• Revenue: $79.1 million, an increase of 6% over the prior year third quarter.
• Gross Profit: Grew by 9% year over year.
• Consumer Payment Segment Gross Profit: Grew by 2% in Q3 and 6% year-to-date.
• Business Payment Segment Gross Profit: Grew by 67% in Q3 and 33% year-to-date.
• Adjusted EBITDA: $35.1 million, representing 10% growth in Q3 and 12% growth year-to-date.
• Adjusted EBITDA Margins: Approximately 44%.
• Adjusted Net Income: $21.2 million or 23 per share.
• Free Cash Flow: $48.8 million in Q3.
• Cash on Balance Sheet: Approximately $169 million as of September 30th.
• Total Liquidity: $419 million, including $250 million of unutilized revolver capacity.
• Net Leverage: Approximately 2.5 times.
• Full Year 2024 Revenue Guidance: Expected to be between $314 million and $320 million.
• Full Year 2024 Gross Profit Guidance: Expected to be between $245 million and $250 million.
• Full Year 2024 Adjusted EBITDA Guidance: Expected to be between $139 million and $142 million.
• Free Cash Flow Conversion Outlook: Increased from 60% to 65% for the full year 2024.

• Warning! GuruFocus has detected 2 Warning Sign with RPAY.

Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Repay Holdings Corp (NASDAQ:RPAY) reported a 9% year-over-year growth in gross profit for Q3 2024.
• The company achieved a free cash flow conversion rate of 139%, indicating strong cash generation capabilities.
• RPAY's business payments segment saw a significant gross profit growth of 67% year-over-year, driven by strength in core AP business and political media vertical.
• The company added several new clients, including 13 new credit unions, expanding its client base to 313 credit unions.
• RPAY's instant funding product experienced a healthy transaction volume growth of approximately 24% year-over-year.

Negative Points

• Consumer payments segment reported only a 2% gross profit growth in Q3, indicating slower growth compared to other segments.
• The company faced headwinds from normalizing consumer spending trends and a loss of a significant RCS client.
• There were delays in enterprise client implementations, impacting growth in the consumer payments segment.
• Corporate spending patterns led to lower volumes in certain pockets of existing clients within the business payments segment.
• RPAY's organic growth was affected by ongoing affordability pressures in the auto and credit union verticals.

Q & A Highlights

Q: Could you elaborate on the organic growth in consumer payments and the headwinds faced in the quarter? A: John Morris, CEO: We observed normalizing consumer spending trends due to affordability pressures, particularly impacting the auto and credit union verticals. Despite this, we continue to win and add new clients, especially large enterprise clients, which take time to implement. Tim Murphy, CFO, added that consumer payments organic growth was in the mid to high single-digit range, considering these factors.

Q: Can you discuss the corporate spending patterns and lower volumes in the business payments segment? A: Tim Murphy, CFO: Business payments reported strong growth, partly due to political media contributions. Excluding this, we still saw growth, although corporate spending softness impacted some volumes. We have new wins like the University of Florida Health System and Blackbaud, which will contribute to growth next year.

Q: What is the progress on the mortgage debit service offerings, and how do you expect it to contribute in 2025? A: John Morris, CEO: We began processing for our mortgage debit acceptance offering with select mortgage servicers in Q3. We expect this to be a multi-year opportunity, contributing to growth starting in 2025 as we scale with current and additional servicers.

Q: Can you provide more details on the instant funding growth and its contribution to consumer payments? A: John Morris, CEO: Instant funding grew 24% year-over-year, driven by the use of Visa Direct and Mastercard networks for personal loan funding. Tim Murphy, CFO, noted that non-card volume-based products represent about 20% of revenue, with instant funding being a significant contributor.

Q: What is the current M&A strategy, and what are you seeing in terms of valuations and areas of interest? A: John Morris, CEO: We are seeing increased activity in the market with more normalizing valuations. We are focused on embedded payments in software and are open to strategic M&A that aligns with our growth objectives. Tim Murphy, CFO, added that they are considering opportunities across both consumer and business payments segments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.