Earnings call transcript Q2 2023

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Operator

Good afternoon. I'd like to welcome everybody to REPAY's Second Quarter 2023 Earnings Conference Call. This call is being recorded today, August 9, 2023.

I would like to turn the session over to Stewart Grisante, Head of Investor Relations at REPAY. Stewart, you may begin.

Stewart Grisante

you. Thank welcome quarter and call. earnings our to afternoon, XXXX second conference Good us Co-Founder Chief Tim Morris, are Financial Chief With John and and today Executive Officer; Officer. Murphy,

differ beliefs making this to These today. results. today's from filings statements most set are materially and our statements During forth will risks statements regarding recent be results that to Actual including we about events and call, forward-looking results our forward-looking Form related uncertainties, make and subject and in estimates future SEC may forward-looking any XX-K. we those the

Forward-looking not law. statements speak only update as intent by of today, and assume we obligation them, do required any except as to or

and effort can also explanation and an today's and other provide are which to Those in be the investors, today's those measures. available to discussion include materials explanations financial non-GAAP IR found organic Reconciliation In press of other include will REPAY's with measures company's additional on release certain each earnings to to growth. information references non-GAAP site. supplement, of reconciliations financial in the respect

calculated in is XXXX XXXX, in second REPAY XXXX. QX of other QX Cow contributions Blue Blue excluding software during organic divested materials, the quarter to growth business since described Cow attributable As the by

like that, call to would With I over now the turn to John.

John Morris

and gross and an basis, X% in organic of you Stewart, for reported our On results. growth joining growth good of Thank you, afternoon, everyone. XX%. review QX, Thank quarter us today second to profit revenue we

will for of our Tim discuss and confidence raise of to first which Our revenue greater strong detail. the results guidance profit the through the in year us half give the gross midpoint XXXX,

specific help integrated that solutions payment to and by focus payments have a needs. acceptance Our businesses processing company to verticals as is transaction providing

while proprietary the experience embedded overall consumers enhancing clients, electronic the for payment and of businesses. Our for complexity payments reduces technology

Payment well trends have investing as been our go-to-market the digital focusing take as continue towards of both efforts in we best-in-class the ensure secular we remain As thoughtfully and on to in frictionless segments. Business technology advantage to payments, we consumer

go-to-market are side, off. On our paying the investments

expand to Central. We integrations, diving continue into our Microsoft Business XXX deeper integrated software services We're further penetrate the also into Dynamics existing and including partners. with XXX

to payments, are Our the accounts accounts receivable enables and of their streams. automate we developing payable process now clients current payment in integration for

has enterprise In large accounts. addition, sales traction, our penetrating direct great when team especially further made

Our technology returns. investments continued to generate also into positive

and in We announced are quarter, revenue payment leveraging and regularly evaluating to Last and the Venmo, industry-leading offer best-in-class boost PayPal wallet continue to new our additional reduce we and clients. modalities we digital like friction capabilities solution. for cash

forging ahead are on the clients We for payments development continuing offering work now. while real-time

the driven Payments and gross verticals organic consumer within we segment by the serve This recent ongoing QX. large client tailwinds XX% of by Our implementations. grew was payments in Consumer profit the primarily secular ramp

We are each verticals, our union sales adding in many with in loans activity credit clients pleased strong and market. the new personal

the We integrated partners are software segment. with in Consumer now Payments XXX

to purchase loan personal via Program. QX institutions reach products and then credit payment expanding further program quarter, QX's REPAY announced the technology an REPAY's directly banking union with into During the enables digital integration our partner banking through digital and industries. the offer Accelerator This QX's platform platform, financial we

management loan to variety partnerships including we offer and In platforms, software management payments servicing addition, systems. established new a receivable embedded across of REPAY's accounts

X We teams. a financial to our all continues this union focus key platform unions streams automate providers sales clients our REPAY's types. and institutions union signed for community and quarter, clients payment credit payment to be Credit credit bringing banks across helps financial XXX. total

unions of across X,XXX in credit this clients market approximately winning continue to positioned well U.S. are the We underserved

opportunities. our go-to-market Credit also new this card features as and new subvertical new product been adding and for have of opportunity a pipeline well that exciting our payment a REPAY, been by modalities building are partnerships a we have strong enhancing services in great as example We present software new existing efforts subvertical.

Consumer The increase a penetration space Payments this and debit segment, our mortgage growth continues significant vertical. card we servicing opportunity look to in in to be

found As card a reminder, more mortgage XX% use that we'd the payments. if a given than consumers, our recent Visa study option, debit of for

next existing addition, The be to Knight's up provide early This to the a the monthly clients. XX% mortgages recurring our both the the is use platform made easier capabilities in process of for In U.S. services through set marketing their with partnership great believe results automatic We're with are and of currently debit over consumers mortgage Knight. opportunity able the debit to are in began we could not supports in lever of the those Black growth card beyond. U.S., for payments. the Black we software XXXX potential and this and so promising, testing payment. majority

with Instant as In through RCS funding, clients. volumes continues approximately new marketplace. resonate in year-over-year. platform modern lastly, which and transaction And the Direct up second quarter, process we resonating existing our real performed nicely the quarter Send, the within XX% and the is were to Visa platform MasterCard time well

the Payments. to Business over Moving

when second reported the political media payment excluding XXXX. on the gross profit year-over-year business quarter, grew digits a basis, but our importantly, grew during impact more During single XX% of

and in for property care, management, growth enterprise health sales normalized mid-market by within municipality the and driven our momentum continued and our implementation companies auto was verticals. pipeline Our

their real-time businesses payment including a provider. it Quadient XX communications also to capabilities in and REPAY's reach working Business solutions payments cloud-based segment, AP Canada Quadient, process and We're software partnership, offering enablement accounts integrated automation leading payable our clients. expand with software to with in with can We're technology. use by Quadient's partners Through embedded Payments that the REPAY's vendor seamlessly

hoteliers Within the hospitality one using REPAY's inflow hotel hotel comprehensive continue management to vertical, with management we're embedded operating integration announce our and recent can With solutions, excited accounts payable platform. inflow. groups in

that simplified new our users to growing to pay], verticals. [account represents Pay Click enables across our provide a with AR on AR automation faster initiatives of integration opportunity and to them. REPAY to REPAY payments, our make by solution list business embedded paid see continues partners recently businesses launching the as payment convenient of the we the Now account by software get And provide to a provided our side and of expanded experience. automation prioritization payment AP feature

As XXX acquired paid is accounts solution a many partners the payment payable managed a great needs. their result during signed their our across management go-to-market REPAY's of the business implemented have clients investments we Management property premier company Management our make all making efforts, and vendor and across A selected verticals with for total Group, and quarter. example Castle their with been of software we properties. a payments HOA approximately to payment system Castle [unified] new properties

health in care for the the health state their selected payment needs. REPAY in a Arkansas care of And large supplier system vertical,

across continue in We includes enhancing suppliers our network, to additions over our XXX,XXX supplier build vendor functionality key within accelerating AP proposition. simultaneously AP which enablement while subverticals all to go-to-market our

towards We enablement will scales continue segment our invest Payments the by real-time Business vendor vertical. as to

In always looking for ways find we're business. in addition, to efficiencies processing cost the

being the world through middle we of excited the payment the businesses We're So flows company there's digital new as guide lot excitement the progress of happening of embedded about strategically America. of payments. in REPAY, ever-changing future and the across in North positioned a

poised organic profitable generation. cash are growth to balance accelerate success We for and with strong sheet a

see we the maintain to opportunities we are strategic potential M&A. to the always various for starting come market, As back

To before am I call turning over wrap of first results to solid up our the the proud and half Tim, for year. of the

pipelines growing. are strong and sales Our

enhancing continue to as a we funds and great us digital ahead our network our integrated networks of receive transformation integrate expanding all of of and opportunity that on have by behalf to We the drive and clients. send payments

and outlook year. on to Tim? for the over to With financials turn that, our the remainder our I'll it Tim go of

Timothy Murphy

Thank John. you,

let's REPAY tax an XXXX. our I strong volume financial over year overall which prior Solutions lower approximately QX a Now This Blue to approximately metrics. Funding. XXXX Cow businesses impacted attributable Instant quarter. for rate refunds Revenue QX within was in Card $X.X delivered across were million, points. payment of results X% guidance second in an Communications second volume-based consumer financial XXXX. to represents results was of In key on partially our basis go solid increase and $XX.X specifically quarter, was billion, in noncard Take by was organic over due the take our review Revenue performance payments, basis rates higher in primarily $X.X the XXX our million. before

an approximately $X.X Gross profit basis. QX gross was organic profit Blue profit Cow million $XX.X of an removes in This growth of attributable XX% increase gross to XXXX. million, on organic

organic segment growth Payments reported Consumer QX. Our in of XX% profit gross

growth while optimization of QX when initiatives. when cost political and on of business payments a reported our XXXX. also basis Payments gross media, realizing Business sales from gross profit the X% the pipeline increased the and excluding processing demonstrates our year-over-year during benefits strong media impact ramp profit excluding automation grew XX% Our

Second quarter per was adjusted $XX.X income million or net share. $X.XX

second EBITDA $XX.X million. quarter Lastly, was adjusted

growth quarter as and key a product margins Second than impact towards technology was the reviewing to increase and through Adjusted verticals XX%. invest investments automation. our slightly expected scale due revenue our while timing to to of see the percentage initially were we EBITDA continue EBITDA business inflationary lower of costs. sales, adjusted of where operations into also efficiently pressures, We process can thoughtfully which for may

continue the to EBITDA XXth organic consecutive rule that believe unique the along of double-digit adjusted the gross combination our to has company, margins, us quarter peers. basis as organic surpassed REPAY makes profit an public strong with XX growth, compared of a for on

X.Xx. net is Our leverage approximately now

and generation, including naturally decline profitability M&A. We leverage the our expect to flow year any cash strong from net potential during

of with $XXX until undrawn of not As approximately million is $XXX X% coupon a amount of balance $XXX to liquidity million $XXX June the total cash convertible million. debt does for note capacity that mature of sheet million comprised XX, REPAY's revolver of on a we XXXX. February of outstanding had total access

Moving for XXXX. outlook our to on

raising and showed strong midpoint and the model, gross our are our As the year-to-date revenue outlook. resilience business XXXX of we profit in performance results

of of $XXX X% and profit between $XXX million growth be and remain XX%, $XXX profit to million $XXX $XX.X between million. to to growth organic be and gross EBITDA gross of now and to million, billion million outlook volume and expect X% are to We profit XX% $XXX between between normalized revenue gross now reflecting billion, we our reaffirming adjusted $XXX $XX organic million; and

be in the Business during will second of XXXX. to the our results the political media we Payments reminder, segment year, half due strong a lapping As in cycle

ramp We be implementations. continued and given XXXX than recent wins QX to greater QX expect the contributions of

overall year the continues to year. the environment macroeconomic the full for a Our during slowdown in XXXX plan outlook remainder range of

refer posted supplement to of earnings additional outlook the bridge on profit XXXX IR our on to XX the XXXX please gross company's organic For growth, details site. Page

first half the the results, XXXX year. As see our of the we deal heading half great can into of of in from a you have momentum second

technology free made from XXXX, expect sales, strong conversion flow the XXXX as remain cash the several investments We year the in adjusted product we we've and to over into in accelerating benefits realize past years. throughout

I'll the to Operator? turn operator back your the now questions. call to over take

Operator

question Instructions] from Barclays. is [Operator Ramsey Our El-Assal with first

Ramsey El-Assal

ask in the to healthy. was It nicely take wanted about quarter-over-quarter. really rate I It popped business. super

the the should of half Just business wondering expect and from back what we yields driver what also was year? there in the

Timothy Murphy

Yes.

So work within in about we pricing, showing yield. lot that's to doing higher We've recently particularly bit of that. and that really take the are some rate. signed payments, higher our up We've margin, good customers been a optimize business feel a

rate Those the take will it slightly first from feel volume-based revenue funding lead strong the of because instant that. it contribute to would where we're in and we're higher generally remainder communications that was the So rates. just terms quite to about not we like be for products the noncard half solutions the overall year, down in year, much. of And mainly projecting as of take projecting

just So will be what not QX. very were the they yields in be them to I still quite to We're think strong. that projecting

Ramsey El-Assal

doesn't seeing materialize, that. the also to of later Okay. most what guidance? And of of is, expect some And any might mentioned what slowdown? flow you year. recently questions that magnitude is related guess pressure contemplates the we secondly, you are macro back if One into two to signs a I some slowdowns, kind guidance one in --

Timothy Murphy

as July I remained mean, exited a quarter stable. we the QX into healthy have in pace. trends Early

with verticals. from So necessarily be continue anything seeing the and wanted given different we're just slowdown. trend to uncertainty just perspective the to overall the not different within potential macro conservative We the a

the QX, quarter this far into stable revisit that, and think So of has so end I our to coming if -- and been see that then and potential QX. through the ranges. don't quarter, like the But guidance just we we into revisit everything right, there's did early

Operator

Peter next is with Davidson. Our Heckmann question from D.A.

Peter Heckmann

update. us quick give you Could a just

ramp? captive manufacturer. you announced -- remind of the it last think do car to us a you second you quarter, a lender when signing of expect was I last Could that

John Morris

Peter, this John. is

indicated schedule. And had implementation detailed indicated very schedule we we them. contribution. a a process So well, and on long process that ongoing have and on is are that an with just as in earlier like we that's plan That's XXXX

Peter Heckmann

Okay. guess do on assume about actually take you to [same primarily how payments, payments as Or real-time And I business be then from that? going there's to to applications terms thinking take real-time you I that some side, ACH]? in of ACH see cards? primarily switching that from maybe and thinking the are volume you that are

John Morris

No.

And network as a early I've to in and see specific would modality. on to reality, even from. I necessarily some would additional cannibalizing on that networks the do Business do side it able side as people we Payments on the probably we that. in see world. business add And people continue accelerate card that it that to I enhanced payable something we to ACH funds value we there for where to yes, of to move as the not option similar own want want to funds. side on, payment be We'll be would an charge the it see indicated, side. be would we But an -- -- on So see as

But end margins payable overall enhance solution. at in looking side existing overall, that to and good be BXB to the vendor, the could it our to looked well. experience augment just we total So as pay we're

Operator

comes question next Our with from Andrew Citi. Schmidt

Andrew Schmidt

key a talk you're Tim, with free had for in some XXXX. want you year. be there, this talk to you flow like what Maybe I free it could know expecting just little conversion that I the some drivers flow you're about comments into conversion. Maybe bit that start off about would just cash release a then question sounds about And improvement on the cash and expecting helpful. that.

Timothy Murphy

sure. Yes,

you the as higher a have CapEx So probably so down conversion the QX -- little second from drove QX, the quarter. bit seen, number to it came in

likely for remain stable the CapEx that the as decline percentage to expect of We a of number somewhat revenue. and rest overall year

as CapEx remains grows convert we'll free an So increase. stable, revenue see and dollars cash flow

that throughout haven't of to that We're the QX, and saw not in number. year. you we so And expect specific we a rest continue given the --

adjusted QX We trend higher cash continue happened free next haven't guidance on conversion, flow at expect into exit we and rate but would to the provided the that same from a going to year QX year. throughout

Andrew Schmidt

interesting. would But it. there? with about the that's you partnership And I And little Black how you anything I Anything that early little the bit mortgage in talk the Knight, that's a John, know a whether prepared be that there early bit you you incremental and maybe outlined. about but digging know days, it's any progressing, opportunity. mortgage consistent learnings, it's study then your Got with have remarks. can to talked

John Morris

give color. little you a Sure. I can

definitely indicated that clients are there. would prospective we there We're opportunities existing as that is clients that fourth basically with we be As demand we're some clients And confirming throughout as as -- well the as that quarter process advance before, there our into well, we're are that engaging initiative the that's going in quarter. of third and as, testing servicers. as we long the confirming well doing

in did As there's we contribution that indicated not for earlier, we any indicate XXXX. that

for quarter throughout on some do fourth XXXX. quarter, look should we will give XXXX we think that what move be to And able will the we So a the contribution. like third we updates that you and be think as

Operator

Andrew from is Securities. question with next Jeffrey Truist Our

Andrew Jeffrey

the get if there quarter decel vertical loans. you little Tim, where if Ramsey's bit mix I And within to personal on of versus you could a wonder consumer manifests? color auto were that second the the do economy in business, a question, think guess I

Timothy Murphy

Yes.

Personal of the quarter. to for credit then you auto like mortgage. within to -- around balance XX% very would similar health up make And total like would is So the and about XX% unions, the categories ARM, XX%. and RCS be verticals And is those XX%. get consumer. breakdown This is last at loans consumer, care the

think where in seeing the auto pressures pressure I space. have we see so been And would some and

sign, is prices used I are there concerns could good still affordability ease, coming change. think materially the car down, but a it but haven't remains which we some we expect that seen

on. So an that area focused we're that's

QX. back happen still about volumes into forecasting was could we've sooner. just we don't more do soon think is happen in ARM we year But talked the coming is know our I which then done planned, XX% think as to that could And about ARM think We that's probably earlier of in out business. that move it We as happening. XXXX. necessarily our and that's We XXXX. what recent

auto and ARM attention closest the there. So I think where playing we're

Andrew Schmidt

Okay.

into mix Now likely know manifest the mortgage of some -- that got And of any beginning to from a I that, next presidential guess I I way XQ considerations you're that auto ARM, business? mean, not seems big talking the about the It but about perspective drivers to that directionally of year. like the lot think opportunities, think cycle. come maybe election of I a pass. captive, indeed you've does 'XX, Is right a sort about --

John Morris

in of to us Correct. technology that those and there. investments start we product. contributions. we'll byproducts for off Directionally, those that seeing those investments is pay sales think and are you're And are starting when we talk accurate 'XX And about are those and

Tim I'll mixes. maybe talk about let

Timothy Murphy

agree. I Yes,

said, others. the will of be I higher that cycle ARM terms overall ARM to year. may should think lead see overall about where you target become which in repayment spend, lot the be I slightly given think folks can help. part in next in public like XX% a supply and mix, that a -- could that public a And some of vertical eventually bigger the payments you the will volumes. in think contributor talking then ARM 'XX And political I than the folks that bigger coming that's We business in of back see a

Operator

with from next Our is Credit Chiodo Instructions] Tim question [Operator Suisse.

Timothy Chiodo

to and we hit believe is don't this it this I And would that players investors, brief often be the of I they're the to the bit I touched a to Tim, thought all ISVs. lack suggests and low just you a of update. with role other integrated low. that I that math topic talked want the that that which a maybe specific up on that in on to because payments we've bring, we've worth relative commissions about comes know a that into the paid you verticals, past little commissions paid take up really gather I of competition rolled the the some than in larger capabilities ISVs. also time is here. back in low adds of they're which on

everything or to services think of of that other I kind see cost paid well. out or trends portion But if maybe could even of is your there's quite those changes just if partners? commissions cost been to goods just get ISV any or sold quantify of So what want you checks anything? Or

Timothy Murphy

referral just the I reason reminder, lower we mean mean partners, resellers. you're I overall why average. on. in as Yes, described everything these spot as a relationships think than not just they're engage is you I industry the

so the reselling not is ISV our product. And

development. terms And compliance, of product onboarding, lifting risk and so in contracting, the lot we're doing heavy a of

us economics. of to us, So all the which have leads is of on share higher a that

that's And of fees we it like you bank within on COGS. parts a then materially things of years. maybe processing number, and other haven't probably overall the not pretty other also but So in costs processing change several -- COGS, the dynamic And portion the our is have a that's in we that at biggest sponsor like is business. described. for RCS all big big it just like And seen past

for of part big than lower managed our structure, reasons. a It's much cost it's industry closely. we've average all still those it but So

Timothy Chiodo

in with then right? then still acquiring and there, All business that right. sponsors the migrated portions bank RCS have sponsor to other third-party you I'm the been yet The have using processor, of things not some and fees correct? contracted are also bank some that

Timothy Murphy

BXB particularly the RCS. Correct. AP, And then them have on in we wouldn't side, on

So there processing. will be

Operator

have like would turn reached Morris call the question-and-answer back Thank the you. end Ladies and for John session. the closing I of gentlemen, to to remarks. we

John Morris

you, everyone, us for Thank today. joining

-- proud We are first of quarter very half half our our first first quarter results. second

to pipelines sales continue growing. Our and strong be

We and excited that and move mentioned and we to ahead great as forward a your our we're look as expanding integrated the Thank different digital opportunity today payments and various that. innovate to to with and We very earlier, continue of have drive funds from networks additional I discussions. us, you. into appreciate call about

Operator

This concludes conference. Thank you. today's

may disconnect time. your this lines at You

Repay (RPAY) 9 Aug 232023 Q2 Earnings call transcript