Repay Holdings Corporation (RPAY) Earnings

Management highlights

Acquisition and Integration - The acquisition of CUBRA closed in June 2026, doubling Repay's pro forma revenue and bringing annualized payment volume to over $130 billion. The acquisition positions Repay as the only provider of a full end-to-end consumer bill payment and communication platform across the U.S. and Canada. - Within 30 days of closing, CUBRA was fully integrated into Repay's operating structure, with $4.5 million in annualized run-rate cost synergies already realized by the end of Q2. The company is on track to hit $8 million in total run-rate synergies by the end of 2026 and over $20 million by 2028. - Platform unification is proceeding on a phased 18-24 month timeline, with large clients already volunteering as early adopters. Core sales and client service teams are insulated from integration work to avoid disrupting growth, and clients control the pace of their platform upgrades. Strategic & Product Developments - Cross-sell opportunities are already emerging: existing Repay clients are requesting CUBRA's bill design and presentment capabilities, while existing CUBRA clients are looking to expand their payment channel options. - The combined company now serves 352 software partners across verticals, with 54 new partners coming from the CUBRA acquisition, expanding Repay's distribution reach. - AI tools are being deployed across the organization: AI-assisted engineering has freed up over 775 development hours per month to accelerate platform unification. The company's new Repay Voice AI tool improves customer experience for billing inquiries while reducing client resource demand, and a successful stablecoin payment proof of concept on the Stellar network was completed in Q2. Organizational Updates - New executive leadership hires include Matt Morrow, leading the consumer payments vertical, Rick Watkins leading CUBRA verticals, and Zach Siedek (Parthenon Capital Partners) joining the board of directors as an independent director. Financial Performance Highlights - Consolidated gross margin was 70% in Q2, down from 76% year-over-year. The decline is entirely driven by CUBRA's lower-margin business mix (including print, mail and professional services), not pricing pressure; core Repay gross margins remain healthy. - Q2 adjusted EBITDA was $36.3 million, up 14% year-over-year, with a 36% adjusted EBITDA margin. Free cash flow was $27.4 million, up 21% year-over-year, representing 75% free cash flow conversion. Adjusted free cash flow (excluding merger/integration costs) was $29.3 million, with 81% conversion.

Guidance

- Management reaffirms the full year 2026 guidance originally issued when the CUBRA acquisition closed, expecting total revenue of $490 million to $500 million, representing 60% reported year-over-year growth and 10-12% total organic revenue growth. - Normalized full year revenue growth (excluding political media contributions and CUBRA) is expected to be 7-9%, with total political media revenue projected at $8 million to $10 million for 2026. - Full year adjusted EBITDA is guided to $168.5 million to $176 million, representing approximately 35% consolidated margins. Free cash flow conversion is expected to be 30%, while adjusted free cash flow conversion (excluding synergy realization costs) is expected to be ~35%. - CUBRA is expected to contribute $150 million to $154 million in full year 2026 revenue and $27.5 million to $30 million in adjusted EBITDA. - Management expects organic growth to accelerate to double-digits in the second half of 2026. - Deleveraging is a top capital allocation priority: the company targets bringing pro forma net leverage below 3.0x within 18 months of the CUBRA acquisition closing.

Segment performance

Total consolidated Q2 2026 revenue was $100.7 million, up 33% year-over-year, including one month of revenue from the acquired CUBRA business. Organic total revenue growth was 6%. - **Consumer Payments Segment**: Revenue increased 33% year-over-year; organic core growth (excluding CUBRA) was 4%. CUBRA contributed $21 million in Q2 2026 revenue, representing approximately 21% of total Q2 revenue, with 5% year-over-year organic growth for CUBRA's standalone business. This segment contributes roughly 79% of Repay's total consolidated revenue when including the full impact of CUBRA on a pro forma basis. - **Business Payments Segment**: Revenue grew 32% year-over-year on a reported basis; normalized organic growth (excluding political media contributions) was 19%. Political media contributed approximately 2 percentage points to total Q2 organic revenue growth. The segment's AP supplier network now reaches over 731,000 vendors, up 65% year-over-year, and it has 108 software partner relationships.

Risks & headwinds

Forward-looking statements related to synergy capture, organic growth acceleration, deleveraging, and platform integration are subject to material risks and uncertainties that could cause actual results to differ materially from projections, as detailed in the company's SEC filings. Key specific risks noted on the call include: the possibility that client platform migration could proceed slower than planned, though management emphasized that synergy targets are not dependent on rapid client migration, so risk to synergy targets is limited. Additionally, integration of a large acquisition carries inherent operational execution risk that could disrupt core business growth if not managed properly; management mitigated this by insulating core sales and client service teams from integration work.

Analyst Q&A

• Q: Can you explain CUBRA's Q2 growth, how it factors into Repay's consumer organic growth number, and what cross-sell opportunity you see? /

  A: CUBRA grew ~5% pro forma year-over-year for the first half of 2026, with ~6% growth in Q2, and is expected to continue mid-single-digit pro forma growth for the full year. CUBRA's growth is not included in Repay's reported 4% core consumer organic growth, which only reflects legacy Repay's consumer business. Early indicators show strong cross-sell potential: CUBRA's bill presentment and communication services can be extended to legacy Repay's larger consumer client base, with initial client interest already emerging. The combined company's new steady, non-cyclical 40% exposure to utility and government payments from CUBRA also improves overall business stability.

• Q: What is your target for CUBRA's margins over the next 3-4 years, and how do you expect synergies to drive improvement? /

  A: CUBRA's starting standalone margins are roughly 20%. Management remains confident in hitting the previously stated synergy target of over $20 million in total run-rate savings and revenue synergies by 2028, which will directly expand margins. Most synergy savings are not tied to client platform migration timelines, and come from corporate function unification, legacy technology infrastructure retirement, and scale efficiencies, so margin improvement is expected even if client upgrades proceed slowly. Additional detail will be shared at the December 2026 Investor Day.

• Q: Why was Q2 free cash flow conversion stronger than expected, given the CUBRA acquisition and integration costs? What should we expect for the rest of the year? /

  A: The strong Q2 conversion was mostly driven by favorable working capital timing, coming off a 16% conversion rate in Q1. Only one month of CUBRA's results (and its associated debt interest expense) was included in Q2. For the full year, the 30% guided conversion rate remains on track: the back half of 2026 will include a full six months of incremental interest expense for the acquisition term loan and one-time costs to achieve synergies, which will bring full year conversion in line with guidance. Management reaffirmed that the CUBRA acquisition is fundamentally a strong cash generation story, and excess free cash flow will be prioritized for debt paydown.