Repay Holdings Corp Q2 FY2021 Earnings Call

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 filing 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 newest GAAP financial measures can be found in our earnings release and earnings supplement, each of which are 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. On today’s call, I want to open with an update on our business for the second quarter, followed by a review of how we’re executing on our growth strategies. I’ll then turn it over to Tim to discuss our second quarter financials in more detail and thoughts on the remainder of 2021. During the second quarter, we experienced solid results across all of our businesses, which included card payment volume growth of 28%, total revenue growth of 33%, which included 16% organic growth for the quarter and gross profit growth of 29%, 13% of which was organic. Please note these organic growth rates are based on a tough comparison in Q2 of last year, as the stimulus payments went out in April and May of 2020. We also reported adjusted EBITDA growth of 26% in the second quarter. We’ve made significant strides in building out our B2B business to capture more of the large and under-penetrated market. On the B2B healthcare side, we recently signed a group purchasing agreement through CPS for advanced accounts payable solutions with Premier, a leading healthcare improvement company. This agreement will provide Premier members with advanced automation capabilities for AP disbursements, enabling healthcare providers and hospitals to streamline internal workflows and realize savings through revenue-generating rebates. During the quarter, we also launched our vendor payments automation solution into Acumatica and Sage 100 leading ERP companies, which will enable businesses to seamlessly pay vendors in a simple, secure way while also reducing unnecessary costs. We’ve been actively promoting the AR, AP cross-sell most recently at the Acumatica Annual Summit. We now have a very full cross-sell pipeline. We’re seeing incredible results for our B2B clients. One of our new CPS customers, Sonifi, went live within one week of signing our contract. In the first month, we helped them generate well over $100,000 in monthly rebates based on the supplier payments we were able to facilitate. Late in the second quarter, we announced our fifth B2B payments acquisition with the addition of Kontrol Payables, an integrated AP automation solutions provider, serving clients in a variety of end markets, including construction, food production, software, manufacturing, and education. Kontrol utilizes its 25-plus ERP integrations and network of over 13,000 suppliers to deliver efficiencies to its clients' AP workflows of executing outbound payments using a variety of payment modalities with a focus on virtual cards. With these acquisitions, REPAY now has more than 3,300 clients in B2B and over 80 B2B software integrations representing approximately 15 vertical end markets. On the AP side, we’ve grown our supplier network to over 92,000, an increase of approximately 30% from last quarter. The B2B payments market is expected to grow to $200 trillion in the next decade from the $123 trillion it is today. We believe that we are uniquely positioned to capture significant share in this growing market. Unlike much of our competition, we are able to provide payments and software solutions on both sides of the transaction, meaning both AR and AP automation. We have recently posted a presentation and webcast on our EVP of Corporate Development and Strategy reviews our B2B business and the addressable opportunity in greater detail. And lastly, on the B2B side, we recently created and filled a new role in our organization for EVP of B2B strategy and business development. Our new B2B leader brings an incredible amount of experience from his prior role as the Head of Business Development Strategy at Divi and also Director of B2B Payment Solutions and Partnerships at Visa. We’re thrilled to welcome him to the REPAY family and look forward to getting his perspective and guidance on how to further accelerate our efforts in the B2B space. On the loan repayments side, we’ve seen a rebound in personal loan volume over the past few months, post-stimulus and tax season, largely driven by increasing consumer demand, holiday travel, and back-to-school preparation. Our lending clients are also finding ways to engage more digitally with their customers, which fits very well with our payment technology. We continue to grow our existing customers as they consistently find value in the services we provide leading lending tech firms like loanDepot leverage our communication solutions and backend payment processing capabilities to deliver great mortgage servicing experiences for their borrowers. We continue to expand with lending partners in Canada with the addition of Fairstone Financial, Canada’s leading provider of responsible lending solutions for new prime borrowers. We’re working with Fairstone to help enhance their customer experience with our opt-in text-to-pay technology, giving borrowers even greater loan repayment flexibility. Auto is still one of the fastest-growing areas of our business with strong macro tailwinds, elevated used car prices, and increasing demand. These are long-duration loans that would lead to increasing digital engagement, which leads to greater repayment activity. Our instant funding product continues to experience significant adoption, breaking the record of the previous month in terms of loan funding amounts. We view this as a positive indicator for personal loan volume growth, as these funded loans will eventually need to be repaid. Moving on to BillingTree, we closed the acquisition on June 15, which was earlier than we expected, and the integration is going very well. We’ve recently posted a presentation and webcast on the BillingTree acquisition on our IR site, which I would encourage you to review. As we previously discussed, the acquisition enhances our position in large and attractive growth markets, including healthcare, credit unions, accounts receivable management, and energy. It also expands our scale and has a highly complementary business profile that is focused on integrated payments with strong distribution capabilities, both direct and through ISVs. In fact, through BillingTree, we recently announced a partnership with a credit management company, a full-service accounts receivable management solutions provider for the healthcare market, to power frictionless payments for healthcare systems, providers, and patients. We look forward to working with them to accelerate digital payments in the healthcare industry. This transaction clearly further expands our software partner relationships and creates opportunities for meaningful cost synergies, some of which we have already begun to realize. That said, BillingTree has brought in a very talented team of payment experts and technologists, and we look forward to working with them to grow the business together. Our TriSource processing business has been performing very well. It’s strategically valuable to own our own backend processing platform, which gives us unique capabilities to control the customer experience in areas such as billing and reporting. We recently signed Woodforest National Bank as a customer and hired a senior sales executive with many years of experience selling processing services to capitalize on our differentiated position in the processing value chain. Woodforest chose us because of our ability to customize their merchant services program. As mentioned previously, TriSource enhances our M&A strategy by allowing us to move acquired companies back into processing to TriSource, thereby eliminating third-party processing costs. We’ve executed on that strategy with APS, and this is also a synergy we expect to realize with BillingTree. I’ll now briefly provide an update on our growth strategies. ISV integrations continue to be a strong growth channel for us. During the quarter, we added 34 new integrations, many of which were related to the Control deal, bringing our total to 209 as of June 30. A recent ISV addition was Provana, a unified platform for credit and collections process management. They have over 400 customers and serve clients in the U.S. and Canada. Provana customers can now leverage REPAY’s processing solution with Provana’s all-in-one loan repayment and customer service application. We now have over 180 credit union customers combined with BillingTree, representing approximately 2 million collective members. This is an exciting growth area for our business. M&A continues to be an important growth driver for our business. Our pipeline remains very active across key areas, such as B2B and healthcare. We’re also very pleased with our ability to integrate a majority of the seven acquisitions we’ve made since going public a little over two years ago. We have also remained busy on the hiring front to prepare for the many organic growth opportunities that we currently have in the business. With that, I’ll turn it over to Tim to discuss the financials in greater detail. Tim?

Thank you, John. Now let’s move on to our Q2 financial results before I review our financial guidance for 2021. As John mentioned, in the second quarter, REPAY delivered strong results across all of our key metrics. Card payment volume was $4.6 billion, an increase of 28% over the prior year’s second quarter. Total revenue was $48.4 million, an increase of 33% over the prior year’s second quarter. cPayPlus, CPS, BillingTree, and Kontrol contributed approximately $6 million of incremental revenue during the second quarter. We had 16 days of BillingTree benefit, which contributed approximately $2.4 million of revenue. Moving on to expenses in the quarter. Other costs of services were $12.7 million compared to $8.7 million in the second quarter of 2020. The incremental other costs of services from cPayPlus, CPS, BillingTree, and Kontrol were $1.6 million for Q2. Gross profit was $35.7 million, an increase of 29% over the prior year second quarter. As John mentioned, on an organic basis, we saw gross profit growth of 13% compared to the second quarter of 2020. We are very pleased with this trend and continue to see positive momentum into early Q3. This organic growth was primarily driven by strength across our loan repayment verticals as well as continued outperformance from the TriSource backend processing business. Our Ventanex business is also performing nicely, particularly within mortgage servicing. SG&A was $29.5 million compared to $19 million in the second quarter of 2020. Second quarter adjusted net income was $14 million or $0.16 per share. Lastly, second quarter adjusted EBITDA was $20.4 million, an increase of 26% over the prior year second quarter. Second quarter adjusted EBITDA as a percentage of total revenue was 42% compared to 44% in the prior year second quarter. This slight decrease in margin was a result of increased investment in sales, technology, and product to continue putting in place the proper infrastructure for accelerated organic growth into 2022. Combined net leverage is approximately 2.8 times on a post-BillingTree transaction basis, which is a very comfortable level, allowing us to continue to fund organic and inorganic opportunities. As of June 30, we had $120 million of cash on the balance sheet and access to $125 million undrawn revolver capacity for a total liquidity amount of $245 million. As of June 30, we had approximately 99 million shares outstanding on a fully diluted basis. Finally, moving on to our outlook for 2021. Due to the strong results we’ve experienced across our businesses year-to-date, we’re increasing our expectations for volume, revenue, and gross profit for the year. We now expect volume to be between $20.3 billion and $20.8 billion, total revenue to be between $214 million and $222 million, and gross profits to be between $160 million to $166 million. Lastly, we are slowly increasing the midpoint for adjusted EBITDA to be between $92 million and $96 million. As I mentioned previously, we believe there are strategic opportunities to reinvest profits in functional areas, such as sales, technology, and products, but also in key growth verticals, such as B2B, in order to establish the proper infrastructure for accelerated organic growth into next year and beyond. Finally, as the economic recovery continues, we expect more of this increased contribution to occur in Q4. As with prior quarters, this guidance assumes no further unforeseen COVID-related impacts that could create substantial economic duress during the year. We’re very pleased with our results in the first half of 2021, particularly the organic growth, and look forward to an exciting remainder of the year. I’ll now turn the call back over to the operator to take your questions.

Thank you. Our first question comes from Ramsey El-Assal with Barclays. Please proceed with your question.

Hi, gentlemen. Thanks for taking my question this evening. I wanted to ask about the organic gross profit growth, which came in ahead of our expectations, I think you said about 13%. Can you kind of share with us your latest thoughts on that sort of organic growth – organic gross profit mid to high teens target for the full year? Does that change in your minds at all given the outperformance in the quarter?

Hey, this is Tim. Thanks for the question. We feel really good about this. As we mentioned on the call, we actually think it could be stronger going into Q3 and Q4. Like John said, the Q2 2020 comp was pretty difficult, given the stimulus payments, and we think Q3 and Q4 would get a little bit easier from there. And so we do feel good about mid to high teens to 20% organic growth in the back half of the year, and particularly going into next year.

Great. And I wanted to ask about – congratulations on closing the BillingTree acquisition a little early. Can you give us your updated view there on synergies, where you’re seeing the most opportunities and maybe a little commentary on kind of timing?

Yes, sure. So we are already realizing certain personnel synergies. There were just certain roles identified early on, and so that is in process. We’ll continue that throughout the remainder of the year. And then toward the end of this year, we’ll start to move the backend processing to our platform, in which case we’ll start to realize those processing cost synergies. So we’re very much on target for that personnel coming first, as I mentioned, processing coming toward the end of the year into early next year. And then I hope to stay on track with fully realizing the $5 million that we estimated previously by the end of 2022.

Okay. All right. Perfect. Thanks so much for your comments today.

Absolutely.

Thank you. Our next question comes from Timothy Chiodo with Credit Suisse. Please proceed with your question.

Great. Thanks a lot for taking the question. The 80 ISVs within the B2B segment that you’ve touched on, I was hoping you could give us a little more context on what the status quo is within the underlying merchant base of those ISVs, in terms of what they’re currently doing in terms of ACH, enhanced ACH, card, check, that type of context would be great. And then also the extent to which any of those integrations are more exclusive maybe than others. Then I have a quick follow-up.

Yes. So Tim, we think we’re still kind of in the early stages in terms of virtual card adoption. There’s still a lot of checks and ACH. Enhanced ACH is sort of a fairly new product, and we’re rolling that out as well. So there’s still a ton of white space and opportunity to further penetrate virtual cards. That’s something that we’re really excited about. One of the reasons we bought these companies in these verticals with these integrations is because we felt like that was a major, major opportunity. And we have a full team of supplier enablement folks that are working on that every day. We’re also increasing our supplier network, as we mentioned, we’re up to 92,000 and quickly marching toward 100,000 plus. And the big part of that is getting the virtual card adoption to increase through having that network enabled to accept electronic payments, particularly virtual cards. So we’re – we think there’s a lot of runway there for growth. We typically have exclusive relationships with these software partners. We’d like to consider ourselves the preferred provider, which gives us better access to customers and information that way. And so that’s how we like to go to market, but it’s not often exclusive.

Especially, in the B2B space, it’s mostly accounting ERP systems. So there generally are not going to be exclusivities on that side.

But one thing I will mention is, we are big partners with Sage and Acumatica within B2B merchant acquiring for some time now. We now have the ability to do accounts payable within each of those integrations, which we think is pretty unique. So again, even though they’re not exclusive, we’re one of the few, if not only, providers that can provide both merchant acquiring and AP automation and AP payments, and we think that’s a way we can really win.

Right. Perfect. That’s really helpful, Tim. Thank you so much. Quick, minor follow-up, you guys gave a lot of great context on the call around growth and organic growth. I apologize if I missed it, but did you happen to mention card payment volume organic growth for Q2?

Yes, we didn’t mention it, but I’ll – we estimate it’s about similar to the organic GP, so in the low teens.

Perfect. All right. Thanks for both of those. I appreciate the time.

Thank you. Our next question comes from Andrew Schmidt with Citi. Please proceed with your question.

Hey, John. Hey, Tim. Thanks for taking my question here. Good organic gross profit growth here in the second quarter, definitely a beat our expectations. But I want to dig a little bit into the outlook? Because it sounds like the qualitative commentary applies that things are running a little bit better than expected, but if you look at the outlook, maybe you’ve absorbed some of the beat for investments and things like that. Obviously, there are probably some conservatism built in there. So just curious to help just bridge the gap between what sounds like more bullish commentary and the quantitative outlooks in the back half. Thanks.

Yes, we do feel very good about the results in Q2, particularly organic growth. As I just mentioned earlier, we think that should continue and even accelerate in the back half of the year. That being said, we’re just monitoring other recovery within loan repayments. We know that our largest lenders have started more aggressively originating and that demand is picking up. Although we don’t always have perfect visibility or control as to when that flows through to our own repayment volume, that depends on the duration of the loan and the repayment schedule. So it’s really a matter of timing. We don’t think it’s a matter of – if it’s really more a matter of when. And so we think some of that volume may end up flowing into early 2022. And again, that’s something we’re closely monitoring. And so that’s one of the reasons for the guide being where it is.

Got it. That makes a lot of sense. That’s fairly prudent. And then a question on M&A, so clearly, it seems like B2B will continue to be a focus here. When you look at your M&A pipeline, is it more about building out verticals or building out capabilities? We talk a little bit about kind of what you’re thinking from an M&A pipeline perspective. Thanks.

Sure. This is John. It’s both. Obviously, the key integrations will be very important if we find things with some significant key integrations. But you see as well, there are some sub-verticals inside of that we think, if we could complement some sub-verticals already in the B2B space, that would be very complementary for us. And obviously, we’re always looking for technology that can help drive additional automation. So all those different areas, we love what we’re seeing in the B2B space. There’s enormous white space. We’ve confirmed it, it’s in our pipeline and our prospects. We gave you a couple of examples on showing you up new customers. We brought on an immediate opportunity for us to convert that into a really good situation for our customer. So the value-add is on both sides, where we can add significant value immediately for someone who has really never been using the AP automation solution. We see an enormous opportunity to continue to invest there. We see opportunities to make sure we’re spending wisely our shareholders' dollars, but we really think there’s a good opportunity in the near-term as we look out into the future.

And I would add on the AP side of B2B, one of the other important elements in addition to integrations and just verticals is the supplier network. So looking for opportunities to broaden the supplier network, either in existing verticals or potentially new verticals is something that we think about a lot when we look at targets within B2B AP.

Got it. Thank you, John. Thank you, Tim. Appreciate the comments.

Thank you. Our next question comes from Sanjay Sakhrani with KBW. Please proceed with your question.

Hi, this is actually Steven Kwok filling in for Sanjay. Thanks for taking my questions. The first question I have was just around the relationships on the Buy Now Pay Later side, given that it’s been a hot topic post the Square acquisition of ActivePay.

Yes, so we have several existing relationships in that space. We view that really as an installment loan in a lot of cases, and we process for a lot of installment lenders, some of which have been considered point of sale lenders in the past, who maybe shifted their business model to be more e-commerce focused, which would fit with Buy Now Pay Later. We have a very active pipeline in that area, both in the U.S. and Canada to bring on additional customers. Again, we think that we have a really nice customized solution for two installment lenders, and that fits really well with Buy Now Pay Later. We have existing customers that are growing, and we’re sourcing new customers as well.

Got it. And you also noted that you remained busy on the hiring front to prepare for the organic opportunities that you see. I just wonder how should we think about the operating margins over the near to intermediate term?

So I think the 42% to 43% is probably a good range in terms of adjusted EBITDA margins. We do want to invest in growth. We have a very large addressable market opportunity across a number of different verticals. And so we think just building out our sales team, our technology team, and product is very important to put ourselves in a position to address that going into next year and beyond. So I’d say where we are this quarter, kind of 42% to 43% is probably a good way to think about it.

Great. Thanks for taking my question.

Thank you. Our next question comes from Joseph Vafi with Canaccord. Please proceed with your question.

Hey guys. Good results and nice to see the pedal to the metal continuing on the M&A front. Just, just, I’ll start off with one on kind of strategic question. It looks like, we’ve heard a lot on the call about B2B tonight, we’ve seen more focus on the M&A front on B2B. How do you see the business in a couple of years relative to payment volume on B2B versus perhaps more on the consumer side versus where it is now? And then I have a follow-up after that?

Yes, we – it’s about 20% today, post-BillingTree, and we see that growing. A lot of other parts of our business are growing nicely as well, so it’s growing faster than those, so that’s why we think it can continue to be a bigger part of the mix. I would say it starts to move back up into the mid 20% to 30% range if we’re sticking with organic. Of course, if we make acquisitions, that could become an even bigger part of the mix. So we definitely want B2B to become bigger. It’s the second largest vertical behind loan repayments today, and we expect it to continue to grow.

Okay. And then just, secondly, the ISV integrations continue a lot of it’s on, you know, on the M&A side, and you’re getting those via M&A, I’m just wondering what you see the natural cadence being on ISV integrations on an organic basis relative to your growing base, considering your cross-sell and other opportunities. Thanks a lot.

Yes. We do see a lot of that growth. This quarter did come from acquisitions, but organically, we also added several partners across loan repayments, credit unions, and other core verticals. So we would see that maybe in the two or three to five additional partners organically each quarter. And then of course, we do additional M&A that could continue at an accelerated pace, but we do have a nice pipeline within our loan repayment verticals and some of the other verticals outside of just B2B. And so we would expect to continue to add there.

Great. Thanks a lot, guys.

Thank you. Our next question comes from Andrew Jeffrey with Truist Securities. Please proceed with your question.

I appreciate you taking the question this afternoon. As a follow-up on the couple of questions that have come before on your growing ISV partnership network. John, can you comment a little bit on relative productivity, sort of how much of your volume growth is coming from, say, I’ll call them sort of legacy ISV relationships. So from those you’ve had since perhaps before the IPO versus new signings and acquired ISVs. I guess what I’m getting at and I wonder if there’s room for growing productivity across that entire footprint over the next couple of years.

Yes. Sure, there is. So obviously, prior to the IPO, our existing verticals were really strong and they’re still delivering new wins for us. Many of those companies are – ISVs are actually growing themselves. So we’re still getting great wins from that. We’re also doubling back and trying to, through marketing efforts and relationships, extract more wins out of those portfolios. That marketing part is paying off. New conditions as well, we are laying out game plans on each one of those and actually getting better at it. So we can continue to partner with them to drive additional growth sales out of those. I suppose on the loan repayment side and on the – as well as on the B2B side, as we drive relationships from that piece of it. So organically, when we look at the different parts of our business, that’s one area that we know that there’s pent-up demand and there’s a great opportunity as we get better at driving new sales growth through our channel partners there.

Okay. Thank you. I’ll look forward to seeing that. And then can you just take a step back and I think the slide in your investor presentation Slide 12 is really helpful as we think about your business. Can you talk about sort of relative yield across the four big categories or three and ARM plus others? Just trying to think about as, for example, B2B grows faster, perhaps in some of your other businesses, what the impact is to yield. So just trying to frame that up as we model forward.

Yes, I’ll take that. So yes, we take it piece by piece. Loan repayment is probably somewhere a little bit north of 100 basis points. I’m talking about net revenue yield or take rate, B2B is probably right around 100. The B2B merchant acquiring space is probably a little bit lower than that. So – but the AP side is maybe a little bit higher if we think about virtual cards. So on average, call it 100 basis points. I’d say healthcare is probably in that same range, maybe slightly lower. But then ARM is probably somewhere in the 125 to 130 basis points, which is why you see our overall take rate moving up from – historically, it was right around 100 basis points for a while, and now it’s maybe 105 basis points this quarter, moving up probably a little bit more as BillingTree becomes a bigger part of the mix. So I’d say somewhere in the range of 105 to 110 basis points on a combined basis as we bring in the full BillingTree contribution.

Okay. That’s super helpful. And if I could just sneak one last quick one in. BillingTree’s organic – or BillingTree’s revenue growth compared to the overall business, higher or lower, the same?

It’s similar. It’s kind of mid-teens, mid to high teens. And so they’re growing nicely. Probably the fastest-growing part of our business is B2B, but we thought BillingTree had very nice growth. And also a strong take rate, like we just talked about in margins, either name or even maybe a little bit higher than the corporate average.

That helps a lot. Thank you very much.

Yes.

Thank you. Our final question comes from Craig Maurer with Autonomous. Please proceed with your questions.

Yes. Hi, thanks for taking the questions, guys. Two questions on some of your traditional verticals. First, can you discuss what you’re seeing in your healthcare vertical as we’re seeing reports and evidence that things like elective healthcare have definitely reaccelerated? And secondly, just maybe what your partners are telling you in the auto finance segment as chip shortages are still heavily impacting supply chains. I know you’re more into the used car business. However, with Mercedes Benz, you have entered into captive and are looking to grow there. Thanks.

Yes. So on the health care side, we have heard the same thing from our customers on elective procedures. That was coming back really strongly. I guess we have to monitor just what’s happening with the COVID variant and their – the hospital bed situation and how that could impact elective procedures. Hopefully, that’s temporary, and it just continues to come back the way it was when we went out and kind of surveyed some customers. So we think that’s really positive. There’s probably a lot of pent-up demand that we could see going into next year within the healthcare space, in general. In healthcare right now, we’re in several different areas. We’re in the consumer payment-driven part of healthcare, where they’re just paying a provider directly. We’re in the space where the insurance provider is paying out through a third-party administrator to a provider, so such AP disbursements, that’s where we would see a lot of elective procedures benefiting us. And then we’re also doing a lot of AP payments for large hospital systems that pay their suppliers with virtual cards. We think there’s a lot of potential recovery going into the back half of this year and next year in healthcare in general. And then in auto lending, you’re right, we’re more focused on used cars. Mercedes is a great customer, a large customer, but most of our business there is in used cars and hasn’t been impacted as much with chip shortages. We haven’t seen any material volume declines from Mercedes either.

Thanks a lot.

Thank you. Our final question is from Bob Napoli with William Blair. Please proceed with your question.

Hi, thank you. Good afternoon. On the growth rates for loan repayments, what are you seeing for year-over-year payment volume growth for personal loans and auto loans? And how has that trended? Is that going to be important in getting that acceleration you’re talking about?

Yes. I mean, on a normalized basis, personal loans are probably in the mid-teens. Auto has continued, even throughout COVID, to be kind of 25%-plus. With personal loans coming back, that is a very important part of the organic growth outlook that I mentioned earlier. We do see it coming back. We see originations happening. We see demand there. It’s just really a matter of timing for us as to when that flows through our repayment volume in the back half of the year going into 2022. If that can get back to a normalized kind of mid-teens growth rate and you combine that with the auto business, that’s how we get to that organic growth outlook.

Okay. Thank you. And then on the B2B payments business, so you’ve made five acquisitions, four on the AP side, different verticals, and one on the merchant acquiring side. What does that organization look like? And I didn’t catch, you hired from Divi or Visa? Are each of these businesses, John, reporting up to you? Or how is that organization being structured from a leadership perspective?

Yes. Sure, Bob. So we did have a great new hire that we mentioned here, and we’re excited about having him on our team. From an overall leadership perspective, that will be reporting directly to me. We’ll separate out the loan repayment and the B2B verticals. We’re looking to have some announcements on that later on this month; we just couldn’t get it all squeezed in before this call. We absolutely know who our leader is going to be there. As we continue to bring those teams together, we’re just trying to have some conversations internally around that. We’re super excited though. As you can imagine, we’ve been very blessed with some great team members there. Our product and technology solutions are superior to what we’re seeing in the marketplace. So look for us to provide more clarity on that as we bring some of our teams together on that piece of it. We know what we’re doing and where we’re headed on that piece of it, and we’ll be showing you that a little bit more clearly as we move through this year.

And then on the cross-sell side, one – another player in the market made a large acquisition on the AR side, obviously, believing in the cross-sell between AR and AP. Are you – how confident are you on that cross-sell? Are you big enough in the merchant acquiring side to make that relevant? Are you looking to make acquisitions on the AR side to balance that out? I mean, so what’s the cross-sell? What are you seeing from cross-sell? How easy is the cross-sell? And can you give metrics on that?

Yes. I mean, we see it across a lot of different verticals. In fact, we see a lot of our lenders wanting to use our AP capabilities. That’s something that they like, the idea of having just a one-stop shop for payments in general. We also see it within B2B merchant acquiring and then B2B AP automation, where, for example, within Sage or Acumatica, we now can provide both services to a single customer. Our team was just out at the Acumatica Annual Summit and getting a lot of really positive feedback on the ability to do that and have just one payment provider for both sides. So they’re building a pretty robust pipeline in Sage and Acumatica. Now we can do both AR and AP. We’re also selling that to our lending customers, and we’re seeing a really nice uptick there. So it’s real. It’s happening. We have our salespeople out there building pipelines and executing on that.

Thank you. And then last question on the virtual card side of the business. Another player in the space is showing some pretty dramatic increases in revenue per transaction. Now they’re more in the SMB space, and I think you’re more mid-market. Do you have that same opportunity? What is the penetration rate of virtual cards today for your B2B business? And what can that be? Or is it – are you not going to see the same type of benefits that somebody might in the SMB space because you have to scale to get more?

Yes. So the companies that we acquired, one of the reasons we liked them was because they had nice virtual card penetration already. So they weren’t check or ACH focused; they were virtual card focused. Our existing penetration may be a little bit higher than average. Maybe across all of our business, it’s somewhere in the high teens to 20% with the ability to go much higher. So we’re kind of starting off probably at a higher base than a company that’s been more focused on ACH, for example. But we also have supplier enablement folks in-house who are experts at this. We don’t outsource that; we do it ourselves, which is why we’re able to get to those rates and think we can bring them higher. There’s absolutely room for more adoption, and we have now a team of people doing that. To your earlier question, within B2B, we’re bringing all of the AP businesses together on the same technology platform and looking to employ the same supplier enablement strategy, which we think could be effective across those businesses. We’ve just been more focused on virtual cards probably from the beginning within B2B, not as much ACH, but there’s absolutely room to increase.

And obviously, the deal size and the volume is much greater the deal size as we’re pursuing.

Thank you. Appreciate it.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. I will now turn the call over to John Morris for closing remarks.

Thank you, everyone, for your questions today and for your time. As we reported, we’re super excited about our second quarter results and the outlook that we have for the rest of the year and even into 2022. Our business continues to perform well. Our organic growth opportunities are there. Our pipelines are strong. We are excited about what’s in our implementation pipeline as well and the opportunities we continue to see just organically in the white space of the markets we serve, specifically in the B2B space and the loan repayment space. We’ll continue to drive the opportunities for our ISV channels, and we see significant opportunities there. We want to continue to invest in the business organically. We think that’s a really good investment for our shareholders, and we’re super excited about our new team members that have joined us from the acquisitions as well as our existing team members that continue to help us deliver superior results, and we’re very grateful for that. So thank you for your time today, and we look forward to speaking with you individually when the opportunity arises.

This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation, and have a wonderful evening.