Mike Praeger: Yes. Maybe, I’ll start by giving a little flavor to that particular kind of product offering and Joel can kind of follow up with some more details. So IDC stands for Intelligent Data Capture and this is a project we’ve been working on for the last couple of years in partnership with Microsoft and really excited about how — one of the challenges we and everybody in this business has is invoices are non-standard documents. Every supplier has a different form, every accounting system has different forms of invoices. And they get delivered to the supplier in many different forms. Obviously, we’re driving electronic receipt of invoices as much as we can. But what IDC does is, it able to kind of read and capture the data elements across all these different forms of invoices in a standardized way.
And so, certainly, taking Microsoft’s new OCR capabilities combined with AI and machine learning and then training it on literally 20 years’ worth of AvidXchange invoices, we think we’re in unique advantage of really driving automation in that front-end process. And I think that’s embedded in our confidence level of getting to 75% plus gross margins over time. Maybe, Joel, you provide a little bit of flavor on kind of the components.
Joel Wilhite: Yes. Will, your follow-up was just — to a degree to which we’ve contemplated that, the impact in the near term. I think, we’re excited to see that potentially — again I would guide that, a more significant impact likely in 2024, but we do expect in the back part of 2023 to see some unit cost improvements and so some efficiencies as a result directly of IDC.
Operator: Thank you. And our next question is from Ramsey El-Assal from Barclays. Please, go ahead.
Ramsey El-Assal: Hi. Thanks so much for taking my question. I wanted to follow up on, I think, Will’s prior question and your response there, and just get a little bit more color from you in terms of the magnitude of macro pressure that sort of factored into your guide. Just trying to understand better whether your guide contemplates, sort of, like, further deterioration in conservatism or just more sort of a steady state in terms of what you’re seeing today?
Joel Wilhite: Yes. Great question, Ramsey. Let me just sort of hit that head on. So we talked about, beginning to see over the course of the fourth quarter that sort of emerging challenge crosscurrents, whatever you want to call it. And we factored that together with everything we’re seeing in the trends in the business into the guide. So it’s certainly contemplated to the extent that we would be sort of beat that meaningfully. It would need to be a fairly abrupt reversal of those trends. And so, we’re expecting that to exist for the year in our guidance.
Mike Praeger: Yes. And maybe, Ramsey, just to give you a little longer-term view, remember we’ve been at this for 20-plus years and certainly navigated through a number of cycles. And we’re not seeing anything different than what we’ve necessarily seen in other economic cycles. Middle market is a pretty resilient group of companies related to very few companies go out of business, but they are — they do manage their expenses and certainly are more cautious related to discretionary spend. And then, we typically see our middle market — those type of expenditures snap back pretty quickly as we exit a cycle.
Ramsey El-Assal: Got it. And I also wanted to ask separately about pricing as a lever that you potentially have deployed or could deploy. I’m just trying to think about that across your business, especially in this kind of context of macro distress. Is pricing, a contributor to margin, or how should we think about that?
Mike Praeger: Yes. So, it’s a really good question and one that we talk a lot about internally, because based on our market leading position and just overall, volume of customers across the middle market, we have significant pricing power. Having said that, the number one, objective that we’re focused on is in a market where still 60% roughly of the middle market, has not yet adopted automated solutions, how do we create incentives for adoption? And we certainly, don’t want price to get in the way. So, it’s a delicate balancing act, that we’re — that we’re following related to having some year-over-year, kind of cost of living-type increases, but are certainly sensitive to the amount of increases that we’re passing through, to knock in the way of our adoption objectives.
Operator: Thank you. And the next question is from Andrew Bauch from SMBC Nikko Securities. Please go ahead.
Andrew Bauch: Hi, guys. Thanks for taking the questions.Just want to think about the building blocks to getting this back to the 20% growth algorithm that you outlined in your prepared remarks. And in that context, I wanted to kind of hone in on the political cycle. I mean Joel, the disclosure around the $8.5 million in 2022 is helpful. And maybe taking that number and thinking about where that goes in 2024, I mean, is there market research that you’ve done that can kind of directionally point people to where that could be, an either from a magnitude or time perspective?
Mike Praeger: Yes. So, I love that question, Andrew. That may be — lot of question that we get about thinking about those building blocks. And I kind of think of them, as kind of base business that we have today and you hit a really good point around the political. Actually, I was in Washington DC, yesterday. We had our media customer advisory board meetings, with our top media customers including the political sector. And what’s really interesting is, just a couple of political cycles ago, that sector hit $5 billion of spend in the political sector and 2024, the industry is expecting to break $10 billion of spend. Today, we have roughly 30% of the political payment transactions running through our platform. So certainly, we’re going to benefit from the overall kind of growth in political advertising spend overall.
So that’s kind of inherent in our existing business. And then, I kind of think of this. This is a really big year for us, in terms of, innovation and new product delivery. And product delivery kind of goes in cycles. And what we’re delivering this year, in kind of three big buckets, starting with Invoice Accelerator 2.0 offering, which has a lot of excitement both within the four walls of AvidXchange as well as, in the outer market, we’re going to be in market during the second half of the year with our 2.0 version of that offering. In addition, we probably have the biggest payload we ever had in terms of, new integrations, new accounting system, ERP integrations that we’re going to be delivering this year for our customers. And then, combined with our new payment platform.
And so those are the building blocks from a product perspective, to drive 2024, 2025, 2026, kind of revenue growth and our confidence when you look at any kind of multiyear period, that will be north of our 20% organic growth targets.
Andrew Bauch: No, helpful to hear all that laid out like that. One other question if I could squeeze in maybe there’s nothing here, but I just wanted to touch upon what you’re seeing on the supplier side of the world. I know that the buyer spend moderating in January and February is something that contemplated in the guide. But is there any elements of macro weakness impacting the supplier side of the business that would also kind of influence the full year guide?
Mike Praeger: Yes, that’s a really interesting question one that we study a lot because there’s multiple things kind of happening at the same time. So, certainly we’ve been active very aggressively adding new suppliers to our network that our supplier customers were up over 16% last year. But while we’re doing that, we’re also noticing that more suppliers are taking advantage of some of the data rate tiers that in our case MasterCard offers to get reduced in or change based on how they process the transaction with the data. And so we actually — although in the short-term, it’s a headwind perhaps on revenue if you think of that way, we actually think it’s a very positive element because what it does is it’s driving adoption and it also drives retention of those suppliers continuing to accept cards.
And they’re using the data that we provide them is one of the key benefits of being on the AvidPay network to be able to be eligible to use that data to get better rates by qualified for different rate tiers based on the data they’re using the process. So, although it may be kind of negative in the short-term related to a supplier using a data tier. Long-term, we think it’s a really positive element for long-term retention as well as adoption for suppliers of electronic payments whether it be a virtual card payment or even our AvidPay Direct.
Operator: Thank you. And the next question is from Bryan Keane from Deutsche Bank. Please go ahead.
