Prospectus Summary
PROSPECTUS SUMMARY The following summary highlights information contained elsewhere in this prospectus. It does not contain all the information you should consider before investing in our Class A common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and related notes included elsewhere in this prospectus, before making an investment decision. In this prospectus, unless the context requires otherwise, all references to “we,” “our,” “us,” “Paymentus,” and the “Company” refer to Paymentus Holdings, Inc. and its consolidated subsidiaries.Our Mission
Our mission is to simplify how bills are paid.
Our Company
Paymentus is a leading provider of cloud-based bill payment technology and solutions. We deliver our next-generation product suite through a modern technology stack to more than 1,300 business clients—our billers. Our platform was used by approximately 16 million consumers and businesses in North America in December 2020 to pay their bills and engage with our billers. We serve billers of all sizes that provide non-discretionary services across a variety of industry verticals, including utilities, financial services, insurance, government, telecommunications and healthcare. By powering this comprehensive network of billers, each with their own set of bill payment requirements, we have created an enviable feedback loop that enables us to continuously drive innovation, grow our business and uniquely improve the electronic bill payment experience for everyone in the bill payment ecosystem.
Our platform provides our billers with easy-to-use, flexible and secure electronic bill payment experiences powered by an omni-channel payment infrastructure that allows consumers to pay their bills using their preferred payment type and channel. Because our platform is developed on a single code base and leverages a SaaS infrastructure, we can rapidly deploy new features and tools to our entire biller base simultaneously. Through a single point of integration to our billers’ core financial and operating systems, our mission-critical solutions provide our billers with a payments operating system that helps them collect revenue faster and more profitably and empower their consumers with the information and transparency needed to control their financial destiny.
We extend our platform’s reach through our Instant Payment Network, or IPN. This is a proprietary network, consisting of tens of thousands of billers, that connects our integrated billing, payment and reconciliation capabilities with our IPN partners’ platforms. Our IPN enables our partners, which include leading consumer brands and financial institutions, to access our next-generation electronic bill payment technology using the same integrated platform we provide directly to our billers. By being connected to our IPN, our IPN partners provide their consumers with the full capabilities of our next-generation product suite, including the ability to engage with and make payments to our large and growing base of billers. Those partners in turn expand our platform’s reach to millions of additional consumers in the United States and globally.
Paying bills is a fundamental obligation for people around the world and a recurring relationship exists between consumers and billers for non-discretionary, essential services. There were approximately 128 million households in the United States as of December 31, 2020, paying an average of ten bills per month per household. Bill payments represented 58% of total monthly expenditures among U.S. adults in a recent survey by the Federal Reserve Banks, with total estimated bill payment spending exceeding $4.6 trillion in the United States in 2020. Despite its ubiquity, the bill payment industry suffers from under-investment in technology, which creates slow, often manual and error-prone experiences for billers and consumers.
Today, most billers rely on legacy bill payment systems from financial institutions or biller-direct solutions. Both of these systems create challenges for billers and their consumers. Financial institutions often lack the ability to view billing details or obtain payment confirmation and limit payment types to their own checking accounts. Similarly, billers traditionally rely on non-integrated, multi-vendor solutions, which force consumers into a decentralized and fragmented experience. These legacy solutions result in inefficiencies in consumer communication, electronic bill presentment and payment capture, which hinder a biller’s ability to create a holistic and accurate perspective on its cash flow.
We address these inefficiencies through our cloud-native, integrated single-vendor solution. Our platform supports omni-channel, electronic bill payments across multiple commerce channels, including online, mobile, interactive voice response, or IVR, call center, chatbot and voice-based assistants. As we do not charge development or implementation fees, there is no minimum investment necessary for billers to achieve efficiencies from the use of our platform to replace some or all of their legacy bill payment systems or biller-direct solutions. We simplify how bills are paid and help our billers collect revenue faster and more profitably because our platform is:
Our platform was built on more than ten years of data, investment, network scale and feedback from billers that used our platform on a daily basis. We leverage our next-generation platform and single code base to deploy new solutions across our entire biller base simultaneously. Our ability to rapidly and cost-effectively drive innovation requires a next generation platform powered by deep software integrations across the bill payment value chain, scale and data, which we believe makes our platform difficult to replicate.
Our ability to seamlessly serve billers, partners and consumers uniquely positions us at the center of a three-sided network and enables us to drive a powerful, and accelerating, flywheel effect. Our robust platform attracts billers and partners seeking to build stronger relationships with their consumers. Adding more billers and partners extends our platform’s reach to more consumers. These consumers drive more transactions to our platform, which strengthens biller and partner retention and in turn accelerates our organic growth. As we scale, we expect to drive increases in our operating leverage, which in turn enables higher profitability and more efficient biller and partner acquisition.
We captured over 15 billion unique transactional and behavioral data points from over 195 million transactions in 2020, across a network of more than 1,300 billers as of December 31, 2020 that had approximately 16 million consumers and business users in December 2020 alone. This rich data set continuously enhances our ML algorithms and AI capabilities, which power the network effects that attract billers, partners and consumers to our platform.
We rely on a diversified go-to-market strategy including direct sales, software and strategic partnerships and our IPN. While the direct sales channel is an important part of our business, we also rely on our software and strategic partners to deliver our solutions to our billers. Our software partners, such as Oracle, integrate our platform into their software products enabling us to power their bill payment capabilities. Our strategic partners, such as U.S. Bank, JPMorgan Chase and a major payroll solutions provider, refer new billers to our platform and in many cases we jointly sell to prospective customers with our strategic partners. Some of our strategic partners, particularly banks, also integrate our solutions into their platforms to provide an integrated bill presentment and omni-channel bill payment solution to their customers, and as such they are also IPN partners.
Our IPN promotes rapid adoption of our platform through partnerships with leading business networks, including:
Our enterprise-grade platform creates a compelling value proposition for our more than 1,300 billers as of December 31, 2020, ranging from small and midsize to large businesses. In 2020, we processed over $37.9 billion in transaction volume across a variety of industry verticals. As billers experience the benefits of our platform, they typically expand their usage. In 2020, 57% of our total dollar volume processed was in utilities, 23% in financial institutions and 16% in insurance. In addition, our biller and partner bases are diversified; in 2020, no single biller represented, and no single software, strategic or IPN partner was associated with, more than 10% of the transactions processed.
We have achieved significant growth through our capital efficient model. We generated revenue of $235.8 million in 2019 and $301.8 million in 2020, representing a year-over-year increase of 28.0%. Gross profit was $74.4 million in 2019 and $92.6 million in 2020, contribution profit was $96.7 million in 2019 and $120.5 million in 2020 and adjusted gross profit was $77.1 million in 2019 and $96.1 million in 2020. We had net income of $13.7 million in both 2019 and 2020, and adjusted EBITDA was $26.0 million in 2019 and $28.5 million in 2020. Our net cash provided by operating activities was $17.5 million in 2019 and $35.6 million in 2020, and we earned free cash flow of $6.3 million in 2019 and $20.8 million in 2020. See the section titled “Prospectus Summary—Summary Consolidated Financial and Other Data—Key Performance and Non-GAAP Measures” for a discussion of the limitations of contribution profit, adjusted gross profit, adjusted EBITDA and free cash flow and reconciliations of these non-GAAP measures to the most comparable GAAP measures for the periods presented.
Our Industry
The bill payment industry is undergoing technological transformation as consumers and billers demand a straightforward and streamlined approach to electronic bill presentment and payment and consumer engagement. The following key trends are currently defining the industry:
Our Opportunity
The consumer bill payment market presents us with a significant opportunity. There were approximately 128 million households in the United States as of December 31, 2020, paying an average of ten bills per month per household.
According to Aite, U.S. consumers paid approximately 15.5 billion bills in 2020, which represents approximately $4.6 trillion. With less than 2% of those bills processed on our platform during the same period, we believe our platform and network positions us well to capture a meaningful portion of the market.
We believe we could address an even broader opportunity because the configurability and extensibility of our platform enables wider application of our software and solutions across different use cases and geographies. Over the long term, we intend to expand our offering to new and existing billers beyond traditional bill payments. According to the Nilson Report, global electronic payments totaled approximately $34.9 trillion in 2019.
Our Platform
Our platform is purpose-built to transform the way billers get paid and engage with their consumers. Our AI-driven SaaS platform provides a single-vendor solution that enhances the bill payment ecosystem with new functionality and added transparency. Our single code base architecture maximizes the inherent flexibility, extensibility and configurability of our solutions, which allows us to rapidly deploy our solutions to our billers.
Single Point of Access
APIs: Our easy-to-use application program interfaces, or APIs, enable billers and partners to seamlessly access the entirety of our network through a single connection.
iFrames: Enables our billers and partners to exercise more control over the user experience by customizing the business logic to meet their specific requirements.
Fully Hosted: We also provide a fully hosted alternative for our billers. In this option, our hosted platform provides our billers the full power of our platform without incurring the cost of using their own IT resources.
Technology Solutions
Engagement: We believe billers must regularly engage with their consumers using actionable and contextualized data. Our tools enable billers to provide billing details to their consumers and directly communicate with them over secure channels.
Presentment: Our solution offers electronic bill presentment across numerous channels. Our electronic bill presentment products help billers maximize their reach to accelerate revenue realization and engage consumers more efficiently.
Empowerment: Consumers can control communication preferences, multi-lingual capabilities, self-directed payment scheduling, multi-account management and dispute management. Billers are able to use automated case management and configurable reporting to quickly and comprehensively provide high-quality customer service.
Payment: Our secure and comprehensive omni-channel payment platform supports traditional and emerging payment technologies across multiple currencies and languages across a variety of payment channels. We support one-time payments, as well as future-dated, recurring and payment plan transactions.
Intelligence: Our AI-powered analytics engine produces data-driven insights on consumer preferences, channel usage, bill lifecycles, messaging effectiveness and paper suppression and can be used by billers to improve the consumer experience.
Technology Architecture
Single Code Base: Our extensible, cloud-based platform was built from the ground-up on a single code base with no versioning, which enables rapid deployment of new features and tools in part because there is no need to manage and reconcile separate versions of our software code.
AI / ML: Our platform uses AI and ML algorithms to increase efficiency and extract data-driven insights from transactions and interactions between consumers, billers, partners and our platform.
Our Network
Our innovative technology platform enables us to sit at the nexus of a powerful three-sided network of billers, partners and consumers. We use the power of this network to enhance the number of product features each biller uses to promote transaction growth. In 2020, our average biller used at least ten of 19 core platform features that enable billers to optimize their payment operations and user experience. Our portfolio data shows that payment adoption is highly correlated to feature utilization. By increasing feature usage, we believe we will realize an increase in transaction volume from our billers.
Our Billers
Our innovative technology platform empowers billers to offer electronic bill payment acceptance across multiple payment types, engage with their consumers and streamline their business operations efficiently and cost-effectively. We attract billers to our platform because our platform modernizes their payment infrastructure and helps them collect revenue faster and more profitably. Our platform is capable of posting payments directly to billers’ systems, which simplifies revenue operations and strengthens the relationship we have with billers.
Value Proposition to Billers
Flexible and Integrated Platform: Billers can offer their consumers a variety of traditional and emerging payment and engagement technologies that enable the billers to collect revenue faster and drive improved customer satisfaction, while reducing costs such as their PCI-DSS compliance burden. Billers have the flexibility to integrate directly to our platform through APIs, iFrames or a fully hosted solution, which allows them to cost-effectively select and customize our solutions to fit their specific requirements. Because our platform is flexible and scalable, and since we do not charge development or implementation fees, our value proposition applies to all billers whether they ultimately choose to use our platform for all of their bills or continue using legacy bill payment systems or biller-direct solutions together with our solutions.
Long-term Growth and Operating Leverage: The scalability of our platform allows billers to capitalize on growth opportunities for their business. While helping billers grow their revenue, we also help reduce costs by leveraging our integrated technology architecture to automate manual workflows, which reduces error-prone manual data entry and efficiently reconciles payments to backend financial and operating systems.
Our Partners
As our biller base expands, we attract market-leading software, strategic and IPN partners that use our platform to power bill payment experiences within their ecosystems. Our innovative platform facilitates a modern bill presentment, consumer engagement and bill payment experience for our partners’ customers, regardless of partner type.
Software Partners: Our software partners include large third-party technology providers, such as Oracle, which integrate our platform into their software suites to power bill payments for their customers and refer billers to us. For example, ERP providers integrate our platform into their own suite of solutions to offer a comprehensive solution set that enhances their ERP software with bill presentment, consumer engagement and bill payment capabilities. In certain cases, we have revenue sharing arrangements with our software partners based on our transaction fees. In other cases, rather than a revenue sharing arrangement, we and our software partner mutually benefit from the partnership as the software partner can offer a more comprehensive solution and stronger value proposition to its customers and we receive broader reach to potential billers and consumers, an efficient biller acquisition channel and stronger biller retention from an integrated solution.
Strategic Partners: Similar to our software providers, our strategic partners refer billers to us and, in many cases, integrate our solutions into their platforms. Our strategic partners, including U.S. Bank, JPMorgan Chase and a major payroll solutions provider, work with us to offer bill presentment, consumer engagement and bill payment capabilities to their customers, which are billers. For example, a large commercial bank has many business clients who seek to improve and streamline the bill presentment and bill payment experience for their consumers. In that case, the large commercial bank partners with us to sell a joint solution. In other cases, the commercial bank may prefer to sell a white-labeled solution, which it obtains from us. Both co-sale and white-label arrangements typically involve revenue sharing agreements with the strategic partner based on the transaction fees we receive.
IPN Partners: Our IPN partners work with us to gain access to broader biller networks and provide their consumers with innovative technology to streamline bill payments. Our IPN partners include PayPal, for which we power bill payment capabilities, a leading global ecommerce retailer, through which we offer electronic bill presentment and payment via its AI-assistant voice service, and Walmart, for which we enhance in-person bill payment capability at Walmart Money Centers. Unlike software and strategic partners, IPN partners typically have direct interactions with consumers, and leverage our platform to connect to our biller network. Through this connection, consumers can initiate bill payments through our IPN partners, which we route to the billers. There are many types of IPN partners, including consumer networks, retailers, banks and financial institutions. We offer consumer networks and retailers increased engagement with consumers by enabling streamlined bill presentment payment experiences for an array of billers through their networks. We similarly offer banks and financial institutions increased engagement with their retail clients. For IPN partners, we will typically receive a fee per transaction processed through our platform and in some cases we pay a referral fee to IPN partners.
Multiple Roles for Partners: Notably, partners may fit into multiple categories, particularly banks and financial institutions. For example, a bank can be a biller, a strategic partner and an IPN partner. As a biller, the bank generates bills, such as mortgage and credit card statements. As a strategic partner, the same bank uses our platform to power an omni-channel bill payment experience for a commercial customer of the bank. In this way, that commercial customer becomes a new biller for our network. Finally, as an IPN partner, the same bank leverages our IPN network to enable a more robust bill payment experience for its business customers and consumers by, for example, enabling its business customers and those businesses’ consumers to pay bills using alternative payment channels, such as PayPal.
Value Proposition to Partners
Higher Consumer Satisfaction: Partners gain access to our network of billers and can provide turnkey electronic bill payment functionality to their consumers through flexible integration options. By integrating our platform into their ecosystems, partners can provide a more comprehensive solution and drive higher customer satisfaction.
Access to Innovative Technology Solutions: As consumers demand a more seamless and secure experience, partners require consumer engagement and payment technology that caters to the latest consumer trends. Our platform offers cutting edge technology that enables partners to grow mind and wallet share with their consumers.
Our Billers’ and Partners’ Consumers
As our platform reaches more consumers, we capture and monetize more payment transactions. In December 2020, approximately 16 million consumers and businesses used our platform to pay their bills. As consumers increasingly demand omni-channel bill payment solutions for more of their bills, we attract more billers and partners who look to our platform to meet that demand.
Value Proposition to Consumers
Next-Generation Electronic Bill Payment Tools: Consumers gain access to advanced payments functionality to streamline their omni-channel bill payment experience. Consumers can view and pay bills through a variety of payment channels and types, engage with their billers and retrieve actionable insights regarding their payments and billing history.
Control Over Financial Health: Consumers gain added control and visibility over their financial health on a daily basis through the advanced tools and features we provide. Our platform allows consumers to set the terms of their bill payments in a way that best suits their needs.
Our Revenue Model
Our revenue model is highly visible because of the mission-critical, embedded and recurring nature of the solutions we provide to billers. We derive the majority of our revenue from a fee paid per transaction by the biller or the consumer or a combination of both. In some industries, billers pass on the transaction costs to consumers, while in other industries, the biller pays for the transaction cost, providing the bill payment free of charge to the consumer. Additionally, some billers use a hybrid approach in which the consumer and biller share the cost of the transaction fee.