Repay Holdings Corporation (RPAY) is a leading provider of vertically-integrated payment solutions, catering to various industry-oriented markets. The company's proprietary technology platform and deep domain expertise have positioned it as a trailblazer in the rapidly evolving digital payments ecosystem.
Company History and Background
Established in 2006 as M&A Ventures, Repay's legacy can be traced back to its inception as a Georgia-based fintech startup, co-founded by industry veterans John Morris and Shaler Alias. The company's transformative journey began in 2016 when certain investment funds sponsored by Corsair Capital LLC acquired a majority stake in the business, setting the stage for its rapid growth and strategic expansion.
In 2019, Repay Holdings Corporation was formed through the merger of Thunder Bridge Acquisition Ltd., a special purpose acquisition company, and Hawk Parent Holdings LLC. This merger marked a significant milestone in the company's history, providing it with enhanced resources and capabilities to further expand its market presence.
Growth Strategy and Acquisitions
Since its formation, Repay has pursued an aggressive growth strategy through strategic acquisitions. In 2019, the company acquired TriSource Solutions, LLC, which provided further control over its transaction processing ecosystem and accelerated product delivery capabilities. The acquisitions of APS in 2019 and Ventanex in 2020 enabled Repay to access the business-to-business vertical, while the acquisitions of cPayPlus, CPS, and BillingTree in 2020 and 2021 further diversified the company's client base and service offerings.
Challenges and Market Positioning
Despite its impressive growth trajectory, Repay has faced some challenges. In 2023, the company recognized a $75.8 million goodwill impairment related to its Business Payments segment, primarily impacted by a change in the discount rate. Additionally, Repay has had to navigate client losses, such as the 2023 disposition of BCS within the Consumer Payments segment and the strategic migration of certain business payment volumes to the company's TotalPay solution in 2024.
Over the past decade, Repay has strategically targeted verticals where its ability to tailor payment solutions to client needs, deep industry knowledge, and embedded integrated payment solutions have driven strong growth. The company's focus on the personal loans, automotive loans, receivables management, and business-to-business verticals has enabled it to capitalize on the significant shift from cash and check to electronic payments.
Financials
Repay's financial performance has been robust, with the company reporting revenue growth of 6% to $313.04 million in the full year 2024. Gross profit grew by 6% to $241.41 million, while adjusted EBITDA increased by 11% to $140.81 million. The company's free cash flow conversion rate improved from 42% in 2023 to 75% in 2024, showcasing its ability to generate strong cash flows.
For the full year 2024, Repay reported a net income of $10.35 million, a significant improvement compared to the prior year's net loss of $117.42 million. The company's annual operating cash flow for 2024 was $150.09 million, with annual free cash flow of $105.24 million.
In the fourth quarter of 2024, Repay reported revenue of $78.27 million, representing a 3% year-over-year growth. However, the company experienced a net loss of $4.12 million in Q4 2024, primarily due to the change in fair value of the tax receivable agreement liability. The quarterly free cash flow for Q4 2024 was $23.50 million.
Consumer Payments Segment
The Consumer Payments segment, representing approximately 83% of total revenue, has been a consistent performer, driven by growth from existing clients and the addition of new clients throughout 2024. Repay's deep integrations with over 180 software partners have been instrumental in driving new client acquisitions and fostering long-term relationships.
This segment provides payment processing solutions, including debit and credit card processing, ACH processing, and other electronic payment acceptance solutions, as well as a loan disbursement product. It also includes Repay's proprietary clearing and settlement platform, RCS. The strategic vertical markets served by this segment primarily include personal loans, automotive loans, receivables management, credit unions, mortgage servicing, consumer healthcare, and diversified retail.
Business Payments Segment
In the Business Payments segment, which accounts for around 17% of total revenue, Repay has also demonstrated robust growth. The segment's gross profit grew by 40% in 2024, driven by strength in the core accounts payable (AP) business, solid contributions from the political media vertical, and the ramp-up of new client wins. Repay's focus on expanding its enterprise-level software partnerships and enhancing its supplier network have been key to this segment's success.
This segment provides payment processing solutions, including accounts payable automation, debit and credit card processing, virtual credit card processing, ACH processing, and other electronic payment acceptance solutions. The strategic vertical markets served within this segment primarily include retail automotive, education, field services, governments and municipalities, healthcare, media, homeowner association (HOA) management, and hospitality.
Strategic Initiatives
Repay's strategic initiatives have included the integration of Worth.ai's underwriting and onboarding tools, which have streamlined the merchant and vendor onboarding processes. Additionally, the company's recent partnership with Lightspeed DMS has expanded its reach into the recreational vehicle (RV) and powersports industries, showcasing its ability to adapt its solutions to new verticals.
The company has grown through a combination of organic initiatives and strategic acquisitions, expanding its software partner integrations to approximately 280 as of December 31, 2024. Repay continues to invest in its technology and product capabilities to serve its clients.
Liquidity
The company's capital management strategies have also been noteworthy. In 2024, Repay refinanced its convertible notes, providing ample liquidity and financial flexibility. The company also opportunistically repurchased shares, demonstrating its commitment to enhancing shareholder value.
As of December 31, 2024, Repay reported a debt-to-equity ratio of 0.67, with cash and cash equivalents of $189.53 million. The company has access to a $250 million revolving credit facility. Repay's current ratio and quick ratio both stand at 2.69, indicating a strong liquidity position.
Market Challenges and Outlook
However, Repay has not been immune to macroeconomic headwinds. The company's fourth-quarter 2024 results were impacted by select client losses, the full-quarter effect of an RCS client rolloff, and softness in the automotive and receivables management verticals. These factors contributed to a 5% decline in the Consumer Payments segment's gross profit during the quarter.
Nonetheless, Repay remains confident in its ability to execute on its growth initiatives. The company's bookings, both in the Consumer and Business Payments segments, have remained strong, and it is focused on improving overall client experiences to drive retention and identify additional value-added service opportunities.
The electronic payments industry has seen consistent growth, with a compound annual growth rate (CAGR) of around 10-12% over the past 5 years, driven by the continued shift from cash and check to electronic payments. This trend bodes well for Repay's future prospects.
Strategic Review and Future Prospects
In a strategic move, Repay has recently announced the commencement of a comprehensive review of its business, including the evaluation of various strategic alternatives, such as mergers and acquisitions, a take-private transaction, or other structural changes. This review, undertaken with the support of the board of directors, aims to capture shareholder value and further strengthen the company's position in the verticals it serves.
Due to this ongoing strategic review, Repay is not providing a 2025 outlook at this time. The company remains focused on prudently running the business and executing on its capital allocation priorities during this process.
Repay's future prospects remain promising, as it continues to leverage its proprietary technology, deep industry expertise, and strategic partnerships to drive growth and innovation in the rapidly evolving digital payments landscape. As the company navigates the challenges and opportunities ahead, investors will be closely monitoring its ability to execute on its strategic initiatives and deliver sustainable, profitable growth.