Repay Holdings Corporation

Good afternoon, and I'd like to welcome everyone to REPE's third quarter 2024 earnings conference call. This call is being recorded today, November 12, 2024. I'd like to turn the session over to Stuart Grisanti, Head of Investor Relations at REPE. Stuart, you may proceed.

Thank you. Good afternoon, and welcome to our third quarter 2024 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 FCC 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. Board-looking statements speak only as of today, and we do not assume any obligation or intend 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. Reconciliations and other explanations of those non-GAAP financial measures can be found in today's press release and the earnings supplement, 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 today. Q3 represented another quarter of profitable growth at Repay, with gross profit growth of 9%, adjusted dividend growth of approximately 10%, and free cash flow conversion of 139%. Our year-to-date results represent strong double-digit adjusted dividend growth and the acceleration of free cash flow conversion towards our updated four-year target. Throughout this year, we have been determined to make progress on our three main strategic initiatives to drive growth for 2024 and beyond. As a reminder, they include our go-to-market efficiency, client implementations, and a focus on product. Our Q3 consumer payments performance represents the continuous execution of our core growth algorithm, which includes growth from existing clients as well as signing new clients over the past several quarters. Overall, our core consumer payments growth continues to benefit from the ongoing secular tailwinds of processing more digital payments for our clients across our verticals. During the quarter, we further strengthened our existing software partnerships while adding new software partners. Our consumer payment segment now has 176 software partners, where our go-to-market and consumer support teams continue to develop our sales pipeline and improve our clients' experience. We added several new clients to our platform in Q3, including 13 new credit unions, bringing our total to 313 out of the roughly 5,000 in the U.S. In addition, we are gaining traction with regional financial institutions, from the direct integrations of our payment technology into multiple core financial institution and credit union software systems. Our robust technology, customizable features, and ongoing client support represents a differentiated solution in the marketplace, leading to a healthy sales pipeline. We are now live with the previously announced AutoCaptive lender, which we believe will be a contributor to growth over multiple years. We began processing in late Q3 and expect a measured ramp during the remainder of the 2024 through 2025. We also began processing for our mortgage debit acceptance offering with a select group of mortgage servicers during Q3. And we continue to expect contribution from this multi-year opportunity to begin in 2025. In addition to new client wins, our growth opportunity continues to extend with existing clients. Across our verticals, there are countless examples of clients that began initial implementation last year, started to ramp their processing needs with a repaid payment technology, and through our client support, came back asking for additional offerings such as IVR, text-to-pay, or digital wallets for both their existing and new portfolio volumes. Additionally, the accounts receivable management vertical continues to be an attractive opportunity with multiple years of growth ahead. Throughout this year, we have expanded our accounts receivable management software partnerships and started implementing for several outsourced accounts receivable management and loan servicing providers in the U.S., And lastly, in value-added services, our instant funding product continues to see healthy growth with transaction volume up approximately 24% year over year. Over the medium term, we continue to evaluate new areas of expanding our instant funding capabilities across our verticals. During the quarter, our growth was partially impacted from normalizing consumer spending trends, lapping the significant and immediate contribution from a large personal lender in 2023, and the loss of an RCS client, which was purchased by another processor. Shifting over to our business payment segment, during the third quarter, our business payments gross profit grew by 67% year-over-year. Gross profit growth was driven by strength in our core AP business, solid contributions from our political media vertical, and the ramp of live new clients during the quarter. We continued to see strength within the healthcare and hospitality verticals and signed several new enterprise clients, including the University of Florida Health Systems. UF Health Systems is one of the largest academic health and research centers in the U.S. with facilities in multiple cities across the state of Florida. Once fully ramped across locations, clients like UF Health Systems and other enterprise healthcare wins become top contributors to our growth. Additionally, we began to benefit from political media spending during Q3, while also onboarding several large new clients during the presidential election cycle, which is great for election cycles into the future. For 2024, our preliminary data suggests that the strong media spending trends continued through November. During the quarter, our B2B growth was partially impacted from corporate spending patterns within pockets of existing clients leading to lower volumes. We remain confident in the top of the funnel sales pipeline as our go-to-market approach is continuing to win new enterprise clients and software partners. In AR, we are focused on optimizing payment acceptance, enhancing our ERP partnerships, and reinforcing our support teams to maintain exceptional client experience. Within Core AP, we continue to grow our software partnerships while enhancing integrations with existing software partners and increasing our supplier network to now over 330,000 suppliers. Our real-time vendor enablement process continues to grow the supplier base by vertical, and our vertically driven go-to-market strategy further strengthens our ability and confidence in building a healthy sales pipeline for our now 100 software integrations and partnerships within business payments. A new integration that was announced during the quarter was with OT Air, a hospitality software and performance optimization platform. Through our integration, OTIR provides a one-stop shop for their clients to streamline their operations by automating the entire vendor payment process, while also providing faster and more secure payment options within OTIR's DigiPay. In the education vertical, we are now allied with Blackbaud. Our team is looking forward to building our partnership, ramp new clients in 2025, and contribute to business payments growth for multiple years to come. As you can see, our vertical go-to-market strategy is driven by directly embedding our payment technology within software partners like OTR, Inflo, and Blackbaud to solve clients' unique payment needs within the various verticals we serve. In combining our software partnerships with our go-to-market sales teams, we are converting sales leads into signed clients. Within Accounts Payable, we are also excited to announce our new partnership with MasterCard to optimize check and ACH payments. When combining our total pay platform with our MasterCard partnership, Repay can recognize our clients' payment flows faster, leading to further automation and digitization of payments. Across both consumer payments and business payments, we have been able to grow Repay by leveraging our now 276 integrated software partners, expanding our product offering, and developing our sales and support teams to provide clients with a seamless onboarding process while consistently evolving our tech platform. Internally, We look to further scale our business as we automate manual processes, enabling us to expand free cash flow conversion for the remainder of the year and beyond. Additionally, in the third quarter, we completed a convertible notes offering while extending and upsizing our revolving credit facility to provide us with the flexibility to continue focusing on profitable growth and accelerating free cash flow. Our capital allocation strategy remains focused on creating value for our shareholders while maintaining a strong balance sheet with ample liquidity and financial flexibilities. Our balanced approach incorporates reinvesting in organic growth opportunities while continuing to be open to accretive strategic M&A and opportunistically repurchasing shares under our buyback program, which we utilized during the third quarter. We believe the market continues to undervalue Repay's profitable growth, strong balance sheet, and the ability to accelerate cash generation. Repay has been a Rule of 40 since becoming publicly traded in 2019, while also remaining committed to allocating capital to drive shareholder value. As CEO, and as part of the commitment to driving shareholder value, I continue to evaluate all aspects of our company, and if necessary, take actions to realize this value. We are focused on running the business efficiently while continuing to execute on profitable growth and free cash generation. With that, I'll turn it over to Tim to go over our Q3 financials and our outlook for 2024. Tim?