Earnings Call Transcript - RPAY Q4 2021

Operator, Operator

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 those non-GAAP financial measures, as well as reconciliation of these non-GAAP measures to the nearest 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, sir.

John Morris, CEO

Thank you, operator, and good afternoon, everyone. Thank you for joining us today to review our fourth quarter and full-year results. During the quarter, we reported card payment volume growth of 43%, total revenue growth of 50%, and gross profit growth of 57%, which included 17% organic growth. This caps off a very successful year for the company. For the full year 2021, we reported card payment volume growth of 35%, total revenue growth of 41%, and gross profit growth of 44%. Beyond financials, we had many successful business developments in 2021. Early in the year, through a concurrent common stock and convertible notes offering, we were able to secure additional capital for total gross proceeds of approximately $590 million, positioning us well for organic and inorganic opportunities. In 2021, we further expanded our offerings in our key verticals, by putting some of that capital to work through acquisitions. In June, we acquired BillingTree, our largest acquisition to date, further expanding our position in health care, credit unions, and accounts receivable management. Also in June, we acquired Kontrol Payables, further expanding our capabilities on the accounts payable side in B2B. And in December, we acquired Payix, which enhances our position in the key auto loan vertical and accelerates expansion in the buy now pay later market. We continue to invest in our integration playbook, which should help us with future M&A. The integrations from our 2021 acquisitions are going very well. Some of our investment spend in 2021 went towards organic growth opportunities. These investments focused on talent, technology, and product, which paid off with strong organic growth during the year, and positions us well to achieve 20% organic gross profit growth in 2022. As for talent, during the year, we added over 265 team members, which is an increase of approximately 60% from 2020. We've increased our sales and distribution resources, focusing both on direct sales as well as further penetrating existing referral relationships with our software partners and adding new ones. For technology, we focus on product development and integrating acquisitions. We hired internally, as well as announced a strategic partnership for Protego Technologies, an Ireland-based consultancy that helps extend technology departments and developer teams with specialized talent and project management. We now have approximately 30 team members dedicated to Repay in Ireland and expect to add additional technology talent through this partnership in 2022. Some of our investments around product were enhancements geared towards cross-selling our B2B solutions, which we successfully implemented in 2021. We expect to do more of this in 2022. Additional highlights for 2021 include further penetrating the credit union space, growing our customer base by nearly 5x year-over-year. We now have over 200 credit union customers, representing approximately 2.8 million members. In 2021, we added 98 new software partners, ending the year with 222 compared to 124 at the same point last year, and 53 when we went public in 2019. We also further strengthened our organization from an employee and governance perspective. In 2021, Great Place to Work and Fortune named Repay one of the 2021 Best Workplaces in Financial Services and Insurance. We expanded our board with the appointment of Emnet Rios, who is an accomplished financial services and technology executive that brings growth experience and blockchain expertise to Repay, as we look to support the evolving needs of our customers and partners. We also published our inaugural corporate sustainability report, highlighting our ESG efforts. Shifting to our fourth quarter highlights; our business payments vertical, which is focused on the enormous $3.4 trillion TAM, continued to perform well during the quarter. We now have over 80 B2B software integrations, representing approximately 15 vertical end markets and have over 3,600 clients. On the accounts payable side, we've grown our supplier network to over 110,000. We saw great success with conversion to our TotalPay solution. An example, one of our hospital clients was averaging close to 20% on virtual card, and we have been able to increase that to almost 40% with TotalPay. We've had similar success in the multifamily and property management space. We also saw strength in the consumer payment side of our business in Q4 and expect the momentum to continue throughout 2022, as the need for loans increases. Our auto loan business was strong in the quarter, driven by the repayment of loans in the used car market, which is still seeing high demand and increased prices. This is a large and growing market that we are both well positioned to continue to penetrate with the combined efforts of Payix and our existing foothold. On the mortgage origination side of our business, we are experiencing strong demand from originators seeking first-time payment solutions through our integration with Ellie Mae. On the mortgage servicing side, there are many large players in this space that continue to use many of our products and solutions. Our service transfer exchange solution is processing transactions and clients are seeing real value in the efficiencies gained. We expect with rising interest rates and decreased originations that the velocity of the MSR transactions will increase, generating additional demand for our STX offering. As previously discussed, our acquisition of Payix accelerates our expansion in the buy now pay later space. I want to take a moment to highlight one of Payix's customers. Scratchpay is a rapidly growing California-based lender in the MedTech space. The company offers its customers various financing options, including an innovative buy now pay later option branded Take 5 for pet expenses. Scratchpay has grown over 600% over the past 4 years and now services more than 11,000 clinics across the U.S. and Canada. The Payix software platform has helped the company to continue to scale through its self-service white-labeled omnichannel platform, with approximately 80% of its 2021 payments originating through the Payix Signature mobile application. Scratchpay has been able to drive customer engagement while keeping defaults and delinquencies low, which has enabled the company to seize market share and generate quality growth. On the personal loan side, we've heard from several of our largest lending customers that they are going completely digital for both loan funding and accepting payments. When we started speaking with some of these lenders over 5 years ago, they thought it was unheard of to accept debit card for payments. They would not consider instant funding because they wanted borrowers to physically walk into branches. Now the consumer is demanding the modern digital experience that our solutions provide. Our instant funding volume ended the year very strong. December volume was roughly 20% above November volume, which is a really good sign for origination activity. Also, our December 2021 monthly volume for instant funding was 130% above our January 2021 volume. Recently, we announced our partnership with Megasys, a loan management software system specializing in the consumer finance industry. We're looking forward to helping them provide the best possible service to consumer and auto lenders across the country and find solutions that make their business as successful as possible. As I mentioned previously, the integration with BillingTree is going well. We are on track to realize the synergies previously discussed. On the business development side, we announced a technology integration with C&R Software, a leading provider of collections and recovery solutions to multiple industries. Through the integration, BillingTree's omnichannel payment solution will help organizations in the collections industry accept payments more efficiently. We also recently signed a leading company in the healthcare revenue cycle management space that provides patient balanced resolution services for hospitals and physician groups. That positions BillingTree at the intersection of accounts receivable management and healthcare. So again, a really strong year capped off with a very productive quarter. We believe that we are well positioned for another successful year of growth in 2022. As we all know, there are many secular trends towards frictionless digital payments that have been and will continue to be a tailwind that will drive our business for years to come. To further take advantage of these trends, we have laid out a few specific initiatives which will be guiding our investments for the year. We look to further increase our card penetration across all our verticals with top clients. We expect the majority of our growth to be derived from further penetration of our existing client base. We will continue to focus on optimizing our processing infrastructure in order to reduce costs as we grow volume. We will look to formally commercialize, market, and cross-sell our accounts receivable/accounts payable unified capabilities during the year. We have had several recent successes, including signing a large customer away from a competitor who selected us because of the demo of our accounts payable solution integrated with Acumatica. We're also seeing strong sales coming out of the 2022 Acumatica Summit in late January. We'll continue to grow our accounts payable supplier network as well as sign new B2B virtual card clients and expand our virtual card adoption. We also will continue to focus on developing the best software and payment solutions for all verticals. To support this, we are pleased to welcome technology expert David Guthrie as our new Chief Technology Officer. He brings extensive experience driving technology and product strategies, with a deep understanding of conversion software technologies. David also has a very strong background in integrating the technology of acquired businesses. As we look to broaden our addressable market and solutions, we will continue to use strategic M&A as an important growth driver for our business. Our M&A pipeline remains very active. Finally, I want to thank the entire Repay team for their hard work in 2021 and welcome all of our new team members. I'm looking forward to keeping up the momentum with all of you in 2022. With that, I'll turn it over to Tim to discuss the financials and guidance in greater detail. Tim?

Timothy Murphy, CFO

Thank you, John. Now let's move on to our Q4 financial results before I review our financial guidance for 2022. As John mentioned, in the fourth quarter, Repay delivered strong results across all of our key metrics. Card payment volume was $5.6 billion, an increase of 43% over the prior year fourth quarter. Total revenue was $62.2 million, an increase of 50% over the prior year fourth quarter. This represents a take rate of approximately 110 basis points, mainly reflecting the benefits of increased virtual card adoption and a strong financial profile of BillingTree. BillingTree, Kontrol, and Payix contributed approximately $14 million of incremental revenue during the quarter. Moving on to expenses in the quarter. Other costs and services were $15 million compared to $11.5 million in the fourth quarter of 2020. The incremental other cost and services from BillingTree, Kontrol, and Payix were $1.9 million for Q4. Gross profit was $47.2 million, an increase of 57% over the prior year fourth quarter. As John mentioned, on an organic basis, we saw gross profit growth of 17% compared to the fourth quarter of 2020, as shown on Slide 6 of the Q4 supplement posted to our IR site. We remain very encouraged by accelerating organic growth. SG&A was $33.4 million compared to $21.5 million in the fourth quarter of 2020. Fourth quarter adjusted net income was $27 million or $0.28 per share. Lastly, fourth quarter adjusted EBITDA was $27.8 million, an increase of 58% over the prior year fourth quarter. Fourth quarter adjusted EBITDA as a percentage of total revenue was 45%. We do still anticipate increased investment in sales, technology, and product to continue putting in place the proper infrastructure for accelerated organic growth into 2022 and beyond. We believe that the combination of double-digit organic top-line growth, along with best-in-class adjusted EBITDA margins, makes us unique when compared to our peers. Moving forward, we have a high degree of confidence that our ability to stay well above the rule of 40 is sustainable. Beginning with the fourth quarter of 2021, we updated our definitions of our non-GAAP financial measures to simplify our presentation and enhance comparability between periods. Historical reconciliation of net income to both our revised and previous definitions of adjusted EBITDA, adjusted net income, and adjusted net income per share, is included in our earnings release. Combined net leverage is approximately 3.6x pro forma for the Payix acquisition. We expect this to be well below 3x by the end of 2022, a very comfortable level, which will allow us to continue to fund organic and inorganic opportunities. As of December 31st, we had $50 million of cash on the balance sheet and access to $165 million of undrawn revolver capacity, for a total liquidity amount of $215 million. As of December 31, we had approximately 99 million shares outstanding on a fully diluted basis. Finally, moving on to our outlook for 2022. The change in methodology for our non-GAAP financial measures that I mentioned has no impact on the company's outlook for 2022 in any subsequent periods. With that said, we expect volume to be between $27 billion and $28 billion, total revenue to be between $296 million and $306 million; gross profit to be between $224 million and $232 million and adjusted EBITDA to be between $128 million and $134 million. Please note, we currently expect approximately 45% of the P&L contribution to come in the first half of 2022, with Q2 slightly more heavily weighted. The remaining 55% will be in the back half of the year. This contribution estimate is primarily driven by continued growth in our B2B business, which we expect to comprise a greater share of the overall mix by the end of 2022, as well as other fast-growing assets such as Payix. As a reminder, we expect Payix to contribute approximately $15 million of revenue in the full year 2022, with gross and adjusted EBITDA margins of approximately 65% and 40%, respectively. As mentioned, when we announced this transaction in early January, Payix is in a very high-growth mode. We would expect each quarter in 2022 to be stronger than the prior quarter for that business. This 2022 outlook assumes organic gross profit growth of approximately 20%. Please note that Q1 is a tough comp for us, given that there were 2 rounds of stimulus sent to consumers in Q1 of 2021. We expect organic growth to gradually increase throughout the year, much stronger growth in the second half of the year. We are already off to a strong start in 2022 and look forward to continuing this momentum throughout the remainder of the year.

Operator, Operator

Our first question comes from Ramsey El-Assal with Barclays.

Ramsey El-Assal, Analyst

Can you talk about the drivers of organic growth acceleration this year, and kind of what gives you confidence about seeing organic growth kind of accelerate back up to that 20% level of the year, from where we were this quarter?

Timothy Murphy, CFO

Sure. Yeah. So we feel very good about organic growth in Q4. A lot of it has to do with continued strength in auto, recovery of personal loan volumes. We're seeing really strong signs in the mortgage space, within our Ventanex business, and so that's really helped a lot with organic growth. We do see continued recovery in the personal loan space in the tax refund season. We're seeing positive signs so far in early 2022 around tax refunds. Auto continues to be strong. We expect mortgage to grow and then B2B will become and has become a much bigger part of the mix, and that's probably the fastest-growing part of our business. So as that grows even stronger throughout 2022, we feel good about the organic gross profit outlook that we mentioned of 20%.

Ramsey El-Assal, Analyst

Okay. In your prepared remarks, you mentioned that most of the growth is coming from deeper engagement with the client base, which we understood. Can you discuss how revenue visibility in your business has changed as it has become more complex with more moving parts? Do you have good revenue visibility now, or is it better or worse compared to previous years?

Timothy Murphy, CFO

Yes. I mean we've certainly grown and diversified. We have a lot more clients now. But we still think a majority of our growth comes from existing customers, like you mentioned, and we see a lot of visibility there, just with additional adoption of card payments. We're seeing that now in the B2B AP side as well, as we see virtual card penetration increase with existing customers. And so over time, as we've added software partners, that may have tilted a bit more to new customer acquisition versus existing customer growth. But we still think a majority of it is going to come from existing customers, which provides a high degree of visibility.

John Morris, CEO

Yes Ramsey, this is John. Good afternoon. You understand our businesses well; we gained twelve months' worth of the new additions and closed deals from last year, and that gradual approach is also a contributing factor, along with developments from our implementation pipelines.

Operator, Operator

Thank you. Our next question is from Bob Napoli with William Blair.

Robert Napoli, Analyst

Thank you, and good afternoon. Great job. I have a question regarding the growth of your revenue from virtual cards and cross-border payments. You mentioned earlier that some of the positive take rates are due to the growth of virtual cards. Can you discuss the penetration rate for virtual cards? I know you have a partnership with Veem for cross-border payments. How much cross-border business do you have currently, and what are your expectations for the growth of revenue from these two streams?

Timothy Murphy, CFO

Yes. Sure. So in terms of virtual card penetration, we mentioned on the call, an example of our TotalPay solution, helping us to increase penetration. So in the hospital space, for example, with one large hospital customer, we've seen virtual card penetration go from 20% to almost 40% by using our TotalPay solution, where we're getting access to all the payments, the TotalPayment file, and we're able to then monetize virtual cards. So that's an example of how we think we can have that continue to grow. We're probably about 15% to 20% penetrated today. But in that example alone, you could see how it could go up to 40%.

John Morris, CEO

Yes, let me provide some additional insights. Good evening, Bob. We are carefully integrating some technology platforms into our primary target technology platform on the B2B side. As we transition some customers, we are witnessing increased engagement among our larger clients as we implement the TotalPay solution, which is the example we mentioned earlier. This gives us strong confidence in what we are observing. We are approaching this process methodically; we won't make automatic switches. Additionally, on the cross-border front, we will continue to promote that segment. However, as you may remember, most of our existing business did not express a demand for cross-border services. We will keep offering this option and expect to see it gain traction towards the end of the year, but not right away. There is some activity in that area, but it has not significantly impacted our second quarter numbers.

Robert Napoli, Analyst

Then just what is the size of the B2B business? And do you expect it to grow above the 20% organic gross margin growth that you've forecasted? And you talked about unified AP and AR, how much potential were unified AP and AR?

Timothy Murphy, CFO

Yes, we noted that we finished the year with an annualized volume nearing $5 billion, and we anticipate continued growth. This segment is expanding at over 30%, which is faster than our overall corporate average. By the end of 2022, we expect it to represent approximately 25% of our total mix. This alone gives us confidence in our full-year expectation of 20% organic growth.

Robert Napoli, Analyst

And the unified AP/AR.

Timothy Murphy, CFO

Yes, we invested in key ERP integrations last year and have seen strong traction. We'll keep expanding these efforts as the marketplace is indicating a preference for a one-stop shop. As we progress with this expansion on both the accounts receivable and accounts payable sides, it's clear that the accounts receivable side is interested in the accounts payable side, which enhances our TotalPay solution for accounts receivable. We anticipate this will continue to be successful for us this year, building on what we started in 2021.

Operator, Operator

Thank you. Our next question is from Andrew Jeffrey with Truist Securities.

Andrew Jeffrey, Analyst

Thank you for taking my question. Tim, you mentioned that B2B makes up about 23% of the overall business by volume. I'm curious about the run rate for the nonvertical market debit acquiring businesses, including B2B in cross-border transactions and BNPL, although I'm unsure if you classify BNPL as a vertical. Is there a significant difference there? You mentioned that B2B is growing faster with a higher yield and gross margin. How much can these other nonvertical market businesses contribute to your growth and yield this year and in the future?

Timothy Murphy, CFO

Yes. Payix is a good example of this, as a significant portion of the BNPL business is with them. We have some BNPL operations ourselves, but Payix has notably expanded, and we highlighted Scratchpay as a successful customer case study that has performed well with them. We believe Payix could grow by over 40% into 2023, illustrating why we acquired that business and how it can enhance our organic growth once integrated. Additionally, we appreciate owning the backend RCS platform, which has been very beneficial, and we are onboarding several customers on that platform early this year. Some of these possibly non-traditional businesses you mentioned indeed support growth, and in Payix's case, they are expanding more rapidly than the overall business.

John Morris, CEO

Yes. Let me add to that, Tim. As our mortgage servicing payment solutions business through our Ventanex acquisition continues to develop, we see significant opportunities as we progress throughout this year. We noticed some of that in the fourth quarter and we are definitely experiencing it in the first quarter. We believe this will keep expanding. As I mentioned in our press release, we are beginning to recognize a solid value proposition in the STX exchange, which we have always anticipated, along with increasing adoption. Therefore, there is ample opportunity for us to continue to offer many of our solutions in the mortgage servicing sector.

Andrew Jeffrey, Analyst

What do you think the impact of consolidation is? It seems like Payix might slightly lower the gross margin. Should we consider any changes in the mix, which appeared to be a positive factor in the fourth quarter? Will we see any significant changes in that as we move forward?

Timothy Murphy, CFO

Payix has strong margins, which we discussed during the call. We believe there are opportunities to expand those margins over time, potentially not in 2022 but in the future, by reducing processing costs, similar to our other businesses. The guidance reflects gross profit margins of 75% to 76%, along with adjusted EBITDA margins of 43% to 44%. Thus, there should not be a significant impact, even with the mix changing in 2022. Looking ahead, we believe we can maintain this margin profile while also achieving accelerated growth.

Operator, Operator

Our next question is from Andrew Schmidt with Citigroup.

Andrew Schmidt, Analyst

Hey John, Tim. Good to see the acceleration in the organic gross profit growth. Just a question on sort of consumer health. Could you remind us sort of your exposure from a consumer perspective, where a longer consumer spectrum that is? And then just the impact from change in consumer health or the credit cycle, understanding that some parts of the underlying business are exposed to longer duration loans and some are exposed to shorter duration loans. Just curious, if you could remind us just exposure to cyclicality?

John Morris, CEO

Yes. We process payments, so we're not the actual lender. However, the feedback we've received indicates that consumer health is the best we've seen in years. We're still observing positive trends in loan repayments and various installment products across all our sectors. This has been consistent as we approach the first quarter. During the tax refund season, particularly from mid to late February, we've noted strong activity, especially on the loan repayment side. This is a positive indicator, as it shows people are fulfilling their financial obligations. From our perspective on consumer health, we believe it remains robust and strong, particularly in terms of repayment.

Timothy Murphy, CFO

I would add that, as John mentioned, the consumer appears very strong in terms of loan repayments. We are monitoring credit metrics and delinquencies among our lenders. Even though we noticed a slight increase in those metrics, our solution actually assists lenders in receiving repayments more quickly and efficiently, which could potentially benefit us. Additionally, we have exposure to healthcare through our BillingTree business, and we believe a full recovery has not yet occurred there. There is some pent-up demand in consumer healthcare volume that we anticipate will benefit us as we move into the middle or end of this year.

Andrew Schmidt, Analyst

That makes sense. It’s reasonable to suggest that the business, due to its B2B component and its more diversified nature, is likely less cyclical than in previous years or, to put it another way, it is less affected by cyclical impacts. Is that a fair assessment, considering the changes in the business mix over the last couple of years?

John Morris, CEO

It could be related to consumer activity. However, keep in mind that we experience seasonality in the loan repayment sector during tax refund season in the first quarter. As Tim noted during the call, there was also seasonality in the first quarter last year due to two significant stimulus payments. While I hesitate to label it as seasonality, these one-time unusual events will make this year's first quarter a challenging comparison for us.

Timothy Murphy, CFO

Yes. I do think you're right, though, over time, as we get more diversified and B2B becomes a bigger part of the mix, there should be less of that.

Operator, Operator

Got it. Very helpful. If I could ask one more question regarding the M&A pipeline, considering you're integrating two acquisitions and your current leverage, how should we view your chances of pursuing larger acquisitions in the next 6 to 12 months? Is the pipeline primarily made up of smaller tuck-ins, or are there larger opportunities as well? I'm interested in how you perceive the current situation with deals and leverage.

John Morris, CEO

We have an active pipeline and have maintained a strategic approach in evaluating potential acquisitions. In the near term, we are likely to focus on smaller tuck-in acquisitions. However, we recognize that we cannot control when opportunities arise in the market. There are significant opportunities out there, and as you've noted, we are currently integrating a couple of recent acquisitions, which are progressing well. The most recent one was Payix at the end of December. I'll now hand it over to Tim to discuss some of the financial metrics.

Timothy Murphy, CFO

Yes, you're correct. Given the current leverage, we would seek to create additional capacity by increasing cash flow and reducing debt somewhat. We did expand our revolver capacity as part of the Payix transaction, so we do have some flexibility there. We will need to determine if we want to exceed a leverage ratio of about 4x for something particularly strategic, but it probably wouldn’t go much beyond that. The target's projected EBITDA and its growth rate may also offer us further capacity for transactions. However, as John mentioned, for now, it would likely be smaller acquisitions.

Operator, Operator

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

Peter Heckmann, Analyst

I’m interested in the growth of new auto loan originations, considering the inventory constraints for new cars and the higher prices for used cars. Did you observe this trend in the quarter, and if so, when do you anticipate it will affect the growth rate? Would that be in 2, 3, or 4 quarters?

Timothy Murphy, CFO

Yes. So, Pete, we are much more focused on the used car market rather than new cars. Therefore, we haven't really been affected by chip shortages or inventory supply issues. We continue to experience strong demand in the used car market, even at higher prices, and we're not seeing that change. Since these loans typically have a duration of six to seven years, it would likely take a few quarters for us to notice any impact from changes in the macro environment due to our strong repayment volume and the long duration of our existing portfolio. To reiterate, we are primarily focused on the used car sector, are not experiencing supply chain issues, and continue to see strong demand.

Peter Heckmann, Analyst

Okay. That's great. And then just in terms of BillingTree, it looked like the revenue there, if I'm inferring correctly, was just a little bit light versus our forecast. Does BillingTree have any seasonality around the fourth quarter?

John Morris, CEO

Not really around the fourth quarter. They actually have some activity in the first quarter, similar to our loan repayment business, where they might benefit from the tax refund season in our revenue cycle management area. We’ve noticed a slight increase in the first quarter. However, I believe the numbers for the fourth quarter came in about where we anticipated.

Operator, Operator

Our next question is from Joseph Vafi with Canaccord.

Joseph Vafi, Analyst

I understand that most of the growth you anticipate for 2022 comes from existing customers. I would like to know your perspective on adding organic software partners in 2022. I also have a quick follow-up question.

John Morris, CEO

Yes, we are adding more organically each quarter. We have expanded our partner relationship management team to not only deepen existing software relationships but also to establish new ones to assist with customer acquisition. Previously, we were seeing growth of about 2% to 3% per quarter, and now that figure is likely closer to 3% to 5% per quarter due to the team's expansion. Additionally, as we venture into more verticals, there are now more software partners available for us to develop relationships.

Joseph Vafi, Analyst

Sure. And then could you just remind us again, like, if you looked across your existing base, how penetrated you are, you think, and where you could go with your existing partners? Thanks a lot and great results, guys.

John Morris, CEO

Absolutely. It's really tough to estimate that. We don't always have access to the full customer base of the software partner, but I'd say in some situations, we're less than 10% penetrated and on average, maybe somewhere in the teens.

Operator, Operator

Thank you. Our next question comes from James Faucette with Morgan Stanley.

James Faucette, Analyst

I appreciate that many of my key questions have been addressed. However, I wanted to inquire about your growth and growth forecast. Can you provide insight into how that is currently divided, or at least in your outlook, between acquiring new customers and expanding with existing customers?

Timothy Murphy, CFO

Yes. I would say it's primarily expansion with our existing customers, likely around two-thirds from them and the remainder from new customers. So we are seeing very strong growth among our current customers. They are adopting our various channels, utilizing not just web and phone payments, but also IVR, mobile, and text, all of which we believe enhance card penetration. Additionally, regarding virtual cards, since the rollout of the TotalPay solution, we are seeing increased adoption of virtual cards within our existing customer base. This gives us considerable visibility into our outlook for this year.

James Faucette, Analyst

Yes, we're already almost a quarter through. And then as far as the Payix acquisition, we've always been big fans of Payix. I know in the press release that there was some commentary about expanding your ability to address BNPL, and I think you kind of touched on this, but can you talk us through a little bit that mechanism and where that exposure would come from, and what kind of exposure it would be, at least today?

Timothy Murphy, CFO

We discussed Scratchpay during the call, which exemplifies a buy-now-pay-later customer that has been with Payix for several years and has experienced significant growth using Payix's technology. This illustrates the expansion of the buy-now-pay-later sector, which increasingly depends on payment processors like us and Payix for handling card transactions. We believe there are many opportunities in this area. There are other similar case studies among Payix's current customers, and they also have prospects in their pipeline. Repay had recognized names in this sector before acquiring Payix. They require our support to process their card transactions, and many of them are experiencing rapid growth, as shown by the Scratchpay example, which bodes well for us.

John Morris, CEO

So, James, this is John. Good evening. I'd like to provide some additional context. Retail sales are increasingly becoming retail installment sales. In the past, unless it involved an auto loan, we typically did not engage in many of those transactions. Now, however, these sales are shifting into some form of repayment obligation, which will still require processing within the financial system. Our strengths in financial technology align well with this need, as some key integrations can support ERP tracking of the workflows and repayments. Furthermore, as this sector moves more towards collections, we believe that our various channels and offerings will enhance our capacity to assist in repayments, fitting seamlessly into our overall strategy to serve this industry.

Operator, Operator

Our next question is a follow-up from Bob Napoli with William Blair.

Robert Napoli, Analyst

Just wanted to ask if you're doing any investing around the crypto ecosystem, if there are thoughts of how that fits into your business model over the medium to long term?

John Morris, CEO

Sure. Good evening, Bob. In the long term, when I consider the overall cryptocurrency landscape, I believe there will be a role for it, particularly in the B2B sector. This quarter, we continued to enhance our digital wallet. If cryptocurrency becomes more mainstream and people wish to utilize it, we will have the capability to support that. I see potential opportunities in the next three to five years with stable coins and solutions that facilitate digital fund exchanges, possibly using blockchain technology, particularly for invoices. This could allow us to provide high-quality transaction support between payors and payees in the B2B space. If it gains traction among consumers, we will also expand our digital wallet offerings accordingly. However, I do not anticipate it becoming mainstream in 2022, although it is part of our roadmap as we continue to expand our digital wallet and the networks we serve.

Robert Napoli, Analyst

Great. Can you tell me the current size of your mortgage business? It seems to be entirely linked to servicing and loan repayments, rather than originations. You appear to have a positive outlook on that aspect of the business, right?

Timothy Murphy, CFO

Yes, we are. It's still a relatively small part of the overall mix, probably less than 10%, but it's growing. We're expanding with some large existing customers, specifically major mortgage servicers. While we've primarily focused on servicing, we’re also entering the origination market through our relationship with Ellie Mae. We’re starting to gain traction there and are seeing opportunities for first payments and interim servicing after the mortgage is originated. Once that happens, it gets transferred to an ongoing servicer, and we are facilitating some of those transfers through our service transfer exchange. We have several large customers in this area who are continuing to grow with us, and our offerings include loan mortgage repayments and communication solutions. We provide both paper-based and electronic communication support to mortgage servicers and originators due to the numerous notifications required in this heavily regulated space. This segment of our business is also growing, and we see various opportunities within the mortgage industry, particularly focusing on mortgage servicing and now expanding into originations.

Operator, Operator

We have reached the end of the question-and-answer session, and I will now turn the call over to management for closing remarks.

John Morris, CEO

Thank you, everyone, for your time today. We were extremely pleased with our 2021 results, and we're very excited about what we're seeing heading into 2022 and our outlook and what we see as far as in our pipelines and what we have in store for us for the 2022 initiatives, and we're looking forward to a fantastic year this year. And thank you for your time today.

Operator, Operator

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