Repay (RPAY) Q3 Earnings call transcript Nov 12, 2024

In Repay's third quarter 2024 earnings call, executives shared insights into the company's financial performance and strategic initiatives, providing a glimpse into its financial health and future growth prospects. During the call, John Morris, Co-Founder and CEO, and Timothy Murphy, Chief Financial Officer, discussed key themes and trends, highlighting the company's progress and strategic focus.

Strategic Initiatives and Financial Performance

Repay reported a profitable quarter with gross profit growth of 9%, adjusted EBITDA growth of approximately 10%, and free cash flow conversion of 139%. The year-to-date results represent strong double-digit adjusted EBITDA growth and the acceleration of free cash flow conversion towards the company's updated full-year target. This performance demonstrates Repay's successful execution of its strategic initiatives, which include go-to-market efficiency, client implementations, and a focus on product.

Consumer Payments

Repay's Consumer Payments segment, which represents a significant portion of the company's business, showed a 2% increase in gross profit in Q3 and 6% year-to-date. The company's core growth algorithm, which includes growth from existing clients as well as new client wins, has been instrumental in driving this performance. With 176 software partners and a robust technology, Repay is well-positioned to capture market opportunities and strengthen its market presence. The addition of new clients, such as 13 new credit unions, and strategic partnerships, like with auto captive lenders and mortgage servicers, bode well for future growth.

Business Payments

The Business Payments segment, another critical component of Repay's operations, saw a 67% increase in gross profit in Q3 and 33% year-to-date. This growth was driven by strong performance in the core AP business, solid contributions from the political media vertical, and the ramp of live new clients. The addition of enterprise clients, like the University of Florida Health Systems, further underscores the company's ability to win and service large clients, paving the way for future growth.

Future Outlook and Strategic Direction

Repay's strategic initiatives are set to drive growth for 2024 and beyond. The company's focus on go-to-market efficiency, client implementations, and product development positions it well for future success. Repay's vertical go-to-market strategy, which involves directly embedding its payment technology within software partners like Otelier and Blackbaud, has proven effective in solving clients' unique payment needs within the various verticals it serves. The company's software partnerships and integrations have enabled it to convert sales leads into signed clients, contributing to a healthy sales pipeline for sustained multiyear growth.

Challenges and Opportunities

The call also touched upon some challenges, such as normalizing consumer spending trends and the loss of a large client, which impacted the Consumer Payments segment's growth. However, the company remains optimistic about the future, with a focus on winning and implementing enterprise clients and expanding its product offerings. In the Business Payments segment, there were some pockets of lower corporate spending, but the sales pipeline remains robust, indicating a positive outlook for future growth.

Financial Management and Capital Allocation

Repay's financial management and capital allocation strategies are key to its growth and profitability. The company's focus on efficient operations and disciplined cost management has enabled it to generate free cash flow and maintain a strong balance sheet. The recent completion of a convertible notes offering and extension of its revolving credit facility provide the company with the flexibility to continue focusing on profitable growth and accelerating free cash flow.

In conclusion, Repay's third quarter 2024 earnings call underscores the company's strong financial performance and strategic focus on driving growth. With a robust pipeline of new client wins and strategic partnerships, a strong balance sheet, and a disciplined approach to financial management, Repay is well-positioned for continued growth and success in the future.