Paymentus Holdings, Inc. (NYSE:PAY) Q4 2023 Earnings Call Transcript

Paymentus Holdings, Inc. (NYSE:PAY) Q4 2023 Earnings Call Transcript March 4, 2024

Paymentus Holdings, Inc. beats earnings expectations. Reported EPS is $0.11, expectations were $0.06. Paymentus Holdings, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and welcome to Fourth Quarter and Full Year 2023 Paymentus’ Earnings Conference Call. This call is being recorded. All participants are currently in a listen-only mode. There will be an opportunity to ask questions following management’s prepared remarks. [Operator instructions] At this time, I will now turn the call over to David Hanover, Investor Relations. Please go ahead.

David Hanover: Thank you. Good afternoon, and welcome to Paymentus’ fourth quarter and full year 2023 earnings call. Joining me today on the call is Dushyant Sharma, our Founder and CEO; and Sanjay Kalra, our CFO. Following our prepared remarks, we’ll take questions. Our press release was issued after the close of market today and is posted on our website where this call is being simultaneously webcast. The webcast replay of this call and the supplemental slides accompanying this presentation will be available on our company’s website under the Investor Relations link at ir.paymentus.com. Statements made on this webcast includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements use words such as will, believe, expect, anticipate, and similar phrases that denote future expectation or intent regarding our financial results and guidance, the impact of, and our ability to address continued economic uncertainty, our market opportunities, business strategies, implementation timing, product enhancements, impact from acquisitions and other matters. These forward-looking statements speak as of today, and we undertake no obligation to update them. These statements are subject to risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements, including the risks and uncertainties set forth under the captions, special note regarding forward-looking statements, and risk factors in our annual report on Form 10-K for the year ended December 31st, 2022, and our subsequent quarterly reports on Form 10-Q, and our Form 10-K for the year ended December 31st, 2023, which we expect to file with the SEC shortly and elsewhere in our other filings with the SEC.

We encourage you to review these detailed forward-looking statements safe harbor and risk factor disclosures. In addition, during today’s call, we will discuss certain non-GAAP financial measures, specifically contribution profit, adjusted gross profit, non-GAAP operating expenses, adjusted EBITDA, adjusted EBITDA margin, and non-GAAP net income and earnings per share. These non-GAAP financial measures, which we believe are useful in measuring our performance and liquidity should be considered in addition to and not as a substitute for or in isolation from GAAP results. We encourage you to review additional disclosures regarding these non-GAAP measures, including reconciliations of the most directly comparable GAAP measures in our earnings press release issued today and the supplemental slides for this webcast, each available on the Investor Relations page of our website.

With that, I’d like to turn the call over to Dushyant Sharma, our Founder and CEO. Dushyant?

Dushyant Sharma: Thank you, David. We had a great quarter and a great year, and we are looking forward to carrying our momentum into 2024. Even more exciting to me is my view that our 2023 financial performance reflects only a subset of the opportunities arising out of the innovation framework we have built over the years. Therefore, we are excited about our long-term future and believe we are just getting started. Now, I’ll cover our fourth quarter and the full year 2023 highlights. In the fourth quarter of 2023, Paymentus again delivered results that were well ahead of our initial expectations. Fourth quarter revenue was $164.8 million, up 24.7% year-over-year. Adjusted EBITDA, which as many of you know is a significant financial metric for us, was $19.9 million for the quarter, up 95.4% year-over-year.

Fourth quarter contribution profit was $66.3 million, up 22.7% year-over-year. In addition to these results, we also exited 2023 with a strong bookings and a strong backlog that we believe puts us in a position to achieve the top end of our guidance without signing any new clients, but, of course, timely completing our expected 2024 implementations. As you may recall, we shared the same sentiment last year around this time. For the full year 2023, revenue increased 23.6% over the last year to $614.5 million, beating our long-term target of 20% top-line growth. Adjusted EBITDA increased 103.1% to $58.1 million, far ahead of our long-term target of 20% to 30%, and contribution profit was $240.9 million, growing 19.7%. In Q4, we added $12.2 million in contribution profit over the same period last year, while dropping $9.7 million of that to adjusted EBITDA.

So for the past few quarters, we have continued to demonstrate an ability to drop the majority of the incremental contribution profit dollars to the bottom line. We believe this highlights one of the key strengths of our operating strategy, our proven ability to expand our operating leverage without sacrificing growth or innovation. As we have shared before, at Paymentus, our goal remains to continue delivering high quality earnings alongside solid top line growth. We are proud of what we have achieved to date and we expect to continue delivering long-term growth in both of these areas in the years to come. Now, I’ll review some of our key fourth quarter business highlights and accomplishments. As I mentioned earlier, we finished 2023 with a strong backlog and are very pleased with our year-over-year growth.

Of course, all of this continues to be driven by the strength of our technology platform and our IPN ecosystem, which enables our clients to participate in a broad and diverse network by merely integrating onto our platform. Turning specifically to new client activity, during the fourth quarter, we signed several notable and large clients. We signed multiple large insurance companies, large utilities and large government agencies. We also signed a large property management company in the real estate sector and a large business in the retail sector. In addition, we signed several clients across various other verticals. We believe this broad mix of customer signings demonstrates the diversity of the businesses and verticals our platform can support.

And as always, one of our key focus areas continues to be onboarding our strong backlog in order to drive further growth. We are making incremental, targeted investments in this area and believe these investments, as well as the continually improving post-pandemic conditions that allows for a more in person, collaborative process, continues to be a tailwind for us in this regard. As part of this effort, we have continued to ramp up hirings. We have made significant progress onboarding new clients since the start of 2023, including the launch of several large clients during the fourth quarter across various verticals, including multiple utilities, insurance companies, commercial entities, property management companies, government agencies and financial institutions.

Of course, we expect to make further progress throughout 2024 consistent with our growth plans and internal targets. As we reflect on our platform and the ecosystem, we believe we are increasingly becoming a central hub to the entire bill payment ecosystem. When I step back, and reflect on our product capabilities and who we currently serve with product offerings, it drives a strong personal belief that we are setting a foundation to become a large global fintech provider. First, we serve businesses of various sizes and industry verticals, engaging with their consumer, and business customers and getting their bills paid through our platform. Second, we have banks and credit unions of various sizes sending payments from their customers to the billers using our platform and our ever expanding IPN ecosystem.

Third, we have millions of consumers and small businesses interacting on our platform and the ecosystem. And finally, we have clients who are disbursing and paying out millions of dollars using our payout and disbursement platforms. These billers, businesses, banks, credit unions and SMBs, all engage our direct product offerings that uniquely address their specific business and payment workflows. So if you’re an investor like me in this business, I hope you are as excited as I am about where the business is headed with ever expanding TAM along with our growth and profitability. In other words, I believe this is a long-term sustainable growth business with innovative platform and the company DNA. In closing, we are proud to report another period of results that were ahead of our original expectations, both for the fourth quarter and the full year 2023.

At the same time, we continue to prove our ability to increase operating leverage without sacrificing revenue growth. We ended the year with a strong backlog and solid sales momentum going into 2024. And of course, we intend to remain focused and disciplined in onboarding our strong backlog which we expect to fuel our future growth. Now, let me turn it over to Sanjay to review our financial results in greater detail. Sanjay?

Sanjay Kalra: Thanks, Dushyant. And thank you all for joining us today. Before I discuss our quarterly and full year results and our 2024 outlook, I would like to remind everyone that the financial results I would be referring to include non-GAAP financial measures. As David mentioned earlier, our Q4 press release and earnings presentation includes reconciliations of the non-GAAP financial measures discussed on this call to their corresponding GAAP measures. Both of these are available on our website. Turning to Slide 5, for the fourth quarter of 2023, we delivered another quarter of very strong financial results. We believe these results continue to demonstrate the resiliency, stability and strength of our business. Our fourth quarter results included revenue of $164.8 million, contribution profit of $66.3 million, and adjusted EBITDA of $19.9 million.

Our results came in higher than we originally expected and I’ll discuss the drivers of our outperformance in more detail shortly. We also continued to experience solid business momentum in the fourth quarter. This enabled us to once again exit the quarter with a strong backlog while further increasing our cash position. Now, let’s review our fourth quarter financials in more detail. Fourth quarter 2023 revenue was $164.8 million, up 24.7% year-over-year. This growth was largely driven by increased transactions from existing billers, the launch of new billers, and increased activity in our Instant Payment Network, or IPN business. The number of transactions we processed grew to $124.8 million in the fourth quarter, up 28.4% year-over-year.

Our transaction growth exceeded revenue growth during the quarter, primarily due to biller mix. Fourth quarter 2023 contribution profit increased to $66.3 million, up 22.7% year-over-year. This year-over-year increase in contribution profit reflects higher transactions from existing billers and the launch of new billers. Contribution margin was 40.3% for the fourth quarter, essentially flat compared to 40.9% in the prior year period, despite adding a number of large sized billers to the mix throughout the past year. Contribution profit in the fourth quarter surpassed our expectations and was actually our best quarter in 2023 in terms of year-over-year growth. This outperformance was primarily driven by three key factors. First, we saw higher transaction growth than we had expected initially during the quarter.

The growth was driven by increased transactions from newer billers that were launched earlier in the year, with the incremental transactions driven by seasonality and adoption success. Second, we saw growth from billers who are seasonally strong in the fourth quarter. And third, we realized the benefit of improved pricing from some billers upon renewal of their contracts. Contribution profit per transaction for the quarter was $0.53 which was modestly down from $0.56 in the prior year period, primarily due to biller mix. As you stated in the past, variables outside our control, such as an increase in the average payment amount, changes in the payment mix, biller mix, CPI and card network fees, et cetera, can significantly influence and diminish the utility of contribution profit on a quarterly and per transaction basis.

Fourth quarter 2023 adjusted gross profit was $54.2 million, up 21.5% year-over-year. Year-over-year adjusted gross profit growth marginally trailed contribution profit growth primarily due to increased employee costs we recorded during the quarter related to customer support that are non-recurring. Fourth quarter 2023 non-GAAP operating expense has increased to $36.7 million, marginally up 1.1% year-over-year. The increase was primarily due to increased sales and marketing expenses and research and development expenses, net of savings we realized in general and administrative costs. We expect to increase sales and marketing expenses as we continue to focus resources on the execution of our go-to-market strategy and increase in investments related to converting our strong pipeline to bookings and onboarding our strong backlog.

Additionally, we started to see increased hiring in the fourth quarter, including some hirings that we had originally planned for the third quarter of 2023. Fourth quarter 2023 non-GAAP net income was $13.9 million or $0.11 per share, compared to non-GAAP net income of $5.1 million, or $0.04 per share in the prior year period. Fourth quarter 2023 adjusted EBITDA was $19.9 million, a record 30% of contribution profit, up 95.4% compared to $10.2 million or 18.9% of contribution profit in the prior year. This very strong quarterly performance compared to the guidance we previously provided was primarily driven by two key factors. First, we benefited from increased contribution profit due to transactions growth and the reasons highlighted earlier.

And second, hirings were less than we had expected in the quarter, resulting in lower operating expenses. Even taking into account these unexpected variables which benefited us, we believe our strong adjusted EBITDA margin demonstrates the inherent operating leverage we have in the business and our ability to adapt to changing market conditions as we continue to grow. Related to this, we also exceeded the Rule of 40 for the fourth quarter, coming in at approximately 53. This is a measure we take very seriously and our team here monitors it very closely. This is our third consecutive quarter exceeding the Rule of 40. Turning to Slide 6, I will summarize our full year 2023 financial results, which also came in higher than we originally expected.

Revenue for the full year increased 23.6% to $614.5 million, driven by 24.9% increase in transactions from new billers as well as transactions growth from existing billers. Contribution profit increased 19.7% to $240.9 million, primarily due to increased transactions and re-pricing initiatives. Lastly, adjusted gross profit increased 23.1% to $199.2 million. Non-GAAP operating expenses increased to $150 million, up 6.8% year-over-year, primarily due to higher sales and marketing expenses as we continue to focus resources on the execution of our net income was $40.1 million or $0.32 per share compared to non-GAAP net income of $14.8 million or $0.12 per share in the prior year period. Adjusted EBITDA increased 103.1% to $58.1 million, primarily due to increased adjusted gross profit net of increased non-GAAP operating expenses.

We exceeded the Rule of 40 for the full year ending at approximately 44. We are proud to report that $29.5 million of $39.7 million contribution profit increase representing 74% incremental contribution profit in the fiscal year 2023 flowed through to adjusted EBITDA. Now, I’ll discuss our balance sheet and liquidity position on Slide 7. We ended fourth quarter with cash and cash equivalents of $183.2 million compared to $166.9 million at the end of Q3 2023. The $16.3 million increase was primarily comprised of $24.4 million of cash generated from operations, offset by $8.4 million used in investing activities, primarily internal use capitalized software used to drive growth and innovation. The company does not currently have any debt. Our free cash flow generated during the quarter was $16 million.

Our day sales outstanding at the end of fourth quarter was 43 days compared to 45 days at Q3 2023 within our expected range. Working capital at the end of the fourth quarter was approximately $208 million, an increase of approximately 6% from the end of Q3 2023. We had 126.5 million diluted shares outstanding as of December 31, 2023, compared to 125.6 million diluted shares outstanding at the end of Q3 2023. The increase was largely due to improved average stock price during the quarter and to some extent due to the vesting of employee restricted stock units and exercise of stock options. Now I’ll turn to our Q1 2024 and full year 2024 guidance for revenue, non-GAAP contribution profit and adjusted EBITDA on Slide 8. Taking into account our progress to date, for Q1 2024, our guidance is revenue in the range of $170 million to $176 million, contribution profit in the range of $64 million to $66 million, and adjusted EBITDA in the range of $15 million to $17 million.

Before discussing full year guidance, I want to mention that we are continuing to follow the same prudent approach to guidance that we followed during 2023 as uncertainty around the macroeconomic environment still exists. For the full year 2024, we currently expect revenue in the range of $720 million to $744 million, reflecting growth of 19.1% at mid-point and 21.1% at high end. Contribution profit in the range of $274 million to $288 million, up 16.6% at mid-point and 19.5% at the high end. Our growth range for contribution profit is wider than revenue primarily because, as we have said before, contribution profit is subject to a number of external factors that are beyond our control. Accordingly, we are taking a cautious approach on this metric.

And finally, adjusted EBITDA in the range of $65 million to $75 million for the year, representing 20.5% increase at the mid-point and 29.1% at the high end. Please note this adjusted EBITDA guidance reflects the annual merit awards for our employees and our expectation that the increased hiring pace we saw in the fourth quarter will continue to pick up in 2024. It also takes into consideration the slower operating expense growth we saw in 2023, which was largely a reflection of the accelerated operating expense growth we had seen in the prior to fiscal years, primarily as a part of going public. Now that this period has passed, we expect to deliver a more normalized operating expense growth rate in 2024. During our last earnings call, we provided long-term growth targets for both revenue and adjusted EBITDA for our two primary financial metrics.

We stated our goal to grow revenue at approximately 20% annually and to grow adjusted EBITDA dollars between 20% to 30% annually. The guidance that we have provided today for the full year 2024 reflects these long-term targets, regarding contribution profit and operating expenses, which we consider secondary financial metrics. We plan to actively manage our operating expenses, dialing them up or down as necessary depending on how contribution profit is trending throughout the year to enable us to remain a Rule of 40 company on an annual basis. We managed this quite well in 2023 and we believe we can do so again in 2024 given our strong operating leverage. In summary, we reported exceptional fourth quarter and full year 2023 results. Throughout 2023, we consistently demonstrated our ability to generate strong revenue, contribution profit, adjusted EBITDA, cash and bookings growth.

This enabled us to end the year with a substantial backlog. Based on this solid footing and strong visibility, we continue to believe we are well positioned for 2024. Thank you everyone for your attention today. And now, I’ll turn it back to Dushyant for final remarks before we open up the call for questions.

Dushyant Sharma: Thanks, Sanjay. I’m proud that our team came together and significantly beat our original expectations for 2023, which we had set out around the same time last year. I believe this performance illustrates the resilience of our business despite the difficult macro environment we dealt with. Sanjay just covered our guidance for the full year and the first quarter 2024. As I shared earlier, we feel good about the guidance based on the strength of our backlog. On that note, also want to thank all of my team members for their continued efforts and dedication. That concludes our prepared remarks. I’ll now open the line up for questions.

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Q&A Session

Operator: Absolutely. We will now begin the Q&A session. [Operator Instructions] The first question is from the line of John Davis with Raymond James. Your line is now open.

Madison Suhr: Good afternoon guys, this is Madison on for JD. I appreciate you taking the question. I wanted to start on the revenue guide, obviously, it calls for roughly 19% growth here, doesn’t include any new client wins and understand the conservatism. But can you help us understand just how much new clients have contributed to growth in the past? I’m just trying to get a sense for the potential upside if new client growth goes as kind of planned, given the strong backlog and sales trends you’re seeing.

Sanjay Kalra: Madison, I appreciate the question. The growth of the new clients and the growth of the existing clients, these are the two contributors for our growth generally year-over-year. And I would say, we generally do not disclose the breakup of the two. I would say that the growth this year, we are seeing the 19.1% at midpoint. That’s comprised of both these factors as I mentioned, and I would say they are in a very similar ratio what you saw last year. They are in a pretty close range of those numbers last year as well. The trends are continuing as we expected and I think as we are guiding the high end at 21.1% and as Dushyant just mentioned, if all our client implementations happen on time as planned, I think that should get us to high end. But I would say, no new customers are planned in this year, which we will have to win this year and implement this year. All our revenue is – expectation is based on the client winnings we had till the end of 2023.

Madison Suhr: Got you. Yes, that’s helpful. It’s probably worth noting that obviously you outperform that initial revenue guide from last year by mid-single-digit percentage wise. And then just as my follow-up here on capital allocation, obviously you talked about the pristine balance sheet, strong cash position, no debt, generating nice free cash flow now. Can you just talk about your capital allocation philosophy and then just any color you could possibly give on how you guys are thinking about cash flow in 2024 would be helpful. Thank you.

Sanjay Kalra: Sure. Madison, we are very glad to be in a great position in the current economy to have a very good balance sheet, $183 million on the balance sheet gives us a lot of comfort and opens a lot of avenues for us to think about. But our priorities for capital allocation or cash spending remain unchanged since what we have discussed in the past. We want to grow organically and the biggest opportunity for us to spend cash to prove the best results for us is to invest in hiring the sales and marketing team so we can build a better pipeline for growth for outer years. In fact, I would rather highlight the current year’s expectations for growth of revenue, do not need any additional sales team or additional sales bookings.

But we plan to invest in our sales team, which we think is the right measure for us to spend money. Other than this, we currently do not have any other plans to spend cash and I think we are headed in the right direction starting from Q4 four itself, we saw that trend happening and we are excited to make that happen more in this year and build a great pipeline.

Madison Suhr: Got it. Thank you. I appreciate all the color.

Sanjay Kalra: Thank you.

Operator: Thank you. The next question is from the line of Dave Koning with Baird. Your line is now open.

Dave Koning: Yes. Hey, guys, thanks so much. A nice job. And I guess, my first question, you gave at the end of 2022, you gave, I think, a little over 1,900 clients. So last year we could kind of back into like 10% client growth and mid-teens revenue per client growth. Did you give that number at the end of 2023 now? I don’t think I saw it in the presentation, but maybe if you could just give us a little bit of how much clients grew and then how much revenue per client grew.

Sanjay Kalra: Yes, David, the new number, that’s an annual number we disclosed, and our 10-K will be filed shortly. And the number will be in there. And it’s 2,200. So it’s a 300 increase from the last number you saw. And the increase prior to that was 200. So definitely we are marching at an accelerated pace than we were marching earlier. And I think revenue per client, I would say, is getting better. Interestingly, the revenue per client I would also highlight, David, is not really kind of the most optimum metric to look at, given the size of the clients we are getting into, we are getting large enterprise customers as well as small and medium sized billers from various verticals. Our mix is kind of becoming different than it was a few years ago.

So I think looking at revenue per client may not be right metric, but I get it that that’s an easy metric to look at and see the trends. I would say just the growth of billers itself is more relevant than revenue per biller.

Dave Koning: Yes, got you. No, that’s helpful. And I guess just follow-up question. You’ve become quite profitable so quickly in the last few years. And now we can look at – like we can look at earnings as a valuation metric. And I’m just wondering, do you have like a normalized tax rate or something that we should use when we start thinking about how to think about earnings?

Sanjay Kalra: Yes, David, that’s a great comment. Thank you for that. We are profitable and we definitely want to be. And we think we’ll be profitable going forward as well, given the strong operating leverage this business has. In terms of tax rate, we are profitable and we kind of exhausted all NOLs this year. A very small portion is left which will be used next year. So going forward, for the long-term planning for earnings, I would suggest you use the rate which is closer to the statutory tax rate in the U.S., counting states, I think you should use approximately 25% tax rate.

Dave Koning: Yes, that makes sense. Well, no, thank you and great job.

Sanjay Kalra: Thank you.

Dushyant Sharma: Thank you, David.

Operator: The next question is from the line of Will Nance with Goldman Sachs. Your line is now open.

Will Nance: Hey guys, I appreciate you taking the question. Dushyant, you called out a number of client wins in the quarter across a number of verticals, and maybe wondering if you kind of double click on the mix of incoming clients. Are there any verticals where you guys are seeing particularly increased traction or where you’re getting increasingly optimistic that maybe could unlock some additional growth, maybe verticals you haven’t played in historically as much?

Dushyant Sharma: Yeah, actually, great point. Well, from our perspective, during the IPO roadshow, we actually had a comment that wherever there is a bill, there is a payment, and wherever there is a payment, there is Paymentus. And I think that’s coming to pass at this point where from all our channels, whether it’s direct acquisition of clients or through channel partners of various kinds, what we are observing is that the needs of the customers is the same that they want to automate their complex payment and business workflows. And our platform fits the bill perfectly for that. So as a result, we are growing in all different verticals. Utilities remains a strong vertical for us, but many other verticals, as I named, we are seeing traction in.

So we are very excited about the future, actually. And one of the other things which is interesting is as we are entering into some other verticals, we are noting that it’s not just the payments in, even payment outs or disbursements and payouts becomes an important transaction flow that we could acquire or automate through our platform. So we’re excited about that as well.

Will Nance: Yes, appreciate all that. And then just maybe on some of the IPN comments, you kind of mentioned the progress and seeing more integration with bank bill pay. Maybe you could just talk about the opportunity there long-term. I think a lot of people would consider Paymentus and companies like that kind of in opposition to traditional bill pay centers at the banks. So how do you see that kind of playing out over time? Are there opportunities to maybe work more closely with some of the incumbents in the space? And how do you kind of see the IPN strategy playing in specifically to kind of the bank bill pay market? Thanks.

Dushyant Sharma: Thank you, Will. I think this is an interesting scenario. I think what we felt right from the beginning of the business that that each billing company, if I can liken it to the analogy of cell phone network, each billing company is like a cell phone tower. And if you have enough of the billing companies like we do, and we continue to – and we have built the platform and the ecosystem where we are signing increasingly at a faster pace the billing companies of all sizes and various verticals onto the network, the cell phone network, if you will, or the biller network becomes increasingly valuable on its own, in addition to the revenue we generate from the billers themselves. So what that means is that any bank who has any desire to attract customers or not, or stop losing the customers or the payment volume they’ve historically lost to Paymentus, if they want to participate and continue to maintain their customer base, they have to use a real time network like IPN.

And since we are the leader in the space, or at least we believe we are the leader in the space, we believe that as we bring more and more billers, this becomes even more valuable for banks and other third party providers who want to provide aggregated consumer bill payment. So in some ways, that chasm that existed between the consolidated business bill payments to the biller drag bill payments is being sort of evaporated or being reduced or eliminated through instant payment network. So we are very excited about the future here. And frankly, as the time progresses, it will start to become more and more evident, how and why we are winning, the type of customers we are winning.

Will Nance: Got it. Super interesting. Appreciate you taking the questions.

Dushyant Sharma: Thank you, Will.

Operator: Thank you. The next question is from the line of Darrin Peller with Wolfe research. You may proceed.

Darrin Peller: Guys. Hey, nice job on this. Maybe just touch a little bit more on the landscape for a minute, because I think I heard you mentioned pricing a couple of times in your prepared remarks. If you can give us a little more understanding on how receptive clients have been to this and where payment is generally felt leveraged to do so, maybe add on to it just overall competition. It looks like you guys obviously have differentiated yourselves as time goes on, more and more, so maybe just any more color on if you’ve seen any incumbents do anything differently or perhaps new startups? Thanks.

Dushyant Sharma: Sure. Great question, Darrin. I think from our perspective, the approach we took during the inflationary period, or high inflationary period was we wanted to work with our clients. We want to demonstrate that we are a long term partner and we understand the pain point that just because inflation has come up rather quickly, it may dissipate quickly as well. So you want to give little bit of a time for customers to understand that they’re working with a great partner in addition to having a great platform like we support or we offer. And that approach actually worked extremely well. So we were able to walk the customers through the pain point, we were suffering publicly, as you all know, that we were being called out multiple times about the inflation impact we were facing.

We were able to show that combined with the data, obviously the detailed data the customers were privy to, we were able to renew the pricing, update the pricing customers were rather understanding. So we feel good about where our contractual arrangements are with the client? Where our pricing capabilities exist with the strength of the platform and the technology capabilities we support? So should a situation like this were to arise in the future, it gives us confidence that our approach and methodology of taking a long term view to customer service and then adjusting the pricing could work again well for us.

Darrin Peller: That’s good. Maybe just one more on the operating leverage side. If you can give us a little bit more color on your operating expense, plans and the cadence expected for 2024, I think perhaps just a little more color on where you think you need to invest.