Repay Holdings Corporation (NASDAQ:RPAY) is a leading provider of integrated payment processing solutions, serving a diverse range of industries with its innovative technology platform. The company has demonstrated strong financial performance, reporting annual revenue of $296,627,000 and annual net income of -$110,490,000 in its most recent fiscal year. Additionally, Repay generated annual operating cash flow of $103,614,000 and annual free cash flow of $39,253,000, showcasing its ability to generate substantial cash flows.

Business Overview

Repay operates through two reportable segments: Consumer Payments and Business Payments. The Consumer Payments segment provides payment processing solutions, including debit and credit card processing, ACH processing, and loan disbursement products, that enable clients to collect payments and disburse funds to consumers. The strategic verticals served by this segment include personal loans, automotive loans, receivables management, credit unions, mortgage servicing, consumer healthcare, and diversified retail.

The Business Payments segment offers payment processing solutions, such as accounts payable automation, debit and credit card processing, virtual credit card processing, and ACH processing, that enable clients to collect or send payments to other businesses. The key verticals within this segment include retail automotive, education, field services, governments and municipalities, healthcare, HOA management, and hospitality.

Repay's proprietary, integrated payment technology platform is a key differentiator, as it reduces the complexity of the electronic payments process for businesses while enhancing the overall consumer experience. The company's deep industry expertise and the embedded nature of its solutions within its clients' workflows have been instrumental in driving strong growth and fostering long-term client relationships.

Financials

In the first quarter of 2024, Repay delivered solid financial results, with revenue of $80.7 million, representing a 10% increase on an organic basis compared to the prior year period. The company's gross profit grew by 11% year-over-year, with the Consumer Payments segment reporting an 11% organic gross profit growth and the Business Payments segment achieving a 17% gross profit growth.

Repay's adjusted EBITDA for the first quarter of 2024 was $35.5 million, up 15% year-over-year, with a margin of 44%. The company's adjusted net income for the quarter was $22.4 million, or $0.23 per share. Additionally, Repay generated $13.7 million in free cash flow during the first quarter, representing a 90%+ year-over-year increase.

Guidance and Outlook

For the full year 2024, Repay is reiterating its previously provided guidance. The company expects revenue to be between $314 million and $320 million, gross profit to be between $245 million and $250 million, and adjusted EBITDA to be between $139 million and $142 million. Repay anticipates adjusted EBITDA margins of approximately 44% and expects its free cash flow conversion to accelerate throughout the year, with a target of around 60% for the full year.

The company's quarterly cadence is expected to follow a similar pattern to previous years, with the first quarter benefiting from tax refund seasonality, the second quarter seeing a slight decline, and the third and fourth quarters benefiting from the contribution of the political media business in the Business Payments segment.

Segmental Performance

In the first quarter of 2024, the Consumer Payments segment reported organic gross profit growth of 11%, driven by the growth of existing clients, the full-year contribution from clients that began ramping in the prior year, and the addition of new clients. Repay continues to see strong performance in its credit union and accounts receivable management verticals, with the addition of 15 new credit union clients in the quarter, bringing the total to 291.

The Business Payments segment delivered a 17% year-over-year gross profit growth in the first quarter, driven by the conversion of strong sales pipelines into live clients that began to ramp during the period. Repay has been successful in expanding its supplier network to over 279,000 suppliers and enhancing integrations with various software partners, including Sage Intacct, Microsoft Dynamics, Quadient, and inflow.

Liquidity

As of March 31, 2024, Repay had $128.3 million in cash and cash equivalents and $185.0 million in available borrowing capacity under its revolving credit facility, providing the company with a total liquidity of $313 million. The company's net leverage ratio at the end of the first quarter was approximately 2.4x.

Repay's capital allocation priorities remain focused on investing in organic growth opportunities, while also being open to accretive strategic M&A. The company has a healthy pipeline of potential acquisition targets, particularly in the accounts payable automation space within the Business Payments segment, as it looks to build scale and expand its software integrations.

Risks and Challenges

Repay operates in a competitive payments industry, facing competition from both traditional payment processors and emerging fintech players. The company's success is dependent on its ability to continue innovating and providing differentiated solutions that meet the evolving needs of its diverse client base.

Additionally, Repay is exposed to macroeconomic risks, such as changes in consumer spending patterns and the potential impact of economic downturns on its client industries. The company's performance is also subject to regulatory changes in the payments and financial services sectors.

Conclusion

Repay Holdings Corporation has demonstrated its ability to deliver strong financial results, with solid organic growth, expanding margins, and robust cash flow generation. The company's diversified business model, spanning both consumer and business payments, and its focus on vertical-specific solutions have been key drivers of its success.

Looking ahead, Repay's guidance and outlook suggest continued momentum, with the company well-positioned to capitalize on the growing demand for integrated payment processing solutions across its target markets. As the company continues to invest in its technology platform, expand its software integrations, and explore strategic acquisition opportunities, Repay appears poised to maintain its position as a leading player in the evolving payments landscape.