Q1 2023 Repay Holdings Corporation Earnings Call

Speaker 1: Good afternoon. I would like to welcome everybody to repays first quarter 2023 earnings conference call. This call is being recorded today May 10th 2023.

Speaker 1: I would like to turn the session over to Stuart Grisanti, Head of Investor Relations at Repay. Stuart, you may be again.

Speaker 2: Thank you. Good afternoon and welcome to our first quarter 2023 earnings conference call.

Speaker 2: With us today are John Morris, Co-Founder and Chief Executive Officer, and Tim Murphy, Chief Financial Officer. During this call, we will be making forward-looking statements about our beliefs and estimates regarding future events and results.

Speaker 2: These forward-looking statements are subject to risk and uncertainty, including those set forth in the FCC filings related to today's results and in our most recent Form 10-K and 10-Q filed with the FCC.

Speaker 2: Actual results may differ materially from any forward looking statements that we make today. Forward looking statements speak only as of today and we do not assume any obligation or intent to update them except is required by law. In an effort to avoid additional information to investors.

Speaker 2: Today's discussion will also include references to certain non-GAAP financial measures.

Speaker 2: Reconciliation and other explanations of those non-gab financial measures can be found in today's press release and in the earnings supplement, each of which are available on the company's IR site.

Speaker 2: Those materials include reconciliations and other explanations with respect to RE-PAY's organic growth. As described in our materials, Q1 2023 organic growth is calculated by excluding incremental contributions attributable to Blue Cow software business in Q1 2022.

Speaker 2: since Repay Divested Blue Cow during Q1 2023.

Speaker 2: With that, I now would like to turn the call over to John .

Speaker 2: Thank you, Stuart, and good afternoon, everyone. Thank you for joining us today to review our first quarter results, which provided a strong start to the year.

Speaker 2: On an organic basis in Q1, we reported revenue growth of 12% and gross profit growth of 13%.

Speaker 2: We believe these results highlight the benefit of our resilient and diversified business model. Organic growth was largely driven by strong performance in our consumer payment segment. We remain excited about the opportunities across both the business payments and consumer payment segments. We also now have 248 software integration partners across rep-

Speaker 2: segmented our results as well as our organization into consumer payments and business payments.

Speaker 2: And on February 15th, we completed the Investura Blue Cow.

Speaker 2: This has enabled us to place a greater focus on the needs and results of each business line. Our consumer payment segment experienced 17% organic growth profit growth year-to-year. Mainly driven by recent large client accommodations, the ongoing secular tailwinds within the payment industry, as well as the demand for our products along with our focus on good market and product expansions.

Speaker 2: During the quarter, we added four new software partners in consumer payments.

Speaker 2: Bring our total software integrations to 154.

Speaker 2: We are also focusing on expanding our relationships with these partners by enhancing our existing integrations with new product features and payment modalities, as well as increasing ourselves efforts.

Speaker 2: Our internal sales efforts continue to focus on large enterprise clients, and we are winning.

Speaker 2: In Q4, we signed a large private captive auto lender. And during Q1, we signed another large captive auto lender.

Speaker 2: which is the internal finance arm for one of the largest automakers in the United States. REPAFE will be providing a full suite of debit card and ACH payment processing for new and used vehicle payments across the captive auto clients enterprise.

Speaker 2: We continue to believe that the automotive market is a great opportunity for future growth. Credit unions also remain a focus of ours. We signed 11 new credit union clients this quarter, bringing our total credit union customers to over 250.

Speaker 2: from less quarter. We are still seeing demand for our clients products and our clients are looking to us for more ways to engage and interact with the borrower from a PINN perspective.

Speaker 2: Morgan's servicing space continues to be a growth opportunity for consumer payment segment.

Speaker 2: Digital solutions help mortgage servicers keep their costs a servicing down. On my acceptance methods to customize messaging tools to automated servicing transfers, it's easy to enable better barway experiences with repay. We found from my recent internal consumer perception study conducted by Visa, more than half of consumers are interested in using a debit card to pay the mortgage bill. In addition, our conversations with existing and prospective clients indicate strong

Speaker 2: making them available to clients across three-page verticals.

Speaker 2: With the addition of these digital water capabilities, repaste clients will have the ability to accept payments using funds from customers PayPal and their middle accounts, enabling secure and convenient payments and eliminating long payment forms.

Speaker 2: makes customers likely to make more payments on time.

Speaker 2: our Insta-funding product.

Speaker 2: which we process real time through VISA Direct and MassacarSyn continues to perform strongly. In the first quarter, transaction volumes were up approximately 45% year-to-year. And lastly, our modern RCS platform continues to take care and receive a positive reception at the most recent electronic transactions and association conference.

Speaker 2: We recently announced that my camp solutions has selected repay as its back-end clearing and settlement process.

Speaker 2: We're selected due to Rephase ability to deliver customizable and comprehensive solutions, while also providing an ever-increasing important operating model with making and transaction processing redundancies.

Speaker 2: Moving on to our business payment segment. During the first quarter, business payments gross traffic grew single digits year by year. Our net new growth was impacted from lapping political media spending, implementation timeline delays, and a large client being required.

Speaker 2: Moving on to our business payment segment. During the first quarter, business payment Scrooge Floppy grew single digits year by year. Our net new growth was impacted from lapping political media spending, implementation timeline delays, and a large client being required. Exiting the quarter in March.

Speaker 2: We saw positive momentum. Additionally, our sales pipelines remain as robust as ever.

Speaker 2: Our integrations with dealer management systems and hospitality management systems are leading to shorter sales cycles with our clients.

Speaker 2: During the first quarter, we went live with previously announced LifeBridge Health in the Baltimore area and signed several large hospital systems within the healthcare vertical.

Speaker 2: Hello GM and HIA.

Speaker 2: And in the municipality vertical, we recently onboarded a large county in the Northeast with a multi-billion dollar annual budget.

Speaker 2: During the quarter, we continue to increase our internal sales and account service teams to further penetrate this massive business payment market.

Speaker 2: integrations was with Optima, a software and services firm specializing and providing IT consulting and digital transformation solutions. The integration will enable Optima's customers to further streamline accounts payable processes and securely pay vendors and suppliers directly to Optima's intelligent accounts payable automation solution.

Speaker 2: We're adding a technology integration with Microsoft Dynamics 365 Business Central, enabling Dynamics customers to send and automate accounts payable AP payments through the Repay platform.

Speaker 2: This integration aims to streamline operations, improve relationships with vendors and suppliers, and support the evolution of businesses moving towards overall digitization.

Speaker 2: and suppliers in our AP Supplier Network.

Speaker 2: And we're consistently looking for ways to find processing cost synergies in the business.

Speaker 2: In March, we began realizing the cost savings from a strategic initiative to consolidate processing of business payments AP volumes. So as you can see, a busy and productive quarter for the team across consumer payments and business payments.

Speaker 2: we remain focused on executing on our strategy as we see an incredible amount of organic growth opportunities.

Speaker 2: accelerate cash generation while maintaining the potential for strategic M&A.

Speaker 2: To wrap up, before turning the call over to Tim, I am proud of the progress we have made so far this year.

Speaker 2: Our sales pipelines are strong and growing. We have new products rolling out as we speak that we believe will drive new and existing client adoption.

Speaker 2: We also have one of the best teams in the industry that believes in our mission and is excited about the road ahead.

Speaker 2: With that, I'll turn the call over to Tim to provide more call on our results and update it to us about the remaining of the year. Tim? Thank you, John . Now let's go over our Q1 financial results before our New York Financial Guidance for 2023. In the first quarter, we paid delivered solid results across our key metrics. Card payment volume was 6.6 billion, which was impacted by tax refunds being down to approximately 10 percent.

Speaker 1: in lower repayment volumes than typically experienced during tax refund season.

Speaker 1: In addition, we had strong performance in several of our non-card volume-based businesses within consumer payments, specifically in communication solutions and instant funding. incremental revenue attributable to Blue Cow in Q1 2022 was approximately $0.9 million.

Speaker 1: First profit was $56.6 million, an increase of 13% on an organic basis.

Speaker 1: Our consumer payments segment reported an organic gross profit growth of 17% in Q1. As John mentioned, we saw continued strong growth from existing clients and recent large client implementations. Our business payments gross profit increased 2% year-to-year.

Speaker 1: client who started consolidating payment providers after being acquired.

Speaker 1: Exiting the quarter, business payments gross profit growth when excluding media accelerated demonstrating the ramp in our sales pipeline while realizing the benefits from our processing cost optimization and automation initiatives. First quarter adjusted net income was $19.2 million or 20 cents per share. Lastly, first quarter adjusted EVA die was $31.2 million.

Speaker 1: First quarter adjusted EVDA's percentage of revenue is 42%.

Speaker 1: Adjust the EBITDA margins came in lower than expected during the first quarter due to this year's tax refund seasonality resulting in higher revenue take rates along with continued investments toward sales, product, and technology.

Speaker 1: For the 15th consecutive quarter as a public company, on an organic basis, REPA has surpassed the rule of 40.

Speaker 1: makes us unique compared to our peers.

Speaker 1: Our net leverage is now approximately 2.8 times on a pro-formal basis. We expect our net leverage to naturally decline during the year from our strong profitability and cash flow generation, excluding any potential M&A.

Speaker 1: As of March 31st, we had approximately $92 million of cash in the balance sheet with access to $185 million of under-owned revolver capacity for a total pro-forma liquidity amount of $277 million. Repay's debt of $440 million is convertible with a 0% coupon and does not mature until February 2026.

Speaker 1: As of March 31st, we had approximately $92 million of cash in the balance sheet with access to $185 million of under-owned revolver capacity for a total pro-forma liquidity amount of $277 million. Repay's debt of $440 million is convertible with a 0% coupon and does not mature until February 2026. Moving on to our outlook for 2023.

Speaker 1: While year-to-date results remain resilient, based on the current macroeconomic uncertainty, we are reaffirming our 2023 outlook. We expect volume to be between $26 billion and $27.2 billion, revenue to be between $272 million and $288 million, and gross profit to be between $216 million and $228 million and $ Gujarati. Thanks for your question.

Speaker 1: and just leave it up to between $122 million and $130 million.

Speaker 1: As we talked about on our Q4 call, the growth implied by our 2023 outlook assumes a mild to moderate recession. As we previously mentioned, organic growth is expected to be slightly higher in the first half of 2023, because of the tough comps in the second half of the year while we maintain the normal cadence of quarterly contributions.

Speaker 1: As a reminder, we will be lapping strong results in our business payment segment due to the political media cycle in 2022. For additional details on 2023 organic gross profit growth, please refer to the 2023 outlook bridge on page 12 of our earnings supplement posted to the company's IR site. Continue to expect adjusted free cash flow conversion for your main stream.

Speaker 1: to take your questions. Operator?

Speaker 1: Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question thank you.

Speaker 1: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. And our first question comes from the line of Ramsey LSL with Barclays. Please proceed. Hi guys, thanks for taking my question and congratulations on the question.

Speaker 1: There's a couple factors there. Some of it was due to tax refund season being a little different this year than in prior years. So overall average refund sizes were down and when that happens we have a certain pricing model called convenience fees where it would be a higher take rate based on lower average refund amounts.

Speaker 1: And so that was actually the opposite that occurred last year in Q1. So we experienced the difference this year. And then also there's some non-card volume based products like communication solutions and instant funding that just performed really nicely in the quarter. And those increase to take rates primarily in consumer as well. So those are a few drivers. Great.

Speaker 1: A follow-up for me is on the business segment, gross profit, which as you mentioned was impacted by a couple of factors. I guess, you know,

Speaker 1: First, I guess, how should we think about those factors impacting Q2? In other words, are you going to see, has that large client roll-off completed? Are you going to see some of that implementation catch up next quarter? How should we think about those factors impacting the segment as we go forward here?

Speaker 1: Yeah, so we, as we mentioned, we saw the faster growth, exiting the quarter in March, and so I think some of the implementation delays have caught up. You know, the new client roll off, will continue into the quarter, but should be completed in Q2. And then...

Speaker 1: we have some new winds, as well, that will be ramping. And so I think the combination of those led to higher growth in March, and then we expect that to continue into Q2. So there were some specific factors to Q1. Fantastic. Thank you very much.

Speaker 1: Our next question comes from the line of Peter Heckman with DA Davidson. Please proceed.

Speaker 2: Thanks for taking the question. Congrats on winning another OEM captive lender. Can you talk a little bit about... If I heard correctly, the win this quarter was the captive lender OEM last quarter was a private lender on the personal side. Could you potentially talk a little bit about the sizing of those potentially on the auto OEM relative to your other OEM customers, Mercedes?

Speaker 1: Yes, thanks, Pete. So Mercedes was the OEM that we won a few years ago. Last quarter in Q4 we announced a private auto captive. So it's not technically an OEM but it's a large privately held captive auto finance company. And then in Q1 we announced another large...

Speaker 1: and we're not expecting a large contribution for the remainder of 23, but we do expect a meaningful contribution to growth in 24 as the business ramps throughout this year and we'll be fully ramped next year. And so it will be meaningful for us in future years.

Speaker 3: Okay, that's great to hear. And then just any additional comments that you can provide in terms of how you're talking to your customers on the lending side, both personal and auto, like what type of changes they might be making in terms of their appetite or pricing that may or may not impact originations.

Speaker 1: Yeah, very similar trends as we mentioned last quarter and as we've heard from some of the lenders that are reported already this quarter and some of our conversations with private lenders. They're still focused on managing their credit performance. We're cautiously optimistic on loosening underwriting standards, but still pretty tight.

Speaker 1: So not opening up originations, but again, we've said this before that there's a lot of demand for this type of credit. And so the demand being there is one of the more critical points for us. And as lenders get more visibility and feel a little bit more comfort, we think they'll open up to originations and to fund that demand. So not really different from last quarter.

Speaker 4: And you know, we had a large win in the personal loan space that we talked about last quarter that ramped up in Q1, and that's been really positive as well.

Speaker 3: That's great. That's great. Just one housekeeping item for the second quarter for Blue Cow. Would that be about two and a half million dollars in revenue in the prior year period?

Speaker 4: Yes, roughly two and a half that we'd have to pull out of Q2 of 22. That's right.

Speaker 4: that we'd have to pull out of Q2 of 22. That's right. All right, thank you.

Speaker 2: Our next question comes from the line of Andrew Schmidt with Citi. Please proceed. Hey, John . Hey, Tim. Good evening. Thanks for taking my questions. I wanted to just drill down for a second to the business payment segment. Nice to see you again.

Speaker 3: The large, the client roll off, maybe you could just talk a little bit more about the situation there and whether you think that was relatively unique and kind of a one-off, or is it possible that other clients could follow suit. Just a little more color around that situation would be helpful. Thanks a lot guys. Go ahead, I'll address Joan.

Speaker 2: We think it's unique. It's obviously it's an account that got acquired so kind of out of our control and so we really think that's unique and then we actually

Speaker 2: feel great about the pipeline of what we have and the opportunities in the business side of it. That's as wide open a space as I've seen in payments. So those are all true for all the reasons we want to be in that space and all the reasons we want to invest in that space. And then obviously we mentioned a couple things on our...

Speaker 2: implementation pipeline slipping on us, but we did see some of that activity pick up in April . So we feel good about executing on the remainder of our year in that implementation pipeline. Got it. Thank you very much, Sean. And then just on the consumer payments.

Speaker 5: segment, pretty, pretty strong growth there. And you know, I understand you're still baking in a mild moderate recession, just to be clear, you know, have you seen any signs of that yet? And what's the current assumption in terms of the, you know, how you're expecting the growth rates progressed throughout the year?

Speaker 5: with the understanding that maybe there is more macro moderation to come. Any help on those fronts would be helpful. Thanks a lot.

Speaker 4: Yeah, absolutely. We were very pleased with the consumer payments growth in the quarter. Really strong and we have seen strength continue into early Q2, but we do want to stick with the planning assumption of a mild to moderate recession. We are seeing, I think we talked about this before, we can some of our end markets like Auto, for example, has probably already been in that type of market.

Speaker 4: Come into play and so we're just maintaining conservatism around that.

Speaker 6: First question I have was just follow up around the last question in terms of the assumptions around a tougher environment. If conditions were to remain the same as current, how much of a differential would there be between your current outlook and where it could potentially be?

Speaker 4: Yeah, I mean, I think we, you know, we're monitoring closely. You know, I think we, if things do continue to stay as they are and don't deteriorate, I think we could become incrementally more positive on the outlook for the year and would update folks as we report each quarter. And, you know, I think like we've said in the past that a mild.

Speaker 4: A moderate recession is probably high single digits, low double digits, and mild is more like low to mid teens. So we could see potentially us moving somewhere in the middle of that range if we became incrementally positive just with more visibility into the macro. Got it. And then the follow-up I had was just around the take rate, just kind of dive a little bit deeper. Because if we take a look at your four-year guidance,

Speaker 6: It works out about 105 basis points versus 113. That was in the first quarter. So what are the puts and takes that gets us to that 105 range?

Speaker 4: Yeah, that's a good question. So it will come down and a lot of it is due to seasonality related to tax refunds. There was some dynamics I just described that caused the take rate to be higher. Also we just ramped a very large enterprise customer in Q1 that like we talked about when we provided the guidance originally.

Speaker 4: just naturally enterprise customers could be at a lower take rate. So as that becomes a bigger contributor, it could bring the take rate down. And then there's, you know, there's the potential for, you know, B2B has become a bigger part of the mix and that take rate is slightly lower. So those are some of the items we would look at that basically bridges from the 113 to the full year 105 or 106.

Speaker 1: Thanks for taking my question. Our next question comes from the line of Andrew Jeffrey with Truist Securities. Please proceed.

Speaker 1: Hey guys, I appreciate you taking the questions. And great to see the Enterprise Momentum. John , can you just comment on whether or not you go after some of these bigger customers, sales cycles are extending? I mean, it sounds like you have a good ramp with this big. Yeah.

Speaker 2: captive in auto next year, but just generally does the business get lumpier in your estimation? Is that something we need to think about or is this all upside? Hi, Andrew. Yeah, it should be upside. As you, you know, we just had a large win that implemented the first quarter this year. We would hope just because of implementation cycles with large enterprises, it takes time to win them and implement them.

Speaker 2: So that'll contribute in 24, which will help offset against what's happening in 23. So I would suspect if we continue to execute, which I expect us to, and I obviously see our sales pipelines, we should continue to be able to execute there. But enterprises, we mentioned in the past, it takes time.

Speaker 2: for us to just for those things to roll around if they actually are under contract. But we have more at-bats, we're investing in more at-bats. We see the opportunities for that. We think that's obviously going to deliver. We see evidence of those things.

Speaker 4: in both the consumer payments and the business payments. Okay, helpful. And then just on RCS.

Speaker 1: Can you kind of characterize the type of business you are winning there? Is it mostly traditional ISO? I recognize it's all incremental, and it seems like it's helping margin. But can you just talk a little bit about what that looks like, and maybe how it might impact your consolidated –

Speaker 2: even down margin going forward? Yeah, so what it looks like I'll talk about that part and Tim can talk about margins. So it is It's unique processors that we are able to give them several capabilities that makes their ability to execute on their strategies

Speaker 2: unique. Specifically, they may have their own technology, their own gateway, and we're just helping them clear and settle with all the money movement and the money flows. And then many in that world are potentially in various different types of e-commerce e-commerce verticals.

Speaker 2: The areas that we're not specifically in So we've we've been fortunate that we build an amazing platform that is we think is the state of the art as from a modern platform for 2023 and we're we're getting

Speaker 4: Lots of inbound interest there. We're able to strategically partner with the ones that we think are have high value for growth and great partners. And I'll let Tim talk about, you know, for his contribution in margins. Yeah, I'll add to that. I mean, what we typically see is a midsize to larger, you know, isotype of customer that.

Speaker 4: is working through one of the larger processors and wants more control of their own ecosystem. And they want to become more of a full-service processor. They want access to banks and they want access to the ability to run their own businesses and have more control of that. And so we're able to customize that and provide that to them with redundancies.

Speaker 4: That's the typical type of customer and the typical type of conversion. It is really nice margin business and it's been performing very well. We were just at the Electronic Transactions Association and have a really nice pipeline coming out of that. It's been a really nice growth driver for us.

Speaker 4: You touched on it a bit in some of the earlier questions, but just directionally, could you kind of provide some comments on business trends more broadly in the month of April and May so far? Thank you. Yeah, April in the consumer space particularly, it started strong. I think some of the tax refund dollars maybe fell over into April .

Speaker 4: payments. We have completed implementations of some of the larger wins that we talked about that provided strength exiting the quarter and into early Q2. So we're seeing positive trends with that as well. And then there's a very strong sales implementation pipeline business payments that will continue to ramp throughout the quarter into next quarter.

This reminder on two things as we talked about as well. We do have some political media overlapping and obviously Blue cow will be out of second quarter numbers and then I'll see all of you know we've mentioned before in the past specifically on the consumer payment side it

First quarter is a high seasonal quarter for us, and second quarter can obviously seasonally be less than the first quarter from an overall volume perspective. Just want to mention a couple of those things. Yep. Thanks for those comments, appreciate that. And just —

As a quick follow-up, I guess bigger picture, Rife has made a bunch of acquisitions on the B2B payment side. Could you just more broadly talk about some of your learnings as you've integrated these deals and going back to your confidence in terms of ability to deliver 20% plus growth in B2B longer term? Thanks so much. Thanks.

Absolutely. So if you look at a normalized growth less than the, you know, political media spend every, every even year, we think that obviously is still there. And we're seeing it. We're seeing it in our, the wins that we're looking at. We're seeing it in our pipelines. The evidence of what we thought is still.

absolutely true and we're excited about that part of our business. Obviously, it's consumer is still a large part of our business and you can see how it's growing fast. So it's hard to catch it from that overall.

Total volume mix, but we really like the business. The verticals we're driving down, and you heard me talk about on the call, and the hospitality vertical as well as municipalities, as well as hospitals. We're still seeing lots of opportunities there. It's a large addressable market that is still well underserved with the entire digital transformation.

money flows and understanding the ability to move those funds as well as give them the state of the art financial technology to do that, we think we have a winning formula

Appreciate the comments. Our next question comes from the line of Timothy Scioto with Credit Suisse. Please proceed.

Great, thank you for taking the question. I wanted to circle back to an announcement you guys made a few years back, and it's featured on your growth plan slide 17. I know it's a smaller part of the business, but I was hoping you could give a brief update of your partnership with Veeam in B2B CrossBorder and how it's helped your business, whether in winning clients or winning volumes.

they do a good job. Specifically for us, we do not have significant cross-border activity with a lot of our specific large enterprise clients. They're more domestic than international and that's why we haven't seen a tremendous amount of growth in the cross-border side of that.

But it is a piece of our product suite. It does allow us to be extremely competitive in the marketplace. As we, some of our large enterprise clients continue to expand, we'll see more and more opportunities of that. Obviously you're seeing some of those opportunities specifically into Canada.

But over all, it's still a nice, significantly meaningful, that meaning cross-border is no.

Absolutely, okay. Thank you, John . And then this one is for Tim. This is a follow-up. So just on an absolute basis on the reported numbers, not adjusted for the media spend comp that's tougher in Q4, is it fair to assume that the guide right now may be conservatively and because of the macro impacts that you're embedding?

the absolute growth is more in the low single digits and then if we added in the media impact it would imply an underlying exit rate and maybe the high single digits for this year and again that is in the more moderate or mild recessionary scenario. Is that a fair recap or would you correct me on anything there?

Yeah, so if you look at slide 12, there's three ways to think about growth. There's the reported number, which is probably mid-single digits, and that's the top section of that chart on the top of that page. And then there's the organic number, which excludes blue cow, which gets us to high single digits.

Then there's the normalized organic which excludes flu cow and the political media impact which gets us to low double digits So that's still what the guidance implies and that's how we build up to it If you look at that slide, which is similar to when we reported guidance originally

Completely Tim, I appreciate that. And the slide is really helpful. I was actually talking more specifically about Q4 and the exit rate, not the full year of my college. Okay.

Yeah, so we think that the Q4 exit rate would probably be, I would say, high single digits and then normalized for political below double digits. Then we add, for example, the large captive auto client that will be rolling out next year, which we think will be incremental to those numbers.

and the color I was hoping for. Thank you so much. Our next question comes from the line of Joseph Vaffe with Kennacourt. Please proceed.

Hey guys, good afternoon. Thanks for taking the questions. I just, maybe we just start circle back to the auto vertical. You've had some good success there, kind of consecutively over the last few quarters.

I mean, it just kind of begs the question on how your solutions, how penetrated are the types of solutions that you're providing into the auto OEM, kind of broader auto sector and should we...

be thinking that there are potentially more of these in the pipeline than I'll be following.

Yeah, so we are winning. This is John . Hi, Joe. We are winning based on our technology and our product and our solutions, our omni-channel experience, our omni-modality experience, which will continue. You heard us talk about adding the digital wallets last year and continue to add.

Venmo, PayPal, just the various different ways you can pay, anywhere, any way, any time. And delivering that solution, the consumer is demanding it. The end consumer expects an ease of use and a high quality financial experience. And we're able to deliver that technology.

as well as the expertise by vertical and the expertise for payments. That is part of our winning formula. Obviously, we have to be competitive from a pricing perspective. But because we own our own clearing and settlement engines, if we want to win, we can win.

And we see there are more opportunities out there. The very, very largest usually takes some time, but we do see more opportunities out there. And overall consumer payments as well. Great.

Thanks for that. And then just maybe just drilling down again a little bit more on this, on the PayPal and Venmo integrations and how you are doing that. And obviously, you are partnering with PayPal to a certain degree here. We could talk about how unique that is potentially in the market versus competitors.

and how customers are receiving integration of those wallets. Thank you very much.

Sure. So as you've heard me speak about, we're continuing to enhance all of our existing loan management system integrations in our consumer payments area. We think that will give us great organic growth opportunities. We know that. As we expand several of our product features and functionalities, that being our digital wallets, that being our

that's going to lead to additional new organic opportunities, but also we think that'll, as we've always talked about, our ability to continue to convert in a digital transformation, convert existing clients into more of a digital solution. We see really good demand there on that side of it as well, but that we're barely scratching the surface there as we're rolling out and enhancing some of those...

payment feature and a payment option at checkout.

So another way to pay and we think that ultimately what that drives is a high quality end consumer experience as we help them engage there, but also you get paid more and you get paid more, so that's a high quality experience across the entire ecosystem.

Sure, great. Thanks for that call, John . Our next question comes from the line of Charles Naeppen with Stevens. Please proceed. Good afternoon and thank you for taking my question.

So some of the more recent wins in auto, particularly Mercedes, would imply more of an upmarket skew from a credit standpoint. So with that in mind, I was wondering if you could comment on...

the overall exposure within auto across the credit spectrum. Not looking for specifics around subprime prime.

etc. But just any high level comments I think would be helpful given the uncertain macro environment. Yeah, thanks for the question. We are clearly trying to go out market. We have been for several years and we are winning deals there now. We have a pipeline in the captive space. We have more enterprise reps.

on our team and so we are seeing success there. We do process for lenders, auto lenders across the entire spectrum but we have focused more of our efforts on the enterprise accounts which would naturally like you said lean toward more of a prime type of borrower. So that's where the focus has been but historically we've sold accounts across that entire spectrum.

of volume impact within business.

Could you give us a sense for the impact of the client acquisition as well as Blue Cow and how we should think about organic growth from a volume standpoint within that business, or normalized growth rather?

So Blue Cow is in the consumer side so that when we broke that out that's what contributed to the difference between the 15% reported and the 17% organic. So that's on the consumer side and as we mentioned there will be about $2.5 million of revenue in Q2-22 that we would pull out. So thinking about consumer organic growth that's how we talked that in. And then...

We don't want to get too specific on the large account, but it would probably be at least a few points of growth that we lost as a result of that. And so you can see how that would impact the exit rate going into Q2.

Thank you for the call. I appreciate it. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad.

Our next question comes from the line of James Faucette with Morgan Stanley . Please proceed. Hey good afternoon gentlemen. Thanks for taking a few minutes here today. Had a couple of follow-up questions on topics that already addressed at least on this call and then the press release first on B2B.

Obviously, you talked about a large client rolling off, and it seems to be having a little bit bigger impact on the BDB segment than at least I would have guessed. Can you remind us what your customer concentration might look like, and how should we think about the risk of additional churn there? Yeah, thanks, James. We're pretty diversified there, so there's not really anything in there we can provide built in.

result to that but there's not significant concentration and we're not aware of other losses like this.

Got it, got it. Thank you. And then on credit unions, you mentioned in the press release that you're seeing continuous strength with credit unions. It was quoted up 20% or so. You mentioned last quarter that credit union strength may be partially due to softness within some other verticals.

Can you remind us a little bit like what the relationship is between verticals and strength and credit unions and give us an update on what you're seeing within credit unions and how we should think about momentum?

Yeah, so I think that comment was related to some of the auto lending moving out of the traditional auto space and into credit unions, just credit unions having, you know, generally lower rates. They were benefiting from rates rising and then being able to provide competitive financing. So I think that, you know, we still see that happening where they're winning some auto finance.

would help with the originations for new loans to those members as well. So I think the biggest tie-in is probably between credit unions and auto.

That's really helpful, Kaleid. Thanks for that, gentlemen. Absolutely. Our next question comes from the line of Mike Grondahl with Northland Securities. Please proceed. Hey, guys. Thanks. Two things. One, we have a question from the line of Mike Grondahl. He's a

more interesting or a lot more interesting. Thanks.

Yeah, so...

On the M&A side, obviously we have a strong balance sheet. We continue to be very profitable building our cash position, positioning ourselves well for multiple types of opportunities in the event that we find them to be very strategic. On the valuation side, on the M&A side, we have seen a few...

entries back into the market. And we're also seeing multiples come down some. We think we'll continue to see more opportunities as the year comes around. And we also think the private side will obviously adjust to some of the bulk of multiples as well.

And we've said this before, we have a very high bar. We obviously understand where we are in the market. That makes it a very strategic high bar for us. But yet, we do think we'll be well positioned for the exact right opportunities that we find in the marketplace. I think from a competitive standpoint, it's not really changed much. I mean, we see some similar names in the.

network within those verticals, but that's where we may see new competition as if we're entering new subverticals particularly within B2B and AP.

Thank you. Ladies and gentlemen, this concludes the question and answer session. I would like to turn the call back to John Morris for any closing remarks.

Got it. Thank you. Thank you. Ladies and gentlemen, this concludes the question and answer session. I'd like to turn the call back to John Morris for any closing remarks. Thank you.

We are very pleased with our first quarter results. We remain focused on executing our strategy as we see incredible amounts of organic growth opportunities.

and we'll continue to invest in those. We will continue to execute our operational efficiencies.

As we expand our sales pipelines and we'll continue to converting on our implementation pipelines as well.

I look forward to speaking with you in the next coming weeks here. Thank you very much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.