Q1 2024 Repay Holdings Corp Earnings Call
Operator: Good afternoon. I'd like to welcome everyone to Repay's first quarter 2024 earnings conference call. This call is being recorded today, May 9, 2024. I'd like to turn the session over to Stewart Grisante, Head of Investor Relations at Repay. Stewart, you may proceed.
Good afternoon, I'd like to welcome everyone to repaid first quarter 'twenty 'twenty four earnings conference call.
Stewart Joseph Grisante: Call is being recorded today May 920, 24, I'd like to turn the session over to you weren't Versace head of Investor Relations at repay you May proceed.
Stewart Joseph Grisante: Thank you. Good afternoon, and welcome to our first quarter 2024 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 about 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 in our most recent Form 10-K. The actual results may differ materially from any forward-looking statements that we make today.
Stewart Joseph Grisante: Thank you good afternoon, and welcome to our first quarter 2024 earnings conference call with US today are John Morris Co founder and Chief Executive Officer, and Tim Murphy, Chief Financial Officer.
Stewart Joseph Grisante: During this call we will be making forward looking statements beliefs and estimates regarding future events and results.
Stewart Joseph Grisante: 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.
Stewart Joseph Grisante: Actual results may differ materially from any forward looking statements that we make today.
Stewart Joseph Grisante: 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. Reconciliations and other explanations of those non-GAF financial measures can be found in today's press release and in the earnings supplement, each of which is available on the company's investor relations site. With that, I will now like to turn the call over to John.
Stewart Joseph Grisante: Looking statements speak only as of today, and we do not assume any obligation or intend to update them, except as required by law.
John: To provide additional information to investors. Today's discussion will also include references to certain non-GAAP financial measures reconciliations and other explanations 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.
Stewart Joseph Grisante: I will now like to turn the call over to Jeff.
John: Thanks, Stuart and good afternoon, everyone. Thank you for joining us today.
John Andrew Morris: Thanks, Stewart. Good afternoon, everyone.
John Andrew Morris: Thank you for joining us today. Our Q1 results represent a strong start to the year as we aim to capture new payment flows while enhancing client relationships with many value-added services. In Q1, we achieved organic revenue growth of 10%, organic gross profit growth of 11%, reported adjusted dividend growth of approximately 15%, and reported free cash flow growth of 90% plus year over year, with each metric performing in line to our expectations. In Q1, we made progress on our three main strategic initiatives, which will drive growth in 2024 and beyond. They include our go-to-market efficiency, client implementations, and a focus on product.
John: Our Q1 results represent a strong start to the year as we aim to capture new payment flows while enhancing client relationships with many value added services.
John Andrew Morris: Q1, we achieved organic revenue growth of 10% organic gross profit growth of 11%.
John Andrew Morris: Reported adjusted EBITDA growth of approximately 15%.
John Andrew Morris: Our reported free cash flow growth of 90% plus year over year.
John Andrew Morris: With each metric performing in line to our expectations.
John Andrew Morris: In Q1, we made progress on our three main strategic initiatives, which drive growth in 2024 and beyond that include our go to market efficiency client implementations and a focus on product.
John Andrew Morris: This progress further enhances our vast ecosystem of payment flows, which we have combined and developed over the past decade. Repays clients value our ability to move money efficiently and easily, as well as provide omni-modality and omni-channel services with our one-stop payment technology. In addition, our vertical-specific software network allows us to embed payments directly within their in-price workflows, making the process seamless and secure for our clients.
John Andrew Morris: This progress further enhances our vast ecosystem of payment flows, which we have combined and developed over the past decade Rebased.
John Andrew Morris: Prepaid clients value, our ability to move money efficiently and easily as well as provide omni modality and Omnichannel services with our one stop payment technology.
John Andrew Morris: In addition, our vertical specific software network allows us to embed payments directly within their enterprise workflows, making the process seamless and secure to our clients.
John Andrew Morris: Consistent with the card networks, we continue to see growth opportunities across emerging verticals for debit card payments, such as loan repayment, commercial payments in our B2B segment, and new flows such as instant funding via Visa Direct and MasterCard SIN. As we continue to strengthen our technical and go-to-market relationships with our software partners, we're excited about the multi-year growth opportunities across our consumer and business payment verticals. Thank you, Juan.
John Andrew Morris: Consistent with the card networks, we continue to see growth opportunities across the emerging verticals for debit card payments such as loan repayments.
John Andrew Morris: Payments in our <unk> segment and.
John Andrew Morris: Our new flows such as instant funding by visa direct and Mastercard send.
John Andrew Morris: As we continue to strengthen our technical and go to market relationships with our software partners. We're excited about the multi year growth opportunities across our consumer and business payment verticals.
Speaker Change: Thank you Juan.
John Andrew Morris: Consumer payments organic gross profit growth was 11%. Our strong performance in Q1 was a continuation of our growth algorithm, which includes growth coming from existing clients, as well as signing new clients over the past several quarters. Our growth is also aided by the ongoing secular tailwinds within our consumer payments verticals and the continued ramp of recent large client implementation. We added many new clients to our network in Q1, including 15 new credit units, an acceleration from last quarter, bringing our total credit unit clients to 291. We onboarded a larger credit union client during the quarter, which is one of the largest 50 credit unions in the United States.
John Andrew Morris: Consumer payments organic gross profit growth was 11%.
John Andrew Morris: Our strong performance in Q1 was a continuation of our growth algorithm, which includes growth coming from existing clients as well as signing new clients over the past several quarters.
John Andrew Morris: Our growth was also aided by the ongoing secular tailwind so within our consumer payments verticals and the continued ramp of recent large client implementation.
John Andrew Morris: We added many new clients to our network in Q1, including 15, new credit unions and acceleration from last quarter, bringing our total credit union clients to 291.
John Andrew Morris: We on boarded a larger credit union clients during the quarter, which was one of the largest 50 credit unions in the United States.
John Andrew Morris: This partnership exemplifies our client's continuous focus on the customer's digital experience, where enhanced payment capabilities can lead to strong operating performance and ongoing membership growth. Credit unions and community banks are a great growth driver for Repay as our vertical expertise and software integrations are a differentiated solution leading to a healthy skills pipeline to address the thousands of financial institutions in the United States. And during the quarter, we added another core software integration partner that specifically serves credit unions and banks, further positioning us well for this opportunity.
John Andrew Morris: This is partnerships and simplifies our clients' continuous focus on our customers' digital experience, where enhanced payment capabilities Kimberly to strong operating performance and ongoing membership growth.
John Andrew Morris: Credit unions in community banks are a great growth driver for repay as our vertical expertise in software integrations are a differentiated solution leading to a healthy sales pipeline.
John Andrew Morris: The address the thousands of financial institutions in the United States.
John Andrew Morris: And during the quarter, we added another core software integration part of that specifically search credit unions and banks further positioning us well for this opportunity.
John Andrew Morris: In addition, accounts receivable management continues to be an attractive vertical for repay with multiple years of growth ahead. During the quarter, we signed one of the largest providers in the U.S. of outsourced accounts for steel management and loan servicing. We also expanded our software partnerships with Maxify, a provider of collections and accounts receivable managed software for lenders and collection aides. Through this integration, Repay's payment technology enables businesses to optimize and streamline payment collections directly within Vaxify software.
John Andrew Morris: Additionally, accounts receivable management continues to be an attractive vertical for repay with multiple years of growth ahead during.
John Andrew Morris: During the quarter, we signed one of the largest providers in the U S of outsource accounts receivable management and loan servicing.
John Andrew Morris: Also expanded our software partnerships with Mcafee I provided our collections of accounts receivable and management software for lenders and collection agencies.
John Andrew Morris: Through this integration repays payment technology enables businesses to optimize and streamline payment collections directly within Backstopped by software.
John Andrew Morris: We added three partners during the quarter in the consumer payment segment and remain focused on strengthening our software partnerships, developing our sales pipeline, and continuously improving our clients' experience. We remain on pace to go live and begin processing with the previously announced large out-of-captain splendor in Lake Q2 with a measured ramp throughout the second half of 2024.
John Andrew Morris: We added three partners during the quarter to in the consumer payments segment and remain focused on strengthening our software partnerships developing our sales pipeline and continuously improving our clients experience.
John Andrew Morris: We remain on pace to go live and get them processing with a previously announced large auto captive lender in late Q2 with a measured ramp throughout the second half of 2024.
John Andrew Morris: And lastly, in value-added services, our instant funding product continues to see great growth, with transactional volume up approximately 33% year-over-year. This product offers an incredible opportunity for our clients to differentiate themselves in the marketplace by delivering quick, convenient, and secure funding experiences to their customers. And over the medium term, we are evaluating new areas and expanding these capabilities. We also had a very productive quarter in the business payments segment, which grew gross profit by 17% year-over-year.
John Andrew Morris: And lastly, and value added services, our instant funding product continues to see great growth with transaction volume up approximately 33% year over year.
John Andrew Morris: This product offers an incredible opportunity for our clients to differentiate themselves in the marketplace by delivering quick convenient secure funding experiences to their customers.
John Andrew Morris: And over the medium term, we are evaluating new areas of expanding these capabilities.
John Andrew Morris: We also had a very productive quarter in the business payment segment, which grew gross profit by 17% year over year.
John Andrew Morris: Gross profit growth was driven by our implementation teams converting strong sales pipeline funds into live clients that began to ramp during the quarter. In AR, we remain focused on optimizing payment acceptance and strengthening our client base through our direct sales team and ERP partners. Within AP, we grew our supplier network to over 279,000 suppliers while adding and enhancing integrations with several software partners during the quarter. In addition, we were honored to receive WEX's 2023 Spark Partner of the Year award for our best-in-class partnership facilitating virtual card business-to-business payment.
John Andrew Morris: Gross profit growth was driven by our implementation teams converting strong sales pipelines into the live clients they began to ramp during the quarter.
John Andrew Morris: And we remain focused on optimizing payment acceptance with strengthening our client base through our direct sales team and ERP partners within AP, We grew our supplier network to over 279000 suppliers, while adding an enhanced integrations with several software partners during the quarter.
John Andrew Morris: In addition, we were honored to receive works as 2023 smart partner of the year.
John Andrew Morris: Our best in class partnership facilitating virtual card business to business payments.
John Andrew Morris: During the quarter, we signed many new clients across our verticals. In the hospitality vertical, we are now live with Rejoice World Las Vegas, a fully integrated premium resort on the Las Vegas Strip, and many new hospitality clients continue to onboard additional properties onto our AP automation and total pay solution.
John Andrew Morris: During the quarter, we signed many new clients across our verticals and the hospitality vertical we are now live with resorts World Las Vegas, a fully integrated premium resort on the Las Vegas strip and many new hospitality clients continue to onboard additional properties onto our AP automation and total pay solution.
John Andrew Morris: Our existing partnerships are driving new client wins within our healthcare vertical, including several regional healthcare systems located in Texas, Georgia, and Maryland. We're gaining increased traction and building a healthy sales pipeline from recent software integrations such as Sage Intact, Microsoft Dynamics, Quadient, and Enflo. We're winning new clients as we continue to enhance our existing integrations with auto dealer software partners, and we're developing new partnerships along the way, such as EnergyCap, a leading provider of utility bill and energy management software.
John Andrew Morris: Our existing partnerships are driving new client wins within the health care vertical, including several regional health care systems, located in Texas, Georgia and Maryland.
John Andrew Morris: We are gaining increased traction in building a healthy sales pipeline from recent software integrations, such as Sage intact, Microsoft dynamics quite yet and then flipped.
John Andrew Morris: Winning new clients as we continue to enhance our existing integrations with auto dealer software partners and we're developing new partnerships along the way such that your energy cat, a leading provider of utility Bill and energy management software.
John Andrew Morris: With our partnership, EnergyCap clients can now rely on Repay's embedded accounts payable automation within their software ecosystem. And importantly, we are continuing to streamline the onboarding and implementation process, while also focusing on increasing the digital payment volumes of our clients. A great example is Country Pure Food, one of the largest manufacturers of multi-serve juices, plant-based beverages, and frozen malteses in the U.S.
John Andrew Morris: With our partnership energy cap clients can now rely on repays embedded accounts payable automation within their software ecosystem.
John Andrew Morris: And importantly, we are continuing to streamline the onboarding and implementation process, while also focusing on increasing the digital payment volumes are our clients.
John Andrew Morris: A great example is country pure food one of the largest manufacturers of multi serve juices plant based beverages and frozen novelties in the U S.
Timothy John Murphy: Since recently onboarding Country Pure Food, Repay's TotalPay solution has transformed their payment volumes from 100% paper-based to over 60% digital, with a 30% virtual card adoption rate and a clear path to 80% digital payment volume. As you can see from our results, we have been able to grow Repay by expanding our services, leveraging over 266 integrated software partners, guiding our clients through a seamless onboarding process, and constantly evolving our tech platform. As we look into the future, our platform continues to scale as we automate manual processes.
John Andrew Morris: So recently Onboarding country pure food Rebased total pay solution has transformed their payment volumes from 100% paper base to over 60% digital.
Timothy John Murphy: With 30% virtual card adoption rate and clear path to 80% digital payment volumes.
Timothy John Murphy: As you can see from our results, we have been able to grow repay by expanding our services leveraging over 266 integrated software partners.
Timothy John Murphy: Adding our clients through a seamless onboarding process and constantly evolving our tech platform.
Timothy John Murphy: As we look into the future our platform continues to scale as we automate manual processes.
Timothy John Murphy: The scaling of our platform and realizing the benefits from the investments we've made in sales, product, and technology over the past several years will enable us to accelerate free cash flow conversion throughout the year and beyond. Lastly, our capital allocation priorities remain focused on creating value for our shareholders by investing in organic growth opportunities. I'll continue to be open to accretive strategic M&A. Repay is positioned with a strong balance sheet to continue to grow profitably and accelerate cash generation throughout the year.
Timothy John Murphy: The scaling of our platform and realizing benefits from the investments we've made in sales product and technology over the past several years will enable us to accelerate free cash flow conversion throughout the year and beyond.
Timothy John Murphy: Lastly, our capital allocation priorities remain focused on creating value for our shareholders by investing in organic growth opportunities, while continuing to be open to accretive strategic M&A.
Timothy John Murphy: Rebased position with a strong balance sheet to continue to grow profitably accelerate cash generation throughout the year.
Timothy John Murphy: We exit Q1 with solid execution and consistent seasonal trends as we embark on the remainder of the year. With that, I'll turn it over to Tim to go over our financials and our outlook for 2024. Tim?
Timothy John Murphy: We exited Q1 with solid execution and consistent seasonal trends as we embark on the remainder of the year.
Timothy John Murphy: With that I'll turn it over to Tim to go over our financials and our outlook for 2020 for Tim.
Timothy John Murphy: Thank you, John. Now, let's go over our Q1 financial results before I review our financial guidance for 2024. As a reminder, Q1 organic growth is calculated by excluding contributions attributable to the divested blue cow software business during 2023. The first quarter delivered solid results across our key metrics. Revenue was $80.7 million, an increase of 10% on an organic basis over the prior year first quarter. Our business continues to benefit from strong performance in both card-based payment revenue as well as other value-added services such as communication solutions and instant funding, along with higher yields and business payments. The Q1 results benefitted from the typical tax refund seasonality.
Tim: Thank you John now, let's go over our Q1 financial results before I review, our financial guidance for 2024.
Timothy John Murphy: As a reminder, Q1 organic growth is calculated by excluding contributions attributable to the divested glucose software business during 2023.
Timothy John Murphy: The first quarter repay delivered solid results across our key metrics revenue was $80 7 million an increase of 10% on an organic basis over the prior year first quarter.
Timothy John Murphy: Our business continues to benefit from strong performance in both card based payment revenue as well as other value added services, such as communication solutions and Edison funding along with higher yields in business payments.
Timothy John Murphy: The Q1 results benefited from the typical tax refunds seasonality.
Timothy John Murphy: As a reminder, revenue attributable to Blue Cow in Q1 2023 was approximately $1.2 million. In Q1, organic gross profit grew by 11% year over year. As John mentioned, our consumer payments segment reported pan and cross-profit growth of 11% in Q1, and our business payments segment cross-profit grew by 17%, which contributed approximately $1.2 million to gross profit in Q1 2023. First quarter adjusted EBITDA was $35.5 million, growing 15% year-over-year with a 44% margin.
Timothy John Murphy: As a reminder, revenue attributable to Blue column Q1, 2023 was approximately $1 2 million.
Timothy John Murphy: In Q1 organic gross profit grew by 11% year over year.
Timothy John Murphy: As John mentioned, our consumer payments segment reported organic gross profit growth of 11% in Q1, and our business payment segment gross profit grew by 17%.
Timothy John Murphy: <unk> contributed approximately $1 2 million to gross profit in Q1 2023.
Timothy John Murphy: First quarter adjusted EBITDA was $35 5 million from 15% year over year with 44% margins Q1, adjusted EBITDA margins improved sequentially as we have maintained relatively stable SG&A costs on a quarter over quarter basis.
Timothy John Murphy: Q1 adjusted EBITDA margins improved sequentially as we have maintained relatively stable SG&A costs on a quarter-over-quarter basis while simultaneously working to align our sales, implementation, and support teams throughout the year. First quarter adjusted net income was $22.4 million, or $0.23 per share.
Timothy John Murphy: Simultaneously working to align our sales implementation and support teams throughout the year.
Timothy John Murphy: First quarter adjusted net income was $22 4 million or <unk> 23 per share.
Timothy John Murphy: Lastly, Q1 free cash flow was $13.7 million, representing 90-plus percent year-over-year free cash flow growth. Pre-cash flow conversion was in line with our internal expectations due to timing around net working capital and remains on track to accelerate throughout the year. Repay's net leverage at the end of Q1 was approximately 2.4 times. We expect net leverage to naturally decline throughout this year from our strong profitability and cash flow generation, including any potential M&A.
Timothy John Murphy: Lastly, Q1 free cash flow was $13 7 million, representing 90 plus percent year over year free cash flow growth.
Timothy John Murphy: Free cash flow conversion was in line to our internal expectations due to timing around net working capital remains on track to accelerate throughout the year.
Timothy John Murphy: <unk> net leverage at the end of Q1 was approximately 2.4 times, we expect net leverage to naturally decline throughout this year from our strong profitability and cash flow generation.
Timothy John Murphy: Including any potential M&A.
Timothy John Murphy: As of March 31st, we had approximately $128 million of cash in the balance sheet with access to $185 million of undrawn reborrow capacity for a total liquidity amount of $313 million. Repay's total outstanding debt of $440 million is comprised of a 0% coupon convertible note, which we are aware matures in February 2026.
Timothy John Murphy: As of March 31, we had approximately 128 million of cash on the balance sheet with access to 185 million of Undrawn revolver capacity, our total liquidity amount of $313 million.
Timothy John Murphy: Total outstanding debt of $440 million is comprised of a zero percent coupon convertible note, which we are aware of matures in February 2026.
Timothy John Murphy: Moving on to our thoughts for 2024. Our year-to-date results are driven by our growth algorithm of growth with existing clients, the full-year contribution from clients that began ramping during the prior year, and growth from new clients signed. We are reiterating our 2024 outlook that we provided in late February. We continue to expect revenue to be between $314 million and $320 million, gross profit to be between $245 million and $250 million, and adjusted EBITDA to be between $139 million and $142 million.
Speaker Change: Moving on to our thoughts for 2024.
Timothy John Murphy: Our year to date results are driven by our growth algorithm of growth with existing clients. The full year contribution from clients that began ramping during the prior year and growth from sign new clients.
Timothy John Murphy: We are reiterating our 2024 outlook that we provided in late February.
Timothy John Murphy: We continue to expect revenue to be between $314 million and $320 million.
Timothy John Murphy: This profit to be between 245 million and $250 million and adjusted EBITDA to be between $139 million and $142 million.
Timothy John Murphy: We expect roughly 44% adjusted EBITDA margins and anticipate adjusted EBITDA to grow faster than revenue and gross profit during the year. We expect our pre-cash flow conversion to accelerate throughout the year, with Q2 pre-cash flow conversion being closer to our full year pre-cash flow conversion target of approximately 60%. As a reminder, free cash flow conversion is calculated by dividing free cash flow by adjusted EBITDA.
Timothy John Murphy: We expect roughly 44% adjusted EBITDA margin and anticipate adjusted EBITDA to grow faster than revenue and gross profit during the year.
Timothy John Murphy: We expect our free cash flow conversion to accelerate throughout the year with Q2 free cash flow conversion being closer to our full year free cash flow conversion targets of approximately 60%.
Timothy John Murphy: As a reminder, free cash flow conversion is calculated by dividing our free cash flow by adjusted EBITDA.
Timothy John Murphy: As we demonstrated in Q1, we plan to reduce overall CAPEX spending, giving us the confidence to accelerate our free cash flow conversion throughout 2024, leading to free cash flow growth of approximately 60% year-over-year and sustained mid- to high-teen growth thereafter. Across the business, we are seeing the sales pipeline develop from our software integrations and partnerships, giving us confidence in our multi-year growth opportunity. The planning assumptions around our 2024 outlook remain consistent with a measured ramp of the previously announced auto-captive win starting in late Q2 and lapping the strong contribution from enterprise clients during 2023.
Timothy John Murphy: As we demonstrated in Q1, we plan to reduce overall capex spending, giving us the confidence to accelerate our free cash flow conversion throughout 2024, leading to free cash flow growth of approximately 60% year over year and sustained mid to high teens growth thereafter.
Timothy John Murphy: Across the business, we're seeing the sales pipeline develop from our software integrations and partnerships, giving us confidence on multiyear growth opportunity.
Timothy John Murphy: The planning assumptions around our 2024 outlook remained consistent with a measured ramp up of the previously announced auto captive when starting in late Q2 and lapping the strong contribution from enterprise clients during 2023.
Timothy John Murphy: Our quarterly cadence is comprised of Q1 being positively impacted by the seasonality of tax refunds, which rolls off in Q2, similar to prior years. Q3 and Q4 will benefit from the incremental contributions of our political media business in the business payment segment. Q2 free cash flow conversion is expected to progress towards our full-year free cash flow conversion target of approximately 60 percent, and free cash flow conversion is expected to accelerate throughout the year, similar to the quarterly cadence we saw in 2023.
Timothy John Murphy: Our quarterly cadence is comprised of Q1 being positively impacted from the seasonality of tax refunds, which rolled off in Q2 similar to prior years Q.
Timothy John Murphy: Q3, and Q4 will benefit from the incremental contribution of our political media business and the business payments segment.
Timothy John Murphy: Q2 free cash flow conversion is expected to progress towards our full year free cash flow conversion target of approximately 60% of free cash flow conversion is expected to accelerate throughout the year. The most of the quarterly cadence we.
Timothy John Murphy: We saw in 2023.
Timothy John Murphy: As you can see from our strong Q1 results and full year 2024 outlook, we continue to realize the benefits from our investments in sales, product, and technology over the past several years, leading to an acceleration in free cash flow conversion during 2024. Our focus remains on profitable growth, redefining processes across the business where we can scale through automation, while also maintaining investments in innovation. I'll now turn the call back over to the operator to take your questions. Operator? Thank you.
Timothy John Murphy: As you can see from our strong Q1 results and full year 2024 outlook, we continue to realize the benefits from our investments in sales product and technology over the past several years, leading to an acceleration in free cash flow conversion during 2024.
Timothy John Murphy: Our focus remains on profitable growth refining processes across the business, where we can scale through automation, while also maintaining investments towards innovation.
Timothy John Murphy: I'll now turn the call back over to the operator to take your questions operator.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. 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 key. Your first question comes from Ramsey L. Assel with Barclays. Please go ahead.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would.
Speaker Change: Like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Your line is in the question queue, you May press star two if he relates to remove.
Speaker Change: A question from the queue.
Speaker Change: For participants using speaker equipment or may be necessary to pick up.
Speaker Change: Handset before pressing with Barclays.
Speaker Change: Your first question comes from Ramsey El <unk> with Barclays. Please go ahead.
Timothy John Murphy: Hi, guys. Thanks for taking my question this evening. And forgive me if you commented on this. I was hopping back and forth between a couple calls. Adjusted EBITDA margins came in nicely ahead of expectations. What drove the beat there? And also, just help us think through the cadence through the remainder of the year.
Speaker Change: Hi, guys. Thanks for taking my question. This evening and forgive me. If you commented on this I was hopping back and forth a couple of calls.
Timothy John Murphy: <unk> EBITA margins came in nicely ahead of expectations what drove the beat there and also just help us think through a cadence through the remainder of the year.
John Andrew Morris: Yeah, we felt really good about that as well. We, as I mentioned, we had similar gross profit margins as prior periods, but we were able to manage SG&A and OPEX while continuing to focus on investing and growth, so that, you know, management of costs led to expanding gross profit or, excuse me, adjusted EBITDA margins. So we would expect that to continue in terms of the gross profit margin profile being steady, slightly expanding, and OPEX only slightly expanding, less than gross profit, which would lead to similar adjusted EBITDA margins for the rest of the year.
Speaker Change: Yeah, we felt really good about that as well, we as I mentioned we.
John Andrew Morris: We had similar gross profit margins as prior periods, but we were able to manage SG&A and opex, while continuing to focus on investing in growth and so that management of costs led to expanding gross profit excuse me adjusted EBITDA margins. So we would expect that to continue in terms of the gross profit margin.
John Andrew Morris: <unk> being steady slightly expanding opex slightly only slightly expanding less in gross profit, which would lead to similar adjusted EBITDA margins for the rest of the year.
John Andrew Morris: Got it. Okay. And then a follow-up from me. Back in March, there were some media reports about you guys potentially looking for a private equity sponsor. Can you give us your updated thoughts on exploring strategic alternatives? Is that something that's in the playbook here?
Speaker Change: Got it Okay, and then a follow up from me back in March there were some media reports about you guys potentially looking for private equity sponsor.
Speaker Change: Can you give us your updated thoughts on exploring strategic alternatives is that something thats in the a and the playbook here.
John Andrew Morris: Hi, this is John. Listen, we take our producer responsibility very seriously. We always have. I think you can see that in our ability to continue to drive our organic growth and execution. We think that's really great for shareholder value, and we're going to continue to do that. We actually, I think we exited 23 with solid execution for that year and then exited our first quarter as we continue to guide for this free cash flow conversion.
John Andrew Morris: Hi, This is John listen we take our fiduciary responsibility very serious we always have I think you can see that with our ability to continue to drive our organic growth and execution. We think that's really great for shareholder value.
John Andrew Morris: We're going to continue to do that we actually I think we exited 23 with solid execution for that year, and then exiting our first quarter as we continue to guide for this free cash flow conversion, we think that.
John Andrew Morris: We think that, at least in our conversations with investors, that seems to resonate with them, and we're on our mission to help to drive that throughout our 2024 year. We think those are all things great for shareholder value, and that should be a positive thing.
John Andrew Morris: Our conversations with investors that seems to resonate with them.
John Andrew Morris: We are on our mission to help to drive that throughout 2024 year.
John Andrew Morris: We think those are all things great for for shareholder value and that should be a positive thing.
Speaker Change: Fair enough. Thanks.
Operator: Next question is Sanjay Sakrami with KBW. Please go ahead.
John Andrew Morris: Next question Sanjay <unk> with <unk>. Please go ahead.
Timothy John Murphy: Hi, this is actually Stephen Kwok filling in for Sanjay. Thanks for taking my questions. The first one I have is that now that you guys don't provide volume growth anymore, perhaps if we could just drill down a little bit on your expectations for each of the segments, like how should we think about the growth rates for the consumer versus business payments as we progress through the year?
Operator: Hi, This is actually Steven Kwok filling in for Sanjay Thanks for taking my questions.
Timothy John Murphy: The first one I have was just around now that you guys don't provide the volume growth anymore, perhaps if we could just drill down a little bit on your expectations for each of the segments like how should we think about the growth rates of the consumer versus the business payments as we progress through the year.
Timothy John Murphy: Yeah, as we mentioned in the last call, we're no longer providing CPV guidance or CPV as a metric just because the business has become more diversified into non-card-based revenue streams like instant funding and communication solutions. And so, you know, we did have a strong quarter in terms of CPV, and the take rate was healthy.
Timothy John Murphy: Yes.
Timothy John Murphy: Mentioned in our last call we are no longer providing <unk> guidance for CBOE is a metric just because the business has become more diversified into non card.
Timothy John Murphy: Base revenue streams like instant funding communication solutions and so we did have a strong quarter in terms of CTV and the take rate was healthy. It's just business like I said is diversified into different revenue streams and more value added services and so in terms of segment.
Timothy John Murphy: It's just business, like I said, is diversified into different revenue streams and more value-added services. And so, you know, in terms of segment take rates and margins and growth, pretty consistent with what we said previously about consumers, high single-digit, low double-digit type of growth segments with similar margins that you saw this quarter. And then business payments would be a mid-to-high teens growth business with similar margins and take rates as you saw this quarter.
Timothy John Murphy: Take rates and margins and growth.
Timothy John Murphy: Pretty consistent with what we've said previously consumers high single digit low double digit type of growth segment with similar.
Timothy John Murphy: Margins that you saw this quarter and then business payments would be mid.
Timothy John Murphy: Mid to high teens growth business with similar margins in take rates as you saw this quarters for margins that you saw this quarter and so one thing that could.
Timothy John Murphy: And so one thing that could, from a take rate perspective, we are signing more enterprise accounts and that sometimes those come with slightly lower take rates, but we're able to manage our costs and so have similar gross profit margins. And there's also potentially a mix towards B2B and business payments, which have slightly lower take rates than the overall, but, you know, there's no pressure other than those dynamics.
Timothy John Murphy: From a take rate perspective, we are signing more enterprise accounts and that sometimes those come with slightly lower take rates, but we're able to manage our costs and so have similar gross profit margins and there's also potentially a mix towards b to b business payments, which has slightly lower take rates and the overall, but there is no. There is no pressure other than those dynamics.
Timothy John Murphy: Got it. And then my follow-up was just around, you know, you had a nice quarter, kept the guidance the same. Just as we think about, you know, where you are relative to your prior guidance, should we think about, you know, with the better-than-expected results, perhaps, you know, you could be at the upper end of the range? Maybe, you know, what are the different factors that've been incorporated into your guidance?
Timothy John Murphy: <unk>.
Speaker Change: Got it and then my follow up just around you had a nice quarter kept the guidance. The same just as we think about you know where you are relative to your prior guidance should we think about you know with the better than expected results, perhaps you could be at the upper end of the range. Maybe you know what are the different factors that's incorporated into your guide.
Timothy John Murphy: Okay.
Timothy John Murphy: Yeah, I mean, we feel good about Q1 results; really strong trends into Q2 are similar to what we would have expected consistent coming out of Q1. There were seasonality impacts from tax refunds in Q1. Typically, Q2 is slightly down from that.
Speaker Change: Yeah, I mean, we.
Timothy John Murphy: We feel good about Q1 results really strong trends into Q2 are similar to what we would've expected consistent coming out of Q1, there was seasonality.
Timothy John Murphy: Impacts from tax refunds in Q1, typically Q2 is slightly down from that and we are lapping a large enterprise win from prior year and actually multiple enterprise wins and so that we're taking that into account with our outlook and then just given the timing of where we are in the year. We're just trying to maintain conservatism in and be thoughtful.
Timothy John Murphy: And, you know, we are lapping a large enterprise win from the previous year and actually multiple enterprise wins. And so we're taking that into account with our outlook. And then just given the timing of where we are in the year, we're just trying to maintain conservatism and be thoughtful around that. So that's how we're looking at the rest of the year.
Timothy John Murphy: And that so that's how we're looking at the rest of the year.
Timothy John Murphy: Perfect. Thank you so much.
Speaker Change: Perfect. Thank you so much.
Operator: Next question: Peter Heckmann with D.A. Davidson. Please proceed.
Timothy John Murphy: Next question, Peter Heckmann with D. A global credit Suisse.
John Andrew Morris: Hey, good afternoon, everyone. I just wanted to check in on B2B AP automation. When you're winning there, are those typically competitive takeaways, or are those kind of a first effort to move away from paper-based payment methods?
Peter James Heckmann: Hey, good afternoon, everyone I just wanted to check in on the B to B AP automation when you're winning there are those typically competitive takeaways or are those.
Peter James Heckmann: Kind of a first effort.
Peter James Heckmann: To move away from from paper based payment.
John Andrew Morris: Hi Peter, it's John. Those are all net new, most of it's... Green Space, White Space, for example, as I mentioned on the call. The example of the food distributor, our ability to drive that digital transformation is there, and we're seeing many of those opportunities. There are occasional takeaways, but many of our verticals are all net new.
John Andrew Morris: <unk>.
John Andrew Morris: Hi, Peter this is John.
John Andrew Morris: Those are those are all net new most of it.
John Andrew Morris: Green space White space for example.
John Andrew Morris: As I mentioned on the call.
John Andrew Morris: The example of.
John Andrew Morris: Of the food.
John Andrew Morris: The food distributor.
John Andrew Morris: Our ability to drive that digital transformation.
John Andrew Morris: Is there and so we're seeing many of those opportunities that there are occasional takeaways and many of our verticals is all net new.
John Andrew Morris: Yeah, Country Pure Food is the example, Pete, that John's referencing, and they went from 100% paper-based when we started with them to over 60% digital today, with 30% virtual card adoption, and we think they can grow to 80% digital because they adopted our unique total pay solution. So that's a great case study of just educating a client on the benefits of AP automation and AP payment execution, and you can see the results.
Peter: Yes country pure food as the as the example, Pete that John's referencing they went from 100% paper based when we started with them to over 60% digital today with 30% virtual card adoption and we think they can grow to 80% digital because they adopted our unique total pay solution. So it's a great case study of of.
John Andrew Morris: Educating our clients on the benefits of AP automation and AP payment execution and you can see those results.
John Andrew Morris: What was the timeframe they are able to do that.
John Andrew Morris: What was the timeframe they were able to do that in?
John Andrew Morris: It's just a few months I mean, it happened very quickly they adopted the solution quickly they really embraced outsourcing their payables function. They outsource the total pay solution. So we could handle all their forms of payment and because of our supplier network and our unique approach to vendor enablement, we were able to achieve these types of digital payment in virtu.
John Andrew Morris: It's just a few months. It happened very quickly. They adopted the solution quickly. They really embraced outsourcing their payables function. They outsourced the total pay solution so we could handle all their forms of payment. And because of our supplier network and our unique approach to vendor enablement, we were able to achieve these types of digital payment and virtual card adoption.
John Andrew Morris: Dual card adoption rates.
John Andrew Morris: That's great, that's great. And then just a quick follow-up, have you seen any change in or, I guess, any perception of an upcoming change in terms of auto loan originations either on the [inaudible] tracking a little bit higher, news might be a little still a bit sluggish, yeah.
Speaker Change: That's great that's great and then just a quick follow up have you seen any change in or I guess any perception of upcoming.
John Andrew Morris: In terms of auto loan originations either on the new are you. It seems like new is tracking a little bit higher use might be a little still a bit sluggish.
John Andrew Morris: Yeah, that's right. No, no real change. I mean, we keep an eye on the used car prices and how those are trending. And that should be a good indicator of affordability and what that means for used car financing. But there's really not any significant change from last time we spoke.
John Andrew Morris: Yes, that's right no no real change I mean, we keep an eye on the used car prices and how those are trending and that should be a good indicator of affordability and what that means for used car financing, but there's really not any significant change from last time, we spoke.
Speaker Change: I appreciate it thanks.
Operator: Next question is Joseph Vafi with Canaccord Genuity. Please go ahead.
John Andrew Morris: Next question Joseph <unk> with Canaccord Genuity. Please go ahead.
John Andrew Morris: Hey guys, good afternoon.
Joseph Anthony Vafi: Hey, guys good.
Joseph Anthony Vafi: Good afternoon, and nice to see the steady results, maybe you could get a little bit of an update on our.
John Andrew Morris: Nice to see the steady results. Maybe we could get a little bit of an update on a couple of the verticals, maybe the latest update on your auto OEM integration and what the pipeline there may look like. And we haven't heard, I think, a ton recently on mortgage, maybe an update there as well. And then maybe I'll have a quick follow-up. Thanks.
John Andrew Morris: A couple of the verticals, maybe the latest update on your auto.
John Andrew Morris: Auto OEM integration and what the pipeline there may look like and we Havent heard I think a ton recently on on a mortgage maybe an update there as well and then maybe I'll have a quick follow up thanks.
John Andrew Morris: On the auto captive, as I mentioned, we're in the process of going live with that, and we expect it to be processing in late Q2 and ramping throughout the second half of this year, and that'll be a multi-year growth opportunity, Joe. We're very excited about that and have done a lot of work on that. And we have, you know, we've been building a pipeline of additional captives, and we've intentionally gone upmarket with some of our sales hires to address the enterprise space across really all of our consumer verticals, not just auto, but auto is a good example.
John Andrew Morris: On the auto captive as I mentioned.
John Andrew Morris: We're in the process of going live with that and we expect it to be.
John Andrew Morris: Processing in late Q2 and ramping throughout the second half of this year and that will be a multiyear growth opportunity Joe.
John Andrew Morris: Very excited about that and we've done a lot of work on that and we have we've been building a pipeline of additional captives.
John Andrew Morris: We've intentionally gone upmarket with some of our sales hires to address the enterprise space across really all of our consumer verticals not just auto but autos are good examples. So that's that's a second half contributor and then like I said multi year growth opportunity as the business continues to ramp in terms of mortgage I mean, we see a lot of pause.
John Andrew Morris: So that's a second half contributor, and then, like I said, a multi-year growth opportunity as the business continues to ramp up. In terms of mortgages, I mean, we see a lot of positive signs there, and, you know, it's not in our forecast, it's not in our outlook, but we're continuing to progress, and there are certain clients that we've identified that... We think we'll adopt the debit solution, and that's progressing nicely.
John Andrew Morris: Dave signs there.
John Andrew Morris: It's not in our forecast, it's not in our outlook, but we're continuing to progress and theres certain clients that we've identified that are.
John Andrew Morris: We think we'll adopt the debit solution and Thats progressing nicely.
John Andrew Morris: Yeah, and I mentioned on our call about a larger credit union we just brought on board, which is one of the largest top 50 credit unions. They do a good bit of auto lending as well, so our ability to continually enhance that overall consumer digital experience. We're seeing really, really positive traction in the credit union space. It's been an area of strength for us, Joe. You say we added 15 this quarter, and we're now up to about 290 credit unions out of just under 5,000 across the U.S. We're signing really large credit unions. We have the right software integrations in that space, and we have all the different payment capabilities that give us the ability to win.
John Andrew Morris: I mentioned as well on our call about a larger credit Union, we just brought on board with us.
John Andrew Morris: One of the largest top 50 credit unions.
John Andrew Morris: A good bit of auto lending as well so our ability to continually enhance overall consumer digital experience.
John Andrew Morris: We're seeing really really positive traction in the credit Union space.
John Andrew Morris: It's been an area of strength for US Joe You said, we added 15 this quarter end.
John Andrew Morris: We're now up to about 290 credit unions out of AR.
John Andrew Morris: Just under 5000 across the U S. We're signing really large credit unions, we have the right software integrations in that space and we have all the different payment capabilities that give us the ability to win.
John Andrew Morris: Great.
Speaker Change: Thanks for that update and then you know I mean, you've got a lot of software partners now which is great and.
John Andrew Morris: I'd imagine that, you know, some are better producers than others in driving revenue and just kind of how you look at that large portfolio of software partners now, you know, in terms of where, you know, maybe how much penetration do you have there with their end customers. And of the 266, is it like... Is it like half of them are bigger producers, or just trying to understand how some of those numbers work with a pretty large partner network now? Thanks.
John Andrew Morris: I would imagine that some are better producers than others and driving revenue and just kind of how you look at that large portfolio of software partners. Now you know in terms of where you know maybe.
John Andrew Morris: How much of it how much penetration do you have their with their end customers and.
John Andrew Morris: Of the 266 is that you know is it like.
John Andrew Morris: Is it like half of them are bigger producers are just trying to understand how some of those numbers work with a pretty large partner network now thanks.
John Andrew Morris: Hi Joe. Yes, it's different by vertical in reality. So you know that we are vertically specific even in consumer payments and even in business payments. On the business payment side, some of those partnerships, if they're ERP systems, are very broad and very, very large. But even inside of that world, we try to hone in on the verticals inside of those ERP systems. But also on the business payment side as well, we really think there's tremendous growth opportunities in the next few years for these large enterprise software ERP platforms such as BlackBaud that really manage the entire workflows. We think the monetization of payments has many long years to go.
Speaker Change: Hi, Joe Yes, it's different by vertical and reality. So you know that we are vertically specific even in consumer payments and even in business payments on the business payment side. Some of those partnerships if their ERP systems are very broad.
John Andrew Morris: In theory, very large, but even inside of that world. We try to hone in on the verticals inside of those ERP systems, but also on the business payment side as well, we really think there is tremendous growth opportunities in the outer years for these large enterprise software.
John Andrew Morris: ERP flat.
John Andrew Morris: Platforms, such as like a blackboard.
John Andrew Morris: And that really manages the entire workflows, we think the monetization of payments has many long years associated with that.
John Andrew Morris: We assign our individual vertical leads to these areas we have almost as we kind of have somewhat of a pod are related to these verticals. So we can be vertical experts as well as payment experts as well as the software expert around the channel we're going through.
John Andrew Morris: We assign our individual vertical leads to these areas. We kind of have somewhat of a pod related to these verticals so we can be vertical experts as well as payment experts as well as the software experts around the channel we're going through. They vary in size as you indicate.
John Andrew Morris: They vary in size as you indicate some some that deal with very large enterprises and then have medium. So we focus on medium to enterprise.
John Andrew Morris: Some that deal with very large enterprises and then have medium. So we focus on medium-sized enterprises. There are some, especially on our consumer payment side, that would have some smaller type clients. We're typically in the medium to enterprise level there. Some are more sophisticated than others, but we have individual team members assigned to drive that, with marketing campaigns associated with it. We like a lot of our sales sequencing around that. We like the way some of the areas that we're focusing on.
John Andrew Morris: There are some especially in our consumer payment side that would have some some smaller type clients were typically in the medium to enterprise level there.
John Andrew Morris: Some are more sophisticated than others, but we have individual team members assigned to drive that with marketing campaigns associated with that we.
John Andrew Morris: We like a lot of our sales sequencing around that like the way.
John Andrew Morris: Some of the areas that we're focusing on as we are prioritizing around many of those as we refresh some of our integrations around some of our product features and functionality as we open up more of those payment modalities that in itself drives captured drives that pay anywhere anyway anytime.
John Andrew Morris: We are prioritizing many of those as we refresh some of our integrations around some of our product features and functionality as we open up more of those payment modalities. That, in itself, drives capture, drives that payment anywhere, anyway, anytime. As the consumer wants to pay, even as the business wants to pay, our total pay solution does that. That is a significant opportunity that one stop shop single payment class is very valuable in itself.
John Andrew Morris: As the consumer wants to pay even as the business wants to pay our total pay solution does that.
John Andrew Morris: That is a <unk>.
John Andrew Morris: Inefficient opportunity that one stop shop single pane of glass.
John Andrew Morris: It is very valuable in itself and our clients want to be able to move <unk>.
John Andrew Morris: And our clients want to be able to move money in all the different ways and have one single provider that can help them do that fully embedded in that. We'll continue to drive that home as we build that out and prioritize that by individual systems, which we do evaluate by opportunity.
John Andrew Morris: Money.
John Andrew Morris: All of the different ways and have one single provider that can help them do that fully embedded in that we will continue to drive that home as we build that out and prioritize that by individual systems, which we do evaluate by opportunity.
John Andrew Morris: Great, thanks for that extra color, John. Thanks, Kim, too.
Speaker Change: Great. Thanks for that extra color John Thanks come too.
Operator: Next question is from Mike Grondahl with Northland Securities. Please go ahead.
John Andrew Morris: Next question, Mike Grondahl with Northland Securities. Please go ahead.
Timothy John Murphy: Hey guys, two questions. First, was the contribution from tax season this year outsized compared to the last couple years? Just kind of curious, if you can quantify that at all. And then secondly, I know we're still a ways from the election, but do you have any sense or feel if the revenue related to that is looking a little better or a little worse?
Michael John Grondahl: Hey, guys two questions first.
Michael John Grondahl: What was the contribution from tax season. This year was that outsized compared to the last couple of years, just kind of curious.
Timothy John Murphy: If you can quantify that at all.
Timothy John Murphy: And then secondly, I know.
Timothy John Murphy: We're still a ways from the from the election, but do you have any sense or feel if the.
Timothy John Murphy: Revenue related to that is looking a little better or a little worse, just any color there would be helpful too.
Timothy John Murphy: Just any color there would be helpful.
Timothy John Murphy: On tax refunds, we, you know, we track those very closely with IRS data, very similar to the prior year, so it was in line with our expectations. It wasn't necessarily a greater contribution than prior periods or what we expected, so a very similar trend there.
Timothy John Murphy: Yeah.
Timothy John Murphy: On tax refunds, we track those very closely with IRS data very similar to the prior year. So it was in line with our expectations. It wasn't necessarily a greater contribution than in prior periods of what we expected so very similar trend there.
Timothy John Murphy: And then with political.
Timothy John Murphy: And then with politics, you know, we're still expecting, and we compare it to what we did in 2022. In 2022, a little over $6 million of gross profit, and we think that business can grow about 20% this year given it's a presidential cycle. We'll have a lot more visibility leading up to the election just a few months before as to, you know, how that 20% looks, but right now, we're still anticipating 20% growth on the six million or so GP in the 2022 cycle.
Timothy John Murphy: We're still expecting we compared to what we did in 2022 and 2020 little over $6 million of gross profit and we think that business can grow about 20%. This year given its a presidential cycle, we'll have a lot more visibility and leading up into the election.
Timothy John Murphy: Just a few months before as to how that 20% looks but right now we're still anticipating 20% growth on the $6 million or so GP in 2022 cycle.
Speaker Change: Got it.
Timothy John Murphy: Got it. And lastly, any updated thoughts on the macro, whether that's consumer-driven or rates? Are you seeing anything there to call out?
Timothy John Murphy: Lastly.
Timothy John Murphy: Any updated thoughts on the macro.
Timothy John Murphy: Whether thats consumer driven or rates.
Timothy John Murphy: Anything there to call out.
Timothy John Murphy: As we just mentioned, very similar to, you know, what we talked about during the last call, the auto industry is similar, as I just said, and we're seeing similar trends across some of the other end markets. So, you know, what we try to do with our planning is take into account the most recent run rate trends we see, both in our own business and in the macro, and bake those into the rest of the year forecast. So nothing's really materially different from what we saw before.
Timothy John Murphy: As we just mentioned I mean, very similar to what we talked about during the last call. The auto is similar like I, just said and we're seeing similar trends across some of the other end markets. So what we tried to do with our planning has taken into account. The most recent run rate trends, we see both in our own business and in the macro and baked.
Timothy John Murphy: Those into the the rest of the year forecast. So nothing has really materially different than what we saw before stable healthy.
Timothy John Murphy: Stable, healthy consumers with a stable, healthy job market.
Timothy John Murphy: Consumer stable healthy job market.
Speaker Change: Sounds good thanks, guys.
Timothy John Murphy: Okay.
Operator: Sounds good. Thanks, guys. Next question, James Faucette with Morgan Stanley, please go ahead. Hi, thank you for taking my question.
Operator: Next question: James Faucette from Morgan Stanley, please go ahead.
Timothy John Murphy: Next question, Tim <unk> with Morgan Stanley. Please go ahead.
Operator: Hi, Thank you for taking my question. This is Paul Mascara, asking a question on behalf of James.
James Eugene Faucette: Given the strong free cash flow could you provide an update around capital allocation, maybe what you're seeing in terms of M&A pipeline currently how valuations are trending and maybe what verticals might be most interesting to you.
John Andrew Morris: Yeah, I'll start. Specifically, we still think, for all the reasons we talked about on the call, and you've heard us say before, organic growth, with the total addressable market that's sitting in front of us and ahead of us, we still think it's very valuable. And we're going to continue to drive our organic opportunities, which we're doing and we're executing on, always. In consumer payments, we're going to drive more investments in our enterprise sales, which is embedded in what we're saying we're going to do, and then, obviously, enhance our integrations. As we talked about on a couple of those questions there,
James Eugene Faucette: Yes, I'll start specifically, we still think for all the reasons, we talked about on the call and you've heard us say before organic growth.
John Andrew Morris: With a total addressable market that we're seeing that's sitting in front of US and ahead of US we still think that's very valuable.
John Andrew Morris: And we're going to continue to drive our organic opportunities, which we're doing and we're executing on.
John Andrew Morris: Always in our consumer payments, we're going to drive more investments in our enterprise sales, which is an embedded in what we're saying we're going to do.
John Andrew Morris: And then obviously enhancing our integrations as we talked about.
John Andrew Morris: And then business payments, like I was mentioning about enterprise software integrations, we think there's a significant opportunity for us to continue to invest there. Obviously, we're going to continue to enhance our overall implementation and improve our ERP partnerships. Building out our overall network of suppliers. We think there's great value in our 279,000-plus suppliers today. We see significant opportunity as we continue to net-add there, as we bring on new clients by vertical. We actually like to do that by industry vertical as well.
John Andrew Morris: A couple of those questions there and in business payments like I was mentioning on a enterprise software integrations, we think there's significant opportunity for us to continue to invest there.
John Andrew Morris: We're going to continue to enhance our overall implementation enhance our ERP partnerships.
John Andrew Morris: We're building out our overall network.
John Andrew Morris: Suppliers, we think theres great value in our 279000 plus suppliers today, we see significant opportunity as we continue to add there.
John Andrew Morris: As we bring on new clients by vertical we actually like to do that by vertical as well and then overall automation.
John Andrew Morris: And then overall, automation, we desire to be larger, to drive scale. We think it's a great opportunity for us to do that in payments. We're obviously using things with AI to try to drive more efficiencies in our business, operational, client, customer service, implementation, things around that with automation. And then I'll let Tim maybe speak to the M&A side.
John Andrew Morris: We desire to be larger to drive scale.
Tim: We think it's a great opportunity for us to do that in payments, we're actually using things with AI to try to drive more efficiencies in our business operational client customer service implementation teams around that with automation and then.
John Andrew Morris: I'll, let Tim maybe speak to the M&A side.
John Andrew Morris: Yeah, to add to that, like John said, our number one priority from a capital allocation standpoint is organic growth and funding additional organic growth and all the reasons for all the reasons John described. And then, you know, we like to balance our net leverage against managing the Convertible Liability, and so that's another priority of ours.
Tim: Add to that like John said, our number one priority from a capital allocation standpoint, as organic growth and funding additional organic growth in all of the reasons to for all the reasons John described.
John Andrew Morris: We like to balance our net leverage against managing the convert liability and so that is another priority of ours and.
Timothy John Murphy: From an M&A perspective, we do have an in-house team that is sourcing deals and evaluating deals. We haven't done an acquisition in close to two and a half years, so we've been remaining disciplined on that front, but we do have a very healthy pipeline building, and we're in various stages of discussions with targets across consumer payments and markets and then business payments and markets. We like the AP vertical a lot within business payments, and there are a number of targets we see there to build out either our number of verticals we're in, supplier network, number of ERP integrations, and just generally at scale to our business payments segment. So those are some of the areas we're focused on, and we will continue to be disciplined. There are some potential attractive tuck-ins.
John Andrew Morris: From an M&A perspective, we do have an in house team that is sourcing deals evaluating deals.
Timothy John Murphy: We haven't done an acquisition close to two and a half years. So we've been remaining disciplined on that front, but we do have a very healthy pipeline building and where we are in various stages of discussions with targets across consumer payments end markets and then business payments end markets we like.
Timothy John Murphy: Vertical a lot within business payments and Theres, a number of targets, we see there to build out either our number of verticals. We're in supplier network number of ERP integrations, and just generally add scale to our business payments segments. So those are some of the areas. We're focused on and we will continue to be disciplined with some potential.
Timothy John Murphy: There are some potential attractive tuck-ins.
Timothy John Murphy: <unk> tuck ins.
Operator: Once again, if you would like to ask a question, please press star 1 on your telephone keypad. The next question comes from Pat Ennis with UBS. Please go ahead.
Timothy John Murphy: Once again, if you would like to ask a question. Please press star one on your telephone keypad.
Patrick Thomas Ennis: Next question comes from Pat <unk> with UBS. Please go ahead.
John Andrew Morris: Thanks, guys. So I mean, you've talked about competition and coming across traditional scaled payments companies such as Global Payments, you know, WorldPay, Fiserv, and not really coming across those guys as much. It's been some time since you talked about these competitors in your core consumer finance markets. Could you maybe touch on how that market has evolved? If those comments still hold for the most part?
Patrick Thomas Ennis: Thanks, guys.
John Andrew Morris: I mean, you've talked about competition and coming across the traditional.
John Andrew Morris: Payments companies, such as global payments World <unk>.
John Andrew Morris: Herb.
John Andrew Morris: And not really coming across those guys as much it's been some time since you've talked about these competitors in your core consumer finance markets could.
John Andrew Morris: Could you maybe touch on how that market has evolved if those comments still hold for the best part of it.
John Andrew Morris: Those comments still hold. But those specific ones you named, I don't recall any particular bake-offs, or if we're competing against someone, those particular names. We have the unique integrations that really make these things... Our vertical focus, go-to-market, is unique with our unique products around that. If you don't have all those features and functionalities with those unique integrations... And so we just don't bump into those specifically. It doesn't mean we can't. And, in reality, we've got a healthy pipeline, and we're winning. And add to that, mainly focused on consumers like China.
John Andrew Morris: Those comments still hold.
John Andrew Morris: We are.
John Andrew Morris: Those specific ones you named I don't recall any particular.
John Andrew Morris: Bake offs are or if we're competing against someone those particular names we have the unique integrations that that really make these things.
John Andrew Morris: Our vertical focus go to market is unique with our unique products around that if you don't have all of those features functionalities with those unique integrations.
John Andrew Morris: And so we just don't we don't we don't bump into those specifically doesn't mean, we couldn't.
John Andrew Morris: And in reality, we've got a healthy pipeline.
John Andrew Morris: And and we're winning.
John Andrew Morris: I'd add to that, mainly focused on the consumer. Like John said, we don't typically see those names.
Speaker Change: I would add to that.
John Andrew Morris: And one of the reasons we've chosen to address these end markets is because they're not only very large, but they're underserved from a payment perspective and underpenetrated from a card perspective. And so we really like our position in those end markets within consumers. And then on the business payment side, as we touched on earlier, most of these are not competitive takeaways. They're just moving clients off of paper-based legacy forms of payment onto digital payments, specifically virtual cards. And we just, we don't, you know, there's an education for the market of why they should be outsourcing their payables versus your really competitive dynamics.
John Andrew Morris: Mainly focused on consumer like John said, we don't typically see those names and one of the reasons. We've chosen to address these end markets is because they are not only very large but they are underserved from a payment perspective, an underpenetrated from a card perspective, and so we really like our position in those end markets within consumer and then the business payment side as well.
John Andrew Morris: An earlier most of these are not competitive takeaways there just moving clients off of paper based legacy forms of payment onto digital payments and specifically virtual cards.
John Andrew Morris: We just we don't as an education to the market with why they should be outsourcing their payables versus your competitive dynamics.
Speaker Change: Great I appreciate that.
John Andrew Morris: Thank you. I would like to turn the floor over to John Morris for closing remarks.
John Andrew Morris: Thank you I would like to turn the floor over to John Morris for closing remarks.
John Andrew Morris: Thank you, everyone, for your time today. We set a solid start to our year with double-digit organic growth. We continue to make progress on our strategic initiatives, as we talked about on our call. We are excited about the multi-year growth opportunities that we've also talked about that we think can give us fantastic opportunities even in the next years. And in execution of our 2024 outlook, we've continued to execute on that to accelerate free cash flow, which we think we'll be able to do for the continuation of this year to hit our goal for 2024. Thank you for joining us today.
John Andrew Morris: Thank you everyone for your time today.
John Andrew Morris: We set a solid start to our year with double digit organic growth.
John Andrew Morris: We continue to make progress on our strategic initiatives that we've talked about on our call.
John Andrew Morris: We exited.
John Andrew Morris: We're excited about this multi year growth opportunities that we've also talked about that we think can give us.
John Andrew Morris: Fantastic opportunities even in the outer years, and our execution of our 2020 for outlook.
John Andrew Morris: We've continued to execute on that to accelerate free cash flow, which we think will be able to do that for the continuation of this year.
John Andrew Morris: To hit our goal for 2024 thank.
John Andrew Morris: Thank you for joining us today.
Operator: This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.
Operator: [music].