Q3 2023 Repay Holdings Corp Earnings Call
Yeah.
Good afternoon, I'd like to welcome everyone to repay third quarter Tween age Binney Street earnings Conference call.
At this time, all participants are in Egypt, and the only mode.
Question and answer session will follow the presentation.
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This call is being recorded today November 9th Tween age can you see.
I'd like to turn the session over to Jewish Crisanti head of Investor Relations at V. P. Stewart you May proceed.
Thank you good afternoon, and welcome to our third quarter 2023 earnings conference call 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.
Our beliefs and estimates regarding future events and results.
Those forward looking statements are subject to risks and uncertainties, including those set forth in the SEC filings related to today's results and our most recent Form 10-K.
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 as required by law.
In an effort to provide additional information to investors. Today's discussion will also include references to certain non-GAAP financial measures reconciliation and other explanation of those non-GAAP 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.
It was materials, including reconciliation and other explanations with respect to repay its organic normalized organic growth.
As described in our materials Q3, 2023 normalized organic growth is calculated by excluding contribution attributable to the divested blue called software business and the contribution attributable to political media in the third quarter of 2022.
With that I would now like to turn the call over to John.
Thanks, George Good afternoon, everyone. Thank you for joining us today to review our third quarter results.
On a normalized organic basis in Q3, we reported revenue growth of 11% and gross profit growth of 12%.
And 13% year today.
We continued to see stable and resilient trends from our clients throughout the quarter.
Our Q3 results performed in line to our expectations and we believe that these results as well as the demand we're seeing from our clients demonstrate the need for our powerful technology and one stop platform to optimize their payment floods.
Throughout this year, we remain focused on operating our business and executing on our strategy.
Our efforts in developing our go to market and implementation teams as well as continuously innovating our payment technology remain our top priority at repay as we strive to be a network to all networks.
Our clients are very focused on reducing the complexities around receiving and making digital payments, while enhancing the overall experience for their consumers and businesses.
On a go to market side, we continue to expand our services into now 257 integrated software partners, while finding ways to further penetrate the relationships. In addition to our internal sales teams remain focused on our multi pronged approach to win clients of all sizes.
Large enterprise accounts as well as expanding our offerings into existing accounts.
The customer journey also continues to be an area of focus for our sales and implementation teams. We're finding that in today's environment. Many of our clients are doing more with less internal resources Joy, making sure. We guide them through the Onboarding process, while providing ongoing at first class support throughout the entire client experience.
As for technology, we remain committed to improving the payment experience for our clients and their customers by delivering innovative solutions that support evolving payments preferences will continuously enhancing our product offerings and have been deploying automation initiatives across our organization.
Both of our consumer payments ambitious payment operations.
As an example, we have implemented various automation processes for charge backs compliance risk monitoring and enabling our vendor squatter network, leading to significant increases in productivity.
Which were expected to scale over time.
Our consumer payments segment grew organic gross profit by 14% in Q3.
This was primarily driven by the ongoing secular tailwind within the consumer payments verticals, we serve and the continued ramp of recent large client implementations.
We're now integrated with 161 software partners in the consumer payments segment.
Our team is excited about the new partnerships that represent a variety of software platforms, including one with our previously announced auto captive wins that will ramp during 2024, but also positioning repaid to pursue enterprise clients across the lending universe.
In addition, expanding partnerships for existing and potential new clients continues to be an area of focus during the quarter, we deepen our integration what's alero a global leader in vehicle lifecycle management.
The expanded integration features repay suite of payment solutions directly within their platform.
Enabling clients to accept digital payments through our multiple channels, including online portal taxpayer in I V. R.
During the quarter, we added nine new credit unions to repay bringing our total credit union clients to 266.
As a reminder, the credit Union market opportunity represents over 185 billion annual total payment volume.
Similar to a credit Union community banks are also an important opportunity for US for example, we signed a new community bank client a specialized in providing loans to consumers with operations in the vast majority of the United States.
Repay all expanded payment tools available to their agents and customers by offering debit card and ACTH processing by a newly designed agent portal.
And customer facing payment modalities. Additionally, prepaid payment technology is integrated within the banks loan management system, allowing our clients to further scale and streamline reconciliation and internal workflows.
Yeah.
Credit card Servicers as well as accounts receivable management companies continue to be attractive verticals and are a great growth opportunity for us we've begun implementing some of the new wins and our growing sales pipeline, while also expanding our software partners.
As we look into the future the mortgage servicing space continues to look promising.
And pulling back on the servicing side of mortgage industry has ever faced with increasing regulation and capital requirements, allowing nonbank mortgage servicers are focused on improving their technology and advancing their payment capabilities to gain market share.
While we do process mortgage payments for several banks.
These non bank servicers represent our primary target market. In addition to this trend repay is partnering with black Knight to bring debit acceptance capabilities to both existing and potential clients.
Dressing along to bring this capability towards the second half of 2024 and beyond.
Our teams have identified a group of clients and they're continuing to engage with black Knight on product development testing and implementation.
And lastly, our instant funding product continues to see significant growth with transaction volume up approximately 50% year over year.
Moving over to business payment segment during the third quarter, our business payments gross profit grew 13% when excluding the impact of political media during 2022.
Our normalized gross profit was driven by the continued momentum in our sales and implementation pipeline for enterprise and mid market companies within our health care property management auto and municipality and articles.
Or a portion of the segment continues to perform nicely as we focus on penetration of existing ERP systems and payment acceptance optimization.
And on the AP side, we extended our supplier network to over 233000 suppliers, which is the largest quarterly ads are vendor neighbor team has on boarded.
Last quarter, we highlighted strong traction across our business payment verticals with recent wins like Castle management group and property management and.
And we're continuing to execute on our robust sales pipeline in Q3.
During the quarter, we signed many new clients across our verticals like Sierra view Medical Center, a Premier Hospital in full service Health Care Center in California.
Yeah.
We are now integrated with 96 software partners in the business payments segment.
A few new partnerships to highlight include PDI technologies, Omnia partners and Black box.
<unk> technologies is a leading global provider of software solutions supposed to convenience retail and petroleum wholesale ecosystem.
With our partnership PDI technologies clients can now rely on repays embedded accounts payable automation within their software ecosystem to reduce cost while experiencing greater control and transparency.
We recently announced a partnership with Omnia partners, the largest purchasing organization for public sector procurement.
Repays automated accounts payable solutions to its portfolio of national supplier contracts.
Digitizing outbound vendor payments will streamline and optimize the AP payments variance for government and education organizations.
Automating accounts payable public agencies can modernize how they make outbound payments increasing efficiency and vendor satisfaction.
And finally, we were excited to announce our partnership with Blackboard, a leading software ecosystem designed specifically to meet unique compliance needs of health care education and nonprofit organizations.
Our partnership.
He has the exclusive AP integrated solution for the Blackrock platform.
Backlogs broad network of clients will be able to perform vendor payment automation directly with blackboard centralized platform experiencing both time and cost savings we.
We are looking forward to implementing this partnership throughout the first half of 2024 and offering embedded solution with blackboard clients towards the second half of the year.
To wrap up you can see the investments we've made in sales and technology are really paying off.
We're partnering with the leading software providers integrated clients of all sizes, and providing them with advanced products and services that enable seamless acceptance outbound execution of digital payments.
Our strong balance sheet and cash generation enable us to continue to innovate and grow organically, while also allowing us to keep our eye on the M&A market and have been an attractive strategic opportunity becomes available.
With that.
I'll turn it over to Tim to go over our financials and our outlook for the remainder of the year Tim.
Thank you John now, let's go over our Q3 financial results before your financial guidance for 2023.
As a reminder, Q3 normalized organic growth calculated by excluding contributions attributable to divested really kind of software business and the contribution of attributable to political media in the third quarter of 2022.
In the third quarter, we delivered solid results across our key metrics card payment volume was $6 4 billion.
And he was $74 3 million, an increase of 11% on a normalized organic basis over the prior year third quarter, which represents a take rate of approximately 116 basis points.
Take rates were higher due to continued strong performance in our non card volume based businesses within consumer payments.
Typically in communication solutions and funding.
With higher yields in business payments.
As a reminder has never been larger clients our mix will naturally bring down the take rates over time.
Revenue attributable to Blue column political media in Q3 2022 with <unk>.
$2 7 million and $1 9 million respectively.
Gross profit was $56 7 million, an increase of 12% on a normalized organic basis.
Normalized organic gross profit growth removed approximately $2 7 million and $1 7 million of gross profit attributable to blue cow and political media in Q3 2022, respectively.
Our consumer payments segment reported organic gross profit growth of 14% in Q3 our.
By business segment gross profit grew 13%, excluding the impact of political media during Q3 2022.
Third quarter adjusted net income was $19 9 million or <unk> 21 per share.
Lastly, third quarter, adjusted EBITDA was $31 9 million.
For the quarter adjusted EBITDA as a percentage of revenue was 43%.
Adjusted EBITDA margins remained stable quarter over quarter, but have been partially impacted by inflationary pressures.
To increase costs.
As a company we have always focused on profitable growth.
Finding processes across the business, where he can scale through automation.
Maintaining investments towards innovation.
This has led to replace with passing a rule of 40 on an organic basis for the 17th consecutive quarter.
The combination of resilient double digit normalized organic gross profit growth.
Adjusted EBITDA margins separates us from many of our peers.
Our net leverage is now approximately two five times.
Now I wish to naturally decline throughout the year from our strong profitability and cash flow generation, excluding any potential M&A.
As of September 30, we had approximately $118 million of cash in the balance sheet with access to 185 million of Undrawn revolver capacity for a total liquidity amount of 303 months.
He pays total outstanding debt of $440 million is comprised of a zero percent coupon convertible note. It does not mature until February of 2026.
Moving onto our thoughts for the remainder of the year.
Based on the year to date results as well as contracts, we are raising our 2023 revenue outlook.
We expect volume to remain between 26 billion and $27 2 billion revenue to now be between $286 million and $292 million.
We are reaffirming our gross profit outlook to remain between $218 million and $228 million, reflecting normalized organic gross profit growth of 9% 14%.
Kind of adjusted EBITA and look to remain between 122 million and $130 million, which reflects gross profit margin and adjusted EBITDA margin range is in line to our year to date results.
As a reminder, during the fourth quarter, we will be lapping strong overall results in the same prior year period as well as increased contributions from our business payments segment due to the political media cycle in 2022.
Political media added approximately 6 million of gross profit in 2020 too heavily weighted in Q3 and Q4.
Our full year 2023 outlook range continues to plan for a potential slowdown in the overall macroeconomic environment during the remainder of the year.
For additional details on 2023 normalized 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.
As you can see from our results, we have solid momentum heading into the fourth quarter of the year.
We expect adjusted free cash flow conversion to accelerate into 2024 as we realize the benefits from investments we've made in sales product and technology over the past several years I'll now turn the call back over to the operator to take your questions operator.
Thank you at this time, we will be conducting a question and answer session.
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One moment, please while we poll for questions.
The first question comes from Bob Napoli from William Blair. Please proceed with your questions Bob.
Good afternoon, and thank you for the question and solid results.
That's my first question would be on just on free cash flow conversion and just your thoughts over the medium term I mean, I think that's the number one question.
We get and I think you know some visibility on that would be really helpful to.
The valuation of your business and so I know you've made a lot of investments in <unk>.
<unk> this quarter.
And some color on what you're targeting what you think the right level is over the long term would be really helpful.
Yeah, absolutely. Thanks for the question. So yeah. As you mentioned, we have made a lot of investments in our products and technology.
We've been enhancing our existing software integrations, we've been combining platforms and.
A lot of that work is behind us as to Capex was up a little bit in Q3, but we expect that to come down again in Q4 similar to the Q2 level. So over the medium term as we grow the topline.
And bring down capex to be probably call. It in the 12% to 14% next year Green is next year, 12% to 14% of revenue and below that in the outer years.
We'll see free cash flow conversion increase so we want to continue to invest in the business. We want to continue to innovate and build out our technology stack built out our product suite, but I expect as a percentage of revenue Capex will come down so as we grow and Capex comes down free cash flow conversion will increase.
Thank you.
There's some take on your target would be helpful. But.
Let's see the next question I would have a nice nice results out of the consumer.
Business really really strong.
Just any color you can give on where youre seeing the health and where I mean, there's been some.
Noise out there that the credit unions have really pulled back on our auto loans are just no really tightened credit and I know you're not tied to originations, but it does affect you eventually but what are you seeing.
Where is that strength that you're seeing coming from.
And you know what are your thoughts as we moved into next year I think you called out tougher comps in 'twenty as we move into 'twenty four.
Good afternoon Bob.
So we are pleased with our strong year to date performance of our normalize 13% organic growth.
And then obviously, we're seeing some positive trends similar to that in October.
Similar to Q3.
On the consumer payment side.
Some parts of that as a continued enterprise wins that are have been rolling out throughout the year.
Some additional parts of that and then on the credit Union side as you as I mentioned on our call. We had additional credit uniting the additional credit unions attitude.
Our total credit.
Credit Union.
I think we have now we're up to about 266 or so of those and we.
We're still seeing the whole digital transformation is real and that consumer experience of driving that interaction on the credit Union side is we're providing that financial technology. So we're still we're still seeing positive confirmations in the marketplace of the need for our technology.
At least that's the part we see.
Nothing I mean, the tightening that you are seeing any credit unions not that the market is seeing in credit Union lending isn't affecting you because of the secular trend to digitization of loan repayments is that kind of.
Yeah, I mean with the alone those loans are still growing in the credit Union space, maybe not as fast as they were previously but I think they still are showing some level of loan growth and but more importantly, it's the digitization of payments and <unk>.
Credit unions overall, just like some other financial institutions looking to upgrade their tech stacks and part of their own digital transformation is increasing the payment experience for their borrowers so they're as they upgrade their overall technology experienced or upgrading their payments with it and we're benefiting from that.
Thank you.
Yeah.
Yeah.
Thank you. The next question comes from Andrew Schmidt from Citi. Please proceed with your questions Andrew.
Okay.
Hey, John Hey, Tim Thanks for taking my questions and you can see the consistent results.
I guess I could put up.
Put a finer point on the fourth quarter normalized organic gross profit outlook to still a pretty wide range for the year. John you mentioned consistent trends and are good trends that were consistent with the third quarter.
Through October maybe you can just talk about you know just some of the assumptions that you're making in the fourth quarter and then more specifically you know what.
How youre expecting.
Organic gross profit growth to trend relative to the third quarter. Thanks, a lot guys.
Yeah, Hey, Andrew it's Tim So we.
As I said on the call I mean, even on a normalized basis, it's a tough lapping quarter for us and when I was talking about the lapping. It was for Q4. If you look at Q4 of last year, even normalized it was the strongest quarter. We had stopped laughing is just part of it.
You did mention that we still feel good about trends in October, but we the planning assumption for the year is that there will be an overall macroeconomic slowdown and probably the place. That's most visible is in the auto market.
And so we're planning for that and that's kind of how we build up to it. So part of it is lapping part of it is just a planning assumption around potential slowdown in the continued challenge in auto.
Got it appreciate that just a quick follow up to that are you seeing I totally that planning assumption. It totally makes sense and you mentioned research reach recessionary trends in auto but are you seeing anything right now in the repayment volume that might suggest that things.
Things are slowing at all or is it is it more of a comp issue. When we think about the fourth quarter I guess, what I'm getting at is it are.
Are you seeing anything thats changed or is it more about just your starting point from a planning perspective. Thank you.
Yeah, it's really the comp issue and then the planning assumption.
Auto.
In personal loans, we're seeing consistent trends with the prior quarter and in fact, a large enterprise win that John referenced has been really nice win for us and.
It has contributed nicely and then auto is still challenge like we said and then credit unions are growing nicely.
So there's positive trends, but the lapping and then just the planning.
Assumption around the slowdown in the main drivers.
Got it. Thank you Tim if I could just squeeze one more in question that is not a lot of People's minds is just the management of peanut costs acceptance from our enterprise suppliers.
Wondering if you've seen any pushback on just virtual card acceptance for large ticket items from enterprise suppliers or generally speaking what you're seeing in terms of just enterprise a peanut costs acceptance trends.
Anything there would be helpful. Thanks, a lot.
But we're not seeing anything different I mean, it may depend on the end market you are serving with an AP.
Have been serving auto dealerships hospitals municipalities property management companies and we're not seeing anything different with the supplier acceptance trends, we've grown our supplier network really nicely this quarter to over 233000 were offering a total pay solution, which allows us to pay them.
All different ways virtual cards enhanced ACTH ACTH and check.
And we still see really nice virtual card adoption. So we don't see anything in our particular end markets that would cause us to think there's a dramatic shift in acceptance trends. So maybe it's just unique to different verticals.
Perfect well understood. Thank you very much Tim.
Yeah.
Thank you. The next question comes from Ramsey El <unk> from Barclays. Please proceed with your questions Ramsey.
Hi, This is Ryan Campbell on for Ramsey. Thanks for taking my question today.
So your normalized business payments gross profit growth came in at 13% in the quarter. So all else being equal given next year's a big political cycle. Unlike this year is this the normalized growth rate should be expecting to see in business payments next year.
Any color there would be helpful.
Well, yeah. So Q4, we actually think could be a little bit above.
Q3, Q2 was 15%.
Q3 came in at 13, we did experience some implementation delays we have started to see those flow through the pipeline John talked about focusing on the customer journey and the implementation experience. So that's a key area for us to try to find ways to be more proactive and moved deals through the pipeline more quickly than you know.
Towards the end of Q3 and into early Q4, we saw we're seeing some success with that so I think that that number will be a little bit higher in Q4, and that's probably a good way to think about it going into next year.
Great. Thank you.
Thank you. The next question comes from Sanjay So Connie from K D. Double you. Please proceed with your question Sanjay.
Hi, does that too Steven Kwok filling in for Sanjay. Thanks for taking my questions. The first one I had with some of the take rate I'm, just how should we think about it moving forward it seems like the.
Thus far the take rate has been stronger than expected just a if you could provide some color around that thanks.
Yeah, absolutely. So yeah as we mentioned we raised our revenue outlook for the year, we're seeing a lot of strength in our revenue.
As you said year to date.
So we felt good raising that.
And it's a similar trend as previous quarters, where some of our non card volume based products performed really well those would be.
Communication solutions and instant funding on the consumer side, and then overall our yields in business payments were higher and have been increasing so we increased the revenue guidance, which implies a little bit of higher take rate than previously in Q4.
The other thing I'd say is over time as we as we ramp more enterprise wins.
Take rate could come down a little bit, but we'll we'll likely have higher GP dollars, which will lead to faster GP growth as a result of the enterprise wins so.
It's been really strong gave us comfort increasing the revenue guidance.
But the mix shift to enterprise could bring that down a little bit in future periods.
Got it and then just following up around the guidance because the gross profit didn't really change. So just wanted to see if you could give a little bit more color around the cost of services and how we should think about that for next quarter and then into 2024.
Yeah, I mean, those products that I, just mentioned are lower margin products in general so they don't flow through from revenue to the G. P. The same way.
They have higher Cogs so.
If those were those are more prevalent that could be one explanation for that.
But in general.
Like I said, the lower margin would imply that.
Just a little bit higher cost of service related to those types of products, where they're not card volume based.
Got it.
Thanks for taking my question.
Okay.
Thank you. The next question comes from Kim <unk> from UBS. Please proceed with your questions Ken.
Great. Thank you.
Quentin on the take rate so the 1.16 that you mentioned Tim.
Can you give us any kind of a rough sense of how much that non card revenue is that contributing I understand the take rate has there's a little bit of the interchange there from the b to B E. P. There's a little bit of a take rate is a little bit it can convenience fee and there is a little bit of the non card revenue. If you could give any context on the relative sizing of.
Those are our most specifically the non card related revenue that basically adds to the numerator, but not the denominator when we look at take rate.
Yes, I appreciate the question, it's about 20% to 25%.
Alright perfect.
2025% of revenue is coming from the non card. Okay. So if we back that out the underlying take rate would look lower which makes total sense.
Yes, it would but it's still you know.
In the Ninety's call. It so we still feel really good about the card take rate, but yeah optically it would be lower if you back that out.
Yeah totally with you Okay, a very nice okay now or this is Tim.
Tim Our G. P. I mean, our EBITDA margins would look similar to what we previously reported.
This year if you.
Just for the revenue just for the revenue piece.
Oh, Okay, well said thank you.
Alright.
Tim. Thank you for that answer the follow up briefly I know that Andrew mentioned this earlier I'm, sorry to come back to it but.
The guidance range for gross profit I know that you know.
When you gave it last time it was kind of wide, but there is still a half of the year left and now that there's only two months left it just seems like kind of a wide range was there any reason that you decided to anything anything that you saw that maybe just want you to keep it at that pretty wide range.
Okay.
So I think it's just a combination of year to date performance and how that has looked at the GP level and then the dynamic where the drivers of the increased revenue.
You don't have the same margin profile as the overall business. So if those are lower margin theyre just not flowing through the same way that you pay so year to date performance and product mix were the two main reasons.
Okay, Alright, thank you so much Tim and John.
Yeah.
Thank you. The next question comes from Joe Ritchie from Truth Securities. Please proceed with your questions Joe.
Hi, guys. This is Joe on for Andrew Jeffrey Thanks for taking my questions.
I had a question around the domestic health care space, and we know it's pretty complex and from what we've heard from some competitors they talked about some delayed implementations there.
Can you speak to the health care pipeline and visibility in general and tell us if youre seeing anything like delays that could impact the timing of Rcs revenue in that vertical.
Yeah, so from our perspective, the health care vertical predominantly for us although as we have.
A smaller part of that on the consumer payment side, a large part of that is for us is going to be health care vertical and the business payment side and predominantly more on the payables side of that.
Which is the back office side of the hospital World for.
So a very large enterprise they have their own sequencing of.
Implementation Rollouts and we've actually.
It could have been some reasons for delay earlier in the year, but actually we've experienced some very positive momentum.
Some of our health care wins here in the.
Third third and fourth quarter.
Yeah.
You could almost say it's good.
You would almost have to say, it's client specific and and the size of clients and their technical ability sometimes.
Okay, and then with the 'twenty 'twenty four political season in mind can you tell us if the competitive landscape has changed at all in the last year and if you could give us some color on what line of sight looks like for media spend just given the tough comps that you've referenced.
Referenced in B to B.
Yeah. So it's very similar competitive dynamics, there theres really us and one other large player that participate in the AP side.
For political media spend in.
2022 was a non presidential cycle and like we said on the call.
Produced about $6 million of gross profit 24, as a presidential cycle and based on the market data we've seen we think that.
Could could grow our gross profit by about 25%.
So just based on overall market growth of presidential cycle being bigger than a non presidential cycle and what we see in our pipeline. That's how we think about growth in 'twenty four over 'twenty, two particularly specifically for political media.
Fantastic. Thank you.
Yeah.
Thank you ladies and gentlemen, just didn't have a reminder, if you'd like to ask a question. Please press Star then one if you'd like to ask a question. Please press Star then one the next question comes from James Fawcett from Morgan Stanley. Please proceed with your question James.
Hi, It's Michael I'm fond town for James Thanks for taking our question Tim I just wanted to ask how youre thinking about the implied card payment volume in for Q. Obviously, you take your comments on macro broadly, but it seems to be well ahead of sequential for qunar them. So I was curious about how you're thinking about the drivers there and sort of how youre thinking about.
Exit rates into next year. Thanks.
Yeah. So we didn't we didn't change our guidance for for CPB.
And we do have this large personal lending customer has been ramping throughout the year, that's one driver of it.
We do have the business payments growth that I mentioned.
We think going to be there's going to be higher in Q4 than Q3, that's one drive another driver of it. So those are a couple of factors, where we think that it could potentially lead to a higher number but again, we didn't we didn't change our CTV volume range specifically.
Yep got it and then maybe just a quick update just in terms of where you are in terms of getting some of the a our functionality on boarded and how you're thinking about the near to medium term impact of that thanks.
A R and b to B.
We have the functionality in place generally we've been optimizing payment acceptance.
Within <unk>, which is one of the reasons for the higher take rates and margins. We have refreshed some of our integrations. So we now have more capabilities within those integrations like say for example, we added Microsoft dynamics on the AP side, we're enabling that and they are side.
So we have good momentum in a R.
That has been a driver of some of the growth in take rate and margin improvement this quarter.
I appreciate it.
Okay.
Thank you. The next question comes from Joseph Murphy from Canaccord Genuity. Please proceed with your questions Joseph.
Hey, guys. Good afternoon, nice to see the double digit adjusted.
Adjusted organic growth.
Maybe kind of talk on software integrations.
You're doing really well good performance I'm always adding to those portfolios how does the competitive environment look there versus the last few quarters and you know obviously pie has been acquired and you know I kind of consider them a competitor and how that may be affecting the competitive landscape on the software.
Grayson and then I'll have a follow up.
Hi, Joe It's John Yeah. So we have 257 of those software partners as mentioned a 161 of those on the consumer payment side.
Which we wouldn't really compete with pi on that side of it Ah and 96 on the business payment side.
And we actually are very focused on the ones that we can truly help monetize payments.
And we're as we're really streamlining how we partner with them to go to market, we actually expect a really good runway and looking into 'twenty four on that obviously, some things take time, but but the the way some of those unique relationships are stacking up for us as I mentioned, a couple of our call we mentioned.
PDI doing some things on the business payment side, we mentioned blackboard.
On how we can we're going to integrate and embedded payable solution for them.
To roll that out on behalf of their clients and then some existing large relationships that we have on the AR and AP side, we will look to continue to to really streamline that as we have been working on on on that whole customer journey client success model.
Got it that's great and then I know you called out other instant payments growth again Ben.
Really hard could you just kind of remind us how big the Tam might be and how the economics look on that payment volume versus some of your other stakes.
Yeah. Thanks, Joe So instant funding as a product we were utilized visa direct mastercard send and where we're funding loans directly is that the primary use case for us to fund personal loans.
And that's a great growth driver for us it's been growing really nicely.
As our customers adopt more digital payments. They also want to digitize the entire funding part of the process and so this helps them do that and then if you recall, if we fund directly onto a debit card.
They're more likely to set up the repayment of the loan on that debit card is the default mechanism. So it also gives us the opportunity to opportunity to increase acceptance on debit cards within personal loans by funding the loans directly and so it's a pretty big opportunity.
All of our thousands of lenders, we probably only have a few hundred using it today. So there's still a long runway to go and it's.
You know you're funding the loans. So the ticket size is much larger versus the repayment streams, which ticket sizes are lower but the economics are more like an <unk>, where it's a per transaction fee. It's not based on basis points on the funding volume it's per transactions the ticket size.
Isn't as relevant in terms of the actual economics to us, but there is a lot of volume flowing through there and then there is we pay the typical card brand fees bank fees, but overall it is a lower margin business and that's why I mentioned one of the reasons, we didnt increase gross profit guidance because this is a.
Driver of revenue growth, that's a little bit lower margin.
Got it but you can make it up on the.
Funding of the loan could be lower margin, but if.
If the consumer repay us off that same card and it's got some nice benefits overtime.
That's why our margin on that.
Yeah. That's a perfect example of when we talk about you know.
Monetizing payments through the whole ecosystem with embedded payments, both outflows that would be an outflow and then an inflow back and a multi modality. That's a different modality. Although it may be card based is going down a different rail in some respects.
Than than debit your funding you're seeing credits versus pulling debits in.
And so that's kind of key to our overall long term core strategy of a network to own networks that move funds to and from.
Great. Thanks, a lot foot color lifestyle.
Yeah.
Thank you. The next question comes from Bob Napoli from William Blair. Please proceed with your question Bob.
Thank you for the follow up.
John the debit interchange Bill how would that affect the time.
Your business if they didn't debit interchange gets cut significantly and so I don't know.
The Durbin when the Durbin Amendment came through I can't remember if he was running this business or not.
Yes, and we benefited.
Okay.
In the past we benefited.
You look at some of our models.
The way it's priced is used.
Think about a convenience fee or do you think about some some type of a fixed rates and pricing.
If it were to go down that we would benefit in some form there.
The benefit.
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That night I mean, because your revenue comes out on your cost comes out more or what.
No I mean, if you're charging them, a fixed fee and our costs come down.
Still charging them not percentage of volume, we just have lower costs.
Should increase margins.
Right do you think there would be pressure on your.
Gross take rate over time or not immediately but overtime.
I don't think so on that on that particular pricing model, we would be still charging if it's call. It one 5% it would still be one 5%.
So I don't think that would change the actual revenue just be that we would have lower cost and better flow through the P&L.
P&L.
Thank you Alright appreciate it you mentioned dine out pay later in your press release, just wondered if that's if there's anything significant going on there or do you think there could be.
I mean, it's a it's definitely an addressable market opportunity.
We have a handful of those names now and.
Talking to others, because as we've said before.
Those installment plans when everybody pays on time and its four six installments and its simple then there is no need to have a processor like US you could use world pay or any other e-commerce provider, but when those installment plan to start to look more complex and it looked like loans, where there's delinquencies and interest and fees and penalties if it starts to feel a lot more.
Like in installment loan and we think we could provide a lot of value to them for those types of situations.
So it's not I wouldn't say, it's a really large significant growth driver for us, but it's certainly a market we can address.
Thank you.
Thank you ladies and gentlemen, just one final reminder, if you'd like to ask a question. Please press star.
And then Glenn if you'd like to ask a question. Please press star and then one we'll pause to see if there are any further questions before we completed.
Ladies and gentlemen, we have reached the end of the question and answer session and I'd like to turn the call back teach online for closing remarks. Thank you Sir.
Yeah.
Thank you everyone for joining us today.
As we've mentioned we are very pleased with our third quarter performance, we continued to invest in our business and our sales and our technology as we partner with our software partners.
To drive embedded payment solutions really help drive this digital transformation that we think is very real.
We remain focused on profitable growth.
While maintaining our investment storage innovation.
Which we think will continue to pay off for us.
So with that said we want to again, thank you for your time today.
Have a good evening.
Thank you. This concludes today's conference you may disconnect. Your lines at this time and thank you very much for your participation.
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Okay.
Yeah.
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Okay.
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