Q1 2025 Repay Holdings Corp Earnings Call
Operator: Good afternoon. I would like to welcome everyone to Repay's first quarter 2025 earnings conference call.
Good afternoon, I would like to welcome everyone to repay first quarter 'twenty 25 earnings Conference call. This call is being recorded today May 12, 2025, I'd like to turn the session over to Stewart Grisanti head of Investor Relations at repay.
Operator: This call is being recorded today, May 12, 2025.
Stewart Grisante: I'd like to turn the session over to Stewart Grisante, Head of Investor Relations at Stewart, you may be. Thank you.
Speaker Change: Stuart you may begin.
Stewart Grisanti: Thank you good afternoon, and welcome to repay its first quarter 2025 earnings conference call with US today are John Morris Co founder and Chief Executive Officer, Ken Murphy, Chief Financial Officer, Tom Sullivan, Chief Accounting Officer, and interim CFO, and David <unk>, Vice President corporate development and strategic.
John Morris: Good afternoon, and welcome to Repay's first quarter 2025 earnings conference call.
John Morris: With us today are John Morris, co-founder and chief executive officer, Tim Murphy, chief financial officer, Thomas Sullivan, chief accounting officer and interim CFO, and Damian Warner, vice president of corporate development and strategic partner.
Speaker Change: Gartner.
John Morris: During this call, we will be making forward-looking statements about our beliefs and estimates regarding future events and 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. Actual results may differ materially from any forward-looking statements that we make today.
Speaker Change: During this call we will be making forward looking statements about our beliefs estimates regarding future results. Those forward looking statements are subject to risks and uncertainties, including those set forth in the SEC filings related to today's results and our most recent Form 10-K actual results may differ materially from any forward looking.
Speaker Change: including those set forth in the FCC violence related to today's results in our most recent form, 10K. Actual results may differ materially from any forward-looking statements that we make today. Forward-looking statements speak only as of today, and we do not assume any obligation or intent to update them except it's required by law. In an effort to provide additional information to investors, today's discussion will also reference certain non-via-prinential measures.
Speaker Change: Statements that we make today.
John Morris: 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.
John Morris: In an effort to provide additional information to investors, today's discussion will also reference certain non-GAAP financial Reconciliations and other explanations of those non-GAAP financial measures can be found in today's press release and in the earnings supplement, each of which are available on the company's IR site.
John Morris: With that, I will now turn the call over to John. Thanks, Stewart, and good afternoon, everyone. Thank you for joining us today. On today's call, we'll address several topics, including an overview of Repay's core performance and highlights for Q1 2025. The conclusion of our strategic review process. An update to our capital allocation strategy. An update on our 2025 financial outlook. and a farewell to Tim Murphy, Repay CFO.
John Morris: First, let's turn to Q1. Throughout the quarter, Repay remained focused on executing on our core growth, which continues to reinforce the ongoing secular tailwinds and resiliency of our business. Our reported growth was impacted from the previously communicated client losses during 2024. Repay showed steady gross profit growth when excluding these clients and maintained strong adjusted dividend margins of 43% during Q1. reported gross profit and adjusted EBITDA declined approximately 5% and 7% year-over-year respectively. Reported fee cash flow conversion was also impacted from the client losses and one time networking capital When removing these impacts, Q1 2025 free cash flow conversion would have been similar to Q1 2024 free cash flow conversion rate of 38%.
Speaker Change: Throughout the quarter repay remained focused on executing on our core growth, which continues to reinforce the ongoing secular tailwind and resiliency of our business model.
Speaker Change: Our reported growth was impacted from the previously communicated client losses during 2024.
Speaker Change: Prepaid showed steady gross profit growth when excluding these clients and maintained strong adjusted EBITDA margins up 43% during Q1.
Speaker Change: Reported gross profit and adjusted EBITDA declined approximately 5% and 7% year over year, respectively.
Speaker Change: Reported free cash flow conversion was also impact upon the client losses, and one time net working capital impacts.
Speaker Change: We're moving these impacts Q1 2025 free cash flow conversion would have been similar to Q1 2020 for free cash flow conversion rate of 38%.
John Morris: While we do not believe these reported Q1 growth rates represent the underlying business... The core growth strategy remains intact and underscores our ongoing commitment to executing towards profitable growth, optimizing payment flows, and enhancing operational efficiency. all while driving long-term value to our shareholders. We are starting to see positive impacts from our investments in our enterprise sales and customer support. We continue to be encouraged by the healthy sales pipeline with enterprise clients across segments, while also working on implementation timing. We do expect the positive trends to be reflected in our reported growth in the second half of 2025.
Speaker Change: While we do not believe these reported Q1 growth rates represent the underlying business trends.
Speaker Change: Our growth strategy remains intact and underscores our ongoing commitment to executing towards profitable growth optimizing payment flows and enhancing operational efficiency, all while driving long term value to our shareholders.
Speaker Change: We are starting to see positive impacts from our investments in our enterprise sales and customer support teams. We continue to be encouraged by the healthy sales pipeline with enterprise clients across segments. While also working on implementation timelines.
Speaker Change: We do expect deposit trends to be reflected in our reported growth in the second half of 2025.
John Morris: Beginning with this consumer payment segment, our core growth algorithm benefited from contributions from existing clients and new client wins over some recent quarters. During Q1, we continued to see the signs of core consumer bookings growth year over year, giving us confidence in executing on our go-to-market, client implementations, and product initiatives, as well as recent client wins accelerating growth later in the year. Economic unpredictability has increased since March due to several still changing variables. While our value proposition and business model of providing a one-stop technology platform and digital experience across our diversified client base and verticals remains unchanged, these factors could lead to potential near-term impacts on consumer spending amid this ongoing uncertainty.
Speaker Change: Beginning with the consumer payments segment, our core growth algorithm benefited from contributions from existing clients and new client wins over recent quarters.
Speaker Change: During Q1, we continued to see the signs of core consumer bookings growth year over year, giving us confidence in executing on our go to market client implementations.
Speaker Change: Product initiatives as well as recent client wins accelerating growth later in the year.
Speaker Change: Economic unpredictability has increased since March due to several still changing variables.
Speaker Change: While our value proposition and business model of providing a one stop technology platform and digital experience across our diversified client base and verticals remain unchanged. These factors could lead to potential near term impacts from consumer spending amid amid this ongoing uncertainty.
John Morris: Year to date, we have seen resiliency with non-discussionary consumer spending ahead of possible tariff-driven inflation. However, during these uncertain times, our clients increasingly seek robust payment capabilities. Repay serves as their comprehensive platform to streamline payment processes while providing value-added services that strengthen their market position. Within consumer payments, we signed two new software partnerships during the quarter, further enhancing our existing relationships and bringing our total software partners to 182. Our go-to-market and consumer support teams utilize these integrations to develop a robust sales pipeline and elevate the overall client experience. We onboarded several new clients to our platform in Q1, including 14 new credit unions, increasing our total credit union client base to 343 out of approximately 5,000 across the US.
Speaker Change: Year to date, we have seen resilient. So you with non discretionary consumer spending ahead of possible tariffs driven inflation wherever during these uncertain times, our clients increasingly seek robust payment capabilities and repay serves as a comprehensive platform to streamline payment processes, while providing value added services that strengthen their market position.
Speaker Change: Within consumer payments, we signed two new software partnerships during the quarter further enhancing our existing relationships and bringing our total software partners to 182.
Speaker Change: Our go to market and consumer support teams utilize these integrations to develop a robust sales pipeline and elevate the overall client experience.
Speaker Change: We on boarded several new clients to our platform in Q1, including 14, new credit unions, increasing our total credit Union client base to 343 out of approximately 5000 across the U S.
John Morris: Our payment technology, which is seamlessly integrated into multiple core financial institution and credit unit software systems, continues to generate a strong sales pipeline targeting thousands of regional financial institutions nationwide. We're also working on ways to enhance existing integrations and partnerships with credit union and financial institutions, leading to optimized loan operations by simplifying accounting and consumer payment processes, securing new payment flows, and fostering deeper client relationships. In addition, Repay Clearing and Settlement Sales and Implementation Pipeline is expanding from the tech investments and product enhances we made on our back-end processing. During Q1, we signed a leading POS software platform that serves thousands of independent retailers across the US and Canada.
Speaker Change: Our payment technology, which is seamlessly integrated into multiple core financial institution credit Union software systems continues to generate a strong sales pipeline targeting thousands of regional financial institutions nationwide.
Speaker Change: We're also working on ways to enhance existing integrations and partnerships with credit Union their financial institutions, leading to optimized loan operations by simplifying accounting in consumer payments processes, securing new payment flows and fostering deeper client relationships.
Speaker Change: In addition, we paid clearing and settlement sales and implementation pipeline is expanding from the tech investments and product enhancements, we made on our backend processing platform.
Speaker Change: During Q1, we signed a leading software platform that serves thousands of independent retailers across the U S and Canada.
John Morris: We're excited to provide this large enterprise client with our best-in-class clearing and settlement plan. allowing their retailers to seamlessly manage their operations in one complete retail software ecosystem. In value-added services, our instant funding product achieved healthy growth in Q1 with transaction volumes rising approximately 19% year over year. Clients in the personal lending vertical rely on this product to distinguish themselves by offering rapid and convenient secure funding options for their customers. Over the medium term, we view incident funding as a potential revenue enhancer as we assess opportunities to expand its capabilities in additional verticals, which we believe could further bolster our growth profile.
Speaker Change: We're excited to provide this large enterprise client with our best in class clearing and settlement platform, allowing their retailers to seamlessly manage their operations and one complete retail software ecosystem.
Speaker Change: And value added services, our instant funding product achieved healthy growth in Q1 with transaction volume driving approximately 19% year over year.
Speaker Change: In the personal lending vertical rely on this product to distinguish themselves by offered rapid convenient secure funding options.
Speaker Change: Our customers.
Speaker Change: Over the medium term, we view instant funding as a potential revenue enhancer as we assess opportunities to expand its capabilities in additional verticals, which we believe could further bolster our growth profile.
Speaker Change: Yeah.
John Morris: Our consumer payments momentum saw similar trends in Q1 as it did in Q4, including the six points of full quarter impact of the previously mentioned clients rolling off our platform. Nevertheless, we remain focused on building our enterprise sales teams, enhancing client experiences, a priority that strengthens retention and creates opportunity for additional value-added services with existing clients. This disciplined approach continues to fortify the core consumer payments growth algorithm at Repay as we progress through 2025.
Speaker Change: Our casino payments women saw similar trends in Q1 as it did in Q4, including the six points of full quarter impact of the previously mentioned clients rolling off our platform.
Speaker Change: Nevertheless, we remain focused on building our enterprise sales teams enhancing client experiences a priority that strengthens retention it creates opportunity for additional value added services with existing clients.
Speaker Change: This disciplined approach continues to fortify the core consumer payments growth algorithm at repay as we progressed through 2025.
John Morris: Now turning to business payments. A reported gross profit increased approximately 7% yearly. When excluding the impact of the political media during Q1 2024, gross profit would have increased by approximately 12% year over year. This also includes approximately 12 points of client loss headwinds during the quarter. The solid growth acceleration in Q1 was driven by strength in our core accounts payable business, the ramp of new enterprise clients signed in recent quarters, and payment monetization issues like expanding enhanced ACH and floating. Our sales teams are capitalizing on our 101 plus software partnerships and integrations by building enterprise relationships and thus expanding our client pipeline.
Speaker Change: Now turning to business payments segment.
Speaker Change: Our reported gross profit increased approximately 7% year over year.
When excluding the impact of the political media. During Q1 2024 gross profit would have increased by approximately 12% year over year.
Speaker Change: It also includes approximately 12 points of client loss headwinds during the quarter.
Speaker Change: A solid growth acceleration in Q1 was driven by strength in our core accounts payable business the ramp up new enterprise clients signed in recent quarters and pay that monetization is like expanding enhanced acha float income.
Speaker Change: Our sales teams are capitalizing on our 101, plus software partnerships and integrations by building enterprise relationships and thus expanding our client pipeline.
John Morris: By aligning these partnerships with our go-to-market strategy, we're improving normalized bookings growth while increasing our supplier network 40% year-over-year to approximately 390,000 suppliers. Looking ahead for business payments, we maintain strong confidence in our overall sales pipeline. Our go-to-market approach continues to expand our software partnerships and enterprise client base while additional monetization efforts within TotalPay position us for accelerated growth in the second half of 2025 and into 2026.
Speaker Change: By aligning these partnerships with our go to market strategy, we're improving normalized bookings growth, while increasing our supplier network, 40% year over year.
Speaker Change: Mm 390000 suppliers.
Speaker Change: Looking ahead for business payments, we maintained strong confidence in our overall sales pipeline.
Speaker Change: Our go to market approach continues to expand our software partnerships, an enterprise client base, while additional monetization efforts within total pay position us for accelerated growth in the second half of 2025 and enter 2026.
John Morris: Now moving on to the next set of topics related to the conclusion of the strategic review process. On our previous earnings call, the company and the board announced the commencement of a comprehensive strategic review to assess a full range of strategic alternatives aimed at capturing shareholder value. We have been committed to our core values of profitable growth and improving cash flow generation, while also being disciplined on M&A and capital allocation. The company has a strong balance sheet, solid cash flow generation, and ample liquidity, providing financial flexibility to pursue a range of strategic and capital allocation priorities.
Speaker Change: Now moving on to the next set of topics related to the conclusion of the strategic review process.
Speaker Change: On our previous earnings call the company and the board announced the commencement of a comprehensive strategic review to assess the full range of strategic alternatives.
Speaker Change: Capturing shareholder value.
Speaker Change: We have been committed to our core values of profitable growth and improving cash flow generation, while also being disciplined on M&A and capital allocation.
Speaker Change: The company has a strong balance sheet solid cash flow generation and ample liquidity, providing financial flexibility to pursue a range of strategic and capital allocation priorities.
John Morris: However, since making this announcement in March, the market and macro environment have drastically changed. And a lot of the prevailing macro uncertainty, the board has decided to conclude the strategic review process at this. We believe that additional investment in our organic growth will yield the best possible result for Repay and its shareholders. Generating returns above what would be possible in other alternative outcomes. As part of the conclusion of the review, we wanted to share some of the operational priorities that we have solidified resulting from an in-depth market and go-to-market assessment we conducted with a highly reputable strategic consulting firm.
Speaker Change: However, since making this announcement in March the market and macro environment have drastically changed.
Speaker Change: In light of the prevailing macro uncertainty the board has decided to conclude the strategic review process at this time.
Speaker Change: We believe that additional investment in our organic growth will yield the best possible result for repay and its shareholders.
Speaker Change: Returns above what would be possible and other alternative outcomes.
Speaker Change: As part of the conclusion of the review we wanted to share some of the operational parties that we have solidified resulting from an in depth market and go to market assessment, we conducted with a highly reputable strategic consulting firm.
Speaker Change: One.
John Morris: We will be enhancing our direct sales model, which practically means allocating more resources to our sales teams and targeting a list of specific logos in our core growth vertical. Two, we will be capitalizing on more monetization opportunities, including targeting nine-card payment volumes. And three, we'll be building more indirect partnership channels in both consumer and business payment segments. While the past few quarters have been challenging, we believe with additional investments towards organic growth, combined with prior initiatives, the second half of 2025 will begin to display growth acceleration, leading to strong momentum in our Q4 2025 gross profit exodus.
Speaker Change: We will be enhancing our direct sales model, which practically means allocating more resources to our sales teams and targeting a list of specific logos in our core growth verticals.
Speaker Change: We will be capitalizing on more monetization opportunities, including targeting nine card payment volumes.
Speaker Change: And three we will be building more indirect partnership channels in both consumer and business payment segments.
Speaker Change: While the past few quarters have been challenging we believe with additional investments towards organic growth combined with priority initiatives. The second half of 2025, we will began display growth acceleration leading to strong momentum in our Q4 2025 gross profit exit rate.
John Morris: Next, I'd like to address our 2025 financial outl... As I just discussed, we have confidence in our ability to invest organically in the business and produce results that generate value to our shareholders. We believe that the initiatives that resulted from our strategic review, combined with our ongoing growth efforts, will deliver sequential quarterly normalized gross profit growths, resulting in a fourth-quarter growth rate of high single-digit to low double-digit growth, as well as free cash flow conversion, exceeding 50% in the second quarter and accelerating above 60% by year-end when excluding one-time networking capital impact. We have conviction in our path back to profitable growth and our team's capability to do so.
Speaker Change: Next I'd like to address our 2025 financial outlook.
Speaker Change: As I just discussed we have confidence in our ability to invest organically in the business and produce results that generate value to our shareholders. We believe that the initiatives that resulted from our strategic review combined with our ongoing growth efforts will deliver sequential quarterly normalized gross profit growth, resulting in a fourth quarter growth rate of high single digit to low double digit growth.
Speaker Change: As well as free cash flow conversion exceeding 50% in the second quarter and accelerating about 60% by year end when excluding one time networking capital impacts we have conviction on our path back to profitable growth and our team's capability to do so.
John Morris: As we progress through 2025, Repay is strongly positioned to lever the secular shift to digital payments, utilizing our scalable platform and 283 plus software partnerships to drive profitable growth and free cash flow generation. Our commitment remains focused on creating value for our shareholders, both through operational excellence and Future Capital Allocation Initiatives. As we move forward, our capital allocation priorities include continued and incremental organic growth investment. to continue managing CapEx at the percent of revenue while maintaining prudent investments towards technology and products. Repurchase shares when we believe our share price is disconnected from our long-term intrinsic value.
Speaker Change: As we progressed through 2025 repay is strongly positioned to lever the secular shift to digital payments utilizing our scalable platform and 283, plus software partnerships to drive profitable growth and free cash flow generation.
Speaker Change: Our commitment remains focused on creating value for our shareholders both through operational excellence.
Speaker Change: And future capital allocation initiatives.
Speaker Change: As we move forward our capital allocation parties include continued and incremental organic growth investments to.
Speaker Change: To continue managing capex as a percent of revenue, while maintaining prudent investments towards technology and products.
Speaker Change: Repurchase shares when we believe our share price is disconnected from our long term intrinsic value.
John Morris: Today we announce that our Board of Directors increased the authorization of the Share Repurchase Program to $75 million. Maintain a strong balance sheet with ample liquidity and cash generation through 2025 to address the 2026 convertible notes. And additionally, we continue to be open to accretive strategic tuck-in M&A to further accelerate repay position and growth potential.
Speaker Change: We announced that our board of directors increased the authorization of share repurchase program to $75 million.
Speaker Change: Maintaining a strong balance sheet with ample liquidity and cash generation through 2025 to address the 2026 convertible notes.
Speaker Change: And Additionally, we keep and continue to be open to accretive strategic tuck in M&A to further accelerate repay transition and growth potential.
John Morris: And before turning the call over to Tim, I want to be the first to express Repay's heartfelt gratitude to Tim Murphy, our Chief Financial Officer. as he will be stepping down from his role in a few days. I was incredibly grateful to have Tim by my side for the past 11 years as he was Repay's first CFO and helped guide Repay through many important milestones and successes during his tenure.
Speaker Change: And before turning the call over to Tim I want to be the first to express repaid heartfelt gratitude, Tim Murphy, our Chief Financial Officer.
Speaker Change: He will be stepping down from his role in a few days.
Speaker Change: I was increased credibly grateful to have him by my side for the past 11 years. So he was repaid first CFO and help guide rebate. There are many important milestones and successes during his tenure.
John Morris: From all of us at Repay, we wish Tim all the best in his next job.
Speaker Change: From all of us at repay we wish them all the best in his next chapter.
Timothy Murphy: Since making the announcement, Tim has helped facilitate a smooth transition to Thomas Sullivan, who has been appointed as an interim chief financial officer as we undergo the process of finding a permanent replacement to lead our financial organization. With that, I'll turn it over to Tim to review our Q1 financials. Tim. Thank you, John, for the kind words. These past 11 years have been truly special.
Speaker Change: Since making the announcement, Tim nice to help facilitate a smooth transition to Thomas Sullivan, who had been appointed as the interim Chief Financial officer, as we undergo the process of finding a permanent replacement to lead our financial organization.
Speaker Change: With that I'll turn it over to Tim to review, our Q1 financials.
Speaker Change: Jim.
Speaker Change: Yeah.
Speaker Change: Thank you John for the kind words. These past 11 years I've been truly special for me.
Timothy Murphy: I am thankful for being part of Repay's journey as the company's first CFO, helping transform the business over the course of 11 acquisitions and also elevating the organization to being a public company. I look forward to watching Repay continue to grow and expand its vital role in the payment ecosystem. Now let's go over our financial results for Q1 2025. In the first quarter of 2025, revenue was 77.3 million, representing a decrease of 4% year-over-year. Reported gross profit declined by 5%. Consumer payment segment gross profit declined by 5% during Q1, while a business payment segment reported gross profit increased 7% year-over-year.
Speaker Change: Vancouver being part of the patient journey is the company's first CFO, helping transform the business over the course of the Lemon acquisition.
Speaker Change: And these realizations being a public company.
Speaker Change: Look forward to watching we continue to grow and expand its vital role in the payments ecosystem.
Speaker Change: Now, let's go over our financial results for Q1 2025.
Speaker Change: Okay.
Speaker Change: In the first quarter of 2020 revenue was $77 3 million, representing a decrease of 4% year over year.
Speaker Change: Reported gross profit declined by 5% year over year.
Speaker Change: Consumer payments segment gross profit declined by 5% during Q1.
Speaker Change: Our business favorite segment reported gross profit increased seven 7% year over year.
Timothy Murphy: When excluding the political media contributions in Q1 2024, business payments gross profit growth accelerated to approximately 12% during Q1 2025, demonstrating the ramp in our partnerships and sales. As John mentioned, Repay's reported gross profit growth was impacted by select client losses and the strategic technology migration of targeted business payment volumes to our total pay solution. When excluding these impacts, reported gross profit growth would have been low single digits in Q1. Our core growth remains resilient, and we are starting to benefit from ongoing go-to-market and customer support investments.
Speaker Change: When excluding the political media contributions in Q1 2020 for business payments gross profit growth accelerated to approximately 12% during Q1 2025 seven.
Speaker Change: Demonstrating the ramp in our partnerships and sales pipeline.
Speaker Change: As John mentioned, the page reported gross profit growth was impacted by some client losses.
Speaker Change: T J technology migration with targeted business payment volumes to our total based solution.
Speaker Change: Excluding these impacts reported gross profit growth would have been low single digits in Q1.
Our core growth remains resilient.
Speaker Change: And we are starting to benefit from ongoing go to market and customer support investments and from additional monetization opportunities across our segments.
Timothy Murphy: and from additional modernization opportunities across our. In addition, our Q1 results benefited from the annual tax refund seasonality. Q1 adjusted evidence was 33.2 million, representing approximately 43% adjusted evidence margin. This demonstrates our disciplined approach to managing operating expenses while still being able to invest towards our sales, implementation, and client service teams across the company. First quarter adjusted in income was $20.3 million or 22 cents per share. Reported Q1 free cash flow was negative $8 million. Reported Q1 free cash flow and free cash flow conversions were negatively impacted by approximately $16 million due to reversal in timing, related to network and capital by approximately $3 million to the previously mentioned client.
Speaker Change: Additionally, our Q1 results benefited from the annual tax refunds seasonality.
Speaker Change: Q1, adjusted EBITDA was $33 2 million.
Speaker Change: Resenting approximately 43% adjusted EBITDA margins.
Speaker Change: Demonstrates our disciplined approach to managing operating expenses.
Speaker Change: I'll still being able to invest towards our sales implementation and client service teams across the company.
Speaker Change: First quarter adjusted net income was $20 3 million or <unk> 22 cents per share.
Speaker Change: Reported Q1 free cash flow was negative $8 million reported Q1 free cash flow and free cash flow conversion were negatively impacted by approximately $16 million due to a reversal in timing.
Speaker Change: Working capital by approximately $3 million to the previously mentioned client losses.
Timothy Murphy: In excluding these impacts, Q1 pre-cash flow conversion would have been similar to the pre-cash flow conversion metric of approximately 38% in Q1 2020. As a reminder, our 2025 free cash flow conversion is expected to follow a similar quarterly cadence as 2024 and is expected to accelerate to above 60% by the end of 2025. As of March 31st, we had approximately $165 million of cash in the balance sheet with access to $250 million of undrawn revolver capacity for a total liquidity amount of $415 million. During Q1, we made an approximate $16 million payment related to the Tax Receivable Agreement, or TRA.
Speaker Change: Excluding <unk> and excluding these impacts Q1 free cash flow conversion would have been so much in free cash flow conversion metric of approximately 38% in Q1 2024.
Speaker Change: As a reminder, our 2025 free cash flow conversion is expected to follow a similar quarterly cadence of 'twenty 'twenty four is expected to accelerate to above 60% by the end of 2025.
As of March 31st one box 365 million of cash on the balance sheet with exit Petroleum's 50 million of Undrawn revolver capacity for a total liquidity amount of $415 million.
Speaker Change: During Q1, we made an approximately 16 million payment related to the tax.
Speaker Change: Receivable agreement or TRA.
Timothy Murphy: We are expecting to make annual TRA payments on a go-forward basis when we pay a sufficient tax of lending. Exiting the quarter, repay is not allowed, which is approximately 2.5 times. Total outstanding debt of $507.5 million is comprised of a $220 million convertible note due in February 2026 with a 0% coupon and a $287.5 million convertible note due in 2029 with a 2.875% coupon.
Speaker Change: We're expecting to make annual TRA payments on a go forward basis.
Speaker Change: <unk> taxable income.
Speaker Change: Yeah.
Speaker Change: Exiting the quarter repaid.
Speaker Change: Box from two five times.
Speaker Change: Total outstanding debt of $507 5 billion is comprised of 220 million convertible note due in February 2026 zero percent coupon.
Speaker Change: 7.5 convertible notes due in 2029 with a 2.8, 75% coupon.
Operator: Net leverage will naturally benefit as Repay continues to execute towards profitable growth and cash flow generation during 2025, while also applying a balanced approach to capital I'm now turning the call back over to the operator to take your questions.
Speaker Change: Net leverage will naturally benefit.
Speaker Change: They need to execute towards profitable growth and cash flow generation during 2025.
Speaker Change: We're also applying a balanced approach to capital allocation.
Speaker Change: Ill now turn the call back over to the operator to take your questions operator.
Operator: Operator. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Thank you.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Formation tone will indicate your line is in the question queue.
Speaker Change: You May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keeps my moment. Please while we poll for questions.
Speaker Change: Thank you.
Ramsey El-Assad: Our first question comes from the line of Ramsey El-Assad with Barclays. Please proceed.
Ramsey El: First question comes from the line of Ramsey El <unk> with Barclays. Please proceed.
John Coffey: Hi, this is John Coffey on for Ramsey. Thanks for taking my questions. I was wondering just to begin with, can you provide some additional color on what you're seeing in the consumer spending environment? I know you talked about this a little bit in some of your prepared remarks. In particular, I was wondering what's the how would you view the top of the funnel from a credit perspective?
Speaker Change: Hi, This is Jon Kaufman on for Ramsey. Thanks for taking my questions. I was wondering just to begin with can you provide some additional color on what youre seeing in the consumer spending environment. I know you talked about this a little bit in some of your prepared remarks in particular, just wondering what's the how would you view the top of the funnel from a credit perspective.
John Morris: Hi, John, this is John. Good afternoon. Yeah, as I mentioned earlier, from an overall market perspective, at least as it pertains to our clients, year to date, we've seen resiliency in the non-discretionary consumer spending. So from a market perspective, our perspective, we're not seeing any major impact. overall payment processing as it relates to kind of the macro associated with the consumer. Okay, great. Thank you.
Ramsey El: Hi, John This is John good afternoon, Yeah.
Speaker Change: As I mentioned earlier.
Ramsey El: And overall.
Ramsey El: Market perspective at least as it pertains to our clients.
Ramsey El: Year to date, we've seen resiliency in the non discretionary consumer spending.
Ramsey El: So from a market perspective, our perspective, we're not seeing any major impact.
Ramsey El: Overall payment processing as it relates to your kind of macro associated with the consumer.
Speaker Change: Okay, great. Thank you I just had one follow up given your increased buyback authorization of 25 million do you plan to continue leaning into this rather than M&A.
John Morris: I just have one follow up. Given your increased buyback authorization of $25 million, do you plan to continue leaning into this rather than M&A? Yes, if we as I also mentioned earlier as well, when we believe that our share price is disconnected from our overall long term intrinsic value, we will opportunistically repurchase shares. So And we see that and we believe that it's happening, we have our convictions around that. And I'll add to that, the capital allocation priorities we mentioned would be still focused on organic growth. And then we would look to execute on the buybacks, the reasons John just mentioned, and then provide ourselves with enough liquidity to address the $220 million convertible coming due in 2026.
Ramsey El: Yes, so we as I also mentioned earlier as well.
Ramsey El: But when we believe in our share prices and disconnected from our overall long term intrinsic value.
Ramsey El: We will opportunistically repurchase shares.
Ramsey El: So.
When we see that and we believe that is happening.
Ramsey El: We have our convictions around that and Oh.
Ramsey El: I'll add that the capital allocation priorities, we mentioned would be so focused on organic growth.
Ramsey El: And then we would look to execute on the buybacks. The reasons, Sean just mentioned and then provide ourselves with enough liquidity to address the.
Ramsey El: $220 million convertible coming due in 2026, and then I would say that.
John Morris: And then I would say that Tuck and M&A would be after those other priorities. Perfect. Thank you very much. Thank you.
Ramsey El: Tuck in M&A would be after those other priorities.
Ramsey El: Perfect. Thank you very much.
Speaker Change: Thank you. Our next question comes from the line of Sanjay Soccer Yep, That's K B W. Please proceed.
Sanjay Sakhrani: Our next question comes from the line of Sanjay Sakria with KBW. Please proceed. Thank you.
Sanjay Soccer: Thank you.
John Morris: Congratulations, Tim, and good luck. John, you mentioned the evolving macro view as a reason for concluding the strategic review process. Maybe you could just share with us, you know, how far you guys went down the process to actually see if you could extract more value. Yeah, Sanjay, so we looked at the overall, as this is a collective board decision, and we, in the strategic review, as you are aware, obviously, the markets have changed, and microenvironment has changed since we announced in March, but ultimately, as we looked at everything, we looked at, we believe that the additional investment in organic growth, which will yield the best result for repay, you know, at this time for shareholders, we think that generates an above above what we, we think it would be possible with these other alternative outcomes.
Sanjay Soccer: Congratulations Tim and good luck.
Speaker Change: John You mentioned the evolving macro view as a reason for concluding the strategic review process. Maybe you can just share with us how far you guys went down the process to actually see if you could extract more value.
Sanjay Soccer: Yeah, Sanjay so we looked at the overall.
Sanjay Soccer: This is a collective board decision and the strategic review.
Sanjay Soccer: As you are aware, obviously the markets have changed in the macro environment has changed since we announced in March.
Sanjay Soccer: But ultimately as we looked at everything we looked at we believe that the additional investment in organic growth.
Sanjay Soccer: Which will yield the best results for repay you know at this time for the shareholders. We think that generates an above average above what we are we think it will be possible when these other.
Sanjay Soccer: Alternative outcomes.
Timothy Murphy: And as you heard me mention as well, we did conclude our in-depth dive into our organic, additional organic investments with an outside reputable firm. And we're actually, we're in the process of adding those additional investments, which we think is a multi-year investment and also a multi-year opportunity to continue to accelerate growth. And I would add to that that the investments John's mentioning are not incremental to any of the forecasts we provided. They're included in the forecast we provided on free cash flows, so while we're executing on those, there's no incremental spend relative to what we've laid out in terms of the outlook.
Sanjay Soccer: And as you heard me mentioned as well we.
Sanjay Soccer: We did conclude our in depth dive into our organic additional organic investments without an outside reputable firm.
Sanjay Soccer: Actually we're in the process of adding those additional investments, which we think is a multi year investment are also a multiyear opportunity to continue to accelerate growth.
Sanjay Soccer: Yeah.
Sanjay Soccer: And I would add to that.
Yeah there is.
Sanjay Soccer: The investment as John was mentioning are not incremental to any of the forecast. We provided they are included in the forecast we provided on free cash flow. So while we're executing on those theres no incremental spend relative to what we've laid out for the outcome in terms of the outlook.
Timothy Murphy: Okay, got it. And then appreciate sort of the forward view for 2025 on gross profit. Can you help us think about like EBITDA growth trajectory over the course of 2025? And then just maybe as we think about 2024, maybe you could just give us, you know, Tim, like what the normalized gross profit dollars were, you know, excluding some of the political and media stuff. Thanks. Sure. So I would say, I would say, again, there's no incremental spend. So I would think the adjusted EBITDA growth would be similar, follow a similar path as the gross profit growth we described.
Sanjay Soccer: Okay got it.
Speaker Change: Appreciate some of the forward view for 2025 on gross profit.
Speaker Change: Just help us think about like EBITDA growth trajectory over the course of 2025 and then maybe as we think about 2024, maybe you could just give us.
Speaker Change: Tim what the normalized gross profit dollars were.
Speaker Change: Putting some of the political and media and stuff.
Speaker Change: Yeah.
Speaker Change: Sure. So I would say I would say.
Speaker Change: Again, theres no incremental spend so I would think the adjusted EBITDA growth would be similar and follow a similar path as the gross profit growth we described.
Timothy Murphy: because we're expecting similar margins and there's nothing incremental to what I've already described. And then just in terms of the 2024 political media contribution, I would say that to think about that as about four or five points of growth impact to the full year at 25. which is normalized out in the growth rates we've mentioned.
Speaker Change: Because we are expecting similar margins and there is nothing incremental to what I've already described.
Speaker Change: And then just in terms of the 2020 for political median contribution I would say that to think about that is about four or five points of growth impact to full year 'twenty five.
Speaker Change: Which is normalized out in the growth rates, we mentioned.
Joseph Vafi: Okay, wonderful, thank you. Thank you.
Speaker Change: Okay wonderful thank you.
Speaker Change: Thank you.
Joseph Vafi: Our next question comes to the line of Joseph Vafi with Canaccord Genuity. Please proceed. Hey guys, good afternoon and congratulations and best of luck from me as well, Tim.
Speaker Change: Our next question comes from the line of Joseph <unk> with Canaccord Genuity. Please proceed.
Speaker Change: Yeah.
Speaker Change: Hey, guys, good afternoon, and congratulations and best of luck.
Speaker Change: On for me as well, Tim just wanted to kind of drill down on the comments on and doing the strategic review a little bit more and some of the invest the additional investment.
Joseph Vafi: Just wanted to kind of drill down on the comments on ending the strategic review a little bit more and some of the additional investments. for growth, just kind of, you know, wondering, was there kind of some ah-ha moments there or was, you know, the consultants providing, you know, a certain kind of insight that perhaps you hadn't made those similar investments yourselves previously, just want to kind of drill down on that because, I mean, it sounds like you've got a lot of confidence in accelerating growth with some of these additional investments and just wondering why, yeah, again, why you might not have done it before now.
Speaker Change: For growth just kind of wondering was there kind of some aha moments there or was there a consultant providing you know a certain kind of insight there.
Speaker Change: Perhaps you hadn't made those similar investments yourselves previously just wanted to kind of drill down on that because I mean, it sounds like.
Speaker Change: You've got a lot of confidence in accelerating growth with some of these additional investments and I'm just.
Speaker Change: Just wondering why again why you might not have done it.
Speaker Change: For now thanks a lot.
John Morris: Thanks a lot. Yeah, Joe, great question. Obviously, this is something that I've been doing this for a while, and so I wanted a really outside third-party view to help me look at certain markets and potentials for there. What it did confirm to us is the absolute market potential is there with four additional investments, and we have the opportunity to make those, and those will deliver a really great shareholder value, and so that's this opportunity just sitting right in front of us to just commit more dollars to investing there.
Joe: Yes, Joe.
Speaker Change: Great question.
Speaker Change: Obviously this is something that I I've been doing this a while and so I wanted really outside third party view to help me look at certain markets.
Speaker Change: And potential for their what it did confirm to US is the absolute market potential was there with four additional investments and we should have had the opportunity to make those and those will deliver a really great shareholder value.
Speaker Change: So that's it's just opportunity just sitting right in front of us to just commit more dollars to investing there.
John Morris: And is there any other insight you can provide as to kind of what those markets are, or that's kind of, I guess, a competitive aspect, and maybe we should wait for more from you on that once it's in place? Is that what maybe we should be thinking about? Yeah, Josh, say in the immediate term, that's specifically related to our existing verticals and markets, specifically in the consumer side, and also there's opportunity in the B2B side. But then, you know, if you look a few years out, there's other opportunities for us. But specifically for the immediate term here, near term, it's on existing verticals.
Speaker Change: Got it and then is there any other insight you can provide as to kind of what those markets are or that kind of I guess the competitive.
Speaker Change: Aspect and maybe we should wait for for more from you on on that once it's in place.
Speaker Change: But I was hoping that we should be.
Speaker Change: Thinking about.
Speaker Change: Yeah, Josh say intermediate term, that's specifically related to our existing verticals and markets.
Speaker Change: Specifically on the consumer side.
Speaker Change: Alastair so theres opportunity on the <unk> side.
Speaker Change: But then you look a few years out and there's other opportunities for us, but specifically for the immediate term here near term.
Speaker Change: Existing vertical and it adds to that one of the one of the items. We're looking to confirm was just we've we've talked about going more enterprise sales and consumer just really confirming the largest logos across each of the sub verticals in finding ways to address those logos and being more efficient with our go to market efforts.
John Morris: And I'd add to that, one of the items we were looking to confirm was just, we've talked about going more enterprise sales and consumer, just really confirming the largest logos across each of the subverticals, and finding ways to address those logos, and being more efficient with our go-to-market efforts, and just generally having more success in terms of winning those logos, and then also implementing them faster. There's just a different implementation cycle with enterprise accounts. We've been doing that for a while now, but we wanted to hone that skill and that focus to not only win them, but get them live faster.
Speaker Change: Just generally having more success in terms of winning those logos and then also implementing them faster theres just a different implementation cycle with enterprise accounts, we have been doing that for a while now but we wanted to hone that skill and that focus to get not only win them or get them live faster.
Speaker Change: Sure great. Thanks for those comments best of luck.
Joseph Vafi: Great. Thanks for those comments. Best of luck, Tim. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of James Sun City with Morgan Stanley. Please proceed.
James Fonsetti: Our next question comes from the line of James Fonsetti with Morgan Stanley. Please proceed. on for James. Thank you for taking my question. Thanks for all the color on the quarter.
Speaker Change: Hi, This is chip I'll he can ask Scott on for James. Thank you for taking my question. Thanks for all the color on the quarter I just wanted to see if you could speak to how the recent macro environment has potentially impacted some of your exposures, but you've talked about on past calls around auto affordability personal lending trends.
John Morris: Speak to us about the recent macro environment has potentially impacted some of your exposures which you've talked about on past calls around auto affordability, personal lending trends, want to hear about both what you were seeing in 1Q and also trends through April and May. Yeah, so we like we said, the Our various end markets were resilient. Spending was resilient. These are largely non-discretionary payments. And so they held up nicely through Q1. And I'd say the trends are similar into Q2, which again gave us confidence to discuss free cash flow conversion acceleration in Q2 specifically. And so trends have held up nicely.
Speaker Change: I want to hear about both what you were seeing Q1and also trends through April and May.
Speaker Change: Yeah.
Speaker Change: Yes, so like we said.
Speaker Change: Yeah.
Speaker Change: Our various end markets for resilient spending was resilient these are largely non discretionary.
Speaker Change: Payments and so.
Speaker Change: Held up nicely through Q1, and I would say the trends are similar into Q2, which again gave us confidence to.
Speaker Change: Discuss free cash flow conversion acceleration in Q2, specifically.
Speaker Change: And so you know trends have held up nicely.
John Morris: Nothing, I don't think, materially different from what we talked about on prior calls, and, but it is certainly, you know, we're paying close attention to it, particularly in the auto space, as we have been, and trying to get out there and speak to our clients and understand what they're seeing to try to gain visibility. But, you know, nothing we've seen through Q1, nothing we've seen in the early part of Q2 yet, in terms of different dynamics. Okay, thank you. Thank you.
Speaker Change: Nothing I don't think materially different from what we've talked about on prior calls and but it is certainly true.
Speaker Change: We're paying close attention to it particularly in the auto space as we have been trying to get out there and speak to our clients understand what theyre seeing to try to gain visibility but.
Speaker Change: Nothing we've seen through Q1, nothing we've seen in the early part of Q2, yet in terms of different dynamics.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Alex Newman with Stephens. Please proceed.
Alex Newman: Our next question comes to the line of Alex Newman with Stevens. Please proceed. Hi, thanks for taking my question here.
Alex Newman: Hi, Thanks for taking my question here.
John Morris: Just going on top of that, could you discuss any underwriting trends that you're seeing within the consumer and market that you've observed recently and what kind of impact do you expect those trends to have on overall volume and penetration rates? Yeah, I would obviously reiterate Tim's comments. We're not seeing specific trends that would change specifically from first quarter to second quarter what we're seeing. We are monitoring, as Tim mentioned. But overall, you can also look at what we're saying for our outlook, though. We do see it. Obviously, we see our growth accelerating. That has a lot to do with new wins, implementations, lapping up some of those client losses.
Alex Newman: Just on top of that could you discuss any underwriting trends that you're seeing within the consumer end market.
Alex Newman: <unk> recently, and what kind of impact do you expect those trends to have on overall volume and penetration rates.
Alex Newman: Yes.
I would obviously reiterate tim's comments were.
Alex Newman: We're not seeing specific trends that would change specifically from first quarter to second quarter, what we're seeing.
Alex Newman: We are monitoring as Tim mentioned, but overall I mean, you can also.
Alex Newman: Look at what we're saying for our for our outlook, though we do see obviously you can see our growth accelerating that has a lot to do with new wins implementations.
Alex Newman: Lapping of some of those client losses, but as we round out the year and we pushed through the rest of this year, especially in the second half of the year.
John Morris: But as we round out the year and we push through the rest of this year, especially the second half of the year, we see very positive things. Great. Thank you.
Alex Newman: We see very positive things.
Alex Newman: Great. Thank you.
Alex Newman: Thank you.
Peter Heckmann: Our next question comes from the line of Peter Heckmann, D.A. Thank you. Good afternoon. I joined the call a little bit late and I'm just trying Yeah, so we mentioned the 600 basis points on consumer and then 12 points in business payments. And then what we said is, if you excluded the client losses, our growth would have been low single digit. And then in terms of the level of confidence looking at Acceleration of Normalized Gross Profit Growth. a low double-digit normalized gross profit growth of the fourth quarter. There's a lot of math there. is there a way to.
Speaker Change: Our next question comes from the line of Peter Heckmann with D. A Davidson. Please proceed.
Peter Heckmann: Hey, good afternoon, I joined the call little bit late.
Speaker Change: And I'm just trying to fill.
Speaker Change: Fill in some holes, but the client losses can you remind us is that the three primary client losses.
Speaker Change: Two in consumer and one in business is that how we should be thinking about it and if so.
Speaker Change: You said about a 600 basis point drag on consumer, but what would be the drag on overall revenue growth.
Speaker Change: Yeah, So we mentioned a 600 basis points.
Speaker Change: On consumer and then.
Speaker Change: 12 points in business payments and then what we said is if you excluded.
Speaker Change: Client losses, our growth would have been low single digits.
Speaker Change: Okay, Great and then in terms of.
Speaker Change: The level of confidence looking at your guidance of sequential.
Speaker Change: Reacceleration of normalized gross profit growth so starting from a base of negative four in the first quarter.
Speaker Change: You're thinking you can get to high single digit to low double digit normalized gross profit growth in the fourth quarter.
Speaker Change: There's a lot of math there is there a way to kind of.
Timothy Murphy: narrow that range down a little bit. getting to the right spot, and does that... rateably increase through the year, you know, or is the second quarter going to be... A little bit more so we can kind of triangulate it. Yeah. So, as I said, if you stripped out the losses, it would be low single digits in Q1, so going from negative 4 to low single digits. I would think that would be a good estimate for Q2, somewhere in that range, slightly faster in Q3, and then ending the year exiting high single digit to low double digit.
Speaker Change: Maybe narrow that range down a little bit and make sure that we're getting to the right spot and does that.
Speaker Change: Is it does it is it ratably increase through the year or worst.
Speaker Change: Second quarter is gonna be a relatively weaker then we see a pick up in the third quarter.
Worse, we can you know kind of.
Speaker Change: Triangulate it out in a little closer to where we should be from a quarterly standpoint.
Speaker Change: Yeah. So as I said, if you stripped out the losses would be low single digits in Q1, so going from negative four to low single digits I would think that would be a good estimate for Q2 somewhere in that range slightly faster in Q3, and then ending the year exiting high single digit to low double digit.
Timothy Murphy: You could, I guess, use the midpoint of that range as probably a good way to think about it. So, it's not going further down in Q2 and then picking up a lot more in Q3 and even more in Q4. It's getting to a similar number as the low single digits for Q2 and a little bit higher than that in Q3 in the midpoint of low single digit to high single digit for Q4. Okay, and then the timing of those. do happen in the third quarter.
Speaker Change: It could.
Speaker Change: I guess you use the midpoint of that range is probably a good way to think about it. So it's not going further down in Q2, and then picking up a lot more in Q3 and even more in Q4, it's getting to a similar number as the low single digits for Q2, and a little bit higher than that in Q3, and the midpoint of low single digit high single digit for Q4.
Speaker Change: Okay, Okay and then.
Speaker Change: The timing of those customer losses, you remember correctly. It was two to happen in the third quarter and what happened in the fourth quarter in terms of Anniversarying them.
Operator: I meant to say, excuse me, on the previous comment, I meant to say midpoint of high single-digit to low double-digit for Q4. And then, yes, there was one loss in Q3 and two in Q4 of last year. Thank you. As a reminder, if you would like to ask a question at this time, please press star 1. All right, okay.
Speaker Change: I meant to say excuse me on the previous comment I meant to say mid point of high single digit to low double digit for Q4.
Speaker Change: And then yes, there were a one loss in Q3 and two in Q4 of last year.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you as a reminder, if you would like to ask a question at this time. Please press star one.
Speaker Change: Alright.
Speaker Change: So you have a question from Andrew Schmidt with Citi. Please proceed.
Andrew Schmidt: We have a question from Andrew Schmidt with Citi. Hey guys, thanks for taking the question. Sorry I hopped on a little bit late here. Maybe, and I apologize if I missed any remarks on the strategic review, but if you could just, you know, we've obviously seen some monetization of B2B assets this quarter. If you just talk about kind of your, you know, your inclination to kind of continue to expand and scale the B2B versus monetizing it, you know, anything you'd share in terms of prerogative there would be helpful. Thanks so much.
Speaker Change: Okay.
Andrew Schmidt: Hey, guys. Thanks for taking the question sorry, I hopped on a little bit late here.
Andrew Schmidt: You know it may be in and I apologize if I missed it in your remarks on the strategic review, but if you could just you know we've obviously seen some monetization of BBB assets. This quarter could you just talk about kind of your.
Andrew Schmidt: Your inclination to kind of continue to expand and scale the <unk> versus <unk>.
Andrew Schmidt: Our monetization yet.
Andrew Schmidt: Anything you'd share in terms of prerogative and there would be helpful. Thanks, So much.
John Morris: Hi, Andrew. Yes. As you're aware, I have watched the B2B space for many years. I think this has many years of growth opportunity for us, just a lot of white space. Our ability to profitably make investments there and grow that, and what I see in our pipeline, and what I see coming in the future, we think there's some really great days ahead of us there as we drive and scale that business. And as we continue to invest, as we said, in these additional partnership channels, we see a really winning formula around some things there. We think that will drive great shareholder value for us on the long term, at least as we look out in the immediate mid-term here on how we drive investments there.
Andrew Schmidt: Hi, Andrew Yes.
Speaker Change: As you're aware I have watched the BW space for many years I think this has many years of growth opportunity for us just a lot of white space, our ability to profitably make investments there and grow that and what I see in our pipeline and what I see.
Andrew Schmidt: Coming into the future we think.
Andrew Schmidt: There's some really great days ahead of US there as we drive and scale that business.
Andrew Schmidt: And as we continue to invest as we said in these additional partnership channels, we see.
Andrew Schmidt: Winning formula around some things there, we think that will drive great shareholder value for us on a long term at least as we look out any immediate.
Andrew Schmidt: Medium term here on how we drive investments there.
John Morris: We really like that part of our business. I would add to that that, you know, business payments performed nicely. As we said, in Q1, it was 12% growth normalized, so, you know, we feel good about that. And there are a lot of investments we have been making, particularly on the partnership side. Enterprise software platforms were embedding payables. That's something we have been doing for a while now. We've increased our speed of implementation, and then we're also winning some large individual clients and have had a lot of success in the hospital space. And you're starting to see that flow through the results here in Q1.
Andrew Schmidt: We like that part of our business.
Andrew Schmidt: I'd add to that.
Andrew Schmidt: Business payments perform nicely as we said in Q1, it was 12% growth normalized.
Andrew Schmidt: So we feel good about that and there are a lot of investments we have been making particularly on the partnership side enterprise software platforms. We're embedding payables, that's something we have been doing.
Andrew Schmidt: For a while now we've increased our speed of implementation and then we're also winning some large individual clients who have had a lot of success in the hospital space and Youre starting to see that flow through the results here in Q1. So there is positive momentum there.
John Morris: So, there is positive momentum. If you add what we also said, and Tim mentioned earlier, Our growth in that business segment, despite the client loss in that space, the growth rate is actually, on a normalized basis, is actually even better. So, we think as we clear some of those things... Hopefully the world will see the quality of the investment. That's helpful.
Tim Murphy: If you add what we also said that Tim mentioned earlier.
Tim Murphy: Our growth in that business segment despite.
Tim Murphy: The client loss in that space.
Tim Murphy: Growth rates actually on a normalized basis is actually even better.
Tim Murphy: So we think as we clear some of those things.
Tim Murphy: Hopefully the world will see.
Tim Murphy: The quality of the investment.
Tim Murphy: That's helpful. And then again, sorry, if I missed this but I know last quarter, you mentioned transition of the total pay solution some impacts there.
John Morris: And then, again, you know, sorry if I missed this, but I know last quarter you mentioned transition to the total pay solution, some impacts there. Any impacts this quarter? Is that stabilized? Just curious where we are from that standpoint. Thanks so much. It's largely stabilized. I mean, what happened previously resulted in a few client losses that will flow through, but there haven't been any incremental impacts related to that. And so the impact we called out previously was related to the loss of the client versus the migration. And so, like John said, 12% normalized, we tell is pretty strong, and then you include the loss of that individual client, and that led to very nice growth.
Tim Murphy: Any impact this quarter or is that stabilized just curious where we are from that standpoint. Thanks. So much.
Tim Murphy: It's largely stabilized I mean, what what happened previously resulted in a few client losses that will flow through but there haven't been any incremental.
Tim Murphy: Impacts related to that and so.
Tim Murphy: The impact we called out on the.
Tim Murphy: Previously it was related to the loss of the client versus the migration.
Tim Murphy: And so like John said, it 12% normalized Vitol was pretty strong and then you <unk>.
Tim Murphy: Include the loss of that individual client now has led to very nice growth.
Andrew Schmidt: Got it.
Tim Murphy: Got it and then I think I'm less up here if I could just ask about just the auto vertical obviously a lot of puts and takes there in terms of.
Andrew Schmidt: And then, since I think I'm last up here, if I could just ask about just the auto vertical, obviously a lot of puts and takes there in terms of consumer health, origination, obviously, you know, auto prices potentially. What are you seeing there in terms of just repayment volume health? What are you forecasting? Would love to get under the hood there. Thanks again, guys. Andrew, we, we, as we mentioned earlier, we still see it as non-discretionary spending, and there's still strength there. So we're not specifically seeing it on the client side, on our client side specifically.
Tim Murphy: See more health origination obviously.
Tim Murphy: Auto prices potentially.
Tim Murphy: What are you seeing there in terms of just.
Tim Murphy: And repayment volume health what are you forecasting would love to get under the Hood. There. Thanks again guys.
Andrew Schmidt: Yes, Andrew.
Andrew Schmidt: As we mentioned earlier.
Speaker Change: We still see it as non discretionary spending and there is still strength there. So we're not specifically seeing it on the client side on our client side specifically.
John Morris: There is no overall macro uncertainty of what may be happening with tariffs, etc. But we don't see anything specifically right now. We couldn't tell you that there would be something specifically as we're looking out. Got it. Thanks, John. Thanks for reiterating that.
Speaker Change: There is no overall macro uncertainty.
Speaker Change: What may be happening with tariffs et cetera.
Speaker Change: But.
Speaker Change: We don't see anything specifically right now.
Speaker Change: And Couldnt tell you that there would be something specifically as we're looking out.
Speaker Change: Got it thanks, John Thanks for reiterating that.
Andrew Schmidt: And, Tim, best of luck with the transition. Good work. I appreciate it. Thank you.
Speaker Change: And Tim Best of luck with the transition.
Speaker Change: Good working with you.
Speaker Change: I appreciate it.
Speaker Change: Thanks.
Speaker Change: Thank you. Our next question comes from the line of Timothy <unk> with UBS. Please proceed.
Timothy Chiodo: Our next question comes to the line of Timothy Chiodo with UBS. Please proceed. Great. Thank you.
Speaker Change: Great. Thank you and also just started off Tim. Thank you for everything over the years wish you the best definitely.
Timothy Chiodo: And also, to start it off, Tim, thank you for everything over the years. Wish you the best. All right, great.
Speaker Change: Appreciate it.
Speaker Change: Alright, great well I want to hit it one of an industry question. If that's okay. So this topic.
Timothy Chiodo: Well, I want to hit it with an industry question, if that's okay. So, this topic of both merchants and platforms, meaning ISVs, software companies, et cetera, going to more of a, let's call it multi-processor type of environment, I just want to see if that's, if you're picking up in your, I don't know, what you're seeing with your ISVs that you work with, is that something that they're looking to do more of, to the extent they were already doing that, as many were already integrated with more than one payments provider. But maybe you could talk a little bit about The number of payments processors that ISBs are looking to work with and whether or not that's changed much at all over the last call it 3, 5, 10 years.
Speaker Change: Both merchants and platforms, meaning Isps software companies et cetera, going to more of a let's call. It multi processor type of environment I just wanted to see if that's if you're picking up in your I don't know what youre seeing with your Isps that you work with is that something that they're looking to do more of to the extent they were already.
Speaker Change: Doing that my understanding is many were already integrated with more than one payments provider, but maybe you could talk a little bit about the.
Speaker Change: The number of payments processors that Isps are looking to work with and whether or not that's changed much at all over the last call. It three 510 years.
John Morris: Yeah, hi, Tim. So great question. If we look out at the market at the consolidation happening at the large processor level, I would tell you our opportunity there, as you're aware, we do repay clearing and settlement. We see and have seen opportunities coming to us that historically probably maybe would not have. So we see maybe what you're thinking and what you're saying, they're a multi-processor potentially, but we also see with some of that disruption in the marketplace, that should be a really good opportunity for us. We will be very selective, but yet we are partnered with some really strong strategic processors or ISOs in the marketplace as we continue to build our pipeline there, as I mentioned earlier in the call as well.
Speaker Change: Yes, Hi, Tim So great question.
Speaker Change: If we look out at the market as a consolidation happening at the large processor level.
Speaker Change: I would tell you our opportunity there as Youre aware, we do repay clearing and settlement.
Speaker Change: We see and have seen.
Speaker Change:
Speaker Change: Opportunities coming to us that historically, probably would maybe will not have so we see maybe what youre thinking and what youre, saying, there a multiprocessor potentially but we also see with some of that disruption in the marketplace that should be a really good opportunity for us.
Speaker Change: We will be very selective, but yet we are partnered with some really strong strategic.
Speaker Change: Processors are highest.
Speaker Change: <unk> in the marketplace as we continue to build our pipeline there as I mentioned in earlier in the call as well.
John Morris: We just won a large ISV this past quarter, and so we think there's great opportunity for us as we are selective on how we want to build out with our partners there. We have about 30 of those today, and we see more opportunities out there, especially if you look at the whole ISV embedded partnership, lots of niche opportunities for those specific partners that we would process for. In terms of ISVs and utilizing payment processors, I don't think there's really been much of a change. In our particular verticals, they typically have two or maybe three payment providers, and we're often the preferred provider.
Speaker Change: We just won a large ISP this.
Speaker Change: Past quarter.
Speaker Change: And so we think theres great opportunity for us as we are selective on how we want to build out with our partners there and we have about 30 of those today.
Speaker Change: And then.
Speaker Change: See more we see more opportunities out there, especially if you look at the whole <unk>.
Speaker Change: Embedded partnership lots of lots of niche.
Speaker Change: <unk> for those specific.
Speaker Change: Specific partners that we would use that.
Speaker Change: The process for us.
Speaker Change: In terms of Isps and utilizing payment processors I don't think theres really been much of a change there in our particular verticals. They typically have two maybe three payment providers, who are often the preferred provider. So does not necessarily exclusivity, but we're typically in a preferred position because we've had the relationship with <unk>.
John Morris: So there's not necessarily exclusivity, but we're typically in the preferred position because we've had the relationship for the longest. We have, you know, more domain expertise in that end market. So I don't think that's really changed much. These aren't, you know, shopping cart environments or marketplace environments where there's half a dozen or ten payment providers you can choose from. It's usually a small group. Yes, Tim, what I was referring to is really the overall processing, clearing, and settlement world, my comments. Tim made a great point for our 283 partners out there. We're not seeing a huge opportunity, any kind of disruption associated with that.
Speaker Change: Longest and we have more domain expertise in that end market.
Speaker Change: So I don't think Thats really changed much on these aren't shopping cart environment for marketplace environments, where there is half dozen or 10 payment providers you can choose from its usually a small group.
Speaker Change: Yes, Tim what I was referring to is really the overall processing clearing and settlement World My comments, Tim made a great point for our 283 partners out there.
Speaker Change: We're not seeing a huge uptick.
Speaker Change: Any kind of disruption associated with that on our side actually we're seeing more enterprise software is coming to us because of our ability to fully do the whole.
John Morris: On our side, actually, we're seeing more enterprise softwares coming to us because of our ability to fully do the whole AR and the AP side of the world. So we think we're in a pretty good position when it comes to that. Our overall payment expertise, as well as our embedded software expertise, is a great value added for those who are coming to possibly partner with us on some things there. And then I'll remind you as well, specifically in our core consumer verticals, we do a total payment modality solution. So it's not just a card-based total solution.
Speaker Change: A R and the AP side of the World.
Speaker Change: So we think we're in a pretty good position when it comes to that.
Speaker Change: Our overall <unk> expertise as well as our embedded software expertise.
Speaker Change: He is a great value add for those who are coming to possibly partner with us on some things there.
Speaker Change: And then.
Speaker Change: Mind, you as well specifically in our core consumer verticals.
Speaker Change: We do what we did.
Speaker Change: Total peanut mono.
Speaker Change: Modality solution. So it's not just a card based.
John Morris: It's all the way from our instant funding the transactions potentially to the debit side of the world, whether it be an ACH or a debit card, or even some of the other features and functionalities on an omni-channel perspective. So a lot of technology, fintech-embedded capabilities there.
Speaker Change: Total solution.
Speaker Change: All the way from our instant funding or funding the transactions potentially too.
Speaker Change: The debit side of the world, whether it be in Asia, or a debit card or even.
Speaker Change: Some of the other features of functionality as an omnichannel perspective, so a lot of it a lot of technology fintech embedded capabilities there.
John Morris: Excellent.
Speaker Change: Excellent.
John Morris: John, Tim, and Tim, thank you again. Absolutely. Thank you.
Speaker Change: 10, 10, thank you again.
Speaker Change: Absolutely. Thank you.
Speaker Change: Thank you there are no further questions at this time I'd like to pass the call over to John for any closing remarks.
Operator: There are no further questions at this time.
John Morris: I'd like to pass the call over to John for any closing remarks. Thank you, everyone, and thank you for your time today.
John You: Thank you Lauren and thank you for your time today, Tim. Thank you again for a great 11 years.
John Morris: Tim, thank you again for a great 11 years. We discussed many topics today on our call, the key areas of accelerating organic growth and our focus on creating value for shareholders through our capital allocation initiatives. We will continue to execute towards profitable growth and strong fee cash flow generation along the way. And we look forward to demonstrating the growth acceleration in the second half of the year and beyond.
John You: We discussed many times today on our call the key areas.
John You: Accelerating organic growth and our focus on creating value for our shareholders through our capital allocation initiatives.
John You: We will continue to execute towards profitable growth and strong free cash flow generation, along the way and we look forward to demonstrating the growth acceleration in the second half of the year and beyond.
Operator: Thank you again for your time.
Thank you again for your time.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
John You: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
John You: [music].