BTRS Holdings Inc.
Q1 2021 Earnings Call Transcript

Published: 13 May 2021

Operator:

Good afternoon, ladies and gentlemen and thank you for standing by. Welcome to Billtrust’s First Quarter 2021 earnings conference call. At this time, all lines have been placed on mute to prevent any background noise. Following the speakers’ remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Dara Dierks to begin.
Dara Dierks:

Thank you. Before we begin, I’d like to remind you that today’s call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC and available in 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.
Flint Lane:

Thanks, Dara. And thank you everyone for joining the call today. The digital transformation of accounts receivable and B2B payments continues to accelerate. The events of the last year have permanently changed the landscape of how corporations around the world conduct business. CFOs have a heightened awareness about the need to automate and digitize the order to cash process. Work from home policies are affecting how our customers and their buyers operate. Finance departments are increasingly implementing solutions to take advantage of efficient and cost effective ways to streamline invoicing, lower DSO, improved customer satisfaction and reduced cost. Our industry leading platform offers customers an end-to-end solution spanning the entire order to cash process, including credit decisioning, e-commerce, invoicing, payments, cash application and collections. These mission-critical solutions are integrated with a number of ecosystem players, including financial institutions, ERPs, and accounts payable software platforms to help our customers accelerate cash flow and more quickly and efficiently generate sales. Equally important to the solutions we provide are the teams we have focused on helping our customers drive the business outcomes they desire from our solutions. For instance, our e-solutions team helps our supplier customers run marketing campaigns to convince their small business customers to switch from paper checks to electronic payments. The switch from analog to digital can be accelerated greatly with our proven best practices. Our Business Payments Network or BBN continues to scale reaping the benefit of strong network effects. Taken together, we're incredibly well-positioned to capture more than our fair share of this enormous and growing market. Our 2020 momentum has carried over into 2021 for a strong start to the year. We're very pleased with our first quarter results which exceeded our expectations. We finished the quarter with over $33 million in net revenue, representing approximately 35% year-over-year growth. As we noted on our last earnings call, we had some deferred revenue that was going to be accelerated to the first quarter rather than spread across the year, making the first quarter larger than normal. We think a more fair way to look at this is to exclude the accelerated deferred revenue. If you do so, our net revenue in the quarter grew 25% year-over-year which is a big step up from Q1 of 2020.
Mark Shifke:

Thanks, Flint, and good afternoon, everyone. As Flint mentioned, we are very pleased with our first quarter results. Before we get into the details, I'd like to provide some further clarity around our business model and in particular how we monetize payments. Billtrust generate subscription revenue from processing ACH payments and interchange as well as gateway fees in connection with processing credit card and virtual card payments. These payments are made by buyers either at our customer portals for smaller buyers we didn’t take invoices or through BPN where larger buyers including AP providers make payments. Subscription revenue at payment portals is usually derived from a bundled solution like billing and payments where subscription tiers are determined by the number of invoices delivered as well as the number of invoices paid. In addition we process credit cards through these portals. Given that we became a PayFac only in the last three years, most of the card volume as we process to the customer portals are as a gateway where we receive a fee for this service. We monetized payments on BPN in somewhat similar ways as we monetize payments through portals. First, we generate BPN platform subscription fees from our supplier customers again based on subscription tier determined by the number of invoices paid. Second, while we are the PayFac we can offer our customers level two and level three discounts on virtual card processing. And from those savings, we look to generate interchange on volumes generally ranging from 10 basis points to 40 basis points. Finally we receive single-digit basis points on volumes from AP providers for providing them access to the suppliers on BPN. Putting all of that together our highest TPV growth driver is card payments and within card our highest growth is PayFac volumes. At the same time, given the long history of accepting cards and providing only gateway services, our largest card revenue is fees from such services. In addition, we generate material subscription revenue from processing ACH transactions and from providing the BPN network. This revenue is payments revenue, but it is bundled with other subscription revenue and we have not yet determined a way to fairly and consistently break out the payments related portion.
Operator:

Thank you. Our first question is from Andrew Schmidt with Citi. Please proceed.
Andrew Schmidt:

Hey, Flint, hey, Mark. Congrats on a great results here. It's really good to see an acceleration in that business.
Mark Shifke:

Thanks, Andrew.
Andrew Schmidt:

So I want to dig into that, so the 27% underlying software payments growth. I'm wondering if you could – and I know you don't disaggregate software and payment split. Could you talk a little about kind of the drivers of the acceleration in the first quarter in a little bit of detail and then I'm sorry if I missed this. But could you discuss the expectation for software and payments growth in 2021. Thanks.
Mark Shifke:

Thanks, Andrew. It really is the growth in the quarter was everything hitting on cylinders, so the subscription revenue came in as expected. We have growth in subscription in the first half of the year as we said previously that will be a bit stronger than the growth we'll see in the second half of the year given the comps to 2020 that came in where we expect it. And payments came in relatively strong as well. So they both led to the – to that nice performance. In terms of the full-year I think we're probably still looking at software and payments in that 21% growth range.
Andrew Schmidt:

Okay. Thank you. And understanding that the comps get a little bit tougher here, is there any particular reason why the underlying momentum should not continue or kind of pick up given the investment in sales and marketing given the step up at payments monetization, just trying to understand the gating factors to maybe higher underlying software and payments revenue? Thanks.
Mark Shifke:

We're just emerging from this pandemic as well as our customers are emerging and we're certainly starting to see volumes pick up which means customers are recovering, the construction space where we have exposure, wholesale distribution manufacturing were all growing strong. We don't know how this plays out over the full year though. And with one quarter behind us we're not ready to say how that recovery is going to look for the whole year. Certainly many of the things that we've invested in are starting to pay dividends but we also want to get ahead of ourselves with so much unknown about this pandemic recovery.
Andrew Schmidt:

That makes a lot of sense to be prudent given the environment. Understandable. And I just – if I can sneak one last question, on the sales marketing front, in the comments it sounds like you've already seen some good traction kind of ticking when – ticking off some wins. What does the pipeline look like? How is it shaping up with the new sales force? And any just observations from just the investments and the sales force and conversation with customers, things like that would be helpful.
Mark Shifke:

Sure. We've been clear with investors that we are going to be aggressive but not foolish with our sales and marketing spend and we certainly plan on doing so. So we've had good traction with some of the new reps. We've had good traction in the different categories both on the enterprise and the corporate side. And we've had good traction on the partner front as well. As you know Andrew we get leaves pass to us from our partners on the business payments network which needs the new suppliers to us that has been very strong. So, we're excited about all of those channels and growing all of them aggressively.
Andrew Schmidt:

All right. Thank you for that. Thank you, Mark. Appreciate the comments.
Operator:

Our next question is from Bob Napoli with William Blair. Please proceed.
Bob Napoli:

Thank you. Good afternoon Flint and Mark. Question on the – I know you hired a new Head of Product Development a while ago Greg Hansen I think from Precision Lender. Just a little discussion on would like a little more color on your product roadmap. Where are you investing? Where are you looking to make to – for innovation in that product set?
Flint Lane:

Yeah. There’s probably a little too much detail to go into on this call. Greg is actually going to be speaking at Billtrust Summit next week, which is a free virtual session that anybody can sign up for, so I'd encourage you to do that if you haven't already. Clearly the business payments network is a big focus for us and we continue to grow that aggressively. But it's not just that, we have a variety of accounts receivable solutions as you well know whether it's our online billing sites called the Invoice Connect which we continue to innovate on. Our cash app solution where just last year we rolled out a new mobile deposit acceptance from cell phones for our customers who have field personnel who have to accept payments on the road. So we're trying to innovate across the entire product stack and we'll be sharing a lot of those details next week at summit.
Bob Napoli:

Okay. And then I think I mean your plan that you had put out there maybe a year ago I guess it's been since not quite last fall was for an acceleration in pretty good acceleration in software and payments it's been since not quite last fall was for an acceleration and pretty good acceleration in software and payments revenue growth into 2022. And I know you're investing aggressively in sales and marketing and the BPL is becoming a bigger part of the business. How do you feel about that acceleration? I think it's into the high-20s in the software and payments revenue growth in 2022?
Flint Lane:

Mark, do you want to take that one?
Mark Shifke:

Sure. So, we had 18% growth in software and payments last year. This year, we're – we're seeing 21% and potentially upside to that. And while we're not going to guide 2022 at this point, so far we're hitting on all cylinders with respect to everything that was underlying our assumptions around getting to the – that accelerated growth – continued accelerated growth into 2022.
Bob Napoli:

Thank you. And then just last question. I know you hired a – also a new Head of Channel or a new Head, maybe I think maybe your first Head of Channel Partnerships in Gwenn Lazar I think last December. I would – can you talk about the channel partnership strategy and how that's developing? And how important do you think that is over the medium to long-term?
Mark Shifke:

Yeah. Sure. So we've had a – a trial strategy for – for quite some time. It is elaborate. There are different elements of our channel strategy. One part is what we do related to ERPs like SAP, Oracle, Infor, Epicor in terms of integrating our solution with those – those products. Another part of the – the channel strategy is what we're doing with the card brands like Visa. As you know we have a – a great partnership with Visa, a big part of it is what we're doing with the banks. And we've certainly announced the major banks who are partnering with Billtrust not only on the issuance side, the – the folks that issue the cards, but also on the treasury side. And continue – continue to see momentum there. And the final area is around the accounts payable And the final area is around the accounts payable software vendors, we announced earlier today a partnership with Bottom Line Technology is one of the first innovators in the accounts payable side. They recognize the value that we can add to their business model by giving them extra supplier reach which means even more volume flowing through business payments network.
Bob Napoli:

Thank you. And just on that AP, are they – can you talk about the volume you're seeing from the AP providers into the BPN. Can you give any color on the momentum there?
Flint Lane:

Yeah. So we've broken out BPN total payment volume. And I believe Mark correct me if I'm wrong it's north of 110% growth but that might be the I think overall it's like 140% growth.
Mark Shifke:

Yeah.
Bob Napoli:

Okay. I guess.
Mark Shifke:

I mean – yeah this card alone was 100% growth year-over-year in the quarter and beyond 140% as Flint said when you take into account the ACH volumes.
Bob Napoli:

Right. Thank you. Appreciate it.
Operator:

Our next question is from George Mihalos with Cowen & Company. Please proceed.
George Mihalos:

Good afternoon, guys, and thanks for taking my questions. Good to be on the call today. I wanted to ask first just now sort of this post COVID environment, how you guys are thinking about pricing overall I think last year obviously you took a more cautious approach as the pandemic hit just curious are we back to sort of normalized pricing patterns and how that sort of playing out throughout the course of the year?
Mark Shifke:

Last year we as you said George we took a pause on what our business as usual annual 18 months or so price increases and we are back to our usual approach for this year so far so good.
George Mihalos:

Okay. That’s – that’s helpful. And then just wanted to add on M&A, Flint you know kind of what you’re thinking about there? How close you might be to pulling the trigger on something and in some of the consolidation that we've seen in the space from some of your peers any thoughts on any potential impact at all to the – to build trust? Thanks guys.
Flint Lane:

Yes so there's been some exciting acquisitions in our category for sure. Most recently bill.com and their deal. We don't compete at all with bill.com so it's not a competitive threat. We've done eight acquisitions in the last 11 years and we've been very clear that we intend to continue to be acquisitive. And part of the reason why we went public is so that we can be more acquisitive and take on big deals. We have a full time focus here and a pipeline of opportunities but we're not ready to announce anything. We're going -- we're going to wait till we have something cooked and ready to go before we talk about any material deals.
George Mihalos:

Okay. Thank you. Congrats, guys.
Flint Lane:

Thanks.
Operator:

Our next question is from Mayank Tandon with Needham and Company. Please proceed.
Kyle Peterson:

Hey. Good evening. This is actually Kyle Peterson for Mayank. Thanks for taking the question. Obviously good to see the software and payments revenue coming in really strong. Just wondered if you could give any color on what drove that strength. Was it you know increased monetization within the existing customer base? Was it like a ramp in kind of new -- new logo wins? How should we think about the split between that growth?
Flint Lane:

Yeah, I think it was strong -- it was strong performance across the board, right. So we landed at . So landing logos is interesting. It Really doesn't affect revenue until we get the business live. So, some of our deals can now go live much faster than before. A lot of our VPN deals can go live in just a few weeks. So, we'll see in quarter deals close and go live, a lot of it was payments acceleration, driving more digital payments as CFOs recognized that their businesses are at risk when they do things in an analog fashion. There is a big push to make things more digital. So, just shift from paper to digital will certainly drive more revenue. The shift from gateway card business to our PayFac will drive more revenue as well. Even if there aren't more digital payments with it running through our PayFac that will drive additional revenue. And BPN we've been very clear on that, it is growing faster than anything in the business and there's ample opportunity to monetize BPN through both sides, whether we're charging the folks who are delivering payments through BPN on the AP side or getting revenue from the supplier side when we sell them our BPN digital lockbox. So, there’s strong performance across the board.
Kyle Peterson:

Got it. That's helpful. And then, I guess just a quick follow-up on BPN. Good to see the really strong TPV growth. Is there a way we can kind of look at some of the TPV trends and think of how that is kind of parlaying into your monetization either on the card side or the ACH side and just how big of an opportunity do you see BPN longer-term for you guys as part of the Billtrust story?
Flint Lane:

Mark, you want to take that?
Mark Shifke:

Sure. Look we're seeing with BPN 3.0 coming on last year, we opened up the opportunity for more ACH to come in as well and in terms of its success as well is that the large buyers continue – key providers continue to be as successful as they are in looking to make payments on behalf of either large companies or aggregation of small companies, it's creating greater and greater stress on the system for suppliers to be able to deal with those payments a complexity of both the payment as well as the complexity of the remittance. So we see BPN as a wonderful opportunity for great growth in providing that network that is open to all buyers and connects sort of very simply to all of our suppliers with the interest. So we’ll see great opportunity there.
Kyle Peterson:

All right. That's helpful. Thanks guys. Nice quarter.
Operator:

Our next question is from Josh Beck with KeyBanc. Please proceed. Josh, check and see if your line is muted.
Josh Beck:

Sorry about that. I did have a mute on. Thanks team for taking the question. I wanted to go back to some your comments Flint on surely the impacts of COVID with respect to volumes. So as we've entered this year are we at a point where you see a line of sight to full recovery? Just wondering if you could give us an update in terms of how that's shaping up.
Flint Lane:

Yeah. So we were – we've been tracking volumes since March and how our customers were performing on a year-over-year basis. So we had a cohort analysis that we monitor closely and we saw volumes drop from March to, sort of the end of May, down to about 70%, and then it bounced back and by June, July time frame, we were sort of back on par, and that just covers like the health of their business in terms of overall volumes, that does not cover the fact that more of those volumes are now digital, the digital volumes are way up. So we are back to sort of pre-pandemic volume levels in terms of total volumes. But digital volumes, which is where we monetize are actually higher.
Josh Beck:

Okay, very helpful. And just curious, if you could maybe characterize the pipeline, qualitatively is fine. But, just when you look at, maybe the discussions that you're having the – inbound activity. Just curious, if you could just help us understand how that is shaping up? Maybe versus historical pipeline?
Flint Lane:

So the pipeline is strong. I think we've mentioned in the past that we hired a new SVP of Sales early last year, and he has continued to build our super strong team across both enterprise and our mid-market segment, as well as our team that focuses on customers and our team that focuses on new prospects. So our goal is to get all four of those segments cranking. We get a lot of leads passed-in from our partners, as I discussed. We have internal targets certainly around bookings that we're working hard towards to achieve. When you're an enterprise sales bookings is super lumpy, right? You can have some months that are super strong, some months that are relatively weak because big deals come in when they come in. But we're very pleased with the progress in the first quarter and have ample pipeline to achieve our goals.
Josh Beck:

Okay. Really helpful, and then just with respect to the guidance let's really understand the $1 million of upside to previous full-year range. Now what are going to be some of the key levers that could drive the performance towards the higher end versus the lower end, should we be thinking about the contribution from new customers, new logos. Should we be thinking about BPN, what are going to be some of the key swing factors that move the final year performance towards the say the higher or lower end of that range?
Flint Lane:

Mark do you want to take that one please.
Mark Shifke:

Yeah, delighted. So look all of the above. In particular if we just think about though what we have in place right now. As we see the economy continue to pick up we have no great customer exposure to certain parts of the economy that are coming on very strong homebuilding, plumbing. So some of those things you could see upside in invoicing, you could see upside in some of our payments actually print as well. So a lot of the transactional aspects of the business have an opportunity to tick up along with the way the economy is percolating. Again it's too early in the year for us to say with confidence that will happen. So we're waiting to get a little bit more visibility around that. But I think payments and other transactional aspects of our business can know push us to the higher end of the range.
Josh Beck:

Really helpful team. Thank you.
Operator:

Our next question is from Joseph Vafi with Canaccord Genuity. Please proceed.
Joseph Vafi:

Hey Flint and Mark, good afternoon. Great results. Thanks for the question time. Just so you announced Bottom Line last quarter I think Repay said that they integrated with you as well. So it seems like the attraction on the AP provider side continues to grow. Maybe if you could just talk a little more detail about what's left out there on the bigger AP provider side and how this momentum in deals that you're seeing maybe kind of helps accelerate the kind of conversion of what's out there and then I have a follow up.
Flint Lane:

Yeah. That’s a great question. So in any partner model, the relatively easy part is to get the partners. The harder part is to actually get the volumes flowing through the network. So today, we announced Bottom Line and that's wonderful in everything. But now we've got to fire them up. And we've got to get them paying all of the suppliers on the network. While we're doing that, we also need to continue to drive supplier growth as we drive more and more suppliers onto the network, we want to make sure that all of the AP side knows those suppliers are on the networks that they can pay them which will then drive more supplier growth. So there's a wonderful network effect. But just having the participants isn't enough, getting them to transact on the network is a big part of that. We certainly have not reached saturation on the payment side on the issuing side, there are many banks that we still want to onboard onto the network and some independent software companies that we want to onboard on to network. And you can imagine that we're in discussions with most of them. And that is certainly a key step We’ve now proven to many of the declares out there that we can add significant value to their business model, we need to do that now, right, proving it and getting a partnership is great. Now we need to drive additional volumes which we've certainly done with the participants who've been on the network for a while which leads us to exciting announcements like we did today with bottom-line that we can show them that we can add some value by driving additional payment volumes for them.
Joseph Vafi:

That's good color. So maybe I'll just follow up on that bank channel maybe because I know you have a couple of big bank partners. But what does that – what does that pipeline look like, because I mean across fintech we continue to see that banks need to partner with fintech more and more and they've got all the accounts right now, Bill. So just some color there would be great.
Flint Lane:

Yeah. So the banks are – there's really two parts of a bank of our bank strategy. There was the issuing inside the folks that are issuing virtual cards and on more on the accounts payable side. We've announced previously that we've signed five of the top 10 issuing banks onto BPN. So we've had a lot of success there. But there's another side of the bank as well it's called treasury and that's the ones that are dealing with corporates, so corporates are going to need to automate digital payments. That is going to be – we think that's clear much like the automated check payments with bank lockboxes, we think corporates are going to need to automate digital payments with a digital lockbox. So the other side of the business payments network is this digital lockbox that we sell that allows them to automate all virtual card acceptance and ACH acceptance. What's not clear is who is going to sell that to the corporate. It could be Billtrust and our direct sales force but it could also be the banks. So we are making a concerted push to convince banks that this is something they should offer to their corporates because if they don't, somebody is going to sell them the solution and don't they want to be relevant in this category, but we need to continue, we've had some success there, but that was not our initial for to the banks, was more on the – on the payment side. So, we need to do a better job around getting the bank treasury departments reselling the bill plus digital lockbox solution.
Joseph Vafi:

That makes sense, Flint. And then, just kind of switching gear to the kind of staff part of your model I know you had some good LTV to CAC numbers in the past and now it’s been public for a little while maybe long enough with the ability to kind of think about growth. And I know you kind of talked about it a little bit, but how do you think about that really attractive staff metric you have relative to your positioning right now relative to your balance. And I made that kind of kind of what might you see there on the P&L relative to sales and marketing and maybe ACV or I don't think you're doing ACV right now but revenue and another big deal wins this high level color would be great? Thanks a lot, guys.
Flint Lane:

Thank you. Mark, do you want to take this?
Mark Shifke:

Sure. So, great question, Joe. We're still in the early stages of having made the concerted effort around sales and marketing. Early indications are things are starting to look nice. Yeah, we're getting some inbounds. We have early positive results as Flint mentioned in terms of pipeline. But it's too early to tell because we just started the year and we just started this considered effort over the course of the end of last year. So far so good, we would expect to continue to have the kind of LTV to CAC that we've had in the past. And once that's proved out, we'll continue to spend more wisely and try to get those types of returns and if we need to pivot to figure out where something didn't quite go right we'll do that as well. But right now our expectation is to continue to spend as we've budgeted and we're cautiously optimistic that we'll get the anticipated results. You have a great sales team. We're making the right progress in the partnership area to expand. Well we've been in partnership. So we feel very positive about the opportunities there.
Joseph Vafi:

That's great. Thanks, Flint. Thanks, Mark.
Operator:

Our next question is from Jeff Cantwell with Guggenheim Securities. Please proceed.
Jeff Cantwell:

Hi. How are you? Can you hear me okay?
Flint Lane:

Yeah.
Jeff Cantwell:

Great. Great. Nice results here. Most of my questions are being asked. I wanted to see if I could ask you specifically about the payment volume this quarter because that $15.1 billion came in about our expectation then the growth is accelerating there. So can you talk a little bit more about that in terms of what you think is driving our performance. Is it sort of like your customer base is seeing some nice momentum from the reopening here and as you're mentioning BPN looks pretty significant as it's continuing to grow very quickly this quarter. So maybe talk about that. And Flint, can you put some perspective on the operating environment for Billtrust right now versus what you might have seen at some point over the past 20 years. Could you maybe tell us why you think that and what that might mean for the company going forward? Any color there would be great. Appreciate it.
Flint Lane:

Yes. So I think the pandemic was a bit eye opening for corporations throughout the US that were dependent on the US post office to run their businesses whether it’s delivering invoices or accepting checks. There's been a widespread slowdown in US mail delivery for a variety of reasons that I won't get into which means that cash flow is being slowed down. I don't think CFO generally knew how dependent they were on the postal system for their businesses. So there you know outside of Billtrust. There has certainly been a bit of a wakeup call that oh my God, we need to stop doing things via paper and US mail. So that is certainly helping. I think we have the best solution to capitalize on that for sure whether it is our SMB focused solutions like our online billing sites that allow small businesses to look at bills and pay bills online whether it's the Business Payments Network which is focused on large corporate AP departments that aren't likely to log into a site whether it's our mobile deposit acceptance or collecting payments on the road. We had a strategy session last year where we talked about what were the big initiatives that we want to focus on for the next 12 months. One of them is we call payments everywhere. We literally want to be able to collect payment at every touchpoint whether it is a somebody calling in payment over the phone whether it is somebody doing collections emails whether it is a payment inside of an e-mail delivery that we do. So we are really trying hard to make sure that we have an opportunity to collect the payment through any possible touchpoint with our customers’ customer. In terms of the operating environment certainly the world has woken up to this B2B payments opportunity and more specifically the accounts receivable side of it. You know there are more players now in the category. You’ve got companies that are sort of point solutions that are doing it. You've got some people like us that are trying to do integrate receivables. You've got card brands who are you know excited about monetizing B2B payments. So there's more, more attention here because it's really like the last big payments opportunity that's going to make a shift from analog to digital. And I think people want to capitalize Because it's really like the last big payments opportunity that's going to make a shift from analog to digital. And I think people want to capitalize that which makes a ton of sense.
Jeff Cantwell:

Okay great. And then my second one, this is a follow-up to one of the prior question. I wanted to ask this in a slightly different way. So you're calling out a major new AP partner in bottom line. Can you maybe tell us a little bit more about your thoughts on that, you seem to have a methodical strategy regarding partner expansion as we look back over the past few quarters. And I thought this was an interesting one because from my understanding customers. So I just wanted to see if you're able to tell us anything about that partnership both qualitatively. And it would be great to get a feel for how that might be reflected quantitatively for you guys. Anything you can tell us about how you are thinking about partnership going forward would be great. Thanks again.
Flint Lane:

Sure. So a big part of our BPN strategy is around creating a supplier directory for AP providers to be able to pay. We've been clear that the quantity of suppliers we do not believe is the correct metric. And I'm not picking on bottom line here because everybody on the AP side does it. They are busy calling up suppliers and saying hey can I pay you electronically. What's your bank account, what’s your routing number, do you accept card? Under what conditions do you accept card. And they're all building private supplier directories. If you have a 100,000 small businesses or a 1,000 enormous businesses which are better, well what's going to give you the better reach. So we think it's important to get great reach and we help people like Bottomline and Avid and JP Morgan and Calm Comdata and WEX and all the others that we've announced get better reach by getting them to the largest suppliers. Because the largest suppliers they don't want to deal with 100 different AP providers who all want to send them payments and all want to send them a remittance in different formats. They want one single type of payments coming through BPN. So that strategy that we made three years ago was right. We've now proven that we can do payments better for these large corporates and I think the AP side has recognized that. I think some thought that we were trying to replace their network because everybody's got a network right, there's the ACH network, there's a visa network, there's the business payments network. We're not trying to replace anybody's network. We're trying to provide an interoperable framework so that participants in B2B payments can connect more seamlessly.
Jeff Cantwell:

Okay. Great. Thanks all very much for all the color. Congrats again and looking forward to seeing you at your summit.
Operator:

Our next question is from with JPMorgan. Please proceed.
Unidentified Analyst:

Hey. Thanks so much. Glad to see the acceleration here. Just a couple of clarification questions and a lot of question if you don't mind just first digging deeper on the pipeline. I know you've gotten a lot of questions on that guys. Just I'm curious just the progress on the supplier recruitment side of BPN, any call outs there I know you just went into that a little bit but love to hear a little bit more just on what's happening on supplier side knowledge about it ACH and wire and things like that also prospects for payback deals. How is that looking or how has that changed versus nine days ago?
Flint Lane:

Yes. I think we've made the decision Mark correct me if I’m wrong that we're going to share our payback percentage on an annual basis not on a quarterly basis, it just doesn't move that much.
Unidentified Analyst:

Yep. Okay. Yeah. Okay.
Flint Lane:

I will share with you that BPN ACH which had very nominal volumes before this year. We have successfully sold have many suppliers our BPN, ACH solution, they’re not actually even accepting cards, but they recognize they need a – need to automate the ACH part of their business, and we’ve also had a lot of success driving virtual card orders – automation for our BBPN card solution. So we’re seeing strength along both of those solutions, because I saw where we have problem, getting digital payments is far where we ACH wire or card is not easy for businesses to accept those payments in volume.
Unidentified Analyst:

Agreed. Which is why we're hoping for the supplier side also pick up because you've gotten a lot of partners already. On the guidance raised revenue $1 million didn't change the rest. Did I hear correctly that the difference is the reinvesting that you're putting – sorry, you’re putting money back into the business there?
Flint Lane:

Yes. So we raised – had a great quarter some of it timing, some of it over performance looking to reinvest the over performance back into the business in terms of leaving margins gross margins adjusted gross margins where they were this year they have mix shift of where the performance can come for the rest of the year. It could be more some more transactional and not necessarily at the same gross margin. So if it's services or print that's contributing in part as we continue. That would have an impact on gross margin. So we thought you know for the marginal difference we give the range as it was.
Unidentified Analyst:

I see. Because the reason I'm glad you said that because when I'm looking at the incremental gross margin it looks like it's running around 90% pretty high. If you – even if you exclude the accelerated deferred revenue, so a lot of your net revenue is dropping down to adjusted gross profit. So if that sustains or maybe I should ask any reason why that wouldn't sustain because it seems like if that does, you'd be running quite ahead of your gross margin…
Unidentified Analyst:

…target if that continues.
Unidentified Analyst:

If you follow my logic here at Mark.
Unidentified Analyst:

Got it. Thank you for that. Good luck with the next week.
Operator:

And we have a final follow-up from Bob Napoli with William Blair. Please proceed.
Robert Napoli:

Thank you and good Q&A. But I – I think you're not going to answer my question, I think you just said. But the PayFac you gave us last quarter was 30% of the card volume PayFac. And since PayFac is so much higher take rate than the rest of the card volume, I thought – I just wondered what your thoughts were on, I mean is that 30% kind of a baseline that should – the mix should grow off of and we should see that by payments volume or payments revenue growing faster than payments volume, so that 30% over time go up to 40% or 50%? What's – and just any thoughts on – on that, given the – the outsized revenue contribution per dollar or volume for the PayFac?
Robert Napoli:

Right. Sure. Caution you to talk about card and ACH separately.
Robert Napoli:

Right. Sure.
Robert Napoli:

Great. Thank you. Appreciate it.
Operator:

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Flint Lane for closing remarks.
Flint Lane:

Great. I just want to thank everybody again for joining the call. It's humbling and I truly appreciate your interest and support in what we're doing here at Billtrust. Hopefully we get to see you next week at Billtrust summit or at one of the upcoming investor conferences that we’ll be presenting at. Have a great night, everybody.
Operator:

Thank you. This does conclude today's conference. You may disconnect your lines at this time and thank you for your participation.

BTRS Holdings Inc. Q1 2021 Earnings Call Transcript

Other BTRS Holdings Inc. earnings call transcripts:

BTRS Holdings Inc.
Q1 2021 Earnings Call Transcript