AvidXchange Holdings, Inc. (NASDAQ:AVDX) Q3 2023 Earnings Call Transcript

AvidXchange Holdings, Inc. (NASDAQ:AVDX) Q3 2023 Earnings Call Transcript November 11, 2023

Operator: Thank you for joining us for the AvidXchange Holdings, Inc. Third Quarter 2023 Earnings Call. Joining us on the call today is Mike Praeger, AvidXchange’s Co-Founder and Chief Executive Officer; Joel Wilhite, AvidXchange’s Chief Financial Officer; and Subhaash Kumar, Avidxchange’s Head of Investor Relations. Before we begin today’s call, management has asked me to relay the forward-looking statements disclaimer that is included at the end of today’s press release. [Operator Instructions]. Please keep these uncertainties and risks in mind as the company discusses future strategic initiatives, potential market opportunities, operational outlook and financial guidance during today’s call. Also, please note that the company undertakes no duty to update or revise forward-looking statements.

Today’s call will also include a discussion of non-GAAP financial measures as that term is defined in the Regulation G. Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. Accordingly, at the end of today’s press release, the company has provided a reconciliation of these non-GAAP financial measures to financial results prepared in accordance with GAAP. With that, I’ll now turn the call over to Mike Prager.

Michael Praeger: Thanks for joining us this morning. Joe and I are both excited to talk about our third quarter results and milestones with you. We once again delivered another set of strong quarterly business performance metrics and financial results. I’ll summarize these shortly, and Joe will provide further details and commentary later on in his section. Given the ongoing macroeconomic volatility, our unique AvidXchange value proposition continues to resonate in the marketplace with our middle market customers. We recently held our annual Customer Advisory Board meeting or CAB, as we call it here in Charlotte with over 25 diverse buyer customers attending across our various industry verticals who use our software to manage their accounts payable and payment processes.

The cab is an in-person form subdivided into a series of vertical industry-focused groups where we dedicate time and resources for a deeper peer dialogue regarding their specific business and accounting processes unique to their vertical industry, updates on the key accounting systems that support their industry, as well as overall specific industry trends and observations they are seeing in operating their businesses. Specifically, as though leaders, we serve as our customers’ key trusted technology and automation partner and are at the forefront in driving their transformational back-office initiatives. Through our domain expertise, we are helping them with the vision and execution to achieve benchmark level of excellence in automating their overall procure-to-pay processes in line with that of enterprise customers.

The CAB reinforced the strategic importance of our value proposition and advancing our customers’ invoice and payment automation initiatives with a rapid and quantifiable return on investment. As we digitally transform their key back-office procure-to-pay processes, driving speed, security, along with workflow efficiencies, catalyzed by our 2-sided network, they are able to optimize every cost lever to take pressure off of their income statement while freeing up increasingly scarce financial resources to support higher value and more strategic initiatives for their core business. This form also importantly underscored that there is a great alignment among our customers related to our recently introduced products, such as our construction lean waiver management software, our 3-way purchase order match functionality, but also the promise of new product pipeline, which currently includes our integrated spend management offering that is in development, new payment modalities, potential vertical marketplace purchasing capabilities, along with 8 areas that we’ve identified leaning into and utilizing artificial intelligence or AI across all segments of our business.

As we open up more opportunities to drive increased value and impact to our customers, gain increased efficiencies in delivering our products and services along with continue to deepen our competitive moat that we have around delivering our unique solutions to our middle market customers and their suppliers. Before I turn to our quarterly key metrics and financial results for the third quarter, I wanted to take minute to remind everyone of the significance in being purpose-built to serve our middle market customers versus small business customers or SMB, as some referred to it. There are several key differences between middle market companies and SMB companies. Middle market companies are significantly larger in size and are typically in the range of $5 million up to and exceeding $1 billion in annual revenues, whereas SMBs are generally considered sub-$5 million in revenues.

Similarly, the number of transactions per customer with middle market companies are many multiples of that of SMBs. In many cases, middle market companies are also the leaders of their various industry segments in which they operate. Moreover, the average light span of a middle market company is 31 years versus roughly 8.5 years for a small business. And finally, in an economic environment of rising interest rates and tightening financial conditions, while many small business bankruptcies tend to increase as access to capital grows scarce, coupled with the fact that a vast majority of SMBs are subscale and undercapitalized. We believe that middle market companies, by contrast, are much more resilient and better positioned to navigate a tough economic backdrop, given their scale and access to resources.

As such, our competitive moat that we continue to build is purpose-built for serving middle market companies in supporting their more complex business and accounting processes continues to be a significant advantage for us, as highlighted by our vertical market industry approach across our 9 different industry segments, supported by over 220 accounting system integrations and unique accounting and business process support we deliver to our customers in these verticals. Now I am really excited to provide a quick summary of our financial and key metric scorecard for the third quarter. We once again delivered another quarter of solid operating results, achieving our ninth consecutive quarter of exceeding our financial targets relative to our implied outlook.

Revenues of $98.7 million, up 19.7% for the quarter and 20.2% growth year-to-date, exceeding our implied Q3 ’23 outlook, while our adjusted EBITDA profitability of $11.4 million was outstanding, driven by healthy revenue growth, continued gross margin expansion, unit cost reduction and continued scaling of our operating expenses. These results of delivering a rule of 40 quarter measurement exceeded 31 for the quarter versus demonstrates our balanced focus of delivering on both 20% organic growth mantra and our accelerating profitability as we see the scale in our business, reinforcing the confidence I have in our rule of 40 growth and profitability objectives, we introduced this past June during our Investor Day event. This balanced approach provides us additional levers to strategically invest in our business and further enables us to continue growing our industry-leading position in delivering accounts payable and payment automation software solutions to our middle market buyer customers and their suppliers.

In addition, we ended the quarter with a transaction yield defined as total revenues over the total number of transactions of $5.15, breaking the $5 marker for the first time, and this is up 12.7% over the same period last year. These operating and financial results highlight both our strong market position and continued execution as we enter the final stretch of this year. On today’s call, I am super excited to discuss 3 topics which do a great job of highlighting several of the growth strategies we have been working on related to the 4 years of our AvidXchange business flywheel that we articulated during Investor Day, which include: number one, our top of funnel activity, which is a reflection of our gear 1 in delivering a great user experience with our industry-leading accounts payable and payment automation software.

Second, discuss a major new software channel partnership with an exclusive built inside integration and positioning that we just signed, which will further drive gears 2 and 3 of our AvidXchange business flywheel. And third, give you an update on the recent launch of the Invoice Accelerator 2.0, driving future growth under Gear 4 of our business slide wheel. Let’s start with the first topic. From a top of funnel, new buyer customer sales opportunity perspective, we are highly encouraged by the continued healthy engagement trends we are experiencing given the volatile macroeconomic backdrop. Please recall there’s roughly a full year lead time from the moment these opportunities enter the top of funnel to when they’re closed, onboarded and achieved full adoption.

So for the 9-month period ending September 30, our top of funnel new buyer customer opportunities are up 13% on a year-over-year basis. Although there may be some perceived moderation from levels compared to the first 6 months of 2023. This was largely due to timing related to several of our key industry trade conferences, specifically SuiteWorld, the largest NetSuite user conference at the end of the year, which was in the third quarter last year and shifted to the fourth quarter this year. Second, a portion of our quarterly spend around marketing initiatives along with some trade shows and user conferences also shifted from the third quarter to the fourth quarter of ’23. And finally, our fourth quarter top– 2023 top of funnel opportunities are off to a strong start across all of our vertical industries as we look to end the year on a very strong top of funnel position to drive our new buyer organic growth in 2024.

Digging deeper into the fundamentals of our top funnel activity, it is very consistent with the trends that we called out in the second quarter of ’23. Virtually all of our industry verticals saw double-digit growth, including construction, financial services, media, health care, HOA or home Association management, as we call it, education are examples. More encouraging, though we saw some initial indications of the sales cycle shortening by several business base. Equally, the growth in top of funnel activity for the 9 months ended September 30 sustained a slightly higher average deal size attachment. This healthy top of funnel growth was further backstopped by a sustained pace of win rates. The only top of funnel deviation continues to be within the commercial office subsector of our overall real estate vertical, which also consists of multifamily, student housing, industrial and subsegments of the real estate vertical remaining very strong.

Overall, we’re very pleased and remain confident with our underlying metrics driving our top of funnel and new buyer customer sales momentum. To better appreciate why our top of funnel remains healthy, is our ability to drive high-impact quantifiable business impact and outcomes for our customers such as PSI services located in Glendale, California. PSI services is an industry-leading provider of assessment and talent management solutions to the private and public sector organizations. PSI streamlines its back office with AvidXchanges accounts payable, invoice and payment automation solutions using NetSuite as its core accounting system. PSI has grown organically and inorganically to over 150 countries to support its growth, PSI was seeking ways to eliminate their legacy paper-based accounts payable system and standardize their processes across a worldwide group of corporate entities.

Galen Bassler, Director of Accounting Systems and Treasury explains. We took the first steps towards streamlining and automating our accounting processes with AvidXchange for NetSuite. The configuration and setup process was very easy and everyone got on board the new automated process very quickly. Given the initial success in automating our accounts payable invoice processes, PSI shifted its focus and its energy on the payment side of their business, Basler stated. We are purchasing blank check stock, stuffing envelopes, applying postage and mailing a large volume of checks every week. With Avid Pay, our 1,500-plus paper checks, my team was printing the signing each month was reduced by over 99%, reducing our total payment-related costs by roughly 60%.

The savings are tremendous and very impactful to our business. Now I’d like to discuss our AvidXchange business flywheel momentum that fuels customer testimonials, such as those from PSI services and our healthy top of funnel new buyer customer sales opportunities. Just as year 1 of our flywheel is around delivering great AP automation software and is foundational to our strategy. Gears 2 and 3 of our strategy are focused on forging new sales partnerships and deep built-in side accounting system integrations with leading accounting systems and ERPs within both existing and new target vertical industries. We believe these verticals have significant transaction volume to be monetized across our proprietary 2-sided AvidPay network. As such, I could not be more excited today to announce our new strategic partnership with AppFolio, which is now one of our biggest vertically focused integration partnerships in our 23-year history.

With over 19,000 customers, AppFolio is a top provider of solutions focused in the real estate vertical. As the first accounts payable application partner in the AppFolio stack, our AvidXchange accounts payable integration includes our best-of-breed invoice automation and payment solutions. This partnership is planned to go live in the first quarter of 2024. Given our 20-plus year heritage in the real estate vertical and not to mention our ability to go deep in the customer base of these accounting system partnerships, that fully a partnership underscores just how large and unpenetrated the runway opportunity still remains in the first vertical we entered 23 years ago. Now I’d like to turn to year 4 of our AvidXchange business flywheel. I couldn’t be more excited today to go live with our much anticipated Invoice Accelerator 2.0 offering designed for our small business suppliers.

For those that are new to the AvidXchange story, Invoice Accelerator 2.0 is our much anticipated digital invoice financing offering. It’s designed to accelerate the cash conversion cycle for the large segment of our $1 million-plus base of supplier customers we have today and growing every month. Monetization of these — of this invoice acceleration offering is derived from both fee and interchange payment structures and is another lever in growing arsenal of our drivers for e-payment adoption, with roughly 60% of our supplier base consisting of small businesses, which represents the sweet spot for this offering as they serve our middle market customers. We are uniquely positioned to address this large market opportunity to finance our short-term funding in a highly automated and frictionless way.

The key to executing this B2B invoice financing and payment modality offering at scale necessitates a very unique and competitive advantage in both underwriting risk and collections. What we believe gives us competitive advantage in eliminating the historical friction and scaling is our proprietary 2-sided network where we are the system of record for our buyer customer€™s expenses and manage their entire payment file of payments to their suppliers. In other words, we have both the buyers and suppliers transaction data, history and capital flows across our two-sided network and our uniquely strong position to deploy this proprietary financing platform at scale. As many of you know, we’ve been in the market with our version 1.0 of our Invoice Accelerator offering for the last several years, which has fostered significant learnings, insights and linkages around the transactional, operational and functional service drivers of the supplier experience.

Though domain knowledge and data science, we have amassed through the learning is incorporated directly into our software and foundation of our Version 2.0 of this new platform. As such, everything from supplier onboarding to transaction execution to customer support have been core focus areas in building our next-generation modern, digital first, feature-rich and real-time decisioning platform and we are — and we’ll be paying very close attention to the speed to transact and its scalability. Our plan is the meter of the initial launch over the next several quarters to make sure the offering is working as designed and then accelerate our Invoice accelerator 2.0 rollout, no pun intended to our largest supplier cohort of over 600,000 small businesses and growing.

I believe that our Invoice Accelerator 2.0 offering, conservatively speaking, could reach over 5% of total revenues over the next several years and has the characteristics to ultimately become our next $100 million revenue business in the future. In summary, we are extremely pleased with the progression of our operating and financial performance, including our third quarter top line revenue growth and exceptional bottom line profitability results. We remain laser-focused on delivering on our extensive product road map, accounting system integration partnerships and e-payment penetration strategies while leveraging data to drive incremental customer value. Our recent customer advisory board experience was a great testament to our focus of being passionate to see our customers being successful in driving increased value to their organizations, which is further reinforced by our announcement of the AppFolio integration partnership, along with the launch of our invoice accelerator 2.0 offering.

Meanwhile, we are continuing to make tremendous progress on unit cost reduction as well as leveraging our operating expenses to drive sustained EBITDA margin expansion as we close the year and prepare for 2024. We believe these strategic and operational initiatives, coupled with our strong balance sheet and talented leadership team that many of you met during our Investor Day positions us very well for value creation and strategic growth opportunities in the future. Of course, as always, we are mindful of the uncertain macroeconomic backdrop and are focused on controlling those elements of our business that we can directly control, which is our overall value proposition and business impact that we can deliver to both our buyer and supplier customers.

That being said, it’s hard to believe, but we’re still in the very early innings of a significant long-term opportunity to drive impactful value for our customers, create future growth opportunities for our team members and unlock significant short-term and long-term value for our shareholders. With that, I’d like to turn the call over to my partner, Joel.

Joel Wilhite: Thanks, Mike. I’m pleased to talk to you today about our third quarter 2023 financial results, which reflect continued execution of our growth strategies amidst continued macro uncertainty. Overall, we delivered another quarter of healthy year-over-year financial performance relative to the implied third quarter 2023 business outlook and adjusting for float, political and onetime deferred revenue cleanup, third quarter revenues came in better, driven largely by higher transaction volumes and yield expansion as we continue to drive checks out of the system. That, together with higher gross margins, driven by higher revenues, progress on unit cost initiatives, yield expansion as well as a shift in the timing of certain operating expenses to the fourth quarter led significant adjusted EBITDA outperformance.

We believe this adjusted EBITDA outperformance underscores the scope for operating leverage in our financial model. Now turning to year-over-year results. Total revenue increased by 19.7% to $98.7 million in Q3 of 2023 over the third quarter of 2022. Roughly 2/3 of the revenue growth was driven by the combination of the addition of new buyer invoice and payment transactions, coupled with yield expansion. The remaining 1/3 or so of our revenue growth this quarter was driven by higher year-over-year interest revenue, coupled with deferred revenue cleanup, partially offset by a year-over-year decline in political revenues. Our strong revenue growth also resulted in total transaction yield expanding to $5.15 in the quarter, up 12.7% from $4.57 in Q3 of 2022.

Of the 12.7% increase, roughly 2/3 of the increase was driven by the aforementioned flux between interest and political revenues as well as the deferred revenues with the remainder driven by paid yield. Software revenue of $28.9 million, which accounted for 29.3% of our total revenue in the quarter increased 15.5% in Q3 of 2023 over Q3 of 2022. Excluding the contribution from onetime changes in deferred revenue, the increase in software revenue was 10.9% and was driven by growth in total transactions of 6.4%, with the balance driven by a combination of price increases and certain subscription-based revenues. Payment revenue of $68.5 million, which accounted for 69.4% of our total revenue in the quarter increased 20.9% in Q3 of 2023 over Q3 of 2022.

Payment revenue reflects the contribution of interest revenues, which were $10.6 million in Q3 of 2023 versus $2.7 million in Q3 of 2022. Recall that a year ago, payment revenues also included contribution from political media revenue. Of the 20.9% increase in payment revenues, roughly 2/3 was driven by a combination of an increase in payment transaction volume of 9% and yield expansion with the remaining portion driven by the aforementioned flux between interest and political revenues. On a GAAP basis, gross profit of $62.3 million increased by 31% in Q3 of 2023 over the same period last year, resulting in a 63.2% gross margin for the quarter compared to 57.8% in Q3 2022. Non-GAAP gross margin increased 500 basis points to 70% in Q3 of 2023 over the same period last year, roughly 2/3 of which was driven by a combination of unit cost efficiencies and yield expansion with the remainder driven by higher interest revenue and the onetime deferred revenue cleanup.

Moving on to our operating expenses. On a GAAP basis, total operating expenses were $77.5 million, an increase of 3.9% in Q3 of 2023 over Q3 of last year. On a non-GAAP basis, operating expenses, excluding depreciation and amortization, increased 0.7% to $57.6 million in the third quarter of 2023 from the comparable prior year period. On a percentage of revenue basis, operating expenses, excluding depreciation and amortization, declined to 58.4% in the third quarter of 2023 from 69.4% in the comparable period last year. The year-over-year decline largely highlights the significant operating expense leverage, particularly across G&A as well as sales and marketing to an extent, even after stripping out the contribution of float and deferred revenue.

I will now talk about each component of the change in operating expenses on a non-GAAP basis. Non-GAAP sales and marketing costs decreased by $1.5 million or 8% to $17.5 million in Q3 of 2023 over Q3 of last year, which was driven largely by a combination of efficiencies and marketing spend and a shift in the timing of event sponsorships related to trade shows and user conferences from the third quarter to the fourth quarter of 2023. Non-GAAP research and development costs increased by $2.4 million or 12.5% to $21.7 million in Q3 of 2023 over Q3 of last year. The increase was due to continued reinvestment in our products and platforms. Non-GAAP general and administrative costs decreased by $0.5 million or down 2.5% to $18.5 million in Q3 of 2023 over Q3 of last year, driven largely due to leveraging public company costs across a larger revenue base of net of various puts and takes.

G&A costs as a percentage of revenues have now decreased 5 quarters in a row and are expected to continue their annualized downward progression as we indicated during our Investor Day. Our GAAP net loss was $8.1 million for the quarter versus a GAAP net loss of $25.4 million in the prior year period, with the reduction in losses driven by a combination of strong revenue flow-through and expense control leading to lower operating losses, coupled with higher interest income and lower interest expense due to reduced borrowing costs and partial debt paydown. Our GAAP loss in the third quarter of 2023 reflects $0.7 million of professional services and legal fees, net of insurance recoveries related to the cyber incident detected in April 2023. On a non-GAAP basis, excluding the cyber costs, our net income in the third quarter of 2023 was $5.8 million versus a net loss of $11.7 million, a $17.5 million positive swing from a year ago quarter, driven by the aforementioned factors.

On a non-GAAP basis, adjusted EBITDA was approximately $11.4 million in Q3 of 2023 compared to a loss of $3.7 million in Q3 of 2022, largely due to the aforementioned factors. Turning to our balance sheet for a moment. I want to touch on a few key items. We ended the quarter with a strong corporate cash position of $440.6 million against an outstanding total debt balance of $82.5 million, including a note payable for $18.7 million. We had $30 million on our credit facility undrawn at quarter end. Corporate cash meanwhile, was split roughly 60% among money market funds, commercial paper and U.S. treasuries with the remaining 40% in demand or in deposit accounts. The weighted average maturity on the corporate cash was roughly 20 days while the effective interest rate on our corporate cash position for the third quarter was roughly 4.95%.

Customer cash at quarter end was approximately $1.2 billion, with an interest rate of roughly 4.42% for the quarter. I’ll now provide an update on our full year 2023 guidance. In light of our third quarter 2023 financial outperformance balanced with further volume impacts from macro crosscurrents based on all information currently available, we’re raising our overall 2023 guidance. We now expect total revenue for the year to be in the range of $374.5 million to $375.5 million. Our 2023 revenue outlook reflects approximately $38 million of interest revenues from customer funds versus approximately $11 million earned in 2022. Also, as a reminder, we do not anticipate any political media revenue contribution in 2023 versus having recognized $8.5 million in 2022.

Similarly, we expect a higher non-GAAP adjusted EBITDA profit ranging between $22 million and $23 million for the year. With that, I would now like to turn the call back over to the operator to open up the line for Q&A. Operator.

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Q&A Session

Operator: [Operator Instructions]. Our first question will come from Dave Koning with Baird.

Dave Koning: Great job across the board here.

Joel Wilhite: I appreciate it, Dave.

Dave Koning: Yes. And maybe first, one of the biggest highlights from me was the sequential growth in yield in payments, you had it very consistently almost every quarter. But this was, I think, the biggest we can see on record sequential yield. And that’s without quite as much interest revenue sequentially, like the growth sequentially wasn’t quite as much. What’s happening? Is there just a big shift to VCC right now? And how do you see that in the future?

Joel Wilhite: Yes. So Dave, great question. We were, again, super pleased with the results in the quarter and a good strong beat top and the bottom. Most of the underlying metrics were really strong, in some cases, meaningfully better than we expected. We’ve talked about — I think you’re asking about TPV yield, and we did see a sequential step up about 5 bps if you strip out the political inflow dynamic. And what we’ve said in the past is don’t read too much into a bit or 2 top or bottom. This is a little bit more than that range, and we are pleased with the results. But I would just point back to what we talked about at Investor Day, the real opportunity for us is to continue to expand this with new payment modes going forward. But overall, pleased with the quarter.

Dave Koning: Great. And then just as a follow-up, incremental margin ex the interest contribution was also probably about the strongest we’ve ever seen. Is — is that sustainable? Do you expect like a lot of the revenue growth, the core revenue growth to fall to the bottom line going forward now?

Joel Wilhite: Yes. So let me take that in 2 parts. One, as we said before, we’re pleased with the gross margin results, even stripping out flow and political dynamics. We’re seeing consistent incremental gross margin expansion through both yield and unit cost improvements. At Investor Day, we talked about being a 75-plus percent gross margin business. So we still have a ways to go, and we still have headroom to expand that gross margin again through both unit cost efficiencies and yield expansion.

Operator: Our next question will come from Ramsey El-Assal with Barclays.

Ramsey El-Assal: I’ll echo that very solid results today. Mike, I had a question on the top of funnel dynamics discussion that you had with us. It sounded like macro headwinds are really more localized just in the sort of commercial office subsegments and pretty much everywhere else, it sounded like things that kind of are looking pretty good. Is it a fair characterization to say that there’s kind of an improvement in the sort of demand environment out there, maybe the macro overlay to that as well. Is that what you’re seeing?

Joel Wilhite: Yes. So maybe take a page out of Joel’s book. I don’t know if you don’t read too much into any one particular quarter. But certainly, we’re pleased with the top of funnel activity that we’re seeing. As I said, one of the things I try to coach people over time on is the real estate vertical itself is actually a collection of many different sub verticals — and certainly, we’ve seen within real estate, for example, multifamily, industrial, student housing, affordable housing, all those subcomponents performed really well in the market as compared to the one that’s kind of static a little bit as the commercial office. But across all the new or other, I should say, kind of verticals that we have, the makeup of our collection of 9 total verticals, really across the board, healthy top of funnel growth.

And I think it’s a combination of a handful of things. Certainly, the leadership that James Sun has brought to our sales organization now closing in on his first full year has been really terrific, along with building the team and kind of the mission that both the Andris and I had with James is how do we build the go-to-market sales organization to be a $1 billion business. And that’s the lens that we’ve kind of looked and we’ve made a lot of progress on that side on the talent, particularly in the — over the course of the year. And certainly, I think with some of the new kind of product features and the road map that we’ve been delivering, it’s created a lot of excitement and engagement. So certainly, we saw a slight benefit in average time to close.

And so we’ve been really encouraged what we’ve seen overall despite kind of the continued volatility of the overall market.

Ramsey El-Assal: Okay. So some internal contribution there as well. A follow-up question from me. I was wondering on Invoice Accelerator. Now that, that product is getting sort of imminent. What does the sales cycle booking conversion, implementation time line look like for that product? Is it the same as kind of the core middle market AP offering? Is there any difference in like the velocity of that product? Or is it a…

Joel Wilhite: Yes, that’s a great question for your question, Ramsey. And so I would say it’s like night and day different. Versus on the — or the core buyer offerings for invoice and pay, there’s certainly a setup configuration, onboarding process. In the case of Invoice Accelerate 2.0, this is really a seamless process. These are existing transactions that they have in our network. And through a simple user interface, they can just literally click a button to have an invoice be accelerated for next day payment if they’re enrolled in the invoice accelerator program. And so it happens very quickly and it can happen real time as suppliers want to advance payments. One thing I will say is with any new product launch, we’re now excited that we started processing our first transactions with invoiced 2.0 during the month of October.

And we’re in the first phase of any new product launch, working hard to make sure the product is working as we’ve designed it to work, making sure we’ve incorporated all the data analytics and understandings that we had during our 1.0 offering as well as to recapture elements to make sure that we’re capturing payments as they’re flowing through our network and then the user experience is working as designed. So that’s the current focus as we roll the product out to more on a measured basis to our supplier customers, but super encouraged and excited about what this product is going to be in the future for us.

Operator: Our next question will come from Andrew Bauch with Wells Fargo.

Andrew Bauch: Nice results. I’m not sure how unintentional that pun was around invoice accelerator. But I wanted to ask about the macro environment and particularly in the middle market. I know it was just asked, but — and we all heard some commentary from your closest peer last week to kind of discussed middle market businesses having more room in their cost structure to kind of scale down expenses? And is there something about the verticals that you guys are playing in that makes your mix a little bit more resilient to that?