Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Repay Holdings Corp (RPAY, Financial) reported a 7% growth in gross profit and a 10% increase in adjusted EBITDA for Q2 2024.
- The company achieved a free cash flow conversion of 57%, representing over 90% growth year over year.
- RPAY added nine new credit unions to its platform, bringing the total to 300, and integrated its payment platform into multiple core credit union and financial institution software systems.
- The Instant Funding product saw a transaction volume increase of approximately 21% year over year.
- RPAY successfully completed a convertible notes offering, addressing half of its 2026 debt maturities and expanding its revolving credit facility, providing financial flexibility for future growth.
Negative Points
- Revenue growth was relatively modest at 4% over the prior year, with seasonality affecting quarter-over-quarter performance.
- There were implementation delays in both the consumer and business payments segments, impacting growth.
- The Instant Funding product experienced a deceleration in growth due to lapping a large client ramp from the previous year.
- The company is facing a competitive environment in the B2B payment space, with challenges in supplier acceptance of digital payments.
- RPAY's growth in the business payments segment is partially dependent on political media contributions, which are subject to timing fluctuations.
Q & A Highlights
Q: On free cash flow conversion, what is the steady state free cash flow conversion you have in mind over time?
A: Timothy Murphy, CFO: We feel good about our 60% target for this year and expect mid- to high-teens growth thereafter. This is driven by adjusted EBITDA growth outpacing revenue and a reduction in CapEx. We aim for CapEx to be 10% to 12% of revenue long-term, supporting sustained free cash flow growth.
Q: Could you give us your view on the overall health of the consumer today, especially in personal financing?
A: Timothy Murphy, CFO: We see consistent trends into Q3 with a healthy but moderating consumer environment. There's been some tightening in personal finance, but nothing noticeably different. John Morris, CEO: Most consumer payments are nondiscretionary, which supports consistent trends.
Q: What macro trends are you assuming within the guide, and have you seen any deviating trends recently?
A: Timothy Murphy, CFO: Our macro assumptions remain unchanged with consistent trends into Q3. We see a healthy consumer in non-discretionary markets, and no major changes from prior periods.
Q: Can you provide updates on the M&A pipeline given the leverage ratio?
A: Timothy Murphy, CFO: We have a healthy pipeline and are looking at tuck-in opportunities across consumer and business payments. We aim to maintain leverage around 4 to 4.5x and bring it down below 3x within 12 to 18 months. John Morris, CEO: We are disciplined and looking for opportunities that are accretive to shareholders.
Q: Within business payments, what was the growth rate excluding media spend-related to the election?
A: Timothy Murphy, CFO: Business payments grew 11% in Q2 and 14% in the first half. We expect high-teens growth, with media contributions back half-weighted due to recent candidate dynamics.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
