Repay Holdings Corporation

Greetings and welcome to today's earnings conference call being hosted by Repay. With us today are John Morse, co-founder and chief executive officer, and Tim Murphy, chief financial officer. During this call, we will be making forward-looking statements about our beliefs and estimates regarding future events and results. These forward-looking statements are subject to risks and uncertainties, including those set forth in the SEC filing related to today's results and in our most recent form, 10-K, filed with the SEC. Actual results might differ materially from any forward-looking statements that we may make today. The forward-looking statements speak only as of today and we do not assume any obligation or intent to update them except as required by law. In an effort to provide additional information to investors, today's discussion will also include references to certain non-GAAP financial measures. An explanation of these non-GAAP financial measures are, as well as reconciliation of these non-GAAP measures to the newest GAAP financial measures can be found in our earnings release and earnings supplement, each of which are available on the company's IRR site. I would now like to turn the call over to Mr. Morris. Please go ahead.

Thank you, Operator, and good afternoon, everyone. On today's call, I wanted to open with an update on our business for the first quarter. followed by a review of how we're executing on our growth strategy, including discussing the acquisition of BillingTree, which we also announced today. I'll then turn it over to Tim to discuss our first quarter in more detail and thoughts on the remainder of 2021. We are pleased with our performance in the quarter, with card payment volume growth of 20%, total revenue growth of 20%, gross profit growth of 22%, and adjusted EBITDA growth of 18%. These strong results were experienced across all of our businesses. On the loan repayment side, auto sales continue to be strong. This coupled with the industry tailwind to digital payments and a large under-penetrated TAM positions auto as one of the fastest growing parts of our business. Our mortgage servicing business also performed very well due to increased home buying and refinancing activity. And while we are monitoring the mortgage origination market, we are focused on processing a fairly specific type of transaction within Portage. So we believe there will continue to be a need for our technology in any macro environment. During the quarter, we went live with two of the top 10 mortgage servicers and a top 10 credit union on our Lyft Payment IQ platform, our proprietary platform that streamlines and integrates payments and messaging for a seamless experience. We also added a top 10 mortgage servicer to the STX Advisory Board. As a reminder, the STX Advisory Board's goal is to improve and standardize payment flow, eliminate errors, reduce stealing fees, and create a better experience for borrowers. Finally, we also recently completed additional real-time integration activities with Ellie Mae. Continue to add customers through this partnership. On the personal loan side, buyers have been strong thus far in 2021. While we expected a seasonal slowdown in Q2 following tax refund and recent stimulus, we still see positive momentum through early May. Our instant funding product continues to experience significant adoption, with recent months showing record-long funding amounts. Our B2B business also showed strength during the quarter. We now have approximately 50 total B2B software integrations, and on the AP side, we've grown our supplier network to over 71,000. which is up 18% quarter over quarter. We recently announced that we became a participant in the CDK Global Partner Program. In connection with this partnership, we joined a marketplace of applications and integrations that CDK, a leading enabler of end-to-end automotive commerce, developed to help nationwide automotive dealers succeed. Through the integration, thousands of automotive dealers will have the ability to automate electronic AP payments to various vendors and suppliers based on specific invoice data within the CDK system. We recently signed an agreement to process electronic payables for the public school district's top 50 U.S. cities. Additionally, we are now processing payables for the largest in-room hospitality technology provider through global hospitality brands. Lastly, our tri-source processing business has been performing very nicely as restrictions lift throughout the country. We have several processing ISOs showing strong growth recently with additional customers in the contracting phase. We made solid progress against all our key growth strategies in the first quarter. Sales, technology, and product are the three areas of focus right now. On the sales side, we've had some great client wins in the quarter driven by our direct sales force, to which we continue to add talent. We recently hired three senior-level sales leaders with decades of combined payment experience. ISV integrations also continue to be a strong growth challenge for us. During the quarter, we added eight new integrations, bringing our total to 132 as of March 31st. We added 15 credit union customers in the quarter, which brings us to 58, representing approximately 635,000 collective members. We also continue to grow existing relationships and add new names to our buy now, pay later pipeline. We understand retail installment sales and believe our payment technology will be a great asset to many of the companies in this space. We've also made progress in the product and technology side. Last quarter, we announced that we recently opened a software development office in Ireland in partnership with a local firm called Prodigo. We've already hired over 20 software development-related staff, and they have hit the ground running. We have a lot of technology and product initiatives on our roadmap and many different verticals to attack, and we felt this partnership was a great way to quickly get additional resources and throughput. More recently, we have been finalizing a partnership with PayFace to enable merchants to accept electronic cash payments. This partnership will allow consumers to have access to approximately 60,000 retail locations to make cash payments to merchants on the repay platform with transactions supported in real time. it will add even greater convenience to payers and expands the capabilities of lenders and other merchant types to meet consumer payment preferences. Now let's move on to M&A, which continues to be an important incremental growth driver for our company. This evening, we announced the acquisition of BillingTree. This is a very exciting announcement as it's Repay's largest and most important transaction today. We have evaluated hundreds of attractive acquisition candidates over the years, and we believe that Billingtree has the best combination of technology, distribution, talent, and skill to complement our company. Billingtree is a leading provider of omnichannel, integrated payment solutions, and builder direct verticals. We posted a separate presentation to highlight the transaction on our investor relations site. Billingtree has two main products. CareVue, which is a healthcare payment and software platform, streamlines patient communication, promotes patient engagement, and allows customers to accept all forms of payments, including FSA, HSA, and Flex Cards. Next, PayRaiser, which offers an omnichannel platform that allows customers to accept and reconcile payments using the medium of their choice. Billingtree enhances our position in large and attractive growth markets, such as the healthcare, credit unions, accounts receivable management, and energy verticals. Billingtree's verticals provide them with access estimated card payment volume opportunity of $700 billion. Addressable card payment volume in BillingTree's core end markets has experienced favorable tailwinds as a result of the COVID-19 pandemic, accelerating the paper-to-digital payment shift within BillingTree's biller-direct verticals. BillingTree meaningfully expands our scale, contributing over $4.4 billion in card payment volume. $60 million in revenue, and $26 million in EBITDA before Synergy's pro forma for the full year, 2021. Billingtree serves over 1,650 clients, including over 120 credit unions. They have customers across multiple attractive end markets with industry-leading retention metrics. Pro forma for the full-year impact of the Billingtree acquisition, we expect to have over $22 billion in card payment volume, over $245 million in revenue, and over $105 billion in adjusted EBITDA, and over 175 ISVs. The BillingTree acquisition will also strengthen our existing product suite of deeply integrated, custom-tailored payment and software solutions for enterprise customers in healthcare, credit unions, and arm industry. Their solutions are tightly integrated with over 50 software platforms, and the acquisition is expected to expand our software partner integrations to 175. Additionally, BillingTree also has a highly recurring revenue model with 110% average net volume retention and strong margins. We expect the transaction to be accretive to adjusted EPS in 2021 before synergies and expect further shareholder migration from synergy opportunities as the combined company. The scale, capabilities, and infrastructure of the combined platform represent significant opportunities for cost savings and increased efficiencies. As a result of processing cost reductions, and operational expense rationalization, we expect to realize annualized synergies of approximately 5 million. We are incredibly excited about this highly strategic acquisition, having delivered on the promise we made to our shareholders earlier this year when we raised significant proceeds to pursue M&A. We will continue to evaluate attractive M&A prospects, maintain a very active pipeline of additional opportunities, and expect that there will continue to be mid-market consolidation across the payments industry. With that, I'll turn it over to Tim to discuss the financials in greater detail. Tim?

Thank you, John. Now let's move on to our Q1 financial results before I review our revised financial guidance for 2021. As John mentioned, in the first quarter, Repay delivered strong results across all of our key metrics. Card payment volume was $4.6 billion, an increase of 20% over the prior year's first quarter. Total revenue was $47.5 million, an increase of 20% over the prior year's first quarter. Funtanix, CPay Plus, and CPS contributed approximately $4.9 million of incremental revenue during the first quarter. Moving on to expenses in the quarter. Other cost of services were $12.5 million compared to $10.8 million in the first quarter of 2020. The incremental other cost of services from Funtanix, CPay Plus, and CPS were $1.7 million for Q1. Gross profit was $35 million, an increase of 22% over the prior year's first quarter. On an organic basis, we saw gross profit growth of 11% compared to the first quarter of 2020. This organic growth was primarily driven by strength across our loan repayment verticals, as well as better than expected performance in our tri-source backend processing business. SG&A was 23.4 million compared to 18.2 million in the first quarter of 2020. First quarter net loss was 18 million compared to a net loss of 13.2 million in the first quarter of 2020. First quarter adjusted net income was 15.1 million or 18 cents per share. Lastly, first quarter adjusted EBITDA was 20.5 million, an increase of 18% over the prior year first quarter. First quarter adjusted EBITDA as a percentage of total revenue is 43% compared to 44% in the prior year first quarter. This increase in adjusted EBITDA was a result of organic growth and contributions from acquired businesses, as well as continued focus on cost management. As John mentioned, today we announced the acquisition of BillingTree for $503 million, consisting of $275 million in cash, which will be financed with cash on hand, and $228 million in stock. This will be our largest acquisition to date. We also anticipate a tax benefit of approximately $20 million. This deal will be immediately accretive to earnings before synergies and is a great example of why we chose to access the capital markets in January. The transaction is expected to close by the end of the second quarter of 2021, subject to certain customary closing conditions. Combined net leverage is expected to be approximately 2.9 times on a post-transaction basis, a very comfortable level, which will allow us to continue to fund both organic and inorganic opportunities. As of April 30th, pro forma for billing tree, we will have $118 million of cash on the balance sheet and access to $125 million of undrawn revolver capacity for a total liquidity amount of $243 million. As of April 30th, pro forma for billing tree, We will have approximately 98.4 million shares outstanding on a fully delivered basis. Finally, moving on to our outlook for 2021. Due to the strong results we've experienced across all of our businesses year-to-date, coupled with our current momentum that will drive further acceleration in the second half of this year, we are updating our outlook for 2021, excluding billing. We are now expecting volume to be between $17.7 billion and $18.2 billion, total revenue to be between $180 million and $190 million. gross profit to $135 million and $141 million. And lastly, adjusted EBITDA to be between $76 million and $81 million. Now, including the impact of Billing 3, which we assume will close on July 1st, we expect the following for 2021. Volume to be between $19.9 billion and $20.4 billion. Total revenue to be between $210 million and $220 million. Gross profit to be between $159 million and $165 million. And lastly, adjusted EBITDA to be between $91 million and $96 million. Please note this includes approximately 2 million of expected pro forma synergies for the final six months in 2021. As with prior quarters, this rate assumes no further unforeseen COVID-related impacts, which could create substantial economic duress during the year. We are pleased to welcome Billingtree to the repay family and look forward to an exciting remainder of 2021, along with accelerated growth in the outer years. I'll now turn the call back over to the operator to take your questions. Operator?