Repay Reports Strong Q2 Growth and Future Expansion Plans

Repay Holdings Corporation Reports Strong Q2 2024 Results

Repay Holdings Corporation recently announced its financial results for the second quarter of 2024, showcasing a profitable performance characterized by a 7% increase in gross profit and a 10% rise in adjusted EBITDA. The company’s free cash flow conversion reached 57%, with anticipation for acceleration as the year progresses. Repay’s strategic focus has been on enhancing go-to-market efficiency, improving client implementations, and advancing product development.

The company has successfully broadened its client base, particularly within the Consumer Payments sector, while also reinforcing its financial standing through a convertible notes offering and an expanded credit facility. For the full year, Repay is projecting revenues between $214 million and $220 million and adjusted EBITDA in the range of $139 million to $142 million.

Key Takeaways:

• Q2 2024 saw a 7% growth in gross profit and a 10% increase in adjusted EBITDA.
• Free cash flow conversion was 57%, with expectations of exceeding the full-year target of 60% in Q3.
• The addition of new clients, including nine credit unions, contributed to growth in the accounts receivable management segment.
• Growth in the Business Payments sector was bolstered by new enterprise clients and expanded software partnerships.
• The recent capital raise has improved the company’s financial flexibility for ongoing growth initiatives.
• The anticipated impact of the 2024 presidential election cycle is estimated to contribute 20% growth, predominantly in the latter half of the year.
• The company is committed to profitable growth while focusing on innovation, automation, and strategic M&A opportunities.

Company Outlook:

• Repay expects to maintain sustained mid- to high-teens growth in free cash flow beyond 2024.
• Plans are in place to reduce capital expenditures in the first half of 2024.
• The anticipated growth from the election cycle is expected to significantly enhance the company’s performance.

Challenges and Opportunities:

Bearish Highlights:

• Growth in the Instant Funding product has slowed due to the previous year’s large client contributions.
• Gains from a significant auto captive win are not expected to materially impact revenue until 2025 and 2026.

Bullish Highlights:

• A positive sales pipeline resulting from software integrations and partnerships.
• A healthy M&A pipeline with potential opportunities in both Consumer and Business Payments sectors.
• Continued investments in go-to-market efficiency, client implementations, and enterprise software monetization.

Misses:

• Implementation delays have contributed to the slowdown in Instant Funding growth.

Q&A Highlights:

• Repay addressed supplier acceptance concerns, indicating no widespread issues.
• The company’s proprietary vendor enablement process and TotalPay solution are enhancing digital adoption.
• Opportunities in increasing card acceptance rates across various verticals were emphasized, with some rates still in single digits or low teens.
• The initiative with Black Knight to accept mortgage debit was highlighted as a significant growth driver.
• Despite some downtime in the auto industry’s ERP systems, the company did not face major impacts on its operations.

In summary, Repay Holdings Corporation is well-positioned for ongoing growth, driven by a strong second quarter and strategic technology and market investments. The company’s emphasis on efficiency and innovation equips it to navigate the evolving landscape of the payments industry effectively.

Company Performance Insights:
Repay Holdings has experienced challenges in the current market environment, reflected in a significant price drop of over 21% in the last three months. However, revenue growth over the past year remains positive at 5.3%. Analysts see potential for a turnaround, predicting net income growth, and indicators suggest that the stock may be in oversold territory. The company’s strong liquidity position, with liquid assets surpassing its short-term obligations, positions it well to support operations and strategic plans.

The firm’s valuation metrics indicate investor skepticism regarding its earnings potential, highlighted by a negative P/E ratio. Nevertheless, the price-to-book ratio suggests potential undervaluation, presenting an appealing opportunity for value-focused investors.

With earnings expected on November 6, 2024, analysts will be closely watching this release to further evaluate Repay’s financial health and outlook. The consensus estimate provides a fair value estimation indicating that the current market price may not accurately reflect Repay’s intrinsic value.

Conclusion:
Repay Holdings Corporation demonstrates a resilient strategy and a commitment to achieving sustainable growth through innovation and strategic investments in the expanding payments industry.