Repay (RPAY) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2024, revenue was $78.3 million, a 3% year-over-year increase, while full-year revenue increased by 6% [35] - Q4 gross profit grew by 2% year-over-year, with consumer payments segment gross profit declining approximately 5% in Q4 but growing 3% for the full year [35] - Adjusted EBITDA for Q4 was$ 36.5 million, representing a 9% increase, with full-year adjusted EBITDA growth at 11% [37] - Free cash flow for Q4 was $23.5 million, reflecting a 64% conversion rate, while full-year free cash flow conversion improved to 75% [38] Business Line Data and Key Metrics Changes - The consumer payments segment experienced growth from existing clients and new client signings, with 16 new credit unions added in Q4, totaling 329 credit union clients [10] - The business payments segment gross profit grew 60% year-over-year in Q4, driven by strength in the core AP business and contributions from new clients [16] - Core AP business increased in the low teens in Q4 when excluding one-off client attrition and strategic migrations [22] Market Data and Key Metrics Changes - The consumer payments segment faced challenges due to client losses and macroeconomic factors affecting the auto and ARM sectors [14][49] - The business payments segment benefited from strong demand in verticals such as healthcare, hospitality, and political media, particularly during the 2024 presidential election cycle [19] Company Strategy and Development Direction - The company is undergoing a comprehensive strategic review to assess alternatives for enhancing shareholder value, including potential M&A opportunities and capital allocation strategies [30][31] - Focus on vertical-specific growth opportunities, particularly in accounts receivable management and credit card servicing [12] - Plans to reinvest in organic growth opportunities and strengthen market position through targeted sales and relationship management investments [32] Management's Comments on Operating Environment and Future Outlook - Management noted that client losses were primarily due to acquisitions and in-house transitions, with no significant changes in market dynamics expected [46][47] - The company remains confident in its sales pipeline and client retention strategies, aiming for improved growth in 2025 despite refraining from providing specific guidance [40][52] Other Important Information - The company has made eight acquisitions since going public in 2019, expanding its consumer payment segment and diversifying its business payment platform [27][28] - The company has approximately$ 190 million in cash and $250 million in undrawn revolver capacity, totaling$ 440 million in liquidity [39] Q&A Session Summary Question: What are the drivers of client attrition? - Management indicated that client losses were due to acquisitions and in-house transitions, with no significant trends suggesting increased attrition [46][47] Question: Can you elaborate on consumer softness mentioned in Q4? - Management noted ongoing challenges in the auto sector and ARM recovery, leading to continued depressed volumes [49] Question: What is the outlook for 2025? - Management refrained from providing specific guidance but indicated that growth rates could normalize to mid to high single digits, excluding client losses [52] Question: How is the competitive landscape evolving? - Management expressed confidence in their competitive position, highlighting investments in enterprise sales and product technology [65] Question: What are the expectations for the personal lending vertical? - Management noted positive momentum in personal lending, with indications of loosening underwriting standards [72] Question: What is the strategy behind the total pay volume migration? - Management explained that migrating clients to the total pay solution aims to enhance monetization opportunities despite some initial volume loss [75] Question: What are the M&A opportunities being considered? - Management is focused on consumer bill pay verticals and B2B AP opportunities, looking for tuck-in acquisitions to expand their network [105][106]