Good day, and welcome to Paymentus’ Fourth Quarter and Full Year 2021 Earnings Call. This call is being recorded. All participants are currently in a listen-only mode. There will be an opportunity for your questions following management's prepared remarks. At this time, I would like to hand the call over to Paul Seamon, VP Finance and Strategy for some introductory comments. Please go ahead.

Thank you. Good afternoon. And welcome to Paymentus’ Q4 quarter and full year 2021 earnings call. Joining me in the call today are Dushyant Sharma, our Founder and CEO; and Matt Parson, our CFO. Following our prepared remarks, we will take questions. Our press release was issued after the close of market today, and it’s posted on our website where this call is being simultaneously webcast. The webcast replay of this call and supplemental slides of the company print presentation will be available on our company website under the Investor Relations link at ir.paymentus.com. Statements made on this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements use words such as will, believe, expect, anticipate, and similar phrases that denote future expectation or intent regarding our financial results, our market opportunity, business strategies, impact from acquisitions, and other matters. These forward-looking statements speak as of today, and we undertake no obligation to update them. These statements are subject to risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements, including the risks and uncertainties set forth under the caption, 'special note regarding forward-looking statements' and 'risk factors' in our quarterly report on Form 10-Q for the quarter ended September 30, 2021, which we filed with the SEC on November 10, 2021, and our annual report on Form 10-Q for the quarter ended December 31, 2021, which we expect to file with the SEC in early March 2022, and elsewhere in our filings with the SEC. We encourage you to review these detailed safe harbor and risk factor disclosures. In addition, during today’s call, we will discuss certain non-GAAP financial measures, specifically contribution profit, adjusted gross profit, adjusted EBITDA, and adjusted EBITDA margins as non-GAAP financial measures. These non-GAAP financial measures, which we believe are useful in measuring Paymentus’ performance and liquidity, should be considered in addition to, not as a substitute for or in isolation from GAAP results. We encourage you to review additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results. And our earnings press release issued today and supplemental slide is available on the Investor Relations page of our website. With that, I’d like to turn the call over to Dushyant Sharma, our Founder and CEO.

Thank you, Paul. Look, 2021 was a great year. We encompassed many things that we believe position us well for a strong 2022 and beyond. But before I talk about 2022, let me discuss our Q4 performance first. We closed out our first year as a public company on a high note. Our contribution profit grew 36% in Q4 to $45.3 million. Our transaction volume grew 54% to over 83 million transactions in the quarter. And in 2021, we also increased our number of clients to over 1700, including billers and financial institutions. From a user standpoint, we saw 21 consumers and businesses use our platform in December 2021. Our payment volume for the full year jumped 68% to $63 billion. To provide additional context, it took us 15 years to get to $30 billion in annual payment volume. And we have added more than that in just the last two years. It is pretty remarkable. And as you can see from these numbers, our core strategy of building a network and gaining market share is paying off handsomely. As reflected in our 2022 guidance, we expect continued demand for our platform and the ecosystem, which we believe provides significant momentum for 2022 and beyond. Let me now discuss our expectations for 2022. Based on our current visibility, we believe 2022 will be another year of strong growth and profitability. We are expecting full year contribution profit growth to be between 29% to 30%, and adjusted EBITDA margin to be between 14% and 16%. We feel great about our prospects for 2022 primarily because of the work we have already done during 2021, which we believe has set a great foundation for our 2022 performance. Let me walk you through a few of these items. First, we established a significant partnership with JPMorgan Chase to jointly sell our solution to the biller market. Both teams continue to be excited about the partnership and the momentum we are seeing. Second, we closed two acquisitions, which have strengthened our presence in the financial services market, allowing us to begin monetizing payments to the bank channel. And I'm sure you're wondering about the integration; it's going very well. Third, we launched our instant payment network or IPN with several of the largest companies in the world, and when combined with nearly 300 financial institutions on our platform, we believe it is a tough combination to beat. And as you know, IPN is unique to Paymentus. Fourth, we signed and implemented a number of key clients that we expect to serve for years to come. We also finished migrations of a large insurance company, a large real estate e-commerce website, and a top 15 U.S. mortgage servicing company. All went live in 2021, each displacing legacy systems. These are among the over 50 clients, billers or financial institutions that we onboarded in the quarter. Fifth, we've signed additional partnerships including a new telecom partnership in the fourth quarter, that we expect to help grow our biller base and corresponding revenues. In October 2021, we launched an IPN-powered app called Bill Center that modernizes bill payments from banks and credit unions. It has been very well received in the market with several clients signed in the fourth quarter. Bill Center provides consumers with a 360-degree view across all bills. It offers more payment choices with debit, credit, and digital wallet options and it delivers immediate notification of payment from the biller to the bank and financial institutions. With IPN and Bill Center, consumers have more choice and flexibility regarding how they pay and when they pay. Finally, our addressable market opportunity is big, and despite our scale, we believe we're just getting started. As a testament to our momentum and leadership position, in a recent comprehensive review from Aite-Novarica Group, a leading financial services advisory firm, Paymentus was named the industry's best-in-class vendor. Aite-Novarica reached its conclusion after numerous capability deep-dives, feature-functionality comparisons, client reference calls, product demos, and due to our innovative biller direct platform and our excellence in biller service and support. As a reminder, our platform and the IPN ecosystem exist to create a flywheel effect where our objective remains to A) sign as many billers as possible. B) constantly grow the digital payment volume. C) expand IPN reach to as many partners and financial institutions as possible. D) generate a warm lead list of all billers that are outside of our biller direct platform but process through our IPN network, and therefore add them to our sales pipeline. We have done a tremendous amount of work in 2021, including all of the exciting accomplishments I listed. As a result, we believe we have more drivers of future revenue than we have ever had before. We believe these revenue drivers combined with our highly visible model provide attractive upside potential for 2022 and beyond. Our 2022 guidance doesn't change, but hopefully this gives you an understanding as to why we feel good about 2022 and beyond. Many of you are new to Paymentus' story, so let me take a moment to describe how we think about our business. Our strategy is centered around capital-efficient long-term growth. We view ourselves as a custodian of your capital, and we take this role very seriously. As a public company, it is never lost on us; in fact, I personally think about it every day. That our long-term performance also impacts children's education plans, family retirement accounts, and vacation funds. Therefore, we will continue to be a responsible executor of our business strategy as we aggressively pursue profitable growth irrespective of the market conditions. Let me now touch quickly on the nature of the bill payment market and the industries we serve. If Christopher Bullock's famous line was spoken today, it would likely say something like, it's impossible to be sure of anything except debt, taxes, and bills. We all have bills, and they have to be paid whether there is a financial crisis or a pandemic. The majority of our clients are recurring services businesses such as utilities, government, financial services, and insurance companies. Due to the non-discretionary nature of these businesses, they aren't affected like other businesses by supply chain issues and geopolitical events. We believe this gives us tremendous stability as we execute on our long-term strategy for accelerating growth and capturing meaningful portions of the total addressable market through innovative offerings. This is one of the many reasons why we feel confident about our ability to execute and deliver long-term sustainable growth. And before I pass the call over to Matt, let me also touch on inflation for a moment. Our pricing and contracts are structured such that either our pricing increases automatically, or we can adjust our pricing if our clients increase their fees to their customers. Therefore, we have protection to maintain margins. This notion is not new at all and has been in our agreements for over a decade now. I want to remind you that one reason we grew through the financial crisis a while back and through the pandemic was because people still had to pay their bills. With that, let me pass the call to Matt. Matt?

Thanks, Dushyant. As a quick reminder, today's discussion includes non-GAAP financial measures. Please refer to the tables in our press release and supplemental slides for reconciliation of non-GAAP items to the most directly comparable GAAP financial measure. I echo Dushyant's commentary on the strength of our performance in 2021. If you recall Dushyant's four ecosystem objectives from last quarter, we've made progress in each of them: signing and implementing a significant number of billers, rapidly growing our payment volume, expanding the reach of IPN, and expanding our sales pipeline through warm leads. In the fourth quarter, we processed 83.3 million transactions, which represents a year-over-year increase of 53.7% and an annualized run rate of more than 330 million transactions. This accelerated transaction volume was driven by a mixed shift as we ramped business-to-business, IPN inclusive of and in particular the Payveris acquisition and other non-biller direct products. These transactions are typically priced based on contribution profit because there is no interchange associated with them. We believe we have the opportunity to drive additional revenues with this volume over time as we extend our reach and scale. The transaction growth drove a 31.2% increase in revenue over the same period in 2020, which resulted in revenue of $108.1 million in the quarter and $395.5 million for the year. Contribution profit for Q4 was $45.3 million, a 36.3% increase over the same period last year. For the full year, contribution profit was $158.5 million, which represents growth of 31.5%. Adjusted gross profit for the fourth quarter was $36.1 million, which is a 35.1% increase from Q4 of 2020, and it was $127.4 million for the year. Adjusted EBITDA was $6.3 million for the fourth quarter, which represents a 13.8% adjusted EBITDA margin. For the full year, adjusted EBITDA finished at $29.5 million or an 18.6% adjusted EBITDA margin. We are very proud of our performance across all these metrics. Operating expenses rose $12.6 million to $33.4 million for Q4 of 2021 from the same period last year. Overall, this increase in operating expenses from last year was driven by increases in headcount from ongoing investments in our business and its growth, as well as our acquisitions and the amortization of intangible assets associated with the acquisitions. Specifically, R&D expense increased $3.1 million or 47.6% from the fourth quarter in 2020, as we continue innovating with and for our customers and partners. Sales and marketing increased $6.3 million or 73.1% as we continue to add headcount to drive new sales and expand partnerships given the significant market opportunity we see and the market position we have established. Travel and marketing events also continue to ramp up relative to Q4 of 2020. We experienced increases in G&A expenses due to our acquisitions and multi-fold increases in the cost of corporate insurance and ongoing investment in public company infrastructure. GAAP net income was $4.7 million and EPS for Q4 was $0.04, and non-GAAP net income was $2.1 million and non-GAAP EPS was $0.02 for the quarter. Our full-year effective tax rate ended up at 10.4%. You may recall that I indicated in our Q3 call to expect a full-year effective tax rate of around 55%, but during Q4 we received a discrete tax benefit associated with the deductibility of stock option exercises, and like most companies, we don't forecast discrete tax items. Without the discrete item, our effective tax rate would have been 52% for 2021. As of December 31, 2021, we had $168.4 million of cash and cash equivalents on our balance sheet, and this cash decreased primarily due to our acquisitions and the timing of customer payments. At year-end, our common stock share account was 120.64 million shares. Now from our Q4 and full results, let's turn to our 2022 full-year outlook. We are introducing our 2022 full-year guidance based on our historical performance and current expectations for this year. Our revenue outlook for 2022 is in the range of $490 million to $495 million, which represents growth between 24% and 26% year-over-year. We expect contribution profit to be between $204 million and $206 million for the year, which is approximately 29% to 30% growth. We anticipate 2022 adjusted EBITDA in the range of $28 million to $33 million with an adjusted EBITDA margin of 14% to 16%. Regarding the adjusted EBITDA, I want to remind you that while we were at 18.6% for 2021, it was a tale of two halves, meaning prior to going public, our adjusted EBITDA margin for the first half of 2021 was 24.4%. But for the second half of 2021, it was 13.8% due to the cost of being a public company and the impact of the acquisitions. So our guidance for 2022 adjusted EBITDA margin includes incremental improvement from our current run rate. We believe the combination of our expected growth and EBITDA margin outlook will continue to keep us a rule of 40 company with a clean balance sheet that has no debt. We would typically expect our effective tax rate to be between 25% and 30%. However, due to the amortization of intangibles associated with acquisitions, we expect pre-tax book income to be essentially break even in 2022. This will cause our effective tax rate to vary from expectations, and accordingly, we are not providing forecasts for the effective tax rate for 2022. This guidance incorporates certain assumptions and does not incorporate the impact of any future acquisitions that we may undertake. Directionally, we expect our contribution profit per transaction to be substantially similar to the level we saw in Q4 throughout 2022. Some of the other assumptions include a consistent rate of growth in same-store sales to what we've seen historically and new customer implementation going live in line with expectations, even though that obviously has a dependency on our clients. It also assumes minimal client attrition, as has been the case historically. As you know, we don't provide quarterly guidance, and one of the reasons we don't is that there can be quarter-to-quarter variations in the growth rate due to changes in average payment amounts, mix of payment types, and other items. But I did want to give you a bit of color on how we anticipate the year may progress. We do not expect to experience straight-line growth from quarter to quarter during 2022. We expect higher year-over-year contribution profit growth in the first half of the year than the second half as we lap our acquisitions in Q3. As a result, we expect the second quarter to have the highest growth rate in the year because of the relative comp to last year. The vast majority of sales that will impact 2022 revenue have been closed, and the variance between quarters is driven by variable implementation timing that can generally move a month or two earlier or later depending on client specifications and needs. Specifically with Q1, please keep in mind that we typically see much lower or actually even really zero sequential contribution profit growth in the first quarter due to higher average bill amounts associated with utility clients. With all that said though, even though we may see fluctuations in growth quarter to quarter, as evidenced by the upper end of our guidance range, we believe we're a 30% growth business on an annual basis. With that, I'll turn the call back over to Dushyant for some closing comments.

Thank you, Matt. As Matt and I have shared, we feel good about 2022 primarily because of the hard work and the foundation building we did in 2021. Likewise, our focus in 2022 is to continue to deliver expected performance and to also set a great foundation to deliver similar results for 2023 and beyond. That is the nature of our business, but also for over a decade now our execution focus is always on a two-year horizon, where we execute in the current year with an eye to the subsequent year. Our 2021 results and 2022 plans won't be possible without the hard work and dedication of our 1100 team members, who will sell and take care of our clients every day. I would like to thank each and every member of our team for their hard work. And with that, we'll now open the line to questions.

Thank you. The first question comes from Darrin Peller with Wolf Research. Please proceed.

Thank you, everyone. Congratulations on completing your first year as a public company. I'd like to start by discussing the customer growth you've experienced over the last six to nine months. If I recall correctly, you began with around 1300 customers, increased to about 1400, and now you're at 1700. This represents a significant increase in a relatively short time. Could you elaborate on what’s driving this growth? What categories are you expanding into? Also, I'd appreciate any insights on sustainability and what you anticipate over the next 12 to 24 months.

Well, the 1700 clients include the Payveris clients as well that came through the acquisition, which are primarily financial institutions. And relative to remaining clients, I think first of all, we remain very bullish. As you heard us talk about, our goal and strategy is focused on continuing to build network and gain market share through acquisition of billers and building the IPN ecosystem and bringing as much volume as possible. So we see a similar trend. Minus the acquisition, we see a similar trend in 2022 and beyond in terms of acquisitions of customers. Now in terms of where they will come from, utilities and insurance are our key verticals, the core verticals. Utilities, insurance, government, consumer finance, telecom as well as healthcare.

The only thing I would add is that also financial institutions, I think with the addition of Payveris, obviously being a focus on financial institutions and continuing to add more and more financial institutions to the stable of clients.

Okay. Just one quick follow-up is one or maybe two parts to it. But when thinking about the guide and outlook for 2022 and beyond now. Number one, I mean, we’re getting a couple of questions on the strength of the customer adds and transactions, but more in-line results on contribution profit, as well as really more in-line trend looking forward. And so, maybe just touch on the yield dynamics for a minute? What you're seeing or expecting to see on the yield and what you're able to charge fee per transaction that's changing at all? Then also, is there an inclusion of anything for the JPMorgan partnership yet or is it just too early on for that?

Yes. On the first part on the contribution profit line, I think I might have said it in the prepared remarks. But we expect in 2022, the contribution profit per transaction to be consistent with what we saw roughly at the level in Q4. As we've said before, we continue to add larger and larger clients. We've been very fortunate, and we've worked hard and earned them in winning larger clients than we've ever won. Of course, with greater volume for a client generally comes better pricing. So certainly, as we need to add larger clients, there will be some continued pressure on the price per transaction line. But we think on the whole we can keep it fairly consistent for 2022 with what we saw in Q4. Some of that also comes from, as I think Dushyant mentioned on the call, from other sources as we continue to expand our B2B presence and the financial institution business in particular. Those are priced on a contribution profit basis. There is no interchange. But that will be more akin to where we are currently on contribution profit per transaction. With respect to the second part on JPMorgan, we have a lot of positive momentum there. But as you said, there's a two-piece structure to the business. One is the migration of their existing accounts, and the second is going to market together with them. As you can imagine, a lot of those clients are on the larger end of the client spectrum. We've had very good results early on, but those are going to take a little bit longer to get up and running simply because of their size. So, there's not a lot of impact in 2022 from revenue associated with those clients. That doesn't mean we haven't already won some and we're well underway on winning others, but the revenue impact doesn't really show up in a meaningful way in 2022. On the migration, there's time that it requires to get prepped and to talk to the clients and get them comfortable with it. So again, there’s not much impact in 2022, but there is some in the back half of the year, though not very large.

Okay. Sorry, that's helpful. Nice job, guys.

Sure. Thanks, Darrin.

Thank you, Darrin. The next question comes from Andrew Bauch with SMBC. Please proceed.

Hey, guys. Thanks for taking my question. I want to touch upon the IPN real quick. I know one of the key advantages of the IPN is it gives you a lot more visibility into really the bill payment ecosystem across the country. I mean, could you help us and investors better understand how the IPN dramatically expands your immediately addressable market and the point on automated biller discovery. I think a little bit more color around that would be helpful?

Yes. So, well, first of all, thank you for the question. Look, as you rightly pointed out, IPN for us is a way to continue to garner insights into how consumers are paying their bills, who they are paying, and whether those billers are on our network directly or not. If they are on, great. So we are now able to serve the existing customers better. But those who are not, they go directly to our sales pipeline, and we are starting to target those customers. This phenomenon actually opens up doors for us beyond the core verticals we talked about. There are several verticals where we are now seeing payments to, where they're starting to look very attractive to us because we're already processing payments, and it becomes a very warm lead for us. The way to think about this is by having financial institutions leverage our IPN and Bill Center. On one hand, they're modernizing their capabilities; on the other hand, using these capabilities and the payment volumes, we are able to garner insights as to what other verticals and what other key features and capabilities we could add to our platform, that allows us to further expand our TAM. So that is actually happening as we speak. Another thing which is interesting in that whole dynamic is, as you know, one of our key areas of focus is how do we reduce the gap between our gross revenue to the contribution profit, the net revenue. And this opens doors for us there as well. So we see that as a big strategy for us.

No, I think you answered it. It was regarding the automated biller discovery. However, my follow-up question would be about the adjusted EBITDA guidance. The 50% margin at the midpoint seems fairly consistent with what we anticipated. Are there any changes to your investment strategy in light of tightening supply or labor markets?

Not really. As we've mentioned before, we're allowing the strength of our business to influence our spending. If we see an opportunity to boost revenue, we believe it's worthwhile to invest in that. We have been adding team members, although, as discussed in a previous call, the hiring process is a bit longer than it was about nine to twelve months ago due to a tighter labor market. Nonetheless, we continue to attract outstanding talent. Some days, I even tell our recruiting team to slow down a bit because they are finding such excellent candidates. We will continue to focus on responsible growth, as Dushyant mentioned earlier. Profitability is important to us, and we will carefully evaluate every investment decision to ensure it can promote further growth. If we don’t see the potential for growth, we won’t proceed. We are committed to ensuring that our spending drives responsible growth in revenue.

Thanks.

Yes. Thank you, Andrew. The only thing I was going to say is just keep in mind that because of our implementation timeline, the results in revenue are lagging the investment. In the sense that, if it takes us six, nine months to get a customer live, we're not going to see the revenue impact of the investments necessarily straight away. It takes a little bit of time to see those.

Good points.

All right. Thank you.

Yep, appreciate it.

Thank you, Andrew. The next question comes from John Davis with Raymond James. Please proceed.

Hey, good afternoon, guys. First, just want to start on net revenue retention. Maybe just comment a little bit; it's not an actual number directionally. How it trended in 2021 versus 2020? What kind of is embedded in the 2022 guidance?

Yes. In line with our historical trends, we have not disclosed a specific number for 2021, but it aligns closely with what we've observed in the past. We can estimate it to be in the mid to upper one teens, around the range of 115 to 120. Additionally, as we've previously mentioned, we consider ourselves to be approximately a 30% grower, with about half of that growth coming from expansions with existing accounts and the other half from new clients, and 2022 will follow a similar pattern.

Okay, great. And then the inorganic contribution for revenue or sorry, contribution profit in Q4, and then how should we think about what's baked in the guide from an organic perspective in 2022?

Yes. We haven't broken it out, because it's not material to the overall numbers. But it's in there and it's baked into the guidance for next year what we expect to do. And there's certainly, when you think about the acquisition, they obviously brought some clients with them. But the real value or the real value is the combination of the companies and what we're able to do as far as providing the bill payment capabilities to financial institutions, et cetera. So it's included in our guidance, but we haven't broken it out because it's not material.

Okay, I'll ask one last question if I may. Dushyant, you mentioned IPN quite a bit in your prepared remarks. Could you provide a rough estimate of its contribution to revenue in 2021, and do you anticipate a significantly higher contribution from IPN in 2022? I'm just looking for an update on its revenue contribution and profitability.

One of the things we are currently working on is recognizing the close relationship between the IPN and our core business due to the network effect we are pursuing, which is already evident. Consequently, we are not distinguishing between the IPN and the core business in our internal reporting. However, the numbers and growth in volume and transactions indicate that both are contributing to our overall growth and the network effect we have been discussing. Do you have anything to add?

Yes. I'll just add on the revenue to contribution profit. We've, as we talked about I think previously, the revenue line will certainly step down on a per transaction basis over time as two things happen. One, we sign larger and larger accounts, but also as more of the mix of our business transitions to becoming a contribution profit-only business without where we don't carry the cost of the interchange such as B2B, as you mentioned, the IPN transactions which includes the financial institutions as part of the Payveris is working with, et cetera. So we will continue to see a progressive increase in contribution profit as a percentage of revenue. I would not, and we can talk more about this obviously, but I would not model a massive step up for that this year. I think it'll be a very kind of slow step up throughout the year as we go through the year.

Okay. That's helpful. Thanks guys.

Thank you, John. The next question comes from Tien-Tsin Huang with JPMorgan. Please proceed.

Thank you. The results are impressive. I wanted to ask about the current pipeline for billers and partners compared to this time last year. Have there been any significant changes? Also, are your sales targets for the sales team in 2022 higher than in 2021? I’m curious about how they compare. Thank you.

Great question, Tien-Tsin. I'm smiling because some of these discussions are already taking place between me, Matt, Jerry, and the rest of the team. We are engaged in those discussions. The pipeline is indeed stronger than it was before. This improvement is a result of the various elements we've been working on over the years, including our partnership framework with both the biller network and financial institutions like JPMorgan Chase. Additionally, our enhanced messaging and the growing recognition in the market of the need for a platform and ecosystem like Paymentus have led us to set larger targets for this year compared to last year. The team is highly focused on achieving these goals. As I mentioned in my prepared remarks, we have multiple revenue sources as part of the platform we have developed.

Yes. Now it feels that way; it seems like the net is definitely wider, which is why I thought I'd ask. So just my quick follow-up then just thinking about the revenue drivers this year versus last year. Do you expect it to be meaningfully different? I mean, given what you just said there with a lot more partners and plays. I know you've signed a lot of larger billers as well. I'm just curious if you think the wheel is going to spin a little bit differently to get to where you're targeting?

Yes. I mean, look, our pursuit is to gain as much of the market share as we can and continue to expand our network. That will continue on, and we remain very excited. Actually, we are seeing tremendous trends in our favor from all aspects. If you think about it, billing companies are looking for a more unified platform. The banks are looking for a modernized user experience, and we sit right in the middle of it all. Consumers want choice. They want a way to be able to pay whatever they want, whenever they want, however they want. And we are able to do that. As a result of that, I think the net, as you said, is getting wider. And as a result, I think we are able to target clients in different industries we were not thinking about initially, opportunistically based on what we are seeing, and then eventually, we’ll formalize that.

Yes. That was great. Thank you, Dushyant. Thank you, Matt.

Thank you, Tien-Tsin.

Thank you, Tien-Tsin. The next question comes from Jason Kupferberg with Bank of America. Please proceed.

Okay. Thanks guys. Just curious how to think about cash flow conversion in 2022 based on the adjusted EBITDA that you're forecasting, whether you want to talk about operating cash flow or free cash flow? Thank you.

Yes. Thanks, Jason. Yes. Consistent with what we've seen historically in 2021 and prior, no real changes to the drivers and cash flow conversion. I think cap software is a big impact. If you think about the difference between operating cash flow and free cash flow, we do have a lot of capitalized software, but there's no changes to any of the leverage of drivers that would change cash flow conversion from adjusted EBITDA, consisting of what we did in 2021.

Okay, good. And then just with respect to the balance sheet. Obviously, in great shape and no debt, and you've had a track record of some successful M&A. What does the pipeline look like there? How do you feel like that will be a meaningful part of the story for finance in 2022?

Yes. I'll begin and Dushyant can add later. We are consistently exploring mergers and acquisitions opportunities. After becoming a public company, we received numerous inquiries in our inbox. As we have mentioned previously, we have been both opportunistic and disciplined in our M&A activities, and we will maintain that approach moving forward. The positive aspect is, as Dushyant outlined regarding our achievements in 2021, our goals for 2022 and beyond do not reveal any significant gaps in our strategy or objectives that would necessitate acquiring something to fill a void. This situation allows us to be very opportunistic in either broadening our total addressable market or enhancing our capabilities in specific areas. Essentially, our focus is on complementing our existing efforts rather than addressing major deficiencies, which positions us favorably and enables opportunistic actions. Dushyant, do you have anything to add?

No. I think I completely agree. I think we'll continue to be selective and very disciplined. But doing acquisitions, I won't put it out of the realm of possibilities. We'll continue to look at opportunities, and if something comes along which we like and you think it could be additive, we'll do it.

Thanks, Dushyant.

All right. Thanks, Jason.

Thank you, Jason. The next question comes from Ashwin Shirvaikar with Citi. Please proceed.

Hi, Dushyant. Hi, Matt. Good to hear your voices.

Thank you.

I guess let me start with the 14 to 16 margin range, and if you could talk about what drives the 14 versus the 16. How much of that is explicit investments versus mix things like that? If you could discuss that, I would appreciate it.

Yes, absolutely. So some of it obviously is dependent upon where we land on the top line, and to the extent it flows through ultimately to EBITDA for sure. And there's a range on the top line. So, there's a flow through on that. But it also is one of the things we want to make sure that we give ourselves enough of a range to be honest and transparent with you and the investors on having additional capability to invest to the extent that we see the opportunity to do that. Again, we're a growth business, and we think that being able to grow in the 30 range is quite attractive, and to the extent that we have opportunities that can add, potentially add to that growth level, we want to have the ability to make those investments. So, I’d say that’s really the difference between kind of the 14 and 16 is throughout the years we see opportunities to invest, and that puts us in a position to do that. As you would expect, a good majority of our expenses are in the people bucket. So, I think we're always looking for good people, and it’s also somewhat dependent upon the timing of hiring and attrition and some of those things you can't control. So, kind of with all those factors in, we felt like that was an appropriate range and just gave, again, ourselves a little bit of flexibility as we kind of work through the year to have additional investment dollars to the extent that we think that there’s things that we can invest in that will drive additional top line.

Got it. Got it. And then, as you added new partners, is there any change observable I guess in either payment type or bill amount size? You might be meaning affluent versus subprime, various different factors that you might look at to figure out sort of the partner strategy and hone it? Can you talk a little bit more about that forward-looking perspective as well?

Yes. I think from what we are seeing is that larger billers are obviously a lot more open to doing partnership with us as a result of the ecosystem we have built in the platform, but also the partnership framework. But we haven't seen a major shift in terms of payment mix or other changes. In fact, that's what makes this thing pretty attractive. And I said, I think this entire business proposition we're talking about is that we have built what we need to build to get to the point where we are at, which is now it's more about having more storytellers, more ways to tell the story, and more listeners, and therefore more customers coming on board, because we have the platform, we have the ecosystem, we have the network, all of the components you needed to make it happen.

I completely agree. I would just add that we have definitely observed an increase in payment amounts across different clients. Reflecting back two years ago, before we began adding larger billers, I could tell you that our average payment amount for all our bills was around $180, and it remained fairly stable without much variation. However, as we have diversified into more verticals, we now have a client we launched in Q4 with an average payment amount exceeding a thousand dollars, and another in the auto sector averaging between $500 and $600. Overall, the average payment amount has slightly increased across all billers, but there is now a larger difference between the highest and lowest amounts. This is a positive indication of our expanding range of billers and verticals. If we price these appropriately, the economic impact remains consistent regardless of the payment types. However, the variation has grown due to our entry into more industries and verticals.

Got it. Thank you, guys.

Thank you, Ashwin. The next question comes from Will Nance with Goldman Sachs. Please proceed.

Hey, guys. Good afternoon. Thanks for squeezing me in here. I had a question just on the revenue trajectory over the year, and it sounds like there are a handful of things that may start to kick in the back half of the year. I think you mentioned some of the JPMorgan partnership will start to contribute towards the end of the year, but really it sounded like more 2023 weighted. I think last quarter you talked about a large client that was supposed to come on board, a larger than normal client coming on board towards the second half of this year. So I just kind of understand like I hearing loud and clear you guys consider the business a 30% grower. Is it possible that with the addition of these handful of things you guys have talked about, we could be exiting the year with a little bit of tailwind?

I'm not going to let Dushyant answer that question. Our guidance has been discussed. We've mentioned that there are developments from the JPMorgan partnership that will impact us later in the year. The client you mentioned is expected to go live late in the year. All of these factors position us well for 2023 and beyond. I want to emphasize that our guidance remains unchanged, but we have reasons to feel optimistic about how things will unfold toward the end of the year. There is still a lot of work ahead of us. Regarding our implementation timeline, I noted earlier that most, if not all, of our revenue for 2022 is set with the clients we have signed up to go live this year. However, the timing and volume of their launches can vary. The work we're doing now will contribute to our revenue in 2023. We have significant tasks to accomplish, and the conditions are favorable for us with several events happening late in the year, but we still need to focus on our goals for 2022 to ensure 2023 meets our expectations.

Got it. That's helpful, and I just in fact that's a follow-up. I just want to try the organic growth question a different way. I realize that you guys are not breaking that out because you don't really consider it too material. I just want to make sure I understand the comments on the quarterly cadence of growth throughout the year. Because it sounded like you said that it was material enough that we would notice just from a comps perspective in the first half of the year, the growth being elevated and then falling off in the back half of the year. So I was wondering if you could just help us understand the magnitude of that inorganic impact from comps in the prior year as we go from the first half into the second half? And I would kind of echo the earlier questions around ballpark what the acquisition from the third quarter are contributing to the current run rate?

Yes. That's a fair point. I think what we were intending was obviously Q3 and Q4 are tougher comps than Q1 and Q2 is really what we're trying to say. Part of the reason for that is even though not material, there's still some amount of acquisition in there. I would say a couple points. Really what we're trying to essentially say is as we go through the year, it's going to appear, well, it is going to be that Q1 and Q2 growth rates are going to be higher than Q3 and Q4. Essentially, what I was trying to say is don’t read into that that growth is slowing down, because there are a lot of factors at play into the quarter-on-quarter results that we see. Overall, part of the reason we don’t give quarterly guidance is because, on an annualized basis, we think we're a 30% grower. Even if Q3 and Q4 aren't at that level, that doesn't mean in our minds that we're slowing down the growth, because we still believe ourselves to be a 30% grower for 2022 and into the future.

And I understood. Appreciate you taking my question.

Well, I'll just make a quick point here. I may be a single voice here at the table, but I'm actually not very happy with 30% growth. So I continue to think about all the innovative ways we could get to that what can we do to accelerate the growth even further. The 30% number actually is important from a different perspective also, that we want to remain a rule of 40 company. We want to be a responsible grower of the business. We want to be a profitable company. We feel like that the rest of the investment community has trusted us with your capital, and it's not lost on us that families through mutual funds are investing in the public funds and they're investing in our business. We want to make sure that we are responsible custodians of the capital. As a result, we feel like that at 30%, we have, with the EBITDA margins we have, we are a rule of 40 company. So that's the key reason why 30% is the number.

Got it. Understood. Appreciate the color.

Thank you. There are no additional questions registered at this time. So I'll pass the conference back to the management team for closing remarks.

Well thank you so much for joining the call, really appreciate. We'll talk to you soon.

Bye-bye.

Bye.

That concludes the Paymentus' fourth quarter and full year 2021 earnings call. Thank you for your participation. You may now disconnect your line.