Repay Holdings Corporation - Ordinary Shares - Class A Aktie

Good afternoon. I'd like to welcome everybody to REPAY's First Quarter 2026 Earnings Conference Call. [Operator Instructions] This call is being recorded today, May 4, 2026. I would like to turn the session over to Stewart Grisante, Head of Investor Relations for REPAY.

Stuart, you may begin. Thank you. Good afternoon, and welcome to REPAY's First Quarter 2026 Earnings Conference Call. With us today are John Morris, Co-Founder and Chief Executive Officer; and Robert Houser, 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 and our most recent Form 10-K. Actual results may differ materially from any forward-looking statements that we make today. Forward-looking statements speak only as of today, and we do not assume any obligation or intend to update them, except as required by law. In an effort to provide additional information to investors, today's discussion will also reference certain non-GAAP financial measures.

Reconciliations and other explanations of those non-GAAP financial measures can be found in today's press release and in the earnings supplement, each of which are available on the company's IR site. In connection with our 2026 Annual Meeting of Stockholders, we intend to file a definitive proxy statement and related materials with the SEC. Our directors and certain of our executive officers and employees will be participants in the solicitation of proxies in connection with the annual meeting. Stockholders are encouraged to read the proxy statement and related materials when they become available as they will contain important information, including the intensity of the participants and their direct or indirect interest by security holdings or otherwise.

As you may know, Veradace Partners submitted a request for the Board to waive the timeliness requirement of our bylaws for stockholders to provide notice of intent to submit director nominations for candidates to stand for election to the Board at the annual meeting. The Board determined to deny the request and on Friday, May 1, we filed our preliminary proxy statement with the SEC.

Veradace failed to comply with the requirements set forth in our bylaws and is not entitled to make lawful director nominations at this year's annual meeting. Additionally, the Board previously confirmed receipt of an unsolicited nonbinding proposal from Forager Capital to acquire the outstanding shares of the company. Earlier today, we set a letter to Forager Capital and issued a press release providing that the Board has unanimously rejected the unsolicited nonbinding proposal because it significantly undervalues the company and is, therefore, not in shareholders' best interest. At this time, we will be making no further comments or take any questions on Veradace, Forager Capital or any matters related to them.

With that, I will now turn the call over to John.

Thanks, Stuart. Good afternoon, everyone, and thank you for joining us today. REPAY had a solid start to the year after exiting 2025 with continued momentum. Since reporting full year 2025 earnings in March, we announced a strategically significant acquisition to create a scaled bill payment provider with the technology and market position to lead the digital journey across the payment ecosystem. I will talk more about the KUBRA acquisition in a little bit, but let's first go over the highlights of our Q1 results and progress we have made.

During Q1, REPAY remained focused on our core growth and operational execution. We achieved 4% revenue growth and approximately 43% adjusted EBITDA margins and continue to generate positive free cash flow. We exited the quarter with over 297 software partners across our consumer and business payment verticals. In Consumer Payments, Q1 revenue increased approximately 4% year-over-year as we implemented new enterprise clients who are adopting more payment channels and modalities. We have seen strong interest in our digital wallet capabilities and began our phased rollout of REPAY Voice AI to select enterprise clients.

Throughout last year, REPAY has been investing in our sales and customer support teams while also enhancing many of our software integrations to help further penetrate existing partnerships and create overall better user experiences. The teams are working through the onboarding and implementation and ramping of clients in our sales pipeline, which we are confident will drive accelerating growth as we move through the year.

During the quarter, we continued to automate workflows and deployed AI capabilities to improve processes such as performance and risk monitoring for our ever-growing volumes on our gateway. We have also been optimizing network routing leading to tangible payment efficiencies. In addition, we completed a strategic partner investment, leading to an immediate EBITDA uplift from existing volumes during the quarter.

And finally, we have strengthened our consumer payments leadership. We're excited for Matt Morrow to join REPAY in the coming weeks as the new executive leader of Consumer Payments. Matt brings over a decade of payments and business service experience managing growth through disciplined strategic planning. He has extensive experience and history with embedded payment partners and will oversee the consumer payments growth, sales, operational initiatives going forward.

Now moving over to our Business Payments segment. Business Payments had another quarter of strong performance with Q1 revenue increasing approximately 18% year-over-year. The business added two new software partners during the quarter, leading to many new clients across our verticals. The sales pipeline continues to build in our automotive, property management, government and education verticals.

New client wins include regional multi-location auto groups and multiple government and school districts within certain regions. In addition, the political media vertical started to see an uptick in processing ahead of the back half weighted political media cycle heading into the 2026 midterm elections.

We ended Q1 with over 665,000 vendors in our supplier network, an increase of over 70% year-over-year. Vendor enablement is a great example of where we are deploying automation to improve vendor matching for clients. During the quarter, we were able to automatically match more than 15,000 new vendors, which will allow us to improve our digital monetization for both new and existing volumes over time.

The last topic I'd like to discuss is our recently announced acquisition of KUBRA. In evaluating capital allocation alternatives, including share repurchases and M&A, we believe the KUBRA acquisition offers the most compelling long-term value creation opportunity given its scale, nondiscretionary, reoccurring revenue profile and synergy potential.

We have received feedback from certain shareholders on KUBRA and wanted to address those points directly. Before doing so, I should reiterate our Board's continued support of the acquisition and management's belief in the long-term benefits. The acquisition is supported by fully committed financing. As such, the teams are moving forward expeditiously, and we expect to close the transaction during Q2 2026.

We also have been asked about our plans for integrating the companies. Our teams have been actively planning for the integration to hit the ground running on day 1 and to provide the identified value creation opportunities in the near term. This incorporates integrating technology, employees and most importantly, client relationships and the support for a seamless transition. I look forward to engaging with KUBRA's clients in the coming months once the deal is closed.

Given the acquisition is yet to close, there are limits to the level of detail we can provide at this time. However, we will provide additional detail following closing. The Board and management remain confident in the strategic and financial rationale of the KUBRA acquisition. As with any integration of this scale, execution will be critical, and we are focused on the disciplined integration planning to mitigate operational and client transition risks. Together, we offer a comprehensive end-to-end digital platform. This means spanning across bill presentment, communication services and payment processing with our own clearing and settlement engine.

The acquisition will result in compelling strategic combination in the market leading to management and the Board's confidence in creating long-term value for all stakeholders. The Board remains focused on the fiduciary duty to maximize long-term shareholder value and regularly evaluates strategic alternatives, such as the KUBRA acquisition. We believe the KUBRA acquisition provides that significant scale. Based on 2025 KUBRA results, we will approximately double our revenue, interact with over 40% of U.S. and Canadian households every month and process over $130 billion in annual payment volumes as we serve nondiscretionary categories with reoccurring billing cycles.

Importantly, the transaction is expected to enhance our free cash flow profile over time and provide identifiable cost and revenue synergy opportunities. We are targeting a return to below 3x net leverage within approximately 18 months of closing, supported by the combined company's cash flow generation, synergy realization, disciplined capital allocation and as appropriate, ongoing evaluation of opportunities to further enhance balance sheet flexibility.

We expect to generate strong free cash flow over this period and look forward to providing additional updates following closing on our progress throughout 2026. With that, I'll turn the call over to Rob to go over REPAY's Q1 financials. Rob?

Thank you, John, and good afternoon, everyone. In the first quarter, REPAY delivered results that were in line with our internal expectations across key metrics. Revenue was $80.8 million, representing 4% growth year-over-year. Consumer Payments revenue increased 4% year-over-year. Business Payments reported revenue increased 18% year-over-year and normalized revenue increased approximately 16%, which excludes the positive political media contributions during the quarter. We expect this positive momentum and sustained contributions from existing clients as well as incremental contributions from new clients will increase growth momentum as we move throughout 2026.

We also started to see early contributions from the political media spending cycle that occurs every 2 years, which we typically see a majority of political contributions in Q3 and Q4 around the November elections. Q1 adjusted EBITDA was $34.4 million, representing approximately 43% adjusted EBITDA margins. During the quarter, we began to benefit from cost improvement initiatives such as optimizing volume routing and the immediate accretion from a strategic distribution partner investment we made during the quarter. As we updated in our flash Q1 performance last week, we raised our adjusted EBITDA outlook, which represents an improvement in our margin expectations to approximately 42% for full year 2026. This improvement includes the volume mix impacts that we recently seen and the ongoing growth investments towards our sales, customer support and technology.

First quarter adjusted net income was $19.4 million or $0.22 per share. Free cash flow was $5.4 million during the quarter, resulting in 16% free cash flow conversion. During Q1, we made approximately $15 million in tax receivable agreement payments related to the 2024 tax reporting year. In addition, we paid approximately $22.5 million for a strategic distribution partner purchase.

We immediately benefited from this investment as the volumes were already on REPAY's platform. The investment resulted in immediate EBITDA uplift during Q1 and for full year 2026. In January, we used approximately $37 million in cash and drew $110 million on our revolving credit facility to refinance our maturing 2026 convertible notes.

Total debt outstanding at quarter end was comprised of $288 million of convertible notes due in 2029 with a 2.875% coupon and the $110 million draw on our revolver facility. As of March 31, we've had approximately $44 million in cash on the balance sheet and net leverage of approximately 2.7x. With a strong and resilient Q1 behind us, we are confident in achieving our 2026 outlook for double-digit revenue growth. As previously mentioned, we recently increased our full year adjusted EBITDA outlook to represent approximately 42% margins for 2026.

For the full year 2026, REPAY expects revenue to be between $340 million and $346 million, representing 10% to 12% reported revenue growth and when excluding political media, approximately 7% to 9% normalized revenue growth. Adjusted EBITDA is now expected to be between $141 million and $146 million. And we are confident in achieving our free cash flow conversion target of 45%.

Please keep in mind that net interest expense is included in our free cash flow, which includes the interest payments associated with our 2029 convertible notes and the recent $110 million draw on our revolving credit facility. We are also expecting to benefit from a strong midterm election cycle with the majority of political media contributions occurring in Q3 and Q4. We continue to expect political media contributions to positively impact revenue by $8 million to $10 million, representing approximately 3 percentage points of reported growth year-over-year.

Our current 2026 outlook does not incorporate contributions or expenditures related to recently announced KUBRA acquisition. We remain confident closing during the second quarter of 2026 upon receiving regulatory approvals. As I outlined on our previous earnings call, REPAY's capital allocation priorities are focused on creating long-term value while maintaining strong cash generation for future opportunities.

In light of the KUBRA acquisition, our overall capital allocation framework remains unchanged, and we are working toward closing the transaction and then deleveraging. In 2026, we have and will continue to deploy capital towards key strategic priorities of organic growth and M&A catalysts to achieve long-term growth. Our first priority is to remain focused on organic operations and growth opportunities.

We continue to make targeted investments to strengthen our position and accelerate our growth opportunities. We have announced strategic M&A and partnerships. The KUBRA acquisition is expected to generate compelling value creation opportunities, including the identified cost synergies by streamlining operations, integrating tech platforms and better aligning REPAY's overall corporate structure.

Following the closing of the KUBRA acquisition, we will continue our commitment to prudently manage balance sheet flexibility and leverage. With the strong free cash flow accretion of the combined companies, we are targeting a return to below 3x net leverage, supported by strong free cash flow generation, synergy realization and disciplined capital allocation within 18 months of closing.

We believe maintaining a prudent level of CapEx towards product and technology initiatives to deliver the best experience for our clients and their consumers is mission-critical.

As we move through 2026, we are focused on accelerating our growth and achieving our 2026 outlook and are committed to implementing our capital allocation strategy. I'll now turn the call over to the operator to take your questions. Operator?

[Operator Instructions] Our first question is from Joseph Vafi with Canaccord Genuity.

Nice to see the revenue outlook guidance and the accelerating growth here. I thought maybe we just start, I know you don't provide quarterly guidance here. But as we look at the year and we look at the ramp on the top line, excluding political media, how should we kind of think about how the quarters progress here on the top line? And I have a quick follow-up.

Joe, it's Rob. Yes. So strong first quarter came out at 4% growth. And as I said, excluding political media, we expect to ramp -- full year, we'll be at the 7% to 9% growth as we guided. And really coming out of that, as I talked about last quarter, we had some new client wins that pushed into the second half of this year. And so -- and we -- in Q1 of this year, we are lapping some small attrition that happened in the back half of last year. So we're at 4% growth this quarter, and we expect to ramp as we get into Q2 and really into Q3 some of those new client wins that will come on, and we feel really confident about that. And so that's really what the ramp-up is excluding political media.

Then when you include the reported numbers, the 10% to 12% double-digit growth for the year, we have a strong political media. It's a midterm election season that really ramps in Q3 and Q4, and that's what really gets us to the reported double-digit growth for the year.

Okay. And then could you remind us on the dynamic? I think in Q1, you said that consumer was a little bit down year-over-year. I know you're expanding offerings there with some customers, and there's a dynamic there that kind of leads, I think, to short term -- maybe a short-term headwind and then a longer-term tailwind. Just if you could refresh us on that.

On the consumer side facility, we did 4% growth for Q1.

I got that. I got it a little confused there, John. Maybe just one other then on -- is there a macro assumption built into the guide this year or just where we are at this point on a macro run rate built into the guide for -- or your outlook here for 2026?

Yes, sure. This is John. Joe, Specifically, we do continue to see a stable consumer and the trends we see at least currently, and that same outlook as we consider that in our full year outlook.

Our next question is from Pete Heckmann with D.A. Davidson.

Just in terms of the KUBRA deal and evaluating it versus, let's say, buyback or other smaller deals, I guess what do you -- what do you feel are one or two most compelling aspects of KUBRA? What does it bring to REPAY? And then in terms of thinking about the combined company, I guess, what are the attributes that you would see 2 years out that really make you feel like either your growth rate both will really drive additional shareholder value?

Yes. We are very excited about it. Obviously, it gives us a comprehensive end-to-end digital platform. We take the best of both of us. So we really allows us to really expand across our bill presentment capabilities, our communication services and our overall payment processing with our own clearing and settlement engine. So we take the strengths of both as we are able to deliver those new solutions together on behalf of both our clients. And we think that's a really great long-term value creation. I would also point you to Slide 8 in our earnings supplement. We think we've become one of the leading providers of these resilient verticals. It does expand our TAM, really increases our scale. And obviously, there's some compelling synergies that we've talked about in this transaction. So on a post combined basis, as we look out into the next 18 months, 24 months, gives us what we consider to be very attractive financial strength as well?

Yes, I would just add to that. The free cash flow generation of the combined company is what really excites us as well, pretty decent free cash flow conversion as we go in the out years. And as John mentioned, we've committed to hitting those synergies, and we're really confident in those synergies out of the gate. We've got plans in place and are very confident on day 1 of close to start executing on those.

Let me touch another couple of points. I mentioned earlier on the call, it approximately doubles our revenue. We'll then be able to interact with over 40% of all U.S. and Canadian households every month, process over $130 billion in annual payment volume. These are very highly nonrecurring categories that -- and then sorry, very nondiscretionary categories with very highly reoccurring billing cycles. Think about it. It's very -- we become a very large consumer bill pay processor on a combined basis, we think that obviously is recession-resistant as well.

Okay. That's helpful. And then the small -- relatively small deal in the first quarter, does that contribute any revenue? Or does it eliminate like a rev share or residual? So it really just has an impact on the EBITDA line?

Yes. No additional revenue contribution there, fully integrated strategic partner there. So no additional revenue there, but fantastic opportunity for us as a highly strategic distribution partner.

And on the EBITDA side, it contributed a little less than $1 million on EBITDA in Q1, and it was part of our full year reguide for EBITDA, about a $4.5 million increase. And remember, it's not a full year because we brought it in towards the end of the quarter. So it's what -- listen, we hit our full year guide -- our quarter guide, and we still feel strong about the guide we gave in fourth quarter. Really, the uptake was due to this strategic distribution partner.

Our next question is from Mike Grondahl with Northland Securities.

John, in the consumer side, auto, personal loans, how would you kind of describe the headwinds you're facing there, the tailwinds you're seeing? If you could handicap those two businesses for us, that would be helpful.

Yes. Mike, it's been actually fairly consistent for the last few quarters that we talked about, and we're not seeing any major differences there. We still see resiliency. We still -- and one example of that would be we had a strong February, March on the consumer side from a tax refund season perspective. So we see positive trends there in our volumes. So currently, that's what we're seeing, which we think is very stable trends across our verticals.

Got it. And over the course of 2026, any important larger customer renewals to kind of call out?

Specifically for core REPAY, nothing that I would call out specific that would not be normal for us. We -- as most of you are aware in the payment processing world, all of us would have some type of automatic evergreens regardless in our contracts, but nothing unusual there, Mike.

Got it. And then maybe just lastly, you guys noted your digital wallet capabilities in the press release. Could you just highlight those again?

Sure. So from a digital wallet perspective, think about you dropping your -- in your case, maybe your card statement automatically in your native wallet and your Apple or Google wallet on your phone. We're going to be able to deliver that solution and are currently rolling some of that out with our clients. We're going to be able to take those consumer invoices or consumer bill presents and present that directly into their native Apple device.

So we see a significant interest from our clients on that, which will be some kind of biller. We see significant share there as well as you may also heard earlier on the call today, we talked about using AI to build -- help us with our product development and specifically even we use that to create and recreate what we consider to be IVR and turn that into a REPAY Voice, which is an interactive AI solution when you -- on behalf of our billers, when someone calls in and wants to make a phone payment, et cetera, we're able to use AI to help them drive that.

And again, early stages of testing and rolling some of those things out with our clients, but see significant interest in our product development and some of the things we're doing.

Our next question is from Timothy Chiodo with UBS.

So a topic that we brought up on the prior call, we hit on this a little bit, but I see actually a comment in Slide 4. So it seems as though it's risen to maybe a greater level of materiality. So you have a comment that says that gross profit margins experienced near-term impact changes of enhanced data programs with the card networks. And I was hoping you could expand upon the comment in Slide 4 of the investor presentation?

Yes, we have seen what we consider to be expected where we saw the impact coming through from the Level 2, Level 3 on the CEDP in the business payment side of it, predominantly on the AR side, as you would expect. So we've seen that impact come through as expected on our side. And then we obviously that was -- you would consume that's embedded in our annual outlook that we gave as well. We do see opportunities as well from our growth in our B2B space on our overall total payment volume opportunities to continue to drive monetization in addition to that. I apologize. No, please go ahead. You first.

No, I was just going to reaffirm that we had always forecasted that. And in our original guide, we had baked the L2 impact into our numbers. So you're just seeing that impact that fall through as we expected.

Our next question is a follow-up from Joseph Vafi with Canaccord Genuity.

Just one quick follow-up. I know you mentioned a few new customer ramps that you've got good visibility to. Just any other organic go-get requirements, do you think other than maybe small normal course stuff to get to your guidance this year? Or is the visibility pretty good on some of these new client wins?

No, we -- from a go get for 2026, we feel really good about those bookings were already booked, and it's really about just executing on deploying those clients and ramping them in the second half, which we have a lot of confidence around. A lot of the work that our sales team is doing now is really starting to focus towards 2027. So our confidence level on those bookings, they're booked. It's just a matter of deploying in the second half, and we have a high confidence level on that.

And we have a follow-up question from Mike Grondahl with Northland Securities.

Just one more question. As I was looking through your May, your new May 2026 deck, Page 22 lists a handful of acquisitions that you guys have done. John, what was the best acquisition there that you did and why? And which one was maybe the toughest and why?

Sure, sure. Specifically on the acquisition side, obviously, acquiring TriSource with our back-end clearing and settlement has fundamentally understanding payments and understanding the whole technology stack and the infrastructure there and our ability to use that to maximize our overall margins and throughput and overall client experiences has to rank up at the top, not one single thing.

Our B2B acquisitions have been very positive for us as well. On the challenging side, I think was your -- the other question there, ultimately would say sometimes actually the smallest ones could be a little bit challenged because the ability to move certain technology pieces around despite the ROI on it can be some challenge sometime. But I would ultimately say on that piece on the challenging side, it would ultimately be your ability to just combine things together.

Now we haven't done an acquisition in the last 3 years. So we are very confident in what we've done and how we've kind of merged all of our tech stack together and how we've really really enhanced our overall product offerings. We think we're in a really good spot from an overall product competitive perspective. And then we've really monetized many things that we are trying to do on both sides of the business. If you add on the fact of what we're doing with AI and really how we're leaning hard into AI on a lot of different things.

We've talked to you for the last few quarters about some of the investments we're making on integrations and implementations. We haven't fully turned our flywheel there how we want to. So we're going to continue to use that to really help us enhance that experience, how we can use that also to really do some additional things from the front office and the back office of our business in addition to enhancing some of our integrations and speeding up implementations.

So we think some fantastic opportunities ahead of us as well. And that -- if you combine that with what we've learned over the past -- the several acquisitions we have done, it gives us a great deal of confidence in the KUBRA transaction and how we're leaning into our core abilities of executing there is very exciting for us as we look out and what we think we can do together. I think as we execute and we understand, as we said on the call, execution is critical. We know that, but we think we're set up well to be able to execute there.

There are no further questions at this time. I would like to turn the floor back over to John for closing remarks.

Thank you, everyone, for joining us today. REPAY had a strong start to the year, and we remain focused on executing against our priorities, including closing the KUBRA transaction. We're also focused on accelerating towards double-digit reported growth with strong profitability in our 2026 outlook. We believe the KUBRA acquisition will put us in a better position to scale and benefit from the opportunities ahead. Thank you so much for joining us.

This concludes today's conference. You may disconnect at this time, and thank you for your participation.

Greetings. Welcome to Repay Holdings Corporation's Acquisition Overview Conference Call. [Operator Instructions] Please note this conference is being recorded.

I will now turn the conference over to Stewart Grisante, Head of Investor Relations. Thank you. You may begin.

Thank you. With us today are John Morris, Co-Founder and Chief Executive Officer; and Robert Houser, Chief Financial Officer. The press release and investor presentation regarding today's announcement are available on the company's IR site. During this presentation, we will be making forward-looking statements about our beliefs and estimates, which include, but are not limited to, the transaction rationale, financial benefits, combined metrics, expected future financial and operating results, objectives and expectations 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 announcement and in our most recent Form 10-K. Actual results may differ materially from any forward-looking statements that we make today. Forward-looking statements speak only as of today, and we do not assume any obligation or intend to update them, except as required by law.

In an effort to provide additional information to investors, today's discussion will also reference certain non-GAAP financial measures. Explanations of those non-GAAP financial measures can be found in today's press release and in the investor presentation, each of which are available on the company's IR site.

With that, I will now turn the call over to John.

Thanks, Stewart, and thank you, everyone, for joining us today to discuss this exciting news. Today's announcement advances REPAY on our transformational journey to become a leading bill payment provider. We're excited to announce that REPAY has reached a definitive agreement to acquire KUBRA for a purchase price of $372 million. With this combination, we are creating a scaled bill payment provider with the breadth, technology and market position to lead the next chapter of digital bill payments across North America.

Let me explain why this transaction is so compelling. REPAY has built a market-leading payment processing platform across the consumer finance verticals. KUBRA has built a market-leading billing and consumer communication platform across utilities, government and insurance verticals. Together, we will offer a comprehensive end-to-end platform spanning bill presentment, communication services, a best-in-class clearing and settlement engine and payment processing. That is a unique and powerful combination in the market today. The combined scale is significant. Together, REPAY will interact with over 40% of U.S. and Canadian households every month and process over $130 billion in annual payment volumes. Our combined 2025 revenue is approximately $548 million with adjusted EBITDA of approximately $178 million.

We will operate across 18-plus dynamic verticals, serving nondiscretionary categories with recurring billing cycles. For those learning about KUBRA today, KUBRA is a leading billing and consumer communications platform serving some of the largest utility and government entities in North America. Their platform spans billing and payments, alerts and preference management, AI-powered solutions, mobile apps and utility mapping. KUBRA serves over 250 clients today through a deeply integrated offering connected to ERP providers across their core verticals. The company's headquarters is in Mississauga, Ontario, Canada and operates through regional hubs in the U.S. What makes this acquisition particularly powerful is how complementary the 2 businesses are. Both companies share a go-to-market approach built on a deep software integrations and vertical expertise.

KUBRA brings 30-plus years of experience in utilities and regulated end markets. REPAY brings deep expertise in consumer finance and a proven payment technology platform. By combining these strengths, we create robust opportunities to expand with existing clients, integrate with new software partners and win new business across every vertical we serve. Upon closing, KUBRA will be led by industry veteran, Rick Watkin, KUBRA's current CEO, and report directly into me. I've gotten to know Rick over the past years as we discuss the potential companies together as one. Rick brings decades of KUBRA and utility vertical expertise. I'm excited to welcome the KUBRA family into the REPAY family as we embark on the vast opportunities ahead.

Before turning the call over to Rob, who will go over the transaction details, I wanted to highlight the long-term value that this acquisition brings to REPAY. We have identified compelling expense synergies, platform cost savings and revenue opportunities that we expect to achieve over the next 3 years. This transaction is expected to be approximately 25% accretive to free cash flow by 2028. The scaled platform of profitable growth and free cash flow generation positions REPAY to quickly delever and reignite REPAY's strategic evolution while enhancing organic growth into the future.

With that, I'll turn the call over to Rob to go over the transaction details. Rob?

Thank you, John. We appreciate everyone for joining us today to discuss this announcement and transformation underway. As we noted in our press release and supplementary materials, REPAY has entered into a definitive agreement to acquire KUBRA for a purchase price of $372 million. The all-cash transaction will be financed with a combination of cash on the balance sheet and a $500 million term loan issued between signing and closing. REPAY has obtained committed financing and plans to replace the existing revolving credit facility as part of this transaction. This gives us ample liquidity and financial flexibility as we move forward.

Net leverage is expected to be approximately 4x at closing when including transaction-related adjustments and synergies. Importantly, with the strong and predictable free cash flow profile of the combined companies, we expect to reduce net leverage to below 3x within 18 months of closing. Rapid deleveraging is a clear priority. We anticipate the acquisition to close during the second quarter of 2026 and is subject to regulatory approvals in the U.S. and Canada.

Let me now discuss the combined financial profile. On a combined basis, REPAY's financial profile will have increased scale with continued strong free cash flow generation. The combined 2025 financial metrics are revenue of approximately $548 million and adjusted EBITDA of approximately $178 million. The acquisition of KUBRA is expected to generate compelling value creation opportunities, including identified synergies. The company expects the acquisition to be free cash flow accretive by 25% in 2028. We expect to drive approximately $15 million of annual run rate expense synergies by 2028, primarily by streamlining operations, integrating tech platforms and better aligning REPAY's overall corporate structure. REPAY's team has identified revenue opportunities across the combined client base. We plan to expand REPAY's payment capabilities with both existing and new clients, leading to increased digital payment adoption and client retention.

Additionally, KUBRA provides extensive communication services, which we expect to roll out across REPAY's consumer finance verticals. Once the company's technology infrastructures have been integrated and optimized, we expect to generate platform consolidation and CapEx savings of $5 million plus by 2028, resulting in CapEx dropping below 10% as a percentage of revenue. In summary, this is a transaction that enhances REPAY's scale, further diversifies our revenue base into attractive nondiscretionary verticals and creates a clear path to significant value creation through identified synergies and revenue opportunities, all while maintaining our commitment to rapid deleveraging and strong free cash flow generation. REPAY will continue to execute on our organic growth initiatives as we work towards closing over the coming months.

I'll now turn the call over to the operator to take your questions. Operator?

[Operator Instructions]

Our first question is from Peter Heckmann with D.A. Davidson.

In terms of the deal, how -- in terms of 250 clients, so those are customers providing services to consumers or billers and they are, in turn, reaching 40% of households in the U.S. and Canada. So can you talk a little bit about like the relative size of their customers and whether they're on long-term contracts, long-term relationships and a little bit more characterization of within those 3 main verticals, utilities, public sector -- public sector primarily also utilities? And then within insurance, what areas of insurance that they have some expertise?

Yes. Thank you, Pete. Yes, these are large enterprise billers. So they're directly billing to consumers. And obviously, some -- the utilities, they have businesses as well. But very large utilities and government. Predominantly, it will be heavier maybe in the utility government space, if you think about utilities and water, power light. And then that is scaled across the U.S. as well. It would lean more towards the segment, probably have more utility and government in it than it would, specifically insurance. Overall, though, it touches, as we said, it touches over 40% through all the services that it provides. We touch over 40% of the U.S. and Canadian households.

Peter, this is Rob. Just on the 40%, it's -- we're touching through payments, but also through the communication services that KUBRA provides, which allows them -- they have some really extensive good technology where they communicate to consumers. For instance, when your power is out, they provide grids that show the outage maps for power companies and notifications around power, water. And so that extensive capability is what really touches a lot of consumers across both Canada and the U.S.

Let me add as well. KUBRA has been around since 1992, right? So probably one of the first leading providers in the overall space which is pretty amazing. Our opportunity to just be able to partner and combine with someone who is just a leading provider already in these verticals. And then the average, many of these clients have been customers, although the government or utility space is a heavy RFP business. This means clients have been customers for years.

That's excellent. Okay. Great. And then just one follow-up. Within KUBRA's current revenue stream, is there any notable amount of pass-through interchange or things like postage related to the communications business?

No. They report net. I mean, from a gross basis, there is some postage that goes through, but we report -- we will be reporting net when we consolidate the 2 companies together, which would exclude that.

Our next question is from Joseph Vafi with Canaccord Genuity.

Congrats on the transaction announcement here. Just maybe we could get into your thoughts here strategically on timing. It sounds like you've known these guys for a while. Maybe just some thoughts, John, on why pull the trigger on this transaction now? And then just thoughts on delevering. Clearly, it looks like you're going to delever here pretty quickly. Do you see the kind of higher leverage perhaps I mean just thinking if there were other priorities in the business that maybe cash could have gone to without the acquisition and now we're going to delever.

Yes. So as we've always said, over the last several quarters, even the last several years, we've been doing acquisitions since we went public in '19. And we've actually delevered all the way to where we are today, which obviously allows us to do something like this. So we've been very disciplined on the inorganic side here for the last 3 years, looking for great opportunities like this that are super strategic to us. #1 priority always for us is organic growth, and we've been investing there. We continue to invest there. As we said last year, some of those investments is overall in our process as well as our sales -- our enterprise sales. And those things are -- those -- we see the fruits of some of those coming through as we look out into '26 and into '27.

So those are still going to be a high priority, even a high priority for KUBRA. We want to make sure that, that piece of go-to-market is still very strong. Obviously, investing in our technology, which you've seen us do. We think we have very good technology on our product stack and our technology stack are in a really well positioned. So we have been investing there. This is -- as you said as well, I've known Rick for some time. even -- and then the market opportunity is, I've always said, don't get to choose when great companies are available in the marketplace. This happened to be great timing for us.

And I'd just add on the deleveraging, as we've said on the call, this business is cash flow accretive, free cash flow accretive by 2028. And we have identified synergies that we feel very strong that we can achieve. And so our commitment to delivering those synergies and the free cash flow profile of this business allows us to deleverage, like we said, with under 18 months. So we feel very confident about that.

Our next question is from Charles Nabhan with Stephens.

I wanted to follow up on the question around deleveraging. First, would you consider selling any noncore or subscale assets within your current business mix to expedite the deleveraging process? And then secondly, is there anything you could say about the free cash flow conversion profile of KUBRA?

Yes. This is Rob. So thanks for the question. So we're still very excited about our other businesses at REPAY. And we think there's cross-sell opportunity when we bring the 2 companies together to leverage some of those businesses and so we're pretty happy with that, and we're going to continue to focus on those businesses as well. Although with KUBRA coming on board, we're obviously a larger consumer business, consumer payments business, but there's a lot of opportunity with our B2B business and a cross-sell capability.

On a deleveraging aspect on free cash flow, the free cash flow profile of KUBRA with the synergies, the synergized free cash flow is in line with similar to what we have at REPAY. And so we feel very good because of the execution of those synergies, the free cash flow conversion profile will help us get there from a deleveraging perspective, as we said, in under 18 months. So it's a pretty strong free cash flow profile with the synergies that we've identified.

Got it. And as a follow-up, I wanted to ask about -- I want to drill into the synergies a little bit. One of your core competencies and advantages within REPAY is your back-end processing capabilities. And I was wondering if you could double-click on what that means for the combined company and if you see any synergies from leveraging those capabilities with the combined asset?

So obviously, we have our own ecosystem, which is very attractive. As we evaluate those on a long-term basis, we think there's a great opportunity for us on a go-forward basis to use all those unique technology assets, including that scale. That's the one advantage you get of scale is that efficiency of having those systems. As you've heard me say over time, we need to be bigger. This is an absolute great opportunity for us to almost double revenue increase our scale and volume over $130 billion. So that is going to help us over time. We'll be strategic about it. Obviously, we have clients, and we don't want to do anything that would disrupt the payment flows of our clients. But there should and will be some opportunities for us to capitalize on that. We haven't overestimated that in our synergy expectations, but we know that there's some opportunities there as we've proven that historically by owning our own tech stack, owning our own true payment expertise in our ecosystem. So we'll see some opportunities there.

I would just add, John. John makes the point about ecosystem. The uniqueness of bringing these 2 companies together is that we have the complete ecosystem. We have bill presentment. We have the bill payment, and we have the back-office processing. A lot of companies sometimes have to partner to get those and REPAY brings all that the combined company under one roof. So that offers a lot of opportunity, again, to John's point around scale.

[Operator Instructions]

Our next question is from Timothy Chiodo with UBS.

Great. I want to talk a little bit about just overall take rate. I know there was a combined volume number there. But if you could just give a rough sense around the take rate of the business when viewed on the net revenue divided by volume basis and how that's trended over time? And as a slight follow-up to that, you had mentioned earlier that it's already netted down in terms of the net revenue, one of the prior questions, but revenue down to gross profit, if you could just give us a sense there. And then I have a brief follow-up, but congratulations, John.

Thanks, Tim. So I'll start with the volume. The $130 billion, as you know, we specifically don't report on a quarterly basis, our overall volumes. That will not be something we'll continue to do. We just want to give you something of the magnitude and the scale. That will also -- that also includes volumes such as ACH volume, which today we don't report as well. So if you're looking at it from a total take rate perspective, that's -- it will be hard to back into that specific number here. Overall, on the revenue generation piece, we will obviously be following 606 on our revenue generation side of that. You can tell on the margin side, this has a little bit lower margin. We'll wind up on an adjusted EBITDA basis in the low to mid-30s on a combined basis.

Yes. And part of that margin profile, just to add to that is large enterprise clients with KUBRA. Large enterprise clients bring a little bit lower margin profile. But again, long-standing recurring nondiscretionary volume, which is a pretty nice thing to have in our synergized EBITDA over time, we feel really good about it.

Perfect. That's all very clear. Really appreciate it. And then, John, you kind of already anticipated my follow-up proactively by saying around the ACH and debit part. But if possible, if you don't mind, just giving a little bit of mix on how that looks across ACH and debit. I'm guessing that's the 2 main forms, but if there's anything else in there.

Yes. We -- obviously, we don't break it out, but specifically in the overall large enterprise consumer, especially in utility, you're going to lean more towards the ACH world as that's kind of think about it the automatic drafting from your bank account. So that's going to be heavier in that space. But inside of this as well, there's large -- we have large opportunities for communications, various types of communications as we were talking about. The things around utility mapping, things around alerts and preferences, this overall -- it's a very skilled opportunity for us. Tim and the whole team here, this makes us one of the biggest bill payment providers in the U.S., right? And then the scale of these nondiscretionary verticals and the ability to really diversify us on the recurring -- these recurring payment methods. That recurring payment flows is fantastic if you think about that. Strategically, very strategic overall.

These were verticals that we had wanted to organically go into that would have taken us years and then to be able to partner with one of the best and biggest in the space, it's pretty amazing to have that opportunity to do that. We're really excited about that. It does make -- consumer payments itself would be about 45% on a forward basis. KUBRA makes up about 45% and business payments would make up about 10%. So diversification, we already have these nondiscretionary payment flows in the REPAY's current business. This adds even more stickiness to that on an overall enterprise basis. So really excited about that. If you look at the -- and then Tim has spoken about free cash flow accretive part of that going out into 2028. scale with ability to drive even more cash flow once we've executed on our synergies, executed on some of our strategic plans here as we look into 2028. Bigger in revenue, bigger in cash flow. We think that makes it a really dynamic opportunity for us.

Tim, I would just add real quick that it's got an ACH and debit profile, but there's also a sizable credit profile. So they do take credit card payments and the utility space for sure. So there'll be a credit volume as well.

Excellent. All right. Actually, I apologize, I normally wouldn't do this, but if you don't mind if I throw in one more. I apologize if I missed it in the presentation or the slides, but did you mention maybe, let's call it, a last 3-year CAGR growth rate or so? Or is it more that we should be looking at that mid-single-digit number for the industry? In other words, what has been the growth of the business over the last, call it, 3 to 5 years? And maybe what's a reasonable go-forward growth rate expectation?

Yes. I would -- for purposes of modeling right now, I would stay with where the industry is in the mid-single-digit range. We'll provide more color when we close and give a guide, but I would probably think in the mid-single-digit range.

This now concludes our question-and-answer session. I would like to turn the floor over to John Morris for closing remarks.

Thank you, everyone, for joining us today. Today's announcement further enhances REPAY's position to drive value for our clients by offering a comprehensive end-to-end digital platform and support their customers. The REPAY of Tomorrow is built to scale across nondiscretionary verticals and further benefit the vast opportunities ahead of us. I look forward to sharing more on our progress throughout 2026 and beyond. Thanks again for joining us today.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

Good afternoon, I'd like to welcome everyone to Repay's Fourth Quarter 2025 Earnings Conference Call. This call is being recorded today, March 9, 2026.

I'd like to turn the session over to Stewart Grisante, Head of Investor Relations at Repay. Stewart, you may begin.

Thank you. Good afternoon, and welcome to Repay's Fourth Quarter 2025 Earnings Conference Call. With us today are John Morris, Co-Founder and Chief Executive Officer; and Robert Houser, 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 and in our most recent Form 10-K. Actual results may differ materially from any forward-looking statements that we make today.

Forward-looking statements speak only as of today, and we do not assume any obligation or intend to update them except as required by law. In an effort to provide additional information to investors, today's discussion will also reference certain non-GAAP financial measures. Reconciliations and other explanations of those non-GAAP financial measures can be found in today's press release and in the earnings supplement, each of which are available on the company's IR site.

With that, I will now turn the call over to John.

Thanks, Stewart. Good afternoon, everyone, and thank you for joining us today. Repay delivered on its promise to improve growth as the company exited 2025. During the fourth quarter, Repay returned to solid normalized growth while continuing to generate strong profitability and free cash flow. This performance underscores the progress of Repay strategic initiatives and operational improvements. Throughout 2025, Repay underwent the necessary improvements to strengthen our operations, go-to-market and overall organizational leadership. As we proceed through 2026, we are well positioned to continue our momentum while supporting and optimizing our client digital payment flows.

On today's call, we plan to go over the 3 main topics: first, a review of the fourth quarter; second, a summary of our progress and achievements during 2025; and lastly, our 2026 outlook to drive growth into the future. First, a review of the fourth quarter. Repay closed out the year accelerating our normalized growth. In Q4, we achieved 10% revenue growth and 9% gross profit growth on a normalized year-over-year basis, which excludes the political media contributions during 2024.

Adjusted EBITDA margins were 41%, and free cash flow conversion was 43%, while reinvesting into several organic growth initiatives. Within the Consumer Payments segment, Q4 revenue increased 8% and gross profit increased 6% year-over-year. Our growth has built on steady payment streams with existing clients plus incremental contributions as we process more of our clients' total payment volumes and the ramp of new clients across the verticals we serve.

We increased our consumer software partnerships to 189, while also further enhancing many existing integrations, leading to better client and consumer experiences. Deeper integrations address the pain points across our consumer payments verticals by combining Repay's flexible payment processing capabilities directly within our clients' existing workflows. Clients that offer the convenience of modern payment modalities can seamlessly accept and track payments while enhancing their operational efficiency.

The newly-announced integration with Emotive software, an all in one automotive finance and compliance platform is one of the many examples of how Repay is building on our software partnerships to build a healthy core consumer bookings pipeline. And throughout 2025, our bookings have gained momentum, giving us confidence to the full year 2026. Additionally, our consumer payments teams are focused on client implementations to help reduce go-live time lines and provide sustainable growth as our clients continue to expand with us.

Now turning to our Business Payments segment. In Q4, normalized revenue increased 41% and gross profit increased 73% year-over-year, while excluding the political media contributions during 2024. Throughout 2025, our business payments strategic focus was on our core AP platform. Our go-to-market and partnerships prioritize the vast AP opportunities leading to many new client wins in the health care and hospitality verticals. We executed on several modernization initiatives like float income, expanded our enhanced ACH offerings and increased total pay adoption with both new and existing clients.

In Q4, we increased our supplier network to 602,000 suppliers, increasing over 65% year-over-year, and we exited the quarter with 105 software partners and embedded integrations. This represents adding over 240,000 suppliers during 2025, leading to great momentum to our hospitality vertical and while building on many software relationships such as use, which serves a broad spectrum of organizations across multiple industries. Businesses and organizations across verticals are looking for ways to modernize AP processes and improve payment security. Repays advanced AP platform provides these capabilities.

An innovative way that organizations are adopting AP platforms is with our recently announced referral partnership with Western Virginia University Gold and Blue enterprises. DPE clients can leverage Repays platform to donate their earned rebates to the university's NAL fund. So overall, we are pleased with the business payments momentum from our partnerships and direct sales teams. We expect our APE initiatives to continue building traction during 2026 and beyond.

Now on to our next topic, a review of the 2025 achievements and progress. Repay went through challenges during 2025, while also making important changes to reinforce our core foundation for a skilled future. We change key executives, streamlined processes and worked on ways to deploy automation and AI. During 2025, we allocated resources towards our sales and customer support teams to pursue enterprise clients across our verticals. Repay added 14 software partners and integrations during 2025 and exited the year with over 294 total partners.

We began rolling out new product capabilities like dynamic Wallet, where iOS and Android users can tap and pay and access statement activity directly within their digital wallet experience. Ultimately, our continued investment in product and technology is about providing best-in-class performance and reliability for our existing clients and prospective clients. We strive to achieve exceptional experiences for our clients and customers. From this, we are proud to be recognized by the Strawhecker Group for best gateway uptime in 2026 and weekly earned first place for the highest authorization rate for the second consecutive year in 2025.

In 2025, we also reviewed Repay's platform for the automated and digital future ahead. I'm excited for the powerful combination of leveraging AI capabilities with rebased technology to increase productivity across the organization. We are utilizing AI to reduce integration time for faster AT connectivity with software partners and are rolling out AI assist functionality for clients onboarding processes. We are deploying AI middleware for client and tech migrations leading to faster discovery and risk detection, reducing manual processes and lowering costs over time.

We also tested new product capabilities, such as Repay Voice. Repay Voice will revolutionize the IVR experience for consumer calls and already has a list of enterprise clients eager for a stage rollout during 2026. These productivity improvements are scalable as we look to spur growth further into inorganic opportunities. We're positioned to digest potential M&A faster with the foundation we have proved upon during 2025. I am proud of the progress we made from an operating perspective as we exited the year. Each quarter led to sequential improvements in the right direction. And now we are focused on maintaining the momentum as we execute throughout 2026.

With that, I'll turn the call over to Rob to go over our Q4 financials and discuss our 2026 outlook and capital allocation priorities. Rob?

Thank you, John, and good afternoon, everyone. In the fourth quarter, Repay delivered solid results across our key metrics. Revenue was $78.6 million and gross profit of $58.3 million. On a normalized basis, revenue and gross profit growth were 10% and 9%, respectively, which excludes the political media contributions during last year's presidential election cycle. .

As a company, we are proud of the progress we've made to sequentially improve growth in Q4. Q4 gross profit margins were approximately 74.2%, representing a similar margin profile that we experienced during Q3 2025 from lapping political media contributions, enterprise volume discounts and noncard mix as we process more of our clients' overall volumes. Going forward, we expect a similar margin profile that we experienced during Q3 and Q4 2025 to continue during 2026. Consumer Payments revenue and gross profit increased 8% and 6% year-over-year, respectively.

Business payments normalized revenue and gross profit increased approximately 41% and 73% in Q4 2025. Q4 adjusted EBITDA was $32.4 million, representing approximately 41% of adjusted EBITDA margins. Repay has been balancing resource allocation throughout 2025 and making incremental investments towards the sales, implementation and client service teams to support our future growth initiatives. Fourth quarter adjusted net income was $16.8 million or $0.19 per share.

In the fourth quarter, reported net income was impacted by a noncash goodwill impairment charge of $138.9 million related to our Consumer Payments segment. Free cash flow was $13.8 million during the quarter, resulting in 43% free cash flow conversion. Free cash flow was slightly below our expectations due to the quarterly timing of net working capital that is not expected to reverse in Q1.

As of December 31, we had approximately $116 million of cash on the balance sheet. Since year-end, we paid off the $147 million of 0% convertible notes at maturity using approximately $37 million of cash on our balance sheet and drawing $110 million on our revolving credit facility. On a pro forma basis, for the debt payment in January, repay has approximately $79 million of pro forma cash and $398 million of pro forma debt outstanding. .

Pro forma total debt outstanding is comprised of $110 million draw on our revolver facility in January and $288 million of convertible notes due in 2029 with a 2.875% coupon. Pro forma total liquidity is approximately $219 million, which includes $140 million of undrawn revolver capacity. Repay's pro forma net leverage is approximately 2.5x after the 2026 convert maturity. Now moving on to our 2026 outlook and capital allocation priorities for the year ahead.

As John mentioned, Repay made many strategic changes during 2025, an ongoing effort to improve our go-to-market operations and technology for a scaled future. These operational improvements are incorporated in our 2026 outlook and approach to allocating capital going forward. Our full year 2026 outlook reflects the growth algorithm that repay can sustainably achieve as we benefit from the secular digital payments tailwind, growth from existing clients and the ramp of new clients onto our platform.

In 2026, we expect revenues to be between $340 million and $345 million. This represents 10% to 12% reported revenue growth and approximately 7% to 9% normalized revenue growth when excluding the positive contributions of our Political Media business. We expect adjusted EBITDA to be between $136.5 million and $141.5 million, representing approximately 40% adjusted EBITDA margins. We are confident in achieving a free cash flow conversion target of above 45%, which incorporates fluctuations in net working capital and the incremental interest payments associated with the recent $110 million draw on our revolving credit facility.

Net interest expense is incorporated in our free cash flow. We expect interest expense to be approximately $15 million during 2026, which includes the interest payments associated with our 2029 convertible notes and $110 million draw on our revolving credit facility. As a reminder, free cash flow conversion is calculated by dividing free cash flow by adjusted EBITDA. During the first quarter, our year-over-year growth is expected to be lower than the full year 2026 outlook. As we have some implementations getting pushed out at several client wins in the back half of 2025 are set to go live later than initially expected, and we'll be lapping against some annualized churn we experienced in the back half of last year.

However, we are confident in the ramp of signed clients and strategic initiatives during the year with the second half returning to strong double-digit normalized growth. We are also expected to benefit from a strong midterm election cycle with the majority of political media contributions occurring during Q3 and Q4. Overall, we expect political media contributions to positively impact revenue by $8 million to $10 million, representing approximately 3 percentage points of reported growth year-over-year. And finally, from a capital deployment perspective in Q1, we will be making $15 million in TRA payments.

In 2026, our capital allocation priorities are focused on creating long-term value while maintaining strong cash generation to support liquidity and financial flexibility. During 2026, we plan to deploy capital towards 4 key areas. Our first priority is with organic growth opportunities. We will continue to make targeted OpEx investments to strengthen our position and accelerate our growth potential for 2027 and beyond. We expect to allocate capital towards strategic M&A and partnerships to further boost existing and new vertical reach while increasing the long-term growth and cash flow for the company.

We will maintain a prudent level of CapEx towards product and technology initiatives. We have $23 million remaining under our existing share repurchase program that we can use during 2026. And lastly, we have the financial flexibility to balance capital deployment towards organic investment, M&A, partnerships and share buybacks with the potential to reduce our total debt outstanding. We are heading into 2026 with exciting progress and momentum. As a company, we are committed to implementing our capital allocation strategy and achieving our 2026 outlook with double-digit reported revenue growth and strong profitability.

I'll now turn the call over to the operator to take your questions. Operator?

[Operator Instructions] And our first question comes from Mike Grondahl with Northland Securities.

I was wondering if you could just spend a moment on kind of the major end markets, maybe auto and personal loans and health care and mortgage, if you could, a little bit.

Mike, Yes, this is John. So from that perspective, what we see is consistent with what we've seen in the fourth quarter, what we've seen throughout last year. We see consistent -- trends that we saw last year on the auto and affordability constraints, that's relatively stable for what we have been seeing. So we still see that occurring in both auto and personal loans. .

Got it. Anything in health care or mortgage to call out in those markets?

Very similar as well. We're not seeing anything that would be different than what we have been experiencing.

Okay. And then any customer renewals in 2026 we should be aware of that are coming up? Anything stick out there?

Nothing major that we would not be inside of our guide that would not be standard on most of our contracts would be auto renewals in some ways, but nothing we wouldn't have already embedded into our guide.

Congrats on the outlook and some growth.

Our next question comes from the line of Alex Neumann with Stephens.

Just quickly, anything on tax refunds? I know there's a lot of data out there, saying average refunds are higher. Just any impact those are having on volumes payment activity?

Alex, yes, this is John. So we have seen a tax refund season. We saw some volume increase in the month of February. But so far to date, we found that to be -- at least we see -- we only see the payment volume, right? So we don't actually see the gross tax refund other than we've seen some normal. And this is a seasonal, this is on the consumer payment side. We do see seasonal uplift in our first quarter related to tax refunds. That appears to be relatively normal. Again, we don't see the total refund, we just see payments. .

Got it. And then if I could just a quick question on B2B. Just on the float income. Could you just dive into how much that contributed to growth, the margins. And where that low income is being generated from?

Yes. Alex, this is Rob. Yes. So the flow is from our customer deposits in our B2B business. We don't typically comment on the exact amount of money, but it was a good portion. We -- in the fourth quarter, we started collecting that interest on customer deposits in 2025. So as we go into our guide into 2026, it's relatively stable. But it played a part of our strong results in the fourth quarter, but we also -- for the B2B business lapped some large customer losses in the fourth quarter versus prior that also helped as well as the monetization efforts we've been making on moving volume to total pay and monetizing some of that volume was a big driver for fourth quarter and the B2B side.

Our next question comes from the line of James Faucette with Morgan Stanley.

This is Shefali Tamaskar asking on behalf of James. So just on the M&A, you called out that recent improvements have allowed you to better digest potential M&A faster. So on that, could you provide an update on what the pipeline looks like? You mentioned potentially new verticals and is more focused on the consumer versus business payment side.

Cliff, this is John. So yes, we've always had a healthy pipeline. Obviously, we haven't done any deals in the last really 3 years. But the opportunity would be in both in consumer and business payments with the selective investment opportunities for us. If we look at partnerships, if we look at potential areas that could drive new vertical reach or additional vertical reach for us that would be complementary to our existing 2 business units.

Both of those are possibilities. We're always looking for attractive opportunities for us to help reinvest and drive, that would help us with our overall scale, but also help us with our ability to drive more long-term organic growth as well.

Great. That's helpful. And then you mentioned the focus on organic growth investments as well. Could you speak to what you're most focused on investing in for '26, whether that be I know you focused on some sales support AI investments, if you could rank order what you're most focused on?

Sure. So from an organic perspective, it's continuously, as you are aware, our investments this year will really be our future growth for '27 and beyond. So we're continuing to invest like we did last year in enterprise sales, some of the go-to-market initiatives around sales support, some of the things that we want to do with as we use -- as I said earlier in the call, as we use AI to help drive new product initiatives like a voice AI, the IVR voice AI that we're going to be rolling out, some things with -- on implementations. We want to obviously continue to -- we think that is a great opportunity for us to use AI, both to help us streamline that, simplify things, but also help our clients possibly implement things as well faster. That's something we'll work on throughout the year and as we try to -- that will help us drive even more scale.

But some of the things that we're seeing as we drive automation and increase some things with that, that's exciting for us. It does -- that will help us as we scale, especially if we did something around any kind of implementation on -- from an integrated perspective, that we think that would allow us to really bring that on board faster.

[Operator Instructions] Our next question comes from Timothy Chiodo with UBS.

I want to follow up on a topic that we touched on, on the prior earnings call. We talked a little bit about the CDP from Visa. And as far as it relates to the business payments portion of prepaid's business, clearly, there's 2 sides to that, right? There's the AR side and the AP side. We also saw when Visa reported they had a nice growth rate for commercial revenue potentially related to the CDP network fee addition. I was hoping you could talk a little bit about how things have evolved now that we're a little bit deeper into that program, both on the AR side, meaning your ability to meet the requirements to get the lower interchange and how that's changing. And then on the AP side, how those receiving your card payments are adapting or not? And if you could -- I guess just talk a little bit on both of those sides.

Yes, great questions. And yes, that's an initiative that, as you're aware, at least 1 of the card brands rolled out in late January and specifically on the Level 2 side. Level 2, Level 3 getting into some details on how cards are off, et cetera. So that predominantly will affects the AR side of the world. specifically on the receiving side and how our clients in or how we can affect pricing around that.

As you probably are aware, asking that question, you're aware that Level 2 effectively is going a way to level 3 and the -- even the ability for the client side to gain and capture some of that has become a little bit more complex. So on that side of it, we should have -- we would have some impact on our AR side of our B2B business related to that.

And on the AP side, we have multiple ways to do virtual cards you can have more than 1 brand that you issue from on that side. So our focus there would be to maximize our ability to monetize based on the overall whichever brand or that we push those rails through or push those transactions through would be our pace for us.

Our next question comes from Pete Heckmann with D.A. Davidson.

I wanted to follow up on the business payment segment and how you think about that business growing over the next couple of years? Do you feel like there's a sustainable level of kind of high teens, low 20s type organic growth possible from that business? And if so, like how do you think about it in terms of signing up new end clients, new partners, volume. How do you build up to that?

And then just on the consumer side, are there any of your larger initiatives that you had talked about over the last, let's say, 18 months, some of the big new clients or big new initiatives that you expect to be outsized contributors to the consumer segment in 2026.

So Pete, it's Rob Houser. Answering your first question around B2B, in our guide, we're -- we had a strong fourth quarter. But when you look at our business going forward in 2026, probably one way to think about it is somewhere in the high teens. Now remember, this is a political year. So we -- as we called out, we have strong -- we're expecting a political season and midterm elections in the third and fourth quarter when that typically happens. And as we said on the call, that's around -- estimated around $8 million to $10 million in revenue. So this is a political year versus prior year, which wasn't. So you do have some of that lumpiness between presidential and midterm elections. But we're expecting -- when you think about this business on a normalized basis, it's probably in the high teens type of growth business for us.

Okay. And that's helpful. And then in terms of consumer, are any of those initiatives that we've talked about, like the auto OEM, the mortgage solution? Anything like that, that you expect to be relative outsized contributors to growth?

No, in 2026, specifically, we have some of those initiatives baked into our outlook. And then specifically on mortgage, that's a longer-term pull-through that's taken us way longer than we expected, as I mentioned last year. But effectively, both of those any kind of initiatives associated with both of those are baked into our 2026 forecast. .

There are no further questions at this time. And this now concludes our question-and-answer session. I would like to turn the floor back over to John Morris for closing comments.

Thank you, everyone, for joining us today. Repay exited 2025 with solid momentum. We are now looking towards to the future by executing on our plan for double-digit reported growth in 2026 outlook for the -- to drive our long-term value for our clients and our shareholders.

The Repay of tomorrow is built to scale and benefit from the opportunities ahead, and I look forward to sharing more on our progress throughout 2026 and beyond. Thanks again for joining us.

Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines and have a wonderful day.

Good afternoon. I'd like to welcome everyone to REPAY's Third Quarter 2025 Earnings Conference Call. This call is being recorded today, November 10, 2025.

I'd like to turn this session over to Stewart Grisante, Head of Investor Relations at REPAY. Stewart, you may begin.

Thank you. Good afternoon, and welcome to REPAY's Third Quarter 2025 Earnings Conference Call. With us today are John Morris, Co-Founder and Chief Executive Officer; and Robert Houser, 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 and in our most recent Form 10-K. Actual results may differ materially from any forward-looking statements that we make today. Forward-looking statements speak only as of today, and we do not assume any obligation or intent to update them, except as required by law.

In an effort to provide additional information to investors, today's discussion will also reference certain non-GAAP financial measures. Reconciliations and other explanations of those non-GAAP financial measures can be found in today's press release and in the earnings supplement, each of which are available on the company's IR site.

With that, I will now turn the call over to John.

Thanks, Stewart. Good afternoon, and thank you for joining us today. During the third quarter, REPAY executed on our promise to sequentially improve growth in the second half of the year. Our core growth strategy is built on our drive to optimize digital payment flows across our consumer and business payment verticals.

We embed our payment technology into software platforms for a seamless experience. And during the second half of 2025, we remain focused on the path of returning to sustainable growth as we exit the year.

In Q3, we achieved 5% revenue growth and 1% gross profit growth on a normalized year-over-year basis, which excludes the political media contributions during 2024. Our adjusted EBITDA margins remain robust at 40%, and we continue to generate strong free cash flow conversion of 67%, while reinvesting into organic growth initiatives. These financial results demonstrate the strategic improvements that are underway.

Across REPAY, we have been enhancing our go-to-market implementation pipelines and operations. We're automating processes, strengthening partnerships and enriching our capabilities and fine-tuning our clients' experience. We are testing and deploying AI tools across the company to build REPAY for a scalable future.

REPAY is using real-time API observability for our gateway monitoring, which is leading to some of the highest authorization and uptime across the industry. We have been utilizing assisted AI functionality during the client onboarding process for faster API connectivity with software partners, reducing manual documentation and improving implementations.

During the quarter, we developed REPAY's Dynamic Wallet, allowing loan payments to be seamlessly integrated into iOS and Android's digital wallet. Dynamic Wallet provides instant access to loan details, reminders to make payments on time and tap and pay directly within the consumer's digital wallet. Easier access leads to better customer experience for our clients and increased digital payments for faster and secure transactions.

Also, we have been adding new software partners during the quarter. We added 5 new software partners, bringing our partnership network to 291 across our Consumer Payments and Business Payments segments. Our investments in enterprise sales and customer support teams have built a healthy sales pipeline across the verticals we serve. This is reflected in sustained year-to-date bookings growth.

Additionally, operational initiatives are leading to improved productivity, increased automation and quicker implementation workflows. As these positive trends continue, our normalized growth is expected to sequentially improve further in the fourth quarter.

Now moving on to our Q3 segment highlights. Within Consumer Payments segment, reported gross profit increased 1% year-over-year. Our core growth algorithm is built on both the recurring and incremental contributions from existing clients and the ramp of recent client wins. As a reminder, Q3 gross profit growth was partially impacted by approximately 3% from the previously mentioned clients rolling off our platform. Without these impacts, gross profit increased single digits year-over-year.

In Q3, we increased our consumer software partnerships to 188 while also enhancing many existing integrations to further improve client and customer experience.

During September, we announced a partnership with Alfa Systems, a leading provider of SaaS software within the auto and equipment financing industry. The partnership combines Alfa Systems software with a complete solution of payment acceptance across modalities and channels. Financial institutions and lenders that use Alfa's loan management platform can utilize REPAYs out-of-the-box seamless payment experience while also streamlining their internal accounting and reconciliation processes. This partnership is a great example that embodies REPAY's overarching embedded payment strategy while also presenting additional sub-vertical growth opportunities.

We also announced a new integration with Fuse, an AI-powered LOS platform that serves banks, credit unions and financing institutions. Fuse's software embraces automation capabilities while also now embedding REPAY's secure payment processing technology directly into workflows to enhance financial institutions' operations. By combining our extensive software partners that span across our consumer verticals with our direct go-to-market approach, our sales teams are building on strong sales and booking pipelines while adding many new clients, including 11 new credit union wins in our financial institutions vertical.

Year-to-date, core consumer bookings have continued to increase from this go-to-market strategy. Our teams are continuing to focus on client implementations and ramp processes. The momentum we see in software partners, sales bookings and improving implementation workflows instills our confidence in our sustainable growth profile as we exit the year.

Now turning to Business Payments segment. In Q3, normalized gross profit increased 12% year-over-year, which excludes the political media contributions during 2024. Please keep in mind that we also lapped approximately 10% impact from last year's client loss. Without these impacts, our gross profit growth was over 20% year-over-year. Business Payments growth was driven by our accounts payable platform and payment monetization initiatives of float income and expanding our enhanced ACH offering.

We continue to win and implement new clients in our health care and hospitality verticals, leading to double-digit growth in our core AP platform. Our strategic focus is on increasing TotalPay adoption as we continue to prioritize our go-to-market and partnership resources towards AP opportunities.

Our supplier network increased to over 540,000 suppliers, growing approximately 60% year-over-year as we see great traction in our hospitality vertical, and we are building on existing software relationships such as Blackbaud in our education and nonprofit verticals.

We also recently announced a new integration with Hughes, a leading provider of AP automation software across multiple industries. REPAY's directly embedded technology ensures timely vendor payments while improving productivity by reducing the need for manual processes for organizations. We are pleased with the business payments momentum for our sales teams and expect to see sustained AP traction from our 103 strategic partnerships and embedded integrations.

In Q3, REPAY took positive steps in the right direction through execution. We returned to profitable normalized growth while generating significant free cash flow and maintaining a strong balance sheet for financial flexibility. We opportunistically deployed capital towards our organic growth initiatives, repurchased approximately 3% of our outstanding shares in August, bringing our total share repurchases to $38 million year-to-date and reduced our debt outstanding by retiring $73.5 million of our 2026 convertible notes at a discount.

Looking forward, we expect the momentum to continue, giving us confidence across both consumer payments and business payments into Q4 2025. And lastly, I would like to welcome Rob Houser, REPAY's Chief Financial Officer, who joined the company in September. Rob has already hit the ground running, bringing over a decade of payment experience and a proven operational track record. I look forward to working with Rob to build on REPAY's success.

With that, I will turn the call over to Rob to review our Q3 financials. Rob?

Thank you, John, and good afternoon, everyone. First, I'm very excited to join REPAY. My first couple of months have been incredible and busy. I've been learning about the company, culture and technology, all of which have confirmed my belief in the opportunities ahead. REPAY has a tremendous payment platform across our consumer and B2B verticals that is positioned to benefit from the secular digital payment trends. I look forward to digging deeper and getting to work and helping drive the company forward.

Now let's go over our financial results for Q3 2025. Revenue was $77.7 million and gross profit was $57.8 million. Normalized revenue growth and gross profit growth increased 5% and 1%, respectively, which excludes the political media contributions during last year's presidential election cycle. Our Q3 growth was impacted by approximately 4% as we continue to lap the previously discussed client losses from 2024. When excluding these impacts, Q3 gross profit increased mid-single digit year-over-year.

During Q3, our gross profit margins compressed approximately 3.4% year-over-year. Our gross profit margins were impacted from lapping one-off client losses and contributions from political media, a larger mix of clients with volume discounts as our client base volumes continue to grow significantly, and we continue to ramp enterprise clients with volume pricing, an increased mix of revenue from ACH and check volumes.

As our clients adopt more of our modalities and undergo provider consolidation, we are processing more of our clients' overall volumes. In addition, we have experienced an increase in average transaction value as we continue to move upmarket towards larger enterprise clients. Higher overall transaction values caused higher-than-expected assessment fees on capped interchange volume. Going forward, we expect these impacts to continue.

Consumer Payments gross profit increased 1% year-over-year. Our Consumer Payments segment is starting to show sequential improvement towards the fundamental growth of this segment. When excluding the approximate 3% impact from one-off client losses, gross profit increased single digits during the quarter.

Business Payments normalized gross profit increased approximately 12% in Q3 2025. In addition, Business Payments growth was impacted by approximate 10% headwind related to the previously communicated client loss during 2024.

Q3 adjusted EBITDA was $31.2 million, representing approximately 40% adjusted EBITDA margins. Throughout 2025, REPAY has been able to manage OpEx while balancing resource allocation and making incremental investment towards the sales, implementation and client service teams to support future growth.

Third quarter adjusted net income was $18.2 million or $0.21 per share. Free cash flow was $20.8 million during the quarter, resulting in 67% free cash flow conversion and demonstrating our solid cash generation as we execute towards sustainable profitable growth. As of September 30, we had approximately $96 million of cash on the balance sheet with access to $250 million of undrawn revolver capacity for a total liquidity amount of $346 million. REPAY's net leverage was approximately 2.5x.

During the third quarter, we opportunistically reduced debt outstanding by retiring $74 million of our 2026 convertible notes at a discount to principal value. Total outstanding debt of $434 million is comprised of $147 million convertible note due in February 2026, with a 0% coupon and a $288 million convertible note due in 2029 with a 2.875% coupon.

In addition, as the company previously announced, REPAY reduced outstanding shares by repurchasing approximately 3.1 million shares for $15.6 million in August. We repurchased a total of $38 million and 7.9 million shares year-to-date, reducing fully diluted shares outstanding by approximately 8%. As of September 30, we had approximately 92 million shares outstanding with $23 million remaining under our existing share repurchase program.

As we move into the fourth quarter, we're refining our financial outlook. In Q4, we now expect 6% to 8% normalized gross profit growth and free cash flow conversion to be greater than 50%. Our updated outlook reflects the normalized growth that REPAY can sustainably achieve as we benefit from secular digital payment tailwinds, growth from existing clients and the ramp of new clients onto our platform.

Our go-to-market and sales pipeline remains robust, which will continue to lead to solid volume and revenue growth opportunities. However, normalized gross profit growth is expected to be towards high single digits, which is at the low end of the previously issued growth outlook due to ongoing margin pressures we saw during Q3. Going forward, we expect gross profit growth to be impacted from an increasing mix of larger clients with volume discounts and pricing, an increased mix of ACH and check volumes and higher overall transaction values.

Additionally, the Q4 growth outlook naturally benefits from fully lapping the one-off client losses from 2024. The Q4 normalized growth would be closer to the lower end of the updated range if we didn't experience this benefit during Q4. And as a reminder, our reported financials will be lapping strong political media contributions, causing an approximate 10% impact to REPAY's Q4 reported growth.

The updated Q4 free cash flow conversion outlook is expected to be above 50% compared to prior outlook of 60% due to the timing of net working capital.

For the remainder of 2025, our capital allocation priorities remain focused on organic growth investments, managing CapEx as a percentage of revenue, maintaining a strong balance sheet with liquidity and incremental cash generation to address the remaining February 2026 convertible notes at maturity.

We plan to use cash on hand to further reduce a portion of our outstanding debt while also using our revolving credit facility for the remaining balance at maturity. And under our current share buyback authorization, we are able to opportunistically repurchase shares. In addition, we continue to be open to M&A to further accelerate REPAY's position and growth potential.

Over the next few months, I look forward to building my first 100 days as we begin the budget process for next year. We plan to provide details related to our 2026 outlook and capital allocation strategy on our next earnings call in early 2026. Until then, I'm going to meet with all of our shareholders and analysts while continuing to execute towards our updated Q4 outlook. Thank you.

I'll now turn the call over to the operator to take your questions. Operator?

[Operator Instructions] The first question comes from the line of Peter Heckmann from D.A. Davidson.

In terms of the free cash flow outlook, I guess, how do you see that trending into 2026? We've seen fairly strong or fairly high free cash flow conversion in some years and kind of off in some years. But I think your updated guidance is now greater than 50% for 2025. I guess kind of best guess is for 2026, how are you positioning that?

Pete, it's Rob. Thanks for the question. Yes. So we're -- I can lay out how we're thinking about it for Q4, and we're going to give 2026 guidance in the next earnings call. But we're rolling -- we'd expect to be in the upper 50s in Q4, and it's really due to just working capital timing. We had a 67% free cash flow conversion in Q3, which was pretty strong. But as we talk about working capital and some of the margin compression that we laid out on this call, we're holding around the upper 50s. And I would model it that as our exit rate going into '26.

Okay. That's helpful. And then just can you remind us, it may be in the appendix of the slide deck, but just the specific political media spend headwind from the fourth quarter of last year.

Yes. So the headwind we had in fourth quarter last year was $4.6 million of gross profit for fourth quarter of last year. And on an annual basis, the political media was around $11.75 million for full '24.

On a gross profit basis. Got it.

[Operator Instructions] The next question comes from the line of Tim Chiodo from UBS.

I was hoping you could expand a little bit upon -- within the B2B business, the Visa commercial enhanced data program, the CDT that's been rolling out this year. Talk a little bit about the various data requirements, maybe how they differ from the prior Level 2, Level 3 requirements. What you think this might mean for overall B2B interchange? What are some of the puts and takes there? And then, of course, I believe there's a slightly higher network fee associated with it as well. We would appreciate any of the context on your business and for the industry overall.

Tim, this is John. And specifically, was your question on the B2B side, was it associated with the AP side or the AR side? You may have not been specific. I'll talk a little bit about that. It's a very detailed question as well, so I won't go so deep.

I guess on the AR side, it might mean slightly lower interchange. And on the AP side, I'm sorry, also might be slightly lower as well. So I was just wondering -- I mean, I guess both is the short answer. But really, I was hoping you could talk about what the requirement changes are, if there's anything you need to do differently on the AR side. And then what it might mean in terms of the interchange rates that you might earn on the AP side. And then also there's that little extra network fee, I believe, as well.

Yes. So there's -- I'll start on the -- so level -- ultimately, it's Level 2, 3 and Level 2 itself is going to be going away. And that's really talking about the enriched data coming out of the invoices coming really from the -- mostly from the accounting ERP systems. And there's several different requirements there to go through that. And those have to be passed through with the transaction to qualify for the Level 3 rates. The Level 3 rates themselves are a little bit better. But the Level 2 rates, you have to now add some additional incremental pieces of data to that to get -- to qualify for the Level 3 rates.

We obviously are very aware of that. Visa -- this is really associated with Visa and those requirements are -- actually Visa is fine-tuning some of those things uniquely. This will come out ultimately in the next spring, but they're doing testing with many of those things today. And so we're working through that. Our ability to pull data, our embedded solutions is a positive thing for us, meaning like we have the ability to be able to go and work with our ERP systems to achieve that. But it's a work in process for most, everybody in the industry as those are a few changes that have come about.

And on the -- on the AP side, obviously, we have virtual cards that can be Visa or Mastercards. So we would look to optimize what's best in our favor on the AP side for -- in that case, we're receiving interchange on the AP side. So we would optimize what's the best rate for us there.

[Operator Instructions] We take the next question from the line of James Faucette from Morgan Stanley.

This is Shefali Tamaskar on for James. Just on consumer payments, in the presentation, you called out some pockets of consumer softness. Could you speak to what subverticals you're seeing this in most and what trends have looked like through early November, if possible?

Sure. Shefali, so what we -- from an overall perspective on the consumer side, we would consider a stable consumer on the marketplace. Obviously, we're not the actual -- those are not actually our end customers, our customers are businesses. But we consider a stable consumer. And then softness-wise, we've talked about previously that we saw some softness in the automotive, the used car piece of that. We think that's still relatively in the same position there. And that would be consistent with what we've seen previously, and we see that consistently the same now.

Great. That's helpful. And then you mentioned also being open to M&A as you look ahead to 2026. So I just wanted to hear about what potential targets look most interesting to you in terms of where you're seeing most like subvertical momentum across business payments and consumer payments. I know you've previously called out B2B being the more focused point for M&A, but curious how the pipeline looks today.

Sure. So a couple of things. So as we mentioned, as you -- earlier on the call, we actually take -- we bought back stock up to -- 8% of the stock in the July, August time frames, and then we actually -- as you heard as well, we retired $73.5 million of our February convertible debt. That's still a priority for us from a capital allocation perspective is addressing our February maturity, which we expect to do. But from an M&A pipeline perspective, we do see a healthy pipeline of some activity in the marketplace, and we are going to obviously always pay attention to opportunistically where that is. We see that both in consumer and B2B.

And just for clarification, we bought 3% in August, 8% year-to-date. Just wanted to get that clarification when we bought back stock.

We take the next question from the line of Alex Neumann from Stephens Inc.

I just wanted to double-click on the nature of the net working capital that's leading to the lower of the free cash flow conversion.

Yes. I mean, it's -- Alex, this is Rob. It's really just when we snap the line on working capital. And like I said, when we've been generating pretty good free cash flow conversion at 67% in the quarter. And the guide slightly down from what we had in Q4 previously at 60% to above 50% is literally just timing of when we snap the chalk line on working capital for the year as well as the compression that we talked about for going up market and some of the pay modality mix that we saw that fell through on the GP is probably the biggest driver to where the guide now is above 50%. But we continue to -- no, go ahead.

No, sorry.

No, I was just going to finish that. We continue to generate free cash flow, really good free cash flow conversion. Again, it was just really snapping the chalk line on when the working capital falls through.

Got it. And then I know a couple of quarters ago, you announced a partnership with a gateway in Canada. I was just wondering if you could update us on that partnership and how that's ramping?

We're still working through our implementation integrations there. So no major real update associated with that currently.

[Operator Instructions] As there are no further questions, I would now hand the conference over to the Co-Founder and Chief Executive Officer, John Morris, for his closing comments.

Thank you, everyone. I do have a slight correction on our supplier count that we mentioned earlier on the call. It's -- we're exiting Q3 with 524,000 suppliers, a very good number for us. We're excited about our growth rate there. But as I close this out, thank you for your time today. We continue to make great progress in our strategic initiatives while remaining focused on returning to profitable normalized growth, generating strong free cash flow and maintaining a strong balance sheet for financial flexibility. Thanks again for joining us.

Thank you. Ladies and gentlemen, the conference of Repay Holdings Corporation has now concluded. Thank you for your participation. You may now disconnect your lines.

Good afternoon. I'd like to welcome everyone to REPAY's Second Quarter 2025 Earnings Conference Call. This call is being recorded today, August 11, 2025.

I'd like to turn the session over to Stewart Grisante, Head of Investor Relations at REPAY. Stewart, please go ahead.

Thank you. Good afternoon, and welcome to REPAY's Second Quarter 2025 Earnings Conference Call.

With us today are John Morris, Co-Founder and Chief Executive Officer; and Thomas Sullivan, Interim CFO and Chief Accounting 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 and in our most recent Form 10-K. Actual results may differ materially from any forward-looking statements that we make today. Forward-looking statements speak only as of today, and we do not assume any obligation or intent to update them, except as required by law.

In an effort to provide additional information to investors, today's discussion will also reference certain non-GAAP financial measures. Reconciliations and other explanations of those non-GAAP financial measures can be found in today's press release and in the earnings supplement, each of which are available on the company's IR site.

With that, I will now turn the call over to John.

Thanks, Stewart. Good afternoon, and thank you for joining us today.

On today's call, we plan to cover 3 main topics: first, a review of second quarter 2025; second, an update to our 2025 outlook and capital allocation priorities; and lastly, an update on our CFO process.

In the second quarter, REPAY executed on our path to reaccelerating growth during 2025. Across the company, we have made great strides to sequentially improve on our go-to-market, implementation pipelines and operational excellence. REPAY's core growth strategy and resilient business model is built upon a never-ending commitment to optimizing payment flows to our clients. We are embedding payments to drive payment technology with software platforms to seamless experiences and these clients, businesses and consumers that we serve will continue to benefit from the ongoing secular tailwinds of digital payment flows in the U.S. As a company, we are putting the right processes in place, enhancing partnerships, fine-tuning our go-to-market. And as we continue to gain traction across our sales pipeline, REPAY is building momentum into the second half of the year.

During the second quarter, our year-over-year growth sequentially improved with reported revenue increasing 1% year-over-year. Our Q2 performance demonstrated steady gross profit growth when excluding political media contributions due in 2024 and the previously communicated client losses. We began to deploy incremental strategic investments into our organic growth opportunities while maintaining strong adjusted EBITDA margins of 42% during the quarter. In addition, Q2 reported free cash flow sequentially improved, resulting in 71% cash flow conversion.

Across our segments, we are benefiting from the go-to-market investments we've made in prior years within our enterprise sales and customer support teams, leading to healthy sales pipelines with enterprise clients. We are encouraged by the sustainable bookings growth experienced over the past several quarters, and we continue to expect these positive trends to reflect our normalized growth in the second half of 2025.

As we continue to focus on our core business, we are working on various operational initiatives to improve productivity, automate processes and enhance implementation workflows. Within the Consumer Payments segment, our reported year-over-year growth sequentially improved as we expected during the second quarter. As a reminder, our Q2 gross profit growth was impacted by approximately 3 points from previously mentioned clients rolling off our platform. However, our core growth algorithm of recurring and incremental contributions from existing clients plus the ramp of new client wins gives us confidence for continued sequential improvement leading to accelerated growth as we exit the year.

Across our consumer verticals, our go-to-market teams are building strong sales pipelines with our 185 software partners, while our customer support teams are hard at work enhancing our overall client experience. As a great example, during the second quarter, we announced enhancements to our integration with MeridianLink, a leading provider of software platforms for financial institutions and consumer reporting agencies. By expanding account funding options with REPAY's payment technology, credit unions and financial institutions using MeridianLink can start accepting funds into member accounts faster and improve their customers' overall experience.

REPAY's payment technology is integrated into multiple core financial institution and credit union software systems, which helps us generate a strong sales pipeline targeting the thousands of financial institutions nationwide. During Q2, our financial institution vertical onboarded several new clients, including 10 new credit union wins, increasing our total credit union client base to 353 out of approximately 5,000 across the U.S. Year-to-date, our core consumer bookings have continued to increase from this go-to-market strategy across our consumer verticals.

As we also focus on client implementations and ramp processes, we remain confident that our growth will accelerate as we move through the second half of 2025. We have been building momentum from prior enterprise sales initiatives. And as we further enhance our direct sales model with investments towards future organic opportunities, we expect overall momentum to continue into 2026.

Now turning to our Business Payments segment. In Q2, reported gross profit decreased by approximately 5% year-over-year as we lapped approximately 6 points of political media contributions and an approximate 10-point impact from last year's client loss. When excluding these impacts, gross profit would have increased double digit year-over-year. Business Payments growth was driven by our focus on our core accounts payable platform and payment monetization initiatives like expanding enhanced ACH and float income.

Our health care and hospitality verticals continue to be points of strength, adding new clients and expanding existing relationships during the second quarter. We also continue to expand with government municipalities and nonprofit organizations. During the second quarter, the municipal authority of Westmoreland County entrusted REPAY to handle their vendor invoicing and AP automation after experiencing vulnerabilities with vendor fraud. REPAY's AP platform prevents and protects against persistent fraud and cybersecurity threats within the payment industry. Our AP platform provides security solutions such as vendor payment validation to remove the risk from our clients while also increasing digital payment flows to ensure faster and secure payments to our supplier network.

During the quarter, we did experience softness in our AR client base as we prioritize resources towards AP opportunities and payment mix shifts with suppliers as we work on building our TotalPay adoption. Nevertheless, we are starting to benefit from our underlying strategic initiatives, giving us confidence that the positive trends we experienced in the first half of the year will lead to growth acceleration in the back half of 2025.

Our sales teams are continuing to capitalize on our software partnerships, embedded integrations, building our client pipelines as we target enterprise opportunities across our core verticals. We continue to add to our supplier network, growing 47% year-over-year to over 440,000 suppliers. In addition, we are focused on increasing both TotalPay adoption and digital payment penetration across our clients' total payment volumes, leading to incremental gross profit contributions from existing clients.

Our solid execution in Q2, strong balance sheet and cash generation give REPAY the ability to continue investing organically into the business while producing results to generate long-term value to our shareholders. In addition, we used the second quarter as a prime opportunity to buy back approximately 5% of REPAY's outstanding shares. Through August 7, we have opportunistically used a total of $38 million to repurchase 7.9 million shares.

Looking forward, we have strong momentum giving us confidence across both our Consumer and Business Payments segments to accelerate growth exiting 2025. As we move into the second half of the year, I'd like to provide an update on our previously issued financial outlook. Given the trends we are seeing into Q3, we will continue executing on our strategic initiatives to deliver sequential quarterly normalized gross profit growth. In Q4, we continue to expect high-single digit to low-double digit normalized gross profit growth and free cash flow conversion to accelerate above 60%.

During the remainder of 2025, our capital allocation priorities remain focused on organic growth and investments, managing CapEx as a percentage of revenue, maintaining a strong balance sheet with ample liquidity and cash generation to address the 2026 convertible notes upon maturity, where we can use cash on hand to reduce our outstanding debt. And on our current share buyback authorization, we're able to opportunistically repurchase shares. Additionally, we continue to be open to strategic tuck-in M&A to further accelerate REPAY's position and growth potential.

And lastly, we're excited to announce the appointment of Robert Houser as our Chief Financial Officer, who will be joining the company on September 8. Rob brings over a decade of divisional CFO and operational experience within the payment industry. We look forward to Rob joining as he will become a great strategic partner in running our company. With Rob's appointment, Interim CFO, Thomas Sullivan, will return to his role as Chief Accounting Officer. We're extremely grateful for Thomas' help in managing the finance organization over the past several months and the entire REPAY team for supporting the company through this process.

With that, I'll turn it over to Thomas to review our Q2 financials. Thomas?

Thank you, John.

In the second quarter of 2025, revenue was $75.6 million, representing an increase of 1% year-over-year. Reported gross profit declined by 2% year-over-year, which was impacted by approximately 5 points as we continue to lap the previously discussed client losses in 2024 and by approximately 1 point from political media contributions during last year's presidential election cycle. When excluding these impacts, Q2 gross profit increased single-digit year-over-year. As a reminder, tax seasonality during the first quarter creates lower activity and gross profit on a quarter-over-quarter basis in Q2.

As John mentioned, our Q2 Consumer Payments gross profit growth sequentially improved and was approximately flat year-over-year. When excluding the approximate 3-point impact from one-off client losses, our Consumer Payments gross profit growth showed improvement towards the fundamental growth profile of our Consumer Payments segment. The Business Payments segment reported gross profit declined by 5% year-over-year. Business Payments normalized gross profit increased approximately 1% in Q2 2025 when excluding the political media contributions in Q2 2024. Q2 Business Payments growth was impacted by a 10-point headwind related to the previously communicated client loss during 2024. In addition, the Business Payments segment experienced some softness in our AR client base and payment mix shifts with suppliers as we focus on TotalPay adoption.

Q2 adjusted EBITDA was $31.8 million, representing approximately 42% adjusted EBITDA margins while beginning to strategically place incremental investments towards our sales, implementation and client service teams across the company. Second quarter adjusted net income was $19.1 million or $0.20 per share. Q2 free cash flow was $22.6 million, resulting in 71% free cash flow conversion that demonstrates the solid cash generation of our business model. We continue to expect free cash flow conversion to accelerate above 60% in Q4.

As of June 30, we had approximately $163 million of cash on the balance sheet with access to $250 million of undrawn revolver capacity for a total liquidity amount of $413 million. REPAY net leverage was approximately 2.5x. 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.

During the second quarter, we were active in buying back shares under our share repurchase program as we repurchased approximately 4.8 million shares for $23 million. In addition, we repurchased another $15 million for a total of $38 million and 7.9 million shares year-to-date. As of August 7, we had approximately 91.3 million fully diluted shares outstanding with $23 million remaining under our existing share repurchase program.

I'll now turn the call back over to the operator to take your questions. Operator?

[Operator Instructions] And our first question comes from the line of Sanjay Sakhrani with KBW.

This is actually Steven Kwok filling in for Sanjay. The first question I have was just around the guidance. If we just look back at the first 2 quarters, excluding the political media along with the customer loss, you guys are growing low-single digits, but you're guiding towards the high-single digits for the back half of the year. I was wondering like if you can help us bridge like how -- what gives you confidence in being able to achieve that?

Steven, thanks for your question. As you know, the normalized growth was negative 1% in Q2. That's, of course, excluding the political media. With the client losses, as you pointed out, we have low-single digit growth as expected, that was a sequential improvement from Q1. We do expect sequential improvement again into Q3 as we accelerate. We expect to accelerate further into Q4 as we continue to lap the previously discussed client losses. I think the -- again, I'd like to reiterate the appropriate way to think about Q4 is the midpoint of our outlook, which is again, high-single digit, low-double digit normalized growth.

Got it. And then just a follow-up around the capital management priorities, given that you still have the $220 million remaining of the convertible notes that's due with less than 6 months, should we expect that the primary use of cash will be allocated towards that? Or do you guys envision taking out additional debt to basically cover for that $220 million that's due?

Yes, I can add -- this is John. So as we said on the call, obviously, the allocation of capital specifically is investments in organic growth, which we've been making, but specifically as well as we -- and obviously monitoring our CapEx spend, but we would prioritize the use of cash or capital towards the convert, which is due in February of '26. We would not have 100% cash available to pay that off in full cash, just to be clear. But we would like to use significant cash on hand to pay some debt down from a prioritization perspective, but we would have to tap back up our revolver to take down the rest of that.

Got it. And if I could sneak one last one in. It's just around the strategic tuck-in M&As that you called out that you were still interested. Any specific verticals or what does the pipeline look like?

No, we don't have any specific -- it would be something that would obviously -- we have -- obviously, we have several criteria we look at in order to be able to evaluate a specific opportunity. We've looked at these things for even in the last 3 years. So you have to be very strategic to us kind of in our swim lanes that we like to give us an opportunity to accelerate growth or give us a really strategic advantage. It would be in consumer payments or business payments, obviously, which is what we're already in today and embedded payments in some form.

The next question comes from the line of Joseph Vafi with Canaccord Genuity.

Nice to see the guidance for the year reiterated here. And so just maybe a couple of quick questions. I know exiting the strategic review, there was -- there's clearly a little bit of a change in the go-to-market or an expanded go-to-market. I know you mentioned a little bit of it here, but just thinking about your platform is pretty broad. It's pretty robust. Does it feel like you can move upmarket into larger customers versus kind of where your wheelhouse has been today and maybe some of the other growth opportunities you see on your platform as it's kind of grown and seasoned here?

Yes. Joe, so you are correct. We have been investing in part of our strategic review we exited, as you're aware, we looked at many different things there, but we specifically looked at how we could accelerate and really accelerate organic growth. We had been last year investing in enterprise sales. We continue to add incremental additional investments and enhancing our direct sales model, allocating more resources to our overall sales team.

We have been capitalizing as well on our monetization opportunities as we drive other noncard payment opportunities. And then our overall indirect partnerships where kind of our partner channels, those that we embed our solutions into, we're continuing to invest in those. So those pieces are going well for us. We are -- the items that we've invested in, we've got those moving. Those are all going in the right direction that we wanted them to do. That should enhance our overall go-to-market and in the implementation pipelines, we're working hard on that. Just overall operational excellence, we're investing into that.

So I think your other question was ways to other verticals or key verticals. We think specifically, if you look at the verticals we're in, in the B2B side, that's in health care and hospitality and government and nonprofit, those have long runways to them. We love those as we -- even as we drive some of that opportunity with some of our overall implementation partners or overall channel partners there. But specifically on the consumer side, we have the ability, and we are -- on the enterprise side, our pipelines are healthy with some of the enterprise opportunities we're looking at. And so we think those investments will pay off for us. I wouldn't call it any net new verticals on the consumer side at this point, just larger opportunities in the existing verticals we're in.

Great. And then any more updates? I know you were focused some on the opening up the mortgage payments market for card payments. Anything going on there worth talking about at this point?

From a materiality perspective, no. But from an opportunity and a healthy pipeline, yes, we're seeing positive -- really positive traction on a few opportunities there and a healthy pipeline on some of the things we're working on there. So -- but materiality in 2025, I would not consider it to be a 2025 needle mover from that perspective.

The next question comes from the line of Alex Neumann with Stephens Inc.

Can you give an update on the recent RCS partnership with the POS provider you talked about last quarter? And just any early trends you're seeing with that relationship?

Yes. So I would say nothing significant other than we're in our process of implementations, et cetera. So no major updates on that other than we like the relationship. We're excited about what the future holds there with us.

Okay. And then just quickly on B2B. Could you remind us the mix between AR and AP for that segment because as you called out some softness in the AR side?

Yes. It's probably 60-40, AR-AP.

The next question comes from the line of James Faucette with Morgan Stanley.

This is Shefali Tamaskar on for James. So just on consumer payments, you noted in the supplement that you're seeing resilient trends across auto and personal loans and mortgage, but you're seeing some pockets of consumer softness. Can you give a little bit more color on where the softness is coming from and if you think it's more temporary or cyclical in nature?

Yes. So specifically, on our overall, we actually see similar trends in Q2 as we did in Q1. And we are seeing a resilient consumer, at least from what we can see. And remember, we're not the actual -- we're the payment provider and in our case, not the actual lender. So overall, we do see specifically on the auto side, when we -- in the first quarter, we talked about that, and we've talked about that for a couple of quarters. We do think the auto piece still remains challenged, but we have not specifically seen any impact from the tariffs there. We haven't seen any major increase or decrease on that side of it, but we entered into this quarter knowing it was challenged from a few quarters back. We do see normalized spending.

Got it. And just to check through July and early August, are you seeing kind of consistent resilient trends as well?

Yes, similar trends.

[Operator Instructions] And the next question comes from the line of Tim Chiodo with UBS.

This is Pat Ennis on for Tim Chiodo. I wanted to touch on the TotalPay solution and the monetization efforts you had referenced on the last call and on this call as well. Could you maybe update us on the strategy there and any progress worth noting?

Sure. Yes. So actually, we're making really good progress there. Specifically, one way we see that is our TotalPay solution, as you recall, is we're processing all the payables for our specific client. And those payables could be executed in the form of a virtual card of an enhanced ACH, even -- and then also specifically, if we can't pay with one of those ways, we can obviously have to pay with a virtual or digital check or even a physical check. So we pay all their payables. That's what we call TotalPay. So the monetization piece of that is to try to monetize that.

If you look at the whole specific TotalPay number, our gross TotalPay number is actually increasing. Now we don't report volume on total TPV, but we get to see that on our side. So our TPV itself overall, we see that increasing. So that's a positive sign for us as we work through and try to monetize that. We have been leaning in on our ACH monetization opportunities, and we're seeing positive results from that as we have a few different offerings we offer there as we try to roll out our offering to the various different vendors in our vendor network, and we're seeing some of our initial sampling, some of our initial testing has been positively received.

Appreciate it. And then just a follow-up on the supplier network. I mean, growth has been pretty strong over the last several quarters, even on a Q-over-Q basis as well. So is that growth a function of existing client demand? Or is this a priority to win new business in the B2B segment? And will that pay dividends eventually?

Yes. So the network effect is real. So we -- over 440,000 vendors, as you can see, year-over-year, nice growth rate. The growth rate itself does -- as you mentioned, it does include existing but also net new wins and net new overall growth. So we do think the network effect is -- and we see it specifically. This is why we like to be vertically focused in that -- in our solutions there. As you can imagine, as we build critical mass in a specific vertical on a net new basis, we've seen that -- for sure, we've seen a national vendor in a lot of ways. So incrementally, it does help us accelerate adoption as we go by vertical when we build up our overall vendor network by vertical.

[Operator Instructions] There are no further questions at this time. I'd like to turn the call back over to John Morris for closing remarks.

Thank you so much for your time today.

As we're building momentum into our second half of the year, REPAY continues to execute towards our profitable growth and strong free cash flow generation. We're making progress. We remain focused on reaccelerating our growth as we move throughout 2025 and into 2026.

Really appreciate your time. Thanks again for joining us today.

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