AvidXchange Holdings, Inc. has a history of exceeding expectations, consistently outperforming revenue and adjusted EBITDA targets for the past ten quarters. Their recent Q1 2024 earnings call continued this trend, revealing a company navigating a choppy macroeconomic environment with strategic agility and a laser focus on efficiency. While analysts have honed in on their impressive gross margin expansion and the promising partnerships with AppFolio and M3, a potentially more significant development may have flown under the radar: the transformative power of artificial intelligence (AI) in driving ePayment adoption and monetization.

Mike Praeger, AvidXchange's Co-Founder and CEO, enthusiastically detailed the impact of their new AI-powered IVR payment automation solution. This innovation, he explained, allows them to automate payments for smaller, low-volume suppliers, a segment previously deemed too costly to manage electronically. This seemingly minor operational tweak could have profound implications for AvidXchange's long-term ePayment monetization goals.

To understand the magnitude of this development, we need to revisit AvidXchange's stated ambition: achieving 70% monetization of their transactions through ePayments. This audacious goal relies heavily on converting suppliers from traditional paper checks to digital payment modalities. While virtual cards and ACH payments have been steadily gaining traction, smaller suppliers, often lacking the resources to seamlessly integrate with electronic systems, have remained a stubborn bastion of paper-based processes.

AI is changing this dynamic. By dramatically reducing the cost of automating low-dollar transactions, AvidXchange can now economically onboard a vast new pool of suppliers onto its AvidPay network. Let's delve into the numbers to illustrate the potential impact.

AvidXchange Revenue and Transaction Yield Growth

This chart displays AvidXchange's revenue and transaction yield growth in Q1 2024 compared to Q1 2023.

In Q1 2024, AvidXchange processed over $105 million in revenue, exceeding 21% year-over-year growth. Their transaction yield, a key metric reflecting the efficiency and effectiveness of their operations, reached $5.47 per transaction, a 15% increase from the previous year. While impressive, these figures only hint at the potential unleashed by AI-powered automation.

AvidXchange's Supplier Hub boasts over 1.2 million supplier customers, a number that has grown by an impressive 24% in the past year. Assuming a conservative estimate that even 10% of these suppliers fall into the "low-volume" category, AI automation could potentially bring over 120,000 new suppliers into the ePayment fold.

The financial implications are significant. If each of these newly automated suppliers processes just 100 transactions per year, at an average yield of $5 per transaction (potentially lower due to the small dollar nature of these transactions), AvidXchange could generate an additional $60 million in annual revenue. This represents a 15% boost to their current revenue base, demonstrating the potential for AI to accelerate their path towards 70% ePayment monetization.

Beyond the immediate revenue impact, AI automation further enhances AvidXchange's competitive advantage. By offering a seamless and cost-effective solution for even the smallest suppliers, they solidify their position as the leading provider of AP automation and payment solutions for the middle market. This enhanced value proposition not only attracts new customers but also fosters loyalty amongst existing ones, driving customer retention rates and solidifying their dominant market share.

AvidXchange is not just riding the AI wave; they are actively shaping it, developing and deploying cutting-edge solutions that directly address the needs of their customers. This forward-thinking approach, coupled with their unwavering focus on efficiency and customer engagement, suggests that their ambitious 70% ePayment monetization goal might not be so audacious after all.

"Fun Fact: Did you know that AvidXchange processes enough invoices annually to wrap around the Earth twice? That's a lot of paper saved thanks to their automation solutions!"