Repay Holdings Corporation

Good afternoon. I'd like to welcome everyone to REPAY's fourth quarter 2023 earnings conference call. This call is being recorded today, February 29th, 2024. I'd like to turn the session over to Stuart Grisanti, head of investor relations at REPAY. Stuart, you may proceed.

Good afternoon and welcome to our fourth quarter 2023 earnings conference call. 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. Those forward-looking statements are subject to risks and uncertainties, including those set forth in the SEC filings related to today's results and in 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 reference 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. With that, I would now like to turn the call over to John. Thanks, Stuart.

Good afternoon, everyone. Thank you for joining us. I wanted to cover three main topics today. First, a review of the fourth quarter. Second, a recap of our accomplishments in 2023. And lastly, go over our strategic initiatives that will drive growth in 2024 and beyond. First, on Q4, on a normalized organic basis, we reported revenue growth of 14% and gross profit growth of 13%, with both metrics performing ahead of our expectations. We closed out the year seeing the continued demand from existing clients adopting more payment capabilities. and new clients demonstrating the need for our powerful technology. 3PA has become a leading expert within the consumer payments and business payment verticals we serve. We have become a one-stop platform to optimize payment streams and are constantly working to capture new payment flows while enhancing client relationships with many value-added services. In Q4, our consumer payments organic gross profit growth was 13%. This was primarily driven by the ongoing secular tailwinds within the consumer payments verticals we serve and the continued ramp of recent large client implementations. We added many new partners and clients to our network in Q4, including four new software partners, bringing us to a total of 165 partners in the consumer payments segment. One example was our launch with Akubo, a leading provider of cloud-based software that elevates how financial institutions collect and manage their portfolios. Through the integration with Akubo's collection management software, we enable financial institutions to accept digital payments while utilizing a secure real-time data exchange for streamlined operations, robust reporting, and simpler RUT conciliation. We also recently announced an integration with Lexop, a self-service software for credit unions, financial institutions, and other financing companies that optimizes the repayment journey for past due consumers. The repayment integration with livestock collections management software enables their clients to collect late payments more efficiently, receive real-time payment updates, and increase engagement and minimize loan servicing costs. We added 10 new credit unions to Repay, bringing our total credit union clients to 276. Repay's vertical expertise and software integrations are a differentiated solution leading to a healthy sales pipeline. As an example, a new credit union client was evaluating multiple processors to solve all their payment processing needs before selecting repay. We believe we are the only market participant that has a combination of integrations with our client's core platform, home banking platform, and collection platform to fit their unique needs. In addition to credit unions, we're also addressing a similar client base in community banks and winning new clients through our existing software integrations. These new wins continue to give us the confidence that our investments towards creating software partnerships and further embedding our payment technology within existing integrations are leading to a strong sales pipeline with positive returns across Repay. Additionally, in value-added services, our instant funding product continues to see significant growth with transactions up approximately 45% year-over-year. What a very productive quarter for our business payment segment. which grew gross profit by 25% when excluding the impact of political media during 2022. Our normalized gross profit growth was driven by sales penetration within software partners and a strong implementation pipeline for enterprise and mid-market companies within our healthcare, property management, auto, and municipality verticals. Within AR, we remain focused on deepening our client bases within existing ERP systems and optimizing payment acceptance. And on the AP side, we increased our supplier network to over 261,000 suppliers during the quarter. Our real-time vendor enablement continues to drive the number of suppliers within our network, which drives the monetization of digital payment flows and deeper virtual card penetration. We find many new clients across our verticals during the quarter, and we also continue to grow with our existing clients. A great example of this is Baywood Hotels. whose management portfolio spans many well-known brands as one of the fastest-growing hotel management and development companies in the United States. We signed and began implementing for Baywood Hotels earlier this year, and they have continued to expand on our AP platform by adding many new hotel properties each month. We are now integrated with 97 software partners in the business payment segment. A few new and expanded partnerships to highlight include Blackbaud, PDI Technologies, and Sage. Repay's enhanced integration with Sage Intac will supplement our existing integrations across Sage's product suite. Software providers are selecting Repay to directly embed our payment technology into their software as they strive to enhance their users' experience by providing value-added services to their customers. And now on to the next topic, a review of full year 2023. From a financial perspective, we demonstrated normalized organic revenue growth of 12% and gross profit growth of 13% while improving our free cash flow generation throughout the year. From a commercial perspective, we made great progress as well, including the continued focus on our sales and distribution resources. We now have over 262 software partners, up from 240 at the end of 2022. In addition, We aligned our internal sales, implementation, and support teams to focus on specific articles and software partners, as well as strengthen the customer experience. And throughout the year, we added talented team members in select areas of our organization while reducing overall net headcount and maintaining our margin profile. We increased our supplier network 60% year-over-year to 261,000 vendors. On the product side, we rolled out additional payment modalities such as PayPal, Venmo, while also enhancing our e-cash solution. We also made progress on our mortgage debit exceptions initiatives with Black Knight. In addition, we made key hires to ensure our product team can support the rollout of future products and services to support our customer needs. From a capital allocation standpoint, we started the year streamlining the organization with the divestiture of BlueCal software, which helps us to remain focused on investments towards organic growth. And during Q4, we utilized our share repurchase program to buy back shares in a disciplined way. The work we've put in this past year positions us well to execute towards RFA's mission of helping businesses make and receive payments so they can focus on what matters most to them. This effort involves meshing together a vast ecosystem of payment flows with many moving pieces over the past decade plus. It involves the connectivity of all various networks that allow us to move money, including our card payment rails, RTP, or instant funding via Visa Direct and MasterCardSend. It means that we need to provide omni-modality and omni-channel. It includes a software network of embedding payments directly within enterprise software workflows. These integrations open up large verticals with critical mass and allows us to create a network within our end markets. On the business payment side, we have developed a vertically rich supplier network to create a flywheel for the future and eventually expand capabilities to enhance our vendor enablement process. This means we are a full-service processor providing value-added services like instant funding and communication solutions, while also working on various strategic initiatives and opportunities to expand over time. The value created is the digitalization of payment flows, while also optimizing transaction routing to deliver the best payment experiences to our clients and their customers. While we are relatively early in this continuous mission, we are starting to see improved growth, which we believe will drive higher returns over time. As we turn to 2024, we will align our strategic initiatives with this mission while driving growth this year and beyond it. As we continue to take advantage of the secular trends towards frictionless digital payments, we will be squarely focused on, first, go-to-market efficiency. We will continue to expand our services into our now 262 integrated software partners while finding ways to further penetrate these relationships. We look to add new software partners to help fill our expanding sales pipelines. And we will selectively add enterprise sales team members to specific verticals within consumer payments and business payments. Second, client implementations. We remain focused on making sure we guide our clients through a seamless onboarding process while providing ongoing and first-class support throughout the entire client experience. And third, product. Our tech platform is constantly evolving as we have developed a best-in-class clearing and settlement engine while expanding our payment modalities. As we look into the future, our platform continues to scale as we automate manual processes. Lastly, our capital allocation priorities remain focused on creating values to our shareholders by investing in organic growth opportunities while continuing to be open to a creative strategic M&A, as well as buying back shares in a disciplined way. We exit 2023 with a solid execution that has continued into January with consistent trends and strong growth. With that, I'll turn it over to Tim to go over our financials and our outlook for 2024. Tim? Thank you, John.