Repay Holdings Corp Q4 FY2024 earnings call

• Q4 2024 was a quarter of profitable growth with gross profit growth, adjusted EBITDA increased ~9%, and free cash flow conversion improved to 64%. Full-year 2024 showed durable business model with gross profit growth 6%, strong double-digit adjusted EBITDA growth, and accelerating free cash flow conversion from 42% in 2023 to 75% in 2024.
• Consumer payment segment added 4 new software partnerships in 2024, bringing total to 180, and added 16 new credit unions in Q4. Examples like FinFed Credit Union were highlighted.
• Business payment segment's gross profit grew 60% in Q4 driven by core AP, political media vertical, and new clients. Signed new enterprise clients like Fairview Health Services. Enhanced integrations with software partners and expanded supplier network 38% year over year to over 360,000 suppliers.
• Announced a strategic review to assess strategic alternatives including M&A, take-private, or sale to capture shareholder value.

In the fourth quarter of 2024, the consumer payments segment's gross profit declined approximately 5% year over year, while it grew 3% for the full-year 2024. The business payments segment saw gross profit growth of 60% in Q4 and 40% for the full year. The business payment segment represents approximately 20% of the revenue mix.

• Refrained from providing 2025 outlook due to ongoing strategic review. However, mentioned that when stripping out client losses and macro impacts, growth rate would align with mid to high single digits seen earlier in 2024 for consumer payments, and core AP in business payments growing low to mid-teens if stripping out losses.

• Consumer payment segment impacted by select factors outside control like client roll-offs, lapping large lender contributions, and client loss moving transaction processing in-house. Macro impacts in auto and ARM verticals.
• Business payment segment partially impacted by large client acquisition and AR softness. Strategic migration of AP volumes had some impact on results.

Q: Ramsey El-Assal from Barclays asked about client losses and attrition drivers.

A: John Morris responded that client losses were from acquisitions, client bringing processing in-house, and no major changes in drivers seen.

Q: Sanjay Sakhrani from KBW asked about 2025 direction of segments.

A: John Morris said growth rate would align with mid to high single digits seen earlier in 2024 when stripping out losses and macro impacts; business payments core AP growing low to mid-teens if stripping out losses.

Q: Joseph Vafi from Canaccord Genuity asked about competitive landscape and mortgage vertical.

A: John Morris said well-positioned competitively with strong sales pipelines; mortgage vertical is multi-year organic opportunity progressing. Tim Murphy added B2B AP winning in healthcare and hospital verticals.

Q: Andrew Schmidt from Citi asked about personal lending vertical and total pay volume migration.

A: Tim Murphy said personal lending has positive momentum with originations; total pay volume migration was strategic to monetize TPV with benefits of monetizing virtual cards and paid ACH.

Q: Peter Heckmann from DA Davidson asked about client losses and total pay migration reflection.

A: Tim Murphy said client losses and total pay migration impacts were fully reflected in Q4.

Q: Rufus Hone from BMO Capital Markets asked about organic growth deceleration.

A: Tim Murphy said deceleration was due to client losses, strategic migration, and AR softness; normalizing would align with earlier 2024 growth rates.

Q: Charles Nabhan from Stephens asked about M&A wish list and product roadmap.

A: Tim Murphy said M&A focus on consumer bill pay verticals, broader consumer commerce, and B2B AP; John Morris added focus on software partners and driving distribution.

Q: Timothy Chiodo from UBS asked about paid ACH and payment rails.

A: Tim Murphy and John Morris discussed paid ACH benefits, enriched data, and win-win for suppliers and company; differences in data attachment and payment rails explained.

Q: Mike Grondahl from Northland Securities asked about double-digit top-line growth hurdles.

A: Tim Murphy said client losses, macro impacts, and strategic migration were factors; but there's momentum in bookings and ramping accounts.

Q: James Faucette from Morgan Stanley Investment Management asked about partner network focus.

A: John Morris and Tim Murphy said focus on both penetration of existing partners and expanding partner base, with interest in enterprise software platforms and AP/AR monetization.