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Paymentus (PAY 3.38%)
Q4 2023 Earnings Call
Mar 04, 2024, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and welcome to the fourth-quarter and full-year 2023 Paymentus earnings conference call. This call is being recorded. All participants are currently in a listen-only mode. There will be an opportunity to ask questions following management's prepared remarks.
[Operator instructions] At this time, I will now turn the call over to David Hanover, investor relations. Please go ahead.
David Hanover -- Investor Relations
Thank you. Good afternoon and welcome to Paymentus' fourth-quarter and full-year 2023 earnings call. Joining me today on the call is Dushyant Sharma, our founder and CEO; and Sanjay Kalra, our CFO. Following our prepared remarks, we'll take questions.
A press release was issued after the close of market today and is posted on our website where this call is being simultaneously webcast. The webcast replay of this call and the supplemental slides accompanying this presentation will be available on our company's website under the Investor Relations link at ir.paymentus.com. Statements made on this webcast include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements use words such as will, believe, expect, anticipate, and similar phrases that denote future expectation or intent regarding our financial results and guidance, the impact of and our ability to address continued economic uncertainty, our market opportunities, business strategies, implementation timing, product enhancements, impact from acquisitions, and other matters.
The forward-looking statements speak as of today, and we undertake no obligation to update them. These statements are subject to risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements, including the risks and uncertainties set forth under the captions, Special Note Regarding Forward-looking Statements and Risk Factors, in our annual report on Form 10-K for the year ended December 31st, 2022 and our subsequent quarterly reports on Form 10-Q and our Form 10-K for the year ended December 31st, 2023, which we expect to file with the SEC shortly, and elsewhere in our other filings with the SEC. We encourage you to review these detailed forward-looking statements, safe harbor, and risk factor disclosures. In addition, during today's call, we will discuss certain non-GAAP financial measures, specifically contribution profit, adjusted gross profit, non-GAAP operating expenses, adjusted EBITDA, adjusted EBITDA margin, and non-GAAP net income, and earnings per share.
These non-GAAP financial measures, which we believe are useful in measuring our performance and liquidity, should be considered in addition to, and not as a substitute for, or in isolation from, GAAP results. We encourage you to review additional disclosures regarding these non-GAAP measures, including reconciliations of the most directly comparable GAAP measures in our earnings press release issued today and the supplemental slides for this webcast, each available on the Investor Relations page of our website. With that, I'd like to turn the call over to Dushyant Sharma, our founder and CEO. Dushyant.
Dushyant Sharma -- Founder and Chief Executive Officer
Thank you, David. We had a great quarter and a great year, and we are looking forward to carrying our momentum into 2024. Even more exciting to me is my view that our 2023 financial performance reflects only a subset of the opportunities arising out of the innovation framework we have built over the years. Therefore, we are excited about our long-term future and believe you are just getting started. Now to cover our fourth-quarter and the full-year 2023 highlights.
In the fourth quarter of 2023, Paymentus again delivered results that were well ahead of our initial expectations. Fourth-quarter revenue was $164.8 million, up 24.7% year over year. Adjusted EBITDA, which as many of you know is a significant financial metric for us, was $19.9 million for the quarter, up 95.4% year over year. Fourth-quarter contribution profit was $66.3 million, up 22.7% year over year. In addition to these results, we also exited 2023 with a strong bookings and a strong backlog that we believe puts us in a position to achieve the top end of our guidance without signing any new clients, but of course, timely completing our expected 2024 implementations.
As you may recall, we shared the same sentiment last year around this time. For the full-year 2023, revenue increased 23.6% over the last year to $614.5 million, beating our long-term target of 20% top-line growth. Adjusted EBITDA increased 103.1% to $58.1 million, far ahead of our long-term target of 20 to 30%, and contribution profit was $240.9 million, growing 19.7% In Q4, we added $12.2 million in contribution profit over the same period last year while dropping $9.7 million of that to adjusted EBITDA. So, for the past few quarters, we have continued to demonstrate an ability to drop the majority of the incremental contribution profit dollars to the bottom line. We believe this highlights one of the key strengths of our operating strategy, our proven ability to expand our operating leverage without sacrificing growth or innovation.
As we have shared before, at Paymentus, our goal remains to continue delivering high-quality earnings alongside solid top-line growth. We are proud of what we have achieved to date, and we expect to continue delivering long-term growth in both of these areas in the years to come. Now, I'll review some of our key fourth-quarter business highlights and accomplishments. As I mentioned earlier, we finished 2023 with a strong backlog and are very pleased with our year-over-year growth. Of course, all of this continues to be driven by the strength of our technology platform and our IPN ecosystem, which enables our clients to participate in a broad and diverse network by merely integrating onto our platform. Turning specifically to new client activity.
During the fourth quarter, we signed several notable and large clients. We signed multiple large insurance companies, large utilities, and large government agencies. We also signed a large property management company in the real estate sector and a large business in the retail sector. In addition, we signed several clients across various other verticals. We believe this broad mix of customer signings demonstrates the diversity of the businesses and verticals our platform can support. And as a -- and as always, one of our key focus areas continues to be onboarding our strong backlog in order to drive further growth.
We are making incremental targeted investments in this area and believe these investments, as well as the continually improving post-pandemic conditions that allows for a more in-person collaborative process, continues to be a tailwind for us in this regard. As part of this effort, we have continued to ramp up hirings. We have made significant progress onboarding new clients since the start of 2023, including the launch of several large clients during the fourth quarter across various verticals including multiple utilities, insurance companies, commercial entities, property management companies, government agencies, and financial institutions. Of course, we expect to make further progress throughout 2024, consistent with our growth plans and internal targets. As we reflect on our platform and the ecosystem, we believe we are increasingly becoming a central hub to the entire bill payment ecosystem. When I step back and reflect on our product capabilities and who we currently serve with product offerings, it drives a strong personal belief that we are setting a foundation to become a large global fintech provider. First, we serve businesses of various sizes and industry verticals, engaging with their consumer and business customers and getting their bills paid through our platform.
Second, we have banks and credit unions of various sizes sending payments from their customers to the billers using our platform and our ever-expanding IPN ecosystem. Third, we have millions of consumers and small businesses interacting on our platform and the ecosystem. And finally, we have clients who are disbursing and paying out millions of dollars using our payout and disbursement platforms. These billers, businesses, banks, credit unions, and SMBs all engage our direct product offerings that uniquely address their specific business and payment workflows. So, if you're an investor like me in this business, I hope you're as excited as I am about where the business is headed with ever-expanding TAM, along with our growth and profitability. In other words, I believe this is a long-term sustainable growth business with innovative platform in the company DNA.
In closing, we are proud to report another period of results that were ahead of our original expectations, both for the fourth quarter and the full-year 2023. At the same time, we continue to prove our ability to increase operating leverage without sacrificing revenue growth. We ended the year with a strong backlog and solid sales momentum going into 2026. And of course, we intend to remain focused and disciplined in onboarding our strong backlog, which we expect to fuel our future growth. Now, let me turn it over to Sanjay to review our financial results in greater detail.
Sanjay.
Sanjay Kalra -- Chief Financial Officer
Thank you, Dushyant, and thank you, all, for joining us today. Before I discuss our quarterly and full-year results and our 2024 outlook, I'd like to remind everyone that the financial results I'd be referring to include non-GAAP financial measures. As David mentioned earlier, our Q4 press release and earnings presentation includes reconciliations of the non-GAAP financial measures discussed on this call to their corresponding GAAP measures. Both of these are available on our website. Turning to Slide 5.
For the fourth quarter of 2023, we delivered another quarter of very strong financial results. We believe these results continue to demonstrate the resiliency, stability, and strength of our business. Our fourth-quarter results included revenue of 164.8 million, contribution profit of 66.3 million, and adjusted EBITDA of $19.9 million. Our results came in higher than we originally expected, and I'll discuss the drivers of our outperformance in more detail shortly. We also continue to experience solid business momentum in the fourth quarter.
This enabled us to once again exit the quarter with a strong backlog while further increasing our cash position. Now, let's review our fourth-quarter financials in more detail. Fourth-quarter 2023 revenue was 164.8 million, up 24.7% year over year. This growth was largely driven by increased transactions from existing billers, the launch of new billers, and increased activity in our Instant Payment Network, or IPN, business. The number of transactions we processed grew to 124.8 million in the fourth quarter, up 28.4% year over year. Our transaction growth exceeded revenue growth during the quarter primarily due to biller mix.
Fourth-quarter 2023 contribution profit increased to 66.3 million, up 22.7% year over year. This year-over-year increase in contribution profit reflects higher transactions from existing billers and the launch of new billers. Contribution margin was 40.3% for the fourth quarter, essentially flat, compared to 40.9% in the prior-year period despite adding a number of large-size billers to the mix throughout the past year. Contribution profit in the fourth quarter surpassed our expectations and was actually our best quarter in 2023 in terms of year-over-year growth. This outperformance was primarily driven by three key factors: First, we saw higher transaction growth than we had expected initially during the quarter. The growth was driven by increased transactions from newer billers that were launched earlier in the year with the incremental transactions driven by seasonality and adoption success. Second, we saw growth from billers who are seasonally strong in the fourth quarter.
And third, we realized the benefit of improved pricing from some bidders upon renewal of their contracts. Contribution profit per transaction for the quarter was $0.53, which was modestly down from $0.56 in the prior-year period, primarily due to biller mix. As we stated in the past, variables outside of our control, such as an increase in the average payment amount, changes in the payment mix, biller mix, CPI, and card network fees, etc., can significantly influence and diminish the utility of contribution profit on a quarterly and per-transaction basis. Fourth-quarter 2023 adjusted gross profit was 54.2 million, up 21.5% year over year. Year-over-year adjusted gross profit growth marginally trailed contribution profit growth primarily due to increased employee costs we recorded during the quarter related to customer support that are nonrecurring. Fourth quarter 2023 non-GAAP operating expenses increased to 36.7 million, marginally up 1.1% year over year.
The increase was primarily due to increased sales and marketing expenses and research and development expenses net of savings we realized in general and administrative costs. We expect to increase sales and marketing expenses as we continue to focus resources on the execution of our go-to-market strategy and increase in investments related to converting our strong pipeline to bookings and onboarding our strong backlog. Additionally, we started to see increased hiring in the fourth quarter including some hirings that we had originally planned for the third quarter of 2023. Fourth-quarter 2023 non-GAAP net income was 13.9 million, or $0.11 per share, compared to non-GAAP net income of $5.1 million, or $0.04 per share in the prior-year period. Fourth-quarter 2023 adjusted EBITDA was 19.9 million, a record 30% of contribution profit, up 95.4%, compared to 10.2 million, or 18.9% of contribution profit in the prior year.
This very strong quarterly performance compared to the guidance we previously provided was primarily driven by two key factors: First, we benefited from increased contribution profit due to transactions growth and the reasons highlighted earlier, and second, hirings were less than we had expected in the quarter, resulting in lower operating expenses. Even taking into account these unexpected variables, which benefited us, we believe our strong adjusted EBITDA margin demonstrates the inherent operating leverage we have in the business and our ability to adapt to changing market conditions as we continue to grow. Related to this, we also exceeded the Rule of 40 for the fourth quarter, coming in at approximately 53. This is a measure we take very seriously, and our team here monitors it very closely. This is our third consecutive quarter exceeding the Rule of 40.
Turning to Slide 6. I'll just summarize our full-year 2023 financial results, which also came in higher than the originally expected. Revenue for the full year increased 23.6% to 614.5 million driven by 24.9% increase in transactions from new billers, as well as transactions growth from existing billers. Contribution profit increased 19.7% to 240.9 million primarily due to increased transactions and repricing initiatives. Lastly, adjusted gross profit increased 23.1% to 199.2 million. Non-GAAP operating expenses increased to 150 million, up 6.8% year over year primarily due to higher sales and marketing expenses as we continue to focus resources on the execution of our go-to-market strategy.
Non-GAAP net income was 40.1 million, or $0.32 per share, compared to non-GAAP net income of 14.8 million, or $0.12 per share in the prior-year period. Adjusted EBITDA increased 103.1% to 58.1 million primarily due to increased adjusted gross profit, net of increased non-GAAP operating expenses. We exceeded the Rule of 40 for the full year ending at approximately 44. We are proud to report that 29.5 million of 39.7 million contribution profit increase, representing 74% incremental contribution profit in the fiscal year '23, flowed through to adjusted EBITDA. Now, I'll discuss our balance sheet and liquidity position on Slide 7. We ended the fourth quarter with cash and cash equivalents of 183.2 million, compared to 166.9 million at the end of Q3 '23.
The 16.3 million increase was primarily comprised of 24.4 million of cash generated from operations, offset by 8.4 million user investing activities, primarily internal use capitalized software used to drive growth and innovation. The company does not currently have any debt. Our free cash flow generated during the quarter was $16 million. Our days sales outstanding at the end of fourth quarter was 43 days, compared to 45 days at Q3 '23, within our expected range. Working capital at the end of the fourth quarter was approximately 208 million, an increase of approximately 6% from the end of Q3 '23.
We had 126.5 million diluted shares outstanding as of December 31, 2023, compared to 125.6 million diluted shares outstanding at the end of Q3 2023. The increase was largely due to improved average stock price during the quarter and, to some extent, due to the vesting of employee-restricted stock units and exercise of stock options. Now, I'll turn to our Q1 '24 and full-year 2024 guidance for revenue, non-GAAP contribution profit, and adjusted EBITDA on Slide 8. Taking into account our progress to date, for Q1 '24, our guidance is revenue in the range of 170 million to 176 million, contribution profit in the range of 64 million to 66 million; and adjusted EBITDA in the range of 15 million to 17 million. Before discussing full-year guidance, I want to mention that we are continuing to follow the same prudent approach to guidance that we follow during 2023 as uncertainty around the macroeconomic environment still exists.
For the full-year 2024, we currently expect revenue in the range of 720 million to 744 million, reflecting growth of 19.1% at midpoint and 21.1% at high end; contribution profit in the range of 274 million to 288 million, up 16.6% at midpoint and 19.5% at the high end. Our growth range for contribution profit is wider than revenue, primarily because, as we have said before, contribution profit is subject to a number of external factors that are beyond our control. Accordingly, we are taking a cautious approach on this metric. And finally, adjusted EBITDA in the range of 65 million to 75 million for the year, representing 20.5% increase at the midpoint and 29.1% at the high end.
Please note, this adjusted EBITDA guidance reflects the annual merit awards for our employees and our expectation that the increased hiring pace we saw in the fourth quarter will continue to pick up in 2024. It also takes into consideration the slower operating expense growth we saw in 2023, which was largely a reflection of the accelerated operating expense growth we had seen in the prior two fiscal years, primarily as a part of going public. Now that this period has passed, we expect to deliver a more normalized operating expense growth rate in 2024. During our last earnings call, we provided long-term growth targets for both revenue and adjusted EBITDA for over two primary financial metrics. We stated our goal to grow revenue at approximately 20% annually and to grow adjusted EBITDA dollars between 20 to 30% annually. The guidance that we have provided today for the full-year 2024 reflects these long-term targets.
Regarding contribution, profit, and operating expenses, which we consider secondary financial metrics, we plan to actively manage our operating expenses, dialing them up or down, as necessary, depending on how contribution profit is trending throughout the year to enable us to remain a Rule of 40 company on an annual basis. We manage this quite well in 2023, and we believe we can do so again in 2024 given our strong operating leverage. In summary, we reported exceptional fourth-quarter and full-year 2023 results. Throughout 2023, we consistently demonstrated our ability to generate strong revenue, contribution profit, adjusted EBITDA, cash, and bookings growth. This enabled us to end the year with a substantial backlog. Based on the solid footing and strong visibility, we continue to believe we are well positioned for 2024.
Thank you, everyone, for your attention today. And now, I'll turn it back to Dushyant for final remarks before we open up the call for questions.
Dushyant Sharma -- Founder and Chief Executive Officer
Thanks, Sanjay. I'm proud that our team came together and significantly beat our original expectations for 2023, which we had set out around the same time last year. I believe this performance illustrates the resilience of our business despite the difficult macro environment we dealt with. Sanjay just covered our guidance for the full year and the first quarter of 2024.
As I shared earlier, we feel good about the guidance based on the strength of our backlog. On that note, I also want to thank all of my team members for their continued efforts and dedication. That concludes our prepared remarks. I'll now open the line up for questions.
Questions & Answers:
Operator
Absolutely. We will now begin the Q&A session. [Operator instructions] The first question is from the line of John Davis with Raymond James. Your line is now open.
Unknown speaker -- Raymond James -- Analyst
Good afternoon, guys. This is Madison on for JD. I appreciate you taking the question. I wanted to start on the revenue guide.
Obviously, calls for roughly 19% growth here, doesn't include any new client wins. And understand the conservatism, but can you help us understand just how much new clients have contributed to growth in the past? I'm just trying to get a sense for, you know, the potential upside of new client growth -- goes as kind of planned given the strong backlog and sales trends you're seeing.
Sanjay Kalra -- Chief Financial Officer
I appreciate the question. You know, the growth of the new clients and the growth of the existing clients, these are the two contributors for our growth generally year over year. And I would say, we generally do not disclose the breakup of the two. I would say that the growth this year, we are seeing the 19.1% at midpoint.
That's comprised of both these factors, as I mentioned. And I would say they are in a very similar ratio what you saw last year. They are in a pretty close range of those numbers last year as well. And the trends are continuing as we expected, and I think, as we are guiding the high end at 21.1%, and as Dushyant just mentioned, if all of our client implementations happen on time as planned, I think that -- that should get us to high end. But I would say no new customers are planned in this year, which we will have to win this year and implement this year. All our revenue is -- expectation is based on the client billings we had till the end of 2023.
Unknown speaker -- Raymond James -- Analyst
Got you. Yeah, that's helpful. It's probably worth noting that, obviously, you outperformed that initial revenue guide from last year by mid-single digit, percentage-wise. And then, just as my follow-up here, on -- on capital allocation, obviously talked about the pristine balance sheet, strong cash position, no debt, generating, you know, nice free cash flow now.
Can you just talk about, you know, your capital allocation philosophy? And then, you know, just any color you could possibly give on how you guys are thinking about cash flow in '24 would be helpful. Thank you.
Sanjay Kalra -- Chief Financial Officer
Sure, Madison. We are -- we are very glad to be in a great position in the current economy to have a very good balance sheet, 183 million on the balance sheet gives us a lot of comfort and opens a lot of avenues for us to think about. But our priorities for capital allocation or cash spending remain unchanged since what we've discussed in the past. We want to grow organically. And the biggest opportunity for us to spend cash to prove the best results for us is to invest in hiring the sales and marketing team so we can build a better pipeline for growth for outer years.
In fact, I would rather highlight the current-year expectations for growth of revenue do not need any additional sales team or additional sales bookings, but we plan to invest in our sales team, which is -- which we think is the right measure for us to spend money. Other than this, we currently do not have any other plans to spend cash, and I think we are heading headed in the right direction. Starting from Q4 itself, we saw that trend happening, and we are excited to make that happen more in this year and build a great pipeline.
Unknown speaker -- Raymond James -- Analyst
Got it. Thank you. I appreciate all the color.
Sanjay Kalra -- Chief Financial Officer
Thank you.
Operator
Thank you. The next question is from the line of Dave Koning with Baird. Your line is now open.
Dave Koning -- Robert W. Baird and Company -- Analyst
Yeah, hey, guys. Thanks so much. A nice job. And I guess my first question, and you gave -- the end of 22, you gave I think a little over 1,900 clients.
So, last year, we could kind of back into, like, 10% client growth and mid-teens revenue per client growth. Did you give that number at the end of '23? I don't think I saw it in the presentation, but maybe if you could just give us a little bit of how much clients grew and then how much revenue per client grew.
Sanjay Kalra -- Chief Financial Officer
Yeah, David, the new number, that's an annual number we disclosed, and our 10-K will be filed shortly. And the number will be in there, and it's 2,200. So, you know, it's a 300 increase from the last number you saw, and the increase prior to that was 200. So, definitely, we are marching at an accelerated pace than we were marching earlier.
And I think revenue per client is -- I would say, is getting better. Interestingly, the revenue per client, I would also highlight, David, is not really kind of the most optimal metric to look at. Given the kind or given the size of the clients we are getting into, we are getting large enterprise customers, as well as small and medium-sized billers from various verticals. Our mix is kind of becoming different than it was a few years ago. So, I think looking at revenue per client may not be right metric, but I get it that that's a easy metric to look at and see the trends.
I will say just the growth of billers itself is more relevant than revenue per biller.
Dave Koning -- Robert W. Baird and Company -- Analyst
Yeah, got you. No, that's -- that's helpful. And I guess just follow-up question, you've become quite profitable so quickly in the last few years. And, you know, now we can look at -- like, we can look at earnings as evaluation metric. And I'm just wondering, do you have, like, a -- a normalized tax rate or something that we should use when we start thinking about -- you know, about -- how to think about earnings?
Sanjay Kalra -- Chief Financial Officer
Yeah, David, that's -- that's a great comment. Thank you for that. You know, we are profitable. And we definitely want to be and we think we'll be profitable going forward as well given the strong operating leverage this business has.
In terms of tax rate, we are profitable, and we kind of exhausted all NOLs this year. A very small portion is left, which will be used next year. So, going forward, for the long-term planning for earnings, I would suggest you use the rate which is closer to the statutory tax rate in the U.S., counting states, I think you should use approximately 25% tax rate.
Dave Koning -- Robert W. Baird and Company -- Analyst
Yeah, that makes sense. Well, no, thank you, and great job.
Sanjay Kalra -- Chief Financial Officer
Thank you.
Dushyant Sharma -- Founder and Chief Executive Officer
Thank you, David.
Operator
The next question is from the line of Will Nance with Goldman Sachs. Your line is now open.
Will Nance -- Goldman Sachs -- Analyst
Hey, guys, I appreciate you taking the question. Dushyant, you called out a number of client wins in the quarter across a number of verticals. And maybe wondering if you kind of double-click on the mix of incoming clients. Are there any verticals where you guys are seeing, you know, particularly increased traction, or you know, where you're, you know, getting increasingly optimistic that, you know, maybe could unlock some additional growth, maybe verticals you haven't played in historically as much?
Dushyant Sharma -- Founder and Chief Executive Officer
Yeah, great point, Will. From our perspective, you know, during the IPO Roadshow, we actually had a comment that wherever there is a bill, there is -- there is a payment, and wherever there is a payment, there is Paymentus. And I think that's coming to pass at this point where -- from all our channels, whether it's direct acquisition of clients or through channel partners of various kinds, what we are observing is that the needs of the customers is the same, that they want to automate their complex payment and business workflows, and our platform fits the bill perfectly for that. So, as a result, we are growing in all different verticals.
Utilities remains a strong vertical for us, but many other verticals, as I -- as I named, we are seeing traction in. So, we are very excited about the -- about the future actually. And one of the other things, which is interesting is, as we are entering into some other verticals, we are noting that it's not just the payments in, even payments out or disbursements, and payouts becomes a important transaction -- transaction flow that we could acquire or automate through our platform. So, we're excited about that as well.
Will Nance -- Goldman Sachs -- Analyst
Yeah, appreciate all that. And then, just maybe on some of the IPN comments, you kind of mentioned the -- the progress and seeing more integration with -- with bank bill pay. Maybe you could just talk about the opportunity there long term. I think a lot of people would consider, you know, Paymentus and companies like that kind of the -- in opposition to, you know, traditional bill pay centers at the bank. So, how do you see that kind of playing out over time? Are there opportunities to -- to maybe work more closely with some of the -- the incumbents in the space? And, you know, how do you kind of see the IPN strategy playing in specifically to kind of the bank bill pay market? Thanks.
Dushyant Sharma -- Founder and Chief Executive Officer
Thank you, Bill. I think this is a interesting scenario. I think what we -- what we felt right from the beginning of the business that each billing company -- if I can liken it to the analogy of cellphone network, each billing company is like a cellphone tower. And if you have enough of the billing companies like we do, and we continue to -- and we have built the platform and the ecosystem where we are signing increasingly at a faster pace, the billing companies of all sizes and various verticals, onto the network, the -- the -- the cellphone network, if you will, or the biller network, becomes increasingly valuable on its own in addition to the the revenue we generate from the billers themselves.
So, what -- what that means is that any bank who has any desire to attract customers or not -- or stop losing the customers or the payment volume they have historically lost to Paymentus, if they want to participate and continue to maintain their customer base, they have to use a real-time network like IPN. And since we are the leader in the space, or at least we believe we are the leader in this space, we -- we believe that this is -- as we bring more and more billers, this becomes even more valuable for -- for banks and other third-party providers who want to provide aggregated consumer bill payment. So, in some ways, that chasm that existed between the consolidated business bill payments to the bill of -- direct bill payments is being sort of evaporated or -- or being reduced or eliminated through Instant Payment Network. So, very very -- we are very excited about the future here. And frankly, as the time progresses, it will start to become more and more evident how and why we are winning the type of customers we are winning.
Will Nance -- Goldman Sachs -- Analyst
Super interesting. Appreciate you taking the questions and [Inaudible].
Dushyant Sharma -- Founder and Chief Executive Officer
Excuse me. Thank you, Will.
Operator
Thank you. The next question is from the line of Darrin Peller with Wolfe Research. You may proceed.
Darrin Peller -- Wolfe Research -- Analyst
Guys, hey, nice job on this. Maybe just touch a little bit more on the landscape for a minute because I think you -- I heard you mentioned pricing a couple of times in your prepared remarks. Maybe if you can give us a little more understanding on how receptive clients have been to this and, you know, where payment is generally felt leveraged to do so. Maybe add on to it, just overall competition. It looks like you guys obviously have differentiated yourselves, you know, as time goes on more and more.
So, maybe just any more color on if you've seen any incumbents do anything differently or perhaps new start-ups? Thanks.
Dushyant Sharma -- Founder and Chief Executive Officer
Sure. Great question, Darrin. I think, from our perspective, the approach we took during the -- during the inflation -- inflationary period -- or high inflationary period was we wanted to work with our clients. We wanted to demonstrate that we are a long-term partner, and we understand the pain point that just because inflation has come up rather quickly, it may dissipate quickly as well. So, you want to give a little bit of a time for customers to understand that they're working with a great partner.
in addition to having a great platform like -- like we support -- or we offer. And that approach actually worked extremely well. So, we were able to walk the customers through the pain point. We were suffering publicly, as -- as you all know, that we were being called out multiple times about the inflation impact we were facing.
We were able to show that, combined with the data, obviously, the detailed data customers were -- were privy to, we were able to review the -- renew the -- renew the pricing update. The pricing customers were rather understanding. So, we feel good about where our contractual arrangements are with the client, wherever pricing capabilities exist, with the strength of the platform, and the technology capabilities we -- we support. So, should a situation like this were to arise in the -- in the future, it gives us confidence that our approach and methodology of taking a long-term view to customer service and then adjusting the pricing could work again well for us.
Darrin Peller -- Wolfe Research -- Analyst
That's -- that's helpful. Maybe just one more on -- on the operating leverage side, if you can give us a little bit more color on your operating expense plans and the cadence expected for '24, and I think perhaps just a little more color on where you think you need to invest.
Sanjay Kalra -- Chief Financial Officer
There, I would say that, you know, you saw that the growth this year was 6.8% full year. And next year, while we don't guide for opex as such, but you can I think model it out looking at the guidance we are giving for the other three metrics. You will see that the opex is currently expected to grow in mid-teens. That's what you'll come, I would think, looking at what we provided.
Darrin Peller -- Wolfe Research -- Analyst
Yeah.
Sanjay Kalra -- Chief Financial Officer
You know, we -- we are actually taking a prudent conservative approach in terms of what we need to do. And as I mentioned earlier, we don't really need to spend opex. Majority of the opex is not needed to be spent for this year's growth. This year's growth is coming from bookings we did last year.
We are planning to spend more in terms of what we need to book for outer years' growth. So, in terms of your main question, where will we spend, the majority of the spend will be in sales and marketing. I think R&D and G&A will marginally go up but not significantly. The growth will mean -- opex growth mainly in sales and marketing. That said, I also want to highlight one thing.
You know, majority of the spend is discretionary in nature. And, you know, we manage our business very carefully. In fact, there is a regular review of how the opex is trending, and we can dial up and down based on how the CP is trending. So, operating leverage is strong. As you saw last year, like, we dropped 70%-plus to the bottom line of incremental CP dollars. It can happen again, but we are not planning to do that by choice.
So, I think we can manage it the way business is progressing. But we are -- we are glad to be in a position of operating leverage the way we are.
Darrin Peller -- Wolfe Research -- Analyst
Understood. Great. Thanks, guys.
Operator
Thank you. The next question is from Andrew Bauch with Wells Fargo. Your line is now open.
Andrew Bauch -- Wells Fargo Securities -- Analyst
Hey, thanks for taking the question. I just wanted to put a finer point on the hiring plans, particularly in sales and marketing that you highlighted. Sanjay, I know you mentioned in your prepared remarks that it was a -- a function of converting the backlog, but then you also said just now that -- that extending the growth in the out years is a priority. So, I guess, qualitatively, like, how do you kind of anticipate these sales and marketing investments as they come on to augment your growth, your -- your go-to-market strategy? And then, if we could just put a finer point on, quantitatively, like, what should we ultimately be kind of expecting based on your current plans for -- for sales and marketing expense growth in '24?
Sanjay Kalra -- Chief Financial Officer
Yeah, Andrew, we -- as I said, you know, from the modeling perspective, you will -- you would come at around 15%, I think, at the midpoint of growth of opex. And to put a finer point quantitatively, I would say, you know, can't give a percentage specifically here, but I would say a bigger piece is -- material piece is for sales and marketing and the remaining piece for R&D and G&A, and a piece also depends on G&A in terms of how the few things come up. You know, the endo insurance renewal, for example, a couple of renewals. We got a good benefit last year, and we don't know if the market trends of those costs, which are significant costs, where do they go this year, are they going to stay flat or go up. But I would think they will marginally go up, not -- not significantly.
So, take it that biggest piece of the increase in sales and marketing and remaining on these two. Now, within sales and marketing, if I have to think about how much we'll go for growth of pipeline for outer years versus the backlog implementation, I would say in these two things as well, the material portion would go for generating additional pipeline for outer years, and the smaller piece -- or a modest piece for backlog implementation.
Andrew Bauch -- Wells Fargo Securities -- Analyst
And then, the qualitative piece, like, is there anything changing in the go-to-market strategy?
Sanjay Kalra -- Chief Financial Officer
Well, our basic go-to-market strategy is not significantly changing. One thing which we are continually looking at, are there more verticals where we need to get into or can get into. We've made a significant progress, I would say, in the last two years in diversifying more into newer verticals, and we are seeing good progress there and good traction there. So, our pace to accelerate diverging into new verticals would continue, but other than that, there is no change in our strategy overall.
Andrew Bauch -- Wells Fargo Securities -- Analyst
Got it. That makes sense. And then, my follow-up was, you know, Sanjay, you mentioned that the contribution guide was slightly wider than the revenue guide that you gave. You called out the -- you know, the uncertainty around macro and a lot of the mix dynamics.
I mean, are you seeing anything, thus far, into 2024, be it around amount type biller or the network fees that, you know, would lead you to inform us all on that -- that wider range for -- for contribution profit?
Sanjay Kalra -- Chief Financial Officer
So, Andrew, that's a very interesting question. Interestingly, we are not aware of any specific change here. What -- what we've learned among, you know, I would say, in the last two quarters, when we look at all the contribution profits for all the quarters and try to analyze all the trends, what we've noted is that the degree of visibility at any given point in time for the current quarter is much better than the full year. And that's where we are, you know. If we look at our Q1 guidance versus full year, we are taking a broader approach just because the quarterly variability exists.
For example, you see Q1 '24 growth exceeds the revenue growth -- I mean, Q1 '24 CP growth exceeds revenue growth. And Q4 '23 was similar revenue growth, but it changes in other quarters. So, quarterly variability exists, and it's one of the most difficult metric to forecast. But that said, you know, the variability on CP does not impact our bottom-line EBITDA as we can calibrate the opex to manage our profitability depending upon how the CP is trending. So, as a result, I would say that the utility of CP, or contribution profit, is a key -- as a key metric is diminishing over time. And hence, we also call it a secondary metric, you know, where the utility is limited, and we mainly use it to calculate Rule of 40.
Hence, we thought it's prudent to take that approach as rather than taking a narrow range as there are so many factors. And ultimately, we can manage to the -- our bottom-line target by dialing up the opex up or down. Maybe this was a mouthful, and maybe this was more than you asked for, but hope it provides some perspective and insight into how we think about this metric.
Andrew Bauch -- Wells Fargo Securities -- Analyst
No, it's helpful. Thank you.
Dushyant Sharma -- Founder and Chief Executive Officer
And also, if I may add, what Sanjay mentioned earlier was that to deliver 2024 growth, opex, actually, even though everyone knows that we work in the non-discretionary, we service the non-discretionary industry. But our own internal opex, in the context of 2024, is actually rather discretionary. So, we are able to turn the dial up and down because of the operating leverage we have. So, we feel -- we feel good about the the -- the top and the bottom end of the guidance and despite the variability in the CP. And that's essentially the message you want to communicate.
The -- we we -- we know the trends in the business, and we are feeling good about how we are capturing the market share and how we are able to profitably grow the business. All of that is moving in the right direction.
Andrew Bauch -- Wells Fargo Securities -- Analyst
Now, a lot clear. Thanks, Dushyant.
Dushyant Sharma -- Founder and Chief Executive Officer
Thank you.
Operator
Thank you. The next question is from the line of Tien-Tsin Huang with J.P. Morgan. You may proceed.
Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst
Hey, good afternoon, and good results here. Just a couple of clarifications. Just did you share the NRR for the year and -- and how that -- that came together and how fiscal '24 might be different? And also, did you disclose the bookings or backlog growth in '23 versus the prior year? Just curious on the magnitude of benefit there.
Sanjay Kalra -- Chief Financial Officer
Hi, Tien-Tsin. No, we have not disclosed the numbers for the things you asked for.
Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst
OK, anything qualitative to share then just on the bookings or backlog front?
Sanjay Kalra -- Chief Financial Officer
Qualitatively, I can share.
Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst
Yeah.
Sanjay Kalra -- Chief Financial Officer
Yeah, sorry. Yeah, qualitatively, I would say our NRR, as well as bookings and pipeline, they are growing -- they are going at a very decent pace, I would say. And that's giving us all the confidence to not only exceed our Q4 expectations. We delivered a strong quarter.
We are very proud of that. And at the same time, Q1 also, we are marching in a very good way. And I think we are headed for the -- I will say in the right direction for the whole year given that we exited with a very strong backlog. So, I think all these metrics, qualitatively, are providing us a lot of encouragement and confidence.
Dushyant Sharma -- Founder and Chief Executive Officer
And, Tien-Tsin, if I may add to that, was that one of the key reasons I wanted to point out -- to point that we exited 2023 with enough in the bag that we could actually deliver the top end of the guide for any -- all of the -- the three metric -- metrices, the two primary and one secondary being CP. That's primarily based on the strength of the backlog. And that is growing year over year, and we are feeling good about 2024 as well.
Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst
Yeah, no, it sounds that way. That's why I thought I'd ask the question. Just my quick follow-up then on the -- on the drop-through or incremental margin around EBITDA was -- was quite strong in '23. It's running around, what, 50% in fiscal '24, looking at my -- my simple math.
So, just -- just to make sure, it sounds like there is some hiring that will come through that -- that you called out. I know you'll adjust opex depending on what contribution profit lands, but is that the primary difference in -- in thinking about drop-through or incremental margin in '24 versus '23?
Sanjay Kalra -- Chief Financial Officer
That's right.
Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst
Thank you.
Operator
Thank you. The next question is from the line of Rebecca Lu with Citi. You may proceed.
Rebecca Lu -- Citi -- Analyst
Thank you. Hi, guys. Can you give us an update on the J.P. Morgan partnership? I think, a year or two ago, we expected that partnership to have a pretty meaningful contribution in 2024.
What do we think now?
Dushyant Sharma -- Founder and Chief Executive Officer
Thank you, Rebecca, for the question. We are very proud with our part -- very proud for our partnership with JPMorgan Chase. They're a great partner, great organization. And it's going extremely well in all areas, and we're looking forward to a great 2024 with -- with JPMorgan Chase. We also have a very strong partnership ecosystem.
And we are looking forward to -- and frankly, as you can think about our go-to-market strategy, as Sanjay was also mentioning earlier, that increasingly, partnerships become a big -- big factor for us. So, JPMorgan Chase is a -- is a strong partner for us, but also, we have other partners, software vendors, fintech providers, and so on.
Rebecca Lu -- Citi -- Analyst
OK. And I want to ask about the contribution profit in a slightly different way. The profit margin has been -- it declined last year because we had some negative impacts from inflation. And if we're looking at the 2024 outlook, even at the top end of the range, we're also assuming a decline as well. Is it just conservatism, or are there anything else that we might not be thinking about?
Sanjay Kalra -- Chief Financial Officer
So, Rebecca, there are two pieces. There are two answers to this. I'll share individually. Number one, as we are onboarding larger customers -- enterprise customers, enterprise customers' pricing definitely is different than smaller or midsize customers due to the volume discounts they get because they've got bigger transactions -- or sorry, much larger transaction base. So, I think as a result of that, our contribution profit margin is getting softer a little bit, but that's totally fine given our strong operating leverage, you know.
And hence, we call contribution profit or contribution margin as our secondary metrices because they don't really matter as much to our long-term growth model which are purely dependent on the revenue growth and EBITDA dollars growth. So, it's a good question to analyze that how the CP margin is going, but at the end of the day, that can easily be managed by adjusting dialing up or down our opex. So, it doesn't really matter to our bottom line. I think there could be situations you will see that if CP percent is getting softer or maybe they could still get better because we can manage our expense better. And in our current long-term model, which we have talked about, i.e. 20% top-line growth and 20 to 30% bottom-line adjusted EBITDA dollars growth annually, I would think if CP margin gets better, which is also a probability depending upon what kind of customers we get, I would think there is an upside to EBITDA.
Although we are not planning to, you know, get there right now, I think we are applying a prudent approach. But what I'm just trying to say is contribution profit and contribution margin are really secondary, and overanalysis of that might not produce an optimum result to understand the company.
Dushyant Sharma -- Founder and Chief Executive Officer
And if I may also say one more thing, as Sanjay alluded to, as your biller makes changes and the larger biller comes to play, imagine a scenario where we saw a large deal where we are going to have a contribution profit of, say, $1 million. That changes, we are less concerned at that point exactly what each transaction is -- contribution profit for each transaction is. We are more concerned about how quickly and how efficiently can we serve the customer and what will be the net operating margin from that biller is once they're live on our platform, which ends up being very good based on the operating leverage we've been talking about.
Rebecca Lu -- Citi -- Analyst
Great. Thank you.
Operator
Thank you. There are no further questions in queue. I would like to turn the call back over to Dushyant Sharma for concluding remarks.
Dushyant Sharma -- Founder and Chief Executive Officer
Well, thank you, everyone, for joining the call today. I really appreciate the time. Have a great day. Thank you.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
David Hanover -- Investor Relations
Dushyant Sharma -- Founder and Chief Executive Officer
Sanjay Kalra -- Chief Financial Officer
Unknown speaker -- Raymond James -- Analyst
Dave Koning -- Robert W. Baird and Company -- Analyst
Will Nance -- Goldman Sachs -- Analyst
Darrin Peller -- Wolfe Research -- Analyst
Andrew Bauch -- Wells Fargo Securities -- Analyst
Tien-Tsin Huang -- JPMorgan Chase and Company -- Analyst
Rebecca Lu -- Citi -- Analyst
