Repay Holdings Corporation

Good afternoon. I'd like to welcome everybody to Repay's second quarter 2023 earnings conference call. This call is being recorded today, August 9th, 2023. I would like to turn the session over to Stuart Crescente, Head of Investor Relations at Repay. Stuart, you may begin.

Thank you. Good afternoon and welcome to our second quarter 2023 earnings conference call. With us today are John Morris, Co-Founder and Chief Executive Officers. 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 filings related to today's results and our most recent Form 10-K. Actual results may differ materially from any forward-looking statements that we make today. 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. Reconciliation and other explanations of those non-GAAP financial measures can be found in today's press release and in the earnings supplement, each of which are available on the company's IR site. Those materials include reconciliations and other explanations with respect to REPAY's organic growth. As described in other materials, Q2 2023 organic growth is calculated by excluding contributions attributable to the Blue Cow software business in the second quarter of 2022 since REPAY divested Blue Cow during Q1 2023. With that, I would now like to turn the call over to John.

Thank you, Stuart, and good afternoon, everyone. Thank you for joining us today to review our second quarter results. On an organic basis in Q2, we reported revenue growth of 9% and gross profit growth of 12%. Our strong results through the first half of the year give us the confidence to raise the midpoint of our revenue and gross profit guidance for 2023, which Tim will discuss in greater detail. Our focus as a company is to help businesses accept and send payments by providing integrated payment solutions to verticals that have specific transaction processing needs. Our proprietary embedded payment technology reduces the complexity of electronic payments for clients, while enhancing the overall experience for consumers and businesses. As we continue to take advantage of the secular trends towards frictionless digital payments, We have been focusing on thoughtfully investing in our go-to-market efforts as well as technology to ensure we remain best in class in both the consumer and business payment segments. On the go-to-market side, our investments are paying off. We continue to further penetrate and expand our services into the 252 integrated software partners. We're also diving deeper into existing integrations, including with Microsoft Dynamics 365 Business Central. Our current integration enables clients to automate their accounts payable payments, and we are now in the process of developing for accounts receivable payment streams. In addition, our direct sales team has made great traction, especially when further penetrating large enterprise accounts. Our investments into technology also continue to generate positive returns. We're regularly evaluating and leveraging new payment modalities to reduce friction and boost revenue for our clients. Last quarter, we announced additional digital wallet capabilities like PayPal and Venmo, and we continue to offer the industry-leading best-in-class e-cash solution. We are forging ahead on offering real-time payments for clients while continuing the development work on FedNow. Our consumer payment segment grew organic gross profit by 16% in Q2. This was primarily driven by the ongoing secular tailwinds within the consumer payments verticals we serve and the ramp of recent large client implementations. We are pleased with our strong sales activity in the personal loans and credit union verticals, adding many new clients in each market. We are now integrated with 158 software partners in the consumer payment segment. During the quarter, we announced an integration with Q2's digital banking platform via the Q2 Partner Accelerator Program. This program enables financial institutions to purchase repaid products and then offer our payment technology directly through Q2's digital banking platform. further expanding Repay's reach into the personal loan and credit union industries. In addition, we established new partnerships to offer Repay's embedded payments across a variety of software platforms, including loan servicing management and accounts receivable management systems. Credit unions and community banks continues to be a key focus for our sales teams. Repay's platform helps financial institutions and financial providers automate payment streams across all payment types. We signed seven credit union clients this quarter, bringing our total credit union clients to 257. We are well positioned to continue winning clients in this underserved market of approximately 4,750 credit unions across the U.S. We have also been enhancing our existing software partnerships by adding new product features and payment modalities, as well as our go-to-market efforts that present new subvertical opportunities. Credit card servicers are a great example of a new opportunity for repay. And we have been building a strong pipeline in this exciting new sub-vertical. The mortgage servicing space continues to be a significant growth opportunity in our consumer payment segment. And we look to increase debit card penetration in this vertical. As a reminder, a recent Visa study found that more than 50% of consumers, if given the option, would use their debit card for mortgage payments. In addition, over 50% of mortgages in the U.S. are not currently set up for automatic recurring payments. We're able to provide those consumers with the opportunity to use their debit card for the next monthly payment. This process is made easier through our partnership with Black Knight. The early results of testing are promising, and we began marketing the debit capabilities to both existing and potential clients. Black Knight's software platform supports the majority of the mortgage services in the U.S., so we believe this could be a great growth lever in 2024 and beyond. Instant funding, which we process real-time through Visa Direct and MasterCard SIN, Continues to resonate with new and existing clients. In the second quarter, transaction volumes were up approximately 60% year over year. And lastly, our RCS platform performed nicely in the quarter, as the modern platform is resonating well within the marketplace. Moving over to the business payments, during the second quarter, our business payment gross profit grew single digits year over year on a reported basis. But more importantly, grew 15% when excluding the impact of political media during 2022. Our normalized growth was driven by the continued momentum in our sales and implementation pipeline for enterprise and mid-market companies within our healthcare, property management, auto, and municipality verticals. We're integrated with 94 software partners in the business payment segment, including Quadient, a leading cloud-based communications solutions provider. Through our partnership, businesses that use Quadient's AP automation software can process payments seamlessly with Repay's real-time vendor enablement and embedded payment technology. We're also working with Quadient to expand Repay's reach in Canada by offering accounts payable capabilities to their clients. Within the hospitality vertical, we're excited to announce our recent integration with Inflow. With Repay's embedded accounts payable solutions, hotelers and hotel management groups using Inflow can continue operating in one comprehensive hotel management platform. On the AR automation side of business payments, we recently expanded our integration with AccountMate. launching Click-to-Pay as a new feature provided by Repay that enables account-mate users to get paid faster and provide a simplified, convenient payment experience. Repay continues to see the prioritization of AR and AP automation issues by businesses across our verticals, and our growing list of software partners represents the opportunity to provide our embedded payment solution to them. As a result of the investments we have been making with software partners and our go-to-market efforts, we signed and implemented many new clients across our business payment verticals during the quarter. A great example is Castle Management Group, a premier property management company with approximately 500 HOA properties. Castle Management required a unified payment system to make their vendor payments across all their managed properties and selected Repay's total pay solution for their accounts payable needs. And in the healthcare vertical, a large healthcare system in the state of Arkansas selected Repay for their supplier payment needs. We continue to build our vendor enablement functionality accelerating to over 195,000 suppliers in our AP supplier network, which includes additions across all key sub-verticals within AP while simultaneously enhancing our go-to-market proposition. We will continue to invest towards our real-time vendor enablement as the business payment segment scales by vertical. In addition, we're always looking for ways to find processing cost efficiencies in the business. So there's a lot of excitement and progress happening across the company as we guide businesses through the ever-changing world of embedded payments. We're excited about the future of repay, being strategically positioned in the middle of the new digital payment flows in North America. We are poised for success with a strong balance sheet and profitable organic growth to accelerate cash generation. As we're starting to see various opportunities come back to the market, we always maintain the potential for strategic M&A. To wrap up and before turning the call over to Tim, I am proud of our solid results for the first half of the year. Our sales pipelines are strong and growing. We have a great opportunity ahead of us as we continue to innovate and drive the transformation of integrated digital payments by expanding and enhancing our network to all networks that send and receive funds on behalf of our clients. With that, I'll turn it over to Tim to go to our financials and our outlook for the remainder of the year. Tim?