AvidXchange Holdings, Inc. (NASDAQ: AVDX), a leading provider of accounts payable and payment automation solutions for the middle market, reported a robust financial performance in its Q3 2024 earnings call on November 1, 2024. The company, led by CEO Mike Praeger and CFO Joel Wilhite, announced a significant year-over-year revenue increase, improved gross margins, and a substantial rise in adjusted EBITDA. AvidXchange also launched a $100 million share repurchase program and revised its 2024 business outlook upward, reflecting confidence in its growth trajectory.
Key Takeaways
- Q3 revenue reached $113 million, a 14% increase year-over-year.
- Non-GAAP gross margins rose to 74.5%, and adjusted EBITDA margins reached approximately 21%.
- A $100 million share repurchase program was initiated.
- Strategic partnerships and market expansion, especially in the healthcare vertical and with regional banks, are driving growth.
- AvidXchange ended Q3 with a strong balance of $394.3 million in cash and marketable securities.
- The company's 2024 revenue forecast is between $437 million and $439 million, with an adjusted EBITDA projection of $78 million to $79 million.
Company Outlook
- AvidXchange's upwardly revised 2024 outlook is influenced by solid transaction retention and product innovations.
- The company is expanding its vertical market strategy, with new partnerships in the healthcare sector and with regional banks.
- For 2025, the company targets 50% to 55% growth, despite recognizing the need for improved transaction retention rates and potential challenges from reduced interest rates.
Bearish Highlights
- Management acknowledged headwinds for 2025 growth due to factors such as political uncertainty and interest rate changes.
- Transaction (JO:TCPJ) retention rates require improvement to meet future targets.
Bullish Highlights
- Positive trends in transaction retention and new customer acquisitions bolster the company's strategic position.
- A partnership with Mastercard (NYSE:MA) aligns with AvidXchange's focus on productivity tools for finance leaders.
- Long-term targets include 80% gross margins and 30% EBITDA margins.
Misses
- Non-GAAP sales and marketing expenses rose by 12.6% to $19.7 million, with R&D costs up by 1.7% to $22.1 million.
- A one-time $1.5 million deferred revenue benefit from the previous year impacted year-over-year margin comparisons.
Q&A Highlights
- CEO Mike Praeger discussed the impact of political uncertainty on customer spending and the recent clarity on the presidential election.
- CFO Joel Wilhite reported positive trends in EBITDA margins, with aims for long-term margin goals of 80% gross and 30% EBITDA.
- The company is focusing on diverse payment modalities and optimizing gross margins through AI and automation.
AvidXchange has demonstrated a strong financial performance in Q3 2024, with a revenue increase of over 14% and a notable improvement in profitability metrics. The company's strategic partnerships and focus on market expansion have positioned it well for continued growth. Despite acknowledging some challenges ahead, AvidXchange's leadership remains optimistic about the company's potential and is committed to delivering long-term value to its stakeholders.
InvestingPro Insights
AvidXchange Holdings, Inc. (NASDAQ: AVDX) continues to show promising growth potential, as evidenced by its robust Q3 2024 performance. To complement the earnings report, InvestingPro data reveals that the company's revenue growth remains strong at 19.31% over the last twelve months, aligning with the 14% year-over-year increase reported in Q3.
Despite the positive revenue trajectory, InvestingPro Tips highlight that AvidXchange is not yet profitable over the last twelve months, with a P/E ratio of -170.11. This aligns with the company's focus on growth and investment in strategic initiatives, as discussed in the earnings call. However, an encouraging InvestingPro Tip suggests that net income is expected to grow this year, which could signal a turning point in profitability.
The company's gross profit margin stands at an impressive 70.4%, closely matching management's reported non-GAAP gross margins of 74.5% for Q3. This robust margin provides AvidXchange with financial flexibility to pursue its growth strategies and product innovations.
It's worth noting that while the stock has taken a significant hit over the last six months, with a -29.98% price total return, the company's long-term outlook remains positive. The initiation of a $100 million share repurchase program demonstrates management's confidence in the company's intrinsic value and commitment to shareholder returns.
For investors seeking a deeper understanding of AvidXchange's financial health and growth prospects, InvestingPro offers 14 additional tips, providing a comprehensive analysis to inform investment decisions.
Full transcript - AvidXchange Holdings Inc (AVDX) Q3 2024:
Operator: Good morning, everyone, and thank you for joining us for the AvidXchange Holdings, Inc. Third Quarter 2024 Earnings Call. Joining us on the call today is Mike Praeger, AvidXchange Co-Founder and Chief Executive Officer; Joel Wilhite, AvidXchange's Chief Financial Officer; and Subhaash Kumar, AvidXchange's Head of Investor Relations. Before we begin today's call, management has asked me to relay the forward-looking statements disclaimer that is included at the end of today's press release. This disclaimer emphasizes the major uncertainties and risks inherent in the forward-looking statements that the company will make this afternoon. Please keep these uncertainties and risks in mind as the company discuss future strategic initiatives, potential market opportunities, operational outlook and financial guidance during today's call. Also, please note that the company undertakes no duty to update or revise forward-looking statements. Today's call will also include a discussion of non-GAAP financial measures as that term is defined in Regulation G, non-GAAP financial measures should not be considered isolation from or as a substitute for financial information presented in compliance with GAAP. Accordingly, at the end of today's press release, the company has provided a reconciliation of these non-GAAP financial measures to financial results prepared in accordance with GAAP. With that, I will now turn the call over to Mike Praeger.
Mike Praeger: Thank you, everyone, for joining us today. Joel Wilhite and I are excited to discuss AvidXchange's third quarter 2024 results. Our third quarter results were all around solid across all the key metrics, including revenue growth, margin expansion, positive GAAP net income, free cash flow and a solid balance sheet. In addition, we made good on our commitment to return cash to shareholders as part of our $100 million share repurchase program. Joel will talk more about the quarterly financial results in a moment, but one of the highlights of the quarter was the underlying trend data we are seeing. In particular, we saw our transactions retained in our network or our transaction retention, as we call it, a key same-store metric inflecting positively from a pattern of acceleration in the past two years over compared to sequential time periods. In addition, we saw our top-of-funnel activity strongly support our new customer buyer logo additions. I will further expand on these observations later during my prepared remarks. When talking about the large greenfield market opportunity that we believe is ahead of us, it is understandable to sometimes lose perspective given the noise and impact of the current macroeconomic dynamics. Judging the future trajectory of the business opportunity over the next five-plus years within the accounts payable and payments automation space, based on a fixed point in time, we believe, undervalues the large and strategic value of both our market opportunity and competitive moat we are building, particularly on the B2B payments automation front for middle market companies. This B2B payments opportunity appears to have reached a pivotal point. In fact, it appears so mission-critical that Mastercard, which is a strategic investor and partner of AvidXchange, has rearchitected its organizational structure across three vectors, with B2B payments being 1 of the 3 directly reporting to their CEO, Michael Maddock. With the younger generation of CFO, treasurers and controllers focused on productivity and profitability, especially more so given the cost of capital has reverted to more normalized levels, Mastercard believes these future generations of finance leaders are looking for tools from domain experts to unlock the opportunity for buyer and supplier customers. As such, MasterCard remains bullish and committed to advancing card adoption across the B2B landscape, to paraphrase Michael Maddock, who recently opined on B2B invoice payments at a recent investor conference. As the leading middle-market focused B2B, accounts payable automation and payments player in the market, we believe AvidXchange is sitting at the epicenter to capitalize on these trends referred to by MasterCard. We do not believe that there is another pure-play publicly traded B2B accounts payable automation and payments company in the industry focused on the middle market segment that has the domain expertise as well as the technology, integration, data, operational and licensed stack honed over more than two decades, nor is there a pure play across the middle market that has a scale of revenues, the breadth of industry verticals, as well as the breadth and library of accounting system integration as AvidXchange does today. This is due to AvidXchange's early mover status in the accounts payable and payments automation space, and the realization early on that the success imperative in the space of building a true two-sided payment network, driving industry monetization penetration, would estate a differentiated value proposition uniquely curated for our 8,000 buyer/customers and over 1.2 million supplier/customers that we have today. Our AvidPay network creates a virtuous cycle of not to only buyer customers attracting supplier customers and vice versa, but also accounts payable automation customers adopting payment solutions and vice versa. Our talented team is delivering rapid, material and quantifiable value in both, current cost efficiency, productivity and future scalability of our customers' back-office AP and payment initiatives, which advances our future growth and fuels our profit potential. I believe the best way to make the narrative around the benefits of accounts payable and payment automation tangible is to continue showcasing customer success stories, shared by middle market finance leaders seeking our solution to drive productivity for their organizations. One such is Orthodontic Partners, which is part of the emerging dental sub-vertical within our fast-growing healthcare facilities vertical market. Based in Grand Rapids, Michigan, Orthodontic Partners provides accounting and administrative services to over 30 orthodontic practices across 15 states on its NetSuite accounting platform, allowing their back-office staff to focus on their core competencies. Our solution set was a perfect fit for growing set of challenges in processing invoices manually, which numbered in the hundreds on a weekly basis. This created significant downstream challenges for Orthodontic Partners leading to delays, loss checks and challenges in routing approvals to promote and traveling approvers. Due to AvidXchange's deeply embedded accounts payable integration partnership with NetSuite, Orthodontic Partners was able to streamline their invoice and payment processing without leaving the native, NetSuite application and user experience. This resulted in increased productivity for Orthodontic Partners across its procure-to-pay cycle, making thousands of invoices easily available and speeding up the invoice approval workflow across their 30 offices. Matt Sanders, an accounts payable specialist with the Orthodontic Partners put it best when he said, "With AvidXchange, we get more critical tasks accomplished which gives us time to focus on other strategic business initiatives that normally we would have the bandwidth for." Turning now, to some of performance highlights and metrics from the third quarter of 2024 that underscore our value proposition and demonstrate our continued strong execution. Revenue for the quarter was just under $113 million or over 14% year-over-year growth. The growth in the quarter was led by a combination of quarterly rebound in transaction volume, aided by transaction retention and transaction yield growth strategies. Non-GAAP gross margins, meanwhile, continued their upward trajectory coming in at 74.5% or up 450 basis points to close to the top end of our 72% to 75% non-GAAP gross margin target ahead of our 2025 expectations that we set over a year ago during our last Investor Day. Our continued focus on automation, AI, sourcing and standardization, which are still somewhat in the early stages, continue to bear significant fruit. Along with solid operating expense discipline, which led to 100% plus year-over-year increase in adjusted EBITDA profitability, adjusted EBITDA margins for the quarter reached roughly 21%. Our important transaction yield metric, which is total revenues over total transactions, was up more than 8% to reach $5.59 per transaction. It is worth reminding investors that transaction yield is a metric that we have consistently messaged since our IPO as a primary metric we focus on across our leadership team as it demonstrates the power and effectiveness of our AvidXchange Business Flywheel. With that overview, I'm excited to cover key topics in two parts that we will shed light into the various initiatives that we believe will fuel our future growth. Number one, the first part being our top-of-funnel activity and other sales key metrics, which provides insights into the sales setup for 2025 and beyond. And second, I will discuss strategic partnerships, which will further drive years two and two of our AvidXchange Business Flywheel. Let's start with our top of funnel and other underlying indicators driving our go-to-market motion. The picture for the comparable 9-month period of 2024 versus 2023 by vertical was encouraging as we saw the HOA, or Homeowners Association Management, market construction, health care, et cetera, show moderate improvements, while real estate, education and media continue to exhibit strong growth momentum. Recall earlier in the year, we highlighted that the strategic changes we have been making in our go-to-market motions, those changes encompass greater discipline around allocation of investment dollars as well as changes in our mix of marketing channels and personnel. For instance, we mentioned that we would be more targeted in the selection of trade shows and industry user conferences that we attend, which would result in potentially fewer, but much more highly qualified leads. The same framework was applied to lead and demand generation channels, including reallocating resources to partnerships to drive higher-quality and more actionable needs versus broadly spreading our resources across digital marketing channels. The result of this go-to-market adoption has been what we believe is a favorable trade-off between the quantity and quality of comparable top-of-funnel leads, which showed up in improved close rates, shorter sales cycles and buyer customer growth count encouragingly pacing ahead of 2023 levels. Now shifting to the second part of the key topics I would like to talk about, about the 4 years of the AvidXchange Business Flywheel. We recently signed some additional notable strategic partnerships which we believe will advance years two and three of our Business Flywheel, both of which drive transaction volumes onto our platform to be monetized. As you know, we have a verticalization go-to-market strategy given the structure of the middle market, which we believe that over 50% of middle market companies highly align themselves to vertical industries that have either unique accounting or business process that require them to use vertical-specific ERP accounting systems to run their business and financial operations. One of the emerging verticals in which we operate is healthcare facilities, which is around 5% of our buyer customer base today and is attractive in high-growth segment of the market. This vertical is comprised of many subverticals or subdomains, including long-term and elderly care centers, dental centers, veterinary centers and so on. In addition to the elderly care centers, we have been growing our portfolio of dental centers using our accounts payable and payment automation offerings. That effort has just received a major boost with the addition of a formalized referral partnership with one of the leading global distributors of healthcare products and technology solutions, which also happens to house a dental support organization practice, or DSO, as it's called in the industry. This large and rapidly growing player selected AvidXchange due to our marquee client list of DSO providers, proven track record in the DSO market space and the strength of our purpose-built value proposition. A dental service organization provides back-office support function to dental offices ranging from staffing, procurement and spend management to functions around the office of the CFO. The DSO market is large and fragmented with some estimates putting the number of DSOs at over 3,000 and approximately 135,000 individual dental offices just in the US market alone. Through our accounts payable and payment automation solution, we are positioned to capitalize in this growing DSO market in which DSO entities currently manage around 30% of the 135,000 dental offices under the DSO structure today. Given our proven track record in the DSO space, which is propelling the referenceable base of DSO clients in our portfolio, we are well positioned to capitalize on this market. As this national DSO provider ramps its sales headcount around its DSO practice, AvidXchange will be its preferred referral partner on invoice and payment solutions. Not only do we believe our value proposition has a strong product and market fit for the DSO industry, we believe that DSOs create a fertile ground to pursue other equally attractive opportunities around care adjacencies such as ambulatory surgical centers, veterinary care centers, radiology centers, et cetera. Also under gears two and three of our business flywheel, we recently forged some strong strategic significant bank seller relationships. For context, we have executed channel-led white label reseller bank partnerships with super regional and money center banks such as KeyBanc, Fifth Third and Bank of America. Leveraging this credibility and standing up these three major bank partnerships over the last decade, we've embarked on a sales strategy to broaden and deepen our bank partnership portfolio and recently signed three premier diversified regional and independently community banks, including Cadence Bank and Orange Bank & Trust, two of which we can announce publicly. These banks with a footprint largely across the Northeast and Southeast corridors of the US boast a combined total of roughly 50,000 commercial customers across these markets. With the reseller partnerships slated to go live over the next three quarters, we are excited to empower these banks with our suite of accounts payable and payment automation capabilities for their middle market customer base. Success with these new partnerships could be self-replicating by helping us penetrate the thousands of these other regional and community banks in the coming years. In closing, we are proud of our strong third quarter operating and financial results, which is leading us to upwardly revise our 2024 business outlook. These results were strong across the board. The discipline we have demonstrated in executing the levers that are within our control are second to none. And having seen an inflection in our transaction retention trends, we are encouraged granted that it's one quarter's worth of data, and retention trends are still sub 100% versus the 104% to 105% normalized range we've seen in the past. Our portfolio of new product innovation and enhancements, such as Payment Accelerator 2.0, our new pay platform and spend management offerings are sequenced for scaling. There are sizable strategic partnerships that we've announced over the last 18 months, including AppFolio (NASDAQ:APPF), Buildium and M3. You couple that with the innovation pipeline that we have in leveraging AI across our vast library of integrations of integrations to accelerate the creation ERP as well as deploying AI across the operational value chain, we believe we are well positioned to deliver a heavy payload of greater value to our customers and improve growth outcomes for our business. Of course, we are mindful of the macro crosscurrents and the potential for headwinds that test us. But we also strongly believe that our vision of a long runway of growth opportunity in the accounts payable automation and payments industry, which we consider to be in its infancy of adoption. We remain focused on closing 2024 on a strong note and believe we are set up for a strong trajectory in 2025. I want to provide a special thanks to all of our AvidXchange team members for their hard work, dedication and relentless focus in executing our operational and strategic priorities that drive value for our customers, creates opportunities for their professional growth and builds long-term value for all of our shareholders. With that, I'd like to turn the call over to my partner, Joel Wilhite.
Joel Wilhite: Thanks, Mike, and good morning, everyone. I'm pleased to talk to you today about our strong third quarter 2024 financial results, which reflect disciplined operational execution as well as a positive inflection in transaction retention trends, which have been decelerating amid continued macro choppiness. Overall, we delivered a solid quarter of year-over-year financial performance across the board. I'll expand on that in a moment, but let's see how we track relative to implied expectations. Relative to the implied third quarter 2024 business outlook and excluding float political revenue contribution, revenues came in above our implied expectations, driven largely by higher total transaction volume, partly helped by better transaction retention trends. Gross margin performance remained strong due mostly to ongoing progress on unit cost initiatives and, to a minor extent, due to lower performance bonus accruals. That, together with sustained operating expense leverage, aided by a slightly lower annual performance bonus accruals, we drove significant adjusted EBITDA outperformance relative to expectations. It's worth pointing out that this continues our streak of delivering adjusted EBITDA profit expansion, excluding the impact of float and political revenues. Equally noteworthy, we delivered our second GAAP net income quarter since going public in 2021. Before I walk through year-over-year financial performance, I want to point out that in the third quarter of 2023, we had a favorable out-of-period adjustment related to a deferred revenue cleanup of $1.5 million, which was favorable to third quarter 2023 revenues, gross profit, adjusted EBITDA and net income. With regard to revenue, specifically, the $1.5 million contribution was split roughly between software and services revenues of approximately $1.1 million and $0.5 million, respectively. Now turning to year-over-year results. Total (EPA:TTEF) revenue increased by 14.3% to $112.8 million in Q3 of 2024 over the third quarter of 2023. Adjusting for the out-of-period adjustment, year-over-year third quarter 2024 revenue growth would have been 16.1%. More than three-fourth of the revenue growth was driven by a combination of pay yield expansion and the addition of new buyer invoice and payment transactions. The remaining revenue growth this quarter was driven by higher year-over-year float and political revenues. Our strong revenue growth also resulted in total transaction yield expanding to $5.59 in the quarter, up 8.5% from $5.15 in Q3 of 2023. Without the out-of-period adjustment in the year-ago quarter, total year-over-year transaction yield growth would have been 10.2%. More than three-fourth of the increase was driven by software and pay yield and higher payments transaction mix with the remainder due to float and political revenues. Software (ETR:SOWGn) revenue of $30.7 million, which accounted for 27.2% of our total revenue in the quarter, increased 6% in Q3 of 2024 over Q3 of 2023. Without the out-of-period adjustment in the year ago quarter, software revenue growth would have been 10.4%. The increase in software revenues was driven by a combination of growth in total transactions and certain subscription-based revenues. Payment revenue of $80.7 million, which accounted for 71.6% of our total revenue in the quarter, increased 17.8% in Q3 of 2024 over Q3 of 2023. Payment revenue reflects the contribution of interest revenues, which were $12.7 million in Q3 of 2024 versus $10.6 million in Q3 of 2023. Political media revenue in the current quarter was approximately $2 million and negligible in the same period a year ago. Excluding the impact of float and political revenues from both comparable periods, payment revenues grew 14.8%, driven by a combination of an increase in pay yield, greater payment mix and payment transaction volume increase of 9.4%. On a GAAP basis, gross profit of $76.4 million increased by 22.5% in Q3 of 2024 over the same period last year, resulting in a 67.7% gross margin for the quarter compared to 63.2% in Q3 of 2023. Non-GAAP gross margin increased 450 basis points to 74.5% in Q3 of 2024 over the same period last year, and 500 basis points increase without the out-of-period adjustment, with the lion's share of increase driven mostly by unit cost efficiencies and yield expansion and, to a minor extent, by lower annual performance bonus accruals. I'm pleased to say that the third quarter of 2024 non-GAAP gross margin was in the upper end of the 72% to 75% range targeted for 2025 as projected during the company's June 2023 Investor Day. Moving on to our operating expenses. On a GAAP basis, total operating expenses were $81.1 million, an increase of 4.6% in Q3 of 2024 over Q3 of last year. On a non-GAAP basis, operating expenses, excluding depreciation and amortization and stock-based compensation, increased as well by 5.3% to $60.7 million in the third quarter of 2024 from the comparable prior year period, with the increase driven by a range of investments in product, technology, sales initiatives, and headcount, partially offset by slightly lower annual performance bonus accruals. On a percentage of revenue basis, operating expenses, excluding depreciation and amortization and stock-based compensation, or non-GAAP OpEx, declined to 53.8% in the third quarter of 2024 from 58.4% in the comparable prior year period. I'm equally pleased to say that third quarter 2024 non-GAAP OpEx as a percentage of revenues in the in the quarter was also 50% to 55% range targeted for 2025 as projected during the company's June 2023 Investor Day. Overall, the year-over-year percent of revenue decline largely highlights expense discipline and significant operating leverage across G&A, sales and marketing, as well as R&D, even after stripping out the contribution of float and political revenue. Now, I'll talk about each component of the change in operating expenses on a non-GAAP basis. Non-GAAP sales and marketing costs increased by $2.2 million or 12.6% to $19.7 million in Q3 of 2024 over Q3 of last year, with the increased investments in sales and marketing spend to support our continued growth, partially offset by slightly lower bonus accruals. Non-GAAP research and development costs increased slightly by $374,000 or 1.7% to $22.1 million in Q3 of 2024 over Q3 of last year. The increase was due to continued reinvestment in our products and platform, including spend management, pay offering, and payment accelerator, partially offset by slightly lower bonus accruals. Non-GAAP G&A costs increased slightly by $481,000 or 2.6% to $18.9 million in Q3 of 2024 versus Q3 of last year net of slightly lower bonus accruals. As a percentage of revenues, G&A costs continue to trend lower as we continue to leverage public company costs across a larger revenue base. Our GAAP net income was $4 million for the third quarter of 2024 versus a GAAP net loss of $8.1 million in the third quarter of 2023, with the $12.1 million positive swing in net income, driven largely by a combination of strong revenue flow-through, solid gross profit increase in expense control, leading to a significant positive swing in operating income, coupled with higher net interest income due to reduced borrowing costs and partial debt paydown. GAAP earnings per share for the third quarter was $0.02, a $0.06 positive swing from the same comparable period last year. Both third quarter 2023 GAAP net income and earnings per share reflect $1.5 million and approximately $0.01, respectively, of previously discussed favorable contribution. On a non-GAAP basis, our net income in the third quarter of 2024 almost tripled to $15.7 million versus $5.8 million in the same year ago period, with non-GAAP earnings per share more than doubling to $0.07 versus $0.03 in the same year ago third quarter. Both third quarter 2023 non-GAAP net income and non-GAAP earnings per share reflect $1.1 million and approximately $0.01, respectively, of previously discussed favorable contribution. All of the net income performance was driven by the aforementioned factors. On a non-GAAP basis, Q3 2024 adjusted EBITDA was $23.3 million versus $11.4 million in Q3 of 2023, largely due to the aforementioned factors. Third quarter of 2023 adjusted EBITDA also included a favorable out-of-period adjustment in the year ago period related to deferred revenue cleanup of $1.5 million. Now turning to the balance sheet for a moment. I want to touch on a few key items. We ended the quarter with a strong corporate cash position of $394.3 million of cash and marketable securities against an outstanding note payable balance of $13.9 million. At quarter end, our new credit facility, which consists of $150 million revolver with a $150 million accordion feature as well, remained undrawn. During the quarter, the company utilized $25.1 million of cash from its balance sheet to purchase $3.1 million of its own shares at an average price of $8.05, under its $100 million share repurchase program announced August 2024. Corporate cash meanwhile, split roughly two-thirds in deposit accounts and one-third among money market funds, commercial paper and time deposit instruments. The weighted average maturity on the corporate cash was roughly 26 days, while the effective interest rate on our corporate cash position for the third quarter was roughly 5%. Customer cash at quarter end remained unchanged sequentially at approximately $1.2 billion, with an interest rate of roughly 4.9% for the quarter. Turning to our updated 2024 business outlook. We now expect total revenue for the year to be in the range of $437 million to $439 million, our 2024 revenue outlook reflects approximately $50 million of interest revenues from customer funds, a $1 million increase from our previous 2024 outlook and versus $41 million earned in 2023. Also, we now anticipate political media revenue contribution of approximately $6.5 million versus our previous expectations of $9 million. As we've mentioned before, this is our first presidential cycle under FastPay. Recall, we acquired FastPay in 2021. And for context, in 2022, during the mid-term election cycle, the political arm of FastPay generated roughly $8.5 million in revenues. Similarly, we now expect non-GAAP adjusted EBITDA profit ranging between $78 million and $79 million for the year, up from our previous range between $73 million and $75 million. We also expect 2024 non-GAAP diluted earnings per share in the range of $0.24 to $0.25. With that, I'd like to turn the call back over to the operator and open up the line for Q&A. Operator?
Operator: We will now begin the question-and-answer session. [Operator Instructions] And our first question today comes from Dave Koning with Baird. Please go ahead.
Q – Dave Koning: Yeah. Hey, guys, great job. And maybe if I could just start off. The yield in the payments segment was up very nicely sequentially, and I think calms a lot of fears on the supplier acceptance side. Is it fair to say, I guess; a, maybe you're not seeing as much supplier acceptance pushback maybe as you have in the past? And then maybe as we look forward, can this yield continue to grow in the future?
Joel Wilhite: Yeah. Great question, Dave, and thanks for that. Look, here's what I would just say. I've said before, be careful reading too much into a bp up or bp down in PPV yield. Remember, we're really focused on the Northstar metric for us overall, total transaction yield, simply total revenues over total transactions. We're comfortable with the monetization strategy and suppliers are going to continue to make decisions around the optimal way to get paid. But we're pleased with the quarter, pleased with the overall yield and revenue results.
Dave Koning: Thanks guys.
Operator: And our next question today comes from Will Nance with Goldman Sachs. Please go ahead.
Will Nance: Hey, appreciate you taking the questions. You had some a bit of commentary on some of the trends you're seeing on top of funnel in some of the verticals that have been seeing some choppier performance. I was just wondering if you could expand on that and the nature of some of the activity that you're seeing? And then just separately, just commentary on transaction retention, nice to see the acceleration in transactions this quarter, what are you seeing under the hood? And what's your latest thinking in terms of where we are and the reset and business spend that we've witnessed over the last year or so? Thanks.
Mike Praeger: Yeah. So Will, I don't know if that's a two, or three, or four-part question, but we'll tackle it. So yeah, first of all, on the kind of just top funnel, to go under the hood on that one first. I would say, kind of, point to all the strategies that we've been talking about executing over the last couple of quarters related to adjustments on top of funnel, I think we're seeing paying off. And particularly this quarter, I would highlight five areas of strength. One, continued strong momentum in real estate vertical, financial services, HOA, emerging markets, led by health care facilities. And then the fifth one being existing customers. And within existing customers, we've seen nice activity related to both construction and real estate and construction. It's continued to be led by the movement to our Titanium SaaS offering within the construction vertical. And I would say within those five areas of strength, the results that we're seeing are paying off in terms of, one, being really pleased with new logo growth as that continues to trend ahead of last year; and the shortening of our average sales cycle and continued strong close rates. So that's, I think, under the hood related to top of funnel and maybe Joel can tackle the second part.
Joel Wilhite: Yeah. Will, I'll just address super briefly your question around the overall transaction growth improvement, and we were pleased with that, both invoice and payment retention levels improved modestly for us in the quarter. I just want to be clear, one quarter's worth of data, so one quarter doesn't necessarily make a trend, but we were encouraged. We did see that, that improvement was relatively broad-based across the verticals. And just a reminder, we're still sub-100% overall total transaction retention, but very encouraged with what we saw in the quarter.
Will Nance: Got it. Appreciate it. Thanks for taking a multi-part question.
Joel Wilhite: You bet.
Mike Praeger: You're welcome.
Operator: And our next question today will come from Ramsey El-Assal with Barclays (LON:BARC). Please go ahead.
Ramsey El-Assal: Hi, there. Thank you for taking my question this morning. Can you give us any preliminary thoughts on 2025, especially as it pertains to kind of growovers next year for things like political media, interest revenues? What are the key drivers that we should be thinking through as we try to tighten up our models next year?
Joel Wilhite: Yeah. Great question, Ramsey. And not surprised to take the question, but we're certainly focused on finishing the year strong, and we'll provide more, obviously, specific guidance when we report the year in February. What I would say is that we still think like we're in the early days of a really big opportunity. The market is large and unpenetrated. That remains true, a lot of conviction and still see ourselves as a leader in the market with a really strong moat. But to your point, there's a couple of things that we're looking at that would impact 2025 growth. We need to see -- we need to get back to our net transaction expansion, that 104%, 105% overall total transaction retention rate needs to be expansion. Today, it's still sub 100%. And then also, there's no political contribution next year. And with Fed cutting rates, we would expect to have headwinds from a float perspective. So a number of puts and takes that will play into 2025 growth. We're focused on finishing this year strong, and we'll update you in February.
Ramsey El-Assal: Got it. Thank you very much.
Operator: And our next question today comes from Sanjay Sakhrani with KBW. Please go ahead.
Sanjay Sakhrani: Thank you. Just wanted to get a little bit more color on the improving EBITDA margins, sort of what's driving some of those improved margins and how we should think about that going forward? Thanks.
Joel Wilhite: Yeah, great question. I'll take that one. We're pleased with the sort of 20-plus percent EBITDA margins that we're seeing in the business. And we just -- that to us just reaffirms the opportunity even in the middle of this macro kind of choppiness that we're seeing impact our overall total transactions and revenue. We're actually ahead of schedule on our gross margin results in that 75% range. We think this business is an 80% gross margin business with 30% EBITDA margins. So you can see the operating expense leverage in addition to the gross margin expansion. And hopefully, it's obvious that you see just good strong operating discipline. That's what we're focused on.
Operator: And our next question today will come from Andrew Bauch with Wells Fargo (NYSE:WFC). Please go ahead. Andrew, your line is live.
Andrew Bauch: Sorry of that. Thanks for taking the question. Just want to revisit the top of funnel comments that you made before. I know that in the past, you've mentioned that election uncertainty was kind of leading to some pent-up demand and some hesitancy in decision-making around AP automation. And how do you kind of anticipate this to play itself out? And if there's a way to kind of frame what has been held back that you think could kind of snap back now that we have this clarity?
Mike Prager: Yeah. Good question, Andrew. And you probably have as much of a silver ball on that as I do. But what I would say is that when I look at kind of that number one metric of transactions retained on the network that we talked about, which is kind of the building block of our growth algorithm, first of all, it's a general concern about general economy. Second of all, what we hear about is just the unknowns related to the results of the presidential election, what that may result in terms of policies. The good news is that one, I think, is resolved. And certainly, that will take some of that risk off the table from the standpoint now. People know who the presence is going to be and what policies may result from that. And then the third element is just the rate environment. And I think we're getting more and more clarity on what that may look So I'm actually probably in the optimistic camp of the combination of those elements being positive catalysts for customers to return their discretionary spend, go back to the platform or begin kind of increasing their discretionary spend, maybe is a better way of saying it. Historically, when we've seen these type of dynamics and when people start having confidence -- CFOs, controllers, finance leaders, having confidence in kind of the go-forward market, we've seen some of that scarcity spend return pretty quickly to the platform historically. So we're hopeful. But certainly, it's kind of a watch and see as certainly Q4 plays out as we go into next year.
Andrew Bauch: All right. Thank you, Mike.
Operator: And next question today will come from Bryan Keane with Deutsche Bank (ETR:DBKGn). Please go ahead.
Bryan Keane: Hey, guys. Congrats on the solid quarter here in progress. Joel, just thinking about the growth rate for the quarter, it was -- on the top line, it was up 14% in change and even then included the $1.5 million adjustment from the deferred -- on third quarter deferred revenue cleanup. So I'm just trying to figure out the fourth quarter implied guide to us looks like 9% to 11%. And just thinking about the pluses and minuses going from third quarter to fourth quarter, maybe you could highlight for us. Thanks.
Joel Wilhite: Yeah. You bet, Bryan. Thanks for the question. Maybe first, just broadly to set, a simple way to think about our revised guidance is we're really just taking the beat. If you take political and float out, we're really just taking the beat up on a full year basis at the midpoint, a couple of million dollars. And then if you think about Q3 to Q4, I guess what I would just say keep in mind, there's a little bit of seasonality there when you think about that sequential shift from Q3 to Q4. And what you'll see is it's very consistent with what we saw in 2022 and 2023.
Operator: And our next question today will come from Craig Maurer with FT Partners. Please go ahead.
Craig Maurer: Yeah. Hi. Good morning. Thanks for taking the question. Just wanted to dig a little deeper into the transaction yield. With your talk about inflection in terms of transaction retention trends that points to perhaps a stronger environment. On the supplier side, has there been any change in terms of how suppliers are looking to get paid at all? We talked about sort of caps at which suppliers are willing to accept sort of higher take rate payment options last quarter. So any change that? And I know this is non-core, but what drove the lower political ad spend assumption for the year, because that seems kind of counterintuitive to we've seen in the environment? Thanks.
Mike Praeger: Yeah. So on the yield question, Craig, I certainly spent a lot of time last quarter talking about that. And what I would say is that what we've seen is no significant changes in supplier behavior. Again, we're within kind of one basis point up and down between the last quarter and this quarter. But we are encouraged with kind of our overall strategies being successful. And those are that we make many different value propositions by creating payment modalities that are particular to either the group of suppliers or even a potential individual enterprise supplier. Payment modality is a combination of the speed of the payment, the price of the payment, the level of remittance data and the level of automation. So certainly, we're leaning into our STP, or Straight-Through Processing tools, as it relates to the enterprise segment and working on different value propositions. At the same time, we continue to see really robust growth of new, smaller suppliers, small business suppliers being added to the network that are predominantly selecting virtual card as their primary payment acceptance methods. So we're kind of seeing our strategies kind of play out. And I think the key is having lots of different payment modalities. And as we indicated today, go to market with roughly 25 different payment modalities and growing. So that's certainly been kind of a key strategy related to that monetization question. The second one, kind of maybe extension of that is on the political side. And as we indicated, this was our first political cycle ourselves. And so we certainly kind of had an extrapolation of what we've seen in the mid-term cycle. And I think we've seen, as you've indicated, is certainly lots of overall spending activity. However, the one thing that is the big driver as it relates to kind of our monetization is the mix of payments. So when you think of the media sector, they're -- because paper check is really not a very viable payment mechanism, you really are left with three main payment mechanisms: Virtual Card, our AvidPay Direct offering and then what we call kind of basic ACH. And what we've seen compared to the mid-term cycle is differences in mix between those three payment modalities that were slightly different than we had been kind of probably expecting based on what we saw two years ago and four years ago related to the mix. And what that -- those changes were, were a greater percentage of spend being directed towards digital channels. Digital channels being: Google (NASDAQ:GOOGL), YouTube, X, Meta Facebook (NASDAQ:META), TikTok as examples. And those typically to more of the non-monetizable basic ACH type category. So -- and we also saw some examples of actually increased activity on our AvidPay Direct or within the media vertical, it's called our FastPay Direct offering. So just different changes of mix between different payment types is, I think, is what we see is all playing out in this particular cycle.
Craig Maurer: Thank you.
Operator: And our next question today will come from Jamie Friedman with Susquehanna. Please go ahead.
Jamie Friedman: Hi. Good morning. And let me echo my congratulations. Mike, I was just wondering if you are still comfortable with those very, very long-term five-year type projections that you put out in June of 2023, especially the rule of 40, 50-plus and the 30% adjusted margin? And again, this is a very long-term question, nothing about next year. Is there anything structurally that would, at this point, think that you would vary from those long-term objectives? Thank you.
Mike Praeger: Yeah. So great question, Jamie and what I'm ever do is, I'm going to ask Joel, to maybe provide the first part of the question, and I can -- I'm sorry, I should say, and I can provide some commentary to that.
Joel Wilhite: Yes. Maybe I'll just start. Look, I want to be balanced. We had -- we're really proud of the quarter that we had. And you can see the progress we're making on all the profitability and efficiency measures, even in the middle of this kind of macro period. And it's super encouraging to see overall total transaction growth inflect in the quarter, but it's just a quarter. And so if you think about what 2025 midterm targets that we set out at Investor Day, you have to think about that through a lens of the macro environment is an uncertainty, right? And not to mention kind of the sort the interest rate dynamic. So we're super focused on operating this highly profitable continuing to grow business through a macro environment that generates meaningful cash flow. We still believe that the long-term targets, right, that 80% gross margin, 30% EBITDA. I think the shape and the timing could play out differently. It just depends on what we see from a macro perspective. And we'll get clear on that when we give guidance in February.
A –Mike Praeger: Yes. And maybe it's a good time just to remind everybody of kind of that growth as it relates to the growth algorithm, it's really in three buckets, right? The first bucket is getting back to that transactions retained in the network. That's usually a 5%-ish same-store growth benefit that we see year in, year out. The second one is our continued kind of new buyer sales logo growth that we've benchmarked being -- needs to be kind of 10% plus. And then the third one is all our yield enhancements that relate to the investments we're making in new innovation -- Payment Accelerator 2.0, Spend Management, our Pay Platform enhancements and new marketplace. So -- and that provides typically another 5 percentage points of kind of growth yield enhancements. So those are kind of the building blocks that certainly will play out over that long-term period.
Jamie Friedman: Thank you.
Operator: Our next question today will come from Darrin Peller with Wolfe Research. Please go ahead.
Q – Darrin Peller: Guys, thanks. And nice results. Can we just go back to the environment for a minute. I mean when we think about just TPV and transaction growth trends you're seeing today, if you could just help frame if you think the market is one that's stable or improving or maybe healthy but still on pause? Mike, I know we've talked quite a bit about how these customers always need the tech to help. But are you seeing any kind of inflection in demand right now, first?.
A –Mike Praeger: Yes. I mean what I would say, certainly, we had a positive quarter. We're encouraged by customer engagement activity. I don't know if I would call out any significant changes in demand that we've seen. I think it's been consistent to what we've seen. And remember, kind of kind of our building blocks as we go through the year, Q4 is always kind of our strongest quarter. And as we kind of -- and a lot of that relates to the increased demand gen coming out of the summer. And we continue to see that. So I wouldn't necessarily think there's been kind of a significant change. Certainly, I think we've seen on some of our transactions retained in the network, some positive kind of rebound or activity there. And that's super positive as it relates to kind of transaction volume. And I think we just really are encouraged by the addition of new buyer customers and engagement. And particularly, I've been on the field significantly over the last couple of weeks, in particular, attending both the MRI and the AppFolio user conferences, and just really encouraged with just the engagement of customers that we have related to these offerings. And just if you think about it from -- if you're the CFO of a real estate company, a multifamily real estate company and using AppFolio to run your -- to basically run your business, and now you want expand your business process to include accounts payable and payment automation. And you raise your hand and say, okay, now I'm ready to kind of extend my platform. That's a very different kind of qualified lead than somebody doing a Google search. And so what we're seeing is really pleased with kind of that evolution of top of funnel move more towards partner-led demand gen, and it's created higher quality, shorter-sales cycles -- and slightly higher close rates. And so we think that's kind of a positive kind of evolution to the go-to-market motion that we've had. But I think it's more driven by us than it is maybe the macro economy.
Darrin Peller: Okay. That's helpful. I guess just one quick follow-up. In respect to the one-timers and some of the adjustments in deferred revenue cleanup, maybe just help us how we should think about what's an appropriate run rate growth or yield expansion to consider for fourth quarter 2024? And then maybe even into 2025, if possible also.
Joel Wilhite: Yes. I mean maybe, first of all, just to kind of clarify. A year ago in the third quarter, we had a onetime $1.5 million deferred revenue benefit, okay? And so in some of my comments, I kind of removed that benefit in a year-over-year comparison. That's not on the run rate. That was a year ago. And so -- and just to be clear, there was about a 50 bps last year gross margin impact to that and about 140 bps on EBITDA margin impact to that last year. So two benefits last year, gross margin and EBITDA, but just onetime non-recurring. Your question about what can we expect going forward, I would just go back to our long-term targets, right? We're ahead of where we thought we would be 450 -- upwards of 450 basis points of year-over-year expansion. We continue to see headroom to continue to move that forward and closer to 80%. Maybe not linearly and maybe not exactly the same level of expansion that we've seen so far, but continued improvement is what we see ahead of us in both gross margin and EBITDA margin percentages.
Darrin Peller: All right. Very helpful guys. Thank you.
Joel Wilhite: Thank you.
Mike Prager: Thanks, Darrin.
Operator: Our next question today will come from Dominick Gabriele with Compass Point. Please go ahead.
Dominick Gabriele: Hi. Thanks so much for taking the question. I was just curious, if you could talk about the average ticket size growth year-over-year and what you're seeing there? And also, if you talk about the pent-up demand, did see that on the -- is that potential on the investment for your products? Or is it more in restocking of inventories? Where would you expect that to play out? Thank you so much.
Joel Wilhite: Okay. You bet. Maybe I'll take the first. I mean look, overall, we were really encouraged in the quarter. I wouldn't point to any particular dynamics around ticket size. I mean just good inflection in that overall total transaction growth and pretty distributed across the verticals. And then maybe I'll -- Mike, I'll let you take the second part of that.
Mike Praeger: Yes. I think as it relates to kind of that retention, transaction network and that discretionary spend that drives getting back to that. I think our normalized target of roughly 105%. What we see in those categories are typically marketing-related expenses, professional services, consulting, plant maintenance, capital project type of activity. And so I think getting back to those numbers, it means that our buyer customers are now kind of increasing that level of spend in those type of categories back to what I'd consider both normalized levels. And perhaps there might be a little bit of a catch-up in some of the categories related to preventive maintenance, things of that nature. And we've seen examples of that in historical cycles as well. But those are the areas that we expect to kind of see that rebound in terms of those transactions retained in the network. So, these are existing customers that are on our platform today and they're just, over the last year or so or three, four quarters, have been more aggressively managing discretionary spend. And so that's what we're expecting to come back at some point.
Dominick Gabriele: Great. Thanks so much.
Operator: And our next question today will come from James Faucette with Morgan Stanley (NYSE:MS). Please go ahead.
James Faucette: Great. Thank you very much. I want to touch on some of your partnerships and other applications, particularly like AppFolio, M3, Buildium, et cetera. How are you thinking about potential growth contribution from them? And where we may see those initiatives later this year and next? I mean I'm just wondering if we could get a point or two of growth uplift from these initiatives in 2025, what kind of timing we should be thinking about? .
Mike Praeger: Yes. So, good question, James. Related to kind of that partner growth, and I'll take a couple of the ones that we've been talking about over the last few quarters, AppFolio, M3 as examples. This is going to directly target solely to our kind of partner-related strategy, driving higher qualified leads through our partner channel. And AppFolio in particular, really encouraging. Because if you think about it, really every one of AppFolio's main competitors is already a strategic partner of AvidXchange. And so they put -- this really puts them on par with -- on the strategic landscape front. We know that playbook really well, and our new demand gen lead activity today is 2x plus what it was a year ago coming from the AppFolio channel. When we take that same lens to M3, we're seeing about 3x the activity on the M3 channel that we saw a year or so ago. So, those are great kind of barometers related to the impact of these new partner and the resulting customers. Now, one thing is related to kind of timing and when it impacts the year and the revenue generation of it. Remember, we still have to go through kind of, on average, a 30 to 60-day setup configuration process. And then on the invoice side, there's usually a two billing cycle adoption rate for the invoices to get to kind of our targeted 100%. And then the payment side to get to our kind of targeted kind of full adoption, we see that takes probably another six months to get to the to get the full adoption period. So, when we certainly the second half of any calendar year, we're really building the book for following calendar. And so we look forward to the impact of both AppFolio and M3 in our 2025 year.
James Faucette: Great. App that.
Operator: Next (LON:NXT) question today will come from Tien-Tsin Huang with JPMorgan. Please go ahead.
Tien-Tsin Huang: Thanks. Good morning. Good results here. I just want to ask on some of the new products. I know you mentioned in the release here, Payment Accelerator 2.0, Payment 2.0 platform and spend management which we're really interested in. Any change, Mike, and expectation for these products and how they might layer into 2025, for example, are they on time, change in excitement, that kind of thing?
Mike Praeger: Yes. So when I think of kind of our innovation pipeline, there's kind of four that I typically reference. And what I would say is that kind of this is more kind of timing. I always give you a rank of timing when we see begin the impact. But Payment Accelerator 2.0 probably lead the pack in terms of overall opportunity, it's in market today. We've been careful in how we've been scaling it and excited to have it be more of a material part of our overall financial profile as we go into 2025 million. The next one is our pay platform, and this is more of an iterative kind of process that we continue to advance. And the benefit of it is we continue to be able to add and manage more payment modalities. The combination of speed, price remains data and level of automation with the different suppliers. And we expect that to continue to support our strategies as it relates to continuing to add new payment modalities throughout next year. The third one is spend management. And I kind of -- my mental kind of picture first spend management is it's about a year behind the impact at our Payment Accelerator 2.0 our product is having. So we're going to begin introducing it to our initial set of customers here, probably over the next 90 days or so. And then use next year or two really get some of those initial customer learnings and look for kind of it to be in to have more material impact as we go to 2026. And then right behind that is kind of our marketplace strategies, initiatives that were -- it's in its early stages that we're continuing to work on in terms of how it may impact the different types of purchasing that happens across our nine different verticals. So that's kind of our big innovation kind of roster related to where we're investing and kind of the timing of impact that we expect them to have.
Tien-Tsin Huang: Great. Thanks for that.
Mike Praeger: Yes.
Operator: And our next question today will come from Rufus Hone with BMO Capital Markets. Please go ahead.
Rufus Hone: Hi. Good morning, guys. Thanks. I wanted to come back to the comments you made about the gross margin and you mentioned the path potentially towards 80%. I guess where are you in terms of realizing the benefits from automation and AI that you referenced in the prepared remarks? Are you starting to see those gross margin tailwinds slow at all? Or do you think there are additional levers for you to pull to keep driving down unit costs? Thanks.
Joel Wilhite: Yes. No, great question, Rufus. We've talked about the way our formula for continuing to see gross margin expansion is a mix of steady continued yield expansion and discipline around unit costs. Year-over-year, if you look at simply take kind of back end to non-GAAP cost of revenue per transaction, right, like looking at that high level of unit cost that you can see, you've seen that we've gone from 154 in the year ago quarter to 143 this quarter. So -- and the way we got there are the things that we've talked about, standardization of processes, automation. AI has played a role even before it was necessarily referred to as AI. So we're sort of making good progress. I think but we're not done. And I think you can continue to expect continued gross margin expansion. Again, maybe not at the exact same pace and certainly not linearly, but we feel good about those profitability targets that we've put out there.
Operator: Our next question today will come from Alex Markgraff with KeyBanc Capital Markets. Please go ahead.
Alex Markgraff: Hey, everyone. Thanks for taking my question. Mike, could you maybe touch on cross-border a little bit and some of the progress you've made here in the last couple of years? And then maybe just comment on the MasterCard move, commercial cross-board introduction as of recently and just the fact it creates opportunities for you all?
A –Mike Praeger: Yes. So it's good. We haven't talked about cross-border in a few quarters. What I would say is related to the cross-border, it's a capability that we've added now probably two years ago to our platform. And Wise (LON:WISEa) is our kind of integration partner that we had, that we utilize related to our cross-border strategy. And what I would say is that -- I would say that we're seeing some of the results that we expect to see. One of the things I tried to do at the time to remind everybody is, remember, we go to market in nine different industry verticals, that if you look at each 1 of those nine verticals, they're not verticals that really lend itself to large degrees of cross-border transactions. They're very localized to regional markets, for the most part, is our verticals are. And so we just don't have the type of large-scale demand for cross-border that we would have if we had maybe other types of verticals, maybe manufacturing would be one that would have more of a cross-border type demand to it. And so it's not an area that we focus on from a really a growth vector because it's driven really by customer payment demand and where their suppliers are located. And what we see is, on average, 95% plus of the suppliers that are in our network are US domestic suppliers.
Operator: And our next question today will come from Timothy Chiodo with UBS. Please go ahead.
Timothy Chiodo: Great. Thanks for taking the question. So Mike, you were talking a little bit about some of the bank partnerships. Obviously, you've had Fifth Third, KeyBank, Bank of America, and you talked about the three more that you just signed. But given this is an important distribution channel and that there are 10,000-plus banks in the US., I was hoping you could just take a moment to just talk a little bit about the landscape and what the other 10,000 banks or so are doing?
A –Mike Praeger: Yes. So these -- so one of the things –I just want to make sure I clarify, Tim. When we talk about kind of our banks, we have two different kind of the strategies. One is we have banks actually as customers. We now are approaching about 1,500 banks that actually use AvidXchange to manage their internal accounts payable and payments for the bank. And then we have the channel partnership, which I think is what you're referring to, related to how we engage. And we feel that's an important part of our overall go-to-market strategy. We want to be both highly aligned with a customer's accounting system, and we want to be highlighted with where a customer may do their banking related to how we engage with those customers. One of the things that we did start out with back when we started the bank channel was going on a path of more of the white label type of experience. And what we've kind of learned is they're hard. They're hard to execute. It requires a big investment by both our partner bank as well as AvidXchange to support them. And some of the change management that has to occur at the bank is pretty significant related to creating specialized sales forces to sell software versus traditional treasury type products. And so what we've learned is that it's actually easier to go to market with more of a reseller type of structure rather than white label. And so we've seen nice growth of our reseller banks. We're approaching -- we have north of 20-plus reseller type banks today, highlighted three of them on today's call. Super excited about Cadence, Orange Bank and Trust. And collectively together, the three new ones that I highlighted, have roughly about 50,000 customers. So that is, again, a nice way to increase kind of our go-to-market TAM approach to focus on customers that are already banking with these banks and have a certain level of engagement that's certainly similar to the engagement that we see on the accounting system side. So that's why we're kind of excited about it, and we've been focused on kind of the ERP partnerships in the last couple of quarters. But while that's been going on, we've been making nice progress on the bank partner side. And I thought it'd be worth highlighting a few of those recent relationships on today's call.
Q – Timothy Chiodo: Excellent. Thank you, Mike.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mike Praeger for any closing remarks.
Mike Praeger: Great. Well, thank you again, everyone, for your interest in AvidXchange. Amid the current macro choppiness, I'm very proud of our disciplined execution and strong financial performance with the inflection of transaction-retained trends being noteworthy. As I said before, I'm particularly excited about the future. Given the pipeline of product innovations, our industry-leading ERP and accounting system integration partnerships, along with the bank partnerships that we highlighted on this call, that progress should propel forward years of our business flywheel and drive long-term value creation for our investors. With that, we look forward to sharing our continued progress on our next earnings call.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may disconnect.
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