Paymentus Q3 2025: Seasonality, Large Biller Impact, and EBITDA Margins Spark Contradictions in Earnings Call

Date of Call: November 3, 2025

Financials Results

• Revenue: $310.7M, up 34.2% YOY
• EPS: $0.17 per share (non-GAAP), $22.6M non-GAAP net income, compared to $0.12 per share ($14.7M) in the prior year period
• Gross Margin: Contribution margin 31.6%, compared to 34.5% in the prior year period

Guidance:

• Q4 2025: Revenue $307M–$312M (~20% YOY at midpoint); Contribution Profit $99M–$101M (~16% YOY at midpoint); Adjusted EBITDA $34M–$36M (~28.2% YOY at midpoint, ~35% margin at midpoint).
• Full-year 2025: Revenue $1.173B–$1.178B (midpoint +34.9% YOY); Contribution Profit $378M–$380M (midpoint +21.5%); Adjusted EBITDA $132M–$134M (midpoint +41.2%), ~35.1% of contribution profit at midpoint; Rule of 40 ~56%–57%.
• Company expects continuation of the four growth vectors and noted Q3 incremental adjusted EBITDA margin of 61.7%.

Business Commentary:

* Revenue Growth and Strong Bookings: - Paymentus Holdings, Inc. reported revenue of $310.7 million for Q3 2025, up 34.2% year-over-year. - The growth was driven by increased number of billers, higher transaction values, early launches of large enterprise customers, and increased activity on its Instant Payment Network (IPN).

• Adjusted EBITDA Margin and Incremental Profitability:
• The company achieved a record adjusted EBITDA margin of 36.5%, with incremental adjusted EBITDA margin exceeding 60%.

• This was largely due to the successful onboarding of new billers and higher transaction values, which significantly improved operating leverage and profitability.

• Large Enterprise and Mid-Market Expansion:

• Paymentus experienced strong bookings and a sizable backlog, particularly in the large enterprise and larger mid-market segments.

• This expansion was driven by vertical-agnostic platform engineering, which allows for effective penetration across various industries, and the onboarding of clients in new verticals.

• Improved Cash Flow and Financial Health:

• Paymentus reported a trailing four-quarter free cash flow conversion over 140%.
• The improved cash flow was attributed to high incremental adjusted EBITDA margins, effective cash management, and a reduction in days sales outstanding.

Sentiment Analysis:

Overall Tone: Positive

• Management: "delivered another strong quarter with the results exceeding our expectations" and "we are once again raising our full year 2025 revenue, contribution profit and adjusted EBITDA guidance." Key metrics: revenue $310.7M (+34.2% YOY), adjusted EBITDA $35.9M (+45.9%) and record adjusted EBITDA margin 36.5%.

Q&A:

• Question from John Davis (Raymond James & Associates, Inc., Research Division): Dushyant, I wanted to start with the comments around onboarding a new B2B customer in a new vertical. Obviously, the B2B market is huge. Just some context about how this relationship and kind of ultimate signing developed? Do you have many more B2B opportunities in the pipe and just maybe some broader comments about that opportunity for Paymentus?
  Response: Paymentus' horizontal platform can be extended to B2B workflows, the newly onboarded client exceeded expectations in usage and revenue, and the company sees a sizable, methodical B2B opportunity enabled by platform design.

• Question from John Davis (Raymond James & Associates, Inc., Research Division): Sanjay, I appreciate your comments around volume discounts. But I think one of the most surprising things to me is you're clearly having success moving up market and moving into new verticals. And yes, that comes with higher card mix, higher kind of gross revenue per transaction but what's more interesting is even contribution profit per transaction is up I think, about 4% year-over-year despite moving upmarket. Just want to understand what's driving that? Or maybe move in some verticals that maybe have a little bit better pricing as you kind of mix away from utilities? Or are you adding kind of more bells and whistles, products and services that are driving a higher kind of contribution profit per transaction. Just would love to get some more commentary on that.
  Response: Higher contribution profit per transaction is driven by stronger pricing and demand for the platform from larger/higher‑value customers and new implementations that delivered materially higher contribution profit despite mix and interchange variability.

• Question from Tien-Tsin Huang (JPMorgan Chase & Co, Research Division): Great results. I wanted to ask around visibility, if that's okay. Just your visibility stay looking ahead to next year. How would you compare it to the same time last year when you were looking ahead? If I recall, there were a lot of questions around enterprise and how those would board and flow through in payment mix. Do you feel like your visibility is better and how is it different?
  Response: Visibility is high and similar to this time last year—strong backlog and pipeline with implementations driving same-store sales; management did not provide 2026 guidance but suggested modeling next year with similar growth rates to prior guidance.

• Question from Tien-Tsin Huang (JPMorgan Chase & Co, Research Division): Perfect. Very reasonable. Great. So let me ask on just my quick follow-up, just on the enterprise pipeline. Both of you expressed that as being very strong. Any change in the type of or who you might be replacing? And what systems the incumbents might be looking to be replaced by -- with Paymentus. I'm just curious if there's any shift in pattern there. So who are you replacing potentially with these deals?
  Response: Paymentus is increasingly replacing in‑house solutions and legacy service providers as large enterprises seek modern, configurable platforms offering control and bespoke workflows that Paymentus can support at scale.

• Question from Craig Maurer (Financial Technology Partners LP): You listed 4 key factors earlier in the call that drove the increase in revenue. Can you provide perhaps some sizing in terms of the impact each of these had? And do you expect these benefits to continue into fourth quarter and perhaps early parts of next year?
  Response: Management won't quantify the split but prioritized the drivers: (1) new biller launches (largest), (2) same‑store sales, (3) early large enterprise launches, (4) IPN growth; they expect all four to continue into Q4 and 2026.

• Question from John Davis (Raymond James & Associates, Inc., Research Division): It looks like free cash flow conversion over a trailing 4 quarters is a little over 140%. Sanjay, maybe just the sustainability of that and what's driving that pretty incredible free cash flow conversion over the last year?
  Response: High free cash flow is sustainable due to very high incremental adjusted EBITDA margins, improved DSO and cash collection quality; model drivers include adjusted EBITDA, ~25% non‑GAAP tax rate, interest income, and cap software ~ $9M/qtr.

• Question from William Nance (Goldman Sachs Group, Inc., Research Division): Maybe just one here on the topic of agentic commerce. I know a lot of the value prop of Paymentus revolves around kind of meeting the consumer where they're at, when they're ready to make that payment and making it as easy as possible. Obviously agentic commerce has been getting a lot of attention from investors recently. I know you guys have always been close to the Braintree and PayPal that got this new partnership with OpenAI. So just wondering how you guys are thinking about just the technical hurdles of making it easier for consumers to pay their bills potentially in a more agentic way? And just where you think that -- where are you on the road map? And how long do you think that extends to sort of hit the market and the reality for consumers?
  Response: Paymentus has invested in AI for years and is positioning the platform to play a central role in agentic/service commerce; management expects growing adoption over coming years and is preparing the company technically and strategically.

Contradiction Point 1

Seasonality and Large Biller Impact

It involves the explanation of seasonality and the impact of large billers launched in previous quarters on current growth, which affects investor expectations and financial forecasting.

What are the key factors affecting visibility for next year versus last year’s same period, and are there any changes in client replacement patterns? - Tien-Tsin Huang(JPMorgan)

2025Q3: We are now targeting larger clients who previously thought they couldn't use third-party platforms. They're looking for control, specific configurations, and large-scale solutions. Paymentus, now at $1 billion, is seen as a partner, replacing in-house and legacy solutions. - Sanjay Kalra(CFO) and Dushyant Sharma(CEO)

Why is this year's Q2 growth different from historical trends, and why isn't Q3 showing the usual acceleration from Q2? Are there specific differences in this year's trend? - David John Koning(Robert W. Baird & Co. Incorporated)

2025Q2: It took up to four quarters for large enterprise billers launched in Q3 of last year to fully impact our results. We expect a more pronounced contribution from these large billers in the coming quarters. - Sanjay Kalra(CFO)

Contradiction Point 2

Bad Debt Expense Impact on Adjusted EBITDA Margin

It involves the explanation of the impact of bad debt expenses on adjusted EBITDA margin, which is a critical financial indicator for investors.

How sustainable is the high free cash flow conversion, what factors are driving it, and how does the company forecast future cash flows? - John Davis(Raymond James)

2025Q3: The bad debt expense is quite small compared to our business size and revenues. It is primarily due to some old amounts that are prudently written off. The impact on adjusted EBITDA margin is not material, and we view it as insignificant. - Sanjay Kalra(CFO)

What caused the recent increase in bad debt expense affecting adjusted EBITDA margin? - David John Koning(Robert W. Baird & Co. Incorporated)

2025Q2: The bad debt expense is quite small compared to our business size and revenues. It is primarily due to some old amounts that are prudently written off. The impact on adjusted EBITDA margin is not material, and we view it as insignificant. - Sanjay Kalra(CFO)

Contradiction Point 3

Growth Drivers and Revenue Forecasts

It involves the factors driving revenue growth and the company's ability to meet financial forecasts, which are critical for investor expectations and strategic planning.

What is the impact of the four key factors driving revenue growth, and will they continue into Q4 and early 2026? - Craig Maurer (FT Partners)

2025Q3: Prioritized factors include new biller launches, same-store sales, early launches of large customers, and IPN network. All are expected to continue into Q4 and 2026, contributing to consistent growth. - Sanjay Kalra(CFO)

What drove the transaction growth: new clients or same-store sales? - Dave Koning (Baird)

2025Q1: Both new clients and same-store sales are growing at a good pace. The trend in the first quarter is that new client implementations seem to be a bigger piece, but same-store sales are also growing nicely. The customer mix in the pipeline and backlog suggests a similar trend should continue. - Sanjay Kalra(CFO)

Contradiction Point 4

Free Cash Flow and Cash Flow Forecasting

It involves the company's ability to generate cash and its expectations for future cash flow, which are crucial for financial planning and investor confidence.

How sustainable is the current high free cash flow conversion, what factors are driving it, and how do you forecast future cash flows? - John Davis (Raymond James)

2025Q3: Cash flow strength is due to high incremental adjusted EBITDA margin. Free cash flow exceeds 100% of adjusted EBITDA. Forecasting involves adjusting for taxes, interest, and capital expenses. Continued strong collection practices contribute to cash flow generation. - Sanjay Kalra(CFO)

What drove the strong free cash flow and how should it be viewed for the rest of 2025? - John Davis (Raymond James)

2025Q1: The strong free cash flow was driven by cash from operations and working capital efficiency. Cash flow will fluctuate quarterly, and the goal is to generate cash above EBITDA annually after taxes. The company has enough liquidity to invest in working capital as needed. - Sanjay Kalra(CFO)

Contradiction Point 5

Growth Drivers and Challenges in the Bill Payment Segment

It involves the company's reported growth in the bill payment segment and the factors driving it, which are crucial for understanding the company's performance and strategic direction.

Can you provide comments on onboarding a new B2B customer in a new industry, the relationship context, and future B2B opportunities? - John Davis (Raymond James)

2025Q3: We added specific workflows to target B2B clients only, attracting a large client in a new vertical. Our platform's horizontal approach allows us to expand into new industries. This B2B client exceeded expectations in platform usage, indicating potential for further growth and targeted expansion in this vertical. - Dushyant Sharma(CEO)

What are the growth drivers and challenges in the bill payment segment? - Dave Koning (Baird)

2024Q4: Our bill payment segment experienced significant growth driven by increasing customer acquisition and strong merchant retention. We saw a 45% increase in merchant customers, and bill volume grew by 39%. The growth is attributed to our advanced product offerings, which enhance the user experience and create stickiness. However, there have been some delays in integrating new merchants due to compliance issues. - Sanjay Kalra(CFO)