BTRS Holdings Inc.
Q4 2021 Earnings Call Transcript

Published: 1 Mar 2022

[Operator:]

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Billtrust's Fourth Quarter 2021 Earnings Conference Call. As a reminder, this conference call is being recorded. I'd now like to turn the call over to John T. Williams, Head of Investor Relations, to begin.

[John Williams:]

Thank you, operator. Before we begin, I'll remind you that today's call may contain forward-looking statements, including our guidance for the full year of 2022, our expectations regarding the continued growth of our Software and Payments business potential for margin expansion, net dollar retention rate and our medium and long term targets. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 10, 2021 and in subsequent reports that we file with the Securities and Exchange Commission from time to time, including our annual report on Form 10-K for the year ended December 31, 2021, and available on the Investor Relations section of our website. Actual results may differ materially from any forward-looking statements we make today. These forward-looking statements speak only as of today and the company does not assume any obligation or intend to update them except as required by law. In addition, today's call may include non-GAAP measures. These measures should be considered as a supplement to, and not as substitute for, GAAP financial measures. Reconciliation to the nearest GAAP measure can be found in today's earnings release, which is available on our website. Hosting today's call are Flint Lane, Billtrust's Founder and Chief Executive Officer, and Mark Shifke, Billtrust's Chief Financial Officer. I'll now turn the call over to Flint to begin.

[Flint Lane:]

Thanks, John. And thank you, everyone, for joining the call today. We recently wrapped up our first full year as a public company, and I'm excited to share with you our outstanding fourth quarter and full-year results. We continue to execute on the strategic direction that we previously laid out with investors. I'll start by covering some of the operational metrics and then update you on some recent business highlights. I'll then hand it off to Mark for more detail on our performance and updated 2022 guidance. Our Software and Payments segment again exceeded expectations, growing 25% year-over-year in the fourth quarter and 28% year-over-year for fiscal 2021. We believe our Software and Payments business will continue to grow at this pace for some time, which is something Mark will discuss in detail during his remarks. We again posted strong adjusted gross margins at 74.7% in the fourth quarter and 73.1% for the full year, an increase of 290 basis points versus fourth quarter 2021. We continue to believe margins will trend higher over time as our customers shift to digital from print and adopt more of our Software and Payments solutions. Total payment volume, or TPV, which is the dollar value of customer payment transactions that we process on our platform, increased 45.3% year-over-year to $22.9 billion versus $15.7 billion in the year-ago quarter. TPV through the Business Payments Network, BPN TPV, increased 98.7% year-over-year in Q4. The credit card component of BPN TPV grew to $2.2 billion in Q4. It was up 52.1% year-over-year. Direct card revenue, or DCR, which is the revenue we get from processing credit card payments through all of our solutions, was $4.7 million or 63.9% year-over-year growth and a quarterly yield of 5.9 basis points. Direct card revenue growth continues to exceed card volume growth and we still expect yield will grow into the teens over the long term as transactions move to our PayFac and we capture a larger share of revenue. Net dollar retention in our Software and Payments segment increased by 10 percentage points from 110% to 120%. As you know, a large B2C customer exited last year, so we would expect to see NDR soften a bit this year to around 115% and then return to its prior trajectory thereafter. Now let's cover some recent business highlights. We made two executive hires to lead key segments of the business. Kelli Negro joined in November as our Chief Marketing Officer. Kelly most recently worked as the CMO of Vendavo and brings significant experience in driving growth through both direct and channel businesses. Aimie Killeen joined in January as our new Chief Legal Officer. Aimie previously held a similar role at Cardtronics and brings considerable SaaS, FinTech, M&A, and international experience that will help guide Billtrust global expansion. Our international expansion continues with our acquisition of Order2Cash, a European B2B order to cash cycle platform provider with over 200 customers connections to over 70 B2B and B2C invoicing networks and roughly $10 million in trailing 12-month net revenue. This is our second acquisition since going public and 10th overall and continues our global expansion into Europe where Order2Cash is well positioned for both cross sell and further expansion of our Business Payments Network. Our integration team is already hard at work and our M&A team continues to scout out additional opportunities both inside and outside the US. We had a great end to 2021, finishing our best sales bookings year ever. This included signing the single biggest new customer deal in Billtrust's history. This large equipment company receives approximately 10,000 monthly virtual credit card payments that require significant manual labor, which is slow, expensive and error prone. By implementing Billtrust's BPN digital lockbox solution, this customer will be able to digitize over $500 million in annual inbound payments and generate significant cost savings. We're excited to recently enter into a partnership with Coupa Software, locking in yet another large AP provider as we expand both sides of BPN our B2B payments network. We believe that Coupa recognizes, much like most of the other AP players out there, that one of the keys to payments growth is interoperability between software providers. In addition, Coupa is also now a Billtrust referral partner because they recognize that many of the suppliers that they work with need Billtrust solutions. Finally, we announced a significant upgrade to our cash application solution, Cash App 10.0 that now incorporates the BPN digital lockbox and improved machine learning technology. Suppliers very much want to increase digital payments, but just because they are digital doesn't mean that they're easy to process which has hampered adoption. A new approach was required and we believe combining Cash App with the BPN digital lockbox gives Cash App a significant competitive advantage in the market. I'd like to take a moment to talk about the differences between automation and digitization. Check processing is a great example of something that has seen a high degree of automation in the United States. Instead of paper checks being sent to a business, they're often mailed to a PO box at a bank, which is called the cheque lockbox. Envelopes are opened with automated equipment, converted to images with high speed scanners and then optical character recognition technology is used to extract the important information. It's a highly automated process that insulates suppliers from handling paper at a reasonably low cost. But there's something better than automation and that's not having to automate in the first place because the paper check is eliminated. Paper checks are slow because they're sent via US Mail. Paper checks are not environmentally friendly. Those things do not change no matter how much automation you throw at it. The combination of Billtrust online billing solutions and the BPN digital lockbox allow our customers to drive digitization, which is faster, more cost effective, and drives higher customer satisfaction both for our customers and our customers' customers. 2021 was a year of fantastic progress for Billtrust. Business progress as we exceeded our revenue and margin forecasts throughout the year and are entering 2022 with significant momentum. Strategic process as we continue to execute against our plan and invest for growth. And organizational progress as we continue to add key contributors and functions across the business that guide us through the next phase of our growth. Before we move ahead to 2022, I'd like to take a quick look back at 2021 and how we performed against the commitments we laid out when we went public a little over a year ago. As the CEO, I'm happy with our performance. We've kept our promises. We beat our internal expectations and raised guidance consistently throughout the year. We're seeing the benefits of our investment in sales and marketing to support our long-term growth. Our product and technology investments have driven new business opportunities. We've grown payments significantly, both for new and existing customers. We've expanded our partnership channel and significantly enhanced our distribution. We successfully leveraged our strong balance sheet to pursue M&A and establish an international presence, completing the acquisition of Belgium-based iController in October and Netherlands-based Order2Cash in February. We retired all of our outstanding warrants, putting the last remnants of our SPAC transaction safely in the rearview mirror. We believe the momentum created in 2021 is setting us up for an exciting 2022. First, we're better positioned than ever before to take advantage of increasingly favorable secular trends. Rising labor costs and interest rates as well as increasing work from anywhere environments all lead to demand for more automation and digitization to reduce costs and increase efficiency. Second, we provide our platform to an underpenetrated and sizeable addressable market. And the immediately actionable portion of that TAM for us has increased materially through our M&A activities, where we have increased our existing customer base by over 30% year-over-year, created a greater cross sell opportunity with this embedded base, and enhanced our competitive positioning to attract new logos. Finally, our differentiated solutions like the BPN digital lockbox are in very high demand. Successfully introducing these solutions to new logos creates a flywheel effect as we continue to execute our land and expand strategy. With increasing confidence in the predictable nature of our results, we've improved our disclosures and made it easier for investors to understand our business. And while we wish our current stock price better reflected our performance, we'll continue to focus on execution and are confident that the market will eventually recognize the value we are creating and the exciting market opportunity we are focusing on. I'm incredibly excited about 2022 and the future. Our sales and marketing investments are paying off, our channel investments are driving significant interest with bank partners, our M&A engine is working, will continue to be a focus. We now have a meaningful base of operations in Europe to drive further global growth. Our PayFac strategy will continue to lead to high margin payments growth and our innovative business payments network is solving B2B payments problems across the entire B2B ecosystem. 2021 was a great year and I'm expecting even better for 2022. I'll now turn the call over to Mark to review our fourth quarter results in more detail and provide our financial outlook. Mark?

[Mark Shifke:]

Thanks, Flint. And good afternoon, everyone. As Flint mentioned, we are very pleased with our Q4 and full-year 2021 results. We entered 2021 expecting net revenue growth of less than 15%, but instead significantly outperformed with over 20% organic and net revenue growth. This growth was driven by our highly profitable Software and Payments segment, which had full-year growth of 28% year-over-year with organic year-over-year revenue growth of 26.9% and 86% segment margins. Turning now to the quarter. In Q4, Software and Payments segment revenue grew 25.1% over a very tough year-ago period comp from $22.1 million to $27.6 million or $1.6 million in excess of our prior-year forecast. And as included in that forecast, iController contributed less than $1 million in Software and Payments revenue during the quarter. This strong outperformance was again driven by higher-than-expected year-over-year in card TPV and direct card revenue, plus increased customer utilization of our software as more customers than expected moved up to higher subscription tiers in the quarter. As contemplated in our guide, Q4 services revenue declined 19.8% year-over-year to $2.4 million, primarily from a tough year-over-year comp where we had the benefit in 2020 of newly instituted higher hourly rates and mix shift from change requests and current revenue recognition to implementation revenue that is accrued over a five-year period. Similarly, Print revenue declined 8.8% to $4.1 million as we continue to migrate Print customers to our digital platform. With those puts and takes, Q4 aggregate net revenue increased 15.4% year-over-year to $34.1 million or $1.6 million in excess of our expectations based on the overall performance of our Software and Payments segment. Adjusted gross profit in Q4 was $25.5 million or 74.7% of net revenue as compared to $21.3 million or 71.8% of net revenue in the fourth quarter of 2020. This outperformance in the quarter once again was driven by a higher mix of Software and Payments revenue versus our expectations as well as lower-than-expected direct cost. Adjusted EBITDA in Q4 was a loss of $7 million as compared to positive $200,000 in the prior-year period. Operating expenses excluding stock comp were largely in line with our expectations, and overall were up 64.4% versus the year-ago period. Excluding stock-based comp, R&D expenses were $13.2 million versus $8.9 million in the year-ago period. We continue to see very good results from sales and marketing efforts, where expenses were $9.6 million versus $6 million in the year-ago period. G&A expenses were $12.2 million compared to $6.4 million in Q4 2020, and reflect incremental spend in the quarter to stand up functions we previously did not have, such as M&A acquiring and integration, as well as corporate social responsibility, expansion and enhancement of our SOX and compliance control functions and higher insurance costs as a public company. Q4 was an investment period, and we do not expect these expenses to occur at this level again next year. G&A also reflects $2.2 million of costs related to the retirement of all of our outstanding warrants in December. This expense is an add back for adjusted EBITDA even though reported as a G&A expense. This strong quarter supported very positive full-year 2021 financial results, well in excess of our expectations heading into the year. Net revenue for full-year 2021 was $131.6 million or a year-over-year increase of 21.2%. With an adjusted gross margin of 73.1%, up 280 basis points versus 70.3% in 2020, adjusted gross profit was $96.2 million or 26.1% growth over the prior year, and adjusted EBITDA was a loss of $13.7 million, a year-over-year decline of $11.5 million and more favorable than we have been guiding for the year. We ended the year with $232.8 million in cash and equivalents and short-term marketable securities on our balance sheet and no debt. Note that we used $59 million recently to complete the acquisition of Order2Cash. One last item on 2021. While we had planned to get our 10-K filing out today, it turns out a little more time is needed to complete the process. We are therefore filing for the standard 15-day extension and expect you will see the filing of our 10-K fairly soon. Now on to guidance, our full-year 2022 outlook accelerates off the strong 2021 trends. For the fiscal year ending December 31, 2022, we expect total revenue between $195 million and $207 million, or 21% year-over-year growth at the midpoint. Our net revenue guidance, which excludes reimbursable items, is a range of $165 million to $171 million or 28% year-over-year growth at the midpoint of $168 million of net revenue. This view reflects our expectations of strong growth in our key Software and Payments segment where we project revenue between $133 million and $139 million or 31% year-over-year growth at the midpoint, reflecting organic growth of greater than 25% when adjusted for a previously disclosed customer loss in q1 2021 and approximately 5 to 7 percentage points of growth coming from M&A. We are very pleased to see a combination of accelerating organic net revenue growth, coupled with expanding gross margins, reflecting the increasingly profitable revenue generated by our business. Absent our two recent European acquisitions, we would have expected over 100 basis points of organic adjusted gross margin expansion year-over-year. Of course, the two companies we recently acquired do not operate at our scale, and potentially will need investment for purposes of both cross sell capability and revenue acceleration from faster implementations. To provide room for those potential costs in our budgets, we are guiding full-year 2022 adjusted gross margins of 73.2% to 73.8% or year-over-year growth of 40 basis points at the midpoint of 73.5%. With those adjusted gross margins, we expect adjusted gross profit for the year to be in the range of $121 million to $126 million or $123.5 million at the midpoint, an increase of 20% year-over-year. For full-year 2022, we are projecting an adjusted EBITDA range of negative $14 million to negative $16 million, which at the midpoint of negative $15 million is a negative 9% adjusted EBITDA margin, more than 100 basis points of improvement year-over-year. We developed our 2022 expected adjusted EBITDA outlook in light of the following considerations. First, we exited 2021 with a number of unfilled budgeted rules, shifting those costs to 2022 and somewhat artificially increasing year-over-year growth and OpEx. Even so, we are pleased with the operating leverage that is embedded in the guide. In addition, we are seeing positive results from our combined sales and marketing and R&D spend. So, we will accelerate spend in those areas, specifically focused on the following. First, we are expanding our channel partnership efforts. Second, we will continue to invest in direct sales where we still are maintaining in excess of 6 to 1 LTV to CAC and positive trends in net dollar retention. And third, we will continue to spend to support our international product and sales growth plans. Now I'd like to briefly touch on cadence for 2022. We expect our net revenue cadence to be much like prior years, with roughly 21% to 23% recognized in Q1, 24% to 26% in Q2, 25% to 27% in Q3 and 26% to 28% in Q4. And in line with that cadence, we expect adjusted EBITDA to steadily improve throughout the year. As a reminder, a customer left at the end of Q1 2021 and revenue that otherwise would have been recognized ratably over the year was recognized entirely in the first quarter, resulting in a materially higher year-over-year growth rate for that quarter than as usual. As a consequence, on a reported basis, we expect that Q1 year-over-year growth will look materially below the projected growth rate average for the full year. I'll now turn to our medium and long-term outlooks. We define medium term as three to five years and long term beyond that. We said last quarter that our confidence in the sustainability of our growth rate has increased and it continues to do so. Given that, we are now providing, for the first time, the following medium-term targets. Annual net revenue growth of 20% to 25%, Software and Payments annual revenue growth of 25% to 30%, adjusted gross margin of 75% to 80%, and adjusted EBITDA margin of positive 8% to 12%. With those goals, we plan to become adjusted EBITDA positive sometime in the back half of 2023 to the first half of 2024. These targets exclude the impact of any future M&A, and assume no major disruptions to the macroeconomic environment that would cause us to reevaluate our strategy or spending. For our long term targets, we introduce a long-term Software and Payments annual revenue growth target of at least 20%. With that, we increase our net revenue guidance from 15% to about 20% since these growth rates will converge over time as Print continues to run off and Software and Payments eventually represents the vast majority of our net revenue. We also reiterate our outlook for long-term adjusted EBITDA margin target of 25% plus. With that said, it's been a fantastic year for Billtrust as a public company. We remain as excited as ever about the opportunity ahead of us, and appreciate your support and partnership. Thanks again for joining the call, and we're happy to answer your questions. Operator, please open the lines.

[Operator:]

. Our first question is from the line of Andrew Schmidt with Citi.

[Andrew Schmidt:]

Flint, Mark, John, great quarterly cooler results here. I wanted to first dig into the comment about the record bookings year. A lot going on in 2021, investment in sales force, you have a broader product platform than you have historically. In the meantime, it seems like your demand trends for just AR, order to cash, digitization have stepped up. I guess, between all these factors and perhaps maybe others, but could you just talk about kind of what's driving the booking between kind of underlying demand and then your own execution? Obviously, there's a mix, but we'd love to get your perspective.

[Flint Lane:]

My sense is that there are certainly more buyers in the market for AR automation solutions. I think everything that's happened over the last couple of years of the pandemic and the work from home and the post office slowing down has caused many CFOs to say we've got to do something. So, there certainly seems to be more just pent-up demand. I think as far as our execution goes, we've been talking for the last 12, 18 months about investing in sales and marketing, and that's paying dividends. So, it has materialized itself in our best sales year ever. We had a great fourth quarter. And I mentioned in my script, signing the biggest deal ever, a large BPN digital lockbox deal. So, the trend in terms of sales and marketing execution in a market that has got a sort of secular tailwind is certainly in our favor.

[Andrew Schmidt:]

On the international component, obviously, over the last several months, you had a couple of nice international capability pickups. Maybe you could talk a little bit about just the game plan from here in terms of integration, expansion, things like that. Would love to get little more details on the international strategy.

[Flint Lane:]

While these acquisitions are international, they are similar to other acquisitions we've done in the past. We did iController back in October. That was our ninth deal. And Order2Cash we just completed earlier in February, which is our 10th deal. But we've done deals like that before, where they have a set of capabilities that are interesting to our customers and there is a bidirectional cross sell that occurs. So their customers need some of our solutions. Our customers need some of their solutions. So that cross selling motion has begun. And there's pipeline building around that. There's certainly some technology integration that needs to occur. But that happens while we're doing that cross selling. It's not required to begin those cross selling efforts. It's a great way for us to land a sizable footprint in a territory. And we expect to build off of there and expand into Europe. And part of the reason we went public in the first place was so that we could do acquisitions of these types. And I would expect that we'll continue to do those throughout this year and in the future.

[Operator:]

Next question is from the line of Tien-Tsin Huang with J.P. Morgan.

[Tien-Tsin Huang:]

Just on the on the acceleration in that revenue and gross profit for 2022. Nice to see it there. Just curious on the visibility and the factors that's driving that accelerated outlook, it sounds like some of it is from the bookings and benefits from the incremental sales investments. But if you could maybe give us a little bit more on the contribution and what factors, that'd be great.

[Flint Lane:]

Mark, you want to take that one?

[Mark Shifke:]

The bookings are clearly a component. At the same time, we're seeing great momentum in the underlying business in terms of TPV. And it's growing not just in card, but we're seeing a nice pickup on our ACH volumes, which in turn are also adding to the overall growth profile of our software subscription revenue in addition to the current revenue that we have and feel we have pretty good visibility to. We're really not looking for anything heroic out of our cross border capabilities. As Flint said, we've landed two great partners in Europe and we're looking to grow their core businesses as they are and then find the opportunities where we can for cross sells there-here and here-there. I believe, you also recognize it's early days and we were not aggressive in looking at the possible outcomes from that.

[Tien-Tsin Huang:]

Just in terms of my follow-up, I heard or wrote down you're expanding your channel partner efforts and you're investing in direct sales and you're still getting the same LTV to CAC, et cetera. So, are you leaning in differently in those areas? For example, in the channel partner efforts, is that more to nurture the existing partners you have? Or do you see some room to find new partners to grow a little faster?

[Flint Lane:]

The vast majority of our success in 2021 was through our direct sales efforts. We mentioned last January that we brought on Gwenn Lazar to manage our channel team, and we've planted some seeds there and we expect significant growth this year and in the future. But very little of our projections calls for the bank channel, for instance, driving business. But we certainly think that is part of our growth profile, but we didn't want to bake that in until we had something solid to announce.

[Operator:]

The next question is from the line of Bob Napoli with William Blair.

[Robert Napoli:]

Nice job on the year overall and the outlook. Really appreciate it. Can you give any color on what the backlog of the ARR added in the ARR backlog at the end of 2021, the ARR added in 2021 versus 2020?

[Mark Shifke:]

The 10-K will be coming out shortly, Bob, and that will include backlog information.

[Robert Napoli:]

I'll go look to see that. On the direct card revenue, nice steady expansion, real strong growth rate there. Over what timeframe do you expect that card yield to get into the teens? Is this a five year – the revenue per transaction is moving up very nicely, up 40% year-over-year, but any color on the trajectory in the direct current revenue and the margin profile of that revenue stream?

[Flint Lane:]

The statement we're making is that we expect it to be in the teens over the long term. And we define long term as five years and beyond. That assumes all of the current strategies that we're executing upon and doesn't assume any additional strategies. You've been following us for a while and you know that we do innovate, roll out new things. So, we will continue to provide guidance as we have it. There was certainly an opportunity to expand and accelerate that. The Business Payments Network, as you know, has been a bit of a rocket ship for us and we expect that to feed that, as we continue to drive more business onto our PayFac, that drives that up materially, but there's very few companies that are increasing yields higher than their increasing payment volumes. Generally, it happens in reverse. So, it's a good dynamic for us.

[Robert Napoli:]

Just last question, what are you baking in for revenue and EBITDA for the acquisitions in 2022? And what do you think the growth rates of those? Are those acquisitions accretive to the growth rate over the medium term?

[Mark Shifke:]

We're not calling out any specific results for either company or our European operations, like we don't call out specific products. I would say, you're looking at the guide, it should be clear, we're showing accelerated organic growth. And so, overall, those operations are adding to that organic growth.

[Robert Napoli:]

So accretive towards…

[Mark Shifke:]

Yes. And on gross margin, I think we've called out they are not yet operating at scale, and so they're right now somewhat of – relative to what otherwise would have been 100 basis point increase in gross margins. They're carving that back, but we expect over time that they will have the same gross margins that we do.

[Operator:]

Next question is from the line of George Mihalos with Cowen.

[George Mihalos:]

I guess, first one, if I'm looking at 2022 correctly, it looks like the different revenue items, it looks like Print and service is another – that appears to be growing 2021 over 22. Is that just a function of the acquisition? Or is there something else driving that?

[Flint Lane:]

It's more a function of the acquisition.

[George Mihalos:]

Flint, you've historically had a fair amount of pricing power in the model. I'm just curious, as you look at now, in this sort of an inflationary environment, customers looking to cut costs and the like, does that pricing power – has that changed at all? Is it increased at all from your point of view? And how are you thinking about that going forward?

[Flint Lane:]

Our invoicing and payment solution includes a huge postage component. So, we are a great solution for our customers because we're driving postage out, which is a significant part of their invoicing expense. So, the charges that we deliver to our customers include that postage expense. While we drive e-billing, it knocks the postage out. So that gives us the ability to raise prices on our side, which is the net line, not impacting the gross line that our customers receive. So we continue to be doing price increases on an annual basis, like we've talked about and get very little pushback from our customers.

[Operator:]

Next question comes from the line of Joseph Vafi with Canaccord.

[Joseph Vafi:]

I'll add my congratulations on great 2021 execution. Really nice to see the business accelerating. I just want to go circle back to your largest signing here ever in the history of the company here in Q4. Is there any read through on that relative to sales cycles for really large potential new logos or was this one in the hopper for a while and finally converted?

[Flint Lane:]

This is a BPN digital lockbox opportunity. And those sales cycles tend to be pretty quick. And I think the reason we share that is, there are a bunch of customers struggling with processing inbound virtual cards. This one customer was getting 10,000 a month, and they were throwing significant labor at this problem. So, when we're competing with somebody else for one of our other solutions, there's an evaluation. And that can take some time. Those sales cycles could be an RFP at the enterprise, generally not an RFP at the mid-market. So, these BPN digital lockboxes, we're the only ones selling a digital lockbox that can automate ACH, automate credit card, automate delivery into the accounts payable portals. So, it's very unique. And our prospects quickly come to that conclusion. And in a market where labor is tough to find, right, they're struggling filling recs, they literally can't process these payments. So we come in with a solution that they decide quickly, we can go live quickly, so it turns into revenue quickly. And this has been a big driver of our growth and will continue to be.

[Joseph Vafi:]

There's a read through on the digital lockbox traction into the bank channel. I know you're not really talking about it quite yet. But more color on the bank channel relative to that lockbox solution and white labeling it would be much appreciated.

[Flint Lane:]

It's my belief that much like when we moved from a cash society to a check society, businesses needed somebody to handle all those checks for them. So they hired a bank to do check lockbox for them. As we move from a check society into a digital society, everybody's going to need a digital lockbox. We've seen interest from the bank channel about being relevant in that conversation. And I'd be surprised if we don't announce something this year with a bank related to digital lockbox. But we believe that any supplier of scale is going to need a digital lockbox. Who brings it to them is sort of – we'll see. We're certainly selling a lot it. We've got partnerships with the accounts payable software vendors and we mentioned one with Coupa around it. ERPs likely will have interest. And we're pretty certain that banks will have interest as well. We don't have anything to announce yet, but I'd be surprised if we don't in the coming quarters.

[Operator:]

Next question comes from the line of Jason Kupferberg with Bank of America.

[Cassie Chan:]

First, I just wanted to ask about like margins in the Software and Payments business. I know you guys talked about how you guys have higher gross margins there. But can you just share anything about how that translates when we get down to the adjusted EBITDA line, what margins look like there for the Software and Payments business, just trying to kind of get a sense of a sort of like a bridge to get to that 8% to 12% adjusted EBITDA margin for the medium term that you mentioned and probably a lot of it is coming from that Software and Payments piece where you have more leverage going forward.

[Mark Shifke:]

Our Software and Payments segment is reported as a GAAP segment and you could see the revenue and margins there. They're pretty much in the mid-80s. And for the most part, the OpEx we have in our business is more aligned to the growth of our Software and Payments, really not so much around Print, where most of that is just cost that shows up in gross margin. So, what we're doing right now is looking at the ability to get operating leverage out of the business. It doesn't take another person to grow direct card revenue more and more every single day. Sort of just by breathing, that portfolio continues to grow. So, I think what you're seeing is the opportunity for the company to continue to accelerate Software and Payments revenue and manage its cost structure in doing so. And we're doing that, in large part, with G&A, which this year would have gone well below the average amount of growth in our OpEx, but for the acquisitions and the support we're putting around those acquisitions. On a go-forward basis, we believe, as I've said in the past, just by running out the Software and Payments revenue at something in the mid-20s and running for the OpEx at something, give or take, in the 15% range, the lines cross fairly quickly without our having to take great effort to get to profitability. But profitability is clearly on our mind. We have with very, very high gross margins on our Software and Payments revenue we have, great ability to manage the OpEx associated with it and get ourselves to profitability, we believe, sometime towards the end of next year, beginning of the year after.

[Cassie Chan:]

If I could just ask a quick follow-up on BPN, I know you guys gave out some helpful disclosures on volumes. But is there anything to share on the revenue side? Can you just talk a little bit more about the opportunity you see? And one of the assumptions for BPN in terms of – in the context of your medium-term outlook, is BPN TPV still expected to be in the strong double-digits? Is that kind of going to be moderating? And how much do you have baked into your medium term outlook there?

[Flint Lane:]

Yeah, a few questions here. So, I'll do my best try to hit most of them. BPN is obviously contributing significant payment volumes to our overall payment volume and is driving higher growth through the TPV because it's growing – the BPN TPV is growing at a faster clip. And that card revenue is obviously growing quite rapidly and it's driving higher yields. So, we don't expect any slowdowns in BPN. In fact, as the flywheel continues to turn and we get more and more partners on BPN, our hope is that it will accelerate. In terms of run rate, there's plenty of TAM available, simply in our customer base, as we expand globally with some of our international acquisitions. That opens up a whole new market for us. So, there is enormous opportunity ahead of us in BPN. By no means do we think we've reached scale there. We're early innings.

[Operator:]

. The next question is coming from the line of Mayank Tandon with Needham.

[Kyle Peterson:]

This is actually Kyle Peterson on for Mayank. I just wanted to touch a little bit on the Software and Payments revenue growth outlook for 2022, especially now you guys have given direct card revenue and that seems to be progressing really nicely. But how should we think about that Software and Payments growth, really from whether it's cross selling software to new customers, having higher payments volume run through the system, or just the onboarding of new logos, any color or breakdown or rank order you guys could give there would be really helpful.

[Mark Shifke:]

I was going to say yes to all of the above. So, what I think we're seeing in general is our direct card revenue is growing at a higher clip than our software subscription revenue. I think that should likely continue into 2022. At the same time, we see both aspects of TPV – ACH/wire and card volumes, both we think accelerating on a year-over-year basis. We get a tremendous benefit out of our land and expand and we're doing, I think, as you can see the numbers, an increasingly better job at linking our R&D and product solutions with our sales and marketing, go-to-market strategy, and we're seeing better wins and – stronger wins, giving rise to new logos that then become the opportunity for the land and expand opportunity. So it is literally all of the above from the way you set it out.

[Kyle Peterson:]

I guess just one quick kind of housekeeping follow-up. With you guys making couple of acquisitions in Europe and having some organic initiatives over there, is there any current exposure, whether it's on the customer side or employee side to the kind of Ukraine, Russia, Belarus region, or are you guys more in the Western and Central Europe?

[Flint Lane:]

I'll take that one, Mark. We have no employees in Ukraine. We don't use any third-party offshore partners in the Ukraine and we have no customers in the Ukraine. So, we've assessed that – our hearts obviously go out to everybody in Ukraine who's struggling with what's going on. But it is not likely impactful to Billtrust at this point, unless it proceeds into other countries like Belgium. And as of now, we're not affected.

[Operator:]

Our next question is from the line of Josh Beck with KeyBanc.

[Maddie Schrage:]

This is Maddie on for Josh. I wanted to touch a little bit about the partnership with Coupa. And I was wondering if you could give some color on where you see the most opportunity with this and if there's any model implications that you see for this partnership going forward?

[Flint Lane:]

Coupa was really the last big AP player that had not joined the BPN. We've spoken in the past around their Coupa Pay initiatives. And they were a little bit late to the game compared to some of the other folks, but they're certainly stepping on the gas. And throughout our conversations, it became abundantly clear to them, and us, that it could be a great partnership. They've got lots of people they want to pay and receiving payments from 100 different accounts payable providers is not good for a supplier. So, they love the model of driving payments to our existing suppliers, but we also announced a referral partnership because they've got suppliers that won't accept payments unless they give it to them in a more streamlined straight through processing way, which is what we offer with the BPN digital lockbox. So, I think it's just further evidence that we have solved B2B payments with BPN in a way that no one else has today. And that's why we're so bullish about that for the future.

[Maddie Schrage:]

Thank you for laying out the path to positive EBITDA in the future. And so, I'm thinking high level, could you talk about what investments are left to be made in the medium term.

[Mark Shifke:]

We're not seeing any step up in investments in order to get to higher revenue growth and delay our path towards profitability. We think the major investments have been made and now we need to manage the business in light of customer demands, expansion of our European operations and the like. But I think – and you saw it in Q4 – some of the larger investments we needed to make we made this year. And we made them within the budget we articulated for the year and, in fact, came in a little bit better on adjusted EBITDA than we had forecast. So that is important, why we feel we're on a good path towards profitability.

[Maddie Schrage:]

Congrats on the quarter.

[Operator:]

At this time, I'll turn the floor back to management for closing remarks.

[Flint Lane:]

Once again, thank you everybody for participating in the call and hearing more about the Billtrust story. We're obviously very bullish about the future. We just had our first year as a public company and we're looking forward to continuing to build on the great things we've already done. So thank you and have a great evening.

[Operator:]

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.