mental health are soloist. A lot of hard to get at, no administrative people at these locations, hard to get at group. Patients finding them and being able to talk with them are as hard as it is over the phone. If you think about the Managed Care Organizations that are in network payers of insurance for mental health, even harder for them to get at somebody because they're leaving 12 messages to try to get at them and so forth. From the standpoint of driving efficiency, you know, that group practice becomes a natural adjunct. Customers fill up their calendar. They need help. They've got a wait list. They get another person. They maybe they worked with at the larger healthcare location. Now you've got a group. Two people is a group for us. The next thing you know, they had another clinician. Very naturally, they've grown from, you know, a couple of years ago, we had 1.4 clinicians per customer. Now we're at over 1.6 clinicians per customer, which maybe doesn't sound like a big number, but we've got, you know, over 100,000 customers and over 160,000 clinicians. That's actually a pretty big number to see that thing go up from 1.4 - 1.6. It continues to trend in that direction just naturally. We actually have, you know, a shocking number of groups that are over 50 and many that are over 100 that we support today very successfully 'cause the solution scales really well there. What we don't have is an enterprise selling team that's going after those 100+ clinician, you know, clinics and customers, so we don't need to. I mean, it's just happened organically, it seems to be working. Now, we wanna be sure that we're pivoting appropriately to satisfy the needs of those larger groups, and that is a priority for us, partially because we're now moving into the, you know, revenue cycle management, claims management business with a partnership today and who knows down the road. As we move forward, we are supporting a lot of insurance payers, these Managed Care Organizations, and the vast majority of our customers don't accept insurance today. That's a big opportunity for us to bring them insurance through our other partnerships that we have with these Managed Care Organizations on this side. It's really a marketplace where we've got the supply, the MCOs, the Managed Care Organizations have the demand. Of course, the demand is in the country, even if you aren't an MCO. We're connecting that marketplace, and there's a lot of revenue to be generated and a lot of patient access to be enhanced because we have online calendars, so we can get a patient seen much more quickly than they can historically. Bob, just thinking about that, you mentioned revenue cycle management, the insurance piece, the claims piece, all for the benefit of driving engagement. I understand that, as you think about being this operating system or ERP system for a clinician, how far can you go? Like, can you extend into things like payroll or lending? You know, it feels like there's a lot of opportunity, right, to potentially do more. What's your thoughts on that? I think there are opportunities for that, but that's really a little bit out of our payroll and accounting. Is, you know, being the accounting system of record, a little bit outside of our realm, tax, you know, tax and all. Yeah. Certainly patient access to care is core to us. Pay, you know, Taking care of the clinician to make sure that they're getting paid in a timely fashion and getting paid appropriately by insurance, those are things that I think are right in our wheelhouse, right? The revenue cycle management opportunity is massive. you know, we believe that that's gonna be a significant extender of our, of our adjustable market as we, as we move forward. We're still in the early days. We've got, you know, significant traction going on with the existing Managed Care Organizations, with many of our customers using us with our partnership for revenue cycle management, for claims management. The indications are all strong that there's gonna be a very strong flywheel effect going on there, particularly for the Managed Care Organizations where they might have 20% of the clinicians that they now refer their patients to, might be using SimplePractice. The 80% that isn't, they want to be using SimplePractice for the online calendar, the ability to track outcomes. Do the patient actually see somebody? Is there another appointment afterwards? That's really important to them. They need to understand what's going on in that journey for that employee or the family member of that employee. We can provide that insight without providing any sensitive information, simplify their time and get much quicker access to care for the patient. Got it. Very clear. Any questions from the audience? We have a couple minutes left. Anybody wanna dominate here? Can you just expand on the revenue cycle management? What do you mean by that? Expand on revenue cycle management was the question. The. Can you use the microphone? Yep. Just expand on the revenue cycle Yep. management. So revenue cycle management for us right now is claims. It's insurance claims. Okay. It's when a customer wants. You know, mental health has become acknowledged as a real disease, and it needs. Insurance is, has, you know, in the last, what, say 10 years, but most, mostly in the last five years, insurance has now been stepping up to accommodate payments for that to our clinicians and to doctors and so forth. We are. Our customers, the vast majority, don't take insurance because credentialing is hard, painful. It's a contract. They don't. It's not what they do. We can simplify that dramatically, and they don't like to deal with denials or, you know, claims management, you know, individually. We can automate the bulk of that process as well. We can simplify that whole claims process and drive revenue for us, but also drive better access to care and better payment for our clinicians. Is there a short-term margin impact to building that business? That, the margin impact is positive. I mean, we actually make money on every claim, so it's not. You don't have to invest in it to drive I mean, we are investing, you know, in new products and, you know, in certain features for group practices as well. Even with those investments, you know, we're still able to continue to expand our margins across the entire company. You know, I think at SimplePractice in particular, it's a very profitable business, and so we're basically investing back into products like RCM. Have been for a year and a half. Yes. Make this the last question. Please talk a little bit about the contract, the way you set up contracts with clients, and then how you get paid in enterprise versus SMB, and maybe how that has changed or how you might change that in the future. Thanks. We're month-to-month on SimplePractice, so it's, you know, pay as you play. You know, our retention's quite high, so I think that's fine. Over typically 3-year contracts with auto renewals for our enterprise customers. Even on the enterprise side, it's all usage driven, so, you know, it really depends on the payments that are flowing through for the most part. And the billing models within enterprise are very customized. Sometimes it's fixed fee, sometimes it's a percent of volume, a mix of both. For SimplePractice, you know, it's more standard in that there's 3 subscription offerings that they can choose from. And then, you know, the payments is another add-on that we offer. On SimplePractice, about 70% of our revenue is subscription driven, 30% is payments oriented, and then enterprise is more like 90% payments driven. Maybe I could just sneak in a 30-second question or answer maybe if that's okay. More focused on the outlook. You reiterated revenue, and you took up EBITDA a little bit less than the beat. It seems like leaving yourself a little bit of room, but just any considerations or call outs for the for the outlook here? I mean, I think we saw really strong profitability in the first quarter, and that gave us a lot of confidence to be able to raise the year. You know, especially with the leverage that we're starting to get from the back office and G&A, and also sales and marketing within enterprise. You know, some of it was a little bit of timing related between Q1 and Q2, but broadly speaking, feeling really good about our ability to continue to grow profitably. Great. No, it's a fun business to cover. Thank you for the time, and we'll catch you very soon. Thanks for having us. Thanks so much. Thank you.