Q2 2024 Repay Holdings Corp Earnings Call

August 8, 2024

Speaker Change: Good afternoon. I'd like to welcome everyone to Repay's second quarter 2024 earnings conference call.

Operator: and Carter, 2024 earnings conference call. This call is being recorded today, August 8, 2024.

Operator: This call is being recorded today, August 8, 2024. I'd like to turn the session over to Grant Grisante, Head of Investor Relations at Repay. Stewart, you may proceed.

Speaker Change: This call is being recorded today, August 8, 2024.

Grant Grisante: I'd like to turn the session over to Grant Grisante, head of investor relations at Repay.

Speaker Change: I'd like to turn the session over to Grant Grisante, Head of Investual Nations at Repay. Stewart, you may proceed.

Stewart Grisante: Stewart, you may proceed. Thank you.

Stewart Grisante: Thank you. Good afternoon, and welcome to our second 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 Grisante: Good afternoon and welcome to our second quarter 2024 earnings conference call.

Speaker Change: Thank you, good afternoon, and welcome to our second quarter 2024 earnings conference call. With us today are John Morris, co-founder and chief executive officer, and Tim Murphy, chief financial officer.

Stewart Grisante: 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 risk and uncertainties, including those set forth in the SEC filings related to today's results in our most recent Form 10-K. Actual results made different materially from any forward-looking statements that we make today. Forward-looking statements speak only as of today, and we do not assume any obligations or intent to update them except as required by law.

Speaker Change: During this call, we will be making forward-looking statements about our beliefs and estimates regarding future events and results.

Speaker Change: Those forward-looking statements are subjects to rest in uncertainties, including those support in the SEC filings related to today's results in our most recent form 10K.

Speaker Change: Actual results make deferment to early for many 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 reported by law.

Stewart 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-GAAP financial measures can be found in today's press release and the earnings supplement, which are available on the company's investor relations site. With that, I would now like to turn the call over to John.

Stewart Grisante: 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 explanations of those non-GAAP financial measures can be found in today's press release and the earnings supplement, which are available on the company's IR site.

Speaker Change: In an effort to provide additional information to investors, today's discussion will also include references to certain non-GAAP financial measures.

Speaker Change: Reconciliations and other explanations of those non-GAAP financial measures can be found in today's press release and the earnings supplement, which are available on the company's IR site. With that, I would now like to turn the call over to John .

John Morris: With that, I would now like to turn the call over to John. Thanks, Stuart. Good afternoon, everyone. Thank you for joining us today. In Q2, we experienced another quarter of profitable growth with gross profit growth of 7%, adjusted EBITDA growth over possibly 10%, and free cash flow conversion of 57%, representing 90% plus growth year-over-year, with each metric performing in line to our expectations. Our year-to-date results represent a strong first-after-year with double-digit adjusted EBITDA growth as we aim to capture new payment flows with payment vertical expertise across our consumer and business payment segments.

John Morris: Thanks, Stewart. Good afternoon, everyone.

John Morris: Thanks, Stewart. Good afternoon, everyone. Thank you for joining us today.

John Morris: Thank you for joining us today. In Q2, we experienced another quarter of profitable growth, with gross profit growth of 7%, adjusted EBITDA growth of approximately 10%, and free cash flow conversion of 57%, representing 90% plus growth year over year, with each metric performing in line with our expectations. Our year-to-date results represent a strong first half of the year with double-digit adjusted dividend growth as we aim to capture new payment flows with payment vertical expertise across our consumer and business payment segments.

John Morris: and Q2, we experience another quarter of profitable growth with gross profit growth of 7%.

John Morris: adjusted EBITDA growth over possibly 10%, and free cash flow conversion of 57%, representing 90% plus growth year over year, with each metric performing in line to our expectations.

Speaker Change: Our year-to-date results represent a strong first half of the year with double-digit adjusted dividend growth as we aim to capture new payment flows with payment vertical expertise across our consumer and business payment segments.

John Morris: During the quarter, we continue to make progress on our three main strategic initiatives that will drive growth in 2024 and beyond. As a reminder, they include our go-to-market efficiency, client accommodations, and a focus on product. In Q2, consumer payments gross profit growth was 7%. Our solid performance in Q2 represents the continued execution 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. We've added many new clients through our platform in Q2, including nine new credit units, bringing our total credit union clients to 300 out of the roughly 5,000 credit unions in the US.

Speaker Change: During the quarter, we continue to make progress on our three main strategic initiatives that will drive growth in 2024 and beyond. As a reminder, they include our Go-to-Market efficiency, client estimations, and a focus on product.

Speaker Change: and Q2, consumer payment's gross profit growth was 7%. Our solid performance in Q2 represents the continued execution of our growth algorithm, which includes growth coming from existing clients, as well as signing new clients in the past several quarters.

John Morris: Our solid performance in Q2 represents the continued execution 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. We've added many new clients to our platform in Q2, including nine new credit unions, bringing our total credit union clients to 300 out of the roughly 5,000 credit unions in the U.S. We are directly integrating our payment platform into multiple core credit union and financial institution software systems, representing a differentiated solution in the marketplace, which is leading to a healthy sales pipeline to address the thousands of financial institutions in the United States.

John Morris: Our growth is also aided by the ongoing secular tailwinds within our consumer payments verticals.

John Morris: We've added many new clients to our platform in Q2, including nine new credit unions, bringing our total credit union clients to 300 out of the roughly 5,000 credit unions in the U.S.

John Morris: We are directly integrating our payment platform into multiple core credit union and financial institutions' software systems, representing a differentiated solution in the marketplace, which is leading to a healthy sales pipeline to address the thousands of financial institutions in the United States. We also further strengthen our existing software partnerships. In May, we became a certified integrating partner with Core Relations Keystone platform. A leading core processor for credit unions. And in June, we announced the enhanced integration with CU Answers. A 100% credit union-owned service organization that provides core processing solutions and services for hundreds of credit unions across the U.S.

John Morris: We are directly integrating our payment platform into multiple core credit union and financial institution's software systems, representing a differentiated solution in the marketplace, which is leading to a healthy philosophical line to address the thousands of financial institutions in the United States.

John Morris: We added three new software partners in the quarter, while also further strengthening our existing software partnerships. In May, we became a certified integrating partner with Correlation's Keystone platform, a leading core processor for credit unions. And in June, we announced the enhanced integration with CU Answers, a 100% credit union-owned service organization that provides core processing solutions and services for hundreds of credit unions across the U.S. With NCU Answers as its platform, Repay released several new features and products, such as real-time payment posting and tracking, enabling both the members and business operations of credit unions to benefit from a streamlined loan repayment mechanism.

John Morris: a leading core processor for credit unions, and in June , we announced the enhanced integration with CU Answers, a 100% credit union-owned service organization that provides core processing solutions and services for hundreds of credit unions across the U.S.

John Morris: With NCUS's platform, Rufay released several new features and products such as real-time payment posting and tracking, enabling both the members and business operations of credit unions to benefit from extreme-lined loan repayment modalities. Additionally, the Council Civil Management Vertical continues to be an attractive opportunity with multiple years of growth ahead as we began implementation of one of the largest outsource accounts for civil management and loan servicing providers in the U.S. During implementations, we are focused on increasing technology and workflow connectivity within our client systems to deliver an embedded solution. The investments being made towards integration and connectivity enhancements are resulting in better consumer experiences and satisfaction, leading to a long-term client and partner relationships.

Speaker Change: with NCU Answers' platform, repaid release seven new features and products such as real-time payment posting and tracking, enabling both the members and business operations are quite at units to benefit from extreme-lined loan repayment modalities.

John Morris: Additionally, the accounts receivable management vertical continues to be an attractive opportunity with multiple years of growth ahead as we began implementation of one of the largest outsourced accounts receivable management and loan servicing providers in the U.S. During implementations, we are focused on increasing technology and workflow connectivity within our client systems to deliver an embedded solution. The investments being made towards integration and connectivity enhancements are resulting in better consumer experiences, and satisfaction Leading to a Long-Term Client and Partner Relationship. And lastly, in value-added services.

Speaker Change: During implementations, we are focused on increasing technology and workflow connectivity within our client systems to deliver an embedded solution. The investments being made towards integration and connectivity enhancements are resulting in better consumer experiences and satisfaction leading to long-term client and partner relationships.

John Morris: And lastly, in value added services, our incident funding product continues to see healthy growth, with transaction volume up approximately 21% year-over-year. This product offers an incredible opportunity for our clients to set themselves apart in the marketplace by delivering quick, convenient, and secure funding experiences to their customers. Over the medium term, we are continuing to evaluate new areas of expanding our instant funding capabilities.

John Morris: Our incident funding product continues to see healthy growth, with transaction volume up approximately 21% year over year. This product offers an incredible opportunity for our clients to set themselves apart in the marketplace by delivering quick, convenient, and secure funding experiences to their customers. Over the medium term, we will continue to evaluate new areas of expanding our instant funding capabilities. We also had a productive quarter in our business payment segment, which grew gross profit by 11 percent year over year.

Speaker Change: and lastly, in value-ed services.

John Morris: Our instant funding product continues to see healthy growth with transaction volume up approximately 21% year-over-year. This product offers an incredible opportunity for our clients to set themselves apart in the marketplace by delivering quick, convenient, and secure funding experiences to their customers.

John Morris: Over the medium term, we will continue to evaluate new areas of expanding our instant funding capabilities.

John Morris: We also had a productive quarter in our business payment segment, which grew growth profit by 11% year-over-year. We feel very good about our top of the funnel pipeline. As our go-to-market approach is continued to win new enterprise clients, which can, in some cases, lead to longer signing-to-go-live timing. First, profit growth was driven by strength in our core AP business, the ramp of new clients during the quarter, and incremental political media contributions leading to the presidential election cycle during the second half of the year. In AR, we continue to focus on optimizing payment acceptance while strengthening our client base through our direct sales team and ERP partners.

John Morris: We also had a productive quarter in our business payment segment, which grew gross profit by 11% year-over-year.

John Morris: We feel very good about our top-of-the-funnel pipeline, as our go-to-market approach has continued to win new enterprise clients, which can, in some cases, lead to longer signing to go live timing, which profit growth was driven by strength in our core AP business, the ramp of new clients during the quarter, and incremental political media contributions leading to the presidential election cycle during the second half of the year.

John Morris: We feel very good about our top of the funnel pipeline, as our good-a-market approaches continue to win new enterprise clients, which can, in some cases, lead to longer signing to go live timing.

Speaker Change: Gris' topic growth was driven by strength in our core APP business, the ramp of new clients during the quarter and incremental political media contributions leading to the presidential collection cycle during the second half of the year.

John Morris: In AR, we continue to focus on optimizing payment acceptance while strengthening our client base through our direct sales team and ERP partners. Within AP, we added four new software partners and enhanced integrations with several existing software partners, while also growing our supplier network to over 300,000 suppliers. Our real-time vendor enabling process continues to grow the supplier base while also driving additional network effects by vertical. During the quarter, we signed many new clients across our verticals, including several within healthcare, such as Grady Health Systems. It is a leading public health care system in the U.S. with nine facilities serving the residents of Atlanta, Georgia.

John Morris: In AR, we continue to focus on optimizing payment acceptance while strengthening our client base through our direct sales team and ERP partners.

John Morris: With an AP, we added four new software partners and enhanced integrations with several existing software partners while also growing our supplier network to over 300,000 suppliers. Our real-time vendor enable and process continues to grow the supplier base while also driving additional network effects by vertical. During the quarter, we signed many new clients across our verticals, including several within healthcare, such as Grady Health Systems, a leading public healthcare system in the U.S. with nine facilities serving the residents of Atlanta, Georgia. Repay was able to swiftly implement Grady Health, quickly making them a meaningful client in business payments.

John Morris: Within AP, we added four new software partners and enhanced integrations with several existing software partners while also growing our supplier network to over 300,000 suppliers.

John Morris: A real-time vendor and naval and process continues to grow the supplier base while also driving additional network effects by vertical.

John Morris: During the quarter, we signed many new clients across our verticals, including several within health care, such as gritty health systems.

Speaker Change: a leading public health care system in the U.S. with nine facilities serving the residents of Atlanta, Georgia. Repay was able to swiftly implement Grady Health, quickly making them a meaningful client in business payments. And now our payment specialist team is focused on the real-time vendor enablement process to drive more virtual card adoption.

John Morris: Repay was able to swiftly implement Grady Health, quickly making them a meaningful client in business payments. And now, our payment specialist team is focused on the real-time vendor enablement process to drive more virtual card adoption. Throughout the first half of the year, we continue to gain traction, and we are building a healthy sales pipeline from our recent software integrations, such as Sage Impact, Microsoft Dynamics, Quadient, Energy Cap, and Enflow. A great example of our vertical go-to-market strategy with these software partnerships is HIA, an ERP and accounting solution with unique functionality designed for the hospitality industry.

John Morris: And now our payment specialist team is focused on the real-time vendor enablement process to drive more virtual card adoption. And throughout the first half of the year, we continue to gain traction, and we are building a healthy sales pipeline from our recent software integrations, such as Sage Impact, Microsoft Dynamics, Quadient, Energy Cap, and Inflow. A great example of our vertical go-to-market strategy with these software partnerships is HIA. At ERP and accounting solution, with unique functionalities designed with hospitality industry. After completing the payment integration within HIA, Repay went wide with our first HIA client in early 2023.

John Morris: And throughout the first half of the year, we continue to gain traction and we are building a healthy sales pipeline from our recent software integrations, such as Sage Impact, Microsoft Dynamics, Quadient, Energy Cap, and Enflow.

John Morris: A great example of our vertical go-to-market strategy with these software partnerships is HIA.

John Morris: an ERP and accounting solution with unique functionality designed for the hospitality industry.

John Morris: After completing the payment integration with HIA, Repay went live with our first HIA client in early 2023, and we are now providing our AP solution to an expanding list of hundreds of properties across the U.S. We have been able to grow Repay by expanding our services, leveraging our now 273 integrated software partners across Repay, guiding our clients through a seamless onboarding process, and constantly evolving our tech platform. As we look into the future, our platform will continue to scale as we automate manual processing.

John Morris: After completing the payment integration within HIA, Repay went live with our first HIA client in early 2023, and we are now providing our AP solution to an expanding list of hundreds of properties across the U.S.

John Morris: And we are now providing our AP solution to an expanding list of hundreds of properties across the U.S. We have been able to grow Repay by expanding our services, leveraging our now 273 integrated software partners across Repay, guiding our clients through a seamless onboarding process, and constantly evolving our tech platform. As we look into the future, our platform will continue to scale as we automate manual processes. The scaling of our platform and investments we've made in sales, product, and technology over the past several years will enable us to continue expanding free cash flow conversion into the second half of the year and beyond.

Speaker Change: We have been able to grow repay by expanding our services, leveraging our now 273 integrated software partners across repaid, guiding our clients to receive us onboarding process and constantly evolving our tech platform. As we look into the future, our platform will continue to scale as we automate manual processes.

John Morris: The scaling of our platform and investments we've made in sales, product, and technology over the past several years will enable us to continue expanding free cash flow conversion into the second half of the year and beyond. Additionally, we are very pleased to have recently completed our convertible notes offering to fortify our balance sheet by addressing half of our 2026 debt maturities while also successfully extending and upsizing our evolving credit facility. These transactions provide us with financial flexibility to continue focusing on profitable growth and accelerating cash generation.

John Morris: Additionally, we're very pleased to have reached and completed.

John Morris: I convertible nose offering to fortifier balance sheet by addressing half of our 2021 significant debt maturitys while also successfully extending and up-sizing our revolving credit facility.

John Morris: With financial flexibility to continue focusing on profitable growth and accelerating cash generation.

John Morris: These transactions provide us with financial flexibility to continue focusing on profitable growth and accelerating cash generation.

John Morris: Our cap allocation priorities remain focused on creating values to our shareholders, by investing into organic growth opportunities, while continuing to be open to a creative strategic M&A.

John Morris: 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. With that, I'll turn the call over to Tim to go over our Q2 financials, our recent balance sheet updates in further detail, and our outlook for 2024. Tim?

John Morris: Our capital allocation priorities remain focused on creating value to our shareholders by investing into organic growth opportunities while continuing to be open to accretive strategic M&A.

Tim Murphy: With that, I'll turn the call over to Tim to go over our Q2 financials, our recent balance sheet updates, and further detail and our outlook for 2024.

John Morris: With that, I'll turn the call over to Tim to go over our Q2 financials, our recent balance sheet updates in further detail, and our outlook for 2024. Tim?

Tim Murphy: Tim? Thank you, John. Now let's go over our Q2 financial results before our Bureau of Financial Guidance for 2024. In the second quarter, Repay delivered solid results across our key metrics. Revenue was 74.9 million to increase the 4% over the prior year second quarter. And as a reminder, the seasonality related to tax refunds during Q1 creates lower processing activity and revenue on a quarter-over-quarter basis. In Q2, growth profit grew by 7% year over year as we continue to benefit from processing cost optimization automation initiatives. As John mentioned, our consumer payment segment reported growth profit growth is 7% in Q2 and 8% in the first half, while our business payment segment growth profit grew 11% in Q2 and 14% in the first half.

Tim Murphy: Thank you, John. Now, let's go over our Q2 financial results before our review of financial guidance for 2024. In the second quarter, Repay delivered solid results across our key metrics. Revenue was $74.9 million, an increase of 4% over the prior year's second quarter. As a reminder, the seasonality related to tax refunds during Q1 creates lower processing activity and revenue on a quarter-over-quarter basis.

Tim Murphy: Thank you, John . Now let's go over our Q2 financial results before our review of financial guidance for 2024.

Tim Murphy: In the second quarter, Repay delivered solid results across our key metrics. Revenue was $74.9 million, an increase of 4% over the prior year's second quarter. And as a reminder, the seasonality related to tax refunds during Q1 creates lower processing activity and revenue on a quarter-over-quarter basis.

Tim Murphy: In Q2, gross profit grew by 7% year-over-year as we continue to benefit from processing cost optimization and automation initiatives. As John mentioned, our consumer payment segment reported gross profit growth of 7% in Q2 and 8% in the first half, while our business payment segment gross profit grew 11% in Q2 and 14% in the first half. Justin Iveda's revenue was $33.7 million, representing 10% growth in Q2 and 13% growth in the first half.

John Morris: In Q2, gross profit grew by 7% year-over-year as we continue to benefit from processing cost optimization and automation initiatives. As John mentioned, our consumer payment segment reported gross profit growth of 7% in Q2 and 8% in the first half, while our business payment segment gross profit grew 11% in Q2 and 14% in the first half.

Tim Murphy: Adjusted EBITDA was 33.7 million, representing 10% growth in Q2 and 13% growth in the first half. Q2 adjusted EBITDA margins were approximately 45%, improving sequentially as we have maintained relatively stable SNA costs on a quarter-of-a-quarter basis, while simultaneously working to align our sales, implementation, and support teams throughout the year. Second quarter adjusted income was 21.8 million, or 22 cents per share. Lastly, Q2 pre-cache saw was 19.3 million, representing 57% pre-cache saw conversion and 90 plus percent year-over-year pre-cache saw growth. Re-cache saw conversion was in line for internal expectations and remains on track to further improve during the second half of the year.

Justin Ewood: Justin Ewood out with 33.7 million representing 10% growth in YouTube and 13% growth in the first half.

Tim Murphy: Q2 adjusted EBITDA margins were approximately 45 percent, improving 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. Second quarter adjusted net income of $21.8 million, or $0.22 per share. Lastly, Q2 free cash flow of $19.3 million, representing 57% free cash flow conversion and 90-plus percent year-over-year free cash flow growth. The cash flow conversion was in line with our internal expectations and remains on track to further improve during the second half of the year. As of June 30th, we had approximately $147 million in cash on the balance sheet.

John Morris: Q2 adjusted EBITDA margins were approximately 45%, improving 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.

John Morris: Second quarter adjusted net income of $21.8 million or $0.22 per share.

John Morris: Lastly, Q2 free cash flow was $19.3 million, representing 57% free cash flow conversion and 90-plus percent year-over-year free cash flow growth. Free cash flow conversion was in line to our internal expectations and remains on track to further improve during the second half of the year.

Tim Murphy: As of June 30th, we had approximately 147 million of cash in balance sheet. Nearly July, we've enhanced our overall capital structure by staggering the maturity of our outstanding debt, while opportunists are taking advantage of market dynamics. We repurchased at a discount of 220 million principal amount of our 440 million convertible notes with an upcoming maturity in 2026, while concurrently issuing a new 287.5 million convertible note due in 2029 with 2.875 percent coupon. We also enter a cap culture in action, increasing the effect of conversion price to 20.42 cents per share, writing significant pollution protection. We repurchased approximately 3.9 million shares as part of the transaction, which will reduce our overall performance share count and help partially offset the interest expense in fact to adjust the P.S.

John Morris: As of June 30th, we had approximately $147 million of cash in the balance sheet.

Tim Murphy: In early July, Repay enhanced our overall capital structure by staggering the maturity of our outstanding debt while opportunistically taking advantage of market dynamics. We repurchased at a discount $220 million principal amount of our $440 million convertible notes with an upcoming maturity in 2026, while concurrently issuing a new $287.5 million convertible note due in 2029 with a 2.875% coupon. We also entered into a cap call transaction, increasing the effective conversion price to $20.42 per share, providing significant solution protection.

John Morris: In early July , Repay enhanced our overall capital structure by staggering the maturity of our outstanding debt while opportunistically taking advantage of market dynamics.

John Morris: We repurchased at a discount $220 million principal amount of our $440 million convertible notes with an upcoming maturity in 2026 while concurrently issuing a new $287.5 million convertible note due in 2029 with 2.875% coupon.

John Morris: We also entered a cap call transaction, increasing the effective conversion price to $20.42 per share, providing significant dilution protection.

Tim Murphy: We repurchased approximately 3.9 million shares as part of the transaction, which will reduce our overall performance share count and help partially offset the interest expense impact to adjust the EPS moving forward. In addition, we extended and upsized our revolver to $250 million, bringing our total per formula liquidity to $392 million. As a result of these transactions, UK's total outstanding debt is $507.5 million.

John Morris: We repurchased approximately 3.9 million shares as part of the transaction, which will reduce our overall performance share count and help partially offset the interest expense impact to adjust the EPS moving forward.

Tim Murphy: moving forward. In addition, we extended an upside that revolved to 250 million, bringing our total performance liquidity to 390 million. As a result of these transactions, UK's total performance outfitting debt is 575 million, is net leverage of approximately 2.7 times. We continue to expect net leverage to naturally decline throughout this year from our strong profitability and cash flow generation, excluding any potential eminence.

John Morris: In addition, we extended and upsized our revolver to $250 million, bringing our total per form of liquidity to $392 million.

John Morris: As a result of these transactions, UK's total performed outstanding debt is $507.5 million with net leverage of approximately 2.7 times. We continue to expect net leverage to naturally decline throughout this year from our strong profitability and cash flow generation, excluding any potential M&A.

Tim Murphy: His net leverage is approximately 2.7 times. We continue to expect net leverage to naturally decline throughout this year from our strong profitability and cash flow generation, excluding any potential M&A. Moving on to our thoughts for the remainder of 2024. Our year-to-date results are driven by our growth algorithm on growth with existing clients, the four-year contribution from clients that began ramping during the prior year, and growth from new clients signed with a measured implementation timeline.

Tim Murphy: Moving on to our thoughts for the remainder of 2024, our year-to-day results are driven by our growth out there that want growth to the existing clients, before your contribution to clients that began ramping during the prior year, and growth from signed in clients with a measured implementation timeline. As we move into the second half of the year, we are re-arraying at 2020 for our look to continue to expect revenues to be between $214,000 and $220,000 for its profits to be between $245,000 and $250,000,000, and adjusted EBITDA to between $139,000,000 and $142,000,000. We expect roughly 44% adjusted EBITDA margins and anticipate adjusted EBITDA to go faster than revenue and growth profit during the year.

John Morris: Moving on to our thoughts for the remainder of 2024.

John Morris: Our year-to-date results are driven by our growth algorithm on growth with existing clients, the four-year contribution from clients that began ramping during the prior year, and growth from signed new clients with a measured implementation timeline.

Tim Murphy: As we move into the second half of the year, we are reiterating our 2024 outlook and continue to expect revenue to be between $214 million and $220 million, gross profit to be between $245 million and $250 million, and adjusted EBITDA to be between $139 million and $142 million. We expect roughly 44% adjusted even margins and anticipate adjusted even to grow faster than revenue and gross profit during the year. We expect our free cash flow conversion to accelerate throughout the year, with Q3 free cash flow conversion being greater than our full-year free cash flow conversion target of approximately 60 percent. As a reminder, free cash flow conversion is calculated by dividing free cash flow by adjusted EBITDA.

Speaker Change: As you move into the second half of the year, we are hearing at 2020 for our look and continue to accept revenues to be between 2014-2020 line, for a profit between 2014-2020 line and just to be with our 2020-139-194-2020 line.

Speaker Change: We expect roughly 44% adjusted even margins and anticipate adjusted even to grow faster than revenue and gross profit during the year.

Tim Murphy: We expect our free cash flow conversion to accelerate throughout the year, with Q3 free cash flow conversion being greater than our full year free cash flow conversion target of approximately 60%. As a reminder, free cash flow conversion is calculated by dividing free cash flow by adjusted EBITDA. As we demonstrated in the first half of 2024, we plan to reduce overall capital spending, giving us the confidence to accelerate our free cash flow conversion throughout 2024, leading to full year free cash flow growth of 60% plus per cent year of year, and sustain mid-to-high teens growth thereafter.

John Morris: We expect our free cash flow conversion to accelerate throughout the year with Q3 free cash flow conversion being greater than our full year free cash flow conversion target of approximately 60 percent.

Speaker Change: As a reminder, we catch up in version that's talked really by dividing through capsule by just me with that.

Operator: As we demonstrated in the first half of 2024, we plan to reduce overall capex spending, giving us the confidence to accelerate our free cash flow conversion throughout 2024, leading to full-year free cash flow growth of 60-plus percent year-over-year and sustained mid- to high-teens growth thereafter. Across the business, we are seeing the sales pipeline develop from our software integrations and partnerships, giving us confidence about our multi-year growth opportunity. The planning assumptions around our 2024 outlook include a measured ramp of the previously announced quarterly capital wind that is expected to go live this quarter, while lapping a strong contribution from enterprise clients during 2023.

Speaker Change: As we demonstrated in the first half of 2024, we plan to reduce overall CapEx spending, giving us the confidence to accelerate our free cash flow conversion throughout 2024, leading to full-year free cash flow growth of 60-plus percent year-over-year and sustained mid- to high-teens growth thereafter.

Tim Murphy: Across the business, we are seeing the sales pipeline developed for our software innovations and partnerships, giving us confidence for our multi-year growth opportunities. The planning assumptions are on a 2020 for outlook, but look to include a measured ramp of the previously announced quarter capital win that is expected to go live this quarter, while lapping a strong contribution from enterprise clients during 2023. As a reminder, our Q3 and Q4 quarterly cadence is expected to benefit from the incremental contributions of our political mobility of business and the business payment segment. We continue to expect healthy growth related to presidential elections like 2024, but due to the timing of media spending, the contribution is more back-cap weighted than previously anticipated.

Speaker Change: Across the business, we are seeing the sales pipeline develop from our software integrations and partnerships, giving us confidence in our multi-year growth opportunities. The planning assumptions around our 2024 outlook include a measured ramp of the previously announced quarter capital wind that is expected to go live this quarter, while lapping a strong contribution from enterprise clients during 2023.

Operator: As a reminder, our Q3 and Q4 quarterly cadence is expected to benefit from the incremental contributions of our political and legal business in the business payment segment. We continue to expect healthy growth related to the presidential election cycle in 2024, but due to the timing of media spending, the contribution is more back half-weighted than previously anticipated. Also, our pre-cash flow conversion is expected to accelerate throughout the year, similar to the quarterly cadence that we saw in 2023.

Speaker Change: As a reminder, our Q3 and Q4 correlations is expected to benefit from the incremental contributions of our political and the views of business and the business payment segment.

Speaker Change: We continue to expect healthy growth related to the presidential election cycle in 2024, but due to the timing of media spending, the contribution is more back half-weighted than previously anticipated. Also, our free cash flow conversion is expected to accelerate throughout the year, similar to the quarterly cadence that we saw in 2023.

Tim Murphy: Also, our free cash flow conversion is expected to accelerate throughout the year, similar to the quarterly cadence that we saw in 2023. As you can see from our strong first half results in full year 2024 outlook, our investments toward sales, product, and technology are leading to an acceleration of free cash flow conversion. We remain focused on profitable growth by finding efficiency across the business where we can scale processes, but also maintaining prudent investments towards innovation and auto-emission.

Operator: As you can see from our strong first half results and full year 2024 outlook, our investments in sales, product, and technology are leading to an acceleration of free cash flow conversion. We remain focused on profitable growth by finding efficiencies across the business where we can scale processes while also maintaining prudent investments toward innovation and automation. And I'll turn the call back over to the operator to take your questions. Operator?

Speaker Change: As you can see from our strong first half results in full year 2020 for Outlook, our investment sort sales product and technology at leading to an acceleration free cash flow conversion.

Speaker Change: We remain focused on profitable growth by finding officials that across the business where we can scale processes but also maintaining food investments towards innovation and automation. I'm also going to call back over to the operator to take your questions. Operator?

Tim Murphy: I'm also going to call it back over to the author to take your question. Thank you.

Operator: Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and then 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 to leave the question queue. For participants making use of speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from Ramsey El Hassle of Barclays. Please go ahead.

Operator: Ladies and gentlemen, we will now be conducting the question-and-answer session. If you'd like to ask the question, please press star and then one on your telephone keypad. A confirmation turn will indicate that a line is in the question queue. You may press star two to leave the question queue.

Speaker Change: Thank you. Ladies and Gentlemen, we will not be conducting the confession in our session.

Speaker Change: If you'd like our secretion, please spread star and then one on each elephant keypad.

Speaker Change: A confirmation turn will indicate that a line is in the question queue.

Speaker Change: You may press star 2 to leave the question queue.

Operator: For participants making use of speak equipment, it may be necessary to pick up your handset before pissing the stockies.

Speaker Change: For participants making use of speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Ramsey El: Author's question comes from Ramsey, else a soul of Parkley's. Peace, go ahead. Hi, thanks for taking my question this evening. On free cash flow conversion, I mean, it's obviously had a really great improvement and continues to do so. How do we think about the normalized level where that will land? What is this steady state fee cash flow conversion that you have in mind over time? Yeah, we do feel really good about that. It accelerated significantly in queue two. We thought it was a strong queue one, and we expected to continue to accelerate throughout the year.

Arthur: Arthur's question comes from Ramsay as a soul of Parkley's, please go ahead.

Ramsey El: Hi. Thanks for taking my question this evening.

Arthur: Thanks for taking my question this evening.

Ramsay: on free cash flow conversion. I mean, it's obviously had a really great improvement and continues to do so. How do we think about the normalized level where that will land? What is this sort of steady state free cash flow conversion that you have in your mind over time?

Tim Murphy: On free cash flow conversion, I mean, it's obviously made a really great improvement and continues to do so. How should we think about the normalized level where that will land? What is the sort of steady state free cash flow conversion that you have in your mind, you know, over time?

Tim Murphy: Yeah, we do feel really good about that. It accelerated significantly in Q2 off of what we thought was a strong Q1, and we expect it to continue to accelerate throughout the year. You know, as we said, we think there can be sustained mid- to high-teens growth in free cash flow, which, you know, our target for this year is 60 percent. So that would start to put us toward, you know, the mid-60s.

Speaker Change: Yeah, we do feel really good about that. It accelerated significantly in Q2 off of what we thought was a strong Q1, and we expect it to continue to accelerate throughout the year.

Tim Murphy: As we said, we think there can be sustained mid-to-high teens growth in free cash flow, which our target for this year is 60%; so that would start to put us toward the mid-60s. We do that math on mid-to-high teens. You can see where that points us to 2026 and beyond. So we feel good about the 60% target for this year. Good about visibility into mid-to-high teens growth thereafter, and you can kind of understand where that takes us from a conversion perspective. And that is happening because we're showing adjusted EBITDA growth faster than top line, and we're showing a reduction to CapEx.

Speaker Change: You know, as we said we think there can be sustain with the high teens growth and free cash flow.

Speaker Change: which our target for this year is 60% so that we start to put us toward.

Tim Murphy: And if you do that math on mid- to high-teens, you can see where that kind of points us to 2026 and beyond. So we feel good about the 60 percent target for this year and good about, you know, visibility into mid- to high-teen growth thereafter. And you can kind of understand where that takes us from a conversion perspective. And that is happening because we're showing adjusted EBITDA growth faster than top line, and we're showing a reduction in CapEx.

Speaker Change: You know, the mid-60s and if you do that math on the dieting, you can see what that kind of...

Speaker Change: Points us to 2026 and beyond, so...

Speaker Change: We show good about the 60% target for this year, good about, you know, visibility into mid to high teens growth thereafter.

Speaker Change: and you can kind of understand what that takes us from a conversion perspective and that is happening because we're showing adjust the even a growth faster than top line and we're showing a reduction of catbacks.

Tim Murphy: And as we talked about previously, we think CapEx won this year at a call at 13 to 14 percent of revenue, and longer term, it can get that down to 10 to 12 percent of revenue. And those combined get us to that mid- to high-teens growth.

Tim Murphy: And as we talked about previously, we think CapEx won this year at a cost of 13 to 14% of revenue. Longer term can get that down to 10 to 12% of revenue, and those combined get us to that mid-to-high teens growth.

Speaker Change: As we talked about previously, we think CapEx won this year at, call it, 13 to 14 percent of revenue, and longer term can get that down to 10 to 12 percent of revenue, and those combined get us to that mid-to-high teens growth.

Ramsey El: I got it perfect and a follow-up from me.

John Morris: Got it perfect, and a follow-up from me. Could you give us just your view on the overall health of the consumer today? It's such an odd sort of cycle we're in, but specifically on the sort of personal financing side of the business, are you seeing any tightening or loosening at the top of the funnel? What is your view of what's happening out there?

Ramsey El: Could you give us just your view on the overall health of the consumer today? It's such an odd sort of cycle we're in, but specifically on the sort of personal financing side of the business, are you seeing any tightening or loosening at the top of the funnel? What is your view of what's happening out there? Yeah, we're seeing consistent trends into Q3. We continue to see a healthy, but somewhat moderating consumer environment that's consistent with what we'd expect. There's no noticeable difference in any of the sub-verticals, as you mentioned: personal finance. I think it's a similar environment there where there's been some tightening over the last year plus, and that's continuing.

Speaker Change: Got it. Perfect. And a follow-up from me.

Speaker Change: Could you give us just your view on the overall health of the consumer today? It's such an odd sort of cycle we're in, but specifically on the sort of personal financing side of the business. Are you seeing any tightening or loosening at the top of the funnel? What is your view of what's happening out there?

John Morris: Yeah, we're seeing consistent trends into Q3. You know, we continue to see a healthy but somewhat moderating consumer environment that's consistent with, you know, what we'd expect. There's no noticeable difference in any of the sub verticals, like, as you mentioned, personal finance. I think it's a similar environment there where there's been some tightening over the last.

Speaker Change: Yeah, we're seeing consistent trends into Q3.

Speaker Change: is somewhat moderating consumer environment that's consistent with

Speaker Change: You know, what we'd expect, there's no...

Speaker Change: noticeable difference in any of the sub-verticals like as you mentioned personal finance I think

Speaker Change: It's a similar environment there, where there's been some tightening over the last year or plus, and that's continuing. So, I wouldn't say anything noticeably different. Very consistent trends going into Q3 off of Q2, and we feel good about that.

John Morris: I wouldn't say anything noticeably different. Very consistent trends going into Q3 off of Q2, and we feel good about that.

John Morris: Ramsey, I would add, as well.

John Morris: Yeah, RIMZ would add, as well. RIMZ would add, as well, we continue to emphasize that predominantly on the consumer side, these are non-discretionary spent items just because of the nature of the natural obligations there. So we continue to see that kind of leads into some of the tense comments we're not going to see. Good point.

Speaker Change: I would add as well, as well as we continue to emphasize that.

Speaker Change: You know, predominantly on the consumer side, these are non-discretionary spent items, just because of the nature of the financial obligations there. So we continue to see that that kind of leads into some of Tim's comments around consistency.

Ramsey El: Thank you.

Tim Murphy: Good point. Thank you.

Operator: Our next question comes from Sanjay Sakharani of KBW. Please go ahead. Hi.

Sanjay Sakharani: Unexquestion comes from Sanjay Sakharani of KBW. Please come ahead.

Speaker Change: An excretion comes from Sanjay Sakroni of KBW, please go ahead

Steven Kwok: Hi, this is actually Steven Kwok filling in for Sanjay, but thanks for taking my questions. The first one I had was just to follow up on, you know, what macro trends are you assuming within the guide? And then as we went through the quarter into July and August, any deviating trends that you're seeing?

Tim Murphy: Hi. This is actually Stephen Cwaftali and Patanjay, but thanks for taking my questions. The first one I had was just to follow up around, you know, what macro trends are you assuming within the guide? And then, as we went through the quarter into July and August, any deviating trends that you're seeing? Thanks. Yeah, we don't see any major change to our macro assumptions from prior quarters. Like I said, there's been very consistent trends into Q3 coming off of Q2. You know, we see it's generally a healthy consumer in the non-discretionary end markets within consumer. And so our macro assumptions really haven't changed from prior periods.

Stephen Guachtellian: Hi, this is actually Stephen Guachtellian from John Jay, but thanks for taking my questions. The first one I had was just a follow up around, you know, what macro trends are you assuming within the guide, and then as we went through the quarter and into July and August, any BBA in trends that you're seeing.

Operator: and Carter, 2024 earnings conference call. This call is being recorded today, August 8, 2024.

Tim Murphy: Yeah, we don't see any major change to our macro assumptions from prior quarters. Like I said, there's been very consistent trends into Q3 coming off of Q2. We see generally a healthy consumer in these non-discretionary end markets within consumers. And so our macro assumptions really haven't changed from prior periods. And as I said, the trends into the quarter have been consistent as well.

Tim Murphy: Thanks.

Speaker Change: Yeah, we don't see any major change to our macro assumptions from fire quarters. Like I said, there's been very consistent trends in TQ3 coming off of Q2.

Grant Grisante: I'd like to turn the session over to Grant Grisante, head of investor relations at Repay. Stewart, you may proceed. Thank you.

Tim Murphy: You know, we see generally a healthy consumer in these non-discretionary end markets within consumer. And so our macro assumptions really haven't changed from prior periods, and like I said, the trends into the quarter have been consistent as well.

Stewart Grisante: Good afternoon and welcome to our second 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 risk and uncertainties, including those such forth in the SEC filings related to today's results in our most recent form 10K.

Tim Murphy: And like I said, the trends into the quarter have been consistent as well. Got it.

Tim Murphy: Got it. And then perhaps you could provide any updates on the M&A pipeline, you know, given your leverage ratio, and just wanted to see if there's anything that's out there that's perhaps interesting.

Sanjay Sakharani: And then just perhaps if you could provide any updates around M&A pipeline, you know, given the leverage ratio. And just wanted to see if there's anything that's out there that's perhaps interesting.

Stewart Grisante: Actual results made different materially from any forward-looking statements that we make today. Forward-looking statements speak only as of today, and we do not assume any obligations or intent to update them except is required by law. In an effort to provide additional information to investors, today's discussion will also include references to certain non-gap financial measures.

Speaker Change: Got it. And then just perhaps if you could provide any updates around M&A pipeline, you know, given the leverage ratio, and just wanted to see if there's anything that's out there that's perhaps interesting.

John Morris: I can start. Maybe John can jump in. We feel good about the refi we just did, and our balance sheet is in great shape. We upsized our revolver to 250. We have, you know, a lot of liquidity and capacity in general. And that gives us, you know, confidence to pursue M&A. We have a healthy pipeline. We have an internal team that sources and executes deals. And we're looking at opportunities across both consumer and business payments. Likely would be a size range of a tuck-in type of opportunities. We're looking at multiple different size deals, but likely given that we'd want to maintain that leverage around four to four and a half times.

Tim Murphy: Yeah, I can start and maybe John can jump in, and we feel good about the refile we just did, and our balance sheet is in great shape. We upsized our revolver to 250. We have, you know, a lot of capacity, liquidity, and capacity in general. And that gives us, you know, confidence to pursue M&A; we have a healthy pipeline, we have an internal team that sources and executes deals. And we're looking at opportunities across both consumer and business payments, which would likely be...

Speaker Change: I can start and maybe John can jump in and we feel good about the refi we just did and our balance sheet is in great shape. We upsized our revolver to 250 we have.

Speaker Change: You know, a lot of capacity, liquidity and capacity in general, and that gives us, you know, confidence to pursue M&A. We have a healthy pipeline, we have an internal team that sources and executes deals, and we're looking at opportunities across both consumer and business payments.

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

Tim Murphy: Size and range of a tuck-in type of opportunity. As we're looking at multiple different size deals, but likely, given that we'd want to maintain that leverage around four to four and a half times and not go above that, it would likely be a tuck-in if we did it with all debt, and then we would look to bring that leverage ratio down with visibility to get it back down below three times and call it 12 to 18 months. So, we're looking at a lot of opportunities, and we have a healthy pipeline.

Speaker Change: likely would be...

Speaker Change: The size range of a tuck-in type of...

John Morris: With that, I would now like to turn the call over to John. Thanks, Stuart.

Speaker Change: Opportunity is we're looking at multiple different size deals but likely given that we'd want to maintain that leverage around four to four and a half times and not go above that it likely be a tuck in if we did it with all debt.

John Morris: And not go above that. It would likely be a tuck-in if we did it with all debt. And then we would, you know, look to bring that leverage ratio down with visibility to get it back down below three times and call it 12 to 18 months. So we're looking at a lot of opportunities, and we have a healthy pipeline.

Good afternoon everyone. Thank you for joining us today. In Q2, we experienced another quarter of profitable growth with gross profit growth of 7%, adjusted EBITDA growth over possibly 10%, and free cash flow conversion of 57%, representing 90% plus growth year-over-year, with each metric performing in line to our expectations. Our year-to-date results represent a strong first-after-year with double digit adjusted EBITDA growth as we aim to capture new payment flows with payment vertical expertise across our consumer and business payment segments.

Speaker Change: and then we would, you know, look to bring that leverage ratio down with visibility to get it back down below three times and call it 12 to 18 months. So, we're looking at a lot of opportunities and we have a healthy pipeline.

John Morris: Yeah, I would just add a little good flow of color there. Obviously, we've been patient over the last couple years looking for, you know, the right valuation, and the right opportunities, and we actually think that, as Tim indicated, we have really healthy dialogues out there. We think that in the private world, more and more attractive assets will be coming, as well as some of the things we see today, but we will be disciplined. We think our balance sheet sets up really strong for anything that's an opportunity that we think is highly creative for our shareholders. Then that's something we would definitely be looking at. It would give us, you know, long-term value creation.

John Morris: Yeah, I've just had a little good little color there. Obviously, we've been patient over the last couple of years looking for the right valuation, right opportunities. And we actually think that, as Tim indicated, we have a really healthy dialogue out there. We think that the private world, more and more attractive assets will be coming, as well as some of the things we see today, but we will be disciplined. We think our balance is set sub really strong. For anything that's not an opportunity that we think is how we create it to our shareholders, then there's something we would definitely be looking at that would give us, you know, long-term value creation.

Speaker Change: Yeah, I would just add a little bit of color there. Obviously, we've been patient over the last couple of years.

Speaker Change: Looking for the right valuation right opportunities, and we actually think that as timidicated, we have a really healthy dialogue out there, we think that the private world more and more attractive assets will be coming as well as some of the things we see today.

During the quarter, we continue to make progress on our three main strategic initiatives that will drive growth in 2024 and beyond. As a reminder, they include our go-to-market efficiency, client accommodations, and a focus on product. In Q2, consumer payments gross profit growth was 7%. Our solid performance in Q2 represents the continued execution of our growth algorithm, which includes growth coming from existing clients, as well as signing new clients over the past several quarters.

Speaker Change: We will be disciplined, we think our balance of this sets up really strong for anything that's an opportunity that we think is highly creative to our shareholders than that something we would definitely be looking at, let's give us a long-term value creation.

John Morris: And I'm not sure if you can share this with us, but is there any specific verticals or products, capabilities that you're looking at? If you just look at it, we like to do things that we have a lot of attributes we look at, obviously embedded payments specifically and obviously something in payments. Similar things we've done in the past, something that would be complimentary to where we are, where we are. It's to mention potentially something of a tuck-in basis. But, as you know, we don't get to choose when something comes to market or is for sale, but we'll keep getting to be disciplined there.

John Morris: Got it. And I'm not sure if you can share this with us, but are there any specific verticals of products or capabilities that you're looking at?

Speaker Change: Got it. And I'm not sure if you can share this with us, but is there any specific verticals of products, capabilities that you're looking at?

Tim Murphy: If you just look at it, we like to do things that have a lot of attributes we look at, obviously embedded payments specifically, and obviously something in payments. So, similar things we've done in the past, something that would be complementary to where we are existing. As Tim mentioned, potentially something of a tuck-in basis. But as you know, we don't get to choose when something comes to market or is for sale. But we will continue to be disciplined.

Our growth is also aided by the ongoing secular tailwinds within our consumer payments verticals. We've added many new clients through our platform in Q2, including nine new credit units, bringing our total credit union clients to 300 out of the roughly 5,000 credit unions in the US. We are directly integrating our payment platform into multiple core credit union and financial institutions software systems, representing a differentiated solution in the marketplace, which is leading to a healthy sales pipeline to address the thousands of financial institutions in the United States.

Speaker Change: If you just look at it, we like to do things that we have a lot of attributes we look at, obviously embedded payments specifically.

Speaker Change: and obviously something in payments. So similar things we've done in the past, something that would be complementary to where we are. As Tim mentioned, potentially something of a tuck-in basis.

Tim Murphy: But as you know, we don't get to choose when something comes to market or is for sale. But we'll continue to be disciplined there.

Steven Kwok: Yeah, I'll add some of the attributes. In addition to the financial profile, which, you know, obviously we like, you know, large, growing, underserved verticals and healthy retention statistics and integrated payments, we look for businesses that would bring us additional software partnerships for distribution. On the AP side, we would look for, you know, a large supplier network to augment our existing supplier network and additional software relationships and sub-verticals within AP. So, you know, those are the types of attributes we're looking for as we're sourcing deals, and we do see some out there that have some of those so far. It was awesome.

John Morris: Yeah, I'll add some of the attributes. In addition to the financial profile, which obviously we like large growing underserved verticals and healthy retention statistics and integrated payments. We look for businesses that would bring us additional software partnerships for distribution. On the AP side, we would look for a large supplier network to augment our existing supplier network and additional software relationships and sub verticals within AP. So, you know, those are the types of attributes we're looking for as we're sourcing deals, and we do see some out there that have some of those so far.

Tim Murphy: Yeah, I'll add some of the attributes in addition to the financial profile which obviously we like, you know, large growing underserved verticals and

We also further strengthen our existing software partnerships. In May, we became a certified integrating partner with Core Relations Keystone platform. A leading core processor for credit unions. And in June, we announced the enhanced integration with CU Answers. A 100% credit union owned service organization that provides core processing solutions and services for hundreds of credit unions across the US. With NCUS's platform, Rufay released several new features and products such as real-time payment posting and tracking, enabling both the members and business operations of credit unions to benefit from extreme-lined loan repayment modalities.

Speaker Change: healthy, you know, retention statistics and integrated payments. We look for businesses that would bring us additional software partnerships for distribution.

Speaker Change: On the AP side, we would look for, you know, a large supplier network to augment our existing supplier network and additional software relationships and sub-verticals within AP. So, you know, those are the types of attributes we're looking for as we're sourcing deals and we do see some out there that.

Sanjay Sakharani: Awesome. Great.

Operator: Awesome. Great. Thanks for taking my questions.

Tim Murphy: and then have some of those to form.

Peter Hickman: Thanks for taking my questions.

Speaker Change: I want to ask you a question.

Additionally, the Council Civil Management Vertical continues to be an attractive opportunity with multiple years of growth ahead as we began implementation of one of the largest outsource accounts for civil management and loan servicing providers in the U.S. During implementations, we are focused on increasing technology and workflow connectivity within our client systems to deliver an embedded solution. The investments being made towards integration and connectivity enhancements are resulting in better consumer experiences and satisfaction leading to a long-term client and partner relationships.

Operator: The next question comes from Peter Heckmann of D.A. Davidson. Please go ahead. Hey, good afternoon.

Speaker Change: Thank you very much for watching this video.

Tim Murphy: The next question comes from Peter Hickman of D.A. Davidson, Peace of Ahead.

Peter Heckmann: Hey, good afternoon. Thanks for taking the time to ask the question. I have several companies reporting earnings, so I apologize if I missed it, but within business payments, did you talk about kind of what the growth rate there was excluding media spend related to the recent political or election events? And then, secondly, do you think you have the right distribution channel in place in terms of you're both signing up direct clients and going through ISVs to really get the revenue accelerated to kind of that mid to high teens range?

Peter Hickman: Hey, good afternoon. Thanks for taking the question.

Peter Hickman: I have several companies reporting earnings, so I apologize if I missed it, but within business payments, did you talk about kind of what was the growth rate there excluding media spend related to any of the political or the election?

Tim Murphy: But within business payments, did you talk about kind of what was the growth rate there, excluding media spend related to many political elections? And then secondly, do you think you have the right distribution channel in place in terms of both signing up direct clients and going through ISVs to really get the revenue accelerated to kind of that mid to high teams range? Yeah, so we did, we did, we have segment, you know, breaking out segments, and we talked about the reported growth and business payments of 11% in Q2 and 14% in the first half. We still think that's a business that can grow in the high teams. You know, they're the media contribution will be back half weighted.

Speaker Change: And then, secondly, do you think you have the right distribution channel in place in terms of, you know, both signing up direct clients and going through ISVs to really get the revenue accelerated to kind of that mid- to high-teens range?

And lastly, in value added services, our incident funding product continues to see healthy growth which transactions volume up approximately 21% year-over-year. This product offers an incredible opportunity for our clients to set themselves apart in the marketplace by delivering quick, convenient and secure funding experiences to their customers. Over the medium term, we are continuing to evaluate new areas of expanding our instant funding capabilities. We also had a productive quarter in our business payment segment which grew growth profit by 11% year-over-year.

Tim Murphy: Yeah, so we did, we did, we have a segment, you know, breaking out the segments, and we talked about the reported growth in business payments of 11% in Q2 and 14% in the first half. We still think that's a business that can grow in the high teens.

Speaker Change: Yeah, so we did, we did, we have a segment, you know, breaking out the segments and we talked about the reported growth in business payments of 11% in Q2 and 14% in the first half.

John Morris: You know, the media contribution will be back-weighted, and so we think that there's probably more in the back half than was initially anticipated, just given the dynamics with the candidates and what's happened in the last few weeks, but we see a lot of positive momentum there that should drive that political media growth in the back half. So we have, like I said, really healthy pipelines building, a lot of distribution coming through our software relationships, and we think that's, those are healthy signs. Yeah, we want to continue to invest in our people.

Speaker Change: We still think that's a business that can grow in the high teens.

Speaker Change: You know, they're the media contribution.

Tim Murphy: And so we think that there's probably more in the back half than there was initially anticipated, just given the dynamics with the candidates and what's happened in the last few weeks. But we see a lot of positive momentum there that should drive that political media growth in the back half. So we have, like I said, really healthy pipelines building a lot of distribution coming through our software relationships, and we think those are healthy signs.

We feel very good about our top of the funnel pipeline. As our go-to-market approach is continued to win new enterprise clients, which can, in some cases, lead to longer signing to go live timing. First, profit growth was driven by strength in our core AP business, the ramp of new clients during the quarter, and incremental political media contributions leading to the presidential election cycle during the second half of the year. In AR, we continue to focus on optimizing payment acceptance while strengthening our client base through our direct sales team and ERP partners.

Speaker Change: We'll be back half-weighted, and so we think that there's probably more in the back half than there was initially anticipated, just given the dynamics with the candidates and what's happened in the last few weeks, but we see a lot of positive momentum there that should drive.

Speaker Change: that political media growth in the back half. So we have, like I said, really healthy pipelines, building a lot of distribution coming through our software relationships and we think that those are healthy signs.

Tim Murphy: We want to continue to invest in our integrated partners and the net new. As you heard us say before, we think there's many years of growth there with existing partnerships, but also the net new ones that we've spoken to in the past, examples like a black blog where we continue to, we think we have multiple years of growth as we help them monetize payments and drive out, drive the efficiencies especially around payables and just how commerce moves. So we think there's lots of opportunity; we want to continue to invest there organically. We think it's a really good return on Chiodo, but how do you do that?

Operator: Okay, does that conclude your question? Our next question comes from Joe Fafi of Canaccord Juniority. Please go ahead.

John Morris: Yeah, we want to continue to invest in our integrated partners and the new net new ones. As you heard us say before, we think there are many years of growth there with existing partnerships but also the new net new ones that we've spoken to in the past. Examples being, you know, like a blackboard, where we continue to think we have multiple years of growth as we help them monetize payments and drive out, drive the efficiencies, especially around payables, and just how commerce moves. So we think there's lots of opportunity. We want to continue to invest there organically, and we think it's a really good return on shareholder value to do that.

With an AP, we added four new software partners and enhanced integrations with several existing software partners while also growing our supplier network to over 300,000 suppliers. Our real-time vendor enable and process continues to grow the supplier base while also driving additional network effects by vertical. During the quarter, we signed many new clients across our verticals, including several within healthcare, such as Grady Health Systems, a leading public healthcare system in the U.S, with nine facilities serving the residents of Atlanta, Georgia.

Speaker Change: We want to continue to invest in our integrated partners and the net new as you heard us say before.

Speaker Change: We think there's many years of growth there with existing partnerships, but also the net new ones, as we've spoken to in the past. Examples being, you know, like a black blog, where we continue to, we think we have multiple years of growth as we help them monetize.

Speaker Change: payments and drive the efficiencies, especially around payables, and just how commerce moves. So we think there's lots of opportunity. We want to continue to invest there organically. We think it's a really good return on shareholder value to continue to do that.

Repay was able to swiftly implement Grady Health, quickly making them a meaningful client in business payments. And now our payment specialist team is focused on the real-time vendor enablement process to drive more virtual card adoption. And throughout the first half of the year, we continue to gain traction and we are building a healthy sales pipeline from our recent software integrations, such as Sage Impact, Microsoft Dynamics, Quadient, Energy Cap, and Inflow. A great example of our vertical go-to-market strategy with these software partnerships is HIA.

Speaker Change: [inaudible]

Peter Hickman: Peter, does that conclude your questions?

Speaker Change: Thank you for watching!

Bala Saini: Our next question comes from Chiod Fafi of Canacode Junivity. Please come ahead.

Speaker Change: Thank you for watching!

Speaker Change: Thank you for watching, and I'll see you in the next video, and I'll see you in the next video.

Speaker Change: Our next question comes from Joe Ferfitt of Canaccord Genuity. Please come ahead.

At ERP and accounting solution, with unique functionalities designed with hospitality industry. After completing the payment integration within HIA, Repay went wide with our first HIA client in early 2023. And we are now providing our AP solution to an expanding list of hundreds of properties across the U.S. We have been able to grow Repay by expanding our services, leveraging our now 273 integrated software partners across Repay, guiding our clients through a seamless onboarding process and constantly evolving our tech platform.

Bala Saini: Good evening, this is Bala Saini on for Jota. Thanks for taking our questions. First of all, we talked about the flexibility on the balance sheet. Is there a desire to accelerate the investments in the organic business given the multiple growth opportunities you have in front of you? If so, where would you like to increase the investments? I'll start, Tim, you can add in as well. As I mentioned on our call, in our 2024 goals are to continue to drive our good and market efficiency, which obviously we think these three things drive organic growth: our client implementations, which will continue to drive efficiencies there, and then overall focus on product. Those things we have been doing and we have been investing, and we've mentioned as well enterprise sales, starting in our enterprise sales, additional investments there, which we are currently doing and will do more there.

Operator: Good evening, this is Pallav Saini speaking on behalf of Joe. Thanks for taking our questions. First of all, you know, we talked about the flexibility on the balance sheet. Is there a desire to accelerate the investments in the organic business given the multiple growth opportunities you have in front of you? If so, where would you like to increase the investments?

Balasani: Good evening, this is Balasani on for Joe. Thanks for taking our questions. First of all, you know, we talked about the flexibility on the balance sheet. Is there a desire to accelerate the investment in the organic business given the multiple growth opportunities you have in front of you? If so, where would you like to increase the investment? And I have a follow-up.

John Morris: I'll start. Tim, you can add in as well. As I mentioned on our call, some of our 2024 goals are to continue to drive our go-to-market efficiency, which obviously we think these three things drive organic growth. Our client implementations, which will continue to drive efficiencies there. And then overall, our focus on product. Those things we have been doing, and we have been investing. And we've mentioned as well enterprise sales, driving our enterprise sales, additional investments there, which we're currently doing, and we'll do more there.

Speaker Change: Yeah, I'll start. Tim, you can add in as well. So, as I've mentioned on our call, some of our 2024 goals are to continue to drive our go-to-market efficiency, which we think, obviously, these three things drive organic growth.

As we look into the future, our platform will continue to scale as we automate manual process. The scaling of our platform and investments we've made in sales, product and technology over the past several years will enable us to continue expanding free cash flow conversion into the second half of the year and beyond. With financial flexibility to continue focusing on profitable growth and accelerating cash generation. Our cap allocation priorities remain focused on creating values to our shareholders, by investing into organic growth opportunities, while continuing to be open to a creative strategic M&A.

Tim Murphy: Our client implementations, which will continue to drive efficiencies there.

Tim Murphy: and then overall focus on product, those things we have been doing and we have been investing.

Tim Murphy: and we've mentioned as well, you know, enterprise cell, striving in our enterprise cells, additional investments there which we are currently doing and we'll do more there and then it's just mentioned in a few comments before driving our overall ISP relationships.

John Morris: And then, as just mentioned in a few comments before, driving our overall ISV relationships, product enhancements into those, and new features, functionality on behalf of existing clients and net new. And then overall enterprise software, helping monetize the overall payment flows and the efficiencies through that. We think that's a multi-year growth opportunity for us. And we're investing in all of those, but we'd like to continue to accelerate investment into those.

John Morris: And then it's just mentioned in a few comments before driving our overall ISV relationships, product enhancements into those and new features, functionalities on behalf of existing clients and net new. And then overall enterprise, software, helping monetize overall payment flows and the efficiencies through that, we think that's a multi-year growth opportunity for us and we're investing in all of those, but we'd like to continue to accelerate investment into those.

Tim Murphy: product enhancements into those and new features, functionalities on behalf of existing clients and net new.

Speaker Change: and then overall enterprise software, helping monetize the overall payment flows and the efficiencies through that. We think that's a multi-year growth opportunity for us. We're investing in all of those, but we'd like to continue to accelerate investment into those.

Tim Murphy: With that, I'll turn the call over to Tim to go over our Q2 financials, our recent balance sheet updates and further detail and our outlook for 2024. Tim? Thank you, John.

Tim Murphy: Thank you, and just to follow up, can you give us a sense of how much incremental revenue you're assuming from the presidential election later this year? Sure, so we've said consistent with what we've said before, which we expect about 20% growth off of the 2022 cycle. 2022 cycle was, you know, called about $6 million, so 20% on top of that. And, you know, we're now expecting about 85% of that amount to come in the back half of the year. And so that's very consistent with what we've been saying; we're not seeing a difference in the total amount, just the timing, just shifted a little bit.

Pallav Saini: Great, thank you. And just to follow up, can you give us a sense of... how much incremental revenue you're assuming from the presidential election later this year? Chirps.

Speaker Change: Great. Thank you. And just to follow up, can you give us a sense of...

Now let's go over our Q2 financial results before our Bureau of Financial Guidance for 2024. In the second quarter, Repay delivered solid results across our key metrics. Revenue was 74.9 million to increase the 4% over the prior year second quarter. And as a reminder, the seasonality related to tax refunds during Q1 creates lower processing activity and revenue on a quarter of a quarter basis. In Q2, growth profit grew by 7% year over year as we continue to benefit from processing cost optimization automation initiatives.

Speaker Change: How much incremental revenue you're assuming from the presidential election later this year?

Tim Murphy: Sure. So we, um, we've said it's consistent with what we said before, which is that we expect about 20% growth off of the 2022 cycle. The 2022 cycle was, um, you know, call it about $6 million. So 20% on top of that. And we're now expecting about 85% of that amount to come in the second half of the year. And so that's very consistent with what we've been saying. We're not seeing a difference in the total amount; just the timing has shifted a little bit, like I said, given the dynamics with the candidates. But in the past couple weeks, a lot has changed. And I think that the change has been largely in our favor.

Speaker Change: Sure, so we've said, it's consistent with what we've said before, which we expect about 20% growth off of the 22 cycle.

Speaker Change: you know, call it about $6 million. So 20% on top of that.

As John mentioned, our consumer payment segment reported growth profit growth is 7% in Q2 and 8% in the first half, while our business payment segment growth profit grew 11% in Q2 and 14% in the first half. Adjusted EBITDA was 33.7 million, representing 10% growth in Q2 and 13% growth in the first half. Q2 adjusted EBITDA margins were approximately 45%, improving sequentially as we have maintained relatively stable SNA costs on a quarter of a quarter basis, while simultaneously working to align our sales, implementation and support teams throughout the year.

Tim Murphy: And, you know, we're now expecting about, call it 85% of that amount to come in the back half of the year.

Tim Murphy: And so, that's very consistent with what we've been saying. We're not seeing a difference in the total amount, just the timing, just shifted a little bit. Like I said, given the dynamics with the candidates, but in the past couple weeks, a lot has changed and I think the change has been largely in our favor.

Tim Murphy: Like I said, given the dynamics with the candidates, but in the past couple of weeks a lot has changed, and I think the change has been like largely in our favor.

Bala Saini: Gordon, thank you.

Speaker Change: Got it. Thank you.

Charles Nabhan: An excretion comes from a Charles Nabhan of Stevens. Please come ahead. Good afternoon, thank you for taking my question. Most of my questions have been asked, but I wanted to ask about instant funding. I know 21% growth is still very strong, but it's a bit of a deceleration from last quarter, last couple of quarters. I know you said not a lot has changed from a consumer macro standpoint, but I wanted to ask, you know, is that just the matter of lapping challenge and comps? Or how should we think about that deceleration in growth within instant funding, as well as, you know, the go-forward growth rate within that business?

Operator: Our next question comes from Charles Nabhan of Stephens. Please go ahead.

Speaker Change: An excretion comes from a child's liver of Stevens. Please go ahead.

Charles Nabhan: Hi, good afternoon. Thank you for taking my question. Most of my questions have been asked, but I wanted to ask about instant funding. I know 21% growth is still very strong, but it's a bit of a deceleration from the last couple quarters. I know you said not a lot has changed from a consumer macro standpoint, but I wanted to ask, you know, is that just a matter of lapping challenging comps, or how should we think about that deceleration in growth within instant funding, as well as, you know, the go-forward growth rate within that business?

Second quarter adjusted income was 21.8 million or 22 cents per share. Lastly, Q2 pre-cache saw was 19.3 million, representing 57% pre-cache saw conversion and 90 plus percent year over year pre-cache saw growth. Re-cache saw conversion was in line for internal expectations and remains on track to further improve during the second half of the year. As of June 30th, we had approximately 147 million of cash in balance sheet. Nearly July, we've enhanced our overall capital structure by staggering the maturity of our outstanding debt, while opportunists are taking advantage of market dynamics.

Speaker Change: Good afternoon, thank you for taking my question. Most of my questions have been asked, but I wanted to ask about instant funding. I know it's 21% growth is still very strong, but it's a bit of a disseleration from last couple quarters.

Speaker Change: I know you said not a lot has changed from a consumer or macro standpoint, but I wanted to ask, you know, is that just the matter of...

Speaker Change: Lapping challenging comps or how should we think about that deceleration?

We repurchased at a discount of 220 million principal amount of our 440 million convertible notes with an upcoming maturity in 2026, while concurrently issuing a new 287.5 million convertible note due in 2029 with 2.875 percent coupon. We also enter a cap culture in action, increasing the effect of conversion price to 20.42 cents per share, writing significant pollution protection. We repurchased approximately 3.9 million shares as part of the transaction, which will reduce our overall performance share count and help partially offset the interest expense in fact to adjust the P.S, moving forward.

Speaker Change: in growth within instant funding as well as, you know, the go-forward growth rate within that business.

Tim Murphy: Yeah, so it's a function of lapping. We signed and ramped a very large personal lending client in the early part of 2023, and they were fully ramped in Q2 of last year. And they adopted our instant funding product almost right away. And so they contributed a lot to instant funding last year, and we're now lapping that. Q2 is the first full quarter of lapping. So I would expect this to be a similar level of growth. We will move beyond the lapping of that large enterprise win, and then we're signing new clients for this product. Do you think there's demand for it?

Tim Murphy: Yeah. So, it's a function of lapping. We signed and ramped a very large personal lending client in the early part of 2023, and they were fully ramped in Q2 of last year, and they adopted our instant funding product almost right away. And so, they contributed a lot to instant funding last year, and we're now lapping that. Q2 is the first full quarter of lapping.

Speaker Change: Yeah, so it is a function of lapping, we signed in ramped a very large personal lending client in the early part of 2023 and they were fully ramped in Q2 last year and they adopted our instant funding product almost right away.

Speaker Change: And so they contributed a lot to instant funding last year, and we're now lapping that. Q2 is the first full quarter of lapping.

Tim Murphy: So, I would expect this to be a similar level of growth. We will move beyond the lapping of that large enterprise win, and then we will sign new clients for this product. We do think there's demand for it, and there should be adoption as more clients go completely digital with not only their acceptance of payments but their funding of loans. So, the deceleration is purely a function of lapping that large client in Q2, and I think we'll see pretty consistent trends moving forward. It's not anything underlying within the business or within macro; it's more about the platform.

Speaker Change: So I would expect this to be a similar level of growth. We will move beyond the lapping of that large enterprise wind, and then we're signing new clients for this product. I do think there's demand for it, and there should be adoption.

In addition, we extended an upside that revolved to 250 million, bringing our total performance liquidity to 390 million. As a result of these transactions, UK's total performance outfitting debt is 575 million, is net leverage or approximately 2.7 times. We continue to expect net leverage to naturally decline throughout this year from our strong profitability and cash flow generation, excluding any potential eminence.

Tim Murphy: And there should be adoption as more clients go completely digital with not only their acceptance of payments but their funding of loans. So the deceleration is purely a function of lapping that large client in Q2, and I think we'll see pretty consistent trends moving forward. It's not anything underlying within the business, or within macro; it's more about lapping. Got it.

Speaker Change: As more clients go completely digital with not only their acceptance of payments, but their funding of loans. So the deceleration is purely a function of lapping that large client in Q2, and I think we'll see pretty consistent trends moving forward.

Speaker Change: It's not anything underlying within the business or within macro, it's more about plapping.

Tim Murphy: Got it. And as a follow-up... You had mentioned the large auto captive was going live this quarter. Just wanted to get a little more color in terms of the financial impact, if we should expect a full quarter impact in the third quarter and how that'll contribute to, sequential or cadence of growth as we move through the year and into next year.

Charles Nabhan: And as a follow-up, you had mentioned the auto, the large auto captive was going live this quarter.

Speaker Change: Got it. And as a follow-up...

Speaker Change: You had mentioned the auto, the large auto cap that was going live this quarter. I just wanted to get a little more color in terms of the financial impact. If we should expect, you know, a full quarter impact in the third quarter and how that will contribute to

Tim Murphy: If you want to get a little more color in terms of the financial impact, if we should expect a full quarter impact in the third quarter, and how that will contribute to the sequential or cadence of growth as we move through the year and until next year. Yeah, so we're excited about that. We're excited to get them live and processing. It'll take them time to ramp and bring over their volume from the existing processor, but that's happening as they go live. We've not modeled any material contribution for them in the second half of this year, so there's not anything material given the measured ramp we're expecting.

Speaker Change: the sequential or cadence of growth as we move through the year and it's an next year.

Tim Murphy: Yeah, so we're excited about that. We're excited to get them live and processing.

Tim Murphy: We expect roughly 44% adjusted EBITDA margins and anticipate adjusted EBITDA to go faster than revenue and growth profit during the year. We expect our free cash flow conversion to accelerate throughout the year with Q3 free cash flow conversion, being greater than our full year free cash flow conversion target of approximately 60%. As a reminder, free cash flow conversion is calculated by dividing free cash flow by adjusted EBITDA. As we demonstrated in the first half of 2024, we plan to reduce overall capital spending, giving us the confidence to accelerate our free cash flow conversion throughout 2024, leading to full year free cash flow growth of 60% plus per cent year of year, and sustain mid-to-high teens growth thereafter.

Speaker Change: Yeah, so we're excited about that. We're excited to get them live and processing. It'll take them time to ramp and bring over their volume from the existing processor, but that's happening as they go live.

Tim Murphy: It'll take them time to ramp up and bring over their volume from the existing processor, but that's happening as they go live. We've not modeled any material contribution for them in the second half of this year, so there's not anything material, given the measured ramp we're expecting, but I would think that it could be more material in 2025 and 2026, which is why we've spent a lot of dollars and time and effort to get them live to give us multi-years of growth. So nothing material for the rest of this year, but the full-year benefit of them being fully ramped up in 2025 and 2026 will be helpful for us. I got it.

Speaker Change: We've not modeled any material contribution for them in the second half of this year, so there's not anything.

Charles Nabhan: But I would think that it could be more material in 25 and 26, which is why we've spent a lot of dollars and time and effort to get them live to give us the multi years of growth. So nothing material for the rest of this year, but a full year benefit of them being fully ramped in 25 and 26 will be helpful for us. Got it. Appreciate the color, guys.

Speaker Change: Material, given the measure of rampal we're expecting, but I would think that it could be one material in 25 and 26, which is why.

Speaker Change: We've spent a lot of dollars in time and effort to get them live to give us the multi-years of growth So nothing material for the rest of this year but fully or benefit of them being fully rampant in 25 and 26 will be helpful for us

Charles Nabhan: Got it. I appreciate the call, guys. Thank you.

Ruth's Home: Thank you.

Operator: Thank you. Ladies and gentlemen, just a reminder, if you'd like to ask a question, you're welcome to press star and then 1 to place yourself in the question queue. Our next question comes from Rufus Hone of BMO Capital Markets.

Ruth's Home: Ladies and gentlemen, just a reminder: if you're a house question, you're welcome for a stall and then one to place yourself in the question, Q. Next question comes from Ruth's home of BMO Capital Mall. Hey guys, thanks. Just one question. I wanted to come back to the organic growth profit growth outlook. So excluding the political media and thinking about the back half of the year, a thank you guidance contemplates sort of a mid to high single digit organic growth trajectory, excluding the political media. In the first quarter, you did 10%; that to celebrate at this quarter to 5%.

Speaker Change: Thank you. Ladies and gentlemen, just a reminder, if you'd like to ask a question, you're welcome to press star and then 1 to place yourself in the question queue.

Mrs. Hull: An expression comes from Mrs. Hull of BML Capital Markets.

Tim Murphy: We continue to expect healthy growth related to presidential elections like 2024, but due to the timing of media spending, the contribution is more back-cap weighted than previously anticipated. Also, our free cash flow conversion is expected to accelerate throughout the year similar to the quarterly cadence that we saw in 2023. As you can see from our strong first half results in full year 2024 outlook, our investments toward sales, product, and technology are leading to an acceleration of free cash flow conversion. We remain focused on profitable growth by finding efficiency across the business where we can scale processes, but also maintaining prudent investments towards innovation and auto-emission.

Operator: Hey guys, thanks. Just one question.

Speaker Change: Hey guys, thanks. Just one question. I wanted to come back to the organic gross profit growth outlook. So excluding the political media and thinking about the back half of the year.

Rufus Hone: I wanted to come back to the organic gross profit growth outlook. So, excluding the political media and thinking about the back half of the year, I think your guidance contemplates sort of a mid to high single-digit organic growth trajectory, excluding the political media. In the first quarter, you did 10 percent. That decelerated this quarter to 5%, so I was wondering if you could put a finer point, I guess, on what pieces made up that 5-point deceleration. Was it just lapping? Thank you.

Speaker Change: I think your guidance contemplates sort of a mid to high single digit organic growth trajectory excluding the political media. In the first quarter you did 10%.

Tim Murphy: So I was wondering if you could put a final point, I guess, on what pieces made up that five point to celebration. Was it just laughing? Thank you. Some of it is laughing. The large client that I just mentioned in terms of the instant funding comment. Some of it's got to do with implementation delays, just like as a good example is the auto captive. There were some implementation delays in the B2V space as well with enterprise clients. So I think it's a combination of laughing and some of the implementation delays that were trying to be more proactive in getting clients live faster.

Speaker Change: That to celebrate at this quarter to five percent, so I was wondering if he could put a fine appoint, I guess, on what pieces made up that five-point deceleration was it just black thing? Thank you.

Tim Murphy: Some of it is lapping the large client that I just mentioned in terms of the instant funding comment. Some of it's got to do with implementation delays. Just as a good example is the auto-captive. However, there were some implementation delays in the B2B space as well as with enterprise clients. So I think it's a combination of lapping and some of the implementation delays that we're trying to be more proactive in getting clients online faster.

I'm also going to call it back over to the author to take your question. Thank you.

Speaker Change: Some of it is lapping the large client that I just mentioned in terms of the instant funding comment.

Operator: Ladies and gentlemen, we will now be conducting the question and answer session. If you'd like to ask the question, please press star and then one on your telephone keypad. A confirmation turn will indicate that a line is in the question queue. You may press star two to leave the question queue. For participants making use of speak equipment, it may be necessary to pick up your handset before pissing the stockies.

Speaker Change: got to do with implementation delays, just as a good example is the auto captive.

Speaker Change: There were some implementation delays in the B2B space as well with enterprise clients. So I think it's a combination of lapping and some of the implementation.

Speaker Change: delays that we're we're trying to be more proactive in getting clients live faster. Grady is a great example of that that we mentioned on the call. They're live very quickly and have become a large customer of ours. So I think it's just a function of those couple of points.

Tim Murphy: I'm sure Grady is a great example of that we mentioned on the call. They went live very quickly and have become a large customer of ours. So I think it's just a function of those couple of points.

Tim Murphy: Grady is a great example of that. We mentioned on the call they're live very quickly and have become a large customer of ours. So I think it's just a function of those couple of points. Okay. And do you think the five points is a fair shot for the rest of the year, or do you think it'll pick up into the second off. I think the math you're doing is generally consistent. I think we have a lot of opportunities to drive growth in the outer years. We talked about some of them on the call, like the auto captive, like the mortgage debit opportunity. That's not we have not really embedded much contribution from that at all the numbers either.

Ramsey El: Author's question comes from Ramsey, else a soul of Parkley's. Peace go ahead. Hi, thanks for taking my question this evening. On free cash flow conversion, I mean, it's obviously had a really great improvement and continues to do so. How do we think about the normalized level where that will land? What is this steady state fee cash flow conversion that you have in your mind over time?

Tim Murphy: Okay. And so do you think the five points is a fair shot for the rest of the year, or do you think it'll pick up in the second half? I mean, I think it's, I think the math they're doing is

Speaker Change: Okay, and so do you think the five points is a fair shot for the rest of the year or do you think it'll pick up into the second half?

Tim Murphy: I mean, I think the math they're doing is generally consistent, and I think we have a lot of opportunities to drive growth in the coming years. We talked about some of them on the call, you know, like the auto captive, like the mortgage debit opportunity, that's not – we have not really embedded much contribution from that at all in the numbers either, and then potential acceleration in the core AP business within the business payment segment.

Speaker Change: I mean, I think it's...

Speaker Change: I think the math you're doing is generally consistent and I think we have a lot of opportunities to drive growth in the outer years. We talked about some of them on the call.

Speaker Change: Like the auto captive, like the mortgage debit opportunity, we have not really embedded much contribution from that at all in the numbers either.

Andrew Schmidt: And then potential acceleration in the core AP business within business payments segments. So there are multi multi-year growth opportunities across both segments of our business, and like John said, we're investing in enterprise sales and consumer enterprise software, embedded payments, enterprise software, and business payments to allow for that. Great. Thanks very much.

Tim Murphy: Yeah, we do feel really good about that. It accelerated significantly in queue two. We thought it was a strong queue one and we expected to continue to accelerate throughout the year. As we said, we think there can be sustained mid-to-high teens growth in free cash flow, which our target for this year is 60%, so that would start to put us toward the mid-60s. We do that math on mid-to-high teens. You can see where that points us to 2026 and beyond.

Speaker Change: and then potential acceleration in the core AP business within the business payment segment.

Tim Murphy: So there are multi-year growth opportunities across both segments of our business, and like John said, we're investing in enterprise sales and consumer and enterprise software embedded payments and enterprise software and business payments to allow for that.

Speaker Change: There are multi-year growth opportunities across both segments of our business, and like John said, we're investing.

John Morris: and enterprise sales and consumer and enterprise software embedded payments enterprise software and business payments to allow for that.

Speaker Change: Great. Thanks very much.

Andrew Schmidt: Next question comes from Andrew Schmidt of City. Please go ahead. Hey guys, thanks for taking my questions. Sorry, I enjoy and later. I apologize if this was asked. Obviously, a lot of questions in the P2B payment space in terms of supplier acceptance. Maybe you could just drill down what you're seeing in terms of virtual card acceptance. Obviously, you guys have a pretty I think rigorous supplier enablement program, but maybe just trying to light on that see if there's any any difference in terms of supply acceptance rates, adverse payment selection, things like that. That'd be helpful.

Operator: Our next question comes from Andrew Schmidt of City. Please go ahead.

Tim Murphy: So we feel good about the 60% target for this year. Good about visibility into mid-to-high teens growth thereafter, and you can kind of understand where that takes us from a conversion perspective. And that is happening because we're showing adjusted EBITDA growth faster than top line and we're showing a reduction to CapEx. And as we talked about previously, we think CapEx won this year at a cost 13 to 14% of revenue. Longer term can get that down to 10 to 12% of revenue and those combined get us to that mid-to-high teens growth.

Speaker Change: Anx-question comes from Andrew Schmidt of 3. Please go ahead.

Operator: Hey, guys. Thanks for taking my questions. Sorry, I joined late.

Andrew Schmidt: Hey guys, thanks for taking my questions. Sorry, I enjoyed late and I apologize if this was asked. Obviously a lot of...

Andrew Schmidt: I apologize if this was asked. Obviously, there are a lot of questions in the B2B payment space in terms of supplier acceptance. Maybe you could just drill down on what you're seeing in terms of virtual card acceptance. Obviously, you guys have a pretty, I think, rigorous supplier enablement program, but maybe just shine a light on that to see if there's any difference in terms of supplier acceptance rates, adverse payment selection, things like that. That'd be helpful. Thank you very much.

Speaker Change: You know, questions in the B2B payment space in terms of supplier acceptance.

Andrew Schmidt: Maybe you could just drill down what you're seeing in terms of virtual cloud acceptance.

Speaker Change: Obviously, you guys have a pretty, I think, rigorous supplier enablement program. But maybe just shine a light on that, see if there's any difference in terms of supplier acceptance rates, adverse payment selection, things like that. That'd be helpful. Thank you very much.

I got it perfect and a follow-up from me.

John Morris: Could you give us just your view on the overall health of the consumer today? It's such an odd sort of cycle we're in, but specifically on the sort of personal financing side of the business, are you seeing any tightening or loosening at the top of the funnel? What is your view of what's happening out there? Yeah, we're seeing consistent trends into Q3. We continue to see healthy, but somewhat moderating consumer environment that's consistent with what we'd expect.

John Morris: Thank you very much. Yeah, I mean, that's a that's an issue where we're off. We don't think that's widespread across our supplier base. We're not seeing it in a material way. And I like you said we have a real-time vendor enablement process that's proprietary and unique to us, and you know, that's very helpful in the acceptance of digital payments and specifically virtual cards within the supplier base. And we also have what we call as our total pay solution, which, you know, when we pitch a client, we're pitching them outsourced all of their payables. So not just their virtual card payments, but we want to do their virtual card payments, their enhanced ACH payments, the regular ACH payments.

Tim Murphy: Yeah, I mean, that's an issue we're aware of. We don't think that it's widespread across our supplier base, so we're not seeing it in a material way.

Speaker Change: Yeah, I mean that's a that's an issue we're aware of.

Speaker Change: We don't think that's widespread across our supplier base. We're not seeing it in a material way.

Tim Murphy: You know, like you said, we have a real-time vendor enablement process that's proprietary and unique to us, and, you know, that's very helpful in the acceptance of digital payments, and specifically virtual cards, within the supplier base. And we also have what we call our total pay solution, which, you know, when we pitch a client, we're pitching them to outsource all of their payables, so not just their virtual card payments, but we want to process their virtual card payments, their enhanced ACH payments, their regular ACH payments, and if we have to, we'll default to checks.

Speaker Change: And like you said, we have a real-time vendor enablement process that's proprietary and unique to us.

Speaker Change: You know, that's very helpful in...

John Morris: There's no noticeable difference in any of the sub-verticals, as you mentioned, personal finance. I think it's a similar environment there where there's been some tightening over the last year plus and that's continuing. I wouldn't say anything noticeably different. Very consistent trends going into Q3 off of Q2 and we feel good about that.

Andrew Schmidt: The acceptance of digital payments, and specifically virtual cards, within the supplier base.

Andrew Schmidt: We also have what we call our total pay solution, which...

Andrew Schmidt: When we pitch a client, we're pitching them to outsource all of their payables, so not just their virtual card payments, but we want to do their...

Andrew Schmidt: Virtual card payments, they're enhanced ACH payments, they're regular ACH payments, and if we have to, we'll default to checks.

Tim Murphy: But I think because of our enablement process, we drive greater digital adoption, and that process, along with the enablement process, along with total pay, you know, put us in a really good position with our suppliers in terms of digital penetration. So it's an issue where we're off, and we're monitoring, but it's not widespread across our base. And like I said, we have a couple of tools we think are effective in that way. Got it. Thank you very much. And I think in the quarter, there was an ERP system that was maybe down for some time in the auto industry.

Tim Murphy: But I think because of our enablement process, we drive greater digital adoption. And that process, along with the enablement process, along with total pay, you know, puts us in a really good position with our suppliers in terms of digital penetration. So it's an issue we're aware of and we're monitoring, but it's not widespread across our base. And like I said, we have a couple of tools we think are effective in that.

Yeah, RIMZ would add, as well. RIMZ would add, as well, we continue to emphasize that predominantly on the consumer side, these are non-discretionary spent items just because of the nature of the natural obligations there. So we continue to see that kind of leads into some of the tense comments we're not going to see. Good point.

Andrew Schmidt: But I think because of our enablement process, we drive greater digital adoption.

Operator: Thank you.

Andrew Schmidt: and that process along with an evening process along with total pay, you know, put us in a really good position with our suppliers in terms of digital penetration. So, it's an issue where we're all in monitoring, but it's not widespread across our base and, like I said, we have a couple of tools we think are effective in that way.

Tim Murphy: Got it. Thank you very much. And I think in the quarter, there was an ERP system that was maybe down for some time in the auto industry. I know you guys are fairly diversified. I'm wondering if you saw any impacts from that in terms of origination volume or anything like that that you observed.

Speaker Change: God it. Thank you very much. And I think in the quarter there was a...

Sanjay Sakharani: Unexquestion comes from Sanjay Sakharani of KBW. Please come ahead.

Speaker Change: and the ERP system that was maybe down for some time in the auto industry. I know you guys are fairly diversified. I wonder if you saw any impacts from that in terms of origination volume or anything like that that you observed.

Tim Murphy: One of you guys, I knew you guys are fairly diversified. One of you saw any impacts from that in terms of origination volume or anything like that you observed. We are aware of that. Yeah, we obviously were very impactful to them, to the software partner, and to the dealerships themselves. Fortunately for us, we did not experience any material impacts. We were monitoring it very closely, talking to the software provider and talking to the auto dealerships. And like I said, we were on top of it and did not have any material impacts. There was downtime, which impacted the dealers, but we were able to keep the payments flowing and running.

Tim Murphy: Hi. This is actually Stephen Cwaftali and Patanjay, but thanks for taking my questions. The first one I had was just to follow up around, you know, what macro trends are you assuming within the guide? And then as we went through the quarter into July and August, any deviating trends that you're seeing? Thanks. Yeah, we don't see any major change to our macro assumptions from prior quarters. Like I said, there's been very consistent trends into Q3 coming off of Q2.

Tim Murphy: We're aware of that. Yeah, obviously it was very impactful to them, to the software partner, and to the dealers and the dealerships themselves. Fortunately for us, we did not experience any material impacts. We were monitoring it very closely, talking to the software provider, and talking to the auto dealerships. Like I said, we were on top of it and did not have any material impacts. There was downtime, which impacted the dealers, but we were able to keep the payments flowing and running and had a lot of uptime in terms of the payments running through the system.

Speaker Change: We are aware of that. Obviously, it was very impactful to them, to the software partner, and to the dealerships themselves.

Speaker Change: Fortunately, for us, we did not experience any material impacts. We were monitoring it very closely, talking to the software provider and talking to the

Tim Murphy: You know, we see it's generally a healthy consumer in the non-discretionary end markets within consumer. And so our macro assumptions really haven't changed from prior periods. And like I said, the trends into the quarter have been consistent as well.

Andrew Schmidt: Like I said, we were on top of it and did not have any material impacts. There was downtime, which impacted the dealers, but we were able to keep the payments flowing and running and had a lot of uptime in terms of the payments running through the system.

Andrew Schmidt: And had a lot of uptime in terms of the payments running to the system. Yeah, so we should also note there specifically around where we are the back office part of that. So not the front side of the AR side of auto. So had a little bit more flexibility from that perspective. And as well as we're just barely penetrated in that world. And that's just one of our self-work partners in that world. So, but no impact from our financial impact from us specifically around that. Perfect. Thank you for that. If I could just squeeze one more in existing client growth, obviously, you know, a function of that is continue penetration.

Tim Murphy: Yeah, so we should also note specifically around we're the back office part of that. So not the front side of the AR side of auto. So we have a little bit more flexibility from that perspective. And as well as, we're just barely penetrated in that world. And that's just one of our software partners in that world. So but no, no impact from our financial impact from us specifically around that.

Speaker Change: Yeah, so we should also note there specifically around where we are the back office part of that, so not the front side of the A-R side of auto.

John Morris: Got it. And then just perhaps if you could provide any updates around M&A pipeline, you know, given the leverage ratio. And just wanted to see if there's anything that's out there that's perhaps interesting. I can start maybe John can jump in. We feel good about the refi we just did and our balance sheet is in great shape. We upsized our revolver to 250. We have, you know, a lot of liquidity and capacity in general.

Andrew Schmidt: So had a little bit more flexibility from that perspective and as well as we're just barely penetrated in that world and that's just one of our self-work partners in that world so.

Andrew Schmidt: But no impact from our, financial impact from us specifically around that.

Andrew Schmidt: Perfect. Thank you for that. If I could just squeeze one more in,

Speaker Change: Perfect. Thank you for that. And if I could just squeeze one more in. Existing client growth, obviously, you know, a function of that is continued penetration in terms of just cash, ACH to card, etc. Where are we at kind of post-pandemic? Is there still, you know, a lot of room to push?

John Morris: In terms of just cash, ACH card, etc. Where are we at, kind of post pandemic?

John Morris: And that gives us, you know, confidence to pursue M&A. We have a healthy pipeline. We have an internal team that sources and executes deals. And we're looking at opportunities across both consumer and business payments. Likely would be a size range of a tuck-in type of opportunities. We're looking at multiple different size deals, but likely given that we'd want to maintain that leverage around four to four and a half times. And not go above that.

John Morris: Existing client growth, obviously, you know, a function of that is continued penetration in terms of just cash, ACH, to card, et cetera. Where are we in terms of a kind of post-pandemic? Is there still, you know, a lot of room to push card acceptance rates up in your verticals, or, you know, have we reached a higher penetration point where that growth factor will be less of a driver? Thank you.

John Morris: If there's still a lot of room to push card acceptance rates up in your verticals or, you know, if we reached, you know, a higher penetration point where that growth factor will be less of a less of a driver. Thank you. Yeah, start. You can add to that. So specifically on the table side, we think our, we think we have one of the best in class solutions for that drives the overall embedded enterprise software embedded solution both into the accounting systems or just the overall enterprise software platforms that drive the workflows. And our ability to seamlessly do all payment types and modalities that one stop shop.

Speaker Change: Card acceptance rates up in your verticals or, you know, if we reach, you know, a higher penetration point, where that goes back to, will be less of a, less of a driver. Thank you.

John Morris: Yeah, I'll start. Tim, if you want to add to that, So specifically, on the payable side, we think our... We think we have one of the best-in-class solutions that drives the overall embedded, Interprise Software Embedded Solution, both into the accounting systems or just the overall enterprise software platforms that drive the workflows. And our ability to seamlessly do all payment types and modalities at a one-stop shop. We think there's great value in that. It's fully embedded. When it's embedded like that as well, it allows you to move funds no matter which modality you use.

John Morris: It would likely be a tuck-in if we did it with all debt. And then we would, you know, look to bring that leverage ratio down with visibility to get it back down below three times and call it 12 to 18 months. So we're looking at a lot of opportunities and we have a healthy pipeline. Yeah, I've just had a little good little color there. Obviously we've been patient over the last couple of years looking for the right valuation, right opportunities.

Speaker Change: Yeah, I'll start Tim, if you want to add to that. So specifically, on the payable side, we think we have one of the best-in-class solutions that drives the overall embedded system. Thank you.

Speaker Change: enterprise software embedded solution, both into the accounting systems or just the overall enterprise software platforms that drive the workflows. And our ability to seamlessly do

John Morris: And we actually think that as Tim indicated, we have a really healthy dialogues out there. We think that the private world, more and more attractive assets will be coming as well as some of the things we see today, but we will be disciplined. We think our balance is set sub really strong. For anything that's not an opportunity that we think is how we create it to our shareholders, then there's something we would definitely be looking at that would give us, you know, long-term value creation.

Tim Murphy: All payment types and modalities.

John Morris: We think there's great value that it's fully embedded, fully when it's embedded like that as well. It allows you to move the funds with no matter which modality. We think there's great value in driving those efficiencies. And we see that market having many years of growth opportunity there, which is when you heard me talk earlier about us team to invest in the enterprise software partnerships. We think there's lots of years of growth there. We think just our solution alone adds value to the overall efficiency and automation process, and that we're finding ways to continue to monetize that.

Tim Murphy: at One Stop Shop. We think there's great value that it's fully embedded like that as well. It allows you to move the funds, no matter which modality.

John Morris: We think there's great value in driving those efficiencies, and we see that market having many years of growth opportunities. Which is why you heard me talk earlier about us continuing to invest in the enterprise software partnerships. We think there's lots of growth there. We think our solution alone adds value to the overall efficiency and automation process and that we're finding ways to continue to monetize that. It's not just a virtual card monetization. And we still see a significant amount of. Overall, just people chat in that world, still, as you would expect, still very large and multiple years of organic opportunity. Perfect. Thank you very much, John.

Speaker Change: We think there's great value in driving those efficiencies and we see that market having many years of growth opportunity there, which is why you heard me talk earlier about us team to invest in the enterprise.

Speaker Change: Software Partnerships.

Speaker Change: We think there's lots of years of growth there. We think just our solution alone adds value to the overall efficiency and automation process, and that we're finding ways to continue to monetize that, and it's not just a virtual card monetization opportunity.

John Morris: And not just, you know, it's not just a virtual card monetization. and Opportunity. And we still see a significant amount of overall just a paper check in that world still, as you would expect, still be large and multiple years of organic opportunity there. Perfect. Thank you very much, John. I'll add to that, please, too. We still disclose good data on that in our investor presentation. That's posted to our IR site. There's a slide slide 14 that shows the overall US consumer payment market is called approaching 80% card penetration, and you can see some of our verticals are in the teens or even mortgages, a great example that's in the single digits in terms of card acceptance.

Speaker Change: And we still see a significant amount of, overall, just paper check in that world. Still, as you would expect, still very large and multiple years of organic opportunity there.

John Morris: But as you know, we don't get to choose when something comes to market or is for sale, but we'll keep getting to be disciplined there. Yeah, I'll add some of the attributes. In addition to the financial profile, which obviously we like large growing underserved verticals and healthy retention statistics and integrated payments. We look for businesses that would bring us additional software partnerships for distribution. On the AP side, we would look for a large supplier network to augment our existing supplier network and additional software relationships and sub verticals within AP. So, you know, those are the types of attributes we're looking for as we're sourcing deals and we do see some out there that have some of those so far.

Tim Murphy: I'll add to that, too. We still disclose good data on that in our investor presentation that's posted to our IR site. There's a slide, slide 14, that shows the overall U.S. consumer payment market is approaching 80% card penetration, and you can see some of our verticals are in the teens or even mortgage is a great example that's in the single digits in terms of card acceptance, and that's why we're so focused on the Black Knight Mortgage Debit Acceptance Initiative that is not contributing this year, but we expect to contribute for the next several years, and there's, you know, some of these penetration rates are, you know, in like the single digit to the teens relative to close to 80% for the overall market, so that speaks to the opportunity to continue to find existing customer growth.

Speaker Change: Perfect. Thank you very much, John .

Awesome. Great.

Speaker Change: I'll add to that too. We still disclose good data on that in our investor presentation that's posted to our IR site. There's a slide, slide 14, that shows the overall U.S. consumer payment market.

Speaker Change: Approaching 80% card penetration and...

Speaker Change: You can see some of our verticals are in the teens, or even mortgage is a great example that's...

John Morris: And that's why we're so focused on the Black Knight mortgage debit acceptance initiative that is not contributing this year, but we expect to contribute for the next several years. And there's, you know, some of these penetration rates are, you know, in like to say, the single digit to the teens relative to close to 80% for the overall market. So that speaks to the opportunity to continue to find existing customer growth. Absolutely. It's good to see the progress, not a relationship. Thank you, John. Thank you, Tim. Appreciate the comments.

Speaker Change: in the single digits in terms of card acceptance. And that's why we're so focused on the Black Knight.

Speaker Change: Mortgage Debit Acceptance Initiative that is not contributing this year, but we expect to contribute for the next several years.

Speaker Change: There's, you know, some of these penetration rates are, you know, in like the single digit to the teens relative to close to 80% for the overall market. So that speaks to the opportunity to continue to find existing customer growth.

Thanks for taking my questions.

Andrew Schmidt: Absolutely, it's good to see the progress in that relationship. Thank you, John. Thank you, Tim. Yeah, just one more comment overall is that we've all...

Peter Hickman: The next question comes from Peter Hickman of DA Davidson. Please come ahead. Hey, good afternoon. Thanks for taking the question. I have several companies reporting earnings, so I apologize if I missed it. But within business payments, did you talk about kind of what was the growth rate there, excluding media spend related to many political election? And then secondly, do you think you have the right distribution channel in place in terms of both signing up direct clients and going through ISVs to really get the revenue accelerated to kind of that mid to high teams range?

Speaker Change: Absolutely. It's good to see the progress on that relationship. Thank you, John . Thank you, Tim. I appreciate the comments.

John Morris: Yeah, just when we're coming overall, we've all talked about the digital transformation, which is absolutely real. And amazingly, most of this has started on the consumer side, which we've all experienced in the business back office. Is really catching up in a good way. Several ways is it has to drive its efficiencies, but that consumer who also works at many in many of these back offices now also expects things to be done more efficiently. So all the right ingredients are setting us up well for many years of option to hear. Thank you.

John Morris: Yeah, just one more comment overall. We've all talked about the digital transformation, which is absolutely real. And amazingly, most of this has started on the consumer side, which we've all experienced. And the business back office is really catching up, in a good way, on several ways it has to drive its efficiencies. But the consumer, who also works in many of these back offices, now also expects things to be done more efficiently. So all the right ingredients are setting us up well for many years of opportunity here.

Speaker Change: Just one more comment overall. We've all talked about the digital transformation which is absolutely real.

Speaker Change: and amazingly most of this has started on the consumer side which we've all experienced.

Speaker Change: And the business back office is really catching up.

Speaker Change: in a good way. Several ways it has to drive its efficiencies.

Speaker Change: but that consumer who also works at many in many of these back office is now also expects things to be done more efficiency. So all the right ingredients are setting us up well for many years of opportunity to hear.

Tim Murphy: Yeah, so we did, we did, we have segment, you know, breaking out segments and we talked about the reported growth and business payments of 11% in Q2 and 14% in the first half. We still think that's a business that can grow in the high teams. You know, they're the media contribution will be back half weighted. And so we think that there's probably more in the back half than there was initially anticipated just given the dynamics with the candidates and what's happened in the last few weeks, but we see a lot of positive momentum there that should drive that political media growth in the back half.

Speaker Change: Thank you.

Operator: Ladies and gentlemen, with no further questions in the question queue, we have reached the end of the question-and-answer session.

Operator: Ladies and gentlemen, with no further questions in the question queue, we have reached the end of the question and answer session. I will now hand over to Mr. John Morris for closing remarks.

Speaker Change: Ladies and gentlemen, with no further questions in the question queue, we have reached the end of the question and answer session.

John Morris: I will now hand over to Mr. John Morris for closing remarks. Thank you, everyone. I really appreciate your time today. Our first half of the year demonstrates our solid execution towards our 2024 outlook and accelerating free cash level, as we've indicated. We will continue to make progress on our strategic initiatives and driving multiple years of growth opportunities across repay while maintaining our focus on profitable growth. Thank you again for joining us today. Thank you.

Speaker Change: I will now hand over to Mr. John Morris for closing remarks.

John Morris: Thank you, everyone. I really appreciate your time today.

John Morris: Thank you everyone. I really appreciate your time today.

John Morris: Our first half of the year demonstrates our solid execution towards our 2024 outlook and Accelerink Free Cash Flow, as we've indicated. We will continue to make progress on our strategic initiatives and drive multiple years of growth opportunities across Repay while maintaining our focus on profitable growth. Thank you again for joining us today.

John Morris: Our first half of the year demonstrates our solid execution towards our 2024 outlook.

Speaker Change: and Accelerantary Casualo as we've indicated.

Tim Murphy: So we have, like I said, really healthy pipelines building a lot of distribution coming through our software relationships and we think those are healthy signs. We want to continue to invest in our integrated partners and the net new, as you heard us say before, we think there's many years of growth there with existing partnerships, but also the net new ones that we've spoken to in the past, examples like a black blog where we continue to, we think we have multiple years of growth as we help them monetize payments and drive out, drive the efficiencies especially around payables and just how commerce moves, so we think there's lots of opportunity, we want to continue to invest there organically, we think it's a really good return on Chiodo, but how do you do that?

Operator: Thank you. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your line.

Operator: Ladies and gentlemen, that concludes today's event. Thank you for attending, and even our disconnect your lines. ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶

Speaker Change: you know

Speaker Change: Thank you. Ladies and gentlemen, that concludes today's event. Thank you for attending. Anyone else can connect your lines.

Speaker Change: [inaudible]

Operator: [music]

Peter, does that conclude your questions?

Bala Saini: Our next question comes from Chiod Fafi of Canacode Junivity, please come ahead.

John Morris: Good evening, this is Bala Saini on for Jota, thanks for taking our questions. First of all, we talked about the flexibility on the balance sheet, is there a desire to accelerate the investments in the organic business given the multiple growth opportunities you have in front of you, if so where would you like to increase the investments? I'll start, Tim, you can add in as well, as I mentioned on our call, in our 2024 goals are continue to drive our good and market efficiency, which obviously we think these three things drive organic growth, our client implementations which will continue to drive efficiencies there and then overall focus on product, those things we have been doing and we have been investing, and we've mentioned as well enterprise sales, starting in our enterprise sales, additional investments there which we are currently doing and will do more there.

Speaker Change: Thank you very much.

John Morris: And then it's just mentioned in a few comments before driving our overall ISV relationships, product enhancements into those and new features, functionalities on behalf of existing clients and net new. And then overall enterprise, software, helping monetize overall payment flows and the efficiencies through that, we think that's a multi-year growth opportunity for us and we're investing in all of those but we'd like to continue to accelerate investment into those.

Tim Murphy: Thank you, and just to follow up, can you give us a sense of how much incremental revenue you're assuming from the presidential election later this year? Sure, so we've said consistent with what we've said before, which we expect about 20% growth off of the 2022 cycle. 2022 cycle was, you know, called about $6 million, so 20% on top of that. And, you know, we're now expecting about, called 85% of that amount to come in the back half of the year.

Speaker Change: and John Morris, John Morris, John Morris, and John Morris

Tim Murphy: And so that's very consistent with what we've been saying, we're not seeing a difference in the total amount, just the timing, just shifted a little bit. Like I said, given the dynamics with the candidates, but in the past couple of weeks a lot has changed and I think the change has been like largely in our favor.

Speaker Change: [inaudible]

Speaker Change: www.thevenusproject.com

Gordon, thank you.

Charles Nabhan: An excretion comes from a Charles Nabhan of Stevens. Please come ahead. Good afternoon, thank you for taking my question. Most of my questions have been asked, but I wanted to ask about instant funding. I know 21% growth is still very strong, but it's a bit of a deceleration from last quarter, last couple quarters. I know you said not a lot has changed from a consumer macro standpoint, but I wanted to ask, you know, is that just the matter of lapping challenge and comps?

Charles Nabhan: Or how should we think about that deceleration in growth within instant funding, as well as, you know, the go-forward growth rate within that business? Yeah, so it's a function of lapping. We signed and ramped a very large personal lending client in the early part of 2023, and they were fully ramped in Q2 of last year. And they adopted our instant funding product almost right away. And so they contributed a lot to instant funding last year, and we're now lapping that Q2 is the first full quarter of lapping.

Charles Nabhan: So I would expect this to be a similar level of growth. We will move beyond the lapping of that large enterprise win, and then we're signing new clients for this product. Do you think there's demand for it? And there should be adoption as more clients go completely digital with not only their acceptance of payments but their funding of loans. So the deceleration is purely a function of lapping that large client in Q2, and I think we'll see pretty consistent trends moving forward. It's not anything underlying within the business, or within macro, it's more about lapping. Got it.

Tim Murphy: And as a follow-up, you had mentioned the auto, the large auto captive was going live this quarter. If you want to get a little more color in terms of the financial impact, if we should expect a full quarter impact in the third quarter, and how that will contribute to the sequential or cadence of growth as we move through the year and until next year. Yeah, so we're excited about that. We're excited to get them live and processing.

Tim Murphy: It'll take them time to ramp and bring over their volume from the existing processor, but that's happening as they go live. We've not modeled any material contribution for them in the second half of this year, so there's not anything material given the measured ramp we're expecting. But I would think that it could be more material in 25 and 26, which is why we've spent a lot of dollars and time and effort to get them live to give us the multi years of growth. So nothing material for the rest of this year, but a full year benefit of them being fully ramped in 25 and 26 will be helpful for us. Got it. Appreciate the color, guys.

Thank you.

Andrew Schmidt: Ladies and gentlemen, just a reminder, if you're a house question, you're welcome for a stall and then one to place yourself in the question, Q. Next question comes from Ruth's home of BMO Capital Mall. Hey guys, thanks. Just one question. I wanted to come back to the organic growth profit growth outlook. So excluding the political media and thinking about the back half of the year, a thank you guidance contemplates sort of a mid to high single digit organic growth trajectory, excluding the political media.

Andrew Schmidt: In the first quarter you did 10% that to celebrate at this quarter to 5%. So I was wondering if you could put a final point I guess on what pieces made up that five point to celebration was it just laughing. Thank you. Some of it is laughing. The large client that I just mentioned in terms of the instant funding comment. Some of it's got to do with implementation delays just like as a good example is the auto captive.

Andrew Schmidt: There were some implementation delays in the B2V space as well with enterprise clients. So I think it's a combination of laughing and some of the implementation delays that were trying to be more proactive in getting clients live faster. Grady is a great example of that. We mentioned on the call they're live very quickly and have become a large customer of ours. So I think it's just a function of those couple of points.

Andrew Schmidt: Okay. And do you think the five points is a fair shot for the rest of the year or do you think it'll pick up into the second off. I think the math you're doing is generally consistent. I think we have a lot of opportunities to drive growth in the outer years. We talked about some of them on the call like the auto captive like the mortgage debit opportunity that's not we have not really embedded much contribution from that at all the numbers either.

Andrew Schmidt: And then potential acceleration in the core AP business within business payments segments. So there are multi multi year growth opportunities across both segments of our business and like John said we're investing in enterprise sales and consumer enterprise software embedded payments enterprise software and business payments to allow for that. Great. Thanks very much.

Tim Murphy: Next question comes from Andrew Schmidt of city. Please go ahead. Hey guys, thanks for taking my questions. Sorry, I enjoy and later. I apologize if this was asked. Obviously a lot of questions in the P2B payment space in terms of supplier acceptance. Maybe you could just drill down what you're seeing in terms of virtual card acceptance. Obviously you guys have a pretty I think rigorous supplier enablement program, but maybe just trying to light on that see if there's any any difference in terms of supply acceptance rates, adverse payment selection, things like that.

Tim Murphy: That'd be helpful. Thank you very much. Yeah, I mean, that's a that's an issue where we're off. We don't think that's widespread across our supplier base. We're not seeing it in a in a material way. And I like you said we have a real time vendor enablement process that's proprietary and unique to us and you know, that's very helpful in the acceptance of digital payments and specifically virtual cards within the supplier base.

Tim Murphy: And we also have what we call as our total pay solution, which, you know, when we when we pitch a client, we're pitching them outsourced all of their payables. So not just their virtual card payments, but we want to do their virtual card payments, their enhanced ACH payments, the regular ACH payments. But I think because of our enablement process, we drive greater digital adoption, and that process along with the enablement process along with total pay, you know, put us in a really good position with our suppliers in terms of digital penetration.

Tim Murphy: So it's an issue where we're off and we're monitoring, but it's not widespread across our base. And like I said, we have a couple of tools we think are effective in that way. Got it. Thank you very much. And I think in the quarter, there was a ERP system that was maybe down for some time in the auto industry. One of you guys, I knew you guys are fairly diversified. One of you saw any impacts from that in terms of origination volume or anything like that you observed.

Tim Murphy: We are aware of that. Yeah, we obviously was very impactful to them to the software partner and to the dealerships themselves. Fortunately for us, we did not experience any material impacts. We were monitoring it very closely, talking to the software provider and talking to the auto dealerships. And like I said, we were on top of it and did not have any material impacts. There was downtime, which impact the dealers, but we were able to keep the payments flowing and running.

Tim Murphy: And had a lot of uptime in terms of the payments running to the system. Yeah, so we should also note there specifically around where we are the back office part of that. So not the front side of the AR side of auto. So had a little bit more flexibility from that perspective. And as well as we're just barely penetrated in that world. And that's just one of our self work partners in that world.

Tim Murphy: So, but no impact from our financial impact from us specifically around that. Perfect. Thank you for that. If I could just squeeze one more in existing client growth, obviously, you know, a function of that is continue penetration. In terms of just cash, ACH card, etc. Where are we at kind of post pandemic? If there's still a lot of room to push card acceptance rates up in your verticals or, you know, if we reached, you know, a higher penetration point where that growth factor will be less of a less of a driver.

Tim Murphy: Thank you. Yeah, start. You can add to that. So specifically on the table side, we think our, we think we have one of the best in class solutions for that drives the overall embedded enterprise software embedded solution both into the accounting systems or just the overall enterprise software platforms that drive the workflows. And our ability to seamlessly do all payment types and modalities that one stop shop. We think there's great value that it's fully embedded fully when it's embedded like that as well.

Tim Murphy: It allows you to move the funds with no matter which modality. We think there's great value and driving those efficiencies. And we see that market having many years of growth opportunity there, which is when you heard me talk earlier about us team to invest in the enterprise software partnerships. We think there's lots of years of growth there. We think just our solution alone adds value to the overall efficiency and automation process and that we're finding ways to continue to monetize that.

Tim Murphy: And not just, you know, it's not just a virtual card monetization, and Opportunity. And we still see significant amount of overall just a paper check in that world still, as you would expect, still be large and multiple years of organic opportunity there. Perfect. Thank you very much, John. I'll add to that, please, too. We still disclose good data on that in our investor presentation. That's posted to our IR site. There's a slide slide 14 that shows the overall US consumer payment market is called approaching 80% card penetration, and you can see some of our verticals are in the teens or even mortgages, a great example that's in the single digits in terms of card acceptance.

Tim Murphy: And that's why we're so focused on the Black Knight mortgage debit acceptance initiative that is not contributing this year, but we expect to contribute for the next several years. And there's, you know, some of these penetration rates are, you know, in like to say, the single digit to the teens relative to close to 80% for the overall market. So that speaks to the opportunity to continue to find existing customer growth. Absolutely.

Tim Murphy: It's good to see the progress, not a relationship. Thank you, John. Thank you, Tim. Appreciate the comments. Yeah, just when we're coming overall, we've all talked about the digital transformation, which is absolutely real. And amazingly, most of this has started on the consumer side, which we've all experienced in the business back office is really catching up in a good way. Several ways is it has to drive its efficiencies, but that consumer who also works at many in many of these back offices now also expects things to be done more efficiency. So all the right ingredients are setting us up well for many years of option to hear. Thank you.

Operator: Ladies and gentlemen, with no further questions in the question queue, we have reached the end of the question and answer session.

John Morris: I will now hand over to Mr. John Morris for closing remarks. Thank you, everyone. I really appreciate your time today. Our first half of the year demonstrates our solid execution towards our 2024 outlook and accelerating free cash level as we've indicated. We will continue to make progress on our strategic initiatives and driving multiple years of growth opportunities across repay while maintaining our focus on profitable growth.

Operator: Thank you again for joining us today. Thank you.

Operator: Ladies and gentlemen, that concludes today's event. Thank you for attending and even our disconnect your lines. Robert Napoli, James Faucette, James Faucette, James Faucette, James Faucette, Robert Napoli, James Faucette, James Faucette, James Faucette, Robert Napoli, James Faucette, James Faucette, James Faucette, Robert Napoli, James Faucette, James Faucette, Robert Napoli, James Faucette, James Faucette, James Faucette,

Q2 2024 Repay Holdings Corp Earnings Call

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