All right. We're going to get started with the next session. Next up, we have Dushyant Sharma, Founder and CEO of Paymentus, and Sanjay Kalra, CFO. Thank you both for joining us. Really looking forward to the conversation.
Thank you for having us.
Paymentus has been public for almost exactly five years now. The company has compounded revenue at a very large clip. Bill presentment is a bit of an underappreciated part of the payments ecosystem. For those who are less familiar with the story, could you talk about the market opportunity that you're going after and really why Paymentus has taken so much share as one of the largest players in that space?
Well, the bill payment is a big market, and the way to think about it is a typical household, 60% of their spend is towards the bills. It's trillions of dollars it is spent just on the consumer side. If you add B2B, it gets even crazier than that. If you factor in about 16 billion-17 billion bills are paid just on the consumer side annually, and we have only captured 4% or 5% of that, it's a huge opportunity ahead of us. In terms of why we are winning the market share, I think it comes down to, number one, the technology platform we have built. The technology platform we have built and the ecosystem, our Instant Payment Network, and the entire partnership ecosystem. It comes down to the way we visualize the market. We never thought that bill payment was just about the payment.
Taking money from point A, kind of like what you see in typical customer experiences. You are buying a shirt, you enter your card, it goes to Visa or Mastercard, you get the approval, and the payment is made type of thing.
Yeah.
Bill payment is more about, to your point, bills, bill presentment, the data, the workflows, the technology aspect of it, what internal workflows the billing company has to do to take care of all of the billing and payments, and then posting the information and getting that information in the right hands. We have done a great job in building a platform, and we took it very seriously. We did not think it was a private equity play that you just keep acquiring companies, and then hopefully the only integration is at the bottom line.
We did not think that was the play. The play was a pure platform play. We believe that longer term, even the larger end of the market would actually want to switch. If they could find an alternative, they would. That is what we are seeing. That is the reason why we are getting market share.
When you look at that market, it must be fragmented. You are only 5%. I think you are the largest in direct biller. What is the state of the end market? Where is all that volume today?
Oh, it is very fragmented. If you think about when we started out, majority of the payments, digital payments, used to be at the bank's website. Remaining were all just checks and walk-ins and cash and some of those types of options. We have made tremendous inroads, meaning now banks are a significant smaller portion of the digital bill payments. Most of the digital payments are happening on the billing company's websites or the billing company ecosystem, powered by Paymentus. But the remaining payments are still check, walk-in, cash, and so on. One of the things which I would urge everyone listening to this to think about it is that we all have bills, and we all have our own bill payment experiences, and so on.
One of the things I would like everyone to be reminded of is that majority of the households are not as privileged as some who are listening to this call. Most people are not as fortunate to be able to say, "Well, I just take my money from my bank account and just go ahead and make the payment." They are having to make a decision which bill they are going to pay this month and from which account. There is a lot of complexity involved for a typical household. That is why some of this fragmentation occurs as well.
Part of our job as Paymentus is, and working with our clients, is to make sure we continuously make it easier for our clients so that they can continue to reduce their cost to serve, so make it more affordable for the customers, but also continue to provide a better customer experience.
It is not just about better UI, it is all about all the options and get all the questions answered for the customer so that they can make the decisions to make a payment.
When you look at this business, what do you think the market gets wrong about the business and the end market? What do you feel is underappreciated about the market opportunity?
I think I would start first with the fact that all of us, like I said, all of us are consumers, so we think of bill payment. When someone looks at Paymentus, we think, "Hmm, so you make a payment. Why can't other people do the same thing?" What I would like everyone to think about it is, think about it from the billing company's standpoint, not just a small township or a small municipality. Think about one of the largest organizations in the country. Say if the average bill amount is $100 you are billing, and you are billing 5 million customers each month. It is a mega operation to be able to talk to the customers. If 100% of those customers made a call to you have no margins left in the business.
To send out billing information in a way that you can understand it, and it answers all of your questions so that you can actually make a decision to pay. Then giving you all the options so that you can make a payment, including clarifying to you what are the penalties if you don't make a payment or if it is not made up until a certain time. Then reminding you probably at different times in a cost-effective manner. It is a huge operation. Then when it comes back to how do you reduce the number of calls coming to your call center, because they are very expensive as well. Paymentus actually, what I would like everyone to think about it is, we are categorized in a fintech world, which may be fair, but think of us as more of the tech of the fintech.
We have no revenues coming in from float income. We are not using our clients' money to make money. We are actually providing technology infrastructure to our clients so that they can improve customer experience and lower their cost to serve. That technology play, and frankly, as the markets have evolved and become more sophisticated, the buyers have become more sophisticated. Our technology platform, which is doing more and more of that technological, handling more of the workflows for our clients, is actually shining. That is what the key reasons are.
Yeah. So one thing I think is underappreciated is just the level of visibility. I know at the beginning of the year, I've got 12 power bills, 12 gas bills, and 12 water bills. Sanjay, when you start the year, how do you think about visibility building up to the forecast, and how do you feel about durability of the model?
Yeah. Visibility is actually getting better and better as we scale the company, as the business is scaling, as all the verticals are expanding, and as we enter into more verticals as well. As we improve our go-to-market strategy as well, visibility is getting better. When we analyze the trends, we see more and more accuracy as well as the visibility. In fact, in the most recent earnings call, we didn't only raise the guidance for 2026, but we also made some comments about 2027. Making those comments early in the year, I think , is very good for our visibility. Overall, I think things are headed in the right direction, and that stems from the fact that our customers are large customers and the renewal rates are very high. It's a recurring stream of revenue, so the visibility is better.
Can you talk about pipelines and maybe reiterate some of that commentary on 2027?
Yeah. The pipeline is very good. In fact, the pipeline is getting better over time. The pace at which our revenue is growing and our profitability is growing, together with the visibility growth, the overall pipeline has to catch up. Pipeline has to be better so that the pipeline- to -conversion ratios match with the expectations for the forecast. Short answer is the pipeline is better than at least if I say a year ago , when we were.
Got it. Okay. I wanted to hit on competitive dynamics. I would observe there's been several data points on the bill pay space that maybe speak to Paymentus's strength. You've got competitors, at least market rumors, that they're shopping their bill pay segments. There's been the notable underperformance in several of the bank channel competitors that you have and sort of the bank-owned bill pay centers. What are the competitive dynamics like today, and how have those changed over the last five years?
I would say the top of the mind for me, as I have shared it publicly as well, is that I think, for us, we believe the market is moving in our direction. The reason we say that is that some of the things we thought would actually come to pass are coming to pass. For an example, starting with number one, we did not think it was a financial play. We thought the bill payment was a technology play. It has panned out exactly the way we thought about it. We thought about that if we can actually build one code base, one platform, one solution for different verticals, we will be able to go into different verticals with ease. We will have greater storytellers, and the story is Paymentus.
Customers of all walks of life, all industries, all sizes will actually like the fact because if you think about it from a consumer standpoint or even a business standpoint, all bills need to be paid, and you do not care whether it is an insurance bill or a utility bill or a telecom bill. To you, the experience better be similar. So they like the fact that there is a company out there who has built a platform that unifies and has all these complex business rules simplified in one platform. From that perspective, I think things have come together. Another critical example I will give you is actually rather top of mind for the entire industry is the AI.
If you think about it right now, AI is, and we love the technology, and we love where it is headed, but the fact is, five years ago, six years ago, we were filing patents on the capabilities we believed are going to be very useful to continue to create a sustained growth algorithm for Paymentus. That is another factor. If you look at some of the reasons why some of these assets are becoming available, I think it is a further testament to the fact that we have been very successful. Some of these assets used to be, they were purchased with the intent for them to be very strategic to the businesses that bought them. Paymentus used to be a small company then and was also, in my opinion, somewhat underappreciated in the market, which we loved.
We did not want to be notifying everyone that we have big plans. We just felt that as long as we can communicate that to our customers and our prospects, that is good enough. That is what we were doing. We feel that the market actually has played out the way we are very fortunate that the way we visualized it and the way we are executing against the strategy we laid out. We feel good about our competitive positioning.
You've been forward-looking in the product strategy. AI, yet again, topic of conversation. But agentic commerce in general has been a bigger topic over the last couple of weeks even, given some of the recent release of new agentic products for consumers. When you think about what that means for bill pay, how does the product set need to evolve? And maybe you could tie in some of the recent product launches you've had, Billeo and BillWallet. Talk about how those products work and how you see them scaling over time.
Sure. I think this is pretty interesting, and I'd like to take a moment or two extra on this. This is a very interesting dynamic here. What's happening is whenever you're hearing "agentic commerce," you would have to add a word to it, which is agentic retail commerce." All this is for making it easy for you to shop. For example, if you're buying a shirt, could it be easier for you to simply say, "Hey, I want a small shirt, and this is the color I want. Maybe even this is the brand I want. Can you find me the lowest -priced one and tell me what it is? And if it is under $70, go ahead and pay." That's a great experience. I would just say that technology is just 25 years too late. We already did that 25 years ago.
You can tell me how much money you want to pay for the bill, which is due every month, and which day you want to pay. Do you want to pay it on the due date or the 15th of every month? And give me your bank account information. I'll take the money out, and if you want to take a rule that, hey, if it is over $100, don't pay. If it's under $100, go ahead and pay. We can do all of that. Autopay has been around for years. For me, from a shopping perspective, I love the agentic part, and from a shopper's standpoint, it's viewed as an additional channel, like Google would be. You just have an additional channel.
But from a service commerce context, if you are telling an insurance company that I can enable all of your customer information, make it available to a personal agent, and oh, by the way, that personal agent can then snoop into all of the information, can see exactly which car you're driving, what was the model, which year it was, and how much you're paying for that, and I can sell that information to the highest bidder. That could be the last interaction you will have through that agentic channel with that particular customer. Because for $60, they could be signed up with another insurance company. There you go, you lose a customer. What we are hearing from our customers is that agentic commerce, agentic retail commerce, has a lot of challenges that need to be solved, and shoppers can always use more channels.
But to the service commerce side, there is a requirement for a paradigm shift, which is what Paymentus is building through Billeo. We are saying we are already handling the data and the payments and your customer relationships in a secure manner. We have the data related to billing and payment. Could we not give you that capability so that now when you're interacting in the agentic world with your customers, number one, your relationship is preserved. Second, the information is secure. Third, any of the rules which already exist on the billing side can all be incorporated. And last but not the least, your identity and the payment information is protected for the customer. We can all do that.
That's sort of our view of the world, and we believe that because of the patent portfolio we have built on the AI side, and we are very fortunate again that several years ago we thought about all these things. We are well-positioned, and the other thing I would also like to make a point about, if you think about the shopping experience in the agentic world, then there is a question, who is the merchant? Who's paying for it? And merchants don't care as long as they get paid.
In case of the utility insurance company and so on, and I was actually joking with one of the investors today that I'm longing for all of these AI companies to go ahead and agentify the entire payments so that Paymentus could immediately, when we have 25% and 30% of the typical biller's customer base paying bills, get the remaining 75%. And so that tomorrow morning, Paymentus could be a $6 billion company as opposed to $1.4 billion or $1.5 billion. Just go ahead and do it because I'm still the provider of the technology to my billing clients, and you'll still have to go through me to make those payments. So please come. Come one, come all. But I think our clients will have a thing or two to say about that, the disintermediation risk, and Billeo and BillWallet set up a greater stage for us there.
Yeah, that's great. Maybe sticking with the theme of AI, what are the areas of the business, maybe more internally, where it's had the biggest impact so far? You talked a lot about how your clients are often the limiting factor and how quickly implementations can proceed. But maybe aside from that, where have you been able to make the organization move quicker, design products and processes faster with the tools that we have now?
All aspects. I think every function in the company is using AI, is involved in it, trying to make use of it. Engineering side, we are very much involved. One of the things Paymentus has made a decision on is that Paymentus, since our pursuit is to have our own agentic platform. We want to have our own platform, which is Billeo. One of the things we are doing is, can we build Billeo agents which could be used by our own team? We actually have contests going on. Who can build what type of capabilities and what type of agents on Billeo platform internally, and how can we utilize them internally itself. Think of Paymentus as a typical organization, but who is very familiar with AI now, getting sort of increasingly more comfortable with AI technology.
The main difference for us would be that we think of us as AI as a source of revenue, not just of efficiencies.
Yeah.
Whatever we are deriving efficiencies, we want to get our clients to also use our technology. That is why we have created the platform.
Got it. Makes sense. One of the things that has evolved since the IPO is just the mix of different verticals that you serve. You are referencing insurance companies. I think at the time of the IPO, it was much more energy utilities and things of that nature. Can you talk a little bit more about that? How has the company had to adapt to serving new verticals and new client types, and if you were to maybe circle the one or two verticals where the company has seen the most success since the time of the IPO?
I think this is one of the key aspects we feel that we got it right because in some ways, we have good fortune of building the company with a next -generation platform. Part of it was some of the mistakes that needed to be made, I fortunately made them in my prior venture when I started the company. Part of the first -generation platforms you're seeing, I was one of those who built them. We learned a lot during that. But one of the key lessons I learned was, you just cannot build a scaled business and build payments by focusing on one vertical or having bespoke solutions for one vertical or one particular set of clients.
We made a decision early on that the platform itself needs to be built in a way that could be one code base regardless of the size of the customer or the type of industry you're going after. That part, we got it right.
Where we had to make the change was that different verticals require different vernacular when you're speaking to them. Therefore, we need to make sure that our team gets it, and the type of support they need throughout the process, the type of regulations, and the compliance infrastructure that needs to be in place for different verticals. We got that. We need to make sure that those changes occurred. To your last part of your question, we are seeing, actually, as you rightly pointed out, that we started out with utility as the primary focus. We love the utility vertical. We believe the utilities was the biggest vertical that got the bill payment efficiencies right. We felt that if we can get it right there, we will be able to succeed in other verticals. That is proving out now. We remain very excited about utility vertical.
We remain excited about all of our verticals. They're all growing. But government vertical is great. Insurance is great. What we're also seeing is B2B is an evolving market for us. It's an emerging market. We are seeing that we can actually handle payments on both sides. We have been doing disbursements for years, but now we are also saying, "Why can't we use our disbursement engine and the other technology we have and the workflows we have built so that we can also handle payouts?" A lot of that, we are excited about. We feel good about our positioning, both from B2C as well as B2B, both for pay-ins as well as payouts.
If I may just add that our operating leverage of the business is very high, as in the most recent quarter, we delivered around 70% of incremental EBITDA margins. One of the reasons for that kind of performance and incremental EBITDA margins is how agnostic our platform is.
Yeah.
We don't have to recreate the wheel when we have to come up with a new vertical or we are supporting new kind of customer which we have never supported before. That was well thought of years ago, and today we are reaping the benefits of that effort.
Got it. That makes a lot of sense. On this topic, are there any verticals today where you're not a big player, and do you see any major low-hanging fruit to go after to build on the scalability of the platform that you have?
I think we feel good about the scalability of the platform we have built. The investments we're making on the R&D side of the platform, we'll continue to do that. It's a constant pursuit as we are signing some of the largest companies you can think of in the country. To continue to make sure that the CIOs, CTOs, CSOs, and the CFOs and the other executives, the customer experience executives of those organizations, continue to trust us for handling their two most valuable assets any business can have, which is their customers as well as their revenues or the monies coming in. We need to always be on our toes, and we live in a 24/7 world, and the platform that needs to be always available. Therefore, you need to make sure that security infrastructure and so on is always a top focus.
Scalability and, security remains on top of mind.
Got it. I want to talk about the go-to-market strategy. Could you just provide an overview, what's the current makeup of your go-to-market organization, and when you're thinking about investing and expanding go-to-market, how are you allocating investments across the different channels?
Well, go-to-market is a confluence of a lot of factors and a lot of things we do. We've got a direct sales team, and we've got a direct sales team also verticalized. At the same time, we have a lot of resellers and a lot of business partners. JPMC is one of them, as we've talked publicly about.
We've got a lot of banks, a lot of partnerships there. We have seen a lot of verticals. In fact, expansion of a lot of verticals and a lot of different size of customers coming in from all these sources. Direct as well as indirect, both.
Got it. Are you leaning more into direct versus indirect these days?
Definitely, we are signing both customers from both the channels. Every quarter. I think it's a consistent effort on both sides.
Got it. Maybe just shifting to customer priorities. You cover a lot of critical infrastructure, power, utilities, and financial services. How has the broader discussion around AI and cybersecurity impacted customer conversations, and how has it impacted customers' investment priorities?
Let me start with cybersecurity first. I think the way we think about our business is it has to be always on, except if it is not secure. You don't want an unsecure platform to be anytime available. If it is not secure, if you have it any second, it is available; it's generating liability, not assets. Security is of paramount importance, and I think our clients love the fact that we put that much priority on the security part of the business. No one is 100% perfect, but you always try to see that can you at least make it harder for anyone so they can focus on other lower or easier targets. You're always trying to focus on that. Cybersecurity remains a top priority.
What we are seeing is our clients are very concerned about when it comes to security, and then as you venture into the AI world, security is of paramount importance. The privacy is very important, and the fear of disintermediation is real. Our clients are actually asking us questions about, okay, we don't want you to use AI tools on our data unless we can get some confirmation as to how it is going to be used, where it is being used, for fear of disintermediation. That's why we believe that BillWallet and Billeo actually provide that answer to the question. As soon as we start talking about both of those capabilities, the temperature starts to drop a little bit. You start to get more comfort.
The fact that Paymentus is actually pursuing AI initiatives itself also makes it comforting for the billers because they start to say, "Well, all of our AI investments, potentially, or some of them, if not all of them, could then be handled by the company that we already trust for handling our customer relationships and our financial information and money." We let Paymentus handle that. We are feeling good about that. Cybersecurity comes before AI, and we feel that we have positioned ourselves well with Billeo and BillWallet for that.
Have you seen any evidence of people reprioritizing work streams in order to focus on things like cybersecurity, delaying implementations or delaying RFP processes, and things like that?
Actually, we are seeing the reverse. What we are seeing is that because cybersecurity is very important and compliance infrastructure, the regulatory framework, the clients, even the larger end of the market are saying, "Paymentus, you can handle some of those things for me. Can we actually get there a little bit sooner?"
And that's why we are making it a point to notify when we are doing our public discourse, notifying not just our investors but also our clients that we recognize how important it is to get your data secure, move you away from some of the unwieldy processes you had, which are more exposed to security risks to our platform, which is PCI compliant, SOC 1, SOC 2, and so on.
Got it. Makes sense. Maybe we could talk about pricing. You have this kind of gross and net revenue model. What is your philosophy around pricing, both defensive as it relates to things like changing energy prices? We've talked about that in the past, but also more strategically, how does pricing fit into the overall algorithm of the company?
Yeah. That's a very important aspect of our business. We price our deals based on what we believe makes sense to the company, and definitely we have to be profitable. Our goal is to be profitable on every new deal we sign. We generally look at the top line, and we know overall it's going to get better. And we have experienced that overall, our pricing, resulting in the net profitability of every deal, gets better as time passes by, not only because of the operating leverage on the business, but overall, we've got a lot of levers in our contracts as well, where if the deals don't turn out as anticipated, we can make changes to get the right pricing. So overall, our long-term business model is 20% top-line growth on a CAGR basis, and bottom line 20%-30% growth as well on adjusted EBITDA.
We keep that in mind in terms of how we price the deals and how the business is flowing, and eventually what economies will be generated by any new transaction. We don't focus too much on net because that does fluctuate overall, and that does go into, at times, it depends on various factors, product, the mix of the cards, and whatnot. It could also fluctuate quarter by quarter, depending on seasonality.
Our north star still remains the top line. But yes, as you see, if you look at the trends of the past many quarters, there is a convergence happening between the top line as well as the contribution profit, if I say net, and from that perspective. That could change over time, but over longer period of time, north star still remains the top-line growth. When it comes to the energy prices, which you touched upon as well within your question. For energy prices, when the company was much smaller in size, if you go a few years ago, that would impact the company if the energy prices would increase significantly, but not anymore.
We have reached a very good scale at this point, and that has become really insignificant to us. As the company has evolved and scaled, we've made a lot of changes in terms of our pricing strategies as well, which have made the energy price index impact immaterial to us.
Got it. That's great. Maybe just on the point, 20% revenue growth, 30% adjusted EBITDA growth, embeds a healthy amount of margin expansion. How are you thinking about generating that operating leverage from year to year? How are you thinking about reinvestment within that algorithm, and where do you see margins heading to longer term in this business?
Well, let me answer the last part first. We have seen expansion not only EBITDA margins, but incremental EBITDA margins over time. We do calibrate our spend every quarter, definitely every year, in terms of how much contribution profit is being generated. So we manage it really well, and we plan to manage it really well going forward as well. Short answer is overall, we would expect expansion of the margins. The biggest reason for that is that the platform was built with an objective of having a very high operating leverage at scale, and we are reaping those benefits. At the same time, overall the business is doing well, and we expect the margin expansion and profitability to continue.
Yeah. So maybe we will close out on this question. The capital allocation, the company is growing fast, profitable, strong levels of free cash flow. You mentioned not going the route of rolling up a bunch of separate platforms and kind of tying them all together. It is a single platform, single code base. That said, it does seem like it is a fragmented market. It does seem like there are assets for sale. Do you think Paymentus is a natural consolidator for this market? If so, why or why not?
That is a great question, and from our perspective, we are seeing all the assets, and we have seen others as well. We have seen some assets where even at 5x EBITDA, they did not make sense to us. The reason for that is we believe we have something special here. We have built something special, and the pursuit we have is to build a very large business. It may sound maybe too bullish right now if I say, "Hey, we are going to be a $10 billion company, and we are 15% of the way there." But it would have been as preposterous if I was saying five years ago, "We are going to be a $1.5 billion company when we are a $300 million company." But again, future is always uncertain.
We are trying to build a bigger business, and we will do whatever we need to do to get there. Right now, we think that organic growth is the best path forward. However, we will remain open to opportunities. If we see something interesting, we will take a look at it. Right now, organic growth remains a big focus for us.
Very clear. All right. Well, thank you for joining us. That is all the time we have, but really appreciate the conversation today.
Thank you so much. I appreciate it.
Okay. Thanks a lot.