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?

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Ramsey Ellisall with Barclays. Please proceed with your question.

Hi, gentlemen. Thanks for taking my question this evening. I wanted to ask about the organic gross profit growth, which came in ahead of our expectations. I think you said about 13%. Can you kind of share with us your latest thoughts on that sort of organic gross profit mid-to-high team's target for the full year? Has that changed in your minds at all, given the outperformance in the quarter?

Hey, this is Tim. Thanks for the question. We feel really good about this. As we mentioned on the call, we actually think it could be stronger going into Q3 and Q4. Like John said, the Q2 2020 comp was pretty difficult given the stimulus payments, and we think Q3 and Q4 would get a little bit easier from there. And so we do feel good about high teens to 20% organic growth in the back half of the year, and particularly going into next year.

Great. And I wanted to ask about, you know, congratulations closing the billing tree acquisition a little early. Can you give us your updated view there on synergies, where you're seeing the most opportunities, and maybe a little commentary on kind of timing?

Yeah, sure. So we are already realizing certain personnel synergies. There was just certain, you know, roles identified early on. And so that is in process. We'll continue that throughout the remainder of the year. And then toward the end of this year, we'll start to move the back-end processing to our platform, in which case then we'll start to realize those processing cost synergies. So we're very much on target for that. Personnel coming first, as I mentioned, processing coming toward the end of the year into early next year, and then hope to stay on track with fully realizing the $5 million that we estimated previously by the end of 2022. Okay.

All right, perfect. Thanks so much for your comments today.

Absolutely.

Thank you. Our next question comes from Timothy Chiodo with Credit Suisse. Please proceed with your question.

Great. Thanks a lot for taking the question. The 80 ISDs within the B2B segment that you've touched on, I was hoping you could give us a little more context on what the status quo is within the underlying merchant base segment. of those ISVs in terms of what they're currently doing in terms of ACH, enhanced ACH, card, check, that type of context would be great. And then also the extent to which any of those integrations are more exclusive maybe than others. And then I have a quick follow-up.

Yeah, so Tim, we think we're still kind of early days in terms of virtual card adoption. There's still a lot of check and ACH Enhanced ACH is sort of a fairly new product, and we're rolling that out as well. So there's still a ton of white space and opportunity to further penetrate virtual cards. That's something that we're really excited about. One of the reasons we bought these companies in these verticals with these integrations is because we felt like that was a major, major opportunity. And we have a full team of supplier enablement folks that are working on that every day. And we're also increasing our supplier network. As we mentioned, we're up to 92,000 and quickly marching toward 100,000 plus. And a big part of that is getting the virtual card adoption to increase is having that network that's enabled to accept electronic payments and particularly virtual cards. So we think there's a lot of runway there for growth. We typically have exclusive relationships in these software partners. We like to consider ourselves the preferred provider in which case we get just better access to customers and information that way. And so that's how we like to go to market, but it's not often exclusive.

And especially in the B2B space, it's mostly accounting ERP systems. So there generally are not going to be any exclusivities on that side.

But one thing I will mention is, so we've been big partners with Sage and Acumatica within B2B merchant acquiring for some time now. We now have the ability to do accounts payable within each of those integrations, which we think is pretty unique. So again, even though they're not exclusive, if we're one of the few, if not only, providers that can provide both merchant acquiring and AP automation and AP payments, then we think that's a way we can really win.

Right, perfect. That's really helpful, Tim. Thank you so much. A quick minor follow-up. You guys gave a lot of great context on the call around growth and organic growth. I apologize if I missed it, but did you happen to mention card payment volume organic growth for Q2?

Yes. We didn't mention it, but we estimate it's about similar to the organic GP, so in the low teens. Perfect.

All right. Thanks for both of those. I appreciate the time.

Thank you. Our next question comes from Andrew Schmidt with Citi. Please proceed with your question.

Hey, John. Hey, Tim. Thanks for taking my question here. Good organic gross profit growth here on the second quarter. Definitely a beat our expectations. But I want to dig a little bit into the outlook because it sounds like the quality of commentary implies that things are running a little bit better than expected. But if you look at the outlook, maybe you've absorbed some of the beat for investments and things like that. Obviously, there are probably some conservatism built in there. So Just curious to help just bridge the gap between the – it sounds like more bullish commentary and just the quantitative outlooks in the back half. Thanks.

Yeah, we do feel very good about the results in Q2, particularly organic growth. And as I just mentioned earlier, we think that should continue and even accelerate in the back half of the year. That being said, we're just monitoring the recovery within loan repayments. We know that our largest lenders have started more aggressively originating and that demand is picking up. Although we don't always have perfect visibility or control as to when that flows through to our own repayment volume, but it depends on the duration of the loan and the repayment schedule. So it's really, we don't think it's a matter of if, it's really more a matter of when. And so we think some of that volume may end up flowing into early 2022. And again, that's something we're closely monitoring. And so that's one of the reasons for the guide being where it is.

Got it. That makes a lot of sense. It's fairly prudent. And then a question on M&A. So clearly it seems like B2B will continue to be a focus here. When you look at your M&A pipeline, is it more about building out verticals or building out capabilities? You talk a little bit about kind of what you're thinking from an M&A pipeline perspective. Thanks.

Yeah, sure. This is John. It's both. Obviously we... The key integrations will be very important if we find things with some significant key integrations, but you see as well there's some sub-verticals inside of that that we think if we could complement some sub-verticals we're already in in the B2B space, that would be very complimentary for us. Obviously, we're always looking for technology that can help drive additional automation. All those different areas, we love what we're seeing in the B2B space. It's enormous white space. We've confirmed it. It's in our pipeline. It's in our prospects. We gave you a couple examples showing you of new customers we brought on. Immediate opportunity for us to convert that into a really good situation for our customer. So the value add is on both sides where we can add significant value immediately. for someone who has really never been using the AP automation solution. So we see an enormous opportunity to continue to invest there, and we see the opportunities there to actually make sure we're spending wisely our shareholders' dollars, but we really think there's a really good opportunity in the near term as we look out into the future there.

And I would add on the AP side of B2B, one of the other important elements in addition to integrations and just verticals is the supplier network. And so looking for opportunities to broaden the supplier network, either in existing verticals or potentially new verticals, is something that we think about a lot when we look at targets within B2B AP.

Got it. Thank you, John. Thank you, Tim. Appreciate the comments.

Thank you. Our next question comes from Sanjay Sakrani with KBW. Please proceed with your question.

Hi, this is actually Stephen Clark filling in for Sanjay. Thanks for taking my questions. The first question I have was just around the relationships on the buy now, pay later side, given that it's been a hot topic post the Squares acquisition of ActivePay.

Yeah, so we have several existing relationships in that space. We view that really as an installment loan in a lot of cases, and we process for a lot of installment lenders, some of which have been you know, considered point of sale lenders in the past and have maybe shifted their business model to be more e-commerce focused, which would fit with buy now, pay later. We have a very active pipeline in that area, both in the U.S. and Canada, to bring on additional customers. And again, we think that we have a really nice customized solution to installment lenders, and that fits really well with buy now, pay later. And so we have existing customers that are growing, and we're sourcing new customers as well.

Got it. And you also noted that you remain busy on the hiring front to prepare for the organic opportunities that you see. I'm just wondering, how should we think about the operating margins over the near to intermediate term?

So I think the 42 percent, 42 to 43 percent is probably a good range in terms of adjusted EBITDA margins. We do want to invest in growth. We have a very large addressable market opportunity across a number of different verticals. And so we think just building out our sales team, our technology team, and product is very important to put ourselves in a position to address that going into next year and beyond. So I'd say where we are this quarter, kind of 42% to 43% is probably a good way to think about it.

Great. Thanks for taking my question.

Thank you. Our next question comes from Joseph Fafi with Canaccord. Please proceed with your question.

Hey guys, good results and nice to see the pedal to the metal continuing on the M&A front. Just, I'll start off with one on kind of strategic question. It looks like You know, we've heard a lot on the call about B2B tonight. We've seen more, you know, focus on the M&A front on B2B. How do you see the business in a couple years relative to payment volume on B2B versus perhaps more on the consumer side versus where it is now? And then all the follow-up after that.

Yeah, it's about 20% today post-billing sheet, and we see that growing. You know, a lot of other parts of our business are growing nicely as well. So, you know, it's growing faster than those. So that's why we think it can continue to be a bigger part of the mix. So I would say it starts to, you know, move back up into mid-20s to 30% range if we're sticking with organic. Of course, if we make acquisitions, that could become an even bigger part of the mix. So we definitely want B2B to become bigger. It's the second largest vertical behind loan repayments today, and we expect it to continue to grow.

Okay, and then just secondly, the ISV integrations, kind of following up on Tim's question earlier, the ISV integrations are continuing. A lot of it's on the M&A side, and you're getting those via M&A. Just wondering what you see the natural cadence being on ISV integrations on an organic basis relative to your growing base, considering your cross-cell integration and other opportunities. Thanks a lot.

Yeah, we do see a lot of that growth this quarter did come from acquisitions, but organically we also added several partners across loan repayments, credit unions, other kind of core verticals. So we would see that maybe in the two or three to five additional partners organically each quarter. And then, of course, if we do additional M&A, that could continue at an accelerated pace. But we do have a nice pipeline within our loan repayment verticals and some of the other verticals outside of just B2B. And so we would expect to continue to add there.

Great. Thanks a lot, guys.

Thank you. Our next question comes from Andrew Jeffrey with Truist Securities. Please proceed with your question.

I appreciate you taking the question this afternoon. As a follow-up on the couple of questions that have come before on your growing ISV partnership network, John, can you comment a little bit on relative productivity, sort of how much of your volume growth is coming from, say, I'll call them sort of legacy ISV relationships, so from those you've had since perhaps before the IPO period, versus new signings and acquired ISVs? I guess what I'm getting at is I wonder if there's room for growing productivity across that entire footprint over the next couple years.

Yeah, sure, there is. So, obviously, prior to the IPO, our existing verticals were actually really strong and are still delivering new wins for us. Many of those companies or ISVs are actually growing themselves. So we're still getting great wins from that. We're also doubling back and trying to, through marketing efforts and relationships, they're trying to obviously extract more wins out of those portfolios, and the marketing part of that is paying off. But new additions as well, we are laying out game plans on each one of those and actually getting better at it so we can continue to partner with them to drive additional growth sales out of those. That's both on the loan repayment side as well as on the B2B side as we drive relationships from that piece of it. So organically, when we look at the different parts of our business, that's one area that we know that there's pent-up demand and there's a great opportunity as we get better at driving new sales growth through our channel partners there. Okay.

Thank you. I look forward to seeing that. And then can you just take a step back and I think the The slide in your investor presentation, slide 12, is really helpful as we think about your business. Can you talk about sort of relative yield across the four big categories or three and ARM plus other? Just try to think about it. For example, B2B grows faster perhaps than some of your other businesses. What the impact is to yield? So just try to frame that up as we model forward.

Yeah, I'll take that. So, yeah, we take it piece by piece. Loan repayment is probably somewhere a little bit north of 100 basis points and talking about net revenue yield or take rate. You know, B2B is probably right around 100. The B2B merchant acquiring space is probably a little bit lower than that. So, but the AP side is maybe a little bit higher if you think about virtual cards. So, on average, call it 100 basis points. I'd say healthcare is probably in that same range, maybe slightly lower. But then ARM is probably somewhere in the 125 to 130 basis points, which is why you see our overall take rate moving up from, historically it was right around 100 basis points for a while, and now it's maybe 105 basis points this quarter, moving up probably a little bit more as billing tree becomes a bigger part of the mix. So I'd say somewhere in kind of the, between 105 to 110 basis points on a combined basis as we bring in full billing tree contribution.

Okay. Yeah, that's super helpful. And if I could just sneak one last quick one in. Billing trees revenue growth compared to the overall business, high or low or the same?

It's similar. It's kind of mid-teens, mid to high teens. And so they're growing nicely. You know, probably the fastest growing part of our business is B2B. but we thought Billingtree had very nice growth and also a strong take rate like we talked about in margins, either the same or even maybe a little bit higher than the corporate average.

That helps a lot. Thank you very much.

Thank you. Our next question comes from Craig Maurer with Autonomous. Please proceed with your question.

Yeah, hi. Thanks for taking the questions, guys. Two questions on some of your traditional verticals. Can you discuss what you're seeing in your healthcare vertical as we're seeing reports and evidence that things like elective healthcare has definitely reaccelerated? And secondly, maybe what your partners are telling you in the auto finance segment as chip shortages are still heavily impacting supply chains. I know you're more into the used car business. However, with Mercedes-Benz, you have entered into captive and are looking to grow there. Thanks.

Yeah. So on the healthcare side, we have heard the same thing from our customers on elective procedures. That was coming back really strongly. I guess we have to monitor just what's happening with, you know, COVID variant and the hospital bed situation and how that could impact elective procedures. Hopefully that's temporary and it just continues to come back the way it was when we went out and kind of surveyed some customers. So we think that's really positive. There's probably a lot of pent-up demand that we could see going into next year within the healthcare space in general. In healthcare right now, we're in several different areas. We're in the consumer payment-driven part of healthcare where they're just paying a provider directly. We're in the space where the insurance provider is paying out through a third-party administrator to a provider. So that's AP disbursements. That's where we would see a lot of elective procedures benefiting us. And then we're also doing a lot of AP payments for large hospital systems that pay their suppliers with virtual cards. And so we think there's a lot of potential recovery going into the back half of this year and next year in health care in general. And then auto lending, you're right, we're more focused on used cars. Mercedes is a great customer, a large customer, but You know, most of our business there is in used cars and hasn't been impacted as much with chip shortages, and we haven't seen any material volume declines from Mercedes either.

Thanks a lot.

Thank you. Our final question is from Bob Napoli with William Blair. Please proceed with your question.

Thank you. Good afternoon. On the growth rates for loan repayments, what are you seeing for year-over-year growth? payment volume growth for personal loans and auto loans, and how is that trended? Is that going to be important in getting that acceleration you're talking about?

Yeah. I mean, on a normalized basis, personal loans is probably in the mid-teens, and auto has continued even throughout COVID to be kind of 25-plus percent. And so with personal loans coming back, That is a very important part of the organic growth outlook that I mentioned earlier. And we do see it coming back. We do see originations happening. We do see demand there. It's just really a matter of timing for us as to when that flows to our repayment volume in the back half of the year going into 2022. And then so if that can get back to a normalized kind of mid-teens growth rate and you combine that with the auto business, that's how we get to that organic growth outlook.

Okay. Thank you. And then on the B2B payments business, so you've made five acquisitions, four on the AP side, different verticals, and one on the merchant acquiring side. What does that organization look like? And I didn't catch who you hired from, Divi or Visa? I mean, are each of these businesses, John, reporting up to you, or how is that organization being structured? you know, from a leadership perspective.

Yeah, sure, Bob. So we did have a great new hire that we mentioned here, and we're excited about having him on our team. From an overall leadership perspective, that will be reporting directly to me. We'll separate out the loan repayment and the B2B verticals. We're looking to have some announcement on that later on this month. Just couldn't get it all squeezed in before this call. But we absolutely know who our leader's going to be there. And as we continue to bring those teams together, we're just trying to have some conversations internally around that. We're super excited, though. As you can imagine, we've been very blessed with some great team members there, and our product and technology solutions are superior to what we're seeing in the marketplace. So look for us to give some more clarity on that as we bring some of our teams together on that piece of it. But we know what we're doing and where we're headed on that piece of it, and we'll We'll be showing you that a little bit more clearly as we move through this year.

And then on the cross-sell side, another player in the market made a large acquisition on the AR side, obviously believing in the cross-sell between AR and AP. How confident are you on that cross-sell? Are you big enough in the merchant acquiring side to make that relevant? Are you looking to make acquisitions on the AR side to balance that out. I mean, so what's the cross-sell? You know, what are you seeing from cross-sell? How easy is the cross-sell? And can you give metrics on it? Go ahead. No, just hoping, I mean, can you give us like metrics in the future on how successful you're being or give us some thoughts on how that's going to work?

Yeah, I mean, we see it across a lot of different verticals. In fact, we see a lot of our lenders wanting to use our AP capabilities. That's something that they like, the idea of having just a one-stop shop for payments in general. We also see it within B2B merchant acquiring and then B2B AP automation, where, for example, within Sage or Acumatica, we now can provide both services to a single customer. Our team was just out at the Acumatica annual summit and getting a lot of really positive feedback on the ability to do that and have just one payment provider for both sides. So they're building a pretty robust pipeline in Sage and Acumatica now where we can do both AR and AP. And like I said, we're also selling that to our lending customers and we're seeing really nice uptake there. So it's real, it's happening. We have our salespeople out there building pipelines and executing on that.

Thank you. And then last question on the virtual card. side of the business. Another player in the space is showing some pretty dramatic increases in revenue per transaction. Now, they're more in the SMB space, and I think you're more mid-market. Do you have that same opportunity? What is the penetration rate of virtual card today for your B2B business, and what can that be? Or are you not going to see the same type of benefits that somebody might in the SMB space?

Yeah, so the companies that we acquired, one of the reasons we liked them was because they had nice virtual card penetration already. So they weren't, you know, check or ACH focused. They were virtual card focused. So I think ours, you know, our existing penetration may be a little bit higher than average, you know, maybe across all of our businesses somewhere in the kind of high teens to 20% with the ability to go much higher. So we're kind of starting off probably a higher base than a company that's been more focused on ACH, for example. But we also have supplier enablement folks in-house who are experts at this. We don't outsource that. We do it ourselves, which is why we were able to get to those rates and think we can bring them higher. And so we certainly do think there's room for more adoption, and we have now a team of people doing that. And to your earlier question, we're Within B2B, we're bringing all of the AP businesses together on the same technology platform and looking to employ the same supplier enablement strategy, which we think could be effective across those businesses. And so we've just been more focused on virtual card probably from the beginning within B2B and not as much ACH. But there's absolutely room to increase.

And obviously the deal size and the volume is much greater, the deal size, as we're pursuing. Thank you, appreciate it.

Thank you. Our next question comes from James Fawcett with Morgan Stanley. Please proceed with your question.

Yeah, thanks. I wanted to ask a follow-up question on the B2B. I'm just curious as you're kind of putting together solutions and talking to customers, how much real competition are you running into versus really putting together solutions and offering capabilities that maybe your customers hadn't seen before. I'm just, you know, I think a lot of times in B2B we get asked a lot about everybody that's talking about B2B and the competition, but I don't really have a great sense of how much you actually run into other suppliers.

Yeah, when we're talking about the AP side of the business, you know, and specifically virtual cards, oftentimes when you're with larger merchants, enterprise-sized customers, you could be running into them using banks as legacy partners, and we're taking share away from banks. We might see invoice pay, we might see CSI, but in most cases, the majority of the cases, it's still wide open, and the customer has not taken electronic payments, or excuse me, they have not made electronic payments to suppliers, and so it's just a wide open space. We do from time to time in larger customers see some legacy banks and then those other names I mentioned, but oftentimes we're just competing against paper methods of payment and checks versus moving them to electronic, which we would like to focus on virtual card.

And then our ability to deliver a total pay solution where it's a one-stop shop for all of their payment modalities. We find that even at enterprise level, they may be using a one-stop Processing ACH is a different way. Obviously, they're just writing checks and that they may be using a purchasing card. To bring it all under one umbrella with superior technology, the ability to track and trace an invoice along with the actual payment throughout its payment lifecycle and back into the ERP system, we're not seeing anything that competes with our offering in the marketplace as we think we have superior technology at least today.

That's a really useful color. And then in terms of revenue and revenue visibility and growth, how is growth right now split between expansion with existing customers or growth of their own volumes versus adding new customers? And how much evolution are we seeing in terms of that contribution?

Yeah, I'd say it's still probably two-thirds existing customers, but that has – That has evolved over time as we've added a lot more ISV partners. So with the amount of ISV partners we have today and the growing sales force, we are adding more new customers, which we think is a very good thing. And we now, of course, have access to a lot more verticals to do so. But a majority of it is still just existing customer penetration, particularly within loan repayments, which are some of the lower penetrated verticals. and other areas where the card acceptance may be somewhere in the teens, there's just a lot of room to run with our existing customers. So that's still a majority of it, but as we continue to add ISV partners and grow our sales force, you'll probably see more new customer wins as well.

And also on our B2B side, there may be some legacy customers. Remember, obviously we acquired some of these companies that were predominantly just virtual card as we roll out our total pay solution to some of those older customers. There's great opportunity and upside from those as well.

That's really good. Thank you very much. Thank you.

Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I will now turn the call over to John Morris for closing remarks.

Thank you, everyone, for your questions today and for your time. As we reported, we're super excited about our second quarter results and the outlook that we have for the rest of the year and even into 2022. Our business continues to perform well. Our organic growth opportunities are there. Our pipelines are strong. We're excited about what's in our implementation pipelines as well and the opportunities we continue to see just organically in the white space of the markets we serve, specifically in the B2B space and the loan repayment spaces. We'll continue to drive the opportunities for our ISV channels, and we see significant opportunities there. We want to continue to invest in the business organically. We think that's a really good investment for our shareholders, and we're super excited about our new team members that have joined us from the acquisitions, as well as our existing team members that continue to help us deliver superior results, and we're very grateful for that. So thank you for your time today, and look forward to speaking with you individually when the opportunity arises.

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation and have a wonderful evening.