AvidXchange (AVDX) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited interim financial statements, management's analysis of financial condition and operations, market risk disclosures, and evaluation of internal controls Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements of AvidXchange Holdings, Inc. for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, revenue recognition, financial instruments, and other relevant financial information Unaudited Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity as of specific dates Unaudited Consolidated Balance Sheets | Metric | As of June 30, 2025 (in thousands) | As of December 31, 2024 (in thousands) | | :--------------------------------- | :---------------------------------- | :----------------------------------- | | Assets | | | | Cash and cash equivalents | $335,773 | $355,637 | | Restricted funds held for customers| $1,148,195 | $1,250,346 | | Marketable securities | $71,461 | $33,663 | | Total assets | $2,003,835 | $2,089,711 | | Liabilities & Stockholders' Equity | | | | Payment service obligations | $1,148,195 | $1,250,346 | | Total liabilities | $1,316,285 | $1,417,878 | | Total stockholders' equity | $687,550 | $671,833 | | Total liabilities and stockholders' equity | $2,003,835 | $2,089,711 | - Total assets decreased from $2,089,711 thousand at December 31, 2024, to $2,003,835 thousand at June 30, 2025, primarily due to a decrease in restricted funds held for customers and cash and cash equivalents[6] Unaudited Consolidated Statements of Operations This section presents the company's revenues, expenses, and net income or loss over specific periods, reflecting operational performance Unaudited Consolidated Statements of Operations | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $110,570 | $105,132 | $218,512 | $210,730 | | Cost of revenues | $30,949 | $30,426 | $61,738 | $60,759 | | Loss from operations | $(12,411) | $(2,101) | $(20,768) | $(6,210) | | Net (loss) income | $(9,464) | $436 | $(16,775) | $(573) | | Basic EPS | $(0.05) | $0.00 | $(0.08) | $0.00 | | Diluted EPS | $(0.05) | $0.00 | $(0.08) | $0.00 | - The company reported a net loss of $9,464 thousand for the three months ended June 30, 2025, compared to a net income of $436 thousand in the prior year period[9] - For the six months ended June 30, 2025, the net loss was $16,775 thousand, an increase from $573 thousand in the same period of 2024[9] - Revenues increased by 5.2% for the three months ended June 30, 2025, to $110,570 thousand from $105,132 thousand in the prior year[9] - Revenues increased by 3.7% for the six months ended June 30, 2025, to $218,512 thousand from $210,730 thousand[9] Unaudited Consolidated Statements of Changes in Stockholders' Equity This section details the changes in the company's equity accounts, including common stock, additional paid-in capital, and accumulated deficit Unaudited Consolidated Statements of Changes in Stockholders' Equity | Metric (in thousands) | As of December 31, 2024 | As of June 30, 2025 | | :-------------------- | :---------------------- | :------------------ | | Common Stock | $204 | $208 |\ | Additional Paid-in Capital | $1,685,644 | $1,718,132 | | Accumulated Deficit | $(1,014,015) | $(1,030,790) | | Total Stockholders' Equity | $671,833 | $687,550 | - Total stockholders' equity increased from $671,833 thousand at December 31, 2024, to $687,550 thousand at June 30, 2025, primarily due to increases in additional paid-in capital from stock-based compensation and stock issuances, partially offset by net losses[12] Unaudited Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Unaudited Consolidated Statements of Cash Flows | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $30,606 | $18,928 | | Net cash used in investing activities | $(53,001) | $(56,279) | | Net cash used in financing activities | $(99,620) | $(379,651) | | Net decrease in cash, cash equivalents, and restricted funds held for customers | $(122,015) | $(417,002) | - Net cash provided by operating activities increased to $30,606 thousand for the six months ended June 30, 2025, from $18,928 thousand in the prior year, driven by changes in working capital[14] - Net cash used in financing activities significantly decreased to $99,620 thousand in 2025 from $379,651 thousand in 2024, primarily due to variations in payment service obligations and common stock issuances[14] Notes to Unaudited Consolidated Financial Statements This section presents the unaudited consolidated financial statements of AvidXchange Holdings, Inc. for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, revenue recognition, financial instruments, and other relevant financial information 1. Formation and Business of the Company This section outlines the company's establishment, its core business activities, and significant corporate events like the proposed merger - AvidXchange Holdings, Inc. was formed in July 2021 through a reorganization, becoming the parent company of AvidXchange, Inc[16][17] - On May 6, 2025, the Company entered into a Merger Agreement to be acquired by Arrow Borrower 2025, Inc. (affiliated with TPG Global, LLC and Corpay, Inc.), which is expected to close in Q4 2025, resulting in the Company becoming privately held and delisted from Nasdaq[18] - AvidXchange provides accounts payable (AP) automation software and payment solutions for middle market businesses across North America in various industries[19] 2. Summary of Significant Accounting Policies This section describes the key accounting principles and methods used in preparing the financial statements, including revenue recognition and fair value measurements - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim reporting, reflecting management's estimates and assumptions[20][22] - In connection with the proposed Merger, the Company incurred approximately $6,450 thousand and $8,590 thousand in transaction-related expenses for the three and six months ended June 30, 2025, respectively, reported in general and administrative expense[24] - A substantial portion of the Company's revenue is derived from interchange fees on virtual commercial card (VCC) transactions, with significant concentration from two service providers (27% and 18% of total revenue for Q2 2025)[26] - The Company has largely transitioned to a money transmitter license model for payment transmission, recognizing restricted funds held for customers as an asset and corresponding payment service obligations as a liability on the balance sheet[37] - New accounting pronouncements, ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation), are being assessed for their impact on future financial statements, with effective dates in 2025 and 2026/2027 respectively[44][45] 3. Revenue from Contracts with Customers This section details the company's revenue streams, categorized by software, payment, and services, and provides information on remaining performance obligations Revenue from Contracts with Customers | Revenue Type (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Software revenue | $32,927 | $29,914 | $63,865 | $59,602 | | Payment revenue | $76,681 | $74,183 | $152,621 | $149,385 | | Services revenue | $962 | $1,035 | $2,026 | $1,743 | | Total revenues | $110,570 | $105,132 | $218,512 | $210,730 | - Software revenue increased by 10.1% for the three months ended June 30, 2025, and by 7.1% for the six months ended June 30, 2025, compared to the prior year periods[47] - Payment revenue increased by 3.4% for the three months ended June 30, 2025, and by 2.2% for the six months ended June 30, 2025, compared to the prior year periods[47] Remaining Performance Obligation | Remaining Performance Obligation (in thousands) | Current | Noncurrent | Total | | :---------------------------------------------- | :------ | :--------- | :---- | | As of June 30, 2025 | $15,824 | $17,910 | $33,734 | | As of December 31, 2024 | $15,805 | $20,946 | $36,751 | 4. Loss Per Common Share This section presents the calculation of basic and diluted loss per common share, along with the number of weighted-average shares outstanding and anti-dilutive equivalents Loss Per Common Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to common stockholders (in thousands) | $(9,464) | $436 | $(16,775) | $(573) | | Weighted-average common shares outstanding, basic | 206,933,045 | 207,025,967 | 205,982,206 | 205,961,720 | | Net loss per common share, basic | $(0.05) | $0.00 | $(0.08) | $0.00 | | Net loss per common share, diluted | $(0.05) | $0.00 | $(0.08) | $0.00 | - For the three and six months ended June 30, 2025, the company reported a basic and diluted net loss per common share of $(0.05) and $(0.08), respectively, compared to $0.00 for the same periods in 2024[60] Anti-Dilutive Common Share Equivalents | Anti-Dilutive Common Share Equivalents | 2025 (Three Months) | 2024 (Three Months) | 2025 (Six Months) | 2024 (Six Months) | | :------------------------------------- | :------------------ | :------------------ | :---------------- | :---------------- | | Stock options | 6,996,174 | 158,920 | 6,996,174 | 7,556,543 | | Restricted stock units | 13,518,979 | 102,523 | 13,518,979 | 10,986,075 | | Employee stock purchase plan | 63,469 | 3,988 | 63,469 | 60,450 | | Total anti-dilutive common share equivalents | 20,578,622 | 265,431 | 20,578,622 | 18,603,068 | 5. Fair Value Measurements This section explains the classification of financial instruments within a three-level fair value hierarchy and details the fair value of assets and liabilities - The Company classifies financial instruments into a three-level fair value hierarchy based on the observability of valuation inputs[62][64] Fair Value Measurements (in thousands) | Description (in thousands) | Level 1 (June 30, 2025) | Level 2 (June 30, 2025) | Total (June 30, 2025) | | :------------------------- | :---------------------- | :---------------------- | :-------------------- | | Money market mutual funds | $86,368 | $- | $86,368 | | Rabbi trust-owned life insurance policies | $- | $2,951 | $2,951 | | Total assets | $86,368 | $2,951 | $89,319 | | Deferred compensation | $- | $2,615 | $2,615 | | Total liabilities | $- | $2,615 | $2,615 | - Money market mutual funds are classified as Level 1, while rabbi trust-owned life insurance policies and deferred compensation liabilities are classified as Level 2[66][67] 6. Marketable Securities This section provides information on the company's marketable securities, including their classification, amortized cost, fair value, and maturity profiles - Marketable securities are classified as held-to-maturity and recorded at amortized cost, with no allowance for expected credit losses[68] Marketable Securities (in thousands) | Sector (in thousands) | Amortized Cost (June 30, 2025) | Fair Value (June 30, 2025) | | :-------------------- | :----------------------------- | :------------------------- | | Agency | $3,099 | $3,103 | | Financial | $22,409 | $22,437 | | Government | $11,402 | $11,400 | | Industrial | $34,551 | $34,716 | | Total | $71,461 | $71,656 | - The fair value of marketable securities is primarily classified as Level 1, with commercial paper holdings in the Financial and Industrial sectors classified as Level 2, totaling $2,704 thousand as of June 30, 2025[70] Maturity of Marketable Securities | Maturity (in thousands) | Amortized Cost (June 30, 2025) | | :---------------------- | :----------------------------- | | Due in one year or less | $40,821 | | Due after one year through five years | $30,640 | | Total | $71,461 | 7. Intangible Assets and Goodwill This section details the company's intangible assets, such as software and customer relationships, and reports on amortization expense and impairment assessments Intangible Assets and Goodwill (in thousands) | Intangible Asset (in thousands) | Net Amount (June 30, 2025) | Net Amount (December 31, 2024) | | :------------------------------ | :------------------------- | :----------------------------- | | Internally developed software | $26,139 | $26,228 | | Non-compete | $1,228 | $1,637 | | Customer relationships | $22,724 | $26,685 | | Technology | $11,175 | $12,201 | | Trade name | $3,969 | $4,317 | | Total intangible assets | $65,235 | $71,068 | - Total intangible assets decreased from $71,068 thousand at December 31, 2024, to $65,235 thousand at June 30, 2025, primarily due to amortization[72] - Total amortization expense for identifiable intangible assets was $7,349 thousand for Q2 2025 and $14,867 thousand for the six months ended June 30, 2025[72] - There were no impairment and write-off expenses for intangible assets in the three or six months ended June 30, 2025, compared to $162 thousand in the six months ended June 30, 2024[74] 8. Leases and Leasing Commitments This section outlines the company's lease expenses, distinguishing between finance and operating leases, and reports on overall lease commitments Leases and Leasing Commitments (in thousands) | Lease Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Finance lease expense | $2,125 | $2,224 | $4,283 | $4,464 | | Operating lease expense | $76 | $408 | $162 | $822 | | Total lease expense | $2,217 | $2,706 | $4,504 | $5,434 | - Total lease expense decreased by 18% for the three months ended June 30, 2025, and by 17% for the six months ended June 30, 2025, primarily due to reductions in operating lease expenses[75] 9. Long-Term Debt This section describes the company's long-term debt obligations, including promissory notes for land acquisition and details of its revolving credit facility Long-Term Debt (in thousands) | Long-Term Debt (in thousands) | As of June 30, 2025 | As of December 31, 2024 | | :---------------------------- | :------------------ | :---------------------- | | Total principal due on promissory notes payable for land acquisition | $9,100 | $9,100 | | Current portion of promissory notes | $(4,800) | $(4,800) | | Long-term debt | $4,300 | $4,300 | - The Company's long-term debt consists of promissory notes for land acquisition, with an aggregate outstanding principal of $9,100 thousand as of June 30, 2025[76][89] - In August 2024, the Company entered into a 2024 Amended and Restated Credit Agreement, establishing a $150,000 thousand 5-year revolving credit facility, with no outstanding balance as of June 30, 2025[76][85] - The Company was in compliance with its financial debt covenants as of June 30, 2025[82] 10. Stockholders' Equity This section provides details on the company's common stock, shares reserved for future issuance, and the status of its share repurchase program - As of June 30, 2025, the Company had 207,695,309 shares of common stock issued and outstanding[6] Common Shares Reserved for Future Issuance | Common Shares Reserved for Future Issuance (June 30, 2025) | Number of Shares | | :--------------------------------------------------------- | :--------------- | | Outstanding stock options | 6,996,174 | | Restricted stock units | 13,518,979 | | Available for future issuance under stock award plans | 30,181,685 | | Available for future issuance under employee stock purchase plan | 9,596,803 | | Total common shares reserved for future issuance | 60,293,641 | - The board authorized a Share Repurchase Program of up to $100,000 thousand in August 2024, with a $50,000 thousand cap per fiscal year[93] - No shares were repurchased in the three or six months ended June 30, 2025, leaving $50,000 thousand available[94] 11. Stock-Based Compensation This section reports on the company's stock-based compensation plans, associated expenses, and unamortized compensation for unvested awards - The 2021 Long-Term Incentive Plan and the 2021 Employee Stock Purchase Plan (ESPP) are maintained for stock awards, with shares automatically increasing on January 1, 2025[95][96] Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenues | $1,949 | $1,587 | $3,889 | $2,784 | | Sales and marketing | $1,540 | $1,453 | $2,937 | $2,551 | | Research and development | $3,802 | $2,924 | $7,491 | $6,582 | | General and administrative | $7,520 | $6,153 | $14,720 | $10,966 | | Total | $14,811 | $12,117 | $29,037 | $22,883 | - Total stock-based compensation expense increased by 22.2% for the three months ended June 30, 2025, and by 26.9% for the six months ended June 30, 2025, compared to the prior year periods[101] - As of June 30, 2025, unamortized stock-based compensation expense for unvested stock options was $4,997 thousand (weighted average period of 1.7 years) and for unvested RSUs was $115,929 thousand (weighted average period of 2.4 years)[99][100] 12. Income Taxes This section presents the company's effective tax rates and explains the methodology used for interim income tax provision Effective Tax Rate | Effective Tax Rate | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Effective tax rate | 4.8% | 21.4% | (3.8)% | (74.2)% | - The Company uses the discrete effective tax rate method for interim income tax provision due to the difficulty in reliably estimating the annual effective tax rate[106] 13. Subsequent Events This section discloses significant events that occurred after the balance sheet date, such as new legislation, and their potential financial impact - On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, extending key provisions of the 2017 Tax Cuts and Jobs Act, but is not expected to have a material impact on the Company's financial statements for the periods ended June 30, 2025[107] 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 operational results, highlighting revenue drivers, expense trends, macroeconomic impacts, and liquidity. It details the proposed merger, business model, key performance metrics, and a comparative analysis of financial performance for the three and six months ended June 30, 2025, versus 2024 Overview This section provides a historical background of AvidXchange, its growth, and the strategic significance of its proposed acquisition - AvidXchange, founded in 2000, has grown substantially through organic growth and strategic acquisitions, launching the AvidPay Network in 2012 to address AP automation and efficient payment methods for the middle market[114] - The Company entered into a Merger Agreement on May 6, 2025, to be acquired by Arrow Borrower 2025, Inc., with the merger expected to close in Q4 2025, leading to delisting from Nasdaq and becoming a privately held company[115] Our Business and Revenue Model This section describes AvidXchange's go-to-market strategy, recurring revenue streams, and the primary sources of software and payment revenue - AvidXchange employs a hybrid go-to-market strategy, combining direct sales with indirect channels through reseller partners and strategic partnerships (e.g., Mastercard, financial institutions, software providers)[116] - Revenues are recurring and primarily derived from software fees from buyers and payment revenue from transactions processed through the AvidPay Network[117] Our Business and Revenue Model | Revenue Type (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Software revenue | $32,927 | $29,914 | $63,865 | $59,602 | | Payment revenue | $76,681 | $74,183 | $152,621 | $149,385 | | Services revenue | $962 | $1,035 | $2,026 | $1,743 | | Total revenues | $110,570 | $105,132 | $218,512 | $210,730 | Macroeconomic Environment's Impact on Revenue This section analyzes how economic factors like interest rates, inflation, and business confidence influence the company's payment volumes, sales, and revenue - Economic uncertainty, including tariff, monetary policy, inflation, and treasury yields, negatively impacted business confidence and led to tempered spending by customers, affecting payment volumes, amounts, and sales[118][119] - Higher interest rates positively impact payment revenue and interest income from funds held for buyers, but a potential Federal Reserve rate cut would negatively impact this revenue component[120] Key Financial and Business Metrics This section presents key operational metrics such as transactions processed, transaction yield, and total payment volume, highlighting their trends and growth Key Financial and Business Metrics | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Percentage Change (QoQ) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Percentage Change (YoY) | | :-------------------- | :------------------------------- | :------------------------------- | :---------------------- | :----------------------------- | :----------------------------- | :---------------------- | | Transactions Processed | 20,094,193 | 19,730,167 | 1.8% | 39,775,912 | 39,050,282 | 1.9% | | Transaction Yield | $5.50 | $5.33 | 3.2% | $5.49 | $5.40 | 1.7% | | Total Payment Volume (in millions) | $21,455 | $20,617 | 4.1% | $42,057 | $40,484 | 3.9% | - Transactions processed increased by 1.8% QoQ and 1.9% YoY, indicating continued use of solutions[122][123] - Transaction yield increased by 3.2% QoQ and 1.7% YoY, reflecting the value of solutions[122][124] - Total payment volume increased by 4.1% QoQ and 3.9% YoY, demonstrating demand for payment services[122][125] Components of Results of Operations This section breaks down the various components of the company's financial results, including revenue types, cost of revenues, and operating expenses - Software revenue is generated from fees based on invoice/payment transactions and recurring SaaS fees, typically from multi-year contracts[127] - Payment revenue is derived from electronic payment solutions (VCC, AvidPay Direct), fees from the Payment Accelerator product, and interest on funds held for buyers pending disbursement[128][129][130] - Cost of revenues includes personnel, external processing expenses (scanning, printing, bank fees), technology use fees, and adjustments for uncollectible advancements and treasury losses[136][137] - Sales and marketing expenses cover direct sales, partner channels, commissions, and brand awareness activities, with a focus on efficient deployment for modest growth[139][140][141][142][143] - Research and development expenses are for new product development, enhancements, and infrastructure projects, including personnel and outsourced services, with some costs capitalized[144][145][146][147] - General and administrative expenses include finance, HR, legal, IT, and facilities costs, with significant increases in 2025 due to Merger-related transaction costs and stock-based compensation[148][149][150] Results of Operations This section provides management's perspective on AvidXchange's financial condition and operational results, highlighting revenue drivers, expense trends, macroeconomic impacts, and liquidity. It details the proposed merger, business model, key performance metrics, and a comparative analysis of financial performance for the three and six months ended June 30, 2025, versus 2024 Comparison of the Three Months Ended June 30, 2025 and 2024 This section provides a detailed comparative analysis of the company's financial performance for the three-month periods, highlighting revenue and expense changes Comparison of the Three Months Ended June 30, 2025 and 2024 | Metric (in thousands) | 2025 (Q2) | 2024 (Q2) | Change Amount | Change Percentage | | :-------------------- | :-------- | :-------- | :------------ | :---------------- | | Revenues | $110,570 | $105,132 | $5,438 | 5.2% | | Cost of revenues | $30,949 | $30,426 | $523 | 1.7% | | Sales and marketing | $23,068 | $19,956 | $3,112 | 15.6% | | Research and development | $26,975 | $25,008 | $1,967 | 7.9% | | General and administrative | $33,510 | $22,635 | $10,875 | 48.0% | | Depreciation and amortization | $8,479 | $9,208 | $(729) | (7.9)% | | Other Income (Expense) | $2,470 | $2,656 | $(186) | (7.0)% | | Income tax expense | $(477) | $119 | $(596) | (500.8)% | - Revenue growth was driven by a $3.0 million increase in software revenue (10%) and a $2.5 million increase in payment revenue (3%), despite a $1.2 million decrease in interest on funds held for customers[156] - General and administrative expenses surged by 48.0% due to $6.4 million in Merger-related transaction costs and increased employee costs, including stock-based compensation[162] - Other income decreased due to lower interest income from reduced cash balances and interest rates, partially offset by a decrease in interest expense from term loan repayment[164] Comparison of the Six Months Ended June 30, 2025 and 2024 This section offers a detailed comparative analysis of the company's financial performance for the six-month periods, highlighting revenue and expense changes Comparison of the Six Months Ended June 30, 2025 and 2024 | Metric (in thousands) | 2025 (YTD) | 2024 (YTD) | Change Amount | Change Percentage | | :-------------------- | :--------- | :--------- | :------------ | :---------------- | | Revenues | $218,512 | $210,730 | $7,782 | 3.7% | | Cost of revenues | $61,738 | $60,759 | $979 | 1.6% | | Sales and marketing | $45,579 | $39,697 | $5,882 | 14.8% | | Research and development | $52,357 | $50,912 | $1,445 | 2.8% | | General and administrative | $62,458 | $46,895 | $15,563 | 33.2% | | Impairment and write-off of intangible assets | $- | $162 | $(162) | (100.0)% | | Depreciation and amortization | $17,148 | $18,515 | $(1,367) | (7.4)% | | Other Income (Expense) | $4,605 | $5,881 | $(1,276) | (21.7)% | | Income tax (benefit) expense | $612 | $244 | $368 | 150.8% | - Total revenues increased by 3.7% to $218,512 thousand, driven by a $4.3 million increase in software revenue (7%) and a $3.2 million increase in payment revenue (2%), despite a $3.3 million decrease in interest on funds held for customers[166] - General and administrative expenses increased by 33.2% due to $8.6 million in Merger-related transaction costs and a $5.4 million increase in employee costs, including stock-based compensation[171] - Other income decreased by 21.7% due to a $3.9 million unfavorable decrease in interest income, partially offset by a $2.6 million favorable decrease in interest expense[173] Liquidity and Capital Resources This section discusses the company's sources of liquidity, capital needs, and the potential impact of the proposed merger on its financial structure - As of June 30, 2025, primary liquidity sources include $335.8 million in unrestricted cash and cash equivalents, $71.5 million in marketable securities, cash from operations, and $150.0 million available under the 2024 Amended and Restated Credit Agreement[175] - The Company believes current liquidity is sufficient for the next twelve months but may need to raise additional capital through equity or debt financing, which could dilute existing stockholders or impose restrictive covenants[176] - The proposed Merger, if consummated, will result in the Company becoming a privately held entity, impacting its capital structure and public market access[177] Cash Flows This section analyzes the company's cash flow activities from operations, investing, and financing, explaining significant changes between periods Selected Cash Flow Data (in thousands) | Selected Cash Flow Data (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $30,606 | $18,928 | | Net cash used in investing activities | $(53,001) | $(56,279) | | Net cash used in financing activities | $(99,620) | $(379,651) | | Net decrease in cash, cash equivalents, and restricted funds held for customers | $(122,015) | $(417,002) | - Net cash provided by operating activities improved to $30.6 million in 2025 from $18.9 million in 2024, primarily due to changes in working capital[180] - Net cash used in financing activities significantly decreased to $99.6 million in 2025 from $379.7 million in 2024, mainly due to variations in payment service obligations and common stock issuances[184] Outstanding Debt This section details the company's current and long-term debt obligations, specifically promissory notes for land acquisition Outstanding Debt (in thousands) | Outstanding Debt (in thousands) | As of June 30, 2025 | As of December 31, 2024 | | :------------------------------ | :------------------ | :---------------------- | | Total principal due on promissory notes payable for land acquisition | $9,100 | $9,100 | | Current portion of promissory notes | $(4,800) | $(4,800) | | Long-term debt | $4,300 | $4,300 | Credit Facilities This section describes the company's revolving credit facility, its available capacity, and compliance with financial covenants - The Company's 2024 Amended and Restated Credit Agreement provides a $150.0 million revolving credit facility, with an option to increase by an additional $150.0 million, and the Company was in compliance with all financial covenants as of June 30, 2025[186][187] Land Promissory Notes This section provides specific details regarding the promissory notes associated with the company's land and property acquisitions - The Company holds promissory notes for land and improvements adjacent to its Charlotte headquarters, with details provided in Note 9[188] Issuances of Common Stock This section reports on the issuance of common stock under the company's existing stock plans during the reporting period - During the six months ended June 30, 2025, the Company issued common stock under its existing stock plans[189] Share Repurchases This section provides an update on the company's share repurchase program, including the amount authorized and shares remaining available - No shares were repurchased under the $100.0 million Share Repurchase Program during the three and six months ended June 30, 2025, with $50.0 million remaining available for future repurchases[190] Payment Obligations This section explains the nature of payment service obligations and the company's transition to a money transmitter license model for managing customer funds - Payment service obligations of $1,148.2 million as of June 30, 2025, represent funds collected from customers for supplier payments, offset by restricted funds held for customers[191] - The Company has largely transitioned from a legacy trust model to a money transmitter license model for payment transmission, with $50.9 million in trust-related and similar accounts as of June 30, 2025[192] Contractual Obligations This section confirms whether there have been any material changes to the company's contractual obligations and commitments - There were no material changes to contractual obligations and commitments during the six months ended June 30, 2025, compared to the prior annual report[193] Critical Accounting Policies and Estimates This section states whether there have been any material changes to the company's critical accounting policies and estimates - No material changes occurred in critical accounting policies and estimates during the six months ended June 30, 2025[195] Recent Accounting Pronouncements This section refers to the notes to financial statements for details on recently adopted and issued accounting pronouncements - Information on recently adopted and issued accounting pronouncements not yet adopted is detailed in Note 2 to the unaudited consolidated financial statements[196] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines AvidXchange's exposure to various market risks, including interest rate risk on its investment portfolio and variable rate debt, credit risk from investments and payment acceleration products, liquidity risk in managing buyer funds, and concentration risk related to revenue sources and financial institutions Interest Rate Risk This section assesses the company's exposure to fluctuations in interest rates on its cash, investments, and variable rate debt - The Company is exposed to interest rate risk on its operating cash and buyer funds, which are invested in interest-bearing demand deposit accounts and marketable securities[197][198][199] - The annualized interest rate earned on investments decreased to 4.04% in H1 2025 from 5.03% in FY 2024[200] - A 100 basis point increase in interest rates would increase interest income by approximately $1.6 million from operating cash and $5.9 million from buyer funds for H1 2025[200] Credit Risk This section identifies the company's credit exposures from investments, advance payments, and the Payment Accelerator product, along with mitigation strategies - Credit risk arises from investments exceeding FDIC limits, buyer funds payments made in advance of confirmed funds, and the Payment Accelerator product where supplier advances may not be recouped[202][204] - Mitigation strategies include diversifying portfolios, setting minimum credit quality for investments, monitoring financial institutions, and using data analytics for advance payment decisions[202][203][204] Liquidity Risk This section describes how the company manages its liquidity to ensure sufficient funds are available to meet payment obligations - Liquidity risk is minimized by collecting buyer funds in advance of payment obligations, ensuring sufficient funds to satisfy all obligations[205] Concentration Risk This section highlights the company's exposure to revenue concentration from key service providers and financial institutions holding buyer funds - A substantial portion of revenue is concentrated in interchange fees from VCC service providers, with two suppliers accounting for over 10% of total revenue individually[206] - Future changes in payment network regulations or interchange rates could materially affect revenue and operating results[207] - The majority of buyer funds are held in demand accounts at a single FDIC-insured national bank, mitigated by monitoring and maintaining balances at well-capitalized institutions[208] Item 4. Controls and Procedures This section details the evaluation of the Company's disclosure controls and procedures and reports on any changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures This section reports on management's assessment of the effectiveness of the company's disclosure controls and procedures - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[209] Changes in Internal Control Over Financial Reporting This section discloses any material changes in the company's internal control over financial reporting during the quarter - There were no changes in internal control over financial reporting during the fiscal quarter ended June 30, 2025, that materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting[210] PART II. OTHER INFORMATION This section addresses legal proceedings, updates on risk factors, equity sales, debt defaults, other disclosures, and a list of filed exhibits Item 1. Legal Proceedings. This section describes legal proceedings, specifically a stockholder lawsuit related to the proposed Merger, and generally addresses the Company's exposure to litigation - A stockholder lawsuit (Zappia v. AvidXchange Holdings, Inc., et al.) was filed on July 11, 2025, alleging materially false and misleading statements and omissions in the preliminary proxy statement related to the Merger[211] - The plaintiff voluntarily withdrew a motion for preliminary injunction seeking to enjoin the stockholder vote and consummation of the Merger on August 1, 2025[212] - The Company is not currently a party to any other legal proceedings that would have a material adverse effect on its business, but defending such proceedings can be costly and burdensome[213] Item 1A. Risk Factors. This section refers to the Company's previously disclosed risk factors, noting no material changes except for updates or additional factual information provided elsewhere in the current report - No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for December 31, 2024, and the Quarterly Report on Form 10-Q for March 31, 2025, except as updated or supplemented by information in this report[214] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. This section confirms no unregistered sales of equity securities and provides an update on the use of proceeds from the IPO and the status of the share repurchase program - There were no unregistered sales of equity securities[215] - Proceeds from the October 2021 IPO have been partially invested in short-term, interest-bearing, investment-grade securities, with no material changes in planned use[216] - No shares were repurchased under the $100.0 million Share Repurchase Program during the three and six months ended June 30, 2025, with $50.0 million remaining available for future repurchases[217] Item 3. Defaults Upon Senior Securities. This section states that there are no defaults upon senior securities - Not applicable[218] Item 4. Mine Safety Disclosures. This section states that mine safety disclosures are not applicable to the Company - Not applicable[219] Item 5. Other Information. This section provides other information, including details on a trading agreement Other Information | Action | Date | Rule 10b5-1 | Non-Rule 10b5-1 | Total Shares to be Sold | Expiration Date | | :-------- | :--------- | :---------- | :-------------- | :---------------------- | :-------------- | | Terminate | May 6, 2025 | X | | 45,000 | June 30, 2025 | - Angelic Gibson, Chief Information Officer, Senior Vice President, terminated a Rule 10b5-1 trading agreement on May 6, 2025, for 45,000 shares, expiring June 30, 2025[220] Item 6. Exhibits. This section lists all exhibits filed as part of the Form 10-Q, including merger agreements, organizational documents, certifications, and XBRL data - Key exhibits include the Agreement and Plan of Merger dated May 6, 2025 (Exhibit 2.2), certifications by the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1), and Inline XBRL documents[221] Signatures This section contains the required signatures for the Form 10-Q filing - The report was signed on August 6, 2025, by Joel Wilhite, Chief Financial Officer, as the authorized signatory and Principal Financial and Accounting Officer[225]