BTRS Holdings Inc. (NASDAQ: BTRS) is a leading provider of cloud-based software and integrated payment processing solutions that simplify and automate business-to-business (B2B) commerce. The company's comprehensive suite of order-to-cash software as a service (SaaS) solutions, including credit decisioning, online ordering, invoicing, cash application, and collections, are helping businesses across various industries digitize their accounts receivable processes and improve cash flow management.

Business Overview

BTRS was founded in 2001 and is headquartered in Lawrenceville, New Jersey, with additional domestic offices and print facilities in Colorado and California, as well as international offices in Belgium, the Netherlands, Germany, and Poland. The company's solutions are designed to address the complexities and inefficiencies inherent in the B2B payment ecosystem, where businesses often struggle with manual, paper-based processes, delayed cash flow, and limited visibility into outstanding receivables.

BTRS's flagship platform, the Business Payments Network (BPN), connects B2B buyers and sellers to a community of banks, FinTechs, and card brands, enabling seamless and secure electronic payments. By automating the order-to-cash process, BTRS helps its customers reduce costs, accelerate cash flow, and enhance the overall customer experience.

The company's solutions cater to a diverse customer base across various industries, including distributors of building materials, electrical, plumbing and technology equipment, healthcare, construction, and consumer products, primarily located in North America. BTRS's ability to onboard new customers and expand its relationships with existing clients has been a key driver of its growth.

Financials

Financial Performance

For the full year 2022, BTRS reported annual revenue of $166.4 million, a 10.4% increase from the prior year. This growth was primarily driven by a 13.1% increase in subscription and transaction fees, as the company continued to onboard new customers and expand its relationships with existing clients. However, the company's annual net income for 2022 was a loss of $61.2 million, compared to a loss of $44.7 million in the previous year, as the company continued to invest in product development, sales and marketing, and infrastructure to support its long-term growth.

BTRS's annual operating cash flow for 2022 was a negative $9.6 million, compared to a negative $9.8 million in the prior year, as the company's investments in growth initiatives outpaced its cash generation. Similarly, the company's annual free cash flow for 2022 was a negative $11.2 million, compared to a negative $11.4 million in the previous year.

Quarterly Performance

In the third quarter of 2022, BTRS reported total revenue of $51.4 million, a 24.0% increase compared to the same period in the prior year. This increase was primarily driven by a 29.3% rise in subscription and transaction fees, reflecting the company's success in acquiring new customers and expanding its relationships with existing clients.

The company's gross profit margin in the third quarter of 2022 was 60.8%, compared to 56.5% in the same period of 2021, as the company continued to benefit from the scalability of its platform and the increasing adoption of its electronic payment solutions.

However, BTRS's net loss in the third quarter of 2022 was $21.2 million, compared to a net loss of $11.2 million in the same period of the prior year. This increase in net loss was primarily due to higher operating expenses, including a $5.8 million increase in merger-related costs, a $4.6 million increase in impairment and restructuring charges, and a $2.5 million increase in research and development, sales and marketing, and general and administrative expenses.

BTRS's operating cash flow in the third quarter of 2022 was a negative $2.6 million, compared to a positive $1.0 million in the same period of the prior year, while its free cash flow was a negative $3.0 million, compared to a positive $0.6 million in the third quarter of 2021.

Geographical Breakdown

BTRS primarily serves customers located in North America, with a growing international presence, particularly in Europe. The company's recent acquisition of Order2Cash, a European B2B order-to-cash platform provider, has expanded its global footprint and enhanced its ability to deliver fully compliant and secure e-invoicing solutions across multiple markets.

Segment Performance

BTRS operates in two reportable segments: Software and Payments, and Print. The Software and Payments segment, which accounted for 68.4% of the company's total revenue in the third quarter of 2022, primarily focuses on software and cloud-based services that optimize electronic invoice presentment, electronic payments, credit decisioning, collections automation, cash application, and e-commerce for B2B customers. The Print segment, which contributed 25.2% of total revenue in the third quarter of 2022, is responsible for printing and mailing customer invoices.

In the third quarter of 2022, the Software and Payments segment reported a 35.2% increase in revenue compared to the same period in the prior year, driven by new customer acquisitions, increased transaction volumes, and the integration of the Order2Cash business. The Print segment's revenue increased by 0.5% during the same period, as the company continued to transition its customers towards electronic invoicing and payment methods.

Liquidity

As of September 30, 2022, BTRS had $145.9 million in cash and cash equivalents, which the company believes is sufficient to meet its working capital and capital expenditure requirements for at least the next 12 months. However, the company's cash flow from operations has historically been negative as it continues to invest in product development, sales and marketing, and infrastructure to support its growth.

Outlook

BTRS has not provided specific financial guidance for the full year 2023. However, the company remains focused on executing its strategic initiatives, including expanding its customer base, enhancing its product offerings, and driving the adoption of its electronic payment solutions. The company's long-term growth prospects remain promising, as it continues to capitalize on the ongoing digital transformation of the B2B payments industry.

Risks and Challenges

BTRS faces several risks and challenges that could impact its future performance, including macroeconomic uncertainties, such as the potential for a global economic slowdown, supply chain disruptions, and inflationary pressures, which could affect its customers' spending and adoption of its solutions. The company also faces competition from other providers of B2B payment and accounts receivable automation solutions, as well as the potential for regulatory changes that could impact its operations.

Additionally, the company's proposed merger with affiliates of the EQT X fund, announced in September 2022, is subject to various closing conditions, including regulatory approvals and shareholder approval, and there can be no assurance that the merger will be completed on the proposed terms or at all.

Conclusion

BTRS is well-positioned to capitalize on the growing demand for digital transformation in the B2B payments industry. The company's comprehensive suite of order-to-cash solutions, integrated with its innovative Business Payments Network, is helping businesses streamline their accounts receivable processes and improve cash flow management. While the company's recent financial performance has been impacted by increased investments in growth initiatives and merger-related costs, its long-term growth prospects remain promising, as it continues to expand its customer base, enhance its product offerings, and drive the adoption of electronic payment solutions.