Paymentus Holdings, Inc. (PAY) Earnings

Management highlights

- Overall Financial & Long-Term Growth Performance * Paymentus delivered a strong quarter with record results, hitting 28.8% YoY revenue growth, 26.3% contribution profit growth, and 54% adjusted EBITDA growth. * The company is outperforming its long-term 20% top-line / 25% adjusted EBITDA CAGR model, hitting 10 years of projected 20% compounded growth three years ahead of schedule, far outpacing most best-in-class SaaS peers. * The company exceeded the Rule of 40 with a score of 68 for the quarter, up from 56 in Q2 2025, demonstrating strong combined growth and profitability. - Customer & Bookings Updates * Robust Q2 bookings, particularly in the large enterprise segment across multiple verticals (utilities, government, telecom, property management, insurance, banking, education, B2B, consumer finance), created a substantial end-of-quarter backlog that provides strong visibility into 2026 and 2027. * New channel partners were added in the telecommunications and insurance verticals, and onboarding of the existing backlog remains a top priority. * Implementation timelines for new customers (both large and small) are improving quarter-over-quarter as onboarding processes gain efficiency from scale. - Strategic AI & Product Innovation * The company launched Billio, its AI-native service commerce suite, built to address enterprise customer concerns over AI disintermediation risk while maintaining client data sovereignty. * Key Billio capabilities include the Billio AI 360 intelligence engine, agentic AI service tools to augment human service centers, an intelligent secure client data vault, and a configurable transactional billing and reconciliation engine, alongside the existing patented Bill Wallet that preserves customer and service provider identity and payment credentials. * The company notes it is already receiving positive early feedback from clients and prospects on the new AI product suite. - Market Context & Value Proposition * A recent joint study with Payments Intelligence found customers now view billing experience as core brand experience, with dissatisfaction driving payment delays that expose hundreds of billions in annual recurring revenue at risk, especially among the fast-growing younger customer cohort. * Paymentus' mission is to close this customer satisfaction gap, giving early adopters a compounding loyalty advantage over time.

Guidance

- The company raised full year 2026 guidance across all key metrics, following stronger-than-expected Q2 performance and strong backlog/pipeline: full year 2026 revenue is now guided to $1.443 billion to $1.458 billion (21.2% YoY growth at midpoint), representing a $18 million (1.3%) increase at the midpoint versus prior guidance; contribution profit is guided to $460 million to $465 million (19.7% YoY growth at midpoint), a $9 million (2%) increase at the midpoint; adjusted EBITDA is guided to $175 million to $185 million (31% YoY growth at midpoint), an $11.5 million (6.8%) increase at the midpoint, with 38.9% adjusted EBITDA margin at the midpoint. - The full year 2026 Rule of 40 score is projected to be 59 to 60, maintaining well above the 40 threshold. - Q3 2026 guidance: revenue of $353 million to $363 million (15.2% YoY growth at midpoint); contribution profit of $112 million to $115 million (15.5% YoY growth at midpoint); adjusted EBITDA of $40 million to $45 million (18.5% YoY growth at midpoint), with a 37.4% adjusted EBITDA margin at midpoint. - Management maintains a disciplined, prudent guidance approach, only including results that can be delivered with high confidence based on current visibility, consistent with past practice regardless of macro conditions.

Segment performance

Paymentus does not break out performance by separate product segments in this call. Aggregate total company performance for Q2 2026 was: record revenue of $360.7 million, 28.8% year-over-year growth; 213.4 million total transactions processed, 21.4% year-over-year growth; average price per transaction of $1.69, up from $1.59 year-over-year; contribution profit of $118.1 million, 26.3% year-over-year growth, 32.7% contribution margin (down from 33.4% year-over-year); contribution profit per transaction of $0.55, up from $0.53 year-over-year; adjusted gross profit of $100.2 million, 28.6% year-over-year growth; non-GAAP operating expenses of $54.2 million, 10.5% year-over-year growth; non-GAAP net income of $32.4 million ($0.25 per diluted share), 66.7% year-over-year growth; adjusted EBITDA of $48.8 million, 54% year-over-year growth, with a 41.3% adjusted EBITDA margin; $39 million in free cash flow. Total cash and cash equivalents at quarter end was $379.7 million, with zero debt on the balance sheet.

Risks & headwinds

No new material standalone risks or operational failures were explicitly discussed on the call. Management did note the general risk that forward-looking statements could differ from actual results, and referenced that quarter-to-quarter variability in contribution profit can be driven by factors outside of the company's control, such as changes to average payment size or payment mix. Management also acknowledged that seasonal transaction growth trends may shift as the company diversifies its vertical and customer mix, and that guidance only reflects currently visible results.

Analyst Q&A

• Q: What is driving four consecutive quarters of accelerating contribution profit dollar growth, and is this driven by a few large enterprise customers or broad-based across verticals? /

  A: The acceleration is broad-based across all customer sizes (small, mid-sized, large enterprise) and all verticals, not concentrated in just a few clients or segments. Strong bookings from prior quarters that are now hitting full run rates are contributing meaningfully, with these large new customers valuing the Paymentus platform enough to support strong pricing and high profitability, leading to improved sequential contribution margins. All customer cohorts are contributing to the growth.

• Q: How is market traction going for the new Billio AI product suite, and when will it start contributing to financial results? /

  A: Management has seen very positive early reactions from both existing clients and prospects, as the suite directly addresses the unmet market need for end-to-end service commerce tools tied to brand experience, while maintaining client data sovereignty to mitigate AI disintermediation risk. All Billio capabilities are built on Paymentus' existing payment infrastructure, and investments are being made prudently without negatively impacting current margins. Management expects visible top-line contributions from Billio to start appearing over the next few years.

• Q: Why has network fee growth as a percent of gross revenue slowed to its lowest rate in over two years, and will this cause contribution profit and gross revenue growth to converge going forward? /

  A: The slowdown is primarily driven by favorable customer mix: the large enterprise customers Paymentus has added increasingly value the platform's capabilities, enabling stronger pricing that offsets network fee pressures. This dynamic supports the ongoing expectation that revenue and contribution profit growth will continue converging over time, consistent with the company's long-term CAGR model.

• Q: Can you share more detail on the sources of strong large enterprise momentum, such as changes in inbound/outbound sales mix or win rates? /

  A: The momentum is the result of years of platform building and consistent execution that has changed how enterprise customers view Paymentus. Unlike traditional payment companies that only offer transaction processing, Paymentus' platform supports sophisticated end-to-end business workflows that enterprises need, leading CIO/CTO decision-makers to now align with Paymentus rather than push back. Growth comes from a mix of outbound outreach, inbound referrals from satisfied customers who use Paymentus in their personal lives, and a growing sophisticated partner ecosystem, with platform capability as the core driver of inroads.