Paymentus (PAY) Q1 2026 Earnings Transcript

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DATE

May 4, 2026, 5 p.m. ET

CALL PARTICIPANTS

• Founder and Chief Executive Officer — Dushyant Sharma
• Chief Financial Officer — Sanjay Kalra

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TAKEAWAYS

• Revenue -- $358.4 million, up 30.2% year over year, driven by new billers and higher transaction volume from existing clients.
• Transactions processed -- 203.4 million, representing 17.4% year-over-year growth, which Paymentus Holdings (NYSE:PAY) attributes to onboarding large enterprise billers.
• Average revenue per transaction -- $1.76, up approximately 11% compared to $1.59 in the prior year; this trend extends seven consecutive quarters of double-digit annual growth.
• Contribution profit -- $109.7 million, increasing 25.2% year over year, with a contribution margin of 30.6% versus 31.8% last year, mainly reflecting a greater proportion of large-scale enterprise billers.
• Adjusted EBITDA -- $42.4 million, up 41.5% year over year and representing a 38.7% margin of contribution profit.
• Non-GAAP net income -- $26.9 million, or $0.21 per share, showing 50% annual EPS growth; includes a 25% non-GAAP tax rate.
• Cash and cash equivalents -- $342.1 million at quarter-end versus $324.5 million at year-end 2025, with the quarter's $17.6 million increase primarily generated from $30.5 million operating cash flow, partially offset by $9.4 million in capitalized software investment, and $3.3 million in net employee RSU settlements.
• Free cash flow -- $20.9 million, with working capital investments—mainly accounts receivable—influencing year-over-year comparison.
• Guidance raised -- Full-year revenue outlook lifted to $1.425 billion–$1.440 billion, representing 19.7%–20.4% annual growth at midpoint and high end, respectively; contribution profit and adjusted EBITDA guidance also raised, anticipating 17.4%–18.3% and 22.6%–25.2% annual growth at the respective midpoints and high ends.
• Rule of 40 -- Achieved a rule of 40 score of 64 in the quarter (compared to 61 in Q4), with full-year guidance implying a range of 53%–56%.
• Vertical diversification -- Management emphasized signing of new clients in utilities, insurance, telecommunications, government, property management, consumer finance, banking, education, and healthcare, with channel partner additions in education and telecommunications.
• Product launch -- Unveiled “Billio,” a patented, AI-native service commerce platform encompassing Bill Wallet, ileo, and AI three sixty, aimed at transforming service transactions and interaction models.
• Adoption metrics -- “Out of that customer base, we have made Bill Wallet available to a mere fraction of our end-user base, but across various cities—early 100 thousand users across more than 1 thousand cities—with a very high conversion rate and no marketing spend, not a single dollar of marketing from Paymentus Holdings.”
• Pricing strategy -- Enhanced and increasingly proactive, with several utility customer contracts now using automatic or adaptable price models indexed to payment amounts, reducing the materiality of energy price fluctuations.

SUMMARY

The call introduced new AI-native products, with management stating these innovations represent a shift toward a “service commerce” model and may enable future participation in interchange economics as Bill Wallet adoption scales. Paymentus Holdings clarified that anticipated near-term economics remain tied to a consumption-based model, with long-term guidance for 20% revenue and 20%-30% adjusted EBITDA growth left unchanged. Management affirmed that raised guidance reflects prudent forecasting, as onboarding timelines for large enterprise clients require full-year data histories, and achievement of updated growth goals is already visible in the current bookings and pipeline strength.

• Sanjay Kalra noted that the year-over-year reduction in contribution margin is “largely offset by a year-over-year reduction in operating expense margin,” supporting record adjusted EBITDA margins.
• Working capital at period end was $365.4 million, a sequential increase of around 6.7%.
• Days sales outstanding was 29, stable versus the prior quarter and “much better than our expected range.”
• Paymentus Holdings reports zero debt and maintains high financial flexibility for organic investment and potential M&A.
• Bill Wallet and Billio usage is not expected to contribute material revenue in 2026, though management is “feeling good about 2027” as pipeline visibility increases to cover more than six quarters.
• Utilities comprise “a little less than 50%” of total revenues, with exposure to energy price changes now impacting only a small subsegment seen as immaterial.
• Adoption incentives for Bill Wallet are currently driven by usability, with leadership indicating “no marketing spend,” and plans to introduce further embedded incentives as scale increases.
• Competitive threat from Repay (NASDAQ: RPAY)’s acquisition of Kubra was dismissed by management, who said, “We wish them very well, just like any other competitor.”

INDUSTRY GLOSSARY

• Rule of 40: A software industry benchmark combining revenue growth and EBITDA margin percentage; a value above 40 signals performance balancing growth and profitability.
• Contribution profit: Revenue less direct costs tied to service delivery, before overhead or unallocated expenses are deducted.
• Bill Wallet: A patented, digital wallet purpose-built for bill payment and persistent customer–service provider relationships, distinct from retail wallets.
• Billio: Paymentus Holdings’ patented AI-native platform that converts static bills and statements into interactive, intelligent service documents.
• ileo: A component of Billio that transforms transactional documents into actionable, interactive experiences for end users.
• AI three sixty: An AI-driven orchestration and data intelligence engine that integrates, interprets, and visualizes service transaction data within the Billio ecosystem.

Full Conference Call Transcript

Our founder and CEO, Dushyant Sharma, will make some opening remarks before Sanjay Kalra discusses the details of the first quarter and our guidance. Following our prepared remarks, we will take questions. Let me just remind you we will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and we will refer to non-GAAP financial measures during this webcast. Forward-looking statements are based on management’s current expectations and assumptions that are subject to risks and uncertainties. Factors that may cause our actual results to differ materially from expectations are detailed in our earnings materials and in our SEC filings that are available on both the SEC website and our website.

Information about non-GAAP financials, including reconciliations to U.S. GAAP, can also be found in our earnings materials that are available on the website. With that, I would like to turn the webcast over to Dushyant Sharma. Dushyant?

Dushyant Sharma: Thanks, David. We are off to a tremendous start to 2026, with record revenue and strong growth exceeding our CAGR model across all key metrics. We believe these results underscore the durability and long-term growth potential of our business model. That strength is driven by our platform, our ecosystem, our expertise and scale, and our quality of service with support, security, availability, and compliance frameworks, along with a broad and continuously evolving innovation framework. In addition to our very strong financial results, we also announced an important product launch today that we believe will transform how service providers interact with their customers. Today’s agenda will proceed as follows. First, I will provide a brief overview of our results.

Sanjay will then provide a detailed financial review and discuss our outlook. I will then come back and discuss the strategic product announcement we have made today. We will then answer any questions. Let me start with financial highlights as shown on Slide 3. First quarter revenue was a record $358.4 million, an increase of 30.2% year over year. At the same time, contribution profit was $109.7 million, up 25.2% year over year. Adjusted EBITDA was a record $42.4 million in the quarter, representing 41.5% growth year over year and a 38.7% margin.

Once again, a majority of our year-over-year growth in contribution profit fell to our bottom line, and we exceeded the rule of 40 for the quarter again, coming in at 64 versus 61 in Q4. This reflects our team’s solid execution and our focus on delivering consistent revenue growth alongside high-quality earnings. These results are exciting for multiple reasons. Let me speak to two that will likely be top of mind. First, they speak to the vertical diversification and our enhanced pricing strategy over the years whereby the impact of elevated energy price index on our numbers has been materially reduced. Second, as we have shared in the past, we operate on a two fiscal year horizon.

Therefore, this outperformance is not just about one quarter. It actually gives us confidence and additional visibility for the rest of the year, and when combined with our backlog and bookings, we are also feeling good about 2027 visibility. Now on to our business results on Slide 4. We continued our strong momentum in the first quarter with robust bookings and a very substantial pipeline. We also continued to expand and diversify our customer base by signing new clients in several industry verticals, including utilities, insurance, telecommunications, government agencies, property management, consumer finance, banking, education, and health care. Complementing this, we signed channel partners in education and telecommunications verticals. Likewise, onboarding of our substantial backlog remains a priority for us.

Our team continues to demonstrate solid execution when it comes to onboarding activities. We also saw better-than-expected seasonal performance in the first quarter, largely from the large cohort of new customers that we added in the second half of last year. In addition, during the first quarter, we onboarded clients throughout multiple verticals including utilities, consumer finance, government agencies, telecommunications, banking, insurance, and education. With that, I will turn it over to Sanjay to review our financial results in more detail. Thanks, Sanjay.

Sanjay Kalra: Thank you all for joining us today. Before I discuss our first quarter results and outlook, I would like to remind everyone that the financial results I will be referring to include non-GAAP financial measures. Our Q1 press release and earnings presentation include reconciliations of these non-GAAP financial measures to their corresponding GAAP measures. Both are available on our website. Turning to Slide 5. We delivered a strong start to the year, with first quarter results that came in much stronger than we had anticipated, driven by higher transaction activity from both new and existing billers. This helped drive strong double-digit growth for revenue, contribution profit, and adjusted EBITDA.

This, combined with our strong bookings, sizable backlog, and strong pipeline at quarter end, supports our positive outlook for 2026. Our first quarter 2026 results included revenue of $358.4 million, contribution profit of $109.7 million, and adjusted EBITDA of $42.4 million. On a rule of 40 basis, we came in at 64, which we consider a solid result and a record for the company. We are encouraged by this achievement, especially given the macro backdrop we are operating in. I would also call out that we saw a sequential acceleration in the year-over-year growth rate for the number of transactions, revenue, and contribution profit, despite tough year-over-year comps and a challenging macroeconomic environment.

Moreover, the sequential growth rate we saw for all three metrics in Q1 was greater than the sequential growth rate we saw during the same period last year. Simply put, both our annual and sequential growth rates accelerated in Q1 2026, boosting our confidence for the full-year 2026 outlook. I will discuss the drivers of our outperformance and strong business momentum behind them shortly. These strong results also enabled us to once again exit the quarter with a much stronger cash position and gave us the flexibility to allocate capital with a continuous focus on longer-term growth, which also contributed to robust bookings. Now let us review our first quarter financials in more detail.

As I mentioned earlier, first quarter 2026 revenue was $358.4 million, up 30.2% year over year. This growth was largely driven by the launch of new billers over the past year, as well as increased same-store sales from existing billers. We also processed a higher number of transactions during the first quarter, reaching 203.4 million, up 17.4% year over year. Our average revenue per transaction increased by approximately 11% to $1.76 in the first quarter compared to $1.59 in the prior-year period, continuing our robust trend of double-digit annual growth of revenue per transaction over the past seven quarters.

This was mainly due to the biller mix, or more specifically the large enterprise billers that we launched during 2025, with higher average payment amounts. The first quarter guidance we previously provided did consider some of the anticipated upside from large enterprise accounts, but as you can see, results still exceeded our expectations. First quarter 2026 contribution profit increased to $109.7 million, up 25.2% year over year. This increase also reflected the launch of new billers and higher transactions from existing billers. Contribution margin was 30.6% for the first quarter, compared to 31.8% in the prior-year period. The year-over-year reduction reflects the increased mix of large, high-volume enterprise billers in our growing customer base.

This change in contribution margin was largely offset by a year-over-year reduction in operating expense margin, which resulted in a record adjusted EBITDA margin of 38.7%. This is consistent with our continued focus on profitability. Contribution profit per transaction for the quarter was $0.54, an improvement from $0.51 in the prior-year period, demonstrating our ability to expand market share without sacrificing comparable contribution profit per transaction. As we have noted before, variables that are outside of our control, such as an increase in average payment amount or changes in the payment mix, can affect contribution profit on a quarter-to-quarter basis. Therefore, we treat this as a secondary metric, while our gross revenue and adjusted EBITDA remain primary metrics for us.

First quarter 2026 adjusted gross profit was $92.4 million, up 27.3% year over year and ahead of our contribution profit growth rate as we achieve operational economies of scale. As we anticipated, first quarter 2026 non-GAAP operating expenses increased 16.3% year over year to $53 million. This increase was primarily due to higher sales and marketing expenses. You may notice our OpEx year-over-year growth rate increased this past quarter. This is a positive leading indicator for our business, as it means we are aggressively converting our substantial pipeline to bookings.

We expect to make similar investments throughout the year as we continue to execute our go-to-market strategy, calibrate operating expenses with contribution profit expansion, and deploy our growing cash balance to support further organic growth. These expectations are already incorporated into our guidance, which I will review in more detail shortly. First quarter 2026 non-GAAP net income was $26.9 million, or $0.21 per share, compared to non-GAAP net income of $17.6 million, or $0.14 per share, in the prior-year period, reflecting an annual EPS growth rate of 50%. This EPS incorporates a non-GAAP tax rate of 25%, which is based on our current expectation of our long-term projected tax rate, and it is also reflected in our 2026 guidance.

First quarter 2026 adjusted EBITDA increased 41.5% to $42.4 million compared to $30 million in the prior-year period. Adjusted EBITDA also represented a record 38.7% of contribution profit, an annual improvement of 450 basis points compared to 34.2% in the prior-year period. We believe the stronger adjusted EBITDA margin demonstrates the inherent operating leverage we have in the business. Please note, our incremental adjusted EBITDA margin was approximately 56%. Related to this, once again, we also exceeded the rule of 40 for the quarter, coming in at 64—a record. Now I will discuss our balance sheet and liquidity position on Slide 6.

We ended the first quarter with total cash and cash equivalents of $342.1 million compared to $324.5 million at year-end 2025. The $17.6 million sequential increase was primarily comprised of $30.5 million of cash generated from operations, partially offset by $9.4 million used in investing activities, primarily for capitalized software, and $3.3 million spent in net settlement of employee RSUs. The company does not have any debt. Free cash flow generated during the quarter was $20.9 million. This was primarily driven by strong adjusted EBITDA in the quarter, offset by investments in working capital, primarily in accounts receivable. Driving organic growth continues to be our primary focus.

Having said that, our strong cash position enables us to maintain financial flexibility to keep room for working capital investments as we scale. In addition, our ample liquidity allows us to explore attractive M&A opportunities that may arise in order to expand our growth prospects. Our days sales outstanding at the end of the first quarter was 29, comparable to 28 days at the end of the prior quarter, and much better than our expected range. Working capital at the end of the first quarter was $365.4 million, an increase of approximately 6.7% sequentially. We had 129.3 million diluted shares outstanding during the first quarter, pretty much comparable to the prior quarter.

Now I will turn to Slide 7 to discuss our second quarter and full-year 2026 raised guidance for revenue, contribution profit, and adjusted EBITDA. Before discussing full-year guidance, I want to mention that we are continuing to follow the same prudent approach to guidance that we have followed for the past three years, which has proven to be successful for us. As shown on the slide, for Q2 2026, we expect revenues in the range of $340 million to $350 million, contribution profit in the range of $108 million to $111 million, and adjusted EBITDA in the range of $38 million to $40 million.

On a rule of 40 basis for 2026, our guidance implies a range of 51 to 55. For the full year 2026, we now expect revenue in the range of $1.425 billion to $1.440 billion, an increase of 2.3% from the midpoint of our previous guidance. This guidance now represents 19.7% annual growth at midpoint and 20.4% annual growth at the high end. Contribution profit in the range of $450 million to $457 million, up 1.5% from the midpoint of our previous guidance, and now representing 17.4% annual growth at midpoint and 18.3% annual growth at the high end.

Adjusted EBITDA in the range of $165 million to $172 million, up 4% from the midpoint of our previous guidance and now representing 22.6% annual growth at the midpoint and 25.2% annual growth at the high end, and a non-GAAP tax rate of 25%. On the rule of 40 basis, our guidance implies a range of 53 to 56 for the full year 2026. During our past few earnings calls, we provided long-term growth targets for both revenue and adjusted EBITDA—our two primary financial metrics. We stated that our goal was to grow revenue at approximately 20% and grow adjusted EBITDA between 20% and 30%.

The full-year updated 2026 guidance range we have provided today reflects the expected achievement of these long-term targets. In summary, we are very pleased with our strong start to 2026, reflecting the continued momentum we have shown across the past several quarters. During this time, we have consistently demonstrated our ability to generate profitable growth. This enabled us to end the first quarter with a substantial backlog and pipeline. Given our solid footing and strong visibility, we continue to believe we are well positioned for further growth in 2026 and beyond. Thank you, everyone, for your attention today. And now I will turn it back to Dushyant for final remarks before we open up the call for questions.

Dushyant Sharma: Thanks, Sanjay. After seeing the impact of our state-of-the-art platform and ecosystem on the broader service economy, we find ourselves at an exciting juncture similar to what we experienced at our inception. As we look at the economy broadly, we realize that almost all investments in commerce have gone towards product or retail commerce, with a focus on how to sell more to customers and having them check out quickly. This product commerce paradigm is also retrofitted in service commerce which, at its core, is not transactional but instead relational. This mismatched paradigm has led service commerce to lag behind as enterprises spend millions of dollars on a myriad of mismatched components and tools.

At Paymentus Holdings, Inc., we realize that to truly solve the issue, we needed to bring about a paradigm shift with a full-stack purpose-built AI-native platform with service-native components. Even before our IPO, employing our proactive thinking, we wanted to make sure that we not only build a platform with full-stack components, but also incorporate AI, which we even knew then would become mainstream. Additionally, we also knew that we would need to seek patent protection on all major components, thereby creating a long-term moat and ecosystem. In line with all I have just talked about, today we announced that we are establishing a new category: AI-native service commerce, where every service interaction becomes intelligent, secure, and outcome-driven.

And as you can see from Slide 9, there are three key gaps in service commerce. First, there is no native payment method that preserves the service provider–customer relationship and identity. Second, static service and transactional documents must become intelligent and interactive. Third, there is a lack of intelligent orchestration across fragmented systems. To address all three pain points, as you can see on Slide 10, we have created a new paradigm called billio that has four key components, all of which have been patented. First is Bill Wallet, a purpose-built digital wallet designed specifically for bill and service payments.

Unlike traditional retail wallets that store cards for one-time purchases, Bill Wallet establishes a persistent, secure relationship identity between the customer and service provider, linking accounts, service relationships, and payment credentials into a unified layer. Bill Wallet is designed to reduce time to complete a payment by approximately 75%, and to work across all dimensions: agentic, digital, social, physical, and vocal. Second, ileo, which transforms static bills, invoices, and statements into intelligent, interactive experiences. Billio enables consumers to understand charges, resolve issues, and take actions directly within the document itself.

And third, AI three sixty, an AI-based integration, orchestration, and data intelligence framework that powers both billio and Bill Wallet and enables systems to automatically interpret, connect, and operate across disparate data sources. AI three sixty also provides data visualization and business intelligence capabilities, replacing third-party BI tools. Fourth, all interactions are secured through Paymentus Holdings, Inc.’s patented PCI-compliant secure service framework, which we believe will ensure end-to-end protection, trust, and compliance across every single service interaction and payment flow. Putting this all in context, in the past, we have mentioned the opportunity to monetize interchange in the outer ears. By design, the interchange cost we incur today is big and getting bigger as we scale.

To us, that represents an incremental untapped TAM. Additionally, we have also shared that with the advent of generative and agentic AI, the industry is predictably moving in our direction and has opened up opportunities far beyond payments with our existing and prospective clients, users of our platform, and in all of our current and prospective verticals. Let me discuss both in detail. Bill Wallet is an IPN-native wallet purpose-built for bill payments and service commerce. As a result of Bill Wallet, a customer visiting their insurance company’s website can complete their premium payment in seconds rather than minutes with their Bill Wallet ID.

We believe that Bill Wallet will also significantly improve security and reduce fraud, whether the interaction takes place through an agent, in a self-driven car, wearable technology, or any other traditional self-service or assistive channels. It is also intended to work well in a physical context. For example, at a government or utility walk-in center, a customer can pay their bill simply by providing the Bill Wallet ID—no card swipe, no manual entry, no POS terminals. This establishes a new paradigm for service commerce, away from the retail commerce paradigm. We believe that this will result in a massive improvement in convenience, speed, and security, and also create a more direct link between service providers and their customers.

As Bill Wallet scales in the next several years, we also intend for it to include native funding capabilities, enabling us to participate in interchange economics while increasing transaction frequency and depth of engagement for our clients. And Bill Wallet works in all aspects of the service economy, B2C and B2B. Let me now discuss early success. As you know, we reported that in December 2025, users on our platform numbered 53 million, which we believe represents approximately 40% of U.S. households and possibly businesses.

Out of that customer base, we have made Bill Wallet available to a mere fraction of our end-user base, but across various cities—early 100 thousand users across more than 1 thousand cities—with a very high conversion rate and no marketing spend, not a single dollar of marketing from Paymentus Holdings, Inc. We believe that these results speak to the pervasive nature of our platform, the power of the network effect, and the ease of use, unlocking an additional dimension to the durability and profitability of our longer-term growth algorithm. After seeing this early success, we are getting increasingly excited about exploring how Bill Wallet can be fully rolled out over the next several years.

In addition, we recognized years ago that with the advent of AI, actual service documents like policies, bills, invoices, and other transactional documents such as bank, credit card, loyalty, or mutual fund statements themselves must evolve to become more intelligent. As a result, we patented our technology called billio that transforms traditional bills, invoices, and statements into AI-powered interactive experiences. With billio, a utility customer can simply ask, “Why is my water bill higher this month?” Or a customer can interact with any other Bill Wallet- and billio-powered enabled service provider, such as a plumbing or HVAC service provider, and automatically schedule a visit and pay for it in advance, based on rules set by the user.

Or a customer can interact with the billio-powered mutual fund statement and ask why their portfolio returns are trending lower than the indexes. Billio is designed to answer, resolve, and execute—eliminating friction, driving faster payments, and reducing support cost for billers and other service providers. Billio is also a full-stack service commerce platform, and with the help of Bill Wallet, it has the potential to transform legacy websites into multimodal pileo sites, potentially ending the era of retail paradigm-based old-school portals and replacing them with secure, interactive, and agentic billiocytes.

Once a customer is recognized using Bill Wallet, the entire billio-enabled website is hyper-personalized, and the payment can be made—but more importantly, many questions can be asked and answered—whether the interaction is from your car, your personal agent, wearable technology, or any other traditional mainstream channels such as your computer or mobile phone. These are not just patents, but rather families of patents. All patent families referenced have granted patents in the U.S. and some international jurisdictions, with additional patent applications pending in domestic and many major international markets. And as exciting as the depth and breadth of our further expanded moat is with our patent families, we want investors to know that this success is not an accident.

We have a carefully crafted business strategy executed over the past several years, emanating from our mindset that the proverbial technological puck will be at a specific place in the future, and we want to take full advantage of it. We believe this strategy will augment our already very strong growth algorithm, further helping Paymentus Holdings, Inc. attain its goal of becoming a multibillion dollar business and ensuring that our efforts are patent-protected so that our customers, our partners, our employees, and of course, our investors are able to enjoy the benefit of their trust in Paymentus Holdings, Inc. That concludes our prepared remarks. I will now open up the line for questions.

We will now open the call for questions.

Operator: Thank you. To withdraw your question, press 11 again. Due to time restraints, we ask that you please limit yourself to one question and one follow-up. Our first question will come from the line of Madison Suhr with Raymond James. Your line is open.

Madison Suhr: Hey, good afternoon, guys. I wanted to start on the new AI product—I really appreciate all the color around the technology, but was hoping you could also provide a little more detail on the economics. Do you expect any differences in gross or contribution dollars per transaction in the near term? And then longer term, does this open up Paymentus Holdings, Inc. to other revenue opportunities outside of the traditional per-transaction model?

Dushyant Sharma: The revenue opportunities—yes. Let me start with that, but not necessarily outside the transaction model. As we have shared previously, our pay-per-use pricing and success-based pricing model actually has withstood the test of time, and in our view, it is further validated with the advent of AI as the world moves towards pay-per-use models. So our approach here remains the same: we want to offer more to our clients, and as they achieve success in reducing their cost to serve and improving their end-user experience, we participate in those economies and, as a result, get the benefit. We plan to remain in a consumption-based model. I think our clients love that model.

They can clearly understand exactly how and where the success is and exactly what the success KPIs are and how Paymentus Holdings, Inc. will get paid. But it does open up opportunities with tremendous potential. If you think about the combination of our approach, we are changing the paradigm of the service economy. So if we are successful in getting the scale the way we expect to in years to come, Paymentus Holdings, Inc. will not only be able to provide an overall total service platform—if I am using my Bill Wallet and billio app, I should be able to do almost anything with it related to my service providers.

For example, ask a question: “My hot water heater is not working. Can you schedule someone to come in and take a look at it?” That could include a payment transaction as well if all of those things are factored in using our model. In terms of the gross and net, the long-term direct strategy here at play is to be able to convert the interchange expense into interchange revenue, and we believe Bill Wallet and billio will play a big role in that. And if I may just add, Madison, I think the question also wanted to cover any near-term impacts.

I would say in the near term, we remain committed to our model, which you have described, which means top line to grow 20% annually and bottom line between 20% and 30%, and show progression throughout the quarters in the year. As you have seen from our past performance, we remain committed to deliver not only the CAGR model, but deliver better results. Operating leverage on the business shines and has been shining since the past few quarters. We remain committed in the near term. There should be no significant impacts here, but especially over the longer term, as the strategy described, we are going to get much better than where we are today. Thank you.

Madison Suhr: Okay, awesome. Then, Sanjay, just a quick follow-up on free cash flow. Obviously, it was down a little bit year over year. I understand the dynamics with working capital, but when do you expect some of that to normalize? And maybe any color you are willing to share on free cash flow expectations for the full year? Thanks, guys.

Sanjay Kalra: Sure, Madison. In Q1, actually, free cash flow is down compared to last year’s Q1, and that is primarily working capital, as you correctly pointed out. If you look at our accounts receivable balance itself, we put in around $15 million into working capital. Last year in Q1, we actually extracted around $19 million to $20 million from working capital. So that flip itself is $35 million. Apples to apples, if the working capital position was exactly the same, I think our free cash flow would be more than $50 million in the quarter. But that said, working capital is very temporary within the year, as you know, so it could come back either in Q2 or Q3.

We are navigating our way to capture the market at a very good pace, and we do get customers implemented at times more toward the later part of the quarter versus the beginning, and that just creates a system variance, which dissipates over time and definitely over one or two quarters. So we feel very good about where the business is progressing. All the working capital is in very good shape. I would rather say, instead of focusing on free cash flow, the right way to understand our business, given the pace of growth, is to look at how total working capital is increasing. I pointed out in the prepared remarks that working capital is up more than 6% sequentially.

Cash is either in cash or accounts receivable—both are very good. In fact, the DSO of 29 days versus 28 days is pretty awesome, much better than our model, which actually dictates around 32 days. We feel very good, not at all concerned. In fact, we feel very bullish about the free cash flow for the full year. Last year, we generated around $125 million. This year—well, we do not guide for cash flow—but as we are marching on the same path, except for working capital adjustments, which could be temporary here or there, I think we are on the same path or better than last year.

Madison Suhr: Awesome. Thank you so much for the color, guys.

Sanjay Kalra: Sure. Thank you. Thank you.

Operator: One moment for our next question. That will come from the line of David John Koning with Baird. Your line is open.

David John Koning: Yeah, hey, guys. Thanks so much. Great job. And I guess my first question—the economics of the wallet—I think it is kind of the payments trifecta here because if I load $1,000 every month, first of all, you get float revenue—now you are sitting on a nice customer balance. Secondly, I make payments out of that; you get to keep the debit interchange instead of paying it out, as you mentioned. And then thirdly, I think you would get the nonregulated debit interchange because you are, you know, not an issuer or you are a sub-10 billion issuer. So there are three kind of nice combinations of economics, it seems, in my view. Am I getting that right?

Dushyant Sharma: Yes. I think that is part of the strategy, but not immediate—that is where we are marching towards. There are other options as well. Recall, we may also have—Bill Wallet is an IP-native instrument—so we will also open it up potentially to be a network player in this. And also, there are fees coming from our clients for the services we are providing them, so Bill Wallet becomes part of that.

David John Koning: Yeah, no, that is great to hear. And then secondly, when I just look at the cadence of revenue through the year, Q2 typically is up sequentially in contribution profit. This year, you are guiding to flat. Is that related to fuel? And maybe talk a little bit about fuel prices, etc., and how that is impacting numbers.

Sanjay Kalra: Yes, sure, David. I think there are two pieces here. Let me first talk about the Q2 guidance and then I will go to the energy prices. In terms of Q2 guidance, there is seasonality in the business, as you would have observed from the past few years. Generally, we guide a little lower than Q1 because we do not know how the seasonality will play out. The seasonality of government billers affects Q2 in a particular shape.

Although it could be similar to Q1 revenue or maybe slightly higher as well if all things come in the right path, we have just onboarded a lot of large enterprise customers recently—some in Q1 as well and some in the past few quarters or second half of last year. We really want to have a full-year history to forecast accurately, so we take a prudent approach when we come up with our forecast, which helps us come up with the guidance for next quarter. So I think prudence prevails on our thought process when we think about our future.

That is one reason why you see a modest softness in Q2 compared to Q1, and at the same time, that falls through to the bottom line as well. Going back to the energy prices, delivering a 25% growth in Q1 itself when energy prices are in the news every day is pretty interesting to see. As we have marched on market capture at a very good pace for many years, we have seen vertical diversification, and our enhanced pricing strategy over the years has really helped us reduce the impact of the elevated energy price index on our numbers.

Overall, even though energy prices impact only our utility business—and that too only a small segment of our utility business—it has lost relevance and materiality to us as we have scaled. I will not say it has fully dissipated over time, but it has definitely faded in our view. Even though CPI energy was up around 6% year over year in Q1, in the past years we took a pill for that problem and have largely solved it. Our prudent guidance methodology already captures it, so we have not been surprised by this since many quarters.

And we hope you will not be given the prudence, the modest impact it has, the diversification we have, and the enhanced pricing strategies we are offering with our billers.

David John Koning: Great. Thanks. Great job, guys.

Sanjay Kalra: Thank you. Thank you.

Operator: One moment for our next question. That will come from the line of Analyst with Wedbush Securities. Your line is open.

Analyst: Hey, good evening, guys. Congrats on a great quarter. I have two questions, if I may. First, I just wanted to get a little bit more color on the AI-native service commerce platform that you guys launched. Got a lot of color around the pricing of the strategy, but can you talk a little bit about what is specifically in the pipeline for this product in the year? Can you talk about if there is any inclusion of revenue coming from this cohort in 2026, or is it strictly in 2027 and beyond? And can you talk about the ramp of this AI-driven cohort moving forward?

Dushyant Sharma: Yeah. As I mentioned, this will again be a transactional model, and our goal remains primarily to capture as many of the transactions for a given customer. This would be applicable to all of our existing and prospective customers as well. The goal here is to continue to build momentum using the patented technology we have created by getting our customers to move away from the retail commerce-based paradigm to the service-native paradigm. That will take time because there is still a lot of installed base. What we are going to see—and are already seeing—is continued momentum in market capture. That is what the strategy is about.

If I could summarize the strategy into two parallel streams: stream number one is evangelize the marketplace with the new paradigm so that more and more customers can sign up with Paymentus Holdings, Inc. The second, right behind that, is monetize the transactions differently than they have been historically monetized. That is why it was very important for us to have patent protection on all this, because after analyzing billions of transactions and, frankly, as we were preparing for the IPO, I was very focused and the team was very focused on making sure that we are able to create shareholder value for our public shareholders.

These are some of the things we were working on at that time, and we are very thankful that the market has moved in our direction. This is a long-term play for us. We are not counting anything in 2026 from it, other than the fact that our market momentum will continue to be validated, and we are feeling good about 2027, in some ways as a result of the momentum we have in the market and the bookings we have had.

Analyst: Alright. Got it. Thank you for the color. And, Sanjay, just one for you, specifically tied to the full-year guidance, specifically for revenue. You basically had a $20 million beat in Q1 but are raising the midpoint of the full-year guidance by about $30 million, so it really is implying a stronger back half of the year and that includes the strong bookings and backlog. What is really holding you back from going after a larger full-year '26 guidance raise? Is it just the fact that you are being a little more conservative? Or is there something tied to onboarding timelines?

And then also, same thing for the rule of 40 profile, because you came in at about 64% this quarter, and you are guiding for about 51% to 55% for full year 2026. Can you just break that down for me a little bit? Thank you so much.

Sanjay Kalra: Yes, I will say that since the past three years, we are following a consistent methodology for guidance, which definitely is dominated by prudence. You answered the question in your question itself—yes, prudence prevails, and we remain very cautious in terms of what is coming. We want to deliver. We do not want to count the chickens before they hatch, and that has been consistent with how we have delivered and how we have guided. The business is very good. The pipeline is very encouraging. We are enthused by the bookings we are having, the diversified portfolio, the diversified verticals we are operating in, and the kind of household names we are getting into our biller base.

We have a lot of Fortune 500 companies as well. We feel very good about where the business is not only going to be in '26 but even in outer years. The comment we made regarding 2027 at the beginning of 2026 stems from the fact that our renewal rates are very strong. Our customer contracts are for longer periods of time. It is now actually giving us visibility more for 2027 as well. Previously, we had visibility of, say, five quarters. Now I think we have it for six quarters or so. We are feeling very good about '26 and definitely a big part of 2027 as well.

And if I may also add a quick point: the reason we are prudent in our guidance principles is for the purpose of creating long-term shareholder value. You can erode value faster than you can build it by being somewhat irresponsible in guidance. You have to make sure that you are paving a smooth road for successful execution of a very thoughtful strategy by having guidance principles. It takes a lot of discipline to be candid. Just like every other company, we would love to be able to pound our chest, but that is far easier to do than to deliver good numbers.

Our interest is to create long-term shareholder value by creating a smooth road for execution by having a guidance philosophy which is prudent, with very aggressive execution behind it, and not create a noisy environment where folks cannot figure out exactly how to think about the company, the management team, or the philosophy of where the business is headed. We think this approach works better for long-term shareholder value creation.

Analyst: Got it. Appreciate the time, guys. Thank you so much.

Dushyant Sharma: Thank you.

Operator: One moment for our next question. That will come from the line of Analyst with Wolfe. Your line is open.

Analyst: Hey, guys. This is just Athena Rugerry on for Darrin Peller. Thank you for taking my question. Just quickly wanted to ask on your new products, belio and Bill Wallet, do these products change who you compete against? Are there any incumbents that we should think about? And then overall, have you noticed any changes in the credit [inaudible] recently? Thanks.

Dushyant Sharma: Sorry, you broke up. I just need to clarify what the question was. We are excited about where we are headed. The market is moving in our direction. As you can see, we were actually prepared, and it is years in the making. It was not that we woke up one morning and saw a lot of press releases on AI, so Paymentus Holdings, Inc. is going to put ours in the mix as well. That is not who we are. It has taken us years to get to this point.

We wanted to create long-term value and a long-term competitive moat for our investors, but more importantly for our customers, so they can see that this is an innovative company—a champion—who is willing to take on the industry status quo. After disrupting the bill payment world—when we started, banks used to have maybe 75% to 80% of the payments, and they are down now to 20% to 25%, primarily because of the model we have championed. We believe under pressure, trends accelerate, and as the trends are accelerating in some ways in our favor, you will see more momentum as time goes by. We have got our company ready for this.

We want our investors, partners, customers, and employees to benefit from the thoughtful and innovative execution from up to this point and from here on out.

Analyst: Thanks. And then one quick follow-up. When we think about your go-forward focus verticals, does utilities still remain on the top of that list, or which others do you think are going to contribute to this new AI-centric model? Thank you.

Dushyant Sharma: Utilities will remain a key vertical for us, of course. It is the most complex, most sophisticated vertical, especially at large scale, because of how much efficiencies utilities were forced to drive out of the paper process. It was not easy to be able to drive more value for utilities customers, so we had to be really good to be able to do that. But now, as you can see from our prepared remarks, we are signing customers in all of the verticals.

Our goal is to go through a household’s and a business’s bills, look at all the bills they have, and start making markets in each of those, and then make sure that in each of those markets we are in, we are capturing more and more of the transactions using the new paradigm of service commerce using pileo.

Operator: One moment for our next question. Our next question will come from the line of Tien-Tsin Huang with JPMorgan. Your line is open.

Tien-Tsin Huang: Hope you can hear me—at the airport here. Good results. I hope this is not a redundant question. Dushyant, on billio and Bill Wallet, just to clarify, will you be managing the Bill Wallet ID, and is the ID distributed through consumer service providers? I know subscription payments are really important. I am asking because I am thinking about, in an agent world, who would wear the risk—I know that is a big debate on the agent side—and I think subscription payments could be a big part of it, if you follow my question. Thank you.

Dushyant Sharma: Our approach here is that any technology or service that distances service providers from their own customers is not going to last long. It will not work out. Paymentus Holdings, Inc.’s approach to Bill Wallet is that, regardless of the channel or mode of communication or interaction, Bill Wallet will allow service providers to have a direct relationship with their end-user customers. That is part of our goal and that is what we have done. Part of the benefit of the wallet approach—not the way traditional, retail-centric wallets have been created—is that the billers themselves, the service providers themselves, set the rules for identity.

How they identify their own customers is set by the billers themselves, and that is how they authenticate the user. Bill Wallet enables that in all channels, whether you are using your intelligent glasses or your car—whatever the mode of interaction is, you are using it through Bill Wallet.

Tien-Tsin Huang: So the wearing of the risk band, just in the agent example I gave, Dushyant—that would be borne then by Paymentus Holdings, Inc., given how you just described it?

Dushyant Sharma: Actually, in some ways yes. In some ways, it would be between us and our clients, in terms of who we are working with. That will be arranged.

Tien-Tsin Huang: More to talk about. It is interesting. I think it is ambitious, and it makes a lot of sense given the network you built. Can I just ask one quick follow-up? I know it is a third question. Sanjay, you mentioned seasonal impact in terms of the upside for the quarter. Can you just clarify that? I heard the answer on the energy prices, but just thinking about the quarter itself and what the seasonal impact was, if any, that surprised you.

Sanjay Kalra: The impact is modest. In our guidance, on the high end for Q2, it is approximately 2% or so soft versus Q1. That is primarily—as I said, prudence prevails—but at the same time, the seasonality of government billers is a part of it, and we need to experience the full-year turnaround of new large billers which were implemented in 2025. All these factors in combination are getting us to a small, modest softness in Q2 compared to Q1.

Tien-Tsin Huang: Understood. Well done. Great results. Thank you.

Operator: One moment for our next question. That will come from the line of Will Nance with Goldman Sachs. Your line is open.

Will Nance: Hey, thank you for taking the question. If I could just follow up on the wallet product, I was wondering if you could talk about distribution there and how to incentivize adoption by consumers over time. How do you think about the marketing required to incentivize consumers to adopt a new wallet partnership given the competitive nature of the wallet landscape?

Dushyant Sharma: From our perspective, the simplicity—how much time saving and simplicity it brings about to end customers—is key. What we have observed with a very small fraction of our customer base we launched to was a pretty high conversion rate. We did not have to spend a lot of money in marketing—in fact, any money in marketing. We think the scale, system, platform, and ecosystem we have built at this stage is pretty pervasive, so that itself would play a big role.

Right now, our focus is the technological advantage as the key reason for customers to sign up: “I do not want to remember how to log in and where to go to find my information—can I just use Bill Wallet ID?” That is why the patent was important, and we wanted to make sure that remains one of the key themes. But we will create other incentives within the wallet itself for repeated use, of course.

Will Nance: Got it. Appreciate that. And if I could just go back to the commentary around energy prices, I was wondering if you could remind us again what fundamentally changed about the enhanced approach to pricing that you adopted several years ago. Do you have contracts that automatically reprice in the face of higher energy bills and larger ticket sizes? What is the actual mechanism that has reduced the exposure within the utilities vertical? And secondarily, could you give us a sense, high level, how much the utilities vertical has declined as a percentage of total over the last three or four years?

Dushyant Sharma: Let me start with the pricing. You rightly called out that in some cases, it is auto-priced. As the average payment amount due to inflation is changing, so is the pricing—our pricing is changing with that. That is one part. We have also been able to move customers to different pricing models, which are favorable to customers and to us as well. Without going into specifics, I would just say it also factored in exactly the same situation we were dealing with several years ago, where we did have the ability to change the pricing, but it was a little later in the process than it is now. Those are the pricing model changes.

On top of that, in the last remaining cohort where there is still some immaterial impact, we have regular meetings with clients to discuss all of the impact and readjust pricing. We are just a more proactive company now than we used to be. As to utilities as a percentage of revenue: traditionally it has been higher than 50%, but we are now a little less than 50%—still a substantial piece of our revenues. Overall, as the pricing models have evolved, we are not seeing an impact of energy prices. Even though utilities is around 50% of the business, I would not equate that to 50% of revenues being at risk with energy pricing.

That is not the type of business we are running. What is happening instead is that only a very small subset of the utilities business is where there might be a modest impact. Overall, it is immaterial for us now.

Will Nance: Thanks for all the detail.

Operator: One moment for our next question. As a reminder, if you would like to ask a question, please press 11. Our next question will come from the line of Craig Maurer with F. Partners. Your line is open.

Craig Maurer: Yes, hi. Thanks for taking the question. I just wanted to quickly get your take on the acquisition of Kubra by Repay and how you think that might change the competitive dynamics in the space?

Dushyant Sharma: We actually—Kubra has been around for a long period of time. We know Kubra for a long period of time. We know Repay as well. From our perspective, as we have shared, the market has been moving in our direction, and we are excited about it. We believe the customers and the prospects finally know where the innovations are coming from in this space and who is taking the approach very seriously. We are very excited about our business from that perspective. So no concerns. We wish them very well, just like any other competitor. We wish everyone the best.

Operator: Thank you. I am showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Sharma for any closing remarks.

Dushyant Sharma: Well, thank you so much, everyone. I really appreciate the opportunity to speak with you. Have a great day. Thank you.

Operator: This concludes today’s program. Thank you all for participating. You may now disconnect.

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