Good day, and welcome to the Second Quarter 2024 Paymentus Earnings Conference Call. This call is being recorded. All participants are currently in a listen-only mode. At this time, I would now turn the call over to David Hanover, Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to Paymentus second quarter 2024 earnings conference call. Joining me on the call today is Dushyant Sharma, our Founder and CEO; and Sanjay Kalra, our CFO. Following our prepared remarks, we'll take questions. Our press release was issued after the close of market today and is posted on our website where this call is being simultaneously webcast. The webcast replay of this call and the supplemental slides accompanying this presentation will be available on our company's website under the Investor Relations link. Statements made on this webcast 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 and guidance, the impact of and our ability to address continued economic and geopolitical uncertainty, our market opportunities, business strategy, implementation timing, product enhancements, 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 captions Potential note regarding forward-looking statements and risk factors in our annual report on Form 10-K for the year-ended December 31, 2023, and our subsequent quarterly reports on Form 10-Q, including our Form 10-Q for the quarter ended June 30, 2024, which we expect to file shortly and elsewhere in our other filings with the SEC. We encourage you to review these detailed forward-looking statements safe harbor and risk factor disclosures. Additionally, during today's call, we will discuss certain non-GAAP financial measures, specifically, contribution profit, adjusted gross profit, non-GAAP operating expenses, adjusted EBITDA, adjusted EBITDA margin, and non-GAAP net income and earnings per share. These non-GAAP financial measures, which we believe are useful in measuring our performance and liquidity, should be considered in addition to and not as a substitute for or in isolation from GAAP results.

Thanks, David. In the second quarter, we saw record revenue, contribution profit, and adjusted EBITDA all exceeding our expectations. Our revenue was $197.4 million, up 32.6% year-over-year and our adjusted EBITDA was $22.5 million up 58.6% year-over-year. These results were once again ahead of our long-term targets of 20% revenue growth and 20% to 30% adjusted EBITDA growth. Contribution profit for the quarter was $76.5 million which was up 28.3% year-over-year. Almost half of all incremental contribution profit dollars dropped to the adjusted EBITDA line. We're very pleased with this performance given we also grew the top line over 30%. As a result of our growth and operating leverage, based on the rule of 40, we were well ahead at 58. As you may recall, we had similar performance using this high-level metric last quarter. We exited the second quarter with strong bookings, backlog, and pipeline. As a result, we feel confident about the remainder of the year and our long-term outlook for success. It's quite remarkable that we have built a durable business where we have been able to consistently deliver solid growth, gain market share, expand our total addressable market and enhance our innovation framework, while at the same time expanding profitability with our strong operating leverage. Let me now talk about our operational performance for the quarter. Demand remains strong for our differentiated platform and our proprietary IP and ecosystem. Clients are looking for a robust platform that allows them to continue to improve their customer engagement and experience while lowering their cost to serve by replacing unwieldy processes with Paymentus' advanced platform. With our advanced technology platform, we offer our clients the ability to be more effective with fewer costs. In addition, as we have discussed in the past, we have a transaction-based pricing model, designed to mitigate the challenges the broader enterprise software market faces in times like these. Our platform is generally priced on a per-transaction basis where we get paid when our clients get paid or when a client initiates a payout transaction. This approach has served us well both in good times and during less favorable conditions. In addition, this model provides clients a great partner in Paymentus where the interests of both parties are directly aligned. As a result, we are seeing continued momentum primarily based on the strength of our innovative technology platform, pricing approach, and a profitable high-growth public company profile, which are very attractive to enterprise clients across all verticals, including those clients that have traditionally not outsourced to any vendor. This quarter, we also delivered another period of strong bookings. When combined with our success in the first quarter, we are significantly ahead of where we were this time last year and well positioned for the remainder of 2024. Based on the feedback we have received from investors, we wanted to provide a broad and diverse list of verticals represented by clients we booked this quarter. We have signed clients in government services, utilities, banks, credit unions, insurance, telecommunications, property management, healthcare, and education. Many of the clients in the verticals identified above are large enterprise clients. Much like our bookings, we also continue to add channel partners across various verticals. During the quarter, we signed partnerships in insurance, healthcare, telecommunications, and government verticals. We believe these new partnerships combined with our extensive partnership ecosystem improve our sales efficiency and continue to add to our momentum toward growing market share in an industry that already has a huge total addressable market. Now on to onboarding activities. Our onboarding velocity continues to improve, particularly our ability to onboard large enterprise-level clients and corresponding complex and sophisticated workflows. During the quarter, we onboarded a substantial number of diverse clients. We can do this because our platform allows us to offer services across all verticals, showcasing the strength and flexibility of our technology. We onboarded clients in verticals including government services, transportation and logistics, utilities, telecommunications, insurance, healthcare, banks, and credit unions. Many of these clients were large implementations. We are pleased with our improving implementation efficiencies and the year-over-year growth of client onboarding in terms of both number of clients and onboarded revenues generated. With that, let me turn it over to Sanjay for detailed remarks on financial performance.

Thanks, Dushyant, and thank you all for joining us today. Before I discuss our quarterly results and outlook, I'd like to remind everyone that the financial results I'll be referring to include non-GAAP financial measures. As David mentioned earlier, our Q2 press release and earnings presentation include reconciliations of the non-GAAP financial measures discussed on this call to their corresponding GAAP measures. Both of these are available on our website. Turning to Slide 5. For the second quarter of 2024, we delivered another quarter of financial results that exceeded the top end of our guidance range. We believe our ability to produce such results demonstrates the overall strength of our business. Our second quarter results included revenue of $197.4 million, up 32.6% year-over-year; contribution profit of $76.5 million, up 28.3% year-over-year; and adjusted EBITDA of $22.5 million, up 58.6% year-over-year. We continue to experience strong customer activity and demand in the second quarter. This drove strong bookings, allowing us to exit the quarter with a significant backlog. Based on our strong quarterly performance, the positive business trends Dushyant just mentioned, and our expectations for the remainder of 2024, we are raising our full-year 2024 revenue, contribution profit, and adjusted EBITDA guidance, which I will discuss shortly. Now let's review our second quarter financials in more detail. The number of transactions Paymentus processed grew to $140.4 million in the second quarter, up 28.2% year-over-year. As mentioned, Q2 revenue was $197.4 million, up 32.6% year-over-year. This growth, ahead of our original expectations, was driven by increased transactions from all of our revenue drivers, which include same-store sales from existing billers, the launch of new billers, and higher activity in our Instant Payment Network or IPN business. Our average price per transaction increased from $1.36 to $1.41 year-over-year, primarily due to updated pricing strategies that were adopted and accepted by our existing and new customers, which reflect the exceptional value and customer service we provide to our billers and the trust they place in us. Second quarter 2024 contribution profit increased to $76.5 million, up 28.3% year-over-year. This contribution profit increase was also higher than expected and reflects the increase in transactions from existing billers, the launch of new billers, and the mix of billers launched. Contribution margin was 38.7% for the second quarter compared to 40% in the prior year period, as we continue to add large, higher-volume enterprise billers to our customer base. Contribution profit per transaction for the quarter was $0.54, which was flat compared to the prior year period. During the second quarter, we saw transaction growth in line with contribution profit growth. In Q1, we saw that transaction growth was in line with the revenue growth. As we have said in prior earnings calls, revenue and contribution profit growth rates may vary quarter-to-quarter. Also, variables outside our control, such as increases in the average payment amount or changes in the payment mix, can substantially affect contribution profit on a quarterly basis. Therefore, we treat this as a secondary metric while our gross revenue and adjusted EBITDA remain primary metrics and focus areas for how we drive our business strategies. Second quarter adjusted gross profit was $64 million, up 28.1% year-over-year. Second quarter non-GAAP operating expenses increased to $44.1 million, up 16.7% year-over-year. The increase was expected and primarily due to higher sales and marketing expenses, mainly driven by increased hiring, increased activity for go-to-market events and trade shows, and increased agency fees for business from resellers. This expense increase was modestly ahead of our expectations, reflecting certain nonrecurring marketing events. Second quarter non-GAAP net income was $14.7 million, or $0.12 per share, compared to non-GAAP net income of $10.2 million, or $0.08 per share in the prior year period. Second quarter adjusted EBITDA was $22.5 million, up 58.6% from $14.2 million in the prior year. Adjusted EBITDA also represented 29.5% of contribution profit for the quarter compared to 23.8% in the prior year. This strong adjusted EBITDA performance was due to the same combination of positive factors I discussed earlier, all of which came together in the quarter. We believe the stronger adjusted EBITDA margin demonstrates the inherent operating leverage we have in the business, and our proven ability to adapt to changing market conditions while continuing to grow. Interest income from our bank deposits was $2.2 million during the second quarter, compared to $1.7 million in the prior year period, improved year-over-year as a result of increased cash balance and effective cash management. Related to our performance, we once again exceeded the rule of 40 for the quarter, coming in at approximately 58, similar to the prior quarter. Now I'll discuss our balance sheet and liquidity position. We ended the second quarter 2024 with total cash of $192.9 million compared to $184.2 million at the end of first quarter 2024. The $8.7 million increase is primarily comprised of $18 million of cash generated from operations, offset by $9.3 million used in investing activities primarily for capitalized software. The company does not have any debt. The free cash flow generated during the quarter was $8.8 million. Our days sales outstanding at the end of the second quarter was 42 days, comparable to the previous quarter of 41 days. Working capital at the end of the second quarter was approximately $229.6 million, an increase of approximately $12.6 million from the end of the first quarter. We had 127.3 million diluted shares outstanding during the second quarter, similar to 126.9 million diluted shares outstanding during the first quarter. Now I'll turn to our non-GAAP guidance for the third quarter and the full-year 2024. For the third quarter 2024, we expect revenues to be in the range of $188 million to $193 million, representing 25% year-over-year growth at the midpoint and 26.6% at the high end. This growth rate range is an improvement from the prior year's third quarter growth rate of 18.9%. Contribution profit is expected to range from $71 million to $74 million, which is 17.9% year-over-year growth at the midpoint and 20.3% at the high end. Adjusted EBITDA is expected to be in the range of $18 million to $20 million, representing a growth of 22.6% year-over-year at the midpoint and 29% at the high end. This represents a 26.2% margin at midpoint and a 27% margin at the high end, which is an improvement from the prior year's third quarter adjusted EBITDA margin of 25.3%. Given our improving backlog and implementation base, we feel even better about the business overall in the third quarter than we did in the second quarter. Additionally, our full-year 2024 guidance reflects the expected achievement of our long-term targets of approximately 20% annual revenue growth and adjusted EBITDA growth of between 20% to 30%. In closing, we reported another quarter of excellent results that exceeded expectations. In the second quarter of 2024, we continued to build on our solid momentum from the first quarter, resulting in strong revenue, adjusted EBITDA, and bookings growth. Additionally, we ended the quarter with a sizable backlog. Due to all of this, we have considerable visibility and believe we are well positioned for the balance of 2024. Thank you everyone for your attention today. And now I turn it back to Dushyant for final remarks before we open up the call for questions.

Thanks, Sanjay. Let me take a moment to briefly talk about our execution strategy. As you can see from these results, our business is doing really well. Our CAGR for revenue and adjusted EBITDA growth since our IPO exceeds our long-term targets, as do our revised guidance for this year. We are also very excited about the future prospects of the business. We are capturing market share and winning large enterprise customers who historically preferred in-house solutions. However, they are now getting comfortable partnering with Paymentus because, number one, we have a proven and differentiated technology platform combined with our unique IP and ecosystem that we believe is not replicable; and number two, we have a high-growth, profitable public company profile with a strong balance sheet. With these tailwinds and this level of outperformance, it is even more important for us to stay disciplined in executing aggressively, while at the same time remaining grounded when forecasting our future projections. Additionally, we primarily serve the non-discretionary part of the economy. People will always need to pay their bills and companies must always collect their revenues. We excel in both. As a result, we believe we can perform well in all seasons and not just during clear blue skies. I am proud of our team and want to thank them for all their hard work and dedication. With that, I'll open the lineup for questions.

Thank you. We'll now open the line for questions. The first question comes from the line of Dave Koning with Baird. Your line is now open.

Yes. Hey, guys. Congrats on another great quarter.

Thank you, David.

Yes. I guess my first question, you've put together now a couple of quarters of about 30% net revenue growth after several that were kind of around 20%. What's the big difference, I guess, these last couple of quarters? Is same-store sales still about the same despite the macro? And is it just selling efforts, like just implementation selling efforts, et cetera? And is some of that sustainable?

Dave, great question. Thank you very much for asking that. The situation here is, as you've seen from the trends and it's pretty clear from your question, and we are seeing those trends as well, business is actually firing on all cylinders, I would say. The bookings are strong as we've been reporting, and that cadence is continuing. The backlogs when we exit the quarter have always been at higher levels than what we were in the prior quarter. So we are seeing a strong business firing on all cylinders. Our revenues are continuing well, and our balance sheet is growing. We believe we are in a very good position for execution in 2024. When it comes to growth rates, we are keeping a clear head. We are grounded in terms of how we are heading, but the execution is very strong. We feel very good about how the business is going to grow. Should the growth rates continue, well, we are guiding to what we expect, but we are very confident that the business is running well and the bookings are strong, which should generate the right revenues and growth rates in the market.

And if I may actually, please go ahead.

Well, I guess I was going to ask then, I guess, relatedly, I know you're guiding Q3 contribution profit to be down a touch despite your backlog being higher. I know it's very recurring billings. Like, what does it really take for contribution profit to be down sequentially when things are really good?

Yes, Dave. Good question. So even though our business is growing and growing at a great pace, as you saw, we are raising the guidance for the full year for all three metrics. I would say it's about a 290 basis point increase for our contribution profit. We are raising 250 basis points for revenue and 400 basis points for EBITDA for the full year. At the same time, there is seasonality in the business, which we cannot ignore because there is a cohort of the business, a cohort of the pillars which performs really strong in one quarter and there's another cohort which performs strongly in another quarter. So I think seasonality will tell you that we should do a comparable year-over-year. Regarding contribution profit, which is our secondary metric, the main idea is to work together with operating expenses so we can calibrate them to reach the desired EBITDA margins. And that's what's happening. So regardless of what contribution profit is doing, our primary metrics, which is revenue growth is continuing in Q3, and our EBITDA margins are also better. We feel pretty good about this, and as things move along, we could recalibrate the expenses based on how contribution profit emerges. I think we feel good about it, and it's just a secondary metric. It doesn't impact our long-term strategy or vision.

Got you. Thanks. Great job.

Thank you.

Thank you. The next question is from the line of Will Nance with Goldman Sachs. Your line is now open.

Hey, guys. Good afternoon. Great to see another nice quarter here. I wanted to maybe follow-up on some of the commentary on volume-based discounts. I think you had in the script that there's been some pricing changes that have been accepted by your customers over the past few quarters, and maybe there's a little benefit in there. So I guess I just wanted to make sure I'm understanding the commentary and the dynamics around the volume-based discounts. Should that accelerate over the next couple of quarters? Or should we expect to see maybe a little bit more decoupling or narrowing of the spread between gross revenue and transactions? It seems like revenue is growing north of transactions in the most recent quarter. I'm just wondering if you're messaging that as we lap the prices, we might see the two converge a little more as some of those volume-based discounts kick in. Thanks.

Thanks, Will. I would start by saying that looking at the process we discussed in the past few quarters of what we are working with all of our billers is primarily to look at how the billers are performing on a regular basis and are we getting the desired results in terms of the transaction growth from them. Based on the results, we reach out to the billers and work on pricing strategies. This was at its peak during inflationary times when we had to go out and work on pricing. However, that has now become a constant process in the company. We see a good improvement in the process with a disciplined approach to reaching out to the billers and working on pricing so we can achieve our desired results. You saw this reflected in the ARPU increase from $1.36 to $1.41. So we saw that happening. Now on the other hand, regarding volume-based discounts, as we are gaining large billers, we are seeing that volume discounts are being provided. But again, those volume discounts are not impacting ARPUs as much, as with the contribution profit margins. Additionally, there's a complete dynamic of how that works with our calibration of OpEx. This allows us to achieve the desired growth in adjusted EBITDA margins, which is our primary focus, both in dollars and percentage. Overall, I would say in the longer term, they should converge. If you look at our CAGR for the last four years, you will see they are aligned. But in the short term, can they fluctuate? Yes, they can. In Q1, you saw CP grew 30%. In Q2, you are seeing CP grew 28%. In Q1, you saw revenue was in the high 20s, and in Q2, you were seeing early 30s or 32%. They are generally close to each other, but the variability and diversity we have in the biller base and the verticals we are expanding to should give us that kind of flexibility to operate. We believe we are still on the right path with our primary metric achievements.

Got it. That is super helpful. You mentioned running way ahead of the rule of 40 targets over time. So is there anything on the horizon that you expect, or where you could see yourself kind of investing more heavily? Are there any kind of investment priorities that may come on board just given the strength of the financial profile right now? Or could we continue to see the really strong incremental margins and a lot of incremental CP falling into the bottom line? Thanks.

Well, we are starting to put our money where our mouth is, and we've started doing that already this quarter. We believe we have a great opportunity in front of us. Our pipeline is very strong, and we want to convert that into bookings. If we have to hire more in sales and marketing or invest more in partnerships and similar arrangements, we are opening those opportunities and working on that. Organic growth is our number one priority, and we would not hesitate to spend there if the opportunity is beneficial for us while still focusing on our long-term metrics.

If I may add to that, I think it may help answer Dave's earlier question. We believe revenue, gross revenue, and adjusted EBITDA are our two primary metrics. The reason for this is that we are still in building mode, focused on capturing a small portion of the large total addressable market. With our product profile, ecosystem reach, IPN capabilities, and a strong balance sheet, we have the ability to access markets that have been difficult to penetrate. Therefore, with this clear focus, we are pursuing deals that are advantageous for us, while revenue growth and adjusted EBITDA margins reflect how profitably we can serve our customers. In terms of our long-term strategy, we want to engage in the interchange economy, which is currently a cost center for us, but there are exceptions. In the future, you will see us taking part in the interchange economy. This represents an excellent opportunity for us to showcase our unique offerings while capturing market share at a faster rate.

Yes, all very clear. Appreciate all the details here and great to see the continued momentum in the business. Thanks for taking the questions.

Thank you.

Thank you. The next question is from the line of Darrin Peller with Wolfe Research. Your line is now open.

Guys, thanks. If you could just help us with a little more color around new biller adds and maybe just a breakdown of the vertical sources that these billers are coming from. I guess maybe just to add on, when we're thinking about the second half, what is the net number of billers you're embedding in the guide? You're obviously converting them and moving them into go live much more quickly than I think you did in the past in some cases. And so it'd be great to know a little more around what kind of cadence we're seeing already, what kind of biller numbers, and maybe the expectations embedded.

Sanjay, go ahead.

Yes, so, Darren, regarding biller adds, we are seeing a very good level of progress during the year, especially in the first two quarters. The billers have grown quite well, particularly in Q2. All the verticals where we have signed clients are growing. Dushyant mentioned nine verticals where we saw bookings in the quarter. However, we do not disclose specific numbers until our annual report. At the same time, I can say our implementation pace over the last six quarters has improved consistently, with Q2 showcasing the best achievement in this area. Our machinery for quickly implementing clients is becoming more efficient across the board. That efficiency not only benefits revenue growth but will support future growth as well.

If I may add quickly, it's quite interesting where we currently stand as a business. We see ourselves as a disruptive engine in the client environment. We are leveraging Paymentus' advanced platform to streamline workflows and enhance customer experience. We are building our business in an agile manner, identifying attractive verticals to capture margin while disrupting incumbents who are not as sophisticated as our platform. This is evident as we are onboarding clients with diverse and complex workflows onto our platform with greater ease due to our automation capabilities and enhanced functionality.

That's great to hear. Just a quick one is just on your net cash, which is $190 million, continues to grow. If you could just remind us of the M&A strategy, what areas do you see potential for investing and what's on the horizon? Thanks, guys. Nice job, by the way.

Thank you. Regarding our M&A strategy, we will remain opportunistic. As you can see from our profile, we are approached by many potential acquisitions, both small tuck-ins and larger companies. It's not easy to find companies that are immediately accretive to our top-line and bottom-line growth. We're actively taking a look at suitable opportunities as we remain open to acquisitions that can enhance our profile.

Got it. Thanks, guys.

Thank you.

Thank you. The next question is from the line of Andrew Bauch with Wells Fargo. Your line is now open.

Hey, guys. Thanks for taking the question. I wanted to pick up the guide here. You beat contribution profit by 7.5% in the second quarter, raised 8.5% in the full year, so about another $1 million in the back half. But on the EBITDA side, you beat by 4.5% and raised by 8%, so 3.5% incremental. Any kind of thoughts around the incremental rates for EBITDA? Is it just a function of the high incremental margins? Or if you run at these levels of incremental margins, what is the motivation to think about putting that back into sales?

Well, Andrew, we both mentioned in our prepared remarks that the business is doing great. The last two quarters have shown exceptional performance, and we are executing well. Our guidance is thoughtfully given regarding how we will use the upcoming EBITDA in relation to future revenue and bookings. Our focus will be on ensuring our operating expenses are aligned to support revenue growth. While contribution profit is our secondary metric, our priority is on growing adjusted EBITDA margins. In fact, we have a robust model for managing operating expenses in relation to contribution profit, allowing us to navigate changes quickly while pursuing optimal growth.

Nice to have that flexibility when the business is performing like it is. Just sticking back on the second quarter, the one thing that sticks out is that you accelerated from a two-year CAGR basis of 21% that you’ve run at for the last two quarters to 25%. So, significantly tougher comp in Q2 2023. You called out the transactions as a lead driver, but is there anything that you can point to that drove that transaction number higher, either intra-quarter that was visible to you?

I would say there are two factors. First, we are seeing robust same-store sales growth from our existing customers, which is higher than our original expectations when we signed them up. Second, the new billers that we have onboarded are also driving increased transactions. The implementation velocity we observed in Q2 is the best we've seen in the last six quarters, indicating our enhanced efficiencies.

Maybe if I could press you a little further on that. Why do you think the same-store sales are coming in so strong?

Well, it’s due to the increased adoption by the billers, who are expanding the use of our platform for their customers. Additionally, we are moving into a more digitalized world, where the younger generations prefer paying bills through modern platforms rather than traditional methods. Consequently, we see an inherent increase in transaction volumes, combined with new bookings and implementations further enhancing growth.

We are also making consistent efforts to ensure our clients can maximize the benefits of our platform by onboarding more customers effectively.

Thanks. Very helpful detail.

Thank you. The next question is from the line of John Davis with Raymond James. Your line is now open.

Hey, good afternoon, guys. Sanjay, I wanted to hit a little more on incremental margins, which were very strong at 49% this quarter. I think the full year implies about 46%. That is a little bit of a step down from last year; I think it was like 74%. I know this year you talked about balancing growth and investments while last year was more focused on demonstrating bottom-line strength. Is this call at 45% to 50% incremental margins the right perspective on this business where you can balance growth and investments? Or are there circumstances where you might step up investments and lower incremental margins to capture opportunities?

That's a good question, John. As the business grows and we improve our adjusted EBITDA margins, it necessitates a question around why incremental margins might not be growing as robust. But as we've seen in Q1 and Q2, the adjusted EBITDA margins have improved, and for the full year, we are raising. Our goal is to enhance EBITDA dollars year-over-year while also allowing flexibility in adjusting OpEx based on market opportunities. Our primary focus remains on generating sustainable EBITDA growth, and we will continue to assess opportunities to optimize expenditures to meet the demands of dynamic growth.

Okay. That's helpful. Dushyant, it was noteworthy in the prepared remarks you called out increased IPN activity as one of the upside drivers. Could you provide any percentage of revenue, percentage of transactions, or just a general update on that?

Thanks, John, for the question. At this stage, our Instant Payment Network (IPN) is such an integral part of our offering that we do not consider it distinct from our overall product offering. It embeds itself naturally within our transactions, whether it's a bank originating to a billing company or a biller on our platform receiving transactions from banks or fintechs. This differentiates the sales and catalyzes transaction growth over time, as we are onboarding larger clients who have historically opted for in-house solutions. Our strong profile and operations encourage them to partner with us as it expands our market share substantially.

That's super helpful. Thanks, guys.

Thank you. The next question is from the line of Andrew Polkowitz with JPMorgan. Your line is now open.

Good afternoon, guys, and congrats on the results.

Thank you.

I wanted to drill in a little bit on your comments regarding increased efficiency and implementation timing. I know you mentioned several areas driving that. So I wanted to ask, is this attributed to just an increase in manpower, or are there specific areas that you could point to that increased your internal velocity?

Great question, Andrew. I'm pleased to provide additional insights on this topic, particularly for our team, who have been instrumental in this evolution. If I reflect on a couple of years back, we faced delays due to the pandemic and the inability to meet clients in person. Now that we can meet our customers, especially those who drive significant changes in our business, we see improvements. Another crucial step was establishing Paymentus as a center of excellence for onboarding, which had been our strength but required adaptation as we entered larger markets. We're automating workflows and enhancing onboarding capabilities. Most of our clients can now be onboarded without a single line of code change, showcasing the effectiveness of our efforts to improve the customer onboarding experience.

That's great to hear. I had one follow-up. You mentioned the strong pipeline exiting the quarter. Is there any potential for upside to bookings driving benefits to 2024, or is that more of a 2025 story? What could be potential upside drivers or surprises that would provide benefits against your implied second-half outlook?

Well, Andrew, I would say the pipeline in front of us is more of a 2025 revenue opportunity rather than for this current year. We do not intend to incorporate expectations from the pipeline into '24 revenue models. However, this pipeline is certainly expected to become bookings that will yield returns in the 2025 and '26 horizon, depending on how strong the large contracts are and their duration.

As to 2024 itself, we are diligently working to onboard as many clients as we can, and some of these figures are already factored into our guidance.

Great. Thanks.

Thank you.

Thank you. The next question is from the line of Matt O'Neil with FT Partners. Your line is now open.

Yes. Thanks. And good evening, everybody. A lot of great questions already asked and answered, and solid results here. I'm curious, Dushyant, from a strategic perspective, what do you see as the top priorities moving forward? What are you telling employees that can ultimately drive those financial outcomes that you've been executing so well against?

Great question. I'm glad it's brought up. Our clients entrust us with their two most valuable assets: their clients and their revenues. As a result, our business has become central to any entity that partners with Paymentus. Therefore, one of our key areas of focus is operational excellence and innovation. I engage the team in this shared vision of listening to customers, innovating continuously, and adapting based on their needs. Our goal is to operate efficiently while demonstrating profitability. Achieving both is essential for a thriving business, and we are committed to doing just that. Thank you for your questions and for your time.

Thank you. Bye-bye.

That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.