Greetings and welcome to today’s Earnings Conference Call being hosted by REPAY. With us today are John Morris, Co-Founder and Chief Executive Officer and Tim Murphy, Chief Financial Officer. During this call, we will be making forward-looking statements about our beliefs and estimates regarding future events and results. These 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 filed with the SEC. Actual results might differ materially from any forward-looking statements that we may make today. The forward-looking statements speak only as of today, and we do not assume any obligation or intent to update them, except as required by law. In an effort to provide additional information to investors, today’s discussion will also include references to certain non-GAAP financial measures. An explanation of these non-GAAP financial measures as well as a reconciliation of these non-GAAP measures to the nearest GAAP financial measures can be found in our earnings release available on the company’s IR site. I would now like to turn the call over to Mr. Morris. Please go ahead.

Thank you, operator, and good afternoon, everyone. We hope everyone is doing well and staying healthy. On today's call, I wanted to first give an update on our business in the third quarter followed by a review of how we're executing on our growth strategy with some exciting business announcements. I'll then turn it over to Tim to discuss our third quarter financials and guidance for the remainder of the year. As you can see from our results, the value proposition for our business has continued to prove more evident since the COVID-19 pandemic began almost eight months ago. For the third quarter, we reported 44% and 45% growth in card payment volume and gross profit, respectively. Similar to Q2, in Q3 we experienced increased demand for our offerings in several of our businesses across existing and new clients as our customers have accelerated the implementation of electronic payment capabilities. The pandemic has proven that loan repayments are resilient. Borrowers place a very high priority on staying current on their loan payments. The use of stimulus funds to pay down debt supports this belief. We've also continued to see significant shifts to electronic payments over the past few months, which has been and will continue to be a tailwind for our organic growth. Specifically, auto loan repayments have been very strong, driven by an increase in auto lending and positive macro trends in the used car space. There is a lot of demand for used cars from people who are moving out of the cities or are more reluctant to use public transportation. Lower interest rates are also contributing to the demand. Other lenders are accepting more payments on cards and are seeing increased clients, which benefits us. Our customers are wanting to use more of our channels and are looking for ways to engage consumers more efficiently. Digital engagement is one such ongoing trend allowing customers to effectively reach consumers, which drives penetration for us in terms of electronic payments for auto loans. In the future, we also look to more actively address the prime lending market including captives. Therefore, our total addressable market for auto is about 600 billion and is one of the fastest-growing parts of our business. Our mortgage servicing business also performed very well in the quarter due to increased home buying and refinancing activity along with low interest rates. This increased demand and low mortgage rates have sparked a boom in originations and mortgage service transfers, positioning us well to benefit. We've seen similar adoption trends in our B2B vertical; businesses, especially enterprise clients we typically serve, have been forced to adopt electronic methods of payments as well as automate their payments. That is a nice catalyst for accelerated growth in the future. Our instant funding product, which allows lenders to send funds directly to borrowers’ bank accounts through eligible debit and prepaid cards, has also continued to see increased adoption as lenders and borrowers shift towards more electronic payments. Overall, it was a strong quarter with positive trends. We made progress against all our growth strategies during the quarter. We continued to execute on our existing business by first expanding the usage and adoption of cards with our existing client base as well as acquiring new merchants in existing verticals. To that end, we had some great client wins in the quarter driven by our direct sales force. These efforts were aided by software integrations, adding 12 new partners during the quarter, mostly through acquisitions. This brought our total to 94 integrations at the end of September. Including the integrations from CPS payments, we now have a total of 119. We signed seven credit unions in Q3, bringing our total to 33, which represents approximately 340,000 collective members. I want to spend a few minutes discussing several of these integrations. In September, we announced a partnership with Advanced Business Computers of America to enhance our card payment acceptance and processing. ABCOA is a leading provider of software with real-time accounting for consumer finance companies. During the quarter, we also announced a partnership with CU*Answers to integrate card processing for credit unions. CU*Answers is a 100% credit union-owned data processing credit union service organization and provides combined services to over 270 credit unions nationally, representing over 2 million members. On the mortgage servicing side, we are also very excited about our recently announced integration with Ellie Mae, the leading cloud-based loan origination platform provider in the mortgage industry. This partnership will enable mortgage originators to accept digital payments, enhance the customer experience, and drive efficiency for in-home service loans. Ellie Mae has over 4,000 clients using their platform, so it could be a very large distribution opportunity for us with the potential to become one of our largest ISP partners. While we're on the topic of mortgage processing, we also recently announced a new service offering called STX, or Service Transfer Exchange, to automate loan transfer payments between mortgage servicers. STX automates the process of routing borrower payments from one lender to another when their mortgage servicing right is sold or transferred. This product solves a real pain point for our target market by eliminating manual and paper-intensive processes, standardizing the exchange of payment data and funds flow, reducing errors and costs for services, and creating a more seamless borrower experience. We are very excited about this new product as efficiency and accuracy are more important than ever in today's environment. Speaking of STX, we also recently announced the formation of the STX advisory board, initially comprised of six mortgage industry experts representing a variety of companies and leadership levels who all play a role in the mortgage service transfers between lenders. The goal of the STX advisory board is to design and promote the implementation of operating standards to ensure consistency, recommend enhancements to products and services to improve workflows and promote participation adoption of these standards throughout their networks. Additionally, we completed some important software integrations for our B2B business with ACH 500 and ACH X3. This adds to our integrations with the ACH 100 and ACH 300 solutions. This technology integration between REPAY and ACH 500 and ACH X3 will allow B2B merchants to easily and affordably accept payments with level 3 processing for B2B transactions, saving time and money. Moving on to our M&A, which continues to be a growth driver for our company. Our pipeline remains very active. There are many players out there that are great acquisition candidates for us. Ideal targets are high-growth businesses in large verticals that are underserved from a payment perspective, are integrated with software, have attractive margins, and have a need for our technology. Recently, we closed the acquisition of CPS payment services, which hits all those boxes. CPS is a B2B and accounts payable automation technology provider that facilitates the issuance, execution, and reconciliation of virtual card enhanced ACH and check payments through their integrated software platform, the CPS payment portal. CPS has developed a proprietary database of over 20,000 enrolled suppliers and serves an expanding base of over 160 enterprise clients across various sectors with the deepest representation in healthcare, education, media, government, and hospitality. Additionally, CPS has integrations with over 25 ERP and accounting software platforms. CPS also has the opportunity to unlock significant growth potential by cross-selling its new total paid solution to capture a greater market sphere across its existing client base. We are very excited about the acquisition as it immediately expands us into new verticals and greatly enhances our current B2B offering. Our ultimate goal for our B2B offering is to truly be a one-stop shop for our clients. We've set ourselves to do that over the past 12 months, having capabilities on both the accounts receivable and accounts payable sides. Taking that solution to the market in a comprehensive one-stop way is something that not many companies are doing. From a competitiveness standpoint, the B2B market is less competitive than some of our other markets. Over two-thirds of the opportunities that we win in this space are Greenfield opportunities and in the rare cases where it's not a Greenfield opportunity, we're winning because of the quality of our technology and the robustness of our platforms. Our B2B business now includes over 40 software integrations and a supplier network of over 50,000. We expect to process card and enhanced ACH payment volume in excess of 4 billion annually, with accelerating growth ahead, including cross-sell opportunities with other parts of our B2B business. Our total addressable market in the B2B space is now 3.4 trillion, bringing our combined overall TAM to 4.7 trillion. We're putting a lot of resources behind our efforts in this vertical. With every acquisition we make in this vertical, we've been fortunate to get B2B payments veterans who are helping us bring together the strategy, unify the businesses as offerings, and be instrumental in the long-term growth and development of our larger strategy. To wrap up, I continue to be incredibly proud of our team for their hard work and dedication to growing this company and providing excellent service to our customers throughout this time. Our business has proven resilient, and our value has become even more apparent as we move into 2021. With that, I'll turn it over to Tim to discuss the financials in greater detail.

Thank you, John. Now let's move on to our Q3 financial results before I review our financial guidance for the remainder of 2020. In the third quarter, REPAY delivered strong results across all of our key metrics. The third quarter card payment volume was 3.8 billion, an increase of 44% over the prior year's third quarter. Total revenue was $37.6 million, an increase of 43% over the prior year third quarter. TriSource, APS, Ventanex, and CPA Plus contributed approximately $10.2 million of incremental revenue during the third quarter. Moving on to expenses in the quarter, other costs of services were $10.5 million compared to $6.8 million in the third quarter of 2019. The increase was primarily due to the additions of TriSource, APS, Ventanex, and CPA Plus. However, when excluding those additions, the amount was down in Q3. Gross profit was $27.1 million, an increase of 40% over the prior year's third quarter. On an organic basis, we saw gross profit growth in the high single digits compared to the third quarter of 2019. Please note that organic growth now includes TriSource. Organic growth was solid in July and September, but August was flat due to the lapping of a very strong August 2019 for personal loan repayments. Also, the increased mix shift to auto and the TriSource recovery resulted in slightly lower gross margin for the quarter. However, our September organic gross profit growth was in the low teens, and volume trends in October were strong, which provides us continued confidence in our mid to high teens organic growth outlook. SG&A was $48.6 million compared to $55.1 million in the third quarter 2019. As a reminder, in the third quarter of 2019, we incurred transaction costs related to the business combination with Thunderbridge. Excluding the impact of those items, expenses were up year-over-year primarily due to commission restructurings completed during the quarter, increased hiring, share-based compensation, and added operating costs from our acquisitions. During the quarter, we modified sales commission plans for certain direct sales representatives by making an upfront payment in exchange for the release of future commission rights associated with designated customer accounts. Given our balance sheet strength and the low multiples paid for these ongoing cash flow streams, we felt it was a very good use of capital. We may consider additional commission or partner residual restructurings in the future as we look to deploy capital in a productive and efficient manner. The third quarter pro forma net loss was $6.6 million compared to a combined net loss of $41.4 million in the third quarter of 2019. The increase was mainly the result of general business growth and the impact of the aforementioned business combination expenses to net loss last year. Third quarter adjusted net income was $9.5 million or $0.12 per share compared to adjusted net income of $10.4 million or $0.18 per share in the third quarter of 2019. The decrease was driven primarily by a pro forma tax adjustment in the current period, which we did not include in the prior year period, as well as a higher outstanding share count. Lastly, third quarter adjusted EBITDA was $15.6 million, an increase of 31% over the prior year's third quarter. Third quarter adjusted EBITDA as a percent of total revenue was 42% compared to 45% in the prior year's third quarter. This increase in adjusted EBITDA is a result of organic growth and contributions from TriSource, APS, Ventanex, and CPA Plus. As a reminder, our adjusted EBITDA margins for these acquired companies are slightly below our loan repayment business; however, they are typically growing faster and we want to continue to invest in growth in the future. In mid-September, we closed an upside public offering of common stock; we sold approximately 14.4 million shares of REPAY's Class A common stock at a price to the public of $24 per share. All the net proceeds from this offering were used to acquire an equivalent number of LLC units from those controlled by Corsair Capital. Accordingly, the offering resulted in an aggregate increase in the company's public flow of Class A common stock by approximately 14.4 million shares, but there was no increase in the total as-converted share count. As a result of this transaction, which included the full exercise of the overallotment option by the underwriter Morgan Stanley, Corsair and its affiliated funds no longer hold an equity stake in the company. Corsair's private equity investment in REPAY occurred in September 2016. We had a great four-plus year relationship with the Corsair team, and we want to thank them for all their contributions in helping us along the way. As John mentioned, on November 2nd, we announced the closing of the acquisition of CPS payments for up to $93 million, of which $78 million was paid at closing last week. The remaining $15 million may become payable depending upon the achievement of certain growth targets. The closing of the acquisition was financed with cash on hand. Our cash and liquidity positions remain very strong. As of October 31st, pro forma assuming $78 million was paid for CPS, we have $101 million of cash on the balance sheet, $30 million of undrawn revolver capacity, and $46 million of undrawn delayed draw term loan capacity for a total liquidity amount of $177 million. Our pro forma net leverage is now only 2.3 times, which is well below our current net leverage covenant of 5 times. Please note that we recently amended our credit agreement with the only material change being to extend the availability period for the delayed draw term loan. As of September 30th, we had approximately 79.6 million shares outstanding on an as-converted basis. Our fully diluted share count, including unvested shares, equals approximately 82.2 million shares as of quarter end. Finally, moving on to our outlook for the remainder of the year. As I mentioned earlier, October volume trends have remained strong, providing us continued confidence in our mid to high teens organic growth outlook. However, we have continued to see an increased mix shift to auto and a recovery of our TriSource business, which is resulting in slightly lower margins. Our personal loan business, which typically has higher margins, has experienced some volatility over the past few months due to the introduction and then lack of stimulus benefits. We expect this volatility may continue while we're in this period of uncertainty around the economy and pandemic. Due to all of these factors, we expect our gross profit margin in the fourth quarter to be more similar to the first quarter of this year. Additionally, we expect adjusted EBITDA margins to be down slightly in the fourth quarter due to investments we are making in sales, product, and technology to set us up for continued growth in 2021. We have also added two months of contribution from CPS; however, please note there is seasonality in this business as it has some concentration in the media and education sectors, which means contribution in Q4 may not be equivalent to prior quarters. Finally, with only a quarter left to report, we thought it was best to narrow our guidance range to the following: card payment volume to be between $14.75 billion and $15 billion; total revenues to be between $148 million and $153 million; gross profit to be between $110 million and $113 million; and adjusted EBITDA to be between $63 million and $65 million. As with prior quarters, this range is based on no further unforeseen COVID-related impacts that could create substantial economic duress in the fourth quarter. Looking forward, with our several recent acquisitions, additional software integrations, new team members, and an expanding addressable market, we continue to enhance our growth levers and have significant momentum heading into 2021. I'll now turn the call back over to the operator to take your questions.

At this time we will be conducting a question-and-answer session. Our first question is from Craig Maurer with Autonomous Research. Please proceed with your question.

Yes. Hi, John and Tim, thanks. So, first what was the composition of your business in terms of revenue or EBITDA, however you want to present it between the different segments within your business and as we head into 2021, I wanted to get some additional color on how you're thinking about the personal loan vertical. Obviously, stimulus is not a guarantee and the volatility there; should we expect that margins should continue to be under pressure if that vertical does not improve? Yes, I will leave it there. Thanks.

Thanks, Craig. This is Tim. So the mix of the business was about 65% loan repayment, 20% B2B, and 15% other. However, now with the CPS acquisition, that mix is shifting more toward B2B, so we expect that to be more like 65% loan repayment, excuse me, 60% loan repayment, 30% B2B, and 10% other going forward heading into next year. And then personal loans; what happened this quarter is really a result of reduced originations in Q2, and we just saw less volume coming out of that origination dynamic. We have seen really positive trends in October where we’ve seen some of our larger personal lenders with more volume. So we feel good about that, and we're just monitoring it closely, and that's part of the commentary around where we expect to see margins in Q4, just given some of that lack of visibility with personal loans. But the trend in October has been positive, and it's something we're keeping a close eye on going into next year.

All right. Thank you.

And our next question is from Ramsey El-Assal with Barclays. Please proceed with your question.

Hi. Thanks for taking my question this evening. You mentioned some cross-sell opportunities with CPS. So maybe specific to CPS, but also just in terms of all the recent acquisitions you've done. Can you sort of rank order for us or give us more color on the cross-sell opportunities and kind of help us dimensionalize the degree to which that could have a noticeable impact next year?

Sure. So, the first one is both CPP and CPS. We can take their AP solution and sell it to our customers within APS on the AR side. So there's been a lot of demand for that over time, and APS has not been able to deliver an AP solution to their customers where they're facilitating acceptance of card payments. Now those conversations are happening where they are offering both acceptance and AP. Similarly, for example, with some of CPS's customers, maybe a large hospital system, we could offer acceptance services on acquiring services. So I think it definitely goes both ways, and we're starting to have some of those discussions on both fronts and getting more organized internally around how we want to roll that initiative out in a cohesive way going into next year. So it's still fairly early with both of those, but we're starting to see dialogue happening within the sales force.

Okay. And I also wanted to ask you about, if you could take a bit of a higher-level question. If you fast forward a few years, say five years, how do you think REPAY's business mix looks like? I guess it's another way of asking; through all the M&A you're doing, are you solving for a particular end state? Are you looking to drive diversification in a certain direction or do you have just sort of targeted areas that you can acquire and you're chasing more opportunistic deals, if that makes sense?

Yes. I mean, I don't think we have a specific percentage we're solving for. We certainly have diversified quite a bit in the last 12 to 15 months where loan repayments have come down as a percentage of the mix and B2B has increased, for example. Even within loan repayments, we've seen auto become a much bigger part of that mix, and now we see credit unions and mortgage increasing as well. Prior to CPS and CPP, it was probably something like 65, 20, 15 in terms of loan repayments, B2B, and other. Today, pro forma with what we know now, it's probably 65, 25, and 10; and then into next year, that will start to look more like 60, 30, and 10, with the 30 being B2B. So we see it shifting to B2B. It's just a very large addressable market with a lot of room to grow, but we're not necessarily solving for a specific percentage.

Yes, Ramsey. This is John. Good afternoon. I'll add to that the opportunity, as you've heard me say before, I've been watching B2B for probably 10 years, and the opportunity was there. If you remember, we inorganically bought APS last year, way before there was a pandemic, and obviously the pandemic proved some of our theories correct on the acceleration of the shift of payments to digital, and we're seeing more and more of that. We've been fortunate that it was a good area for us to go to, and it has all the attributes that we talk about. So, the opportunities are there, and we're chasing markets to try to achieve our organic growth rate, which we think is a significant opportunity out there. Our current loan repayment vertical, as well as the B2B vertical, has significant organic opportunities for growth left. We don't necessarily have to go into another vertical; if we find the opportunity to be there, we will. We take a big-picture, long-term view. We believe there is a significant opportunity to continue to grow both of those. Without inorganic acquisition growth, it will probably be hard to change the mix if both are growing well, but obviously with acquisitions, it can change that mix. From there, it's just a matter of opportunities we see in the marketplace that truly match who we are and what we think we can do.

Great. Thanks for the answer.

And our next question is from Sanjay Sakhrani with KBW. Please proceed with your question.

Thanks. First question, I guess, Tim, you talked about the air pocket as far as like stimulus and its implications for the fourth quarter. I guess as we look ahead to 2021, how are you planning for the year on that front? What does it mean for growth and investments if there is stimulus or if there isn't?

Yes. So we are trying to focus on what we do best, which is provide high-quality technology to these underserved verticals, and really, really strong direct sales force and customer service. We've been investing from a sales and product perspective in auto. We think it's a very attractive opportunity; it's a very large market, and we are investing in it. We've also been investing in B2B, not only through acquisitions but now with new hires from each of those acquisitions. So, we think that sets us up nicely. We can't necessarily predict the stimulus or if there is stimulus or the timing of it, but what we can do is monitor our top customers closely and look for trends like we saw in October related to personal lenders, for example, and try to get a sense by looking at some market research and also having discussions with those customers about the underlying trends and if that's something we should be projecting. We are just trying to get our arms around as much data as possible to inform what scenarios could look like with and without stimulus and the timing of that, and also investing with key investments focused on auto and B2B.

Okay. And you guys think you can hit your historical growth rates? I assume there will be some sort of stimulus; it's just a matter of how large or small. I guess as we think about whether it's small or large, do you guys think you can probably hit your long-term growth targets?

Yes. We felt confident, like we talked about in the mid to high teens organic growth longer-term outlook. We have a lot of avenues for growth in addition to auto and B2B. We talked about mortgage; we've had a lot of really positive momentum and mortgage related to the Ellie Mae partnership and then the STX announcement, so that's another area. We've had really good success this year in credit unions. We signed seven in the most recent quarter and we have a lot of targets out there just through our partnerships we've announced in that space. We now have three partnerships. So I think we are trying to either organically or through acquisitions set ourselves up with a lot of different avenues for growth and if one part of the business is down, then other parts of the business will be up, and that gives us the confidence in the combined organic growth outlook I just mentioned.

Okay. Perfect. Just one follow-up for John, maybe. Could you talk to the pipeline of M&A, like size and sort of where you're looking? It sounds like B2B area, but maybe you could just characterize it a little bit more.

Sure. Let me also kind of follow on Tim's last comment as well. Listen, we're trying our best to be transparent with everything we can see versus just not giving any type of numbers and drawing guidance and things like that. We're trying our best here, but what we're also looking at is to avoid a complete and absolute shutdown again, as that could be significant for everybody—all public companies. We're not seeing that, and we're hoping and praying that doesn't exist again, but that could have an impact on how we see things happening in 2021, obviously. Now on the M&A pipeline, it is very actionable based on what we see. We have been blessed to be very acquisitive since we became public. We've done five acquisitions, and we see some good opportunities out there still. We obviously need to do our homework from a numbers perspective. We don't really want to forecast those. We are very particular about that, as you can see what we've done in the past, and we’re also very measured in incorporating them into our organization. We look for these attributes; we see several in the marketplace with the attributes that are coming to market. We are also going to be patient and diligent with our shareholders' money. So we're excited, as there are opportunities out there.

Thank you. Appreciate it.

And our next question is from Andrew Jeffrey with SunTrust. Please proceed with your question.

Good afternoon, guys. Appreciate you taking the question. I think the mix conversation is an interesting one, especially as we start thinking about mortgage and this Ellie integration. John, can you give us a sense as to when you think you might be able to talk about some pretty significant mortgage payment volume? I assume maybe some of that STX revenues in the 10% that you talked about, but I'm wondering when you think that's a vertical for which you're going to be discussing in more detail from a payment perspective.

Yes. Sure. We are very excited about that. If you think about it, we haven't seen anything like the exchange that we're putting together. We think that's a long-term value creation opportunity for us in the entire industry. It really solves a lot of pain points and eliminates a lot of friction, but it also allows us the opportunity to gain additional foothold into solving other payment solutions and needs for those specific lenders. I would not say to us that's a longer-term investment, meaning over the next couple of years. We will ask you to be patient with us there because we see a significant opportunity, and it will create significant shareholder value long-term as we move into creating and developing that asset over time. It's not an immediate term bump, but we do see activity happening, and we see conversations happening. As we move through the first part of 2021, we see additional wins out there, but moving into 2022, we think there's even more opportunity as we build that out. On the mortgage side, especially when it involves large banks, it will take time; those are longer sales cycles and decisions, which is why you hear me say let’s be measured in that. We do think it's a really wise use of dollars.

Okay. Yes. It's an exciting opportunity. On the personal loan front, please correct me if I'm mischaracterizing this, but to the extent that there's current organic revenue growth deceleration, it seems like it's coming from that line of business, which is still 60% pro forma or so. Is it demand or supply? Is this an underwriting issue or is it consumer demand?

To clarify: within the 60% to 65% loan repayment, personal loans is just a part of that. So it's probably about 30%. The rest of the balance of that is auto and then there's a small portion still that's credit unions, mortgage, and then our Canadian business.Personal loans is just a part of probably about half, maybe a little less than half of the total loan repayment business. When there was a lot of stimulus dollars out there when the CARES act really started flowing money out and the enhanced unemployment benefits were happening throughout April and May, and maybe even into June, there was a lot of excess cash. Consumers were paying their loans, but there wasn't a lot of demand for originations, and they were down because consumers were flush with cash, and also lenders were tightening credit underwriting standards. However, what we see and we think now is becoming a trend in our data is when the stimulus benefits ran out at the end of July or early August, demand picked back up because there wasn't as much cash in the system, and consumers needed personal loans. Those originations that started occurring in August and September are now resulting in repayments, and we think that's what we started to see at the end of September into October, and that's a trend that we probably need a little bit more time to understand if that truly is a trend and will last. It’s a little bit of a higher margin, so even though our volume held strong, that was really driven by auto and a TriSource recovery, but auto is a slightly lower margin of personal loans and then TriSource had a lower margin as well.

Okay. So just to clarify, to the extent that demand for personal loans has come back, you don't have a strong sense that it's being blunted in any way by tighter underwriting standards?

No, I think there may have been a short period where that happened, but I think that they started originating loans more aggressively, like I said in August and September, and we're starting to see the repayment volume on that now.

Okay. Thanks. That's helpful.

And our next question is from Peter Heckmann with D.A. Davidson. Please proceed with your question.

Good afternoon. Thank you for the question. I would like to clarify some numbers here. Regarding the acquired revenue for the fourth quarter, are we looking at a range of approximately $4 million to $7 million?

Yes. In terms of the incremental revenue, that sounds about right, but we've included TriSource in our organic growth numbers for Q3 and basically pro forma them for Q3, '19, and then yes, we'll do the same thing with APS in Q4. Both will be included in the Q4 numbers.

Got it. Okay. That makes sense. And then just in terms of that opportunity with the captives, can you remind us when Mercedes-Benz was contributing a full quarter? And how would you kind of size or think about the rest of the captives, and are there some current prospects you think have a relatively higher probability for the next, let's say, couple of quarters?

We started processing with them in May, and so they have been just continuing to ramp up and add volume each month, and it’s been going really well. We're seeing that continue each month, and we are trying to have discussions with other captives through our network of relationships in the auto space and our relationship with the card brands and others. As you know, those are really long sales cycles, and we have to make sure that we're in the renewal discussions, and they might up our fees, or we're trying to get ahead of that and make sure we're in those discussions. That's where we are in terms of additional captives. Mercedes relationships now have been processing with them for about I guess four or five months, and it's going really well.

Okay. Good to go. I appreciate it. Thank you.

And our next question is from Joseph Vafi with Canaccord. Please proceed with your questions.

Hi guys, good afternoon. I was wondering if we could maybe just kind of switch over to the integration side of the business. Clearly a lot of M&A activity. Maybe get some thoughts here on, I guess to a certain degree, cost synergies from here on acquisition activity. I know you're putting stakes in the ground in some different payment volume areas of the economy. So also just wondering to the extent that provides or does not provide capability for more kind of tightly integrated technology integration on the back end, and then I have a quick follow-up.

This is a question about just the integration of acquisitions?

Yes, integration. I mean the business side, and if you look across your business and the potential for kind of integrating the various payment buckets into perhaps a single platform, or do you think you've got to run a lot of different stacks to address some of these different payment areas that you're focused on at this point?

Yes. Sure. This is John. I'll take that. So, actually, our integrations in the last 12 months are actually on track and on target. Starting with APS, Ventanex and then CPS Plus. The first two have gone well, and we've integrated most of those operationally. There are a few things we were changing on APS on the back end, clearing the settlement piece over to our TriSource platform. It's been more of an acquiring asset that has been successfully done. We're looking forward to going into 2021 with most of those pieces already integrated. It's a great point on the technology piece; as we do feature parity, we go in and look at work streams for all of our acquisitions to determine how we integrate them. They're all on track from that perspective. But on the technology side, we also work on work streams around feature parity to understand how to get the stop sale and ultimately sunset. We are on track with all of those assets. Sometimes some of those pick up some really good technology, and we're also picking up some key integrations. Integrations will be critical; even with technology, you have to work through your integrations, and those are critical to the whole CMOS piece of the payment piece that we do. So, we continue to work on those work streams, and our overall goal is to consolidate technology that makes sense, add technology we buy that is superior or complements well and sunset technology that possibly duplicates what we already do. What's unique about us—and I want to reiterate this—is we are a payment processor that also has superior financial technology integrated into ERP systems. We have the ability to move and settle funds. We own our clearing and settlement engine on the card side as well as we own our own clearing and settlement engine on the ACH side, and our ability to even print, mail, and process checks. We have a total end-to-end solution. As we continue to put our pieces and parts together with some of our acquisitions, we will continue to finish that out and build those out in 2021. Overall, everything looks very good, and we're excited about the people as much as the technology assets in this. I want to stress that we've said before, we don't always have OpEx synergies when acquiring fast-growing companies, and we're a fast-growing company. We acquire great people who help us continue to accelerate growth. That’s why you suddenly see us forecasting any kind of OpEx synergies. Most of the time, it will be some type of processing synergy on that side. You will, obviously, continue to see us invest in technology because we think that’s part of the winning formula that we will build around our business to provide excellent solutions.

Sure. That's helpful. Thanks, John. And then just quickly, kind of the outlook for, let's call it organic integrations if you're looking into next year? Some commentary around that, and then I guess penetration, end-user penetration in some of your existing integrations and the opportunity there? Thanks.

In terms of software integrations?

Yes.

We now have, as you see, been able to accelerate those in recent quarters just because we have a lot more verticals to address, and each of those verticals has their own unique software partners. That's something we placed a lot of focus on recently and putting resources toward that, and so we think that’s going to really benefit us long-term. A lot of those now are coming from our acquisitions because we're helping them with resources. We often find during diligence that there are partners that they want to have but just have not been able to get them across the finish line or for various reasons not been able to actually sign them up, and we're now helping them do that. That’s just one other example of being able to accelerate growth with these businesses through acquisition. In terms of the penetration question, a lot of them offer electronic payments within their customer base. There are several providers, but maybe not as focused on the particular vertical or not providing all the different channels we have from a payment perspective, for example, mobile or web or IBR—maybe just a simple web-based or phone transaction without the other channels. That’s how we see ourselves gaining share, increasing penetration in a lot of these different partnerships. That’s definitely a key distribution avenue for us; it’s something that we are very focused on.

Yes. I want to add to that. Most of you, since we’ve known us, we’ve probably over doubled our software integration partner list, and with GPS, we’re now at 119. Obviously, some of those were through acquisitions, but we think that’s substantial as we continue to build that out. That represents lots of prospective customers inside of each one of those integrations. I also want to emphasize that we continue to build out our supplier network now over 50,000 of those with our recent acquisitions. We think that’s a great opportunity over time as we continue to build those out. That will have some long-term benefits as that network builds over time, creating cross-sell opportunities.

Great, guys. Thanks very much. That’s all I have.

Our next question is from Bob Napoli with William Blair. Please proceed with your questions.

Thank you. Good afternoon. The question on the mortgage business. Can you give a little more coverage on exactly what the servicing, the transfer of servicing, and the revenue stream, the recurring nature of the revenue stream and the opportunity that you see with the likes of Ellie Mae? I mean are you competing with Black Knight in that business? Who are they? A little bit of color would be helpful.

Sure. Black Knight is actually a software partner of ours, so they provide software to mortgage servicers. They’re a software partner. Ellie Mae is more focused on originations. So those would all be partners of ours, not necessarily competitors. Right now, there’s a lot of ACH payments happening there. It's become electronic, but it’s still pretty heavy ACH. One of our initiatives is to convert some of that to card and increase card penetration, which will be hard for us, so it’s a per-transaction based revenue model. We want to convert it to more of a volume-based revenue model. We would then pay a referral fee, for example, to a partner like Ellie Mae or Black Knight. Ellie Mae has about 4,000 mortgage originators using their platform. We get involved in the kind of initial closing of the mortgage where there may be escrow fees or appraisal fees, and there is the first payment. We would be involved in processing that and that would be transferred to a servicer most likely, and we could be processing the ongoing recurring payments with that servicer if they were our customer. Oftentimes, we’re involved in that kind of complex refinancing activity, service transfer-related activity. If it’s not done correctly, it can create a lot of errors, and that’s why we are trying to automate it and make it more efficient, and we get processing fees for that.

Okay. Thank you. And then, a question on the B2B payments business and the kind of revenue and profit models between, the difference between the revenue streams on the AR business versus the AP automation business like how much of that is—is there software revenue on the AR side, the pure transaction on the AP side? How much difference is there in the revenue models for each of those?

So on the AR side, it’s a typical merchant discount rate. We’re doing merchant acquiring for businesses in a business to business card-based transaction, very similar model where we’re charging basis points on volume and then maybe a per-transaction fee as well. On the AP side, we are also getting bips on volume, but it’s on the interchange, so we’re basically on the issuing side where interchange is our revenue, and then we pay processing partners. There are rebates involved; we might pay rebates for virtual card usage. That’s the model there—it’s also similar in the sense that it’s basis points on volume. It’s not subscription based or flat fee per month, but it’s the interchange part of the transaction where we’re generating revenue versus on the merchant acquiring side; it changes the cost to us.

Great.

There is also the concept of enhanced ACH on the AP automation side, which would be a percentage of volume, and all that’s designed to provide seamless automation, reconciliation, and data transfers. So that's a version of that on the AP side. There is some of that as well on the AR, and then there are normal ACH transfers where you may have large file transfers and even potentially the mailing of checks, which is automated as well, predominant.

And then, John, the instant funding piece that you’re launching—what kind of penetration rate do you expect, and what's the pricing on the instant funding fees?

Yes. That’s per transaction, so it’s going to feel something like an ACH, but that’s a per-transaction fee. So it has good margins for transactions but it wouldn’t be bips as a percent of the transaction. For our users that are on it, we're starting to see really strong activity. We’re still early on, Bob; just to predict an exact penetration rate would be difficult, but for our specific lenders that are using it, we’re seeing really strong growth in their uptake. We’re seeing also more people using it, and just the automation pieces—you can, this common sense, say that it’s much more efficient. So we are seeing that.

Thank you. Appreciate it.

And our next question is from Timothy Chiodo with Credit Suisse. Please proceed with your question.

Great. Thanks a lot. I want to dig a little bit more into the automotive captive opportunity. I know that last quarter, and earlier on this call, you mentioned you've increased your addressable market—the analysis you’ve provided in the slides to better account for this opportunity. You mentioned also earlier some of the RFP processes and renewal timing that you want to get ahead of. In that light, maybe you could just give us—not mentioning any specific names—but when we look at the top 15 or so automotive captives, what’s the status quo? What are they offering now to their consumers to repay the loans? Is it set up on ACH? Is it just one payment method? Is it not multi-channel, omni-channel, etc.? Maybe just give us a sense of what the status quo is.

Sure. Very large addressable market, and I don’t want to give you any quoted names or anything like that because it is various different cycles. But you hear me smiling. It is longer sales cycles, so again, be patient here. Specifically across the board, there are some captives that merely process payments if you mail the payment in or it’s an ACH—kind of what we consider an ACH automatic draft. There might be an ACH if they have an online presence, but those who would not be using many of the omni-channels. They would need to be for the omni-channels—a complete IVR solution, or maybe even a tech solution or a mobile solution as well. We think there’s a web presence that is generally the first presence there, but the concept of being 24/7, being able to take a payment, that still exists in some of those players, and definitely the ability to take a debit card. I think that exists with a few that don’t even take debit cards. Several have been taking debit cards in that case, that would be a competitive win, but we have built certain features and functionalities for the auto re-lending space that we think can create winners for us. It’s just a matter of timing, and after we have to get there and win and then tell our story. We don’t win everything, but there’s plenty there, and if we get our fair share, we should do well.

That sounds good. Thanks, John. A quick follow-up; you mentioned this just a couple minutes back, I just want to dig into a little bit, the enhanced ACH offering came over a little bit from CPS, and it’s for use in accounts payable. Fully recognize that it allows you to send remittance data; it’s part of the workflow and the process reconciliation. It’s very important in accounts payable. Maybe you could just give us what the good use case is there. What’s a good example—sorry—a good use case for that relative to traditional ACH or virtual card? In other words, when’s a good time to use enhanced ACH?

I think if they’re cost-conscious about virtual card fees but want more data and want a more efficient workflow, the balanced product is enhanced ACH where it’s not a straight ACH. It doesn’t cost as low, but you're getting much better data quality and data transfer. It costs a little bit more than a traditional ACH, but not the same as a virtual card. There are certain players out there that want that product and want that balance in between, which is why that product. You can also price it in a way that is more similar to a card transaction and make the economics a little bit better for us because the cost to us is lower, and so that’s why it’s become, I think, more popular and something that CPS has done a really good job with and we can now bring that to the CPA Plus customers as well.

Yes, that’s very good. Yes. That’s right.

That one-on-one exchange, Tim, that you’re aware of, listen, you have a very large file—thousands of payments. If you need 10 to 15 attributes per payment, if you were to get that file in bulk, and it’s all ACH, and you get five of those attributes, but now you have to pay someone to go find the other 10 attributes that just—you kind of need or would like to supplement in a world of big data. We can do those one-for-one exchanges completely linked, so it’s seamlessly back into the ERP system. There’s tremendous value if you look at the man hours that could be spent in AP, and it eliminates and drives certainty and reduces errors, then drives down costs.

Excellent. Really appreciate the overview. Thank you, Tim and John.

And our next question is from James Faucette with Morgan Stanley. Please proceed with the question.

Thank you. Hi John, hi Tim. I wanted to ask you, you mentioned you’re looking at some incremental or potential acquisitions, but still work to be done there, and you indicated that you thought that diversification of the revenue stream, at least by end market type, etc. would most likely come through acquisition. I want to make sure I understood that correctly. But on the topic of acquisitions, how much flexibility do you think you have in your balance sheet right now, and in the capital structure to go do acquisitions? And I’m just wondering if you can achieve that diversification through a single acquisition, or are we going to have to look at multiples of acquisitions within the same area to get to the diversification that you might be thinking about?

Yes, sure. I think the comments around organic versus acquisitions from a diversification standpoint is just that it takes more time organically to move the needle, and so although we have really solid organic opportunities in areas like mortgage and credit unions, it’s just going to take time for those to be large enough to actually shift the mix, whereas an acquisition can happen right away. We’ve seen a great example in B2B; about a year ago, our percentage of B2B was zero percent. We didn’t have a business there and now it’s up to probably call it 25% if you include CPS pro forma. We’d be looking for other opportunities on the B2B AP side. We now look at that like we did with merchant acquiring; we are out there acquiring new verticals is one way to look at and go deeper within existing verticals within AP, and so that’s something we would want to focus on that could bring that percentage of the overall mix up above 25%. I think that was really the point of the comment. Balance sheet-wise, we’re at 2.3 times net leverage today; we would feel comfortable going up to 3.5 to 4 times for something very strategic. We have some flexibility there to do deals probably similar in size to what we’ve been doing, and if it was something larger, we’d have to tap the equity markets and look at that. We have some flexibility to do more M&A but if it was something larger it wouldn’t be all debt financed.

Right—that makes sense. And then quickly, I guess, you may provide some color on the adjustments you made this quarter in commissions. I think previously you’d mentioned your commissions are maybe a bit lower than industry because you control the merchant relationship. Do you expect that to be the case as you enter new markets or how should we think about that part of the expense group?

Yes. We do— we are very focused on rev shares. Historically, we’ve been able to have lower than market rev shares to your point. As we enter some of these new markets, it will be more competitive, particularly if there’s already an existing payment provider or several payment providers. But we try to structure those in a way that allows us to grow volumes with those partners and make sure that they benefit from that but not destroy our own margins. We’re focused on those deals. We also have the ability to restructure some of these commissions like we did this quarter, either with direct sales reps or with partners, and we can typically do that at very good, attractive multiples, and we think that could make a lot of sense too. That’s just another tool we could use. We felt like the dollars we are paying for commissions or residuals to partners were large enough we could just look to restructure them and bring more of that cash flow to our P&L.

That's really useful. Thank you.

And our next question is from Mike Grondahl with Northland Securities. Please proceed with your questions.

Yes, thanks guys. Two questions: one, your pipeline of ISVs, does that kind of map the volume of the different verticals in your business? Or is there an area where maybe your pipeline’s a little bit outsized compared to the volume? And then secondly, just in the personal loan space, have you lost any lender customers kind of through the turmoil this summer?

So for the first question, I don't think it directly correlates with the addressable market opportunities. It’s more about where we aim to allocate our resources. We still have many partners to engage with in the auto sector, and there are a few we are targeting in the mortgage sector as well. We view this more strategically in terms of resource placement and how we can boost growth and explore new distribution channels, rather than just focusing on the largest market size. This loosely connects to the idea of a one-for-one relationship. Regarding personal lenders, we haven't lost any of them. We're not aware of any that have been significantly harmed to the point of ceasing operations or going out of business. It's primarily that some of their volumes have decreased due to either tightening credit or lower demand for new loans. The larger lenders we monitor seem to be in good standing, and through our assessment and underwriting processes, we believe their balance sheets remain solid, and they have managed this situation well.

Great. Okay. Thanks, guys.

Yes.

And we have reached the end of our question-and-answer session, and this also concludes today’s conference. Everybody disconnect your lines at this time. Thank you for your participation. Have a good day.

Thanks everyone.