Good afternoon. I'd like to welcome everyone to Repay's second quarter 2025 earnings conference call. This call is being recorded today, August 11th, 2025. I'd like to turn the session over to Stuart Grisanti, Head of Investor Relations at Repay. Stuart, please go ahead.

Thank you. Good afternoon and welcome to Repay's second quarter 2025 earnings conference call. With us today are John Morris, Co-Founder and Chief Executive Officer, and Thomas Sullivan, Interim CFO and Chief Accounting Officer. During this call, we will be making forward-looking statements about our beliefs and estimates regarding future events and results. Those forward-looking statements are subject to risks and uncertainties, including those set forth in the SEC filings related to today's results and in our most recent Form 10-K. Actual results may differ materially from the forward-looking statements that we make today. Forward-looking statements speak only as of today, and we do not assume any obligation or intend to update them, except as required by law. In an effort to provide additional information to investors, today's discussion will also reference certain non-GAAP financial measures. Reconciliations and other explanations of those non-GAAP financial measures can be found in today's press release and in the earnings supplement, each of which are available on the company's IR site. With that, I will now turn the call over to John.

Good afternoon, and thank you for joining us today. On today's call, we plan to cover three main topics. First, a review of second quarter 2025. Second, an update to our 2025 outlook and capital allocation priorities. And lastly, an update on our CFO process. In the second quarter, Repay executed on our path to reaccelerating growth during 2025. Across the company, we have made great strides to sequentially improve on our go-to-market, implementation pipelines, and operational excellence. Repay's core growth strategy and resilient business model is built upon a never-ending commitment to optimizing payment flows to our clients we are embedding payments to drive payment technology with software platforms to seamless experiences and these clients businesses and consumers that we serve will continue to benefit from the ongoing secular tailwinds of digital payment flows in the u.s as a company we are putting the right processes in place enhancing partnerships fine-tuning our go-to-market and as we continue to gain traction across our sales pipeline, repay is building momentum into the second half of the year. During the second quarter, our year-over-year growth sequentially improved with reported revenue increasing 1% year-over-year. Our Q2 performance demonstrated steady gross profit growth when excluding political media contributions due in 2024 and the previously communicated client losses. We began to deploy incremental strategic investments into our organic growth opportunities while maintaining strong adjusted EBITI margins of 42% during the quarter. In addition, Q2 reported free cash flow sequentially improved, resulting in 71% cash flow conversion. Across our segments, we are benefiting from the go-to-market investments we've made in prior years within our enterprise sales and customer support teams, leading to healthy sales pipelines with enterprise clients. We are encouraged by the sustainable bookings growth experienced over the past several quarters. And we continue to expect these positive trends to reflect our normalized growth in the second half of 2025. As we continue to focus on our core business, we are working on various operational initiatives to improve productivity, automate processes, and enhance implementation workflows. Within the consumer payments segment, our reported year-over-year growth sequentially improved as we expected during the second quarter. As a reminder, our Q2 gross profit growth was impacted by approximately three points from previously mentioned clients rolling off our platform. However, our core growth algorithm of recurring and incremental contributions from existing clients plus the ramp of new client wins gives us confidence for continued sequential improvement leading to accelerated growth as we exit the year. Across our consumer verticals, our go-to-market teams are building strong sales pipelines with our 185 software partners where our customer support teams are hard at work enhancing our overall client experience. As a great example during the second quarter, we announced enhancements to our integration with Meridian Link, a leading provider of software platforms for financial institutions and consumer reporting agencies. By expanding account funding options with Repay's payment technology, credit unions and financial institutions using Meridian Link can start accepting funds into member accounts faster and improve their customer's overall experience. RepaysPayment technology is integrated into multiple core financial institution and credit union software systems, which helps us generate a strong sales pipeline targeting the thousands of financial institutions nationwide. During Q2, our financial institution vertical onboarded several new clients, including 10 new credit union wins, increasing our total credit union client base to 353 out of approximately 5,000 across the U.S. Here today, our core consumer bookings have continued to increase from this go-to-market strategy across our consumer verticals. As we also focus on client implementations and ramp processes, we remain confident that our growth will accelerate as we move through the second half of 2025. We have been building momentum from prior enterprise sales initiatives, and as we further enhance our direct sales model with investments towards future organic opportunities, we expect overall momentum to continue into 2026. Now turning to our business payment segment. In Q2, reported gross profit decreased by approximately 5% year-over-year as we lapped approximately 6 points in political media contributions and an approximate 10-point impact from last year's client loss. When excluding these impacts, gross profit would have increased double-digit year-over-year. Business payments growth was driven by our focus on our core accounts payable platform and payment monetization initiatives like expanding enhanced ACH and float income. Our healthcare and hospitality verticals continue to be points of strength, adding new clients and expanding existing relationships during the second quarter. We also continue to stand with government, municipalities, and nonprofit organizations. During the second quarter, the municipal authority of Westmoreland County and trusted Repay to handle their vendor invoicing and AP automation after experiencing vulnerabilities with vendor fraud. Repay's AP platform prevents and protects against persistent fraud and cybersecurity threats within the payment industry. Our AP platform provides security solutions such as vendor payment validation to remove the risk from our clients while also increasing digital payment flows to ensure faster and secure payments to our supplier network. During the quarter, we did experience softness in our AR client base as we prioritize resources towards AP opportunities and payment mix shifts with suppliers as we work on building our total pay adoption. Nevertheless, we are starting to benefit from our underlying strategic initiatives, giving us confidence that the positive trends we experienced in the first half of the year will lead to growth acceleration in the back half of 2025. Our sales teams are continuing to capitalize on our software partnerships, embedded integrations, building our client pipelines as we target enterprise opportunities across our core verticals. We continue to add to our supplier network, growing 47% year-over-year to over 440,000 suppliers. In addition, we are focused on increasing both total pay adoption and digital payment penetration across our clients' total payment volumes, leading to incremental gross profit contributions from existing clients. Our solid execution in Q2, strong balance sheet, and cash generation give Repay the ability to continue investing organically into the business. while producing results to generate long-term value to our shareholders in addition we use the second quarter as a prime opportunity to buy back approximately five percent of repays outstanding shares through august 7th we have opportunistically used a total of 38 million dollars to repurchase 7.9 million shares looking forward we have strong momentum giving us confidence across both our consumer and business payment segments to accelerate growth exiting 2025. As we move into the second half of the year, I'd like to provide an update on our previously issued financial outlook. Given the trends we are seeing into Q3, we will continue executing on our strategic initiatives to deliver consequential quarterly normalized gross profit growth. In Q4, we continue to expect high single-digit to low double-digit normalized gross profit growth and free cash flow conversion to accelerate above 60%. During the remainder of 2025, our capital allocation priorities remain focused on organic growth and investments, managing cap access and percentage of revenue, maintaining a strong balance sheet with ample liquidity and cash generation to address the 2026 convertible notes upon maturity, where we can use cash on hand to reduce our outstanding debt, and under our current share buyback authorization, we are able to opportunistically repurchase Additionally, we continue to be open to strategic tuck-in M&A to further accelerate repayment's position and growth potential. And lastly, we're excited to announce the appointment of Robert Hauser as our Chief Financial Officer who will be joining the company on September 8th. Rob brings over a decade of divisional CFO and operational experience within the payment industry. We look forward to Rob joining as he will become a great strategic partner in running our company. With Rob's appointment, Interim CFO Thomas Sullivan will return to his role as Chief Accounting Officer. We're extremely grateful for Thomas' help in managing the finance organization over the past several months and the entire Repay team for supporting the company through this process. With that, I'll turn it over to Thomas to review our Q2 financials. Thomas?

Thank you, John. In the second quarter of 2025, revenue was $75.6 million, representing an increase of 1% year-over-year. Reported gross profit declined by 2% year-over-year, which was impacted by approximately five points as we continue to lap the previously discussed client losses in 2024, and by approximately one point from political media contributions during last year's presidential election cycle. When excluding these impacts, Q2 gross profit increased single digit year over year. As a reminder, tax seasonality during the first quarter creates lower activity in gross profit on a quarter over quarter basis in Q2. As John mentioned, our Q2 consumer payments gross profit growth sequentially improved and was approximately flat year over year. When excluding the approximate three-point impact from one-off client losses, our consumer payments gross profit growth showed improvement towards the fundamental growth profile of our consumer payment segment. The business payment segment reported gross profit declined by 5% year-over-year. Business payments normalized gross profit increased approximately 1% in Q2 2025 when excluding the political media contributions in Q2 2024. Q2 business payments growth was impacted by a 10-point headwind related to the previously communicated client loss during 2024. In addition, the business payment segment experienced some softness in our AR client base and payment mix shifts with suppliers as we focus on total pay adoption. Q2 adjusted EBITDA was $31.8 million, representing approximately 42% adjusted EBITDA margins, while beginning to strategically place incremental investments towards our sales, implementation, and client service teams across the company. Second quarter adjusted net income was $19.1 million, or 20 cents per share. Q2 free cash flow was $22.6 million, resulting in 71% free cash flow conversion that demonstrates the solid cash generation of our business model. We continue to expect free cash flow conversion to accelerate above 60% in Q4. As of June 30th, we had approximately $163 million of cash on the balance sheet with access to $250 million of undrawn revolver capacity for a total liquidity amount of $413 million. Repay's net leverage was approximately two and a half times. Total outstanding debt of $507.5 million is comprised of a $220 million convertible note due in February 2026 with a 0% coupon and a $287.5 million convertible note due in 2029 with a 2.875% coupon. During the second quarter, we were active in buying back shares under our share repurchase program as we repurchased approximately 4.8 million shares for $23 million. In addition, we repurchased another $15 million for a total of $38 million and 7.9 million shares year-to-date. As of August 7th, we had approximately 91.3 million fully diluted shares outstanding, with $23 million remaining under our existing share repurchase program. I'll now turn the call back over to the operator to take your question.

Operator?

Thank you. Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, and may be necessary to pick up your handset before President Sarkis. And our first question comes from a line of Sanjay Sakharani with KBW. Please proceed.

Hi, this is actually Stephen Kwok doing it for Sanjay. Thanks for taking my questions. The first question I have was just around the guidance. If we just look back at the first two quarters, excluding the political media along with the customer loss, you guys are growing low single digits, and your guidance towards the high single digits for the back half of the year. I was wondering if you can help us bridge what gives you confidence in being able to achieve that.

Hey, Stephen.

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

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

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

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

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

Great.

Thanks for taking my question.

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

Please proceed.

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

Yeah. So you are correct. We have been investing, and part of our strategy review we actually did, as you're aware, we looked at many different things there, but we specifically looked at how we could accelerate and re-accelerate organic growth. We had been, last year, investing in enterprise sales. We continue to add incremental additional investments in enhancing our direct sales model, allocating more resources to our overall sales team. We have been capitalizing as well on our monetization opportunities as we drive other non-card payment opportunities. And then overall indirect partnerships where kind of our partner channels, those that we embed our solutions into, we continue to invest in those. So those pieces are going well for us. We are, the items that we've invested in, we've got those moving. Those are all going in the right direction that we wanted them to do. That should enhance our overall go-to-market. And then the implementation pipelines, we're working hard on that. Just overall operational excellence, we're investing into that. So I think your other question was ways to other verticals or key verticals. We think specifically if you look at the verticals we're in in a B2B site, that's in health care and hospitality and government nonprofit. Those have long runways to them. We love those even as we drive some of that opportunity with some of our overall implementation partners or overall channel partners there. But specifically on the consumer side, we have the ability and we are on the enterprise side. Our pipelines are healthy with some of the enterprise opportunities we're looking at. And so we think those investments will pay off for us. I wouldn't call it any net new verticals on the consumer side at this point. just larger opportunities in the existing verticals we're in.

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

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

Got it. Thanks very much.

The next question comes from the line of Alex Newman with Stephen Zink. Please proceed.

Thanks for taking the question. Could you give an update on the recent RCS partnership with the POS provider you talked about last quarter and any early trends you're seeing with that relationship?

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

And then just quickly on B2B, could you remind us of the mix between AR and AP for that segment? Just as you called out some softness in the AR side.

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

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

Please proceed.

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

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

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

Yeah, similar trends.

A reminder, everybody, please press star one if you would like to ask a question. And the next question comes from the line of Tim Scioto with UBS. Please proceed.

Hi, thanks for taking the question. This is Pat Ennis on for Tim Scioto. Wanted to touch on the total pay solution and the monetization efforts you had referenced on the last call and on this call as well. Could you maybe update us on the strategy there and any progress worth noting?

Sure, yes. So actually, we're making really good progress there. Specifically, one way we see that is our total pay solution, as you recall, is we're processing all the payables for our specific client. And those payables could be executed in the form of a virtual card, of an enhanced ACH, and then also specifically if we can't pay with one of those ways, we can obviously have to pay with a virtual or digital check or even a physical check. So we pay all their payables. That's what we call total pay. So the monetization piece of that is to try to monetize that. If you look at the whole specific total pay number, our gross total pay number is actually increasing. We don't report volume on total TPV, but we get to see that on our sites. Our TPV itself overall, we see that increasing. So that's a positive sign for us as we work through and try to monetize that. We have been leaning in on our ACH monetization opportunities, and we're seeing positive results from that as we have a few different offerings we offer there as we try to, you know, roll out our offering to the various different vendors in our vendor network. And we're seeing some of our initial sampling, some of our initial testing has been positively received.

Appreciate it.

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

Yeah, so the network effect is real.

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

Appreciate taking the questions.

A reminder, if you would like to ask a question, please press star one by yourself on the keypad. There are no further questions at this time.

I'd like to turn the call back over to John Morris for those remarks.

Thank you so much for your time today. as we're building momentum into our second half of the year. Repay continues to execute towards our profitable growth and strong free cash flow generation. We're making progress. We remain focused on reaccelerating our growth as we move throughout 2025 and into 2026. Really appreciate your time. Thanks again for joining us today.

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