Repay Holdings Corporation

Greetings, and welcome to today's earnings conference call being hosted by Repay. With us today are John Morris, 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 nearest GAAP financial measures can be found in our earnings release and earnings supplement each of which are available on the company's IR 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 want to open with an update on our business for the second quarter, followed by a review of how we're executing on our growth strategies. I'll then turn it over to Tim to discuss our second quarter financials in more detail and thoughts on the remainder of 2021. During the second quarter, we experienced solid results across all of our businesses, which included card payment volume growth of 28%, total revenue growth of 33%, which included 16% organic growth for the quarter, and gross profit growth of 29%, 13% of which was organic. Please note, these organic growth rates are based off a tough comp in Q2 of last year, as the stimulus payments went out in April and May of 2020. We also reported adjusted EBITDA growth of 26% in the second quarter. We've made significant strides in building out our B2B business to capture more of the large and under-penetrated market. On the B2B healthcare side, we recently signed a group purchasing agreement through CPS for advanced accounts payable solutions with Premier, a leading healthcare improvement company. This agreement will provide Premier members with advanced automation capabilities for AP disbursements, enabling healthcare providers and hospitals to streamline internal workflows and realize savings through revenue-generating rebates. During the quarter, we also launched our vendor payments automation solution into Acumatica and Stage 100, leading ERP companies, which will enable businesses to seamlessly pay vendors in a simple, secure way while also reducing unnecessary costs. We've been actively promoting the ARAP cross-sell, most recently at the Acumatica Annual Summit. We now have a very full cross-sell pipeline. We're seeing incredible results for our B2B clients. One of our new CPS customers, Sonify, went live within one week of signing our contract. In the first month, we helped them generate well over $100,000 in monthly rebates based on the supplier payments we were able to facilitate. Late in the second quarter, we announced our fifth B2B payments acquisition with the addition of Control Payables, an integrated AP automation solutions provider, serving clients in a variety of end markets, including construction, food production, software, manufacturing, and education. Control utilizes its 25-plus ERP integrations and network of over 13,000 suppliers to deliver efficiencies to its clients' AP workflows, ultimately executing outbound payments using a variety of payment modalities, with a focus on virtual cards. With these acquisitions, RepayNow has more than 3,300 clients in B2B and over 80 B2B software integrations representing approximately 15 vertical end markets. On the AP side, we've grown our supplier network to over 92,000, an increase of approximately 30% from last quarter. The B2B payments market is expected to grow to $200 trillion in the next decade from the $120 trillion it is today. and we believe that we are uniquely positioned to capture significant share in this growing market. Unlike much of our competition, we are able to provide payments and software solutions on both sides of the transaction, meaning both AR and AP automation. We have recently posted a presentation and webcast on our IR site where Jake Moore, our EVP of corporate development strategy, reviews our B2B business and the addressable opportunity in greater detail. And lastly, On the B2B side, we recently created and filled a new role in our organization for VP of B2B Strategy and Business Development. Our new B2B leader brings an incredible amount of experience with his prior roles as a head of business development strategy at Divi and also director of B2B payment solutions and partnerships at Visa. We're thrilled to welcome him to the Repay family and look forward to getting his perspective and guidance on how to further accelerate our efforts in the B2B space. On the loan repayment side, we've seen a rebound in personal loan volume over the past few months, post-stimulus and tax season, largely driven by increasing consumer demand, holiday travel, and back to school preparation. Our lending clients are also finding ways to engage more digitally with their customers, which fits very well with our payment technology. We continue to grow our existing customers as they consistently find value in the services we provide. Even lending tech firms like Loan Depot leverage our communication solutions and back-end payment processing capabilities to deliver great mortgage servicing experiences for their borrowers. We continue our expansion with lending partners in Canada with the addition of Fairstone Financial, Canada's leading provider of responsible lending solutions for near-prime borrowers. We're working with Fairstone to help enhance their customer experience through our opt-in text-to-pay technology, giving borrowers even greater loan repayment flexibility. Auto is still one of the fastest growing areas of our business with strong macro tailwinds, elevated used car prices, and increasing demand. These are long duration loans with increasing digital engagement, which leads to greater repayment activity. And speaking of digital engagement, our instant funding product continues to experience significant adoption in each month in the second quarter, breaking the record of the previous month in terms of loan funding amounts. We've seen this trend continue throughout July. We view this as a positive indicator for personal loan volume growth, as these funded loans will eventually need to be repaid. Moving on to billing tree, we closed the acquisition on June 15th, which was earlier than we expected, and the integration is going very well. We've recently posted a presentation and webcast on the billing tree acquisition on our site, which I would encourage you to review. As we've previously discussed, the acquisition enhances our position in large, attractive growth markets, including healthcare, credit unions, accounts receivable management, and energy. It also expands our scale and has a highly complementary business profile that is focused on integrated payments with strong distribution capabilities, both direct and through ISVs. In fact, through Billingtree, we will see announced a partnership with Credit Management Company, a full-service accounts receivable management solutions provider for the healthcare market. to power frictionless payments for healthcare systems, providers, and patients. We look forward to working with them to accelerate digital payments in the healthcare industry. This transaction clearly further expands our software partner relationships and creates opportunities for meaningful cost synergies, some of which we have already begun to realize. That said, Billingtree has brought in a very talented team of payment experts and technologists, and we look forward to working with them to grow the business together. Our tri-source processing business has been performing very well. It's strategically valuable to our own, our own backend processing platform, which gives us a unique capabilities to control the customer experience in areas such as billing and reporting. We recently signed Woodforest National Bank as a customer and hired a senior sales executive with many years of experience selling processing services in order to capitalize on our differentiated position in the processing value chain. Woodforest chose us because of our ability to customize their merchant services program. As mentioned previously, TriSource enhances our M&A strategy by allowing us the ability to move an acquired company's back-end processing to TriSource, thereby eliminating third-party processing costs. We've executed on that strategy with APS, and this is also a synergy we expect to realize with BillingTree. I'll now briefly provide an update on our growth strategies. ISV integrations continue to be a strong growth channel for us. During the quarter, we added 34 new integrations many of which were related to the control deal, bringing our total to 209 as of June 30th. A recent ISV addition was Provana, a unified platform for credit and collections process management. They have north of 400 customers and serve clients both in the U.S. and Canada. Provana customers can now leverage REPAY's processing solution with Provana's all-in-one loan repayment and customer service application. We now have over 180 credit union customers combined with BillingTree, representing approximately 2 million collective members. This is an exciting growth area for our business. M&A continues to be an important growth driver for our business. Our pipeline remains very active across key areas such as B2B and healthcare. We're also very pleased with our ability to integrate a majority of the seven acquisitions we've made since going public a little over two years ago. We have also remained busy on the hiring front to prepare for the many organic growth opportunities that we currently have in the business. 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 Q2 financial results before I review our financial guidance for 2021. As John mentioned, in the second quarter, Repay delivered strong results across all of our key metrics. Part payment volume was $4.6 billion, an increase of 28% over the prior year second quarter. Total revenue was $48.4 million, an increase of 33% over the prior year second quarter. CPay Plus, CPS, Billingtree, and Control contributed approximately $6 million of incremental revenue during the second quarter. We had 16 days of Billingtree benefit, which contributed approximately $2.4 million of revenue. Moving on to expenses in the quarter. Other cost of services were $12.7 million compared to $8.7 million in the second quarter of 2020. The incremental other cost of services from CPay Plus, CPS, Billingtree, and Control were $1.6 million for Q2. Gross profit was $35.7 million, an increase of 29% over the prior year second quarter. As John mentioned, on an organic basis, we saw gross profit growth of 13% compared to the second quarter of 2020. We are very pleased with this trend and continue to see positive momentum into early Q3. This organic growth was primarily driven by strength across our loan repayment verticals, as well as continued outperformance in our tri-source back-end processing business. Our botanics business is also performing nicely, particularly within mortgage servicing. SG&A was $29.5 million compared to $19 million in the second quarter of 2020. Second quarter adjusted net income was $14 million or $0.16 per share. Lastly, second quarter adjusted EBITDA was $20.4 million, an increase of 26% over the prior year second quarter. Second quarter adjusted EBITDA as a percentage of total revenue was 42% compared to 44% in the prior year second quarter. This slight decrease in margin is a result of increased investment in sales, technology, and product to continue putting in place the proper infrastructure for accelerated organic growth into 2022. Combined net leverage is approximately 2.8 times on a post-billing trade transaction basis, a very comfortable level, which will allow us to continue to fund organic and inorganic opportunities. As of June 30th, we had 120 million of cash in the balance sheet and access to 125 million of undrawn revolver capacity for a total liquidity amount of $245 million. As of June 30th, we had approximately 99 million shares outstanding on a fully diluted basis. Finally, moving on to our outlook for 2021. Due to the strong results we've experienced across our businesses year to date, we are increasing our expectations for volume, revenue, and gross profit for the year. We now expect volume to be between $20.3 billion and $20.8 billion, total revenue to be between $214 million and $222 million, and gross profit to be between $160 million and $166 million. Lastly, we are slowly increasing the midpoint for adjusted EBITDA to be between $92 million and $96 million. As I mentioned previously, we believe there are strategic opportunities to reinvest profits in functional areas such as sales, technology, and product, but also in key growth verticals such as B2B in order to establish the proper infrastructure for accelerated organic growth into next year and beyond. Finally, as the economic recovery continues, we expect more of this increased contribution to occur in Q4. As with prior quarters, this range assumes no further unforeseen COVID-related impacts, which could create substantial economic duress during the year. We're very pleased with our results in the first half of 2021, particularly the organic growth, and look forward to an exciting remainder of the year. I'll now turn the call back over to the operator to take your questions. Operator?