Subject: Paymentus 2026 Q1 Update
Paymentus had a strong Q1. Revenue grew faster than our long-term growth
assumption, profitability improved, and management raised its full-year
outlook. The quarter makes our growth and margin assumptions look more
achievable, but one quarter is not enough to make a major change to the
base case. At the same time, the stock price is also higher than it was in
March, so the market is now assuming stronger future results than before.

Key Updates to the Base Case

Growth: Revenue grew 30.2% from last year, well above our base case assumption
of about 20% early growth. Growth came from both new billers and more payment
activity from existing billers. Transactions grew 17.4%, and average revenue
per transaction also increased. This suggests Paymentus is adding customers
while also deepening use with customers it already has.

Profitability: Operating profit as a percentage of revenue rose from about 5.7%
last year to about 7.4% this year. This supports our view that Paymentus can
become more profitable as it gets larger, even while it continues to invest in
software development.

Reinvestment: Paymentus continues to generate cash, but it also reinvests a
meaningful amount into software development. In Q1, capitalized software
spending was about $9.5 million, compared with about $30.5 million of operating
cash flow. That supports the view that the business is software-driven, but
requires meaningful investment to grow.

Guidance: Management raised full-year guidance. The new revenue outlook is
$1.425 billion to $1.440 billion, which still points to roughly 20% growth for
the year. That lines up well with our March base case.

Advantage period: Large enterprise growth and deeper use by existing customers
support the idea that Paymentus can be hard to replace once installed. Our
March estimate was that Paymentus’s advantage could last about 10 to 12 years.
Q1 supports that view, but does not suggest the advantage should be extended.

New products: Paymentus introduced Bill Wallet and Billio. The idea is to make
bills easier to find, understand, manage, and pay. Bill Wallet would give
customers one place to keep and pay bills from different providers. Billio would
make bills more useful by letting customers see information, ask questions, and
take action instead of just reading a static document. These products could
become another growth path over time, but they are still early and are not
expected to add meaningful revenue in 2026.

Stock price expectations: At the current price of about $28 per share, the
stock likely assumes a longer period of strong performance than it did at the
old $24 reference price. The stronger quarter helps offset this, but future
results need to keep supporting the higher expectations.

What We Should Watch Next

The most important item is margin progress. If revenue keeps growing and
operating margins keep improving, the base case becomes stronger.

Second, we should watch whether large enterprise customers keep adding payment
volume after they go live. We can track this through comments about existing
customers using the platform more, transaction growth, average revenue per
transaction, and contribution profit per transaction.

Third, we should watch for early signs of adoption for Bill Wallet and Billio.
These products are not expected to add meaningful revenue in 2026, so near-term
progress should be measured by customer interest, early usage, and management
commentary rather than financial impact.

Ears

*************** DISCLAIMER ***************
I don't own shares of Paymentus.
I'm not qualified to give investment advice.
This is not a recommendation to buy or sell Paymentus.