Repay Holdings Corp Q1 FY2025 earnings call

• REPAY remained focused on executing core growth, with steady gross profit when excluding client losses and strong adjusted EBITDA margins of 43% in Q1. - The company concluded its strategic review process, deciding to invest in organic growth over other alternatives. - Operational priorities include enhancing the direct sales model, capitalizing on monetization opportunities, and building indirect partnership channels in both segments. - For 2025, there's confidence in sequential quarterly normalized gross profit growth, with free cash flow conversion exceeding 50% in Q2 and above 60% by year-end. - The Board increased the share repurchase program authorization to $75 million.

Consumer Payments: Reported gross profit declined 5% year-over-year. Signed 2 new software partnerships, onboarded 14 new credit unions, and Instant Funding transaction volumes rose approximately 19% year-over-year. Business Payments: Reported gross profit increased approximately 7% year-over-year. Excluding the impact of political media in Q1 2024, gross profit would have increased by approximately 12% year-over-year. Sales teams are leveraging 101-plus software partnerships, and the supplier network increased 40% year-over-year to approximately 390,000 suppliers.

• Expect sequential quarterly normalized gross profit growth, with fourth-quarter growth rate in the high single-digit to low double-digit range. - Free cash flow conversion is expected to exceed 50% in Q2 and accelerate above 60% by year-end when excluding one-time net working capital impacts. - Board increased share repurchase program authorization to $75 million to repurchase shares when the share price is disconnected from long-term intrinsic value.

• Macro uncertainty poses potential near-term impacts on consumer spending. - Reported growth was impacted by client losses and one-time net working capital impacts.

Q: Can you provide additional color on what you're seeing in the consumer spending environment?

A: John Morris mentioned year-to-date resiliency in nondiscretionary consumer spending from an overall market perspective.

Q: Given increased buyback authorization, do you plan to continue leaning into this rather than M&A?

A: John Morris stated they will opportunistically repurchase shares when the share price is disconnected from long-term intrinsic value.

Q: How far did you go in the strategic review process and why conclude it?

A: John Morris said the Board concluded the review as the market and macro environment changed, and they believe additional investment in organic growth will yield the best result.

Q: Drill down on additional investments for growth and why not done before?

A: John Morris said an outside third-party view confirmed market potential with four additional investments, and they have the opportunity to make these for shareholder value.

Q: How has the recent macro environment impacted exposures and underwriting trends?

A: John Morris mentioned various end markets were resilient, with spending holding up nicely through Q1 and into Q2, and no material different dynamics observed yet.

Q: Client losses impact and guidance timing?

A: John Morris explained client losses led to drags, and guidance has sequential normalized gross profit growth with midpoint of high single-digit to low double-digit for Q4.

Q: Monetization of B2B assets and TotalPay solution impact?

A: John Morris and Tim Murphy discussed positive momentum in Business Payments and stabilization of TotalPay solution impacts.

Q: Industry question on ISVs and payment processors?

A: John Morris and Tim Murphy talked about REPAY's position with 283 partners, seeing more enterprise software coming due to their full AR and AP capabilities, and no major disruption in ISV payment processor utilization.