Paymentus Holdings, Inc. ($PAY)

All right. Let's get started. I'm Tien-Tsin Huang. I'm the payments analyst at JPMorgan and always grateful and happy to have the Paymentus team with us, Dushyant Sharma, the CEO, Sanjay Kalra, the CFO. I put together a list of questions from the investment community, but also happy to take questions from the audience and from the portal. But thank you both for being with us means a lot to me.

Thank you. Thank you so much for having us here.

Yes. Now Paymentus has been doing some really great things and putting up results quietly and been impressed. I thought we'd start with that, right? The quarter itself I don't want to call it typical, right, because we've been spoiled with a lot of upside in terms of the quarter and everything else, but it's been a long sort of repeat performance doing better. So maybe anything different in terms of what's driving the strong performance in the first quarter and how that informs your opinion on the rest of the year. Just to start with quarter.

I'll say that Q1 was really strong. Great start to the year 2026. And the growth stems from the fact that we had -- we exited the last year with a very strong backlog. We had a very strong pipeline, a lot of diversification happening in the verticals we are in. And same thing continues even in Q1 as well. . But over Tien to understand is that the business is growing not just because of the payments piece of it. I think the biggest contribution to our growth is the technology behind it. The technology, the platform we have, any vertical can be connected with our platform and platform being agnostic without needing any significant massive customizations for any business or any vertical or any biller. I think that differentiates us. And the entire customer experience right from start till the end, which also entails payment as a piece. I think that's something which is contributing to the growth and the massive bookings we're having.

Yes, it's probably something I underappreciated just in terms of how quickly things can be onboarded and how quickly that platform resonates with enterprise, I think that's a big positive surprise. I think Dushyant, you mentioned the 2 fiscal year horizon, and I think you talked quite a bit about this ability being quite good and referenced 2027 quite a bit. Can you just elaborate on what informs that opinion as you're thinking about it in the 2-year phasing?

Actually, all markets of the business from our bookings, the backlog, the same-store sales and the existing customer cohort we have with digitization tailwinds we are seeing. So all of that puts us more in a frame of mind. And we have always operated the business in a 2-year horizon to be candid. Because within the year, let's say, right now, we're executing in 2026 primarily based on how strong our 2025 was, even though to the investor community, it appears that 2025 is sort of in the back in the rare view mirror. To us, it's not because we were doing a lot of hard work in 2025, which was manifesting itself into 2025 results, but also setting a date foundation for 2026. And we are doing something similar now for 2027. So we feel good about it. there's still a lot of execution risk at this. We still have to perform. But we thought that investors in this broader macro environment will actually like company to be able to at least say that we are feeling good about 2027 based on bookings, backlog and all the things which are going on in the pipeline, of course.

Yes. No, it stood out to me. So if you're going to characterize the demand environment then and close rate sales cycles, however you want to word it, how would you characterize that today versus the prior year or even back to as a board, let's say

A lot is stronger now. Actually, in 2004 or early part of Paymentus journey, we were sort of the new company trying to prove ourselves, a lot of fear uncertainty doubt and the customers who are actually choosing Paymentus. But then as they started to realize the benefits of the platform and how simple we made everything and how reliable it was even as they grew the -- as the needs grew, Paymentus was able to accommodate them and then seeing the transition go into larger and larger customers and now a lot more the enterprise clients who are historically not even outsourcing to -- they never really outsourced to anyone. We were the first system they ever trusted. So -- that gives us a lot more confidence that we are not just replacing the legacy providers who displacing the legacy infrastructure altogether. So demand environment is a lot more -- a lot stronger. It has gone beyond the utilities. As you know, it's not just utilities, insurance and all the other vertical. We are literally just taking a household bill and then typical business builds and going through what are the key builds they have and going into each of those verticals.

Yes. So maybe just to go deeper on that. moving beyond utilities, living upsides and clients? So what verticals are hot? Like where do you see specific demand? .

Actually, we sound somewhat like a cliche, but all of the verticals are feeling great about. Because the way our team is organized, the way we're business we are organizing it, we felt that platform has always been great. We just need great historic story tellers. As the story is being dolled with the vernacular of the specific vertical, I think the platform continues to resonate extremely well. So you're seeing we are signing deals in education vertical, which is a investment to us, health care vertical and insurance, telecommunications, property management. But was is going down the line. We're saying, well, we have 3 or 4 bills covered with the utilities, insurance, we've got another couple of them, then consumer finance we got a couple of more and then keep going to -- we're trying to capture all the 12 to 15 bills.

Yes. So what do you think is the -- what is changing the sense of urgency for these billers to work with you 1 side, I know is tech and whatnot, but are there other forces that are driving this decision process to maybe be a little bit faster to say, "Hey, we need to update or automate or even outsource our bill payments.

Yes. I think what has transpired is bill payment has gone mainstream, the digital repayment has called mainstream, and it has become an imperative. Previously, it used to be that you have 3% or 4% of your payments coming digitally, that's are coming manually paper checks and cash and money orders and so on. Now when you start to get to like 20%, 25%, 30%, it's a very big channel a 1 hour of unavailability means your entire organization is brought to your knees. And what our doesn't sound like a lot when you're talking about in a year in the context of a year, but it's happening on the first of the month, for example, which typically could happen when -- if your platform is not a scaling well, you have led the entire customer body down. And if you think about if you are in-house solution provider and you're having to ask millions of dollars of investment and resources and then you have compliance and security to the CFOs of the organization. The natural question is, is there no alternative. And then previously -- the answer used to be now really. Now with Paymentus is because of what we have built and the infrastructure we have created, and actually, we are very fortunate to be the size we are in right now. We are approaching $1.5 billion and profitable, strong balance sheet. So customers can see that we are a deal worthy company, along with the technology platform, solving the 2 fundamental principles we set out to solve, how do we reduce the cost to serve by improving the customer experience and both of that comes together. So I think almost everyone wants our platform is it just a matter of when can they get out of the contracts they have -- and then -- and how -- where does it sit with some of the other priorities that might be going on in that particular time.

Good. That's helpful to hear it. So before we move on to some of the other fund parts of the business, just thinking about the predictability of the business. I think you've been very careful around setting the guidance because you want to learn how the behavior of payers, payee perform. And I didn't appreciate the seasonality as you shift into insurance and education, right? These are bigger tickets that have different payments at different times that might have different data types. So -- so just walk us through that? Like do you have visibility into that at this point? Because it's hard for us to appreciate right how some of this new flow is coming in and how the seasonality changes.

I'm glad you asked this. As we are navigating our way through capturing the market share and getting into more verticals and even diversifying into more bigger size of the billers compared to smaller size within the same vertical. We are learning a lot. And as the quarters pass by and once we have full 1-year experience, we are more -- we are more knowledgeable about how to forecast the trends because some seasonality might be into play, but we are not aware of it on this 1 year is past. So we are baking a lot of that into as we guide because we never want to get ahead of ourselves. We will not count our chickens before they hatch. And that has been a policy of prudence, you call it, and that's what we've followed and that land that has been an important part of our success as well. We don't want to chase a number and then fall behind. That's not our goal. Our goal is to be very prudent cautiously come up with the guidance, but actually deliver a good result. And once the full alleges obtained, then you start baking into the guidance. And I think as we are scaling the company at such a pace at which we are prudence becomes more and more important. And the diversification is causing us to do it. And I think for the right reasons. But seasonality could play into roles. For example, utility bills, you pay every month, but still you use more in summers and winters compared to other months. So Q1 and Q3 are different than Q2 and Q4, for example, but at the same time, insurance, for example, has seasonality, you might have -- you might be paying your premiums once a year for your cars versus some people would pay monthly. Some people would pay quarterly. So all that comes into play and bring seasonality into the play. So in some cases, you will see that as we are scaling, you might see dissipating over time because the scale is there. At the same time, in some quarters, you may not. But we are committed to our model for top line growth and bottom line growth, which we talk about 20% top line and 20% to 30% bottom line. That's the long-term CAGR model. We are committed to that. So that may entail quarterly variability. But overall, we are marching to the right path.

So with with the just trying to think back in terms of new learning, right, which is really important in adapting the business, the energy business or exposure to high energy prices, you address that by adjusting your pricing. So walk us through how that evolved and why that's maybe applicable to some of the new business that you're bringing on or not? I mean, I don't know if there's a way to smooth out some of this seasonality given how you price, but how did that happen? What can we learn from that.

So energy prices were more relevant to us during COVID. I think that's behind us many years ago, and we learned our lesson at that time. And utilities was a much bigger piece of business at that time. Now what has happened is, over the time, first of all, the company has scaled. We are like we guided to $1.44 billion top line revenue. During COVID, it was much less revenue. We scale massively. Secondly, utilities is not the most important piece of the business today. And even within utilities, a very small subsegment of that has some correlation to it. What we have done over time is this diversification has helped. Secondly, we have evolved over in terms of our pricing strategies. Any impact, any significant impact are right away recovered from the bidders, if I say in simple terms? Our impact is insignificant. And I think in case there is a misconception out there, the energy prices are kind of directly related to our performance, I think that's the wrong belief. So I want to straightaway clarify that. That's not the case at all. In fact, Q1 is a very good example. I believe the inflation energy was still not double digit, but 6% or 7% year-over-year, but the impact was meniscule, our growth of CP was 35.2% and revenue was 30%. So it was immaterial, I would say. The short answer is diversification has helped scale our helped and pricing strategies have evolved, we are not as directly impacted.

So as we look ahead, then naturally, we should expect revenue and contribution profit probably to converge a little bit more. Is that a fair.

I think longer-term conversion should happen of revenue growth and CP growth. but there could be periods as we grow and as we scale, there will be periods and quarters where the revenue -- the gap will be more. For example, in the past year, you saw there was more gap because we were launching new enterprise customers. But as we have now built the cadence, you see that we are converting more.

Okay. Good. So before I move to Valeo and Bill Wallet, I had a lot of questions around that. Any other questions from people on the base business and the financials -- if not, you going if I missed something, you want to highlight?

I was just going to say we CP revenue the convergence is 1 phenomena. But I won't be surprised if that happened in the past, so could outgrow revenue as well. So we'll see how that all plays out. .

Yes. I mean, dynamics in terms of consumer pay versus payment mix -- exactly. Okay. But it doesn't -- yes, it feels more likely but as things to converge rather than the Yes. Yes. Yes. Good. So let's do Valeo and Bill Wallet. I think the way I phrased the question maybe to kick it off is just Disha, you mentioned this new category. I like the phrasing of the AI native service commerce we're still focused on retail e-com and consumer person to merchant, whatever, like that's obviously a big market. But you're right, the service commerce side of it is a little less addressed -- can you define that, elaborate on what you mean by it and what you're building, right, to attack it?

Sure. So I think I was thinking about what is the best way I can explain. So if I can -- if we look at our own experience. It has become very easy to buy things. So all the commerce advancements have been towards checkout. -- quick checkout. So sitting here, you can buy anything. You could buy a shirt, you can buy a nice bag. And frankly, if you are so implied, you can also buy a car, right? All of that could happen here from your phone. And there are tools available to you to be able to do that. So you can go to the website, you can see the product, you can see exactly all the benefits of it. You can also get the checkout assistance. You can get payment digital wallets -- you can check out with Apple Pay, Google Pay, Venmo, PayPal. So you don't even have to remember your card numbers and so on. So you can do that. However, let's take an example. You've got now the car -- and now next morning at fender-bender, unfortunately, what do you do? Who do you call? How do you call? And if you even get the insurance on the car you just bought, what does that experience look like? You have moved into a brand-new house. You have your conditioning all new things and now the air conditioning is not working. The hot water is not working for whatever reason. What is the experience like? -- doesn't look like that you're an alternative universe, one where you can buy anything you want very quickly and everyone is set up to get you to buy something very quickly. But when it comes to service, so on selling has become easier, servicing continues to be lagging behind. And Paymentus has been doing about power for years, we have been trying to modernize customer experience and so on. And everyone starts to take a look at Paymentus as more and more -- part of it is just because of the name and just because of the way we get paid, the Paymentus is basically just payments. And what your take rate is kind of like how you will look at traditional credit card processor and so on. Service commerce is all about making that part, which is the servicing of the customer, making it easy. Is starting with all of aspects of customer journey, whether it is -- if I can make one more point about service commerce, it will be getting a product -- the service commerce actually starts where product commerce finishes, meaning checkout is just the beginning. After that, or opening a bank account is the easier part. -- getting people -- customers to stay with the bank, getting customers to invest in the bank or use other services of the bank requires you to continue to have a great customer service, quality of service. Same is true for service providers. Paymentus has visualized that we could actually -- we are already going pretty far in the process, but maybe to go far enough, we need to actually -- and we will need the help of AI, and we are thinking this in 2020, 2019, 2021. So we started to file all these patterns. So you can take a look at how these patterns were filed in those time frames. So we said, well, first, we will need a digital wallet, but not a typical old school purchase friendly digital wallet, but a wallet that allows you to interact with your service provider and say, "Hey, I had a fender-bender and tell me what I need to do and the app helps you take the picture and send it to us." You don't have to identify yourself. You don't have to tell them your policy number. Bill Wallet already knows that and we'll take tale of all of that stuff for you. So my hard water heater is not working. We already know who your hot water heater is with. We will take care of everything else. And say, I'm available at 8:30 a.m. on Wednesday. We will schedule all of those for you. So that is sort of the journey we thought about. So -- that was 1 part of the fact. The other part was, wouldn't it be nice that all these documents themselves, there your statement or your bill, your invoice, all of them themselves come to life -- so you can ask any questions in the document, you can interact with it, you can then make a payment to it, but have all of the questions, you don't have to call someone to have the question. So we filed a pattern we call it Bill. And its other part was all of this would require integrations in the back-end systems. Wouldn't it be nice that AI itself has integration framework that systems can talk to each other without a whole bunch of manual interventions. So we follow a pattern on that 1 as well. So that's sort of what we created and then the visualization, which is AI 360, part of the integration framework. So we felt that this is what we could -- if we could achieve that we would be able to create the alternative universe and make the change there. So other part can be reliable for consumer side of that these product commerce or Shopify, the websites and so on. Well, I don't pay Paymentus website engine that can be personalized for you and that could be multimodal. So it talks to you from the phone. It can talk to you -- I can talk to you from your map glasses. You can talk to you from your car. You can talk to you interact with you exactly the same way and including all the billing information, et cetera. So we are basically saying the entire stack of the product commerce can be hosted by Paymentus. And that we already do with all the stuff we have been building over the years, all the multichannel communications and so on, now it's a matter of having build wallet and Billio being available. So that's the -- a little bit of a mouthful, but that's the way.

It's good to have the analogy or the examples that you went through with the water heater and but just thinking about what you described -- this is less about the payment itself. It's more about the workflow around -- the payment. So can you explain to some really the the logic, right? Because you're already doing a lot with the consumer in terms of authenticating and validating and then you understand the preferences, but you also can read the invoice, and you know how the interface with the service operations side of the way they want to engage, right? And you can do it like you said, multichannel, but just there's a lot of complexity there. But -- so how did you solve around all of those things? Is it just a byproduct of you having all those connection plants? I'm just trying to understand the workflow of how you solve that.

Yes. So a lot of this is basically taking a step further, realizing that -- at some point, AI itself will be integrating systems. We wanted to make sure that look at the pack and pipes and let's make sure we address that. Identity, we do do the identity today. There are billions of times identities are verified every year between consumers and the service providers. And we felt that if that process itself could be encapsulated into 1 identity between the user and their bill wallet. And that Bill Wallet already has all of the entities relative to each of the service providers based on the rules set by the service provider we would be able to provide the unified interaction. So that's what sort of what triggered. And as a result, rather than having a 5-minute call waiting for 30 minutes, can we create a TSP check line equivalent that you just dial a bill wallet number or you don't even have a you start typing on your phone, and we will do the rest. So we will identify who you are, your -- with your policy, with your bill and all of that. And then if you -- for example, an example of having a hot water heater or HVAC or what have you, if the fee was $85, even that could be paid through till wallet. So we wanted to make sure that happens. But all that is happening in seconds as opposed to right now, all of our experience are any of these calls are like 10 minutes to authenticate yourself. And then you have another 10 minutes, 20 minutes to just wait on the line. And frankly, because it's so expensive to talk to anyone, no 1 wants to talk to you with all of these service providers. So we feel that to broaden the scope of -- to be able -- for Paymentus is to be able to serve the entire service economy have become a tens of billions of dollars of revenue company as opposed to in the single digits, we need to broaden the scope of all those who we can serve and all those will require different technology components from us, including the integrations -- ease of integration and so on. So we have solved all of that. So that's what this is about. Creating basically, in my mind, Paymentus is creating a universe beside the product retail university of digital, their website providers, searching optimization, then you have digital wallets and your payment processing companies, all of that. We are just creating a travel universe to that for the service economy, which is larger than the retail economy.

Yes. I think I appreciate it. So you talked about how you've pilot this and and tested, you haven't marketed it, but you've had some positive signals so far. What can you share detail-wise?

Yes. So we basically said that can we just launch Bill Wallet and prove to us that we can -- our curious is that we have about 40% of U.S. households, can we launch it to a very small fraction of that and see what our conversion will look like to Bill Wallet from that. And when people start using Bill Wallet to make a payment, how does that compare to the legacy digital wallets. So that was the thesis. So we launched it at a very small fraction, and we were blown away with the number of customers we started to sign up. So we've announced that we have signed close to 100,000 users or 100,000 users. And -- the number of times Bill Wallet is being used compared to some of the other payment methods in the.

Yes, we can see all of that.

So we are already ahead of all of them, in fact, maybe all of them combined. So I don't want to go that forward just yet, but I will just say that we believe that we have solved the need. I want you to think about as from an investment community, I want you to look at Dillio,Bill Wallet and all of these AI 360, all these tools, but also the service commerce. I don't want you to think about the payment of securing new products and new categories for the sake of it. That's not Paymentus. We have seen the need and the problem, and we have basically solved it. We are not geniuses in any way, and we have basically this problem solvers. We are saying customers have hired us to solve problems, learn from their experiences, understand where the pressure points are, where the frustration points out of the customers, why does it take 30 minutes to get a call answered, can Paymentus solve that problem. And can we make it easier for customers. We believe we have done that with this. So the success we are seeing it now with 100,000 users, we believe in coming years if this starts to get to millions of users think about our acceleration of our growth from the perspective of if you go into a billing company and saying, look, we have a customer cohort that can make this percentage of your payments will already be in seconds and your call will drop from 4.5 minutes to 30 seconds to take a payment or any interaction. And all of those interactions, the best call is the one which never took place, you will not even need to have the call because our agency commerce framework will take care of all of that. Everything you can do for your customer on the phone, you can do it through Bill Wallet and Billio. So I think this is -- so in our minds, we believe that customers who are beyond Paymentus uses reach and the customers you think we want -- average will be become likely our customers. So as strategy in gene or whatever you want to call it business engineer. My job is to see what can I do for next. So the company 10 years from now looks just as attractive as it is today as an investment, and that's the foundation.

So that's good. So you have IPN and you have some partners in the past we've talked about Walmart and PayPal and these consumer service providers in general. How do you think they will play a role in the evolution of this? Because I know -- I hear you're solving it from an engineering perspective. You don't want to be a consumer-facing company direct to consumer, but that's not where -- I don't think that's where you're taking this, but -- how do you think those players will come along in the journey

They remain great partners. I mean, from a face-to-face perspective, transaction will take place very quickly. You don't need to use our authentication. You just need to do.

You're doing at a very .

Yes. Bill Wallet ID and your payment could be made. And the other thing I would say is from -- PayPal remains a great partner of ours and probably could participate in the water itself. So we are working through some of the mechanics. So we feel like -- we are taking our partners along with us and reminding them that all your investments have solved a problem that was in a different universe. -- the majority of the universe, which is the majority of the economy, the service economy, you haven't been able to solve, and Paymentus is actually uniquely positioned. We are already running systems for who's who in America. Some of the largest household companies are using us. So we feel great about our chances to be able to be actually to just change of simplicity. Simplify bill payment simplify service interactions, all of them for you. I think our journey would be -- I would love to see a day where someone in their house when they put their kids to bad and realize that they -- something is not working in the house, they just say, do the Bill Wallet app and it gets taken care of. I mean that's what the -- this is all about. And you no longer have to stand in line. You don't have to call anyone. It is all taken care of. We are doing work for you, so to speak.

Because you've automated the workflow into your systems. Any questions on this before I keep going. Happy to take them. So looking ahead, I think you were very clear. Both of you were very clear to say, right, this is the vision, you're thinking 10 years out your willingness to fund it the guardrails in place to right, to not get too ahead? I'm curious how are you balancing that in terms of the opportunity in being first tier versus respecting and honoring the objectives that you set financially for investors?

Yes, the model remains intact. I think we are basically -- we have been investing in these things while we were delivering over model exceeding for the last couple of years as well. That's why it is very important to call out that this has been in the works with your past now? So we are -- we remain committed to that. and you want to. Yes. I mean you haven't spent anything on sales and marketing on this to date. We did spend in R&D though, in the past years, we've been spending a decent amount on technology, and this was a part of that also. But I think this was a point that we had to bring it up at this point, given the vision needs to be clear, and we are marching on that path. And I think having a good milestone with us for 100,000 customers or users was a good landmark for us to open this up. But we remain committed to our financial performance, which we've been very good in the past as well, and we remain committed to these numbers.

And this is about making the financial performance back not.

So quickly just to hit a few subjects. We have to ask you an AI question. You talked about it. I know it's the foundation of a lot of Robalo and the wallets Sobel. So just at the core bill payment the core business today, thinking about AI, any interesting observations? What's moving very quickly for you, whether in your conversations with builders as well as with the consumer service providers? .

I think for us, the AI remains a very -- it's a central theme internally and externally. So internally, we are already working on a lot of advancement of the how we support our customers without losing the human touch, but we are still supporting our customers through the -- to improve our own processes and so on, engineering side, becoming more efficient there. But externally, they're also excited about having -- becoming an AI player for our clients. So we feel good about that. .

So when you're deploying AI internally then, what are you most excited about? Is it more on the product velocity front? Is it productivity? Is it customer support, operations? Where do you see the most impact in the short term? -- internally. .

All of those, I mean, from an operations perspective, support, we already are using tools for AI. AI tools there engineering-wise as well, pretty robust tool. So we're excited about all of those components. Because it's -- again, without sounding like cliche here, but -- we have been thinking about some of the stuff for a while now. So it is just we are able to talk a little bit more openly and publicly now, but we are thinking about a lot of that earlier. .

As we read about -- and we've had a couple of sessions earlier and all this talk about agent commerce and the impact on traditional e-commerce, the bill payment part doesn't quite come out. Sometimes we hear a little bit about subscription management. But do you see it having real momentum in terms of use cases today or even the next 3 to 5 months, do you think that we'll see more sort of a Agentic-driven payments from the consumers? Is there a demand for that? .

I think we do see that it's just like any other technology adoption curve, there will be innovators, early adopters and then before they become mainstream. So I think it's still -- we are far before the mainstream adoption occurs. But I do want to make 1 quick point actually that you asked on the call as well that the public call, which was who owns and how the security and the liability of the tokens and so on. And I was reflecting on how can I vest provide the answer to that. . The simple point the question is, can who's the relationship, who owns the tokens, who owns the charge backs and all of that. And my answer to that is, if I may, that it's entirely product commerce universe framework paradigm. We have shifted that paradigm. We implement us, that's not applicable because in our case, we have the security and privacy of the merchant relationship with their customer, and no agent of AI in the middle is the foundation of the wallet. So when you're talking to your agent, whether wherever it resides, and you are saying open Bill Wallet and call my utility company entirety of that interaction . Is happening out of band from that agent because we got all the information. We don't need you to tell us what your data but is. You don't need to tell you card numbers and all that. And we are doing it based on what our client the billing company would want us to do each billing company is different. So that's the way we are doing it. So it's a different paradigm, and that's why we thought the best way it could be that you call it an AI-native agent e-commerce and service commerce so that folks can start to differentiate between their product and their service and stay connected with us.

Okay. Makes sense. Look, I think we sometimes focus too much on the retail side and .

But we haven't done our part we are not a $20 billion company yet.

We should still pay attention -- thank you both -- and we're out of time, but I appreciate the discussion.

Thank you so much. Thank you. Thank you.