美國
證券交易委員會
華盛頓特區20549
表格
(Mark One)
根據1934年證券交易法第13或15(d)節的季度報告 |
截至季度結束日期的財務報告
或者
根據1934年證券交易法第13或15(d)節的轉型報告書 |
從____________到____________的過渡期。
委託文件編號:001-39866
(根據其章程規定的註冊人準確名稱)
(設立或組織的其他管轄區域) |
(納稅人識別號碼) |
,(主要行政辦公地址) |
(郵政編碼) |
公司電話,包括區號:(
在法案第12(b)條的規定下注冊的證券:
每個課程的標題 |
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交易符號 |
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註冊的每個交易所的名稱 |
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請在以下複選框中打勾,指示註冊人:(1)在前12個月(或註冊人被要求提交這些報告的更短期間內)已經提交了1934年證券交易法第13或15(d)條規定需要提交的所有報告;以及(2)在過去的90天內一直受到了此類文件提交要求的限制。
請在以下複選框中打勾,指示註冊人是否已經電子提交了根據Regulation S-T規則405條(本章節的§232.405條)需要提交的所有互動數據文件在過去的12個月內(或註冊人被要求提交這些文件的更短期間內)。
用複選標記指明註冊人是大型加速申報人、加速申報人、非加速申報人、小型申報公司還是新興成長型公司。參見《交易法》第12b-2條中 「大型加速申報人」、「加速申報公司」、「小型申報公司」 和 「新興成長型公司」 的定義。
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☒ |
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加速文件提交人 |
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☐ |
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非加速文件提交人 |
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☐ |
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較小的報告公司 |
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新興成長公司 |
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如果是新興成長型公司,在選中複選標記的同時,如果公司已選擇不使用根據證券交易法第13(a)條提供的任何新的或修訂後的財務會計準則的延長過渡期來符合新的或修訂後的財務會計準則,則表明該公司已選擇不使用根據證券交易法第13(a)條提供的任何新的或修訂後的財務會計準則的延長過渡期來符合新的或修訂後的財務會計準則。☐
請用勾號表示註冊人是否爲殼公司(如《交易所法》規定的第120億.2條)。是 ☐ 否
截至2024年11月4日,註冊人員已
AvidXchange Holdings公司
10-Q表格
截至2024年9月30日季度期末
目錄
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第I部分 |
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項目1。 |
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1 |
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2 |
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2024年和2023年9月30日止三個月和九個月的未經審計的股東權益變動合併報表 |
3 |
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4 |
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5 |
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事項二 |
19 |
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第3項。 |
29 |
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事項4。 |
31 |
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第二部分 |
31 |
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項目1。 |
31 |
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項目1A。 |
31 |
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事項二 |
31 |
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第3項。 |
32 |
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事項4。 |
32 |
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項目5。 |
32 |
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項目6。 |
33 |
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簽名 |
34 |
i
第一部分——財務信息
項目1.基本報表。
AvidXchange Holdings公司
未經審計的合併資產負債表
(以千爲單位,除股份數和每股數據外)
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截至2022年9月30日, |
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截至12月31日, |
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2024 |
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2023 |
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資產 |
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流動資產 |
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現金及現金等價物 |
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$ |
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$ |
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客戶限制資金 |
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有價證券 |
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應收賬款,扣除$(2024年)和$(2023年)的撥備 |
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供應商預付款應收賬款淨額,減免額爲$ |
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預付費用和其他流動資產 |
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總流動資產 |
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資產和設備,淨值 |
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經營租賃權使用資產 |
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遞延客戶起源成本,淨額 |
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商譽 |
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無形資產, 淨額 |
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其他非流動資產和存款 |
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資產總額 |
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$ |
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$ |
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負債和股東權益 |
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流動負債 |
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應付賬款 |
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$ |
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$ |
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應計費用 |
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支付服務義務 |
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遞延收入 |
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融資租賃下的租賃義務到期流動性 |
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經營租賃下的租賃義務到期流動性 |
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長期債務的流動部分 |
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流動負債合計 |
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長期負債 |
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遞延營業收入,減去流動部分 |
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融資租賃下的義務,減去當前到期的部分 |
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經營租賃下的義務,減去當前到期的部分 |
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長期債務 |
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其他長期負債 |
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負債合計 |
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股東權益 |
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優先股,$0.0001 |
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普通股,每股面值爲 $0.0001; |
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額外實收資本 |
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累積赤字 |
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( |
) |
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( |
) |
股東權益合計 |
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負債和股東權益合計 |
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$ |
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$ |
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所附註釋是這些未經審計的合併財務報表的組成部分。
1
AvidXchange Holdings公司
未經審計的綜合損益表
(以千爲單位,除股份數和每股數據外)
|
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截至9月30日的三個月 |
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截至9月30日的九個月 |
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2024 |
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2023 |
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2024 |
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2023 |
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收入 |
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$ |
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$ |
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$ |
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$ |
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收入成本(不包括折舊和攤銷費用) |
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運營費用 |
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銷售和營銷 |
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研究和開發 |
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一般和行政 |
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無形資產的減值和核銷 |
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- |
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- |
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- |
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折舊和攤銷 |
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運營費用總額 |
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運營收入(虧損) |
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1,255 |
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(9,629 |
) |
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(4,955 |
) |
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(47,227 |
) |
其他收入(支出) |
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利息收入 |
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利息支出 |
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( |
) |
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( |
) |
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( |
) |
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( |
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其他收入 |
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所得稅前收入(虧損) |
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( |
) |
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( |
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所得稅支出 |
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淨收益(虧損) |
|
$ |
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$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
歸屬於普通股股東的每股淨收益(虧損): |
|
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基本 |
|
$ |
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$ |
( |
) |
|
$ |
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$ |
( |
) |
||
稀釋 |
|
$ |
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$ |
( |
) |
|
$ |
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$ |
( |
) |
||
用於計算歸屬於普通股股東的每股淨收益(虧損)的普通股加權平均數: |
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基本 |
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稀釋 |
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所附註釋是這些未經審計的合併財務報表的組成部分。
2
AvidXchange Holdings公司
未經審計的股東權益變動綜合表
(以千爲單位,除股份數和每股數據外)
|
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額外的 |
|
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總計 |
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普通股 |
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實收資本 |
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累計赤字 |
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股東權益 |
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2023年12月31日的餘額。 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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行使股票期權 |
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- |
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- |
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根據限制性股票單位的歸屬而發行的普通股 |
|
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( |
) |
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- |
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- |
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股票補償費用 |
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- |
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- |
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- |
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員工股票購買計劃(ESPP)的股票補償費用 |
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- |
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- |
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- |
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淨損失 |
|
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- |
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- |
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- |
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( |
) |
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( |
) |
2024年3月31日的結餘 |
|
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$ |
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$ |
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$ |
( |
) |
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$ |
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行使股票期權 |
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- |
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- |
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根據限制性股票單位的歸屬而發行的普通股 |
|
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( |
) |
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- |
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- |
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在ESPP下發行普通股 |
|
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- |
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- |
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股票補償費用 |
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- |
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- |
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- |
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員工購買期權計劃的股票補償費用 |
|
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- |
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- |
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|
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- |
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淨利潤 |
|
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- |
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- |
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|
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- |
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2024年6月30日的餘額 |
|
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|
$ |
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$ |
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|
$ |
( |
) |
|
$ |
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||||
行使股票期權 |
|
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- |
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|
- |
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根據限制性股票單位的歸屬而發行的普通股 |
|
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( |
) |
|
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- |
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- |
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普通股的回購和養老 |
|
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( |
) |
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( |
) |
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( |
) |
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- |
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( |
) |
股票補償費用 |
|
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- |
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- |
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- |
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員工股權期權計劃的股票補償費用 |
|
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- |
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- |
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- |
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淨利潤 |
|
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- |
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- |
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- |
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4,047 |
|
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4,047 |
|
2024年9月30日的餘額 |
|
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|
$ |
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$ |
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$ |
( |
) |
|
$ |
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額外的 |
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總計 |
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普通股 |
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實收資本 |
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累計赤字 |
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股東權益 |
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2022年12月31日的餘額 |
|
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|
$ |
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$ |
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$ |
( |
) |
|
$ |
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||||
行使股票期權 |
|
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|
- |
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- |
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|||
根據限制性股票單位的歸屬而發行的普通股 |
|
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( |
) |
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- |
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股票補償費用 |
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- |
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- |
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- |
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||
員工期權計劃的股票補償費用 |
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- |
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- |
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- |
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||
淨損失 |
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- |
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- |
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- |
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( |
) |
|
|
( |
) |
2023年3月31日的餘額 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
行使股票期權 |
|
|
|
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|
- |
|
|
|
|
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|
- |
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|
|||
根據限制性股票單位的歸屬而發行的普通股 |
|
|
|
|
|
|
|
|
( |
) |
|
|
- |
|
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|
- |
|
||
在ESPP下發行普通股 |
|
|
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|
- |
|
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- |
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|||
股票補償費用 |
|
|
- |
|
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|
- |
|
|
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|
- |
|
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||
員工股票期權計劃的股權補償費用 |
|
|
- |
|
|
|
- |
|
|
|
|
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|
- |
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||
淨損失 |
|
|
- |
|
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|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
2023年6月30日的餘額 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
行使股票期權 |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|||
根據限制性股票單位的歸屬而發行的普通股 |
|
|
|
|
|
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
||
股票補償費用 |
|
|
- |
|
|
|
- |
|
|
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|
|
- |
|
|
|
|
||
員工期權計劃的股票補償費用 |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
淨損失 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
2023年9月30日的餘額 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
所附註釋是這些未經審計的合併財務報表的組成部分。
3
AvidXchange Holdings公司
未經審計的現金流量表合併報表
(以千爲單位)
|
|
截至9月30日的九個月 |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
來自經營活動的現金流 |
|
|
|
|
|
|
||
淨收益(虧損) |
|
$ |
|
|
$ |
( |
) |
|
調整以將淨收益(虧損)與經營活動使用的淨現金進行對賬 |
|
|
|
|
|
|
||
折舊和攤銷費用 |
|
|
|
|
|
|
||
遞延融資成本的攤銷 |
|
|
|
|
|
|
||
債務清償成本 |
|
|
|
|
|
- |
|
|
信貸損失準備金 |
|
|
|
|
|
|
||
基於股票的薪酬 |
|
|
|
|
|
|
||
應計利息 |
|
|
|
|
|
|
||
無形資產的減值和核銷 |
|
|
|
|
|
- |
|
|
增加持有至到期的投資 |
|
|
( |
) |
|
|
( |
) |
遞延所得稅 |
|
|
|
|
|
|
||
經營資產和負債的變化 |
|
|
|
|
|
|
||
應收賬款 |
|
|
( |
) |
|
|
( |
) |
預付費用和其他流動資產 |
|
|
( |
) |
|
|
( |
) |
其他非流動資產 |
|
|
( |
) |
|
|
|
|
遞延的客戶發放成本 |
|
|
( |
) |
|
|
|
|
應付賬款 |
|
|
( |
) |
|
|
|
|
遞延收入 |
|
|
( |
) |
|
|
( |
) |
應計費用和其他負債 |
|
|
( |
) |
|
|
( |
) |
經營租賃負債 |
|
|
( |
) |
|
|
( |
) |
調整總額 |
|
|
|
|
|
|
||
由(用於)經營活動提供的淨現金 |
|
|
|
|
|
( |
) |
|
來自投資活動的現金流 |
|
|
|
|
|
|
||
購買持有至到期的有價證券 |
|
|
( |
) |
|
|
( |
) |
從持有至到期的有價證券到期的收益 |
|
|
|
|
|
|
||
購買設備 |
|
|
( |
) |
|
|
( |
) |
購買無形資產 |
|
|
( |
) |
|
|
( |
) |
供應商預付款,淨額 |
|
|
( |
) |
|
|
( |
) |
投資活動提供的(用於)淨現金 |
|
|
( |
) |
|
|
|
|
來自融資活動的現金流 |
|
|
|
|
|
|
||
償還長期債務 |
|
|
( |
) |
|
|
( |
) |
融資租賃的本金支付 |
|
|
( |
) |
|
|
( |
) |
發行普通股的收益 |
|
|
|
|
|
|
||
根據ESPP發行普通股的收益 |
|
|
|
|
|
|
||
債務發行成本的支付 |
|
|
( |
) |
|
|
( |
) |
回購普通股 |
|
|
( |
) |
|
|
- |
|
收購相關責任的支付 |
|
|
( |
) |
|
|
( |
) |
付款服務義務 |
|
|
( |
) |
|
|
( |
) |
用於融資活動的淨現金 |
|
|
( |
) |
|
|
( |
) |
爲客戶持有的現金、現金等價物和限制性資金淨減少 |
|
|
( |
) |
|
|
( |
) |
爲客戶持有的現金、現金等價物和限制性資金 |
|
|
|
|
|
|
||
年初爲客戶持有的現金、現金等價物和限制性資金 |
|
|
|
|
|
|
||
期末爲客戶持有的現金、現金等價物和限制性資金 |
|
$ |
|
|
$ |
|
||
非現金投資和融資活動的補充信息 |
|
|
|
|
|
|
||
應付賬款和應計費用中的財產和設備採購 |
|
$ |
- |
|
|
$ |
|
|
爲換取新的融資租賃義務而獲得的使用權資產 |
|
|
- |
|
|
|
|
|
爲換取新的經營租賃債務而獲得的使用權資產 |
|
|
- |
|
|
|
|
|
對應付票據支付的利息 |
|
|
|
|
|
|
||
爲融資租賃支付的利息 |
|
|
|
|
|
|
||
爲所得稅支付的現金 |
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
AvidXchange Holdings, Inc.
Notes to the Unaudited Consolidated Financial Statements
(in thousands, except share and per share data)
1. Formation and Business of the Company
AvidXchange, Inc. was incorporated in the state of Delaware in 2000. In July 2021, the company consummated a reorganization by interposing a holding company between AvidXchange, Inc. and its stockholders. After the reorganization, all of the stockholders of AvidXchange, Inc. became stockholders of AvidXchange Holdings, Inc. and AvidXchange, Inc. became a wholly owned subsidiary of AvidXchange Holdings, Inc. To accomplish the reorganization, the company formed AvidXchange Holdings, Inc., which was incorporated in Delaware on January 27, 2021, and AvidXchange Merger Sub, Inc. (“Merger Sub”) as a wholly owned subsidiary of AvidXchange Holdings, Inc. The Company merged AvidXchange, Inc. with and into Merger Sub, with AvidXchange, Inc. as the surviving entity, by issuing identical shares of stock of AvidXchange Holdings, Inc. to the stockholders of AvidXchange, Inc. in exchange for their equity interest in AvidXchange, Inc.
The merger was considered a transaction between entities under common control. Upon the effective date of the reorganization, July 9, 2021, AvidXchange Holdings, Inc. recognized the assets and liabilities of AvidXchange, Inc. at their carrying values within its financial statements.
AvidXchange Holdings, Inc. and its wholly owned subsidiaries are collectively referred to as “AvidXchange” or “the Company” in the accompanying consolidated financial statements after the reorganization.
AvidXchange provides accounts payable (“AP”) automation software and payment solutions for middle market businesses and their suppliers. The Company provides solutions and services throughout North America spanning multiple industries including real estate, community association management, construction, financial services (including banks and credit unions), healthcare facilities, social services, education, media, and hospitality.
2. Summary of Significant Accounting Policies
Basis of Consolidation and Presentation
The accompanying unaudited consolidated financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair statement of the Company’s financial position, results of operations, changes in stockholders’ equity, and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other future annual or interim period. The unaudited consolidated balance sheet as of December 31, 2023 included herein was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by U.S. GAAP on an annual reporting basis. All significant intercompany accounts and transactions have been eliminated. There are no items of comprehensive income.
These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2023.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities as of and during the reporting period. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. Significant estimates reflected in these unaudited consolidated financial statements include, but are not limited to, the allowance for credit losses and returns, useful lives assigned to fixed and intangible assets, capitalization of internal-use software, deferral of customer origination costs, the fair value of intangible assets acquired in a business combination, the fair value of goodwill, and the recoverability of deferred income taxes. The Company assesses estimates on an ongoing basis; however, actual results could materially differ from those estimates.
Concentrations
Significant Services
A substantial portion of the Company’s revenue is derived from interchange fees earned on payment transactions processed as virtual commercial cards (“VCC”). The Company utilizes service providers to process these transactions. Revenue from one service provider represented
5
AvidXchange Holdings, Inc.
Notes to the Unaudited Consolidated Financial Statements
(in thousands, except share and per share data)
December 31, 2023, respectively. Revenue from a provider represented
Future regulation or changes by the card brand payment networks could have a substantial impact on interchange rates and the Company’s revenue from VCC transactions. If interchange rates decline, whether due to actions by the card brand payment networks or future regulation, or if merchant/suppliers elect to receive payments that result in lower or no interchange revenue such as check or apply fees in consideration of accepting electronic forms of payment, the Company’s total operating revenues, operating results, prospects for future growth and overall business could be materially affected. The Company’s revenue from VCC transactions is also impacted by fees charged by service providers to process our VCC transactions.
Restructuring costs
During the fourth quarter of 2023, the Company initiated a restructuring plan to generate cost savings and improve effectiveness of the organization which resulted in a reduction in the Company’s U.S. workforce. The plan was implemented in the fourth quarter of 2023 and completed in the second quarter of 2024. There were
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase that are not recorded as marketable securities to be cash equivalents. The carrying values of cash and cash equivalents approximate their fair values due to the short-term nature of these instruments. Cash in the Company’s bank accounts may exceed federally insured limits.
Marketable Securities
Marketable securities consist of short-term investments in corporate bonds, commercial paper, certificates of deposits and various U.S. government backed securities. To reflect its intention, the Company classifies its marketable securities as held-to-maturity at the time of purchase. As a result, the marketable securities are recorded at amortized cost and any gains or losses realized upon maturity are reported in other income (expense) in the consolidated statements of operations.
Accounts Receivable, Supplier Advances and Allowance for Credit Losses
Accounts receivable represent amounts due from the Company’s VCC service providers for interchange fees earned and from buyer customers who have been invoiced for the use of the Company’s software offerings, but for whom payments have not been received. Accounts receivable from VCC service providers are presented net of an allowance for returns for transactions subsequently canceled that do not ultimately settle through the payment network. Accounts receivable from buyer customers are presented net of allowances for credit losses and returns. The Company estimates expected credit losses related to accounts receivable balances based on a review of available and relevant information including current economic conditions, projected economic conditions, historical loss experience, account aging, and other factors that could affect collectability. Expected credit losses are determined individually or collectively depending on whether the accounts receivable balances share similar risk characteristics. The allowance for returns for VCC transactions subsequently canceled are assessed at each period end and recognized as a reduction of revenue. The allowances for buyer customer’s credit losses and returns are assessed at each period end and are recognized as bad debt expense within general and administrative expenses in the consolidated statements of operations and as a reduction of revenue, respectively. A buyer customer receivable is written off against the allowance when it is determined that all collection efforts have been exhausted and the potential for recovery is considered remote. Historically, losses related to customer nonpayment have been immaterial and most of the accounts receivable balances have been current.
Supplier advances receivable represent amounts that have been advanced as part of the AvidXchange’s Payment Accelerator product but have not been collected. Advances are collected from the buyer customer once the buyer initiates the transfer of funds for the invoice that was previously advanced. If the buyer does not transfer the funds as expected, the Company is exposed to losses. The Company’s experience with such delinquencies by buyer customers has been immaterial. Supplier advances receivable are stated net of expected credit losses. The Company estimates expected credit losses related to supplier advances receivable balances based on a review of available and relevant information including current economic conditions, projected economic conditions, historical loss experience, account aging, and other factors that could affect collectability. Expected credit losses are determined individually or collectively depending on whether the accounts receivable balances share similar risk characteristics. The allowance for credit losses for supplier advances is assessed at period end and the measurement of the allowance is included as a component of cost of revenues in the Company’s consolidated statements of operations. Supplier
6
AvidXchange Holdings, Inc.
Notes to the Unaudited Consolidated Financial Statements
(in thousands, except share and per share data)
advances receivable balances are charged against the allowance when the Company determines it is probable the receivable will not be recovered after collection efforts and legal actions have been exhausted. The Company classifies the fees charged to supplier customers as cash flows from operating activities with the remaining accelerated advancements and recoupments classified as cash flows from investing activities on a net basis within the consolidated statements of cash flows.
Restricted Funds Held for Customers and Payment Service Obligations
Restricted funds held for customers and the corresponding liability of payment service obligations represent funds that are collected from customers for payments to their suppliers. The Company determines the balances of restricted funds held for customers, and the corresponding payment services obligations, by reconciling cash held by financial institutions and the corresponding payments in transit at the end of each period. The balance of these obligations may fluctuate from period to period depending on the timing of the period end and the timing of when outstanding payments clear with financial institutions. The Company is registered as a money services business with the Financial Crimes Enforcement Network.
|
|
As of September 30, 2024 |
|
|
As of December 31, 2023 |
|
||
Outstanding Transaction Liabilities |
|
$ |
|
|
$ |
|
||
Other unregulated settlements |
|
|
|
|
|
|
||
Total payment service obligations |
|
$ |
|
|
$ |
|
The Company historically transmitted buyer customer funds using a legacy model pursuant to which buyer customer funds were held in trust accounts that were maintained and operated by a trustee pending distribution to suppliers in accordance with instructions provided through the Company’s platform. The Company is not the trustee or beneficiary of the trusts which hold these buyer deposits; accordingly, the Company does not record these assets and offsetting liabilities on its consolidated balance sheets. The Company has largely phased out this model although certain banks that resell its products and services continue to leverage a similar structure. The Company contractually earns interest on funds held for certain buyers. The amount of Company and bank customer funds held in all trust-related and similar accounts was approximately $
The Company has transitioned most payment transmission activity to the money transmitter license model and obtained a money transmitter license in all states which require licensure. This model enables AvidXchange to provide commercial payment services to businesses through its “for the benefit of customer” bank accounts, also known as FBO, that are restricted for such purposes. The restricted funds held for customers are restricted for the purpose of satisfying the customer’s supplier obligations and are not available for general business use by the Company. The Company maintains these funds in liquid cash accounts and contractually earns interest on these funds held for customers. These funds are recognized as a restricted cash asset and a corresponding liability is recorded for payments due to their suppliers on the Company’s consolidated balance sheets. Restricted funds held for customers are included in the cash and cash equivalents on the consolidated statements of cash flows.
Stock-Based Compensation
Compensation cost for stock-based awards issued to employees and outside directors, including stock options and restricted stock units (“RSUs”), is measured at fair value on the date of grant.
The fair value of stock options is estimated using a Black-Scholes option-pricing model, while the fair value of RSUs is determined using the fair value of the Company’s underlying common stock. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period of the award. Stock-based compensation expense for RSUs with performance conditions is recognized over the requisite service period on an accelerated-basis as long as the performance condition in the form of a specified liquidity event is probable to occur. In the case of equity issued in lieu of cash bonus, expense is recognized in the period the cash bonus was earned.
Nonqualified Deferred Compensation Plan
The Company adopted a nonqualified, deferred compensation plan effective October 1, 2015, which is an unfunded plan created for the benefit of a select group of management or highly compensated employees. The purpose of the plan is to attract and retain key employees by providing them with an opportunity to defer receipt of a portion of their compensation. It is exempt from the participation, vesting, funding, and fiduciary requirements set forth in Title I of the Employee Retirement Income Security Act of 1974, as amended. Deferred amounts are not subject to forfeiture and are deemed invested among investment funds offered under the nonqualified deferred compensation plan, as directed by each participant.
7
AvidXchange Holdings, Inc.
Notes to the Unaudited Consolidated Financial Statements
(in thousands, except share and per share data)
The Company has established a ‘rabbi trust’ that serves as an investment to shadow the deferred compensation plan liability. The assets of the rabbi trust primarily consist of trust-owned life insurance policies which are recorded at cash surrender value and are included in other noncurrent assets. The change in cash surrender value of the life insurance policies in the rabbi trust is recorded in other income (expense) on the Company's unaudited consolidated statements of operations. The assets of the rabbi trust are general assets of the Company and as such, would be subject to the claims of creditors in the event of bankruptcy or insolvency. The related deferred compensation liabilities are included in other long-term liabilities.
The Company has recorded these assets and liabilities at their fair value. In association with this plan, $
Contingent Liabilities
Contingent liabilities require significant judgment in estimating potential losses for legal claims. The Company reviews significant new claims and litigation for the probability of an adverse outcome. Estimates are recorded as liabilities when it is probable that a liability has been incurred and the amount of the loss is reasonably estimable. Disclosure is required when there is a reasonable possibility that the ultimate loss will materially exceed the recorded provision. Contingent liabilities are often resolved over long periods of time. Estimating probable losses requires analysis of multiple forecasts that often depend on judgments about potential actions by third parties such as regulators, and the estimated loss can change materially as individual claims develop.
New Accounting Pronouncements
Recently Adopted Accounting Standards
In March 2023, the FASB issued ASU No. 2023-01, Leases (Topic 842): Common Control Arrangements. The amendments in this update that apply to public business entities clarify the accounting for leasehold improvements associated with common control leases. The
Accounting Pronouncements Issued but Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires significant additional disclosures about income taxes, primarily focused on the disclosure of income taxes paid and the rate reconciliation table. The new guidance will be applied prospectively (with retrospective application permitted) and is effective for calendar year-end public business entities in the 2025 annual period and in 2026 for interim periods, with early adoption permitted. The Company is assessing the impact of this guidance on its financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This standard is intended to require more detailed disclosures about specified categories of expenses included in certain expense captions presented on the face of the income statement. This ASU is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The amendments may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. The Company is assessing the impact of this guidance on its financial statements.
3. Revenue from Contracts with Customers
Disaggregation of Revenue
The table below presents the Company’s revenues disaggregated by type of services performed.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Software revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Payment revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Services revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Contract Assets and Liabilities
The Company’s rights to payments are not conditional on any factors other than the passage of time, and as such, the Company does not have any contract assets. Contract liabilities consist primarily of advance cash receipts for services (deferred revenue) and are recognized as revenue when the services are provided.
8
AvidXchange Holdings, Inc.
Notes to the Unaudited Consolidated Financial Statements
(in thousands, except share and per share data)
The table below presents information on accounts receivable and contract liabilities.
|
|
As of September 30, 2024 |
|
|
As of December 31, 2023 |
|
||
Trade accounts receivable, net |
|
$ |
|
|
$ |
|
||
Payment processing receivable, net |
|
|
|
|
|
|
||
Accounts receivable, net |
|
$ |
|
|
$ |
|
||
Contract liabilities |
|
$ |
|
|
$ |
|
Significant changes in the contract liabilities balance are as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Revenue recognized included in beginning of period balance |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Cash received, excluding amounts recognized as revenue during the period |
|
|
|
|
|
|
|
|
|
|
|
|
The tables below present a summary of changes in the Company’s allowances for credit losses and returns for the nine months ended September 30, 2024 and 2023:
|
|
Accounts Receivable |
|
|
|
|
||||||
|
|
Allowance for Credit Losses |
|
|
Allowance for Returns |
|
|
Supplier Advances Receivable Allowance |
|
|||
Allowance balance, December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Amounts charged to contra revenue, cost of revenues and expenses |
|
|
|
|
|
( |
) |
|
|
|
||
Amounts written off as uncollectable |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Recoveries of amounts previously written off |
|
|
- |
|
|
|
- |
|
|
|
|
|
Deduction released to revenue |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Allowance balance, September 30, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Accounts Receivable |
|
|
|
|
||||||
|
|
Allowance for Credit Losses |
|
|
Allowance for Returns |
|
|
Supplier Advances Receivable Allowance |
|
|||
Allowance balance, December 31, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Amounts charged to contra revenue, cost of revenues and expenses |
|
|
|
|
|
|
|
|
|
|||
Amounts written off as uncollectable |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Recoveries of amounts previously written off |
|
|
- |
|
|
|
- |
|
|
|
|
|
Deduction released to revenue |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
Allowance balance, September 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
Transaction Price Allocated to Remaining Performance Obligations
Transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized. These revenues are subject to future economic risks including customer cancellations, bankruptcies, regulatory changes and other market factors.
The Company applies the practical expedient in ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”), paragraph 606-10-50-14(b) and does not disclose information about remaining performance obligations related to transaction and processing services that qualify for recognition in accordance with paragraph 606-10-55-18 of Topic 606. These contracts contain variable consideration for stand-ready performance obligations for which the exact quantity and mix of transactions to be processed are contingent upon buyer or supplier request. These contracts also contain fixed fees and non-refundable upfront fees; however, these amounts are not considered material to total consolidated revenue.
9
AvidXchange Holdings, Inc.
Notes to the Unaudited Consolidated Financial Statements
(in thousands, except share and per share data)
The Company’s remaining performance obligation consists of contracts with financial institutions who are using the ASCEND solution. These contracts generally have a duration of to
|
|
Current |
|
|
Noncurrent |
|
|
Total |
|
|||
As of September 30, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
As of December 31, 2023 |
|
|
|
|
|
|
|
|
|
Contract Costs
The Company incurs incremental costs to obtain a contract, as well as costs to fulfill a contract with buyer customers that are expected to be recovered. These costs consist primarily of sales commissions incurred if a contract is obtained, and customer implementation related costs.
The Company utilizes a portfolio approach when estimating the amortization of contract acquisition and fulfillment costs. These costs are amortized on a
The following tables present information about deferred contract costs:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Capitalized sales commissions and implementation costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Amortization of deferred contract costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Costs to obtain contracts included in sales and marketing expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Costs to fulfill contracts included in cost of revenue |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
4. Income (Loss) Per Common Share
The following common share equivalent securities have been excluded from the calculation of weighted average common shares outstanding because the effect is anti-dilutive for the periods presented:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
Anti-Dilutive Common Share Equivalents |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total anti-dilutive common share equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per common share is calculated as follows:
10
AvidXchange Holdings, Inc.
Notes to the Unaudited Consolidated Financial Statements
(in thousands, except share and per share data)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Net income (loss) attributable to common stockholders |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding, basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average effect of potentially dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock options |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Restricted stock units |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Employee stock purchase plan |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Weighted-average common shares outstanding, diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) per common share, basic |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Net income (loss) per common share, diluted |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
5. Fair Value Measurements
The Company’s financial instruments consist of cash and cash equivalents, marketable securities, trade and supplier advances receivables, assets of the rabbi trust, AP, deferred compensation liabilities, and debt. The carrying amount of cash, trade and supplier advances receivables, and AP approximate fair value due to the short-term maturity. The estimated fair value of long-term debt is based on borrowing rates available during the period to the Company for similar debt issues. The fair value approximated the carrying value of long-term debt at the report date.
In accordance with applicable accounting standards, the Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.
The following is a brief description of those three levels:
Level 1 |
Observable inputs such as quoted market prices in active markets for identical assets or liabilities. |
Level 2 |
Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. |
Level 3 |
Unobservable inputs that reflect the reporting entity’s own assumptions. The fair value for such assets and liabilities is generally determined using pricing models, discounted cash flow methodologies, or similar techniques that incorporate the assumptions a market participant would use in pricing the asset or liability. |
When more than one level of input is used to determine the fair value, the financial instrument is classified as Level 1, 2 or 3 according to the lowest level input that has a significant impact on the fair value measurement. The Company performs a review of the fair value hierarchy classification on an annual basis. Changes in the observability of valuation inputs may result in a reclassification of certain financial assets or financial liabilities within the fair value hierarchy.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level to classify them for each reporting period. This determination requires significant judgment.
The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis using the above categories, as of the periods presented.
11
AvidXchange Holdings, Inc.
Notes to the Unaudited Consolidated Financial Statements
(in thousands, except share and per share data)
|
|
As of September 30, 2024 |
|
|||||||||||||
Description |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market mutual funds (1) |
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||
Rabbi trust-owned life insurance policies (at cash surrender value) (2) |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other long-term liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred compensation |
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
|
|
|
||
Total liabilities |
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
|
As of December 31, 2023 |
|
|||||||||||||
Description |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market mutual funds (1) |
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||
Rabbi trust-owned life insurance policies (at cash surrender value) (2) |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other long-term liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred compensation |
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
|
|
|
||
Total liabilities |
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
________________
(1) |
Money market funds are classified as cash equivalents in the Company’s unaudited consolidated balance sheets. As short-term, highly liquid investments readily convertible to known amounts of cash with remaining maturities of three months or less at the time of purchase, the Company’s cash equivalent money market funds have carrying values that approximate fair value. |
(2) |
Fair value of insurance policies represents their cash surrender value based on the underlying investments in the account which is determined based on quoted prices for identical or similar financial instruments in active markets. |
6. Marketable Securities
Marketable securities consist of corporate bonds, commercial paper, certificates of deposit, and U.S. Treasury and agency debt, and are classified as held-to-maturity. Investments held in marketable securities had contractual maturities of less than
|
|
As of September 30, 2024 |
|
|||||||||||||||||||||
Sector |
|
Amortized Cost |
|
|
Allowance for Credit Losses |
|
|
Net Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
||||||
Financial |
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Industrial |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Total |
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
As of December 31, 2023 |
|
|||||||||||||||||||||
Sector |
|
Amortized Cost |
|
|
Allowance for Credit Losses |
|
|
Net Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
||||||
Financial |
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
|
|||
Total |
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
|
$ |
( |
) |
|
$ |
|
12
AvidXchange Holdings, Inc.
Notes to the Unaudited Consolidated Financial Statements
(in thousands, except share and per share data)
The fair value of marketable securities in the Government major security type is classified as a Level 1 in the Company’s fair value hierarchy described in Note 5. The fair values of the remaining major security types are classified as Level 2.
The following table presents information about the Company’s investments that were in an unrealized loss position and for which an other-than-temporary impairment has not been recognized in earnings:
|
|
As of September 30, 2024 |
|
|
As of December 31, 2023 |
|
||
Aggregate fair value of investments with unrealized losses (1) |
|
|
|
|
$ |
|
||
Aggregate amount of unrealized losses |
|
|
( |
) |
|
|
( |
) |
_________________
(1) |
Investments have been in a continuous loss position for less than 12 months |
7. Intangible Assets and Goodwill
Intangible Assets
The following table presents information about capitalized software development costs:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
Capitalized software development costs |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Capitalized |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Amortized |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2024 |
|
|||||||||
|
|
Gross |
|
|
Accumulated |
|
|
|
|
|||
|
|
Amount |
|
|
Amortization |
|
|
Net Amount |
|
|||
Internally developed software |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Non-compete |
|
|
|
|
|
( |
) |
|
|
|
||
Customer relationships |
|
|
|
|
|
( |
) |
|
|
|
||
Technology |
|
|
|
|
|
( |
) |
|
|
|
||
Trade name |
|
|
|
|
|
( |
) |
|
|
|
||
Total intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
As of December 31, 2023 |
|
|||||||||
|
|
Gross |
|
|
Accumulated |
|
|
|
|
|||
|
|
Amount |
|
|
Amortization |
|
|
Net Amount |
|
|||
Internally developed software |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Non-compete |
|
|
|
|
|
( |
) |
|
|
|
||
Customer relationships |
|
|
|
|
|
( |
) |
|
|
|
||
Technology |
|
|
|
|
|
( |
) |
|
|
|
||
Trade name |
|
|
|
|
|
( |
) |
|
|
|
||
Total intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
Total amortization expense associated with identifiable intangible assets was as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Total amortization expense associated with identifiable intangible assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Impairment and write-off of intangible assets
Impairment and write-off expense related to internally developed software projects was as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Impairment and write-off of intangible assets |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
13
AvidXchange Holdings, Inc.
Notes to the Unaudited Consolidated Financial Statements
(in thousands, except share and per share data)
Goodwill
There were
8. Leases and Leasing Commitments
Supplemental cash flow information related to the Company’s operating and finance leases was as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financing cash flows for finance leases |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating cash flows for finance leases |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating cash flows for operating leases |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Right of use assets obtained in exchange for new lease obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Finance lease liabilities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Operating lease liabilities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
The components of lease expense were as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
Lease expense |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Finance lease expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of right-of-use assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest on lease liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating lease expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Variable lease expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total lease expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
9. Long-Term Debt
Long-term debt as of September 30, 2024 and December 31, 2023:
|
|
As of September 30, 2024 |
|
|
As of December 31, 2023 |
|
||
Term loan facility |
|
$ |
- |
|
|
$ |
|
|
Promissory note payable for land acquisition |
|
|
|
|
|
|
||
Total principal due |
|
|
|
|
|
|
||
Current portion of term loan and promissory notes |
|
|
( |
) |
|
|
( |
) |
Unamortized portion of debt issuance costs |
|
|
- |
|
|
|
( |
) |
Long-term debt |
|
$ |
|
|
$ |
|
On August 8, 2024, the Company, through its wholly-owned subsidiaries, AvidXchange, Inc. and AFV Commerce, Inc. (the "Borrowers"), entered into a credit agreement (the "2024 Amended and Restated Credit Agreement") with KeyBank National Association ("KeyBank") to amend and restate in its entirety its previous senior secured credit facility (as amended, the "2022 Credit Agreement"), dated as of December 29, 2022. The Company repaid all amounts outstanding under the term loan facility under the 2022 Credit Agreement upon closing the 2024 Amended and Restated Credit Agreement. The 2024 Amended and Restated Credit Agreement has a term of
Under the 2024 Amended and Restated Credit Agreement and subject to specific conditions, the Company may request, and the lenders have the right, but not the obligation, to increase the 2024 Revolver or add a term loan facility by an additional amount (for all such increases) not to exceed $150,000, for a total aggregate amount of $300,000. The 2024 Revolver may be used for working capital, for refinancing existing indebtedness, and for other general corporate purposes.
14
AvidXchange Holdings, Inc.
Notes to the Unaudited Consolidated Financial Statements
(in thousands, except share and per share data)
Letters of credit may be issued by KeyBank pursuant to the 2024 Amended and Restated Credit Agreement in an aggregate face amount up to $30,000 and the availability under the 2024 Revolver will be reduced by any outstanding letters of credit. As of September 30, 2024,
The maturity date for the 2024 Revolver is
Interest on the loans under the 2024 Amended and Restated Credit Agreement is equal to the daily simple secured overnight financing rate ("SOFR"), term SOFR or a base rate, plus an applicable margin. The applicable margin is between
The 2024 Amended and Restated Credit Agreement contains certain customary representations and warranties and affirmative and negative covenants. The affirmative covenants require the Company to provide the lenders with certain financial statements, budgets, compliance certificates and other documents and reports and to comply with certain laws. The negative covenants restrict the Company’s ability to incur additional indebtedness, create additional liens on its assets, make certain investments, dispose of its assets or engage in a merger or other similar transaction or engage in transactions with affiliates, which are subject, in each case, to the various exceptions and conditions described in the 2024 Amended and Restated Credit Agreement. The negative covenants further restrict the Company’s ability to make certain restricted payments, including the payment of dividends in certain circumstances and repurchase of common equity in excess of $50,000 shares in any fiscal year.
The 2024 Amended and Restated Credit Agreement also includes certain customary events of default. If an event of default occurs and is continuing, the lenders are entitled to take various actions, including the charging of a default rate of interest, accelerating the maturity of all loans and taking all actions permitted to be taken by a secured creditor with respect to the collateral for the 2024 Amended and Restated Credit Agreement and under applicable law.
The obligations under the 2024 Amended and Restated Credit Agreement are secured by:
Under the 2024 Amended and Restated Credit Agreement, the Company's wholly-owned subsidiaries, AvidXchange, Inc. and AFV Commerce, Inc., are the only borrowers, and AvidXchange Holdings, Inc. and certain subsidiaries of AvidXchange, Inc. and AFV Commerce, Inc. are co-guarantors.
Revolving Credit Facility
There was
15
AvidXchange Holdings, Inc.
Notes to the Unaudited Consolidated Financial Statements
(in thousands, except share and per share data)
Deferred Financing Costs
Costs incurred with entering into the 2024 Amended and Restated Credit Agreement were deferred and amortized over the
Amortization of deferred financing costs was $
Land Promissory Notes
The Company has
10. Stockholders’ Equity
The holders of common stock are entitled to
Authorized Shares
The Company is authorized to issue
Common Stock
At September 30, 2024, the Company had reserved a total of
|
|
As of September 30, 2024 |
|
|
Outstanding stock options |
|
|
|
|
Restricted stock units |
|
|
|
|
Available for future issuance under stock award plans |
|
|
|
|
Available for future issuance under employee stock purchase plan |
|
|
|
|
Total common shares reserved for future issuance |
|
|
|
Share Repurchase Program
In August 2024, our board of directors authorized the repurchase of up to $
During the three and nine months ended September 30, 2024, the Company repurchased and subsequently retired
16
AvidXchange Holdings, Inc.
Notes to the Unaudited Consolidated Financial Statements
(in thousands, except share and per share data)
11. Stock-Based Compensation
Stock Plans
The Company maintains its 2021 Long-Term Incentive Plan ("2021 Plan") under which it grants stock awards to its employees, directors and non-employee third parties. On January 1, 2024, the number of shares of common stock available to issue under the 2021 Plan automatically increased by
The Company also maintains its 2021 Employee Stock Purchase Plan ("ESPP"), under which eligible employees may purchase the Company’s common stock through accumulated payroll deductions. On January 1, 2024, the number of shares of common stock reserved for issuance under the ESPP automatically increased by
Stock Options
Stock options granted under the Company's current and prior equity incentive plans have various vesting periods ranging from fully-vested on the date of grant to vesting over a period of or
Stock option activity for the nine months ended September 30, 2024 was as follows:
|
|
Stock Options |
|
|||||||||||||
|
|
Number of Stock Options Outstanding |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Remaining Contractual Life |
|
|
Aggregate Intrinsic Value |
|
||||
Balance as of December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Cancelled |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Balance as of September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and exercisable |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
As of September 30, 2024, the total unamortized stock-based compensation expense related to the unvested stock options was $
Restricted Stock Units
RSUs have a vesting period generally of to
RSUs granted prior to the Company's IPO have a term of
RSU activity for the nine months ended September 30, 2024 was as follows:
|
|
Restricted Stock Units |
|
|||||
|
|
Number of Restricted Stock Units Outstanding |
|
|
Weighted Average Grant Date Fair Value |
|
||
Balance as of December 31, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Released |
|
|
( |
) |
|
|
|
|
Cancelled |
|
|
( |
) |
|
|
|
|
Balance as of September 30, 2024 |
|
|
|
|
$ |
|
17
AvidXchange Holdings, Inc.
Notes to the Unaudited Consolidated Financial Statements
(in thousands, except share and per share data)
As of September 30, 2024, the total unamortized stock-based compensation expense related to the unvested RSUs was $
Stock-Based Compensation Expense
Stock-based compensation expense from stock options and RSUs, reduced for actual forfeitures, was included in the following line items in the accompanying consolidated statement of operations:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Cost of revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Employee Stock Purchase Plan
Stock-based compensation expense for the ESPP is based on the estimated fair value of the option to purchase shares at a discount and uses grant date inputs including the purchase discount, expected contributions and stock price.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
ESPP expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
12. Commitments and Contingencies
Cybersecurity Incident
13. Income Taxes
The Company’s effective tax rate for the three months ended September 30, 2024 and 2023 was
14. Subsequent Events
On October 31, 2024, the Company issued
On November 8, 2024, the Board of Directors approved the fourth installment of 165,729 shares of common stock to a philanthropic partner, Foundation for the Carolinas and its affiliate, Community Investments Foundation, as a charitable contribution in connection with an agreement between the parties dated October 1, 2021. Pursuant to this agreement, we intend to provide annual ongoing grants of 10% of the pledged shares for a period of ten years, subject in each case to the approval of our board of directors.
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the unaudited interim financial statements and notes thereto included in this Quarterly Report on Form 10-Q and with our audited financial statements and notes thereto for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2023.
Cautionary Note Regarding Forward Looking Statements
The following discussion and other parts of this Quarterly Report contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future operating results and financial position, our business strategy and plans, market growth, and our objectives for future operations, may constitute forward-looking statements. These statements are often identified by the use of words such as “believe,” “may,” “will,” “estimate,” “potential,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “target,” and similar expressions or variations. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, operating results, business strategy, short-term and long-term business operations and objectives. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A under the heading “Risk Factors.” The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
You should read this Quarterly Report on Form 10-Q, and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the SEC, with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.
In this Quarterly Report on Form 10-Q, the words “we,” “our,” “us,” “AvidXchange,” and “our Company” refer to AvidXchange, Inc. prior to our reorganization, and to AvidXchange Holdings, Inc. and its consolidated subsidiaries following the reorganization, unless the context requires otherwise.
Overview
AvidXchange was founded in 2000 to serve the AP automation needs of the middle market. In 2012, in response to customer demand for more efficient payment methods, we launched the AvidPay Network. Since 2012, we have had substantial growth, both organic and through a series of strategic acquisitions allowing us to expand in the markets that we serve and enter new ones.
Our Business and Revenue Model
We sell our solutions through a hybrid go-to-market strategy that includes direct and indirect channels. Our direct sales force leverages their domain expertise in select verticals and over 270 referral relationships with integrated software providers, financial institutions and other partners to identify and attract buyers that would benefit from our AP software solutions and the AvidPay Network. Our indirect channel includes reseller partners and other strategic partnerships such as Mastercard, through MasterCard’s B2B Hub, which includes Fifth Third Bank and Bank of America, and other financial institutions, such as KeyBank, and third-party software providers such as MRI Software, RealPage and Sage Software. Our referral and indirect channel partnerships provide us greater reach across the market to access a variety of buyers.
Our revenues are recurring in nature and are derived from multiple sources, predominantly through software revenue from our buyers and revenue from payments made to their suppliers. The table below represents our revenues disaggregated by type of service performed (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
Disaggregation of Revenue: |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Software revenue |
|
$ |
30,664 |
|
|
$ |
28,919 |
|
|
$ |
90,266 |
|
|
$ |
83,135 |
|
Payment revenue |
|
|
80,697 |
|
|
|
68,485 |
|
|
|
230,082 |
|
|
|
190,894 |
|
Services revenue |
|
|
1,411 |
|
|
|
1,276 |
|
|
|
3,154 |
|
|
|
2,627 |
|
Total revenues |
|
$ |
112,772 |
|
|
$ |
98,680 |
|
|
$ |
323,502 |
|
|
$ |
276,656 |
|
Software revenue, payment revenue and services revenue are described below in the section titled "Components of Results of Operations."
19
Macroeconomic Environment’s Impact on Revenue
Despite the resiliency exhibited by aspects of the U.S economy during the first nine months of 2024, we believe that certain of our customers continue to exhibit caution in their purchasing decisions. More broadly, we believe that certain of the verticals or sub-components of those verticals in which we operate have been and continue to be more adversely impacted by the macroeconomic environment, which contrasts with the broader but measured improvement in overall economic sentiment.
Tempered spending by prospects and customers impacts us two ways. First, tempered spending and a focus on costs can impact payment volumes, payment amounts, and payment type mix. The business metrics that best reflect this impact include transaction yield and total payment volume. Second, cautious spending impacts sales and is reflected, in part, in our software revenue as well as the number of invoices that we process. The business metric that best reflects this impact can be found in transactions processed.
In the short term, while we believe that we will benefit from improving overall economic sentiment in the coming quarters, we also believe that we will be better positioned to gauge inflections in sentiment among our customer verticals after the uncertainties of the current political cycle and broader macroeconomic environment are behind us.
As for the changing interest rate environment, when rates were higher during the earlier part of the year, our payment revenue and interest income, resulting from the funds we held for buyers, were positively impacted. Interest income, which is a component of our payment revenue, was negatively impacted when the Federal Reserve cut interest rates earlier this year and will continue to be negatively impacted should the Federal Reserve elect to continue to cut interest rates. Such changes could also lead to difficulty in comparing our current consolidated financial results to our results in future reporting periods.
Key Financial and Business Metrics
We regularly review several financial and business metrics to measure our performance, identify trends affecting our business, prepare financial projections, and make strategic decisions. We believe that these key business metrics provide meaningful supplemental information for management and investors in assessing our historical and future operating performance. The calculation of the key metrics and other measures discussed below may differ from other similarly titled metrics used by other companies, securities analysts or investors.
|
Three Months Ended September 30, |
|
|
Percentage |
|
|
Nine Months Ended September 30, |
|
|
Percentage |
|
||||||||||||
|
2024 |
|
|
2023 |
|
|
Change |
|
|
2024 |
|
|
2023 |
|
|
Change |
|
||||||
Transactions Processed |
|
20,177,994 |
|
|
|
19,175,866 |
|
|
|
5.2 |
% |
|
|
59,228,276 |
|
|
|
56,253,181 |
|
|
|
5.3 |
% |
Transaction Yield |
$ |
5.59 |
|
|
$ |
5.15 |
|
|
|
8.5 |
% |
|
$ |
5.46 |
|
|
$ |
4.92 |
|
|
|
11.0 |
% |
Total Payment Volume (in millions) |
$ |
21,479 |
|
|
$ |
19,627 |
|
|
|
9.4 |
% |
|
$ |
61,963 |
|
|
$ |
56,040 |
|
|
|
10.6 |
% |
Transactions processed
We believe that transactions processed is an important measure of our business because it is a key indicator of the use by both buyers and suppliers of our solutions and our ability to generate revenue, since a majority of our revenue is generated based on transactions processed. We define transactions processed as the number of invoice transactions and payment transactions, such as invoices, purchase orders, checks, ACH payments and VCCs, processed through our platform during a particular period.
Transaction yield
We believe that transaction yield is an important measure of the value of our solutions to buyers and suppliers as we scale. We define transaction yield as the total revenue during a particular period divided by the total transactions processed during such period.
Total payment volume
We believe total payment volume is an important measure of our AvidPay Network business as it quantifies the demand for our payment services. We define total payment volume as the dollar sum of buyers’ AP payments paid to their suppliers through the AvidPay Network during a particular period.
Components of Results of Operations
Revenue
We generate revenue from the following sources: (i) software, (ii) payments, and (iii) services.
Software Revenue
We generate software revenue from our buyers primarily through (i) fees calculated based on the number of invoices and payment transactions processed and (ii) recurring maintenance and SaaS fees. Software revenue is typically billed to and paid by our buyers on a monthly basis. Our software offerings, many of which are built for specific verticals, address the needs of buyers and together they comprise our suite of predominately cloud-based solutions designed to manage invoices and automate the AP function. We generally sign multi-year contracts with buyers and revenue is recognized over the term of the contract. We also
20
generally receive initial upfront implementation fees and software maintenance fees for ongoing support, which are recognized ratably over the term of the applicable support period.
Payment Revenue
We generate revenue from the payments our buyers make to their suppliers through (i) offering electronic payment solutions to suppliers, (ii) fees charged to suppliers from our invoice payment accelerator product, and (iii) interest on funds held for buyers pending disbursement.
Our electronic payment solutions currently include VCC and an enhanced ACH payment product, or AvidPay Direct, which eliminate paper checks and increase the speed of payment to the supplier. AvidPay Direct also provides suppliers with enhanced remittance data allowing the supplier to reconcile the payment and the underlying invoice. VCC revenues result from interchange fees applied to the spend processed and are recorded net of fees and incentives. AvidPay Direct revenue is based on a per transaction fee that we charge to suppliers that generally includes a cap and is based on the spend per payment and is recorded net of incentives.
Our invoice payment accelerator product, Payment Accelerator, provides certain suppliers with the opportunity to better manage cash flows and receive payments even faster by allowing suppliers to receive advance payment on qualifying invoices. Revenues are generated on a per transaction basis for each payment that is advanced. We currently fund the accelerated payment of invoices from our balance sheet.
Interest income represents interest received from buyer deposits held during the payment clearing process. We receive interest on funds held through our contractual relationship with our buyers, which we recognize as payment revenue. The rate we earn on buyer funds is difficult to predict in the short and long term and will continue to be impacted by the Federal Reserve’s monetary policy and any adjustments that are made in response to inflation. Due to the elevated levels of inflation in the U.S. economy, and the resulting increases in interest rates, we experienced an increase in revenues generated on funds held during the payment clearing process during 2022, 2023 and 2024. This level of interest income on buyer deposits may not be sustainable in future years or in nearer term periods depending on the Federal Reserve’s future actions. The Federal Reserve is expected by many to reduce interest rates in near to mid-term future periods, which would in turn have a negative impact on our payment revenue although the extent to which rates will be reduced, if at all, and the specific timing of the rate cuts remains highly uncertain.
Our media payments business includes customers that are involved in political advertising in the U.S. Revenue from these customers is cyclical as it is connected to U.S. election advertising spend which tends to increase during significant election years, such as mid-term and presidential elections. As 2024 is a presidential election year, we expect an increase in the payments associated with political advertising in connection with the presidential election cycle in 2024, compared to 2023 which was not a significant election year.
We utilize service providers to process a substantial portion of our payment revenue that is derived from interchange fees earned on payment transactions processed as VCCs. A large percentage of our revenue is processed by a small number of providers and our revenue is also dependent on the rates we are able to negotiate with these providers. See Note 2 “Summary of Significant Accounting Policies” of our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for disclosures regarding this concentration.
Services Revenue
Services revenue includes fees charged to process buyer change in service requests.
Total Revenue
We expect our total revenue to increase year over year due to an increase in the number of transactions processed, and the number of buyers and suppliers using the AvidPay Network, and that payment revenue should comprise a greater proportion of total revenue as the volume of transactions on the AvidPay Network continue to increase.
Cost of Revenues and Operating Expenses
Cost of Revenues
Cost of revenues includes personnel related costs, which include direct compensation, fringe benefits, short- and long-term incentive plans and stock-based compensation expense. Cost of revenues includes teams responsible for buyer and supplier onboarding and setup, invoice processing, payment operations, money movement execution, and customer service. Personnel costs also include internal labor associated with the employees who monitor the performance and reliability of our buyer and supplier solutions and the underlying delivery infrastructure (i.e., application and data hosting administration, product support and escalations, payment monitoring and settlement functions).
Cost of revenues also includes external expenses that are directly attributed to the processing of invoice and payment transactions. These expenses include the cost of scanning and indexing invoices, printing checks, postage for mailing checks, expenses for processing payments (ACH, check, and wires), bank fees associated with buyer deposits held during the payment
21
clearing process, and other transaction execution costs. Additionally, cost of revenues includes fees paid to third parties for the use of their technology, data hosting services, customer relationship management tools used in the delivery of our services or in support of the delivery infrastructure, and adjustments to the allowance for uncollectible advancements processed through Payment Accelerator. Lastly, cost of revenues includes estimates for treasury losses that occur in treasury operations. Treasury losses include various unrecoverable internal payment processing errors that occur in the ordinary course of business, such as duplicate payments, overpayments, payments to the wrong party and reconciliation errors.
We have elected to exclude amortization expense of capitalized developed software and acquired technology, as well as allocations of fixed asset depreciation expense and facility expenses from cost of revenues.
We expect our cost of revenues as a percentage of revenue to decrease as we continue to realize operational efficiencies and shift more of our transactions to electronic payments.
Sales and Marketing
Sales and marketing consists primarily of costs related to our direct sales force and partner channels that are incurred in the process of setting up go-to-market strategies, generating leads, building brand awareness and acquiring new buyers and suppliers, including efforts to convert suppliers from paper check payments to electronic forms of payments and efforts to enroll them into the Payment Accelerator solution.
Personnel costs include salaries, wages, direct and amortized sales commissions, fringe benefits, short- and long-term incentive plans and stock-based compensation expense. Most of the commissions paid to the direct sales force are incremental based upon invoice and payment volume from the acquisition of a new buyer and are deferred and amortized ratably over an estimated benefit period of five years.
The partner ecosystem consists of reseller, referral and accounting system partners. Compensation paid to referral and accounting system partners in exchange for the referral and marketing efforts of the partner is classified as sales and marketing expense.
In addition, we focus on generating awareness of our platform and products through a variety of sponsorships, user conferences, trade shows, and integrated marketing campaigns. Costs associated with these efforts, including travel expenses, external consulting services, and various technology applications are included in sales and marketing as well.
While we expect to continue to increase marketing activities over the coming periods, we are focused on efficient deployment of these marketing resources, and as a result we expect our sales and marketing expenses to experience modest growth in absolute terms in the near term.
Research and Development
Research and development efforts focus on the development of new products and business intelligence tools or the enhancements of existing products and applications, as well as large scale infrastructure projects that improve the underlying architecture of our technology.
The main contributors of research and development costs are (i) personnel related expenses, including fringe benefits, short- and long-term incentive plans and stock-based compensation expense, and (ii) fees for outsourced professional services. We capitalize certain internal and external development costs that are attributable to new products or new functionality of existing products and amortize such costs to depreciation and amortization on a straight-line basis over an estimated useful life, which is generally three years.
We also incur research and development costs attributable to the use of software tools and technologies required to facilitate our research and development activities. Examples of such costs include fees paid to third parties to host lower technical environments and the associated virtual machine ware fees paid to support agile development efforts, and fees paid for software tools and licenses used in quality control testing and code deployment activities.
We expect our research and development expense to increase in absolute dollars but to decrease as a percentage of revenue over the longer term as we are able to efficiently deploy our development resources against a larger revenue base.
General and Administrative
General and administrative expenses consist primarily of our finance, human resources, legal and compliance, facilities, information technology, administration, and information security organizations. Significant cost contributors are (i) personnel expenses, including fringe benefits, short- and long-term incentive plans and stock-based compensation expense, and (ii) costs of software applications, including end user computing solutions, and various technology tools utilized by these organizations. Occupancy expenses, which include personnel, rent, maintenance and property tax costs are not allocated to other components of the statements of operations and remain in general and administrative expenses.
22
While we expect our general and administrative expenses to decrease as a percentage of revenue over the longer term, we expect our general and administrative expenses may increase from time to time in absolute dollars over the shorter term as we continue to build out our infrastructure to support our operations and implement additional safeguards and cybersecurity enhancements.
General and administrative expenses include costs incurred from time to time related to events and transactions not directly attributable to operations. For example, during 2023, general and administrative expenses include costs incurred in connection with a cybersecurity incident as well as insurance recoveries. Additionally, general and administrative expenses also include restructuring costs incurred in connection with planned reductions of our U.S. workforce. Restructuring costs consist of one-time severance charges to be paid to affected employees.
Impairment and Write-Off of Intangible Assets
Impairment and write-off of intangible assets is the reduction from carrying value to fair value for assets or asset groups whose carrying value is not recoverable and also includes charges determined based on our estimation of the amount of obsolescence of previously capitalized software development costs.
Depreciation and Amortization
Depreciation and amortization expense includes depreciation of property and equipment over the estimated useful life of the applicable asset, as well as amortization of acquired intangibles (i.e., technology, customer list and tradename) with a useful life between 3 and 15 years, and amortization of capitalized software development costs with an estimated benefit of 3 years.
Other Income (Expense)
Other income (expense) consists primarily of interest expense on our bank borrowings and headquarters finance leases, offset by interest income on non-customer corporate funds.
Income Tax Expense (Benefit)
Income tax expense (benefit) consists of federal and state current and deferred income taxes.
Results of Operations
The following table sets forth our results of operations for the periods presented (in thousands, except share and per share data):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Revenues |
|
$ |
112,772 |
|
|
$ |
98,680 |
|
|
$ |
323,502 |
|
|
$ |
276,656 |
|
Cost of revenues (exclusive of depreciation and amortization expense) |
|
|
30,429 |
|
|
|
30,767 |
|
|
|
91,188 |
|
|
|
90,461 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
21,102 |
|
|
|
18,735 |
|
|
|
60,799 |
|
|
|
58,946 |
|
Research and development |
|
|
25,125 |
|
|
|
24,754 |
|
|
|
76,037 |
|
|
|
72,616 |
|
General and administrative |
|
|
25,769 |
|
|
|
25,002 |
|
|
|
72,664 |
|
|
|
75,345 |
|
Impairment and write-off of intangible assets |
|
|
- |
|
|
|
- |
|
|
|
162 |
|
|
|
- |
|
Depreciation and amortization |
|
|
9,092 |
|
|
|
9,051 |
|
|
|
27,607 |
|
|
|
26,515 |
|
Total operating expenses |
|
|
81,088 |
|
|
|
77,542 |
|
|
|
237,269 |
|
|
|
233,422 |
|
Income (loss) from operations |
|
|
1,255 |
|
|
|
(9,629 |
) |
|
|
(4,955 |
) |
|
|
(47,227 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
5,837 |
|
|
|
5,100 |
|
|
|
18,378 |
|
|
|
14,820 |
|
Interest expense |
|
|
(2,614 |
) |
|
|
(3,428 |
) |
|
|
(9,274 |
) |
|
|
(10,106 |
) |
Other income |
|
|
3,223 |
|
|
|
1,672 |
|
|
|
9,104 |
|
|
|
4,714 |
|
Income (loss) before income taxes |
|
|
4,478 |
|
|
|
(7,957 |
) |
|
|
4,149 |
|
|
|
(42,513 |
) |
Income tax expense |
|
|
431 |
|
|
|
134 |
|
|
|
675 |
|
|
|
339 |
|
Net income (loss) |
|
$ |
4,047 |
|
|
$ |
(8,091 |
) |
|
$ |
3,474 |
|
|
$ |
(42,852 |
) |
Net income (loss) per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.02 |
|
|
$ |
(0.04 |
) |
|
$ |
0.02 |
|
|
$ |
(0.21 |
) |
Diluted |
|
$ |
0.02 |
|
|
$ |
(0.04 |
) |
|
$ |
0.02 |
|
|
$ |
(0.21 |
) |
Weighted average number of common shares used to compute net income (loss) per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
207,235,954 |
|
|
|
202,526,844 |
|
|
|
206,389,565 |
|
|
|
201,338,550 |
|
Diluted |
|
|
209,015,661 |
|
|
|
202,526,844 |
|
|
|
209,721,858 |
|
|
|
201,338,550 |
|
23
Comparison of the Three Months Ended September 30, 2024 and 2023
Revenues
|
Three Months Ended September 30, |
|
|
Period-to-Period Change |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percentage |
|
||||
|
(in thousands) |
|
|||||||||||||
Revenues |
$ |
112,772 |
|
|
$ |
98,680 |
|
|
$ |
14,092 |
|
|
|
14.3 |
% |
The increase in revenues was largely comprised of an increase in payment revenue of $12.2 million, or 17.8%, driven primarily by increased electronic payments on the AvidPay Network due to the addition of new and existing buyer payment transaction volume and an increase in payment yield, that resulted, in part, from increased interest rates over the prior year period. Payment revenue and payment yield were positively impacted by interest on funds held for customers as the rate earned on those funds increased during the period compared to rates earned in the prior year period. Payment revenue from interest increased $2.0 million to $12.7 million in the third quarter of 2024 from $10.6 million in the third quarter of 2023. Software revenue increased by $1.7 million, or 6.0%, primarily driven by increased invoice and payment transaction volume from new and existing customers as well as increases in certain subscription-based revenue. The prior year period included an out of period adjustment of a $1.5 million increase to revenue, primarily comprised of an increase in software revenue of $1.1 million and an increase in services revenue of $0.5 million, offset by a decrease in payment revenue of $0.1 million.
Cost of Revenues
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|||||||||||||||
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
Percentage of |
|
|
|
|
|
Percentage of |
|
|
Period-to-Period Change |
|
|||||||||
|
Amount |
|
|
Revenue |
|
|
Amount |
|
|
Revenue |
|
|
Amount |
|
|
Percentage |
|
||||||
|
(in thousands) |
|
|||||||||||||||||||||
Cost of revenues (excluding depreciation and amortization expense) |
$ |
30,429 |
|
|
|
27.0 |
% |
|
$ |
30,767 |
|
|
|
31.2 |
% |
|
$ |
(338 |
) |
|
|
(1.1 |
)% |
The decrease in cost of revenues (excluding depreciation and amortization expense) was due primarily to decreases in employee costs of $1.6 million due to decreased headcount (explained in Sales and Marketing below) and savings of $0.5 million in consulting and contract labor costs as a result of transitioning to new vendors. These decreases were partially offset by increases in invoice and check processing fees of $0.7 million and increases in IT infrastructure costs of $0.2 million. Additionally, misdirected payments increased $0.3 million and Payments Accelerator reserve increased $0.3 million.
Operating Expenses
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|||||||||||||||
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
Percentage of |
|
|
|
|
|
Percentage of |
|
|
Period-to-Period Change |
|
|||||||||
|
Amount |
|
|
Revenue |
|
|
Amount |
|
|
Revenue |
|
|
Amount |
|
|
Percentage |
|
||||||
|
(in thousands) |
|
|||||||||||||||||||||
Sales and marketing |
$ |
21,102 |
|
|
|
18.7 |
% |
|
$ |
18,735 |
|
|
|
19.0 |
% |
|
$ |
2,367 |
|
|
|
12.6 |
% |
Research and development |
|
25,125 |
|
|
|
22.3 |
% |
|
|
24,754 |
|
|
|
25.1 |
% |
|
|
371 |
|
|
|
1.5 |
% |
General and administrative |
|
25,769 |
|
|
|
22.9 |
% |
|
|
25,002 |
|
|
|
25.3 |
% |
|
|
767 |
|
|
|
3.1 |
% |
Depreciation and amortization |
|
9,092 |
|
|
|
8.1 |
% |
|
|
9,051 |
|
|
|
9.2 |
% |
|
|
41 |
|
|
|
0.5 |
% |
Sales and Marketing Expenses
The increase in sales and marketing expenses was primarily driven by increases in employee costs of $1.7 million and marketing costs of $0.6 million. The increase in employee costs reflects the shift in responsibility of certain teammates to increase utilization and adoption of our software. These increases were partially offset by a decrease in consulting costs of $0.2 million as we discontinued services of certain vendors.
Research and Development Expenses
Research and development expenses increased primarily due to costs associated with engaging consultants and contractors of $2.0 million. These increases were partially offset by decreases in employee costs of $1.2 million related to a decrease in headcount and lower rate of bonus accrual compared to the prior year period. An additional decrease of $0.7 million was attributable to an increase in amount capitalized for software development costs.
General and Administrative Expenses
The increase in general and administrative expense is primarily attributable to a $1.1 million increase in reserve for credit losses compared to the prior year period which also benefited from a reserve release. We experienced additional increases in IT
24
infrastructure costs of $0.8 million related to several enhancement initiatives and $0.3 million related to staffing and consulting services. These increases were offset by a decrease of $0.7 million of net costs incurred in the prior year period in connection with the cybersecurity incident that was detected in April 2023. Additionally, we incurred $1.1 million of costs from the write-off of debt issuance costs from amending and restating our credit facility in the current period that were more than offset by a loss contingency of $1.6 million related to a potential commercial dispute recognized in the prior year period.
We do not expect additional recoveries or significant costs related to the cybersecurity incident will be incurred in future periods.
Depreciation and Amortization
Depreciation and amortization increased in absolute terms primarily due to the amortization of intangible assets associated with capitalized software development costs.
Other Income (Expense)
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|||||||||||||||
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
Percentage of |
|
|
|
|
|
Percentage of |
|
|
Period-to-Period Change |
|
|||||||||
|
Amount |
|
|
Revenue |
|
|
Amount |
|
|
Revenue |
|
|
Amount |
|
|
Percentage |
|
||||||
|
(in thousands) |
|
|||||||||||||||||||||
Other Income (Expense) |
$ |
3,223 |
|
|
|
2.9 |
% |
|
$ |
1,672 |
|
|
|
1.7 |
% |
|
$ |
1,551 |
|
|
|
92.8 |
% |
Other income increased due to an increase in interest income of $0.7 million and a decrease in interest expense of $0.8 million that resulted from repaying our term loan during the period.
Income Tax Expense
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|||||||||||||||
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
Percentage of |
|
|
|
|
|
Percentage of |
|
|
Period-to-Period Change |
|
|||||||||
|
Amount |
|
|
Revenue |
|
|
Amount |
|
|
Revenue |
|
|
Amount |
|
|
Percentage |
|
||||||
|
(in thousands) |
|
|||||||||||||||||||||
Income tax expense |
$ |
431 |
|
|
|
0.4 |
% |
|
$ |
134 |
|
|
|
0.1 |
% |
|
$ |
297 |
|
|
|
221.6 |
% |
The provision for income taxes is driven by current state income taxes in taxable jurisdictions and changes in the Company's valuation allowances relative to pretax earnings.
Comparison of the Nine Months Ended September 30, 2024 and 2023
Revenues
|
Nine Months Ended September 30, |
|
|
Period-to-Period Change |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percentage |
|
||||
|
(in thousands) |
|
|||||||||||||
Revenues |
$ |
323,502 |
|
|
$ |
276,656 |
|
|
$ |
46,846 |
|
|
|
16.9 |
% |
The increase in revenues was largely comprised of an increase in payment revenue of $39.2 million, or 20.5%, driven primarily by increased electronic payments on the AvidPay Network due to the addition of new and existing buyer payment transaction volume and an increase in payment yield, that resulted, in part, from increased interest rates over the prior year period. Payment revenue and payment yield were positively impacted by interest on funds held for customers as the rate earned on those funds increased during the period compared to rates earned in the prior year period. Payment revenue from interest increased $10.6 million to $37.5 million in the first nine months of 2024 from $26.9 million in the first nine months of 2023. Software revenue increased by $7.1 million, or 8.6%, primarily driven by increased invoice and payment transaction volume from new and existing customers as well as increases in certain subscription-based revenue.
25
Cost of Revenues
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||||||||||
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
Percentage |
|
|
|
|
|
Percentage |
|
|
Period-to-Period Change |
|
|||||||||
|
Amount |
|
|
of Revenue |
|
|
Amount |
|
|
of Revenue |
|
|
Amount |
|
|
Percentage |
|
||||||
|
(in thousands) |
|
|||||||||||||||||||||
Cost of revenues (excluding depreciation and amortization expense) |
$ |
91,188 |
|
|
|
28.2 |
% |
|
$ |
90,461 |
|
|
|
32.7 |
% |
|
$ |
727 |
|
|
|
0.8 |
% |
The increase in cost of revenues (excluding depreciation and amortization expense) was due primarily to increases in invoice and check processing fees of $2.3 million, increases in IT infrastructure costs of $1.0 million, and an increase in Payments Accelerator reserve of $0.9 million, partially offset by costs savings in consulting and contract labor of $2.0 million as a result of transitioning to new vendors and decreases in employee costs of $1.6 million (explained in Sales and Marketing below).
Operating Expenses
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||||||||||
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
Percentage |
|
|
|
|
|
Percentage |
|
|
Period-to-Period Change |
|
|||||||||
|
Amount |
|
|
of Revenue |
|
|
Amount |
|
|
of Revenue |
|
|
Amount |
|
|
Percentage |
|
||||||
|
(in thousands) |
|
|||||||||||||||||||||
Sales and marketing |
$ |
60,799 |
|
|
|
18.8 |
% |
|
$ |
58,946 |
|
|
|
21.3 |
% |
|
$ |
1,853 |
|
|
|
3.1 |
% |
Research and development |
|
76,037 |
|
|
|
23.5 |
% |
|
|
72,616 |
|
|
|
26.2 |
% |
|
|
3,421 |
|
|
|
4.7 |
% |
General and administrative |
|
72,664 |
|
|
|
22.5 |
% |
|
|
75,345 |
|
|
|
27.2 |
% |
|
|
(2,681 |
) |
|
|
(3.6 |
)% |
Impairment and write-off of intangible assets |
|
162 |
|
|
|
0.1 |
% |
|
|
- |
|
|
|
0.0 |
% |
|
|
162 |
|
|
|
100.0 |
% |
Depreciation and amortization |
|
27,607 |
|
|
|
8.5 |
% |
|
|
26,515 |
|
|
|
9.6 |
% |
|
|
1,092 |
|
|
|
4.1 |
% |
Sales and Marketing Expenses
The increase in sales and marketing expenses was primarily driven by increases in employee costs of $1.9 million and marketing expenses of $0.5 million. The primary driver for the increase in employee costs relates to the shift in responsibility of certain teammates to increase utilization and adoption of our software. Additionally, amortization expense of deferred sales commissions increased $0.4 million and partner commissions increased $0.2 million. These increases were partially offset by decreases in consulting costs of $0.8 million as we discontinued services of certain vendors and a decrease in travel expense of $0.2 million.
Research and Development Expenses
Research and development expenses increased primarily due to costs associated with engaging consultants and contractors of $2.0 million and increases in employee costs of $1.6 million. We experienced additional increases of $0.8 million in IT infrastructure and other costs. These increases were partially offset by decreases of $1.0 million attributable to an increase in the amount capitalized for software development costs.
General and Administrative Expenses
The decrease in general and administrative expense is primarily attributable to the cybersecurity incident that was detected in April 2023. During the first nine months of 2024 we recorded $0.9 million more recoveries from cybersecurity insurance than the prior year period and we experienced a decrease in costs related to the cybersecurity incident of $5.2 million as the prior year period incurred a significant amount of expense associated with our initial threat response. An additional decrease of $1.6 million is attributable to an accrual made in the prior year period related to a potential commercial dispute. These decreases were partially offset by increases in employee costs of $0.6 million, IT infrastructure costs of $1.9 million, and legal and professional fees of $0.3 million. Additionally, we incurred $1.1 million of costs from the write-off of debt issuance costs from renegotiating our credit facility in the third quarter of 2024 as well as $1.2 million in non-reoccurring restructuring costs during 2024.
We do not expect additional recoveries or significant costs related to the cybersecurity incident will be incurred in future periods.
Impairment and Write-off of Intangible Assets
The impairment and write-off of intangible assets during the nine months ended September 30, 2024 relates to internally developed software projects.
Depreciation and Amortization
Depreciation and amortization increased in absolute terms primarily due to the amortization of intangible assets associated with capitalized software development costs.
26
Other Income (Expense)
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||||||||||
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
Percentage |
|
|
|
|
|
Percentage |
|
|
Period-to-Period Change |
|
|||||||||
|
Amount |
|
|
of Revenue |
|
|
Amount |
|
|
of Revenue |
|
|
Amount |
|
|
Percentage |
|
||||||
|
(in thousands) |
|
|||||||||||||||||||||
Other Income (Expense) |
$ |
9,104 |
|
|
|
2.8 |
% |
|
$ |
4,714 |
|
|
|
1.7 |
% |
|
$ |
4,390 |
|
|
|
93.1 |
% |
Other income increased primarily due to an increase in interest income of $3.6 million and a decrease in interest expense of $0.8 million that resulted from repaying our term loan during the period.
Income Tax Expense
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||||||||||
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
Percentage |
|
|
|
|
|
Percentage |
|
|
Period-to-Period Change |
|
|||||||||
|
Amount |
|
|
of Revenue |
|
|
Amount |
|
|
of Revenue |
|
|
Amount |
|
|
Percentage |
|
||||||
|
(in thousands) |
|
|||||||||||||||||||||
Income tax (benefit) expense |
$ |
675 |
|
|
|
0.2 |
% |
|
$ |
339 |
|
|
|
0.1 |
% |
|
$ |
336 |
|
|
|
99.1 |
% |
The provision for income taxes is driven by current state income taxes in taxable jurisdictions and changes in the Company's valuation allowances relative to pretax earnings.
Liquidity and Capital Resources
Prior to the second quarter of 2024, we did not historically generate positive cash flow through our operations. We have historically financed our operations and capital expenditures primarily through sales of common and preferred stock, through borrowings under our credit facilities, as described below, and through our IPO that was completed in October 2021, which resulted in net proceeds of $621.4 million, including the exercise of the overallotment option and after deducting underwriting discounts and commissions of $40.4 million and offering expenses of approximately $11.8 million. As of September 30, 2024, our principal sources of liquidity are our unrestricted cash and cash equivalents of $315.3 million, marketable securities of $79.0 million, and funds available under our revolving credit facility, which we refer to as the 2024 Amended and Restated Credit Agreement, which we entered into in August 2024. As of September 30, 2024, our unused committed capacity under the 2024 Amended and Restated Credit Agreement was $150.0 million comprised of a revolving commitment.
We believe that our unrestricted cash, cash equivalents, marketable securities, and funds available under our 2024 Amended and Restated Credit Agreement will be sufficient to meet our working capital requirements for at least the next twelve months. To the extent existing cash, marketable securities, cash from operations, and amounts available for borrowing under the 2024 Amended and Restated Credit Agreement are insufficient to fund future activities, we may need to raise additional capital. In the future, we may attempt to raise additional capital through the sale of equity securities or through equity-linked or debt financing arrangements. If we raise additional capital by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional capital by the incurrence of additional indebtedness, we may be subject to increased fixed payment obligations and could also be subject to additional restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. Our ability to raise additional debt may be limited by applicable regulatory requirements as a licensed money transmitter that require us to meet certain net worth requirements. Any future indebtedness we incur may result in terms that could be unfavorable to equity investors. There can be no assurances that we will be able to raise additional capital. The inability to raise capital would adversely affect our ability to achieve our business objectives.
Cash Flows
Below is a summary of our consolidated cash flows:
|
|
Nine Months Ended September 30, |
|
|||||
Selected Cash Flow Data: |
2024 |
|
|
2023 |
|
|||
|
|
(in thousands) |
|
|||||
Net cash (used in) provided by: |
|
|
|
|
|
|
||
Operating activities |
|
$ |
43,482 |
|
|
$ |
(10,991 |
) |
Investing activities |
|
|
(51,656 |
) |
|
|
226 |
|
Financing activities |
|
|
(507,852 |
) |
|
|
(57,474 |
) |
Net decrease in cash and cash equivalents, and restricted funds held for customers |
|
$ |
(516,026 |
) |
|
$ |
(68,239 |
) |
27
Net Cash Provided by (Used in) Operating Activities
Our primary source of cash provided by our operating activities is from our software and payment revenue. Our primary uses of cash in our operating activities include payments for employee salary and related costs, payments to third party service providers to execute our payment transactions, sales and marketing costs, and other general corporate expenditures.
Net cash provided by operating activities improved to $43.5 million during the nine months ended September 30, 2024 from $11.0 million used in operating activities during the nine months ended September 30, 2023 due primarily to an increase in revenue and an improvement from net loss to net income offset by changes in working capital, primarily due to variations in timing of payment of accrued expenses.
Net Cash (Used in) Provided by Investing Activities
Cash flows related to our investing activities consist primarily of the maturity and purchases of marketable securities, purchases of property and equipment, purchases of intangible assets, capitalization of internal-use software, and supplier advances related to our Payment Accelerator product.
Net cash used in investing activities increased to $51.7 million during the nine months ended September 30, 2024 compared to $0.2 million provided by investing activities during the nine months ended September 30, 2023, primarily driven by differences in the timing of purchases and maturities in our portfolio of held-to-maturity marketable securities.
Net Cash Used in Financing Activities
Cash flows related to our financing activities consist primarily of changes in restricted buyer fund deposits related to buyer payment transactions, exercise of stock options, principal payments on financing leases, borrowings and repayments of long-term debt, and share repurchases.
Net cash used in financing activities was $507.9 million during the nine months ended September 30, 2024 compared to $57.5 million during the nine months ended September 30, 2023, due primarily to variations in the inflows and outflows from payment service obligations of our customers as well as repayment of debt and share repurchases.
Outstanding Debt
Below is a summary of our outstanding debt (in thousands):
|
|
As of September 30, 2024 |
|
|
As of December 31, 2023 |
|
||
Term loan facility |
|
$ |
- |
|
|
$ |
63,375 |
|
Promissory note payable for land acquisition |
|
|
13,900 |
|
|
|
13,900 |
|
Total principal due |
|
|
13,900 |
|
|
|
77,275 |
|
Current portion of term loan and promissory notes |
|
|
(4,800 |
) |
|
|
(6,425 |
) |
Unamortized portion of debt issuance costs |
|
|
- |
|
|
|
(1,090 |
) |
Long-term debt |
|
$ |
9,100 |
|
|
$ |
69,760 |
|
Credit Facilities
On August 8, 2024, we entered into an agreement to amend and restate our previous credit facility. As a result, we repaid the outstanding amount of the term loan and expanded the borrowing capacity of the revolving line of credit. As of September 30, 2024, the aggregate available borrowing capacity under this agreement was $150.0 million, which may be increased, subject to specific conditions, by an additional amount (for all such increases) not to exceed $150.0 million, for a total aggregate amount of $300.0 million.
We were in compliance with our financial covenants as of September 30, 2024. Refer to Note 9 of our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional details about our credit facilities.
Land Promissory Notes
We have promissory notes in connection with land and improvements adjacent to our Charlotte, North Carolina headquarters campus. Refer to Note 9 of our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information on our promissory notes.
Issuances of Common Stock
During the nine months ended September 30, 2024, we issued shares of common stock under our existing stock plans. Refer to our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for details.
Share Repurchases
In August 2024, our board of directors authorized the repurchase of up to $100.0 million of our outstanding shares of common stock. During the three and nine months ended September 30, 2024, we repurchased and subsequently retired 3,104,312 shares
28
of common stock for $25.1 million. Refer to Note 10 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional details.
Payment Obligations
We process payments for our customers. As part of our payment product offering, we have recorded payment service obligations in our consolidated balance sheets of $1,154.3 million as of September 30, 2024 and an offsetting asset of restricted funds held for customers. This balance is short-term in nature and represents our obligation to pay our customers' suppliers as directed by our customers.
We historically transmitted buyer customer funds using a legacy model pursuant to which buyer customer funds were held in trust accounts that were maintained and operated by a trustee pending distribution to suppliers in accordance with instructions provided through our platform. After buyers’ funds were deposited in a trust account, we initiated payment through external payment networks whereby the buyers’ funds were distributed from the trust to the appropriate supplier. We are not the trustee or beneficiary of the trusts which hold these buyer deposits; accordingly, we do not record these assets and offsetting liabilities on our consolidated balance sheets. We have largely transitioned away from the trust model although certain banks that resell our products and services continue to leverage a similar structure. We contractually earn interest on funds held for certain buyers. The amount of Company and bank customer funds held in all trust-related and similar accounts was approximately $21.9 million and $6.3 million as of September 30, 2024 and December 31, 2023, respectively.
Contractual Obligations
There were no material changes in our contractual obligations and commitments during the nine months ended September 30, 2024 from the contractual obligations and commitments disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023. See Note 8 of the notes to our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding contractual obligations and commitments.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue generated, and reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no material changes to our critical accounting policies as compared to the critical accounting policies and significant judgments and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on February 29, 2024.
Recent Accounting Pronouncements
See Note 2 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of September 30, 2024.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
Our overall investment portfolio is comprised of (i) our operating cash and (ii) buyer funds. Our operating cash includes cash received from revenues generated, the sale of common and preferred stock and increased borrowings. Buyer funds are funds that have been collected from buyers, but not yet remitted to the applicable supplier. The funds are held in either company-owned accounts, which are subject to applicable state money transmitter laws, or in trust-related accounts. We are generally entitled to retain any interest earned on the investment of buyer funds as specified by our contractual arrangements with our buyers.
Our operating cash may be invested in accordance with our cash investment policy. Under that policy, we invest with the objective of preserving capital while optimizing yield. Permissible investments include U.S. Treasury instruments, U.S. Government Agency securities, Government-Sponsored Enterprise securities, corporate bonds, commercial paper, certificates of deposit, and money market funds. As of September 30, 2024, we held marketable securities with an amortized cost basis of $79.0 million and money market funds with an aggregate value of $60.5 million. The remaining amount of operating cash was held in interest-bearing demand deposit accounts.
Our buyer funds assets are invested with safety of principal, liquidity, and diversification as the primary objectives. Consistent with these objectives, we also seek to maximize interest income and to minimize the volatility of interest income with emphasis on
29
liquidity. Pursuant to our investment policy and subject to applicable law, buyer funds may be invested in U.S. Treasury securities, U.S. Government Agency securities, or other cash equivalents, including certificates of deposit and time deposits. As of September 30, 2024, all buyer funds have been invested in interest-bearing demand deposit accounts.
We are exposed to interest-rate risk relating to our investment portfolio, which consists principally of interest-bearing demand deposit accounts as well as investments made in accordance with our cash investment policy. We recognize interest earned from buyer funds assets as revenue. We generally do not pay interest to buyers. Factors that influence the rate of interest we earn include the short-term market interest rate environment and the weighting of balances by security type. The annualized interest rate earned on our investment of operating cash and funds held for buyers increased to 5.04% during the first nine months of fiscal year 2024 from 4.39% during fiscal year 2023. Based on current investment practices, an increase in the interest rate of 100 basis points would have changed our interest income in the first nine months of fiscal year 2024 from our investment of operating cash by approximately $2.9 million and our interest on buyer funds assets by approximately $8.1 million based upon the average balances for the first nine months of fiscal year 2024 of $452.6 million in operating cash investments and $1,006.8 million in buyer funds investments, respectively. In addition to interest rate risks, we also have exposure to risks associated with changes in laws and regulations that may affect buyer fund balances. For example, a change in regulations that restricts the permissible investment alternatives for buyer funds may reduce our interest earned revenue.
We are also exposed to interest-rate risk relating to existing variable rate bank borrowings. As of September 30, 2024 and December 31, 2023, we had outstanding borrowings on variable rate debt of $0 and $63.4 million, respectively. A 100 basis points increase in the variable rate would have resulted in incremental interest expense of $0.4 million during the nine months ended September 30, 2024.
Our interest-rate risk will continue to be impacted by the Federal Reserve’s monetary policy and response to the higher than normal level of inflation in the U.S. economy.
Credit Risk
We may be exposed to credit risk in connection with our investments, as our cash on deposit, including buyer funds, regularly exceed Federal Deposit Insurance Company (“FDIC”) limits. We limit credit risk by diversifying our portfolio, including a requirement that no more than 5% of invested funds may be held in the issues of a single corporation. Additionally, absent certain limited exceptions, the minimum credit quality of any fixed income investment shall be not less than an ‘(A-) or (A3)’ rating equivalent from any single rating services based on ratings by any of Standard and Poor’s Ratings Services, Moody’s Investors Service, or Fitch Investor Services. The maximum maturity of any security in the portfolio shall not exceed 24 months. The weighted average maturity of the portfolio shall not exceed 36 months. In addition, maximum maturities of individual securities are further limited by the security type and cash segment of the investment. We are also exposed to credit risk related to the timing of payments made from buyer funds collected. We typically remit buyer funds to our buyers’ suppliers in advance of having good or confirmed funds collected from our buyers. Our buyers generally have three days to dispute transactions and if we remit funds in advance of receiving confirmation that no dispute was initiated by our buyer, then we could suffer a credit loss. We mitigate this credit exposure by leveraging our data assets to make credit underwriting decisions about whether to accelerate disbursements, managing exposure limits, and various controls in our operating systems.
There can be no assurance that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S. government, or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions or by acquisition in the event of a failure or liquidity crisis. While we do not currently maintain private insurance to mitigate this risk, we seek to mitigate this risk by monitoring financial institutions that we conduct business with and endeavoring to maintain our cash balances at large well-capitalized financial institutions.
We are also exposed to risks associated with our Payment Accelerator product, in which our supplier customers can accelerate the receipt of payment for outstanding invoices before our buyers initiate the transfer of funds. If those invoices are not approved or the buyer does not transfer the requisite funds then we are exposed to the risk of not being able to recoup our advances to the supplier. We mitigate this risk through data analytics to determine which invoices are available and appropriate for advance payment.
Liquidity Risk
As part of our buyer funds investment strategy, we use the daily collection of funds from our buyers to satisfy other unrelated buyer funds obligations. We minimize the risk of not having funds collected from a buyer available at the time the buyer’s obligation becomes due by collecting the buyer’s funds in advance of the timing of payment of the buyer’s obligation. As a result of this practice, we have consistently maintained the required level of buyer funds assets to satisfy all of our obligations.
Concentration Risk
A substantial portion of our revenue is derived from interchange fees earned on payment transactions processed from VCC service providers. Prior to 2022, our interchange fees were processed primarily through a single provider. To mitigate this
30
concentration risk, we have expanded the number of processor suppliers. Revenue from two of these suppliers was greater than 10% of our total revenue, individually. Refer to Note 2 of our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding this concentration.
Future regulation or changes by the payment networks could have a substantial impact on our revenue from VCC transactions. If interchange rates decline, whether due to actions by the payment networks, merchant/suppliers availing themselves of lower rates, or future regulation, our total operating revenues, operating results, prospects for future growth and overall business could be materially affected.
We are also exposed to concentration risk associated with buyer funds that we hold in Company-owned accounts, which are subject to applicable state money transmitter laws, and in trust accounts. As of September 30, 2024, all buyer funds have been invested in interest-bearing demand deposit accounts. The majority of these demand accounts are maintained at one institution which is a full-service, FDIC-insured national bank supervised by the Office of the Comptroller of the Currency and is a subsidiary of a bank holding company subject to regulation, supervision, and examination by the Federal Reserve. As indicated above, while we do not currently maintain private insurance to mitigate this risk, we seek to mitigate this risk by monitoring financial institutions that we conduct business with and endeavoring to maintain our cash balances at large well-capitalized financial institutions.
ITEM 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, as of September 30, 2024, to reasonably ensure that information required to be disclosed and filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified, and that management will be timely alerted to material information required to be included in our periodic reports filed with the Securities and Exchange Commission.
(b) Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter ended September 30, 2024, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we have been and will continue to be subject to legal proceedings and claims. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition, or cash flows. Defending such proceedings is costly and can impose a significant burden on management and employees. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
Item 1A. Risk Factors.
There have been no material changes to the risk factors associated with our business previously disclosed in "Item 1A. Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Unregistered Sales of Equity Securities
None.
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(b) Use of Proceeds
Use of Proceeds
On October 15, 2021, we completed our IPO. All shares sold were registered pursuant to a registration statement on Form S-1, as amended (File No. 333-259632), declared effective by the SEC on October 12, 2021.
There have been no material changes in the planned use of proceeds from the IPO from those described in our Final Prospectus. We have invested a portion of the funds received in short-term, interest bearing, investment-grade securities.
(b) Purchases of Equity Securities by the Company
Purchases of Equity Securities by the Company
In August 2024, our board of directors authorized the repurchase of up to $100 million of our outstanding shares of common stock (the "Share Repurchased Program"). Repurchases under the program may be made in the open market, in privately negotiated transactions or otherwise, including pursuant to a Rule 10b5-1 plan. The timing, price, and volume of the repurchases will be executed based on various market and legal factors, and subject to a $50 million cap in any fiscal year pursuant to the terms of the 2024 Amended and Restated Credit Agreement. The share repurchase program will terminate upon the earlier of December 31, 2025 or the date on which the maximum dollar amount has been expended, but is subject to suspension, modification, or termination at any time at the Company's discretion.
The following table provides shares repurchase activity during the three months ended September 30, 2024:
Period |
|
(a) Total Number of Shares Purchased |
|
|
(b) Average Price Paid Per Share |
|
|
(c) Total Number of Shares Purchased as Part of Publicly Announced Plan |
|
|
(d) Maximum Dollar Value of Shares that May Yet be Purchased Under the Plan |
|
||||
July 1, 2024 - July 31, 2024 |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
August 1, 2024 - August 31, 2024 |
|
|
1,060,000 |
|
|
$ |
8.10 |
|
|
|
1,060,000 |
|
|
$ |
91,413,358 |
|
September 1, 2024 - September 30, 2024 |
|
|
2,044,312 |
|
|
$ |
8.03 |
|
|
|
2,044,312 |
|
|
$ |
75,000,006 |
|
Total |
|
|
3,104,312 |
|
|
|
|
|
|
3,104,312 |
|
|
$ |
75,000,006 |
|
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
(c) Trading Plans of Directors and Executive Officers
|
|
|
|
|
|
Trading Agreement |
|
|
|
|
|
|||
|
|
Action |
|
Date |
|
Rule 10b5-1* |
|
Non-Rule 10b5-1** |
|
Total Shares to be Sold |
|
|
Expiration Date |
|
|
|
|
|
|
|
|
|
|
Not applicable |
|||||
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Intended to satisfy the affirmative defense of Rule 10b5-1(c) |
||||||||||||||
** Not intended to satisfy the affirmative defense of Rule 10b5-1(c) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Item 6. Exhibits.
|
|
|
|
Incorporated by Reference (Unless Otherwise Indicated) |
|
||||||
Exhibit Number |
|
Description |
|
Form |
|
File |
|
Exhibit |
|
Filing Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
2.1 |
|
|
S-1 |
|
333-259632 |
|
2.1 |
|
September 17, 2021 |
|
|
3.1 |
|
Restated Certificate of Incorporation of AvidXchange Holdings, Inc. |
|
8-K |
|
001-40898 |
|
3.1 |
|
October 15, 2021 |
|
3.2 |
|
Second Amended and Restated Bylaws of AvidXchange Holdings, Inc. |
|
8-K |
|
001-40898 |
|
3.1 |
|
September 15, 2022 |
|
4.1 |
|
|
S-1/A |
|
333-259632 |
|
4.1 |
|
October 1, 2021 |
|
|
4.2 |
|
|
S-1 |
|
333-259632 |
|
10.1 |
|
September 17, 2021 |
|
|
10.1 |
|
|
8-K |
|
001-40898 |
|
10.1 |
|
August 9, 2024 |
|
|
31.1 |
|
|
__ |
|
__ |
|
__ |
|
Filed herewith |
|
|
31.2 |
|
|
__ |
|
__ |
|
__ |
|
Filed herewith |
|
|
32.1 |
|
|
__ |
|
__ |
|
__ |
|
Furnished herewith |
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
|
__ |
|
__ |
|
__ |
|
Filed herewith |
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
__ |
|
__ |
|
__ |
|
Filed herewith |
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
__ |
|
__ |
|
__ |
|
Filed herewith |
|
|
|
|
|
|
|
|
|
|
|
|
|
33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
AvidXchange Holdings, Inc. |
|
|
|
|
|
Date: November 8, 2024 |
|
By: |
/s/ Joel Wilhite |
|
|
|
Joel Wilhite |
|
|
|
Chief Financial Officer (Authorized Signatory and Principal Financial and Accounting Officer) |
34