Repay Holdings Corp Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Strategic Initiatives: Focus on go-to-market efficiency, client implementations, and product. Core consumer payments growth benefits from secular tailwinds in digital payments.
• Segment Specifics: Consumer Payments strengthened software partnerships and added new clients. Business Payments saw strong gross profit growth, with strength in AP, political media, and enterprise verticals.
• Product and Partnerships: Live with auto captive lender; began processing mortgage debit acceptance in Q3; expanded accounts receivable management partnerships; Instant Funding grew 24% YOY.
• Capital Allocation: Completed convertible notes offering, extended revolving credit facility; focused on organic growth, strategic M&A, and share repurchases.

Segment Performance

• Consumer Payments: Q3 gross profit grew 2%, YTD 6%. Has 176 software partners; added 13 new credit unions, totaling 313. Instant Funding product saw transaction volume up ~24% YOY.
• Business Payments: Q3 gross profit grew 67% YOY, YTD 33% YOY. Revenue for Q3 was $79.1 million, up 6% YOY. Growth driven by core AP business, political media vertical, and new enterprise clients like University of Florida Health Systems.

Guidance

• Full year 2024 revenue expected $314M - $320M, gross profit $245M - $250M, adjusted EBITDA $139M - $142M.
• Adjusted EBITDA margins expected ~44%.
• Free cash flow conversion outlook increased to 65% from 60% due to positive net working capital impact.

Risks

• Normalizing consumer spending trends impacting growth.
• Lapping significant contribution from a large personal lender in 2023.
• Loss of an RCS client.
• Corporate spending patterns affecting Business Payments volumes.

Question and Answer

Q: Elaboration on organic growth in Consumer and Business Payments A: John and Tim discussed softening consumer spending, client loss, corporate spend patterns, but highlighted new client wins and growth drivers.

Q: Progress on mortgage debit service offerings A: Began processing in Q3, expected to contribute in 2025.

Q: Framework for FY 2025 growth A: Early planning, focusing on various initiatives to drive growth.

Q: Instant Funding growth and revenue contribution A: 24% YOY growth, ~20% of revenue from non-card volume-based products.

Q: M&A strategy A: Focus on organic growth, open to accretive strategic M&A, looking at embedded software and payments.

Q: Float revenue and sponsor bank fees A: REPAY does not earn float revenue, sponsor bank fees are separate.