Repay (RPAY) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2023, the company reported revenue of $74.3 million, representing a take rate of approximately 116 basis points, with card payment volume reaching$6.4 billion [5][82] - Normalized organic gross profit grew by 12% year-over-year, amounting to $56.7 million, after excluding contributions from Blue Cow and political media [6][82] - Adjusted net income for Q3 was$19.9 million, or $0.21 per share [7] - The company had approximately$118 million in cash and $185 million in undrawn revolver capacity, totaling$303 million in liquidity, with total outstanding debt of $440 million [8][84] Business Line Data and Key Metrics Changes - The Business Payments segment saw a gross profit increase of 13$185 billion in annual total payment volume [71] Market Data and Key Metrics Changes - The company is now integrated with 257 software partners, with 96 in the Business Payments segment and 161 in the Consumer Payments segment [66][2] - The Instant Funding product experienced a significant growth in transaction volume, up approximately 50% year-over-year [76] Company Strategy and Development Direction - The company is focused on enhancing its technology and payment solutions, aiming to streamline the payment experience for clients and their customers [65][68] - There is a strong emphasis on partnerships with software providers to expand service offerings and improve client integration [4][66] - The company is exploring M&A opportunities while maintaining a strong balance sheet and cash generation for organic growth [4] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's momentum heading into Q4, expecting adjusted free cash flow conversion to accelerate into 2024 [10] - The company anticipates a potential slowdown in the macroeconomic environment, particularly in the auto market, which may impact future performance [93] - Management noted that the competitive landscape remains stable, with expectations for growth in the political media segment due to the upcoming presidential cycle [113] Other Important Information - The company has implemented various automation processes to enhance productivity across its operations, particularly in charge-backs, compliance, and risk monitoring [68] - The company reaffirmed its gross profit outlook for 2023, expecting normalized organic gross profit growth of 9% to 14% [85] Q&A Session Summary Question: Insights on free cash flow conversion - Management indicated that capital expenditures (CapEx) are expected to decrease to 12% to 14% of revenue next year, which will enhance free cash flow conversion [13] Question: Performance in the consumer business - Management reported strong year-to-date performance with normalized 13% organic growth, driven by enterprise wins and digital transformation trends [15] Question: Fourth quarter normalized organic gross profit outlook - Management acknowledged the challenges of lapping strong results from the previous year but remains optimistic about trends observed in October [93] Question: Trends in payment cost acceptance from enterprise suppliers - Management noted no significant pushback on virtual card acceptance and highlighted the growth of their supplier network to over 233,000 [102] Question: Take rate expectations moving forward - Management suggested that while take rates may decrease slightly with more enterprise wins, gross profit dollars are expected to increase, leading to faster growth [24] Question: Competitive landscape in the domestic healthcare space - Management reported positive momentum in healthcare wins and noted that implementation delays were specific to client size and technical capabilities [34] Question: Impact of the upcoming political cycle on growth - Management expects a 25% growth in gross profit for the political media segment due to the larger presidential cycle compared to the previous non-presidential cycle [113]