Repay Holdings Corporation

Good afternoon. I'd like to welcome everyone to Repay's fourth quarter 2024 earnings conference call. This call is being recorded today, March 3rd, 2025. I'd like to turn the session over to Stuart Grisanti, head of investor relations at Repay. Stuart, you may begin.

Thank you.

Good afternoon and welcome to Repay's fourth 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 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 reference certain non-GAAP financial measures. Reconciliations 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 will now like to turn the call over to John.

Thanks, Stuart. Good afternoon, everyone. Thank you for joining us today. On today's call, we plan to cover three main topics. First, a review of the fourth quarter 2024, second, a recap of our progress and accomplishments in 2024, and lastly, the announcement related to a strategic review, including a review of our overall strategic alternatives. First, on Q4, REPAY closed out the year with another quarter of profitable growth. While gross profit growth showed steady growth, adjusted EBITDA increased approximately 9%, and free cash flow conversion improved to 64%. Our full year results showcased our durable business model with gross profit growth of 6%, strong double-digit adjusted dividend growth, and accelerating free cash flow conversion from 42% in 2023 to 75% in 2024. In Q4 and throughout 2024, the consumer payment segment executed on our core growth profile, which includes growth from existing clients as well as signed new clients during the year. Core consumer payments continues to benefit from the ongoing secular tailwinds of processing more digital payments for clients across our verticals. We continue to see the demand for our clients to adopt more payment capabilities, making repay a powerful one-stop payment platform to optimize payment flows while offering value-added services. Within the consumer payment segment, we added four new software partnerships during the quarter, while further strengthening our existing partners, bringing our total software partners to 180. Our go-to-market and customer support teams leverage these relationships to develop our robust sales pipeline and help improve our overall client experiences. We added several new clients to our platform in Q4, including 16 new credit unions, bringing our total credit union clients to 329. Our payment technology is directly integrated into multiple core financial institutions and credit union software systems. which is driving a healthy sales pipeline into the 5,000-plus credit unions and regional financial institutions across the U.S. A great example of a recent win is PenFed Credit Union, one of the nation's largest credit unions that serves approximately 3 million members. PrePay is excited to go live with PenFed to enhance their members' payment experience, giving them 24-7 digital capabilities while making automotive payments. In addition to new client wins, we made great strides in 2024 to position Repay for vertical-specific growth opportunities ahead, such as expanding our software partnerships within the accounts receivable management vertical. We're also making progress with the credit card servicing industry, a newer sub-vertical. Clients are selecting Repay as their payment technology provider because of our payment capabilities providing greater flexibility and convenience for their users. And lastly, in value-added services, our instant funding product continues to see healthy growth in Q4 transaction volumes, up approximately 34% year-over-year. Our clients primarily use this product today to differentiate themselves by offering a quick and convenient way to securely fund their customers within the personal lending vertical. Over the median term, the instant funding product can become an additional revenue stream with other verticals as we continue to evaluate new areas to expand the capabilities.

Our consumer payments growth was partially impacted from select factors during the quarter.

Some of these factors were outside of our control, such as the full quarter impact of the previously mentioned RCS client that is rolling off due to being purchased by another processor, lapping the contributions from a large personal lender in 2023, and a client loss within the lending communications solutions business who began moving their transaction processing in-house. Over the past year, we have been building momentum within our enterprise sales team, making key hires, which has translated into incremental contributions during 2024. Our core consumer bookings grew nicely year over year, giving us confidence in accelerating growth from new client wins. As we move into 2025, we remain confident in executing our go-to-market, client implementation, and product initiatives. We are also laser focused on improving our overall client experiences, which can lead to improved overall client retention, as well as additional value-added service opportunities with existing clients to further enhance the core consumer payments growth algorithm at Repay. Now shifting over to our business payment segment, during the fourth quarter, our business payments gross profit grew 60% 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. Throughout 2024, our AP business benefited from our direct sales team and software partners producing robust sales pipeline across the healthcare, hospitality, property management, and municipality verticals. We enhanced integrations with existing software partners and added several software partnerships such as Blackbaud in the education vertical, OTAIR in the hospitality vertical, and most recently, Lightspeed DMS in the automotive vertical. Repay's collaboration with Lightspeed DMS expands our reach within the automotive industry by extending our vendor payments automation functionality to a wide range of retailers and dealerships. Our sales teams are leaning into our over 100 software partnerships and integrations to cultivate enterprise relationships and develop extensive client pipeline. By combining these partnerships with our go-to-market sales teams, our normalized business payment bookings continue to build while also increasing our supplier network 38% year-over-year to now over 360,000 suppliers. During the fourth quarter, we signed several new enterprise clients, including Fairview Health Services. Fairview Health Services is an award-winning nonprofit healthcare network with a care portfolio footprint of over 50 clinics, hospitals, and medical centers in Minnesota. We're excited to start ramping these volumes with our total pay solution, and we'll also enhancing Fairview's fraud prevention processes along the way. In addition to new wins, our business payment segment was positively impacted from the continued ramp of many existing enterprise clients, such as Grady Health and UF Health Systems. Within our political media vertical, we benefited from the onboarding of several new clients and the strong ad spending during the 2024 presidential election cycle. During the quarter, our B2B growth was partially impacted from a large client being acquired and generally AR softness. Our ARR represents a large opportunity. We are dedicating less resources to AR in order to focus on the strong AP growth opportunity ahead. Within AR, we remain focused on enhancing our existing ERP partnerships and optimizing payment acceptance within these existing client bases. In addition, as we focus on accelerating growth, management made the strategic decision to migrate a group of existing AP clients onto our total pay solution to better serve and address future monetization opportunities for these clients' entire AP spending volumes. This client migration initiative, like other operational strategic initiatives, was part of our focused approach on driving long-term profitable growth. Our core AP business increased in the low teens in Q4 when excluding the one-off client attrition and strategic migration of clients. We remain confident in the sales pipeline as our go-to-market approach continues to build our software partners and enterprise clients, while also enhancing our growth profile with additional monetization efforts within our total pay solution, leading to an acceleration in growth during the second half of 2025 and into 2026. Now onto the next topic, a review of our progress in the full year 2024. From my financial perspective, we demonstrated revenue and gross profit growth of 6%, adjusted EBITDA growth of 11%, and improved reported free cash flow conversion to 75%. From an operating and go-to-market perspective, we have made great progress as well, including the focus of our sales and distribution resources. We have been able to grow Repay by leveraging our 280 software partners, up from 262 at the end of 2023. We scaled operations by further aligning our internal sales, implementation, and support teams, realized efficiencies through process automation, and added talented team members in select roles of our organization. In addition, Repay recently announced the integration with Worth AI in our merchant underwriting and onboarding processes. By directly embedding Worth AI into Repay's workflows, we can spend less time on manual aspects of merchant underwriting and onboarding, while also helping to mitigate KYB risk. On the product side, we implemented new debit acceptance offerings And as we look to the future, we work in continuous development of new potential capabilities such as RTP. We also continue to explore ways of providing value-added services to our clients, such as expanding instant funding into new areas of the company. And from a capital management standpoint, we significantly increased our cash generation profile while strengthening our balance sheet by refinancing our convertible notes to provide ample liquidity and financial flexibility. In addition, we repurchased shares in a disciplined way during 2024. As we reflect on the accomplishments we achieved in 2024 and turn to 2025, we remain dedicated to the best payment experience for our clients and creating value by facilitating the ongoing secular shift to more digital payment flows. As always, our focus is on creating value for our shareholders. Since becoming a public company in 2019, Repay has made eight acquisitions. These strategic acquisitions helped us expand our consumer payment segment into six verticals and 180 software partners, while also diversifying Repay with a leading business payment platform that represents approximately 20% of our revenue mix today, including 100 software partners and a growing supplier network of over 360,000. Over the past several years, we have been committed to our core values of profitable growth and improving cash flow generation while also being disciplined with our M&A and even strategically divesting an asset during that time. Repay has built our technology platform to scale both organically and inorganically with the potential to benefit from additional opportunities ahead. As mentioned previously during the November earnings call, I am continuing to evaluate all aspects of our company and taking the necessary actions to realize shareholder value. With the Board's support, we have commenced a comprehensive strategic review with the assistance of outside advisors to assess the full range of alternatives aimed at capturing shareholder value. The review includes evaluating opportunities to further strengthen ReFace's position in the verticals we serve, adjacent end markets, go-to-market strategy, relationships with our partners, and capital allocation. This strategic review may also include consideration of various strategic alternatives, including M&A, a take private or sale of the company, or other structural changes, transactions, or alternatives that could enhance shareholder value. We do not intend to comment further or provide updates regarding this strategic review until it has been completed, unless the company determines that additional disclosure is appropriate or required. As we are undergoing the review of our business, our capital allocation priorities remain focused on creating value for our shareholders. while maintaining a strong balance sheet with ample liquidity and financial flexibility. Our approach is as follows. To reinvest into organic growth opportunities. In 2025, we plan to make targeted sales, go-to-market, and relationship management investments to strengthen our position and accelerate our organic growth in 2026 and 2027. To continue managing CapEx as a percentage of revenue, while maintaining prudent investments towards technology and product. to address the $220 million convertible note due in February 2026 with this capital allocation framework in mind. Additionally, we continue to be open to accretive strategic M&A, and we will continue to have the authorized share buyback program where we have opportunistically repurchased shares in the past. With that, I'll turn it over to Tim to go over our Q4 and full-year 2024 financials. Tim?

Thank you, John. Now let's go over our financial results for Q4 and full year 2024. In the fourth quarter and full year 2024, Repay delivered solid results across our key metrics. Revenue was $78.3 million in Q4, representing an increase of 3% year-over-year. Full year revenue increased 6% year-over-year. In Q4, gross profit grew by 2% year-over-year. Consumer payments segment gross profit declined approximately 5% during Q4 and grew 3% in full year 2024. while our business payment segment gross profit grew 60% in Q4 and 40% for the full year. As John mentioned, our gross profit growth was impacted by select client losses and the strategic technology migration of targeted business payment volumes to our total pay solution. We believe these are isolated to specific situations, while our core growth remains healthy. Excluding these impacts, reported gross profit growth would have been approximately 10% in Q4. Q4 adjusted EBITDA was $36.5 million, representing 9% growth in Q4 and 11% growth for the full year. Q4 and full year adjusted EBITDA margins were approximately 47% and 45%, respectively, demonstrating our disciplined approach to managing operating expenses while being able to support sales, implementation, and client service teams across the company. Fourth quarter adjusted net income was $22.4 million, or $0.24 per share. Q4 reported free cash flow was $23.5 million, representing 64% free cash flow conversion. Our full year 2024 free cash flow conversion was 75%. Throughout 2024, free cash flow benefited from our continued growth, while also seeing the flow through for managing both operating expenses and CapEx. During 2024, free cash flow was favorably impacted by over $20 million in positive network and capital changes that we expect to reverse in Q1 2025. As of December 31st, we had approximately $190 million of cash in the balance sheet with access to $250 million of undrawn revolver capacity for a total liquidity amount of $440 million. BPAY's net leverage is approximately 2.3 times the total outstanding debt of $507.5 million comprised of a $220 million convertible note due in February 2026 with a 0% coupon and $287.5 million convertible note due in 2029 with a 2.875% coupon. That leverage will continue to naturally benefit from our strong profitability and cash flow generation. As John mentioned in his opening remarks, we have initiated a strategic review of our company, including exploring strategic alternatives with our board support. As part of this dynamic, we are refraining from providing a 2025 outlook at this time. Before opening for questions, I want to reiterate that with respect to the company's strategic review, the board and management team are committed to improving operations and driving shareholder value. Management remains focused on prudently running the business and exceeding on our capital allocation priorities during this time. The company cannot provide assurance that exploring strategic alternatives will result in any transaction or particular outcome. As you understand, we will not be communicating anything additional about the strategic review process while it is ongoing. Again, we do remain focused on managing the business diligently and driving shareholder value during this time. We will not be taking any questions on the review process or 2025 outlook. Thank you. I'll now turn the call back over to the operator to take your questions. Operator?

Great, thank you. We will now be conducting a question and answer session. If you'd 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 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. First question is from Ramsey LSL from Barclays. Please go ahead.

Hi, gentlemen. Thank you for taking my question, Stephen. I appreciate it. I wanted to ask about some of the client losses that you've called out across the business, the sort of attrition, I should characterize it as attrition. Are you seeing any changes in the drivers of attrition? I think you called out a couple of folks that were taking things in-house, maybe some customer consolidations is this sort of a tricky period where you're seeing more of that than usual or is there anything changing in the end market of your customers basically that would make you think that this is a maybe you may see more attrition than you have in the past I read this John good evening no we're not seeing any major changes with any specific ones that I called out two of those were

Clients that actually got acquired, one of those was in the consumer side of the business and one of those was in the business payment side. They were important clients to us, but they were acquired. Nothing we could have changed about that. And then the third one was the lending communication solutions. They brought that in-house. We don't see any trend associated with that either.

Okay, fair enough. And then a follow-up from me. On slide seven, as you're talking about your consumer payments performance in the quarter, you called out seeing pockets of consumer softness. I'm just curious if you could elaborate a little bit more on what those might be.

Those are related to what we've talked about in the past with auto and arm, you know, just continuation of what we saw previously, so nothing incremental to that, but just the The dynamics and the challenges within the auto space around used car sales, used car affordability, and then the arm recovery that we anticipate we have not seen. And so there's just a continuation of the depressed volumes in the arm space that we talked about previously.

Got it. Okay. So a continuation of trends. All right. Appreciate it. Thank you.

Our next question is from Sanjay Sakrani from KBW. Please go ahead.

Thank you. Good afternoon. I guess maybe starting with how we think about 2025, I know you guys are refraining from providing specific guidance, but just as we think about the trend lines of growth, any strategic actions, could you just talk about, you know, sort of direction relative to 2024 you're expecting the segments to operate?

Yeah, I'd say overall, if we think about Q4, I mentioned that if you strip out the client losses and the strategic migration, that reported gross profit growth would have been approximately 10%. And then there's some of the softness that we just talked about in the consumer verticals around auto and arm. And so when you take all those things together, I think the growth rate looks similar to how it, on a normalized basis, how it looked earlier in 2024. In the first half of 24, the growth rate was call it mid to high single digits. And so I think all those pieces together build back up to that. So again, we're not providing a 2025 outlook, but that's the way I would think about it when you strip out the losses and some of the consumer macro impacts.

And then like business payments should continue to grow as the clip that it is, or do we expect that to slow? I mean, how should we think about that segment?

We talked about the elements that there's a client loss. We're not as focused on the AR portion of that business. We're still trying to upgrade and maintain the existing integrations, but really more focused on core AP. And core AP is growing called low to mid-teens. And so that's how I think about that business is growing at that pace if you strip out the the loss, and then like I said, we're not as focused on the AR portion. The AR portion is important to us, and we have a lot of strong integrations there, but we're really investing going forward in what we would call core AP. Okay.

Great. And then, John, maybe you could just talk about sort of what led to the decision-making process of getting to the strategic review. And, you know, I know there's no deadline or specific timeline, but, like, maybe you could just tell us how we should look at it from the outside in terms of, like, thinking about progress being made. Maybe you could just give us a little bit more color on that. Thank you.

Yeah, sure. If you recall, back in the November earnings call, I really am committed to evaluating all aspects of the company to really drive and realize shareholder value. So with the Board's support, we commenced this comprehensive strategic review, which is comprehensive with the assistance of outside advisors. We're going to look at the full range of alternatives in order to capture the overall shareholder value. We're committed to that, and we think that will end in a very positive outcome for our shareholders. And those aspects could be from reviewing our go-to-market strategies, our overall capital allocation strategy, and our strategic alternatives, including M&A.

Okay, great. May I ask just one question for Tim? Just on the free cash flow conversion, obviously you had that one-time benefit that sort of gets reversed in the first quarter. As we think about free cash flow conversion, should we think about it on an adjusted basis to be comparable in 2025, or is that affected by other stuff this year? Thanks.

I would think of it that way. I mean, if you look at the earning supplement, we did show some detail on that on slide six. And so I think if you strip out the impacts from this year and then also strip them out from what we expect to reverse in Q1 of next year, you would see a comparable conversion. Overall, we are showing, as we talked about previously, faster adjusted EBITDA growth than top line and a continued reduction of CapEx as a percentage of revenue. So should lead to continued strong free cash flow conversion when you strip out the working capital impacts in both periods.

Okay, great. Thank you.

The next question is from Joseph Zafi from Canaccord Genuity.

Please go ahead. Hey, guys. Good afternoon. Thanks for the questions. Anything going on on the competitive landscape that we should be aware of? And then secondly, Any update on your focus on the mortgage vertical? I know there was a lot going on with some of the card networks. Thanks a lot.

Yeah. Hi, Joe. So from a competitive perspective, as you know, last year we continued to invest in our enterprise sales, our product, our technology. So we're well-positioned there. Obviously, we're seeing strength in our sales pipelines that obviously drives the overall, our ability to compete in both sides of the business. So we find ourself well-positioned there, but we'll, as part of this strategic review, we'll obviously make sure that those all things are true. The overall end markets, we still are very positive on as well. And I think you mentioned mortgage. On the mortgage side, as we mentioned, Last year, and really in our November call, that's kind of a multi-year organic opportunity for us. That's still progressing, as we indicated then, where clients are rolling that out as we move throughout this year.

And in B2B within AP, we've been calling out wins within the healthcare and hospital vertical recently. We're having a lot of success there, and so this speaks to the approach of being vertical-specific within AP, and you can see our solution is now winning in those verticals. We're not trying to compete in every vertical. We're in areas such as healthcare, hospitals, auto dealerships, property management, and we're seeing positive traction there in those particular land markets.

Great. Thanks, guys. Next question is from Andrew Schmidt from Citi. Please go ahead.

Hey, John. Hey, Tim. Thanks for taking the questions this evening. So I wanted to ask just another macro question, but perhaps more specifically on the personal lending vertical. Maybe talk about your expectations there versus the prior year and then anything you're seeing in terms of demand or supply side trends to be aware of in the coming year. Thanks so much.

I'd say trends are pretty similar to what we've talked about previously. Personal loans, there is some positive momentum and positive developments around origination activity. Based on our conversations with clients and some of the names we track publicly, there do seem to be indications that they're loosening their underwriting standards and opening up to originations. I do think there's demand for that. And so they're looking to meet that demand. So I would say generally that's what we're seeing in personal loans. Not that different from what we said from prior periods, but a little bit of positive momentum there.

Got it. Thank you, Tim. That's great to hear. And then the total pay volume migration, the strategic shift you called out, could you just walk through the mechanics of that in terms of it sounded like that was driver of the B2B payments results this quarter in terms of coming in a little bit lower, but just trying to understand what the mechanics look like and what's going on under the hood. Thanks so much.

So we've identified certain clients that were really focused on virtual cards. And we want to be able to monetize the total payment volume. And so where there were instances where there were effectively virtual card only clients, we were looking to migrate them to our total pay solution. And as part of that, there was some volume lost. But we were, that was a strategic shift. We were aware of those potential losses and that we were aware those impacts could happen. But the idea that once that volume has been converted, there's a greater monetization opportunity to not only monetize virtual cards, but also paid ACH. And so we think that, you know, that we were aware that there could be impacts, but we were willing to make that strategic move for the future monetization benefits of having all of that total payment volume on our platform.

Got it. That makes a lot of sense, Tim. Are you seeing – I understand the strategic shift. It makes sense to offer the broad range of payment modalities, but are you seeing a broader shift from virtual card to ACH within the broader supplier base? Just kind of the common question in terms of payment acceptance costs and trends and things like that. Thanks a lot.

We still see healthy adoption trends within virtual card, but we are promoting the paid ACH option more regularly. And we are only able to do that when we have the total payment volume and they're on total pay solution. So that is, again, a strategic move to be able to capture more of that spend versus just the virtual card. And we are seeing that happen. And again, we're promoting it. We want that to happen. We think it's nice to have the balance between virtual card and paid ACH. And if we have to, we can default to sending regular ACH or check. But again, we think being able to capture the TPV and monetize similar rates on virtual card, but then incrementally add paid ACH wins for us in the future.

Yeah. Andrew, let me add some additional color there. Our net new wins are all green space in a lot of times. So that's That shift itself, we're actually bringing them to the virtual quarter piece sometimes for the first time. So those net new wins we talk about a lot of times, those are just never have outsourced payables before.

Right. And to the extent we can get, again, we're seeing really nice growth in TPV. We don't disclose that separately, but we're seeing that trend, and we just need to be able to capture more of it and monetize it.

Got it. Thank you, John. Thank you, Tim. Appreciate the comments. Next question is from Pete Heckman from DA Davidson.

Please go ahead.

Hey, good afternoon. I just wanted to confirm, but in terms of these client losses that you've, the three client losses that you've explained, were those fully reflected in the fourth quarter or would you expect a little bit of additional revenue to run off next quarter?

One of them was we mentioned last quarter, but this quarter was the full quarter impact. And then the other is, yes, we've experienced the full runoff this quarter. So there will be, you know, a lapping effect in the back half of next year, but we'll see the impacts of those in the first half of 25, the back half of this year.

Got it. Got it. And then in terms of the – some of the attrition related to the total pay migration. I guess, was that fully reflected in the fourth quarter, or is there a little bit more to go?

Yes, that's been reflected in the fourth quarter.

All right, that's all I had. Thank you. Our next question is from Rufus Hone from BMO Capital Markets.

Please go ahead.

Hey, guys. Thanks. Maybe sticking with the organic growth, organic growth, profit growth, ex-political. I know you touched on that from a high level, but could you sort of put a finer point on the deceleration you saw from the third quarter into the fourth quarter? So sort of bridging from that plus one percent organic growth last quarter to the minus nine this quarter. Thanks.

Again, that was largely related to the The client losses we mentioned and then the strategic migration of the AP volume, there was a little bit, I guess, I'd say of additional softness in the AR part of B2B. That's why we've emphasized AP. But as I mentioned, when you strip out those impacts and then you take into account some of the ongoing arm and auto macro impacts, it should get us back to a level that we saw earlier in 2024. So if you look at the normalized growth rates in Q1 and Q2 of 2024, I would think that's more indicative of where we'd be.

And obviously, in order to get to that number, you're already normalizing for the political, which was in the fourth quarter, which political for us will not be in 2025.

Got it. And maybe just as a follow-up, but Was there any offsetting benefit from the ramp and the auto captive customer you called out last quarter and the mortgage debit acceptance customer?

That client is still ramping, but I wouldn't say it materially offset any of the other impacts.

Okay, got it. Thanks. Our next question is from Charles from Stevens.

Please go ahead.

Good afternoon, and thank you for taking my question. I had a quick one on the consumer segment. On slide seven, you indicated that the headwind from the client losses in Q4 was roughly 5%. So if I add that back to the gross profit decline this quarter, we're roughly flat. My question is, assuming some normalization over the course of the year, could you maybe help us understand how much of that is going to be coming from macro improvement versus new bookings? I know you have a number of go-live scheduled for this year.

Yeah.

So, again, the client losses don't take into account the macro impacts from ARM and auto that I mentioned earlier. So, the client losses get you to flat, and those macro impacts get you to call it low single digits, and then you have the ramp of the captive auto win, you have the ramp of the previously signed accounts, you have the really strong bookings that John mentioned, all of which would get you higher. So again, we're not providing a 25 outlook here, but that's how I would frame it up.

Got it. Appreciate it, Tyler. And as a follow-up, you had indicated in the strategic review that M&A was also an option. So just to drill into that as well as your product roadmap, Could you maybe talk a little about what would be on your wish list if you were to go the M&A route? And, you know, I guess any comments around what's on your product roadmap organically would be helpful as well.

So from an M&A perspective, we really like consumer bill pay. We're in some large consumer bill pay verticals today in terms of auto and mortgage and personal. There are others we're not in. such as insurance or government or utilities. So those could be interesting, and we see some targets in those spaces. There's some consumer end markets we're not in that are more related to general commerce, I would say. And then I would say in B2B, we'd be focused on AP. So there are a lot of sort of tuck-in opportunities within AP that could get us into additional verticals and grow our supplier network. So I'd say either existing or new consumer bill pay verticals, broader consumer commerce, and then B2B AP.

I'll add a couple things to that. Always anything that you could add to our software partners that would embed payments that we fit well into, those could potentially increase our verticals or complement our existing verticals or adjacent verticals, as I mentioned in our strategic review. And then something that would, I find would be very attractive, something that could drive overall scale, something that could drive our overall distributions. Those could be software partners or just ways that we could really drive a flywheel effect of driving overall distribution.

Got it. Appreciate the caller. Thank you.

Next question is from Timothy from UBS. Please go ahead.

Hey, thank you for taking the question. Tim, you mentioned earlier paid ACH, and I just wanted to drill into that more from an industry perspective. When we think about paid ACH, typically it's paid because you're able to attach information and add value to a typical ACH payment. So the question would be, number one is, is there anything different about the data that you can or cannot attach to an ACH payment in your enhanced ACH offering relative to what you could attach to a card? And then second is, within the various other bank-based payment rails, is there any difference that you would call out or reason why you would or would not, whether it's cost or timing, et cetera, associated with either something like an RTP or FedNow or something along those lines relative to the traditional ACH? Thanks.

Yeah, I mean, again, the supplier is willing to pay a fee because they're getting enhanced data relative to a regular ACH. So it may not be as robust and seamless as a card transaction, but it is more so than a regular ACH, and they're willing to pay for that. I think the difference is just the fee to them is lower. So it's higher than regular ACH but lower than card. And then like we've said, our economics are better because our cost of processing ACH is lower. So for us, we kind of net out in the same place, even though it's better for the supplier because they pay less and get more data. So it's pretty nuanced in terms of what that data is, but there's really a win-win for both of us. They're paying less and getting rich data, and we're ending up with a similar net economic situation.

So enriched data, which obviously makes reconciliation a lot easier, the bulk payment of things, as well as the overall embedded part of that, which makes reconciliation as well and the tie-down back to the original invoice is a whole lot easier to reconcile.

Thanks, Tim and John. A minor follow-up, though, but is it safe to say, then, that more of the suppliers are set up to receive that information with the virtual card relative to the number that are set up to receive that information with an ACH payment, or is that something that you solve for?

Yeah, we attempt to solve for that through our supplier enablement. And so, again, we like owning the 360,000-plus supplier network. We do our own proprietary form of supplier enablement where we have a really hands-on, real-time approach, and that allows us to determine the optimal way to pay and how they want to be paid. And so, you know, we like owning that network. We like owning the enablement process, and that gives us visibility into the best way to pay.

Tim, long-term, bigger picture long-term, if you think about the world of automation, the world of overall cyber and fraud, we think what we add in the value around cybersecurity, around the making and sending of payments is going to be even more important if I look out over the next three years or so. We have great value just in that piece alone. As you can imagine, the mailing of checks, a check in itself has your routing and account number on it, right? And so our ability to drive value around security of that transaction we think is something we'll see more and more of as the era of fraud continues to elevate itself with automation. Thank you, Tim and John.

As a reminder, if you would like to ask a question, it is star one. Our next question here is from Mike Rondell from Northwind Securities. Please go ahead.

Hey, guys. Thanks. Kind of a high-level question, but double-digit top-line growth has been really elusive, tough to get back to. What have been the biggest hurdles to get back to that? Is it sales? Is it the end markets? Is it this client retention. Could you just kind of walk us through why that's been so hard?

I think the timing of the client losses is a big factor, as we said earlier. They're hitting us in Q3 and really to a larger extent in Q4. So I think the timing of that, you have the continued macro impacts in auto and arm, which layer onto that. And then we've mentioned some impacts in the AR part of B2B. And so those are all the factors that I was describing where I bridged from the normalized growth back to what we showed in early 2024. Now, we did mention that we've had really strong bookings across both consumer and business payments. We've been selling enterprise accounts in consumer and then embedding payments into enterprise software and B2B. We are ramping some accounts that signed last year that will have more of an impact this year. So there is momentum within go-to-market. There are strong signs within bookings and ramping, but there have been some impacts that have really hit a lot in Q3 and to a greater extent in Q4.

Let me add into that, as part of this comprehensive strategic review, as you heard me mention earlier, Our goal is to find ways to accelerate growth, and so that's one of the many things we'll be reviewing, and we're confident we will find opportunities there.

Hey, that's helpful, guys. Thanks. Next question is from James Fawcett from Morgan Stanley Investment Management.

Please go ahead.

Hi, this is Shapali Tamaskar on for James. So you mentioned wanting to drive further distribution and want to understand how you're thinking about the current opportunity set in the partner network. Are you more focused on penetration of existing partners or expanding the partner base? And if so, what segments or verticals are you interested in expanding based off of where you're seeing the most demand right now?

Yes, sure. So we're now up to 280 of those partners, about 180 on the consumer side, about 100 on the business payment side. You can see we also added to that during the quarter. So both, the answer to that question is both. We want to continue to obviously drive our overall penetration into our existing partners, and we think there's a lot of opportunity there. We're continuing to add that as we go to market and find additional strategic relationships. We want to do that. And we've talked about overall enterprise software platforms. We think there's a significant opportunity as we look out the next two to five years on driving, helping them drive the monetization as we embed our software into their core platforms. Our ability to do that both on the AP and the AR side, we think there's a significant opportunity out there for us. So we'll continue to invest in both of those and those should produce really positive outcomes for us as we look out over the years.

I'll add to that that, you know, like John said, we're investing in both, and we do add new software relationships each quarter. But there is a pretty significant opportunity within the existing base to increase penetration, to your point. And there's some software relationships where we may be 10% or less penetrated. And so we think there's an opportunity to find ways to jointly market and jointly promote the solution to increase the penetration of existing software. in addition to adding new.

And we've said in the past as well, on the enterprise software platforms on the B2B payable side, we've said that's a multi-year organic growth opportunity for us.

Thank you.

This concludes the question and answer session. I'd like to turn the floor back to management for any closing comments.

Thank you, Operator. Thank you, everyone, and thank you for your time today. Our 2020-24 results demonstrated our solid execution towards profitable growth and accelerating free cash flow. We remain focused on our strategic initiatives to drive overall shareholder value. Thank you for joining us today.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.