Conference Transcript - RPAY 2026-08-12

Joe Vafi, Analyst — Canaccord

All right, we are continuing here at the 46th annual Canaccord Growth Conference. I'm Joe Vaffi, Equity Research Analyst here at Canaccord, focused on digital assets. And up next, we're pleased to have the team from Repay with us, and that's John Moore, CEO, and Rob Hauser, CFO. Repay is a payment technology and software company providing electronic payment processing solutions for businesses, lenders, and financial institutions. The platform handles consumer payments, B2B vendor payments, and loan repayments across multiple payment channels. Company recently closed on an exciting acquisition called Kubra, which materially increases the size of the company, and we will get into that a little bit more here. We like the repay story relative to valuation, margin profile, and free cash flow generation.

John Morris, CEO

So with that, thanks for being with us here today, John and Rob. so maybe we'll just start off you know maybe John you want to introduce repay to us in your own words and where you are right now in the evolution of the company and then we'll get into more detailed questions from that sounds great yeah so thank you for joining us today from a repay perspective on a post-cuber basis the new repay is we are we are the we think of one of the leading providers of consumer bill payment bill presentments across the United States and Canada we offer that most we offer the most modern consumer experience where the modern consumer is today and that consumer is us and how we're operating how we interact with a large biller we provide services to some of the largest billers in the US whether it may be on a consumer finance side and now on the utility municipality side and the government side and our ability to offer that end-to-end comprehensive solution that we can provide all those communication services those bill presentment services and obviously the payment services of that and I will share a little bit more about that as we walk through today but our ability to offer that end-to-end enhanced consumer experience on behalf of our clients will be the which will be many of the large billers that you interact with as consumers that's great yeah Coober is a very exciting add to the company materially expands the business and with

Joe Vafi, Analyst — Canaccord

cross-sell opportunities. It's great. So you also just reported your Q2 results, which showed some exact organic growth acceleration. You've had Kubra now for a month, so maybe we kind of just walk through the highlights from the quarter real fast.

Rob Hauser, CFO

Sure, sure. So we delivered on our expectations for the quarter for Q2. We had 6% organic growth. Two points of that organic growth was our political media business, which we'll talk more about in a few minutes. With the primary season going right now, we had a nice up pick from that for the first half of the year. And in Q2, our consumer business organic growth was around 4%. And we're starting to ramp that as we go into the year. We gave a guide this year that will exit the year on organic growth of 10 to 12%. And if you exclude that political media number that I talked about, it's more around 7% to 9%. So we do expect a ramp in the back half of the year. Things are going as planned with the Cobra integration. We had a strong free cash flow conversion at 75% or $27.4 million of free cash flow in the second quarter. And so, you know, the story that I gave on the call and the story I continue to give is this. It's a cash story. Both businesses generate a decent amount of cash. And we feel strong about our guide for the rest of the year. We expect a free cash flow conversion of around 30 percent. That will ramp down because of the term loan that we took to buy Kubra. Some of the the interest will start hitting on the back half of the year for that. But we're starting to expect a decent ramp for the back half of the year as we have new business coming online and our consumer space. And as I said on the call, we're seeing some of that ramp come through even in the month of July. It's starting to really materialize. So we're really excited about that. And we're excited about returning to double-digit reported organic growth. And then we're excited, obviously, to talk about Coober. Only owned it one month for the quarter, but plans are executing quite well.

Joe Vafi, Analyst — Canaccord

That's great, Rob. There is some good news here. You know, this is, you know, maybe, you know, across my coverage, this may be one of the more attractive risk reward stories right now, I think, out there. Rob I want to talk about the industry a little bit but I also want to maybe double click on you know your comments here about you know this kind of visibility you have to you know continued acceleration in the organic story yeah through the year because I think you know that's where the rubber hits the road with your story you know relative to you know potential multiple expansion from here yeah yeah so you know we've made a lot of investments We've talked about over the past few quarters in people, process, and technology.

Rob Hauser, CFO

We're launching some new technology in our consumer business. We've talked about some of the voice AI John talked about on our call and our dynamic wallet where we can put bills into our actual physical bills into your iOS or Google device. So new technology is coming out, and our customers are excited about it. and we're ramping some new volume. For any of us to track us, we had some non-competitive losses that we had ramped or lapped from 2024 of a few clients that were part of an M&A and sold and went with the parent company. But we have since lapped that and we continue to have pretty strong growth on the back half of the year. Our B2B business, um you know excluding the political media piece still grew in the quarter at 19 and we feel pretty strongly that we'll stay in the roughly mid-teens as part of our guide that we gave for the full year for the back half of the year so that business is growing really nice anybody who's followed us we've brought on a lot of it's that's our pay uh our payables business for business to business payments we've brought on a lot of volume and we've been monetizing that volume uh from check volume to digitalize volume and and monetizing that and we have a large base of embedded partners that we started to bring on volume there as well so that business continues

Joe Vafi, Analyst — Canaccord

to grow nicely so we're really excited we're going to see that back half ramp but all you know all things out of the gate in the q3 we're seeing that we feel really confident about it that's great that's a lot of good news maybe we'll double click a little bit on some of those new technology rollouts you were talking about that's one new thing going on in payments anything else that we should be kind of tracking at a super high level on you know innovations or trends you know relative to you know you know your business and and payments that you know could be catalyst for the story yeah I think I'll jump in so if you look at when I was talking about that end-to-end

John Morris, CEO

consumer experience i call it the modern consumer experience everyone in this room is a consumer every one of you gets billed by someone from your power bill to your car payment or credit card whatever it may be that's who we service that's our clients so you effectively are one of our clients through one of our clients and our ability to deliver with that modern experience so that modern experience i talk about you almost could refer to it as the amazon experience the e-commerce world has trained us to have a very frictionless experience. I call it two clicks. With two clicks of your smart device, you expect something to happen and happen immediately almost at times. The billowing world and many facets and the verticals that we serve is catching up to that experience. Still us as consumers, we see it when there's friction in that process that's not the same. We see it now in that process in a really great way. We have the financial technology that does that and we actually take the payments and move the money and we have the full technology stack and ecosystem to deliver that from end at the beginning of experience to the end of the experience now that includes a lot more things that includes the communication with you not just a payment but most of the time it comes some form of communication and think of all the ways you're communicated to deliver that in a one-stop shop single pane of glass our clients don't want six vendors to do the same to do each piece of that they know every time you bring a vendor into that experience there's an opportunity to break that whole cycle so our ability to deliver that in the end from the presentment the creation of a bill the actual communication about that bill and all the ways you can communicate that whether you mobile maybe text maybe IV are all the channels you can communicate in consumers expect you to have it all now how they want to see you how they want to interact with you they expect that to be a high quality experience we provide the tools that deliver that overall in an experience in a one-stop shop competitively we think We think we're the only one that can do end-to-end, all of those things, and it's core to who we are, especially on a post-Cubra acquisition basis. We think we can deliver that full suite of solutions, including some of the things Rob was just talking about, some of the AI automation we're doing, some of the AI things we've done with just voice. Voice is not going to be an IVR. It's not going to just be call this number, press a few numbers. It's going to be an interactive conversation on how you want to interact with that consumer and how they make a payment, etc. through that Things that we're going to be looking at on the agentic experience of how bills are paid it with with Possibly your own agent as we look out in the future how the modern consumer wants to to act and interact with their biller We can deliver that and there as you can imagine very large enormous billers that are our customers across the US and how we we provide that those are going from essential services to high priority payments very large non-discretionary marketplace so high priority bills as we as we help them interact with that things that are people you and I we want to make sure is paid every month we're helping deliver that experience that's great Right.

Joe Vafi, Analyst — Canaccord

That's an exciting time, I think, for, you know, continuing expansion of your value proposition in the market. So I know, Rob, you mentioned kind of growth rates, you mentioned growth in your B2B segment, if you could just kind of remind us your two segments on a revenue mix basis percentage, and then the growth rates there to kind of help people understand kind of the build to, you know, how, you know, you're looking at the overall business.

Rob Hauser, CFO

Yeah, so if you look at our core consumer business, ex-Cubra, it's roughly 45% of the business. Cubra is around another 45%, and that all is reported under the consumer segment going forward. And then our B2B business is about 10% of our revenues. So, again, for the full year guide, you know, we expect our core consumer business is going to ramp into double digit growth, but to achieve roughly mid single digit growth this year. And we expect to exit the year really going into like a high single digit, double digit growth rate. Our Kubra, we've only owned it for one month, but if I just proform it, it grew 6% in Q2 in the previous earnings we just had. And it's expected to stay mid-single digit for this year on the back half of the year, roughly 5% grower. And that's in line with industry. It's also a very non-seasonal type business. It's utility bills, government bills, reoccurring, non-discretionary bills. And then our B2B business, as I said, we grew 32 percent in the quarter. If you exclude the political media piece of it, it grew at 19 percent. And we expect that to continue in the mid-teens on the back half of the year. Plus, we guided $8 million to $10 million of political media, particularly with the midterm election cycle for Q3 and Q4 this year. So really, our organic growth is returning, and we're lapping those legacy losses and really starting to ramp up our volumes on the organic side. And then we're really excited about what Coober brings to the house because, as John mentioned, you bring Coober together with Repay. We've got the entire ecosystem from bill creation, bill presentment, rather digital or print, because in our industries we play in, particularly in utility and government, you're required to have a print bill. We are one of the major players in that space, taking the payment on our gateway, processing the payment and connecting with all the card brands and banks on the back end, having our own processing engine. Communication, which is if you have a power outage and you get that notification on your phone or your email that says, here's a geo map and here's the outage. And when we expect your power to be restored, that's us. That's Kubra. the email that says if you buy a nest thermostat you get 10 off your utility bill that's us that's kubra and repay and then everything from professional services to help some of our clients who have our large enterprise clients but they don't have a large technology infrastructure so we do professional services to help them augment some of that staff so imagine all of that under one vendor which most of our competitors do one or two pieces of that so we can come in now and offer the full comprehensive suite so that's what's got us really excited as we go into the new year and we'll be talking a lot more about our investor day uh december 7th in new york and joe those are new to our story when rob

John Morris, CEO

talks about our b2b business to business that's the 10 percent that think of that as the business the back office of business think of it the office of the cfo we're helping automate their payables still over half of business payments or or their payments their invoices are paid with a probably a pay-per-check in a lot of ways we have a total pay solution that helps automate the payment and facilitation of all those payments and when you hear us talk about the political media spend while we talk about that is that's a that's a generally revolves around a political cycle happens to be part of that payable business platform we're the intermediary on when you see a TV ad on TV for a political ad there's a 60% chance we actually move the money on that and the

Joe Vafi, Analyst — Canaccord

reason for that obviously is it's a good funds world in that the winning candidates that losing candidates can't pay so they always when you see something you should know it's paid for and so we facilitate that very good part of our business it just happens to be have to create some cycles to it and the margin profile on that business is outstanding and generates a lot of cash so although it's in every other year cycle it puts a lot of cash on the balance sheet that's a good business yeah I know rot you both talked about kubra a little bit uh kind of maybe we just kind of go through the numbers on kubra a little bit more on um you know the size of the business the margin profile sure you know what you know what

Rob Hauser, CFO

we're talking about in terms of balance sheet leverage and you know the plan for that yeah i'm sure so we'll own kubra roughly seven months this year so our guide for for the year was 150 to $154 million in revenue on a pro forma basis. Imagine at around $240 million net revenue-ish. And margin profile, it's roughly an 18% to 20% EBITDA. Margin profile, if you listen to our call, we talked about gross profit going down from our 79% to 70%. That is not price compression or anything bad happening in the market. As I mentioned before, core repay was pure payments processing and payment gateway, high margin profile. To bring that full ecosystem, Kubra also has a large communications business, bill presentment business, which is a lower margin profile. But again, we're still excited about that because we can bring our payments expertise into the communications and their existing payments piece with the professional services and offer that comprehensive solution. So we're guiding full year EBITDA at 35% for the year. And what's really important here when I talk about it's a cash story, we've identified synergies and committed to synergies. We've committed to $8 million run rate synergies in the quarter. Out of the gates, we already realized $4.5 million. We feel really confident that we'll continue to get up to at least $8 million in the quarter, and we've committed to $20-plus million by the end of 2028. We're well on our way to achieve those synergies, which also drive to a cash portfolio and improve that margin profile. So a little bit different margin profile than core repay. Our net leverage, you know, when we closed the acquisition was around 3.9 times net leverage. we're at 3.7. So we had a good cash quarter. And I've committed publicly that we'll get below three times in 18 months of owning the asset. So again, cash profile is really strong and helps us delever that. And our focus will be on delevering the company. And we have a history of doing that. Historically, repay has done a lot of acquisitions. And we've levered up this high before and delevered pretty quickly. So our confidence level is pretty high on that.

John Morris, CEO

Yeah, just to reiterate, So $4.5 million identified on a run rate basis already, just basically two months of owning, and $8 million for the whole year for 2026 as we exit that, and as Rob indicated, $20 million by 2028. So what we see is we really like everything we're seeing about the business. I've been out visiting clients, really good business, really great client base. our ability to really enhance that overall experience we have several clients we only do one piece or part of that and our ability to do that comprehensive solution is a fantastic opportunity for us to deliver on so that would be it's not on my list John but you know that would be a cross-sell opportunity right and so you think that actually that's a that's a decent opportunity here that's right right we talked about go ahead well no I was going to say if you just look at the cubra uh communications and bill presentment piece there is a big opportunity to cross sell that into our core um consumer business we have today

Rob Hauser, CFO

because we don't have we didn't have that capability they they use partners we've had interest from clients already inquiring about it so the ability to cross sell and leverage and and i i have a experience from from that business and a prior company and uh our our sophistication one platform that can do either digital or print and can also guarantee paper suppression and an industry that has a lot of paper so to be and that in the economics on that paper suppression are really good companies have tried that before but the two platforms don't talk to each other we have one solution that handles both paper or the digital aspect so to be able to offer that paper suppression and our existing client base a new client base and bundle that with the whole ecosystem is what really has us excited from a growth perspective that's great and you kind of talked about cost synergies is there kind of a threshold of cost synergy where i i believe you said the deal will go accretive in 2020 was it 2028 2028 on a free cash flow will be 25 free cash flow creative and a lot of that's driven by the synergies right that we're realizing and our deleveraging. So, yeah, I mean, out of the gates, there's a lot of opportunity there on the synergy aspects. And some of the things that we've seen with the acquisition is that similar reporting platforms. So that was a good synergy savings. Similar cloud layout on back office cloud for both technology platforms. So you have scale now. You can negotiate better rates. So it's not just an overhead or a CapEx save. It's also pure contract save. Just the scale of bringing the two companies together has driven a lot of cost savings that we've identified pretty quickly.

John Morris, CEO

And, Joe, you haven't asked us about AI yet, which I'm sure comes up in all these conversations. But ultimately, you would expect us to be using that. And what we've been able to use and see with that, to be able to use that. You would expect us to be using it heavily in technology development and coding, which we do. I talked about the number of hours we're saving on our development cycle. But our ability to allow the AI technology piece of what we're clawed is what we specifically use a lot of to interact with these various platforms, to be able to merge that, to be able to create the conversation behind the scenes. synergies yeah the integration ability the probability and the accuracy of what we've been able to achieve just in a short period of time this year where it drives our confidence level on what we are going to be able to do and with the Kubra acquisition that's great just one more on Kubra I know you you've been up you know a strong free cash flow generator you know capital intensities you know pretty pretty good generally on the business can you talk about kind of

Rob Hauser, CFO

capital intensity of the kubra core business versus kind of core repay yeah so kubra had previous to us owning them spent a lot of money on building out a new platform that's finished pretty much and so we're leveraging my kubra hq which is a brand new platform we're merging that the best parts of that with our channels platform that we've invested in our rcs we've just invest a a lot of money to replatform, a bunch of our RCS platforms. So now our gateway and our processing engine are 100% in the cloud. And so we both Repay and Coober have made substantial investments in the past. So we have committed to getting our CapEx down as a percentage of revenue compared to where we're at now and get below 10% by the time we get into 2028. And so that CapEx, we're going to continue to invest in the business, but a lot of that heavy lifting, both companies have replatformed and done a lot of that work early on. So now it's about bringing the best pieces together and going out and selling a full in the cloud, modernized solution.

Joe Vafi, Analyst — Canaccord

Right. That's a great opportunity that doesn't show up in the P&L. And so a really interesting piece of the story. We're going to run out of time. Is there any kind of other point that we haven't talked about today? I mean, we got through some of it, but I don't think we got through all of it. But, you know, if there's anything else that you want to kind of note here before we run out of time.

John Morris, CEO

Yeah, so listen, we just made a major event. We just basically doubled our company, right? And we understand that our goal is to drive shareholder value. We're confident in our ability to deliver that as we drive throughout kind of your tagline. We're going to drive to our success as upon execution of the plans we're talking about. Our ability to use technology to help us do that. As we go through that, as we build and continue to enhance our go-to-market and drive our organic growth back to the high single-digit, low double-digit range, which we're talking about, we've made the right investments to do that. But it's about execution. We're going to continue to drive that. And in that process of generating more free cash flow, we're going to delever. And we think no question we can deliver on that piece of it, as we also deliver on our synergies that we've talked about.

Joe Vafi, Analyst — Canaccord

That's great. Do we have a little more time, guys, or where are we on time? I think we're out of time. The clock's a little wrong. So thanks, John and Rob, for being with us today. You know, repay a really good risk-reward story now in payments. So thanks for being with us.

John Morris, CEO

Appreciate it.

Joe Vafi, Analyst — Canaccord

Thanks, everyone.