PART I—FINANCIAL INFORMATION Item 1. Financial Statements. This section presents AvidXchange's unaudited consolidated financial statements, including Balance Sheets, Statements of Operations, Cash Flows, and detailed notes on accounting policies and recent events Unaudited Consolidated Balance Sheets Balance sheets show decreased total assets and liabilities, mainly from reduced restricted funds, while total stockholders' equity slightly increased Key Balance Sheet Metrics | Metric | As of Sep 30, 2024 (in thousands) | As of Dec 31, 2023 (in thousands) | Change (in thousands) | Percentage Change | |:-----------------------------------|:----------------------------------|:----------------------------------|:----------------------|:------------------| | Total Assets | $2,005,049 | $2,483,737 | $(478,688) | -19.3% | | Cash and cash equivalents | $315,324 | $406,974 | $(91,650) | -22.5% | | Restricted funds held for customers | $1,154,280 | $1,578,656 | $(424,376) | -26.9% | | Marketable securities | $78,957 | $44,645 | $34,312 | 76.9% | | Total Liabilities | $1,328,251 | $1,827,292 | $(499,041) | -27.3% | | Payment service obligations | $1,154,280 | $1,578,656 | $(424,376) | -26.9% | | Long-term debt | $9,100 | $69,760 | $(60,660) | -87.0% | | Total Stockholders' Equity | $676,798 | $656,445 | $20,353 | 3.1% | Unaudited Consolidated Statements of Operations AvidXchange turned a net loss in 2023 to net income in 2024, driven by strong revenue growth, improved interest income, and reduced interest expense Key Consolidated Statements of Operations Metrics | Metric (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | YoY Change (3M) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | YoY Change (9M) | |:------------------------------------------|:--------------------------------|:--------------------------------|:----------------|:-------------------------------|:-------------------------------|:----------------| | Revenues | $112,772 | $98,680 | 14.3% | $323,502 | $276,656 | 16.9% | | Cost of revenues | $30,429 | $30,767 | -1.1% | $91,188 | $90,461 | 0.8% | | Income (loss) from operations | $1,255 | $(9,629) | N/A | $(4,955) | $(47,227) | N/A | | Interest income | $5,837 | $5,100 | 14.4% | $18,378 | $14,820 | 24.0% | | Interest expense | $(2,614) | $(3,428) | -23.7% | $(9,274) | $(10,106) | -8.1% | | Net income (loss) | $4,047 | $(8,091) | N/A | $3,474 | $(42,852) | N/A | | Basic EPS | $0.02 | $(0.04) | N/A | $0.02 | $(0.21) | N/A | | Diluted EPS | $0.02 | $(0.04) | N/A | $0.02 | $(0.21) | N/A | Unaudited Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased from December 2023 to September 2024, driven by net income and stock-based compensation, offset by share repurchases Key Stockholders' Equity Metrics | Metric (in thousands) | Balances at Dec 31, 2023 | Balances at Sep 30, 2024 | Change | |:-----------------------------------|:-------------------------|:-------------------------|:-------| | Common Stock (shares) | 204,084,024 | 205,517,689 | 1,433,665 | | Common Stock (value) | $204 | $205 | $1 | | Additional Paid-in Capital | $1,678,401 | $1,695,279 | $16,878 | | Accumulated Deficit | $(1,022,160) | $(1,018,686) | $3,474 | | Total Stockholders' Equity | $656,445 | $676,798 | $20,353 | - During the nine months ended September 30, 2024, the company repurchased and retired 3,104,312 shares of common stock for $25.1 million6 Unaudited Consolidated Statements of Cash Flows Operating cash flow significantly improved to a net provision in 2024, while investing activities shifted to a net use, and financing activities saw a substantial increase in net cash used Key Consolidated Statements of Cash Flows Metrics | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Change | |:----------------------------------|:-------------------------------|:-------------------------------|:-------| | Net cash provided by (used in) operating activities | $43,482 | $(10,991) | $54,473 | | Net cash (used in) provided by investing activities | $(51,656) | $226 | $(51,882) | | Net cash used in financing activities | $(507,852) | $(57,474) | $(450,378) | | Net decrease in cash, cash equivalents, and restricted funds held for customers | $(516,026) | $(68,239) | $(447,787) | Notes to Unaudited Consolidated Financial Statements This section details AvidXchange's accounting policies, financial instrument valuations, revenue recognition, debt, equity, and other significant financial events 1. Formation and Business of the Company AvidXchange Holdings, Inc., formed in 2021, provides AP automation software and payment solutions for middle-market businesses in North America - AvidXchange Holdings, Inc. was incorporated in Delaware on January 27, 2021, and completed a reorganization in July 2021, making AvidXchange, Inc. a wholly-owned subsidiary9 - The company specializes in accounts payable (AP) automation software and payment solutions for middle-market businesses and their suppliers across North America, serving industries like real estate, construction, financial services, and healthcare9 2. Summary of Significant Accounting Policies This section outlines AvidXchange's key accounting policies, including consolidation, estimates, revenue concentration, restructuring, and accounting for various financial items - A significant portion of revenue (25% in Q3 2024, 22% in 9M 2024) is derived from interchange fees on virtual commercial cards (VCC) processed by one service provider, indicating concentration risk1214 - The company completed a restructuring plan in Q2 2024, incurring $1.16 million in severance costs for the nine months ended September 30, 2024, included in general and administrative expenses15 - AvidXchange has largely transitioned to a money transmitter license model, recognizing restricted funds held for customers and corresponding payment service obligations on its balance sheet, which amounted to $1.15 billion as of September 30, 20242021 3. Revenue from Contracts with Customers AvidXchange's total revenues increased significantly for both the three and nine months ended September 30, 2024, primarily driven by payment revenue Revenue by Type | Revenue Type (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | YoY Change (3M) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | YoY Change (9M) | |:----------------------------|:--------------------------------|:--------------------------------|:----------------|:-------------------------------|:-------------------------------|:----------------| | Software revenue | $30,664 | $28,919 | 6.0% | $90,266 | $83,135 | 8.6% | | Payment revenue | $80,697 | $68,485 | 17.8% | $230,082 | $190,894 | 20.5% | | Services revenue | $1,411 | $1,276 | 10.6% | $3,154 | $2,627 | 19.7% | | Total revenues | $112,772 | $98,680 | 14.3% | $323,502 | $276,656 | 16.9% | Contract Liabilities and Capitalized Costs | Metric (in thousands) | As of Sep 30, 2024 | As of Dec 31, 2023 | Change | |:--------------------------|:-------------------|:-------------------|:-------| | Accounts receivable, net | $56,102 | $46,689 | $9,413 | | Contract liabilities | $25,471 | $27,593 | $(2,122) | | Remaining performance obligation (Total) | $35,325 | $35,434 | $(109) | | Capitalized sales commissions and implementation costs (9M) | $9,496 | $8,422 | $1,074 | 4. Net Income (Loss) Per Share The company reported basic and diluted net income per common share of $0.02 for both the three and nine months ended September 30, 2024, a significant improvement from prior year losses Net Income (Loss) Per Share Metrics | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | |:----------------------------------------------------------------------------------|:--------------------------------|:--------------------------------|:-------------------------------|:-------------------------------| | Net income (loss) attributable to common stockholders (in thousands) | $4,047 | $(8,091) | $3,474 | $(42,852) | | Weighted-average common shares outstanding, basic | 207,235,954 | 202,526,844 | 206,389,565 | 201,338,550 | | Weighted-average common shares outstanding, diluted | 209,015,661 | 202,526,844 | 209,721,858 | 201,338,550 | | Net income (loss) per common share, basic | $0.02 | $(0.04) | $0.02 | $(0.21) | | Net income (loss) per common share, diluted | $0.02 | $(0.04) | $0.02 | $(0.21) | 5. Fair Value Measurements The company measures certain financial assets and liabilities at fair value, primarily classifying money market mutual funds as Level 1 and other items as Level 2, with total fair value of assets decreasing from December 2023 to September 2024 Fair Value Measurements | Metric (in thousands) | As of Sep 30, 2024 | As of Dec 31, 2023 | |:----------------------------------------------------|:-------------------|:-------------------| | Total Assets Measured at Fair Value | $63,333 | $228,581 | | Money market mutual funds (Level 1) | $60,510 | $226,715 | | Rabbi trust-owned life insurance policies (Level 2) | $2,823 | $1,866 | | Total Liabilities Measured at Fair Value | $2,429 | $2,398 | | Deferred compensation (Level 2) | $2,429 | $2,398 | 6. Marketable Securities AvidXchange's marketable securities, classified as held-to-maturity, primarily consist of short-term corporate bonds, commercial paper, and U.S. Treasury/agency debt, with net amortized cost increasing significantly Marketable Securities Metrics | Metric (in thousands) | As of Sep 30, 2024 | As of Dec 31, 2023 | Change | |:----------------------|:-------------------|:-------------------|:-------| | Net Amortized Cost | $78,957 | $44,645 | $34,312 | | Gross Unrealized Gains | $83 | $0 | $83 | | Gross Unrealized Losses | $(4) | $(14) | $10 | | Fair Value | $79,036 | $44,631 | $34,405 | - All marketable securities are classified as held-to-maturity and have contractual maturities of less than 13 months as of September 30, 202436 - The company does not recognize an allowance for expected credit losses on marketable securities due to their short-term nature and high credit quality36 7. Intangible Assets and Goodwill Total intangible assets, net, decreased due to amortization, despite increased capitalized software development costs, and an impairment and write-off of internally developed software was recorded Intangible Assets and Goodwill Metrics | Metric (in thousands) | As of Sep 30, 2024 | As of Dec 31, 2023 | Change | |:--------------------------|:-------------------|:-------------------|:-------| | Total intangible assets, net | $74,033 | $84,805 | $(10,772) | | Internally developed software, net | $26,283 | $26,816 | $(533) | | Customer relationships, net | $28,703 | $34,911 | $(6,208) | | Technology, net | $12,714 | $15,613 | $(2,899) | | Capitalized software development costs (9M) | $12,939 | $11,898 | $1,041 | | Total intangible amortization expense (9M) | $27,607 | $26,515 | $1,092 | | Impairment and write-off of intangible assets (9M) | $162 | $0 | $162 | 8. Leases and Leasing Commitments AvidXchange's total lease expense increased for both the three and nine months ended September 30, 2024, primarily driven by higher amortization of right-of-use assets and interest on finance lease liabilities Lease Expense | Lease Expense (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | |:-----------------------------|:--------------------------------|:--------------------------------|:-------------------------------|:-------------------------------| | Amortization of right-of-use assets (Finance) | $538 | $292 | $1,694 | $1,352 | | Interest on lease liabilities (Finance) | $1,658 | $1,647 | $4,966 | $4,934 | | Operating lease expense | $361 | $426 | $1,183 | $1,290 | | Variable lease expense | $109 | $99 | $257 | $206 | | Total lease expense | $2,666 | $2,464 | $8,100 | $7,782 | 9. Debt AvidXchange significantly reduced its long-term debt by repaying its term loan facility in August 2024, replacing it with a new $150 million revolving credit facility, and was in compliance with covenants Debt Metrics | Debt Metric (in thousands) | As of Sep 30, 2024 | As of Dec 31, 2023 | Change | |:---------------------------|:-------------------|:-------------------|:-------| | Term loan facility | $0 | $63,375 | $(63,375) | | Promissory note payable for land acquisition | $13,900 | $13,900 | $0 | | Total principal due | $13,900 | $77,275 | $(63,375) | | Long-term debt (net of current portion and unamortized costs) | $9,100 | $69,760 | $(60,660) | - On August 8, 2024, the company entered into a new 5-year revolving credit facility of $150 million, replacing its previous senior secured credit facility and repaying all outstanding term loan amounts43 - The company was in compliance with its financial debt covenants as of September 30, 202444 10. Stockholders' Equity AvidXchange has authorized 1.6 billion common shares and 50 million preferred shares, with over 52 million common shares reserved for future issuance, and initiated a $100 million share repurchase program Common Shares Reserved for Future Issuance (as of Sep 30, 2024) | Common Shares Reserved for Future Issuance (as of Sep 30, 2024) | |:------------------------------------------------------------------| | Outstanding stock options: 7,422,922 | | Restricted stock units: 10,127,567 | | Available for future issuance under stock award plans: 26,812,935 | | Available for future issuance under employee stock purchase plan: 7,948,829 | | Total common shares reserved for future issuance: 52,312,253 | - In August 2024, the board authorized a $100 million share repurchase program, with $75 million remaining available as of September 30, 202447 - During the three and nine months ended September 30, 2024, the company repurchased and retired 3,104,312 shares of common stock for $25.1 million47 11. Stock-Based Compensation AvidXchange's stock-based compensation expense increased for both the three and nine months ended September 30, 2024, reflecting grants under its 2021 Long-Term Incentive Plan and Employee Stock Purchase Plan Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation Expense (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | |:--------------------------------|:--------------------------------|:--------------------------------|:-------------------------------|:-------------------------------| | Cost of revenues | $1,615 | $1,109 | $4,399 | $3,437 | | Sales and marketing | $1,364 | $1,212 | $3,915 | $3,747 | | Research and development | $2,944 | $2,976 | $9,526 | $8,175 | | General and administrative | $5,700 | $5,746 | $16,666 | $15,214 | | Total | $11,623 | $11,043 | $34,506 | $30,573 | | ESPP expense | $227 | $186 | $622 | $608 | - As of September 30, 2024, the total unamortized stock-based compensation expense related to unvested RSUs was $92.16 million, to be amortized over a weighted average period of 2.8 years52 12. Commitments and Contingencies The company completed its investigation of the April 2023 cybersecurity incident in Q4 2023, with related professional and legal fees significantly decreasing in 2024 - The company completed its investigation of the April 2023 cybersecurity incident in the fourth quarter of 202355 - Professional and legal fees, net of recoveries, related to the cyber incident were $0.3 million for the nine months ended September 30, 2024, a significant decrease from $5.54 million in the prior year period55 13. Income Taxes AvidXchange's effective tax rate for Q3 2024 was 9.6% (vs. -1.7% in 2023) and for 9M 2024 was 16.3% (vs. -0.8% in 2023), driven by current state income taxes and valuation allowance changes Effective Tax Rate | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | |:--------------------|:--------------------------------|:--------------------------------|:-------------------------------|:-------------------------------| | Effective tax rate | 9.6% | (1.7)% | 16.3% | (0.8)% | 14. Subsequent Events Subsequent to September 30, 2024, AvidXchange issued 187,544 common shares under its ESPP and approved a charitable contribution of 165,729 common shares - On October 31, 2024, the company issued 187,544 shares of common stock under its employee stock purchase plan for $1.34 million57 - On November 8, 2024, the Board of Directors approved the fourth installment of 165,729 shares of common stock as a charitable contribution to a philanthropic partner57 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's perspective on AvidXchange's financial condition and results of operations, highlighting revenue growth, key business metrics, and the impact of the macroeconomic environment Overview AvidXchange, founded in 2000, has grown significantly through organic expansion and strategic acquisitions to serve the AP automation needs of the middle market - AvidXchange was founded in 2000 to address AP automation for the middle market and launched its AvidPay Network in 201261 - The company has experienced substantial growth, both organically and through strategic acquisitions, expanding its market reach61 Our Business and Revenue Model AvidXchange employs a hybrid go-to-market strategy, combining direct sales with indirect channels, with recurring revenue primarily from software fees and payment transactions - The company uses a hybrid go-to-market strategy, including direct sales and indirect channels through reseller partners and strategic partnerships (e.g., Mastercard, Bank of America, KeyBank)61 - Revenues are recurring and primarily generated from software fees from buyers and payment revenue from transactions made to suppliers through the AvidPay Network61 Revenue by Type | Revenue Type (in thousands) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 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 | Macroeconomic Environment's Impact on Revenue The macroeconomic environment continues to impact AvidXchange's revenue, with customers exhibiting caution in purchasing decisions, affecting payment volumes, amounts, and sales - Tempered spending by prospects and customers impacts payment volumes, payment amounts, payment type mix, and software sales, as well as the number of invoices processed64 - Interest income, a component of payment revenue, was positively impacted by higher interest rates earlier in the year but will be negatively impacted by Federal Reserve rate cuts64 - The company expects to better gauge sentiment inflections among customer verticals after the uncertainties of the current political cycle and broader macroeconomic environment subside64 Key Financial and Business Metrics AvidXchange monitors Transactions Processed, Transaction Yield, and Total Payment Volume as key indicators of business performance, all showing positive year-over-year growth Key Financial and Business Metrics | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | YoY Change (3M) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | YoY Change (9M) | |:---------------------------------|:--------------------------------|:--------------------------------|:----------------|:-------------------------------|:-------------------------------|:----------------| | 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 is a key indicator of solution usage and revenue generation, as a majority of revenue is transaction-based67 - Transaction yield measures the value of solutions to buyers and suppliers as the company scales, calculated as total revenue divided by total transactions processed68 Components of Results of Operations This section details AvidXchange's revenue sources and cost components, explaining their contribution to financial results and outlining management's expectations for future trends Revenue AvidXchange generates revenue from software fees, payment solutions (VCC interchange, AvidPay Direct, Payment Accelerator, and interest on funds held), and services, with payment revenue expected to comprise a larger proportion - Software revenue is primarily derived from fees based on invoice and payment transactions processed, along with recurring maintenance and SaaS fees, typically billed monthly70 - Payment revenue sources include interchange fees from Virtual Commercial Cards (VCC), per-transaction fees from AvidPay Direct, fees from the Payment Accelerator product, and interest earned on funds held for buyers pending disbursement72 - The company expects total revenue to increase year over year, driven by more transactions and increased adoption of the AvidPay Network, with payment revenue growing as a proportion of total revenue73 Cost of Revenues and Operating Expenses Cost of revenues includes personnel, external processing fees, and IT infrastructure, expected to decrease as a percentage of revenue, while operating expenses are detailed across sales & marketing, R&D, and G&A - Cost of revenues includes personnel costs for onboarding, invoice processing, payment operations, and customer service, as well as external expenses for transaction processing (scanning, printing, bank fees) and IT infrastructure7476 - Sales and marketing expenses are driven by direct sales force, partner channels, and marketing campaigns, with most sales commissions deferred and amortized over five years77 - Research and development efforts focus on new product development and existing product enhancements, with certain internal and external development costs capitalized and amortized over three years78 - General and administrative expenses include finance, HR, legal, IT, and information security, and may increase in absolute dollars in the short term to support infrastructure and cybersecurity enhancements7980 Results of Operations AvidXchange demonstrated strong financial improvement, turning a net loss into net income for both the three and nine months ended September 30, 2024, driven by increased payment revenue, interest income, and reduced interest expense Comparison of the Three Months Ended September 30, 2024 and 2023 For Q3 2024, total revenues increased by 14.3% to $112.8 million, primarily due to a 17.8% increase in payment revenue, resulting in a net income of $4.0 million Three Months Ended September 30, 2024 vs 2023 | Metric (in thousands) | Sep 30, 2024 | Sep 30, 2023 | Change | Percentage Change | |:------------------------------------------|:-------------|:-------------|:-------|:------------------| | Revenues | $112,772 | $98,680 | $14,092 | 14.3% | | Cost of revenues (excl. D&A) | $30,429 | $30,767 | $(338) | (1.1)% | | Sales and marketing | $21,102 | $18,735 | $2,367 | 12.6% | | Research and development | $25,125 | $24,754 | $371 | 1.5% | | General and administrative | $25,769 | $25,002 | $767 | 3.1% | | Other income (expense) | $3,223 | $1,672 | $1,551 | 92.8% | | Net income (loss) | $4,047 | $(8,091) | $12,138 | N/A | - Payment revenue increased by $12.2 million (17.8%), driven by increased electronic payments and higher interest rates on funds held for customers, with interest income from funds held increasing by $2.0 million84 - General and administrative expenses increased due to a $1.1 million increase in credit loss reserve and $0.8 million in IT infrastructure costs, partially offset by a $0.7 million decrease in cybersecurity incident costs8486 Comparison of the Nine Months Ended September 30, 2024 and 2023 For the nine months ended September 30, 2024, total revenues grew by 16.9% to $323.5 million, primarily from a 20.5% increase in payment revenue, resulting in a net income of $3.5 million Nine Months Ended September 30, 2024 vs 2023 | Metric (in thousands) | Sep 30, 2024 | Sep 30, 2023 | Change | Percentage Change | |:------------------------------------------|:-------------|:-------------|:-------|:------------------| | Revenues | $323,502 | $276,656 | $46,846 | 16.9% | | Cost of revenues (excl. D&A) | $91,188 | $90,461 | $727 | 0.8% | | Sales and marketing | $60,799 | $58,946 | $1,853 | 3.1% | | Research and development | $76,037 | $72,616 | $3,421 | 4.7% | | General and administrative | $72,664 | $75,345 | $(2,681) | (3.6)% | | Impairment and write-off of intangible assets | $162 | $0 | $162 | 100.0% | | Other income (expense) | $9,104 | $4,714 | $4,390 | 93.1% | | Net income (loss) | $3,474 | $(42,852) | $46,326 | N/A | - Payment revenue increased by $39.2 million (20.5%), driven by increased electronic payments and a $10.6 million increase in interest income from funds held for customers89 - General and administrative expenses decreased by $2.7 million, primarily due to $0.9 million more in cybersecurity insurance recoveries and a $5.2 million decrease in cybersecurity incident costs compared to the prior year90 Liquidity and Capital Resources AvidXchange's liquidity improved significantly, with operating activities providing $43.5 million in cash, maintaining $315.3 million in unrestricted cash, $79.0 million in marketable securities, and a $150.0 million revolving credit facility Cash Flow Data (in thousands) | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | |:------------------------------------------|:-------------------------------|:-------------------------------| | Net cash provided by (used in) operating activities | $43,482 | $(10,991) | | Net cash (used in) provided by investing activities | $(51,656) | $226 | | Net cash used in financing activities | $(507,852) | $(57,474) | | Net decrease in cash, cash equivalents, and restricted funds held for customers | $(516,026) | $(68,239) | - As of September 30, 2024, principal sources of liquidity include $315.3 million in unrestricted cash and cash equivalents, $79.0 million in marketable securities, and $150.0 million available under the 2024 Amended and Restated Credit Agreement92 - The company repaid its term loan facility and reduced total principal debt from $77.3 million to $13.9 million as of September 30, 202496 - A $100 million share repurchase program was authorized in August 2024, with $25.1 million in shares repurchased by September 30, 202499100 Critical Accounting Policies and Estimates There have been no material changes to AvidXchange's critical accounting policies and estimates compared to those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to critical accounting policies and estimates were reported compared to the Annual Report on Form 10-K for the year ended December 31, 2023103 Recent Accounting Pronouncements The company adopted ASU No. 2023-01 (Leases) on January 1, 2024, with no financial statement impact, and is assessing ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation Disclosures) - ASU No. 2023-01, Leases (Topic 842): Common Control Arrangements, was adopted on January 1, 2024, with no impact on the company's consolidated financial statements24 - The company is assessing the impact of ASU 2023-09, Improvements to Income Tax Disclosures (effective 2025), and ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (effective 2026), on its financial statements24 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk AvidXchange is exposed to interest rate risk through its investment portfolio and variable rate bank borrowings, with the annualized interest rate on investments increasing to 5.04% in 9M 2024 - The annualized interest rate earned on the 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 2023107 - A 100 basis point increase in interest rates would increase interest income from operating cash by approximately $2.9 million and from buyer funds assets by approximately $8.1 million for the first nine months of fiscal year 2024107 - The company's exposure to variable rate debt decreased significantly, with $0 outstanding as of September 30, 2024, compared to $63.4 million as of December 31, 2023107 Credit Risk AvidXchange faces credit risk from investments exceeding FDIC limits, timing of buyer fund payments, and its Payment Accelerator product, mitigated through portfolio diversification and data analytics - The company is exposed to credit risk from cash deposits exceeding FDIC limits and from remitting buyer funds to suppliers before confirming funds are collected from buyers108 - Credit risk is mitigated by diversifying the investment portfolio, requiring minimum credit quality ratings for fixed income investments, and managing exposure limits108 - The Payment Accelerator product exposes the company to risk if advanced payments are not recouped from buyers; this is mitigated through data analytics for invoice eligibility108 Liquidity Risk AvidXchange manages liquidity risk by collecting buyer funds in advance of payment obligations, consistently ensuring sufficient funds are available to satisfy all obligations - The company minimizes liquidity risk by collecting buyer funds in advance of payment obligations, ensuring sufficient funds are available to satisfy all obligations109 - This practice has consistently maintained the required level of buyer funds assets109 Concentration Risk AvidXchange faces concentration risk from revenue reliance on interchange fees from a few VCC service providers and from holding a majority of buyer funds at a single financial institution - A substantial portion of revenue is derived from interchange fees on VCC transactions processed by two service providers, each contributing over 10% of total revenue111 - Future regulation or changes by payment networks affecting interchange rates could materially impact the company's operating revenues and results111 - The majority of buyer funds are maintained in demand accounts at one financial institution, posing a concentration risk, which the company mitigates by monitoring well-capitalized institutions111 ITEM 4. Controls and Procedures. Evaluation of Disclosure Controls and Procedures As of September 30, 2024, AvidXchange's management concluded that its disclosure controls and procedures were effective in ensuring timely and accurate reporting of information required under the Exchange Act - The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2024112 - These controls are designed to ensure information required for SEC reports is recorded, processed, summarized, and reported within specified time periods112 Changes in Internal Control Over Financial Reporting There were no changes in AvidXchange's internal control over financial reporting during the quarter ended September 30, 2024, that materially affected or are reasonably likely to materially affect these controls - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2024112 PART II—OTHER INFORMATION Item 1. Legal Proceedings. AvidXchange is not currently a party to any legal proceedings that would individually or collectively have a material adverse effect on its business, results of operations, financial condition, or cash flows - The company is not a party to any legal proceedings that would have a material adverse effect on its business113 Item 1A. Risk Factors. There have been no material changes to the risk factors previously disclosed in AvidXchange's Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to risk factors were reported compared to the Annual Report on Form 10-K for the year ended December 31, 2023114 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. AvidXchange reported no unregistered sales of equity securities, with IPO proceeds used consistently, and initiated a share repurchase program in August 2024 Unregistered Sales of Equity Securities There were no unregistered sales of equity securities during the reporting period - No unregistered sales of equity securities occurred114 Use of Proceeds The planned use of proceeds from the October 2021 IPO remains unchanged, with a portion invested in short-term, interest-bearing, investment-grade securities - No material changes in the planned use of proceeds from the October 2021 IPO were reported114 - A portion of the IPO funds has been invested in short-term, interest-bearing, investment-grade securities114 Purchases of Equity Securities by the Company In August 2024, AvidXchange authorized a $100 million share repurchase program, repurchasing 3,104,312 shares for $25.1 million by September 30, 2024, with $75 million remaining - In August 2024, the board authorized a $100 million share repurchase program115 Shares Purchased by the Company | Period | Total Number of Shares Purchased | Average Price Paid Per Share | |:----------------------------------|:---------------------------------|:-----------------------------| | August 1, 2024 - August 31, 2024 | 1,060,000 | $8.10 | | September 1, 2024 - September 30, 2024 | 2,044,312 | $8.03 | | Total | 3,104,312 | | - As of September 30, 2024, $75,000,006 remained available for future share repurchases under the program116 Item 3. Defaults Upon Senior Securities. This item is not applicable to AvidXchange for the reporting period Item 4. Mine Safety Disclosures. This item is not applicable to AvidXchange for the reporting period Item 5. Other Information. This section discloses trading plans of directors and executive officers, including the termination and adoption of Rule 10b5-1 plans by Angelic Gibson and Michael Praeger in August 2024 Officer Trading Plans | Officer | Action | Date | Trading Agreement | Total Shares to be Sold | Expiration Date | |:---------------------------------------------------|:---------|:-----------|:------------------|:------------------------|:----------------| | Angelic Gibson, Chief Information Officer, Senior Vice President | Terminate | August 29, 2024 | Rule 10b5-1 | 45,000 | Not applicable | | Angelic Gibson, Chief Information Officer, Senior Vice President | Adopt | August 29, 2024 | Rule 10b5-1 | 45,000 | June 30, 2025 | | Michael Praeger, Chief Executive Officer and Chairman of the Board | Adopt | August 27, 2024 | Rule 10b5-1 | 258,883 | May 16, 2025 | Exhibits. This section lists the exhibits filed with the Form 10-Q, including the Amended and Restated Credit and Security Agreement, certifications, and XBRL documents - Key exhibits include the Amended and Restated Credit and Security Agreement dated August 8, 2024, and various certifications (e.g., 302 and 906 certifications)118 SIGNATURES The report is duly signed on behalf of AvidXchange Holdings, Inc. by Joel Wilhite, Chief Financial Officer, on November 8, 2024 - The report was signed by Joel Wilhite, Chief Financial Officer, on November 8, 2024120
AvidXchange (AVDX) - 2024 Q3 - Quarterly Report