AvidXchange Holdings, Inc. (NASDAQ:AVDX) Q4 2022 Earnings Call Transcript

AvidXchange Holdings, Inc. (NASDAQ:AVDX) Q4 2022 Earnings Call Transcript March 1, 2023

Operator: Good morning everyone and thank you for joining us for the AvidXchange Exchange Holdings Inc. Fourth Quarter 2022 Earnings Call. Joining us on the call today are Mike Praeger, AvidXchange 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. This disclaimer emphasizes the major uncertainties and risks inherent in the forward-looking statements the company will make this afternoon. Please keep these uncertainties — risks in mind as the company discusses future strategic initiatives, potential market opportunities, optional 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 Regulation G. Non-GAAP financial measures should not be considered in isolation from or as 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 the financial results prepared in accordance with GAAP. I will now turn the call over to Mike Praeger. Please go ahead.

Mike Praeger: Thank you everyone for joining us today. Joel Wilhite and I are excited to discuss AvidXchange’s fourth quarter 2022 results. We had another quarter of healthy financial and operating performance leading to a strong finish in our first full year as a public company and what a productive and successful year 2022 was. As highlighted by three core themes to our success, which include our talent, our products, and our financial performance. Our first theme relates to the incredible talent we continue to assemble across all our key functions to support our objective of delivering profitable, long-term organic 20%-plus average revenue growth for our business. This is highlighted by the recent elevation of Dan Drees to his new role as President along with the addition of James Sutton as our new Chief Revenue Officer, driving both buyer and supplier customer sales of our business.

With this new organizational structure, I believe we will foster greater organizational agility and operational synergies by bringing sales, marketing, operations, and product management under Dan. At the same time, this new structure will enable me to further focus on our longer term strategic growth and operational efficiency efforts along with leading our corporate development initiatives for future meaningful acquisitions and strategic partnerships. I cannot be more excited to partner closely with Dan in both driving and executing the future growth of our business. Secondly, we significantly advanced our product capabilities with new API integrations and partnerships built on our highly scalable AvidConnect integrations platform along with key new product launches such as our new next-generation purchase order management and three-way matching tools for purchase orders, invoices, and receipts.

Straight through virtual card and ACH processing capabilities to aid in supplier reconciliation, while eliminating their manual data entry of card information along with cross-border payments in our new AvidAnalytics offering. We also kicked off key new product initiatives related to our next-generation Pay platform and Invoice Accelerator 2.0 offerings, which we believe will drive meaningful revenue growth in future years as well as address a growing demand from our small business suppliers to have access to cash flow management and supplier financing tools to better manage their cash flow and run their businesses. Lastly, related to financial performance, we are capitalizing on our strong operational and financial results including our continued acceleration towards profitability.

I’m excited to share with you that we now expect to be EBITDA profitable for the full year of 2023, which is a pull-forward of our previous 2024 breakeven target. The strength of our overall AvidXchange flywheel business model enabled us to generate growing float income as an embedded monetization lever for the management of our buyer customers’ full payment file and the management of the remaining paper checks. One of the key metrics that we focus on across our leadership team and that I believe is a good barometer of the strength of our business and demonstrates the power of our AvidXchange flywheel business model and the impact of our true two-sided AvidPay network is our transaction yield metric, which we’ve increased incrementally every quarter for the last two years from $3.52 to $4.51 per transaction.

Our strong operational performance combined with our accelerated path towards profitability this year in 2023 and our overall financial strength enabled us to recently renegotiate a new $95 million credit facility on favorable terms to substantially reduce our borrowing costs, while partially deleveraging our already strong balance sheet. With a very productive 2022 behind us, we are entering 2023 with a fresh set of new product introductions and integration initiatives to help buyer and supplier customers leverage the power of our accounts payable and payment automation platform to drive digital transformation of their back office. We’ll provide more details around our product momentum and technology road map for 2023 shortly after I touch on the highlights of this past quarter and the year that just ended.

On today’s call, I’d like to cover three topic areas which include; number one, our perspectives on our fourth quarter results; number two, review of our year end AvidXchange business flywheel metrics and our key initiatives for this calendar year; and number three, along with insights and trends we are seeing related to the macro impacts to our business and our middle market customers. Despite a year of mounting macro uncertainty across the general economy, we remain laser-focused on executing those things that we control. Specifically, we remain steadfast in our deepening of our competitive moat and advancing our proprietary two-sided AvidPay network. We did this through the disciplined execution of our playbook across the four growth years of our AvidXchange business flywheel.

Our flywheel framework is designed to drive new software and partnership integrations, product innovation, operational execution and value creation for our buyer and supplier customers along with our valued shareholders. We believe our solid year-over-year and quarterly financial performance is proof of our execution. For the fourth quarter ending December 2022, we delivered revenues of over $86 million which grew at a rate of over 24% compared to the same period last year. This now marks six consecutive quarters of exceeding our internal financial targets and delivering 20%-plus comparable organic revenue growth. Non-GAAP gross margins expanded to almost 65% in the quarter, up 270 basis points on a year-over-year basis and we further narrowed our non-GAAP adjusted EBITDA losses to $1.3 million in the quarter relative to our implied business outlook expectations.

While numbers only tell part of the story, our customers and their adoption of our automation software products complete the story and there are no better evangelists for our value proposition than our customers. Take Chief Financial Officer, Ken Oesch of Piedmont Service Group, a Raleigh North Carolina-based heating ventilation air conditioning company or an HVAC company. Piedmont specializes in providing energy efficiency industrial HVAC solutions to help commercial, industrial and government organizations lower their operating costs. Ken manages an accounting team of 15 associates utilizing the Microsoft Dynamics Great Plains accounting system. Piedmont was drowning in thousands of paper invoices and struggling to match them with purchase orders to get their suppliers paid on time.

Thanks to AvidXchange, when auditors needed information and GM’s ask about certain invoices and need quick replies, Ken immediately can access the key information and reports to get them their answers. We tell people all the time of what AvidXchange Ken said, and what it has done for our business, streamlining our accounts payable and eliminating the need to send paper checks, replied Oesch. The power and stickiness of our value proposition can be seen across many industry verticals including one of our emerging subverticals of hospitality. Hampton Golf is another powerful story that speaks to our success in solving our customers’ problems. Florida-based Hampton Golf is a premier golf course hospitality management company with 2,600 associates that manage 30 golf course and facility locations throughout the United States.

Using QuickBooks Enterprise as his accounting system, Chief Financial Officer, Dede Franklin manages a team of 16 associates overseeing the day-to-day processing of invoices and payments and onboarding new golf courses to the company’s accounting system. Prior to adopting AvidXchange’s accounts payable and payment’s automation solutions Hampton Golf was scanning stacks of paper and voices and pulling them from e-mails while cutting paper checks. After adopting AvidXchange’s full invoice-to-pay solution, which seamlessly integrates into QuickBooks Enterprise, Dede Franklin articulated our impact to their business pretty well by saying automated AP is no-brainer. AvidXchange’s automated invoice and pay offerings are essential to our business and onboarding is such a simple process.

It’s the first of our critical systems that we train new hires on. I had no idea how truly exceptional automate AP can be along with the economic and efficiency impact to our business. Now I have no idea however survived without it. Thanks to middle market customers such as Piedmont and Hampton Golf, we closed 2022 on a strong note as reflected in our year-end operating metrics. So let’s take a closer look at those metrics in the context of our flywheel. During 2022, we increased the total number of buyer customers by 10% to 8,800 from 8,000 in the prior year driving €“ driven by delivering great AP automation software under year one of our flywheel. With a large and highly fragmented total addressable market of approximately 435,000 middle-market companies in the United States alone, representing $400 billion of untapped opportunity, growth in buyer customers was once again broad-based across all of our eight core verticals.

This growth in buyer customers was a result of our hybrid go-to-market strategy, contemplating our strong buyer growth was supplier customer growth of 17% in 2022. The networking effects of buyers bringing their suppliers to our two-sided network culminated in us approaching one million suppliers on our AvidPay network. The resulting addition of new buyer and supplier customers drove increased transactions onto our two-sided network and our spend under management in Gear number 2 of our flywheel. Transaction volumes on our network reached 70.2 million were rising year-over-year 12.3% with our total payment volume increasing roughly 31% on a year-over-year basis to $68 billion in 2022. This increase in total payment volume was driven by growth in payment transactions, contributions from the FastPay and PayClearly acquisitions, coupled with some vertical mix impact.

The increase in total volume reflected 19% year-over-year rise in spend under management to $215 billion. And given our growing transaction volume, we remain focused on maximizing our industry-leading e-payment monetization, which is the secret sauce as we refer to it, by converting suppliers to one of our various forms of electronic payment on the AvidPay network under Gear 3 of our flywheel. In 2022, e-payment transactions on the AvidPay network grew by 16% from the prior year, roughly in line with our supplier growth numbers. We believe this underscores the overall value proposition of our AvidPay network for our suppliers. The sum of execution and growth across the business flywheel encompassing buyers, suppliers and transaction monetization resulted in growing our all-encompassing transaction yield metric, which was up over 13% to $4.51 per transaction from $3.98 per transaction in 2021.

And we ended the year with net transaction retention rate of over 10%. As we enter 2023, we are mindful of the macro crosscurrents related to the rising interest rates and inflation with their potential impact to our customers and our business. While we continue to be encouraged by our top of funnel sales activity, we have seen some moderation in transaction retention trends across several of our verticals. While we don’t want to over interpret the trajectory in volume trends and retention, we are paying daily attention to all of our key metrics and continue to run strategic and operational scenarios that preserve optionality should any of the macro headwinds, markedly shift and have a greater impact on our middle market customers. That said, we plan to capitalize on the building blocks that we put in place throughout 2022, while continuing to invest in new product offerings and API integrations to deepen our significant competitive moat that we have across the middle market sector along with enhancing our growth and scale of our operations.

Copyright: dizanna / 123RF Stock Photo

On the product front, in 2023, we are very, very excited to launch our proprietary flagship Invoice Accelerator 2.0 offering. This launch couldn’t come at a better time for our large and growing base of small business supplier customers. For those that are hearing about Invoice Accelerator for the first time, IA as we call it, it is a product that provides unique invoice payment acceleration, which functions as a short-term working capital financing tool for eligible invoices and bridges critical working capital funding gaps for our supplier customers. Our business model is purpose-built to leverage this product as it overcomes two of the most significant hurdles for traditional invoice financing products, which are around the underwriting risk of the supplier, and collecting the money, when it’s paid by the underlying buyer.

That’s because in our unique two-sided business model, both the buyer and the supplier our customers on our AvidPay Network. And we have visibility to all their historical transactions, including invoice and payment history, along with their timing. In addition, these transactions and the related payments flow through our network, which enables us to underwrite targeted invoices and automatically intercept the buyer payments related to these invoices. We’ve been testing and metering our initial 1.0 version of Invoice Accelerator, with a limited cohort of suppliers to develop key learning’s along, with perfecting the underlying data science and determine how best to scale this offering efficiently. Invoice Accelerator 2.0 is designed to be an automated self-service supplier solution underpinned by our next-generation technology, architecture incorporating real-time underwriting, credit analytics and credit decisioning targeted towards our growing small business-related suppliers, utilized by our middle market buyer customers.

Our Invoice Accelerator 2.0 offering is slated to be launched in the second half of 2023 and we expect that it will serve as a growth lever in 2024 and beyond. Second 2023 is also a year that we’re planning to launch our proprietary AvidXchange intelligent data capture product or IDC as we call it. This is an intelligent invoice digitization and indexing platform that we jointly designed and configured in partnership with Microsoft, leveraging artificial intelligence and machine learning to analyze a decade plus worth of historical invoice data sets. We have been engineering and partnering closely with Microsoft on this product since 2019. IDC digitizes invoice data send by suppliers to our buyer customers before they go through our standard workflow approval process.

Currently, we digitize a portion of the invoice data by deploying human capital assets worldwide, whose great data fields off paper and non-machine generated PDF invoices. But with IDC, we will arm our data extraction team with a custom-built interface paired with real-time AI and machine learning capabilities, which together are projected to drive scalability by increasing productivity levels by almost twofold. We believe this scale change in productivity will further aid our gross margin expansion towards our long-term gross margin target exceeding 75% as we continue to leverage automation to markedly reduce our unit costs. And lastly, on the integration front, we have a robust portfolio of new integrations and partnerships on deck for 2023.

Since our launch of our out-of-the-box integration APIs built on our Avid Connect platform last year, we’ve been deepening our penetration of the vertical and horizontal accounting systems and our ERP partners used by our buyer customers. Our strategy around API partnerships and integration playbook is to be deeply embedded, with accounting system and ERP providers who have been leading the market of our customers across existing and new target verticals, where there is an opportunity for significant transaction volume to be monetized. 2022 was an active year with the launch of our next-generation APIs, as we successfully launched our new API integration for QuickBooks Online, which alone boasts over 200,000 middle-market customers. Not to mention, APIs for Blackbaud, Acumatica and ResMan, who combined pool of roughly 15,000 customers are a multiple of our current total buyer customer base today.

What’s powerful about these API integrations is that they typically lead to a deepening of our technical, sales, marketing, and go-to-market partnership, with these accounting solution providers, which provides a catalyst for accelerating our share of middle market customer base. We are confident that 2023 will accelerate that activity with API integrations across our eight vertical markets, along with planned development of several new subvertical focus areas, while supporting growing horizontal and accounting system partners. In summary, we are very pleased with our results in the fourth quarter and our first full year as a public company. We believe that we significantly advanced our competitive moat, serving the middle market, along with strategically operationally and financially positioning our business to achieve our revenue and profitability objectives, as we enter 2023.

As I discussed at the beginning, our three themes of success in 2022, which included our talent, products, and financial performance will also help position us well in 2023 and beyond to deliver our product road map and achieve our accelerated profitability and free cash flow objectives. That’s not to say that we won’t be tested and we’ll have to navigate potential bumps along the way, as we successfully have done throughout our previous 22 years. We believe that the current macroeconomic backdrop will remain choppy throughout 2023 and we continue to assess the impacts to our customers, and we are adapting accordingly. That said, we believe that, while the macro picture creates near-term uncertainties, it also creates new opportunities to strengthen and grow our business, as customers tackle revenue and cost pressures.

Among these opportunities, we see openings for new verticals and subverticals for our offerings across our large and fragmented addressable middle market, which is still in the early stages of digital transformation and shifting away from paper invoices and paper checks. arket dislocations can also unlock acquisition opportunities, which have been largely dormant for us for the last 18 months, due to various market reasons. Finally, macro uncertainty can also play to our competitive strength, as middle market customers gravitate even more towards proven market-leading, differentiated and well-capitalized providers, such as AvidXchange, thus bolstering and even accelerating our overall market-leading position across the middle market — impact to both our buyer and supplier customers in 2023 along with reaching our profitability objectives for the year.

With that, I’d like to turn the call over to my partner Joel.

Joel Wilhite: Thanks, Mike, and good morning everyone. I’m excited to talk to you today about our fourth quarter 2022 financial results, which reflect continued execution of our growth strategies and continued macro uncertainty. Overall, we delivered another quarter of solid year-over-year financial performance. Relative to the implied fourth quarter 2022 business outlook, fourth quarter revenues came in better, driven largely by higher interest revenue from funds held for customers. That, together with expense control contributed to a lower-than-expected adjusted EBITDA loss in the fourth quarter of 2022. As Mike mentioned in his prepared remarks, we’re once again pulling forward our path to EBITDA profitability to 2023 from 2024.

More on that later. Total revenue increased by 24.4% to $86.2 million in Q4 of 2022 over the fourth quarter of 2021. Organic revenue growth, which excludes the contribution of our PayClearly acquisition, which closed in January 2022 was 23.3%. Organic revenue growth was driven primarily by the combination of the addition of new buyer invoice and payment transactions, which reflect increased e-payments to suppliers and the contribution of interest revenues. Revenue related to our political media advertising book-of-business for the fourth quarter and full year 2022 was $3.1 million and $8.5 million respectively. This revenue contribution stems from the 2022 mid-term elections and associated run-offs. As a reminder, because 2023 has neither the mid-term nor presidential elections, we are not factoring any revenue contribution from political advertising in our 2023 business outlook.

Back to Q4 2022 financial results. Our strong revenue growth also resulted in total transaction yield expanding to $4.79 in the quarter, up 14% from $4.21 in Q4 2021. Excluding the $0.04 contribution from the acquisition of PayClearly in the fourth quarter of 2022, the transaction yield of $4.75 increased 12.9% with roughly half of the increase driven by yield improvement, and the remainder driven by interest revenue. Software revenues of $26.4 million, which accounted for 30.6% of our total revenue in the quarter, increased 12.5% in Q4 of 2022 over Q4 of 2021. The increase in software revenues was driven largely by growth in total transactions of 9.2%. Payment revenue of $59.1 million, which accounted for 68.6% of our total revenue in the quarter, increased 31% in Q4 of 2022 over Q4 of 2021.

Payment revenues reflect the contribution of interest revenues, which were $5.8 million in Q4 of 2022 versus $1.1 million in Q4 of 2021. Payment revenues also reflect the contribution of the PayClearly acquisition. Excluding PayClearly, which contributed approximately $0.8 million in the quarter, organic payment revenue growth was 29.3% roughly two-thirds of the organic increase in payment revenues was driven by payment volume and the remainder driven by interest revenues. On a GAAP basis, gross profit of $49.9 million increased by 41.8% in Q4 of 2022 over the same period last year, resulting in a 710 basis point improvement in gross margin for the quarter to 57.9%. Non-GAAP gross margin increased 270 basis points to 64.9% in Q4 of 2022 over the same period last year driven primarily by the contribution of higher interest and political revenue.

Moving on to our operating expenses. On a GAAP basis, total operating expenses were $78.7 million, a decrease of 22.2% in Q4 of 2022 over Q4 of last year. The year-ago period operating expenses reflect the impact of IPO transaction expenses, termination fees related to a facilities development agreement, and the recognition of non-cash stock-based compensation costs resulting from completing our IPO in Q4 2021. On a non-GAAP basis, operating expenses excluding depreciation and amortization increased 11.8% or $6.1 million to $57.3 million in the fourth quarter of 2022 from the comparable prior year period. However, on a percentage of revenue basis, operating expenses excluding depreciation and amortization declined roughly 750 basis points to 66.5% in the fourth quarter of 2022 from 73.9% in the comparable period last year.

This highlights the operating expense leverage across sales and marketing, R&D and G&A. I’ll now talk about each component of the change in operating expenses on a non-GAAP basis. Non-GAAP sales and marketing costs increased by $2.3 million to $18.5 million in Q4 of 2022 over Q4 of last year with the increase driven by the continued investment in our direct and channel strategies to acquire new buyers and supplier customers. Non-GAAP research and development costs increased by $1.8 million to $19.5 million in Q4 of 2022 over Q4 of last year. The increase was due to continued investment in our products and our platform. Non-GAAP general and administrative costs increased by $1.9 million to $19.2 million in Q4 of 2022 over Q4 of last year, driven by a combination of higher expenses, as we transitioned to a public company and an increase in performance-based bonus accruals due to continued strong operating and financial results.

Our GAAP net loss was $25 million for the quarter versus a GAAP net loss of $72.1 million in the prior year period, driven by the impact of IPO transaction expenses, a mark-to-market adjustment for convertible common stock liability upon our IPO, termination fees related to facilities development agreement and the recognition of non-cash stock-based compensation costs resulting from completing our IPO in Q4 2021. On a non-GAAP basis, our net loss in the fourth quarter of 2022 was $7.4 million, an improvement of $10.3 million compared to the year ago quarter on solid organic revenue growth as well as interest revenues combined with expense leverage. On a non-GAAP basis, our adjusted EBITDA was a loss of $1.3 million in Q4 of 2022 compared to a loss of $8.2 million in Q4 of 2021 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 year with a strong corporate cash position of $461.5 million against an outstanding total debt balance of approximately $83.7 million including a note payable for $18.7 million. The year-end total debt balance reflects debt paydown of approximately $44 million from 2021. The corporate cash meanwhile is split roughly 60:40 between money market funds along with commercial paper and demand deposit accounts respectively. The weighted average maturity on corporate cash was roughly 13 days, while the effective interest rate in our corporate cash position for the fourth quarter was roughly 335 basis points. Customer cash at quarter end was approximately $1.3 billion with an interest rate of roughly 2.5% for the quarter.

During the quarter, we established a new $75 million credit facility which substantially reduces our borrowing costs. Subsequent to year-end, we increased our credit facility to $95 million from $75 million. I’ll now move on to our full year 2023 guidance. In light of Mike’s commentary about the opportunities and initiatives we continue to execute across our business balanced with the macro crosscurrents and the potential for further volume impacts based on all information currently available, we expect total revenue for the year to be in the range of $359 million to $366 million. Our 2023 revenue outlook reflects approximately $30 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.

We expect roughly 47% of the projected 2023 revenues in the first half with the remaining 53% in the second half. We expect our non-GAAP adjusted EBITDA to be between breakeven and $3.5 million positive EBITDA for the year. We expect EBITDA losses to occur in the first half and to reverse in the second half of 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: Thank you. We will now begin the question-and-answer session. And the first question will come from Dave Koning from Baird. Please go ahead.

Dave Koning: Yeah. Hey guys. Thanks and nice quarter. And I guess my first question is, kind of, two parts. The software revenue grew sequentially at the fastest pace in probably seven quarters. And I often think of that as that’s what you can control. That’s based on new sales. Am I right about that? And then the corollary to that is the payments business, I know you’re guiding to deceleration, but is it fair to think of it the new sales part doing maybe a little better than normal and it’s really the stuff out of your control, the macro is really causing a deceleration. Is that a fair way to think about this?

Joel Wilhite: Yeah, Dave, it’s Joel. Broadly yes. And just specifically first off on software revenue, we can control that. The impact in the fourth quarter has a light impact associated with just some routine price increase. I would guide you though to we did have some kind of year-end, one-time non-recurring catch up around some revenue share, et cetera. So I wouldn’t guide that level of software yield necessarily going forward, but pleased with the outcome on software revenue. And then broadly yes relative to the guide certainly reflects some of the emerging caution we see in spending across the business.

Mike Praeger: Yeah. Hey, Dave just to maybe add a little bit of flavor related to top of funnel activity related to new customer adds. We continue to see really healthy engagement across really all the verticals of our business and see really top of funnel activity up about 20% in that ZIP code over a year ago.

Dave Koning: Got you. Thanks. And then just my second question. The way you’re guiding 2023 incremental margins, it seems like you’re guiding revenue up $40 million, $50 million something like that with about 35%, 40% incremental margin to drive that EBITDA profitability. Is that — do you think a normalized go-forward incremental margin? Just wondering around that.

Joel Wilhite: Yeah. I mean, good question Dave. Like, broadly we’re pleased with the steady expansion of gross margin across the business. Remember our long-term target is 75-plus percent. And we said, as we begin to approach that 70% ZIP code we see the business turning profitable which is reflected in the guide. We did certainly have some impact annually and quarterly depending on sort of the float portfolio contribution. But even stripping that out, we do see good steady gross margin expansion going forward.

Dave Koning: All right, Thanks guys.

Joel Wilhite: Yeah. Thanks David.

Operator: And the next question is from Will Nance from Goldman Sachs. Please go ahead.

Will Nance: Hey guys. Good morning. I wanted to follow-up on maybe some of the payment volume trends that you guys spoke about. I know both the software and the payment side are kind of largely volumetric driven. You mentioned, lower — seeing lower transaction retention trends. I’m just wondering could you maybe touch on, average transaction size? And how it’s impacting payment volume as well? And then, maybe just more of some market color. I mean, when you talk about seeing a slowdown in transaction retention, is it more across the vertical the vertical businesses the horizontal parts of the business and any kind of noticeable trends or delineations across various parts of the business? Thanks.

Joel Wilhite: Yes. Thanks Will. I’ll start it off just adding a little bit of color. Again I kind of mentioned in the answer to the first question that we did see during the fourth quarter some emerging caution in spending across really all our buyers in all our verticals fairly broad-based. And what I would say about that is as we look closer to what we see is, customers adjusting largely their discretionary spending. So, not necessarily vertical specific but sort of spend type specific. And things like advertising and marketing, professional services in some cases tenant improvement projects et cetera. But still pleased that, in the face of these kind of macro crosscurrents still retaining over 100% — over 100% of the transactions year-over-year. But hopefully that gives you a little bit of color in what we’re seeing for the quarter. And what’s kind of baked into our guidance going forward. Mike, I don’t know if you want to add anything from a market perspective.

Mike Praeger: Yeah. I’d say, maybe to follow-up on my last comments to Dave related to top-of-funnel activity. When you look across kind of our — all the different verticals, plus the horizontal maybe kind of current areas where top of funnel is kind of exceeding our expectations would be in the horizontal slice is one good example. We’re driven by channel partners such as NetSuite, Acumatica and others like that. We’re seeing really strong engagement. The other one being in some of the new, what I call, kind of emerging vertical markets that we’ve talked about. I highlighted one of them on the call today within hospitality with Hampton Golf as a good example. And we’re seeing some really kind of emerging trends related to the hospitality vertical as well as I’d say, a sub-sector of our health care vertical being long-term care centers.

So those would be some examples that are kind of probably exceeding our expectations. We really have one vertical that is kind of below expectations currently and that’s with our financial services and kind of Tier 2, Tier 3 banks. They’ve been more cautious related to taking on kind of new projects initiatives related to digital transformation. And then, we have a number of verticals that have been more kind of flat year-to-year. Real estate would be a good example of that. So — but again really good diversification and collectively across all verticals seeing top of funnel activity about — up about 20% over a year ago.

Will Nance: Got it. Super helpful. And then, just maybe if I can ask a quick follow-up on the intelligent data capture. I was wondering if you could kind of size the pie of expenses that you guys are currently devoting towards like the invoice ingestion part of the business. And when you think about — in the context of the 75% gross margin target and I think the 10 points of gross margin expansion you guys have kind of outlined more over the near term. Like, is this kind of — was this something that was contemplated as part of that guide? And I guess how much of that improvement can you guys attribute towards the rollout of the IDC?