Repay (RPAY) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q2 2024, the company reported revenue of $74.9 million, a 4% increase year-over-year [14] - Gross profit grew by 7% year-over-year, with adjusted EBITDA increasing by approximately 10% [4][14] - Free cash flow conversion was 57%, representing over 90% growth year-over-year [4][14] Business Line Data and Key Metrics Changes - Consumer Payments segment gross profit grew by 7% in Q2 and 8% in the first half of the year [14] - Business Payments segment gross profit increased by 11% in Q2 and 14% in the first half [14] - The Instant Funding product saw transaction volume rise by approximately 21% year-over-year [9] Market Data and Key Metrics Changes - The company added nine new credit unions in Q2, bringing the total to 300 out of approximately 5,000 in the U.S. [6] - The accounts receivable management vertical is expected to experience multiple years of growth [8] Company Strategy and Development Direction - The company is focused on three main strategic initiatives: go-to-market efficiency, client implementations, and product focus [5] - The company aims to capture new payment flows with expertise across Consumer and Business Payments segments [4] - Capital allocation priorities include investing in organic growth opportunities and being open to strategic M&A [13] Management's Comments on Operating Environment and Future Outlook - Management noted a healthy but moderating consumer environment, with no noticeable differences across sub-verticals [22][24] - The company expects revenue for 2024 to be between$ 214 million and $220 million, with adjusted EBITDA between$ 139 million and $142 million [17] - Free cash flow conversion is anticipated to accelerate throughout the year, with a target of approximately 60% for the full year [18] Other Important Information - The company completed a convertible notes offering to address half of its 2026 debt maturities and expanded its revolving credit facility [13][16] - Total pro forma outstanding debt is$ 507.5 million, with net leverage of approximately 2.7x [16] Q&A Session Summary Question: What is the normalized level for free cash flow conversion? - Management expects sustained mid- to high teens growth in free cash flow conversion, targeting 60% for the year [21] Question: What is the overall health of the consumer today? - The consumer environment is healthy but moderating, with consistent trends observed [22][24] Question: What macro trends are assumed within the guidance? - No major changes to macro assumptions; trends remain consistent with prior periods [27] Question: Any updates on M&A pipeline? - The company has a healthy M&A pipeline and is looking at opportunities across both Consumer and Business Payments [29][30] Question: What is the growth rate in Business Payments excluding media spend? - Business Payments reported 11% growth in Q2, with expectations for high teens growth [34] Question: What is the outlook for Instant Funding growth? - The deceleration in growth is attributed to lapping a large client from the previous year, with expectations for consistent trends moving forward [42] Question: How much incremental revenue is expected from the presidential election? - The company expects about 20% growth off the 2022 cycle, with most contributions coming in the back half of the year [40] Question: What is the outlook for organic gross profit growth? - The company anticipates mid- to high single-digit organic growth trajectory, with opportunities for acceleration in the future [46]