Greetings. 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 the 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 in our most recent Form 10-K filed with the SEC. Actual results may differ materially from any forward-looking statements that we 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, 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..

Thank you, operator, and good afternoon, everyone. Thank you for joining us today to review our first quarter results. During the quarter, we reported card payment volume growth of 39%, total revenue growth of 42% and gross profit growth of 46%. We also now have 225 total software integration partners.

In addition, Q1 new client implementations across our business was a record, setting us up well for 2022 and beyond. Moving on to our first quarter business highlights. First, our business payments vertical, which is going after a massive 3.4 trillion TAM, continued to perform well during the quarter.

On our Q4 call, we talked about our initiative to focus on cross-selling our AR/AP unified capabilities in a more streamlined and formal way.

One recent example of this was with Hotel Investor Apps, HIA, which is a hospitality management ERP provider, who currently uses Repay for payment processing and learned of our payables capability during Q4 2021. We signed a partnership to begin adding our payable solution to HIA properties during the second quarter of this year.

We now have 85-plus B2B software integrations, representing approximately 15 vertical end markets, and have over 3,700 clients. On the AP side, we've grown our supplier network to over 127,000.

During the quarter, we signed Shepherd Center, an Atlanta-based private not-for-profit hospital, who will be using our AP automation and vendor payment solutions.

By automating their accounts payable processes, our technology will allow Shepherd Center to improve operational efficiencies, create a better experience for internal AP teams and hospital vendors as well as allow Shepherd to benefit from its cash rebates. We've also been looking at new ways to expand our TAM for B2B AP.

For instance, we recently found a 2022 and 2027. This translates into significant investment opportunities at all levels of government. In fact, we recently signed a large municipality in Metro Atlanta. B2B is a big part of our mix now and will continue to be a key growth driver as we expand our TotalPay solution and drive virtual card penetration.

We had another strong quarter in the consumer payments side of our business. We saw strength on the personal loan side in Q1 as volumes from tax refund season were strong. This strength in personal loan repayment volume continued into April and early May.

In addition, many of our clients have recently experienced above seasonal pre-pandemic levels of originations. The data suggests that the recovery in personal loans is now accelerating and will continue to do so for the remainder of the year.

Experian recently noted that the industry originated $222 billion of personal loans last year, up 31% versus 2020 and 22% over 2019. The growth in personal loans tracks a broader increase in spending and borrowing.

According to the Federal Reserve Bank of New York, nonmortgage consumer debt totaled $4.33 trillion at the end of last year, the highest level on record. Our auto loan business was very much focused on used car payments, is growing rapidly as used car demand and prices remain elevated, driven by the lack of new vehicles.

We continue to see extended durations and higher loan amounts. We're having success expanding into the credit unit space. We recently announced a technology integration with FLEX, a leading provider of core system software for credit unions.

The partnership further expands credit unions' abilities to offer digital payment options to members, enhancing the overall member experience and streamlining payment operations and reconciliation efforts for credit unions. This brings us to over 210 credit union clients. The Payix integration is going well.

We recently entered into an exclusive partnership between Payix and Nortridge Software, a leading software provider for lenders and loan servicing companies to provide Nortridge clients online cash payment acceptance, known as eCash.

eCash streamlines payment acceptance by enabling borrowers to make payments on their loans using cash at thousands of participating retail locations, including major convenience stores, dollar stores and pharmacies.

Cash payments are then settled electronically through the system of record to simplify reconciliation and end-to-end payment management, all from 1 place. Turning to our mortgage service and payment business. Much of our growth is coming from existing customers as some of our largest clients are servicing more mortgage volume.

Our STX offering is fully live in processing transactions, and the feedback has been very positive thus far. An emerging mortgage servicer recently joined our STX Board of advisors, bringing the total advisory Board members to 9 leading servicers.

We're continuing to add new members to the exchange, and this offering can really take off as new participants go live. Our instant funding volume for Q1 2022 was roughly 70% above Q1 2021. We're excited to be part of the Visa Direct partner program to help grow our instant funding solution.

As a Visa Direct partner, Repay will have access to Visa's tools and resources aimed to help launch and sell real-time payment solutions. Lastly, Repay clearing and sentiment continues to perform nicely with a significant pipeline for future growth.

We recently attended the Electronic Transactions Association ETA Conference and it came away with the sentiment that both the market and the networks believe that we are well positioned to continue winning new business via competitive takeaways, as we provide superior technology and an enhanced onboarding experience.

This presents an opportunity for Repay to take share with our proprietary platform which offers ISOs and payment facilitators more autonomy and greater flexibility than traditional large acquired programs.

In fact, we're excited to join the Visa Acceptance Fast Track program as a Visa-preferred partner providing us with direct access to Visa's capabilities and its global network of partners.

Through the Acceptance Fast Track program, Visa will point prequalified fintechs and [Payfacs] to its preferred partners who are willing to provide key acquiring and processes and services, develop a network of networks globally. So we feel it was a solid first quarter that sets us a strong foundation for success in 2022.

The secular trends towards frictionless digital payments will not go away in that of the macro environment and will continue to be a tailwind that will drive our business for years to come. As a reminder, we laid out a few specific initiatives on our last call, which will be guiding our focus and investments for the year.

As discussed, we continue to increase card penetration across all our verticals with top clients. We expect the majority of our growth to be derived from our existing client base. We have been optimizing our processing infrastructure in order to reduce costs as we grow the volume.

This will help us drive automation from first touch and every interaction. We are formally commercialized, marketed and are cross-selling our AR/AP unified capabilities this year.

As shown by the impressive growth this quarter, we continue to increase our AP supplier network as well as signed new B2B virtual card clients and expand virtual card adoption. We also will continue to focus on developing the best software and payment solutions for all verticals. Lastly, we are focused on thoughtful capital allocation.

Strategic M&A remains a powerful value creation lever for us. And we're continuing to see attractive opportunities in the pipeline. We believe that private valuations are beginning to moderate, and we remain confident that M&A will continue to enhance our performance relative to peers.

Before turning the call over to Tim, I want to thank our entire Repay team for the hard work so far this year. With that, I will turn it over to Tim to discuss the financials and guidance in greater detail.

Tim?.

Thank you, John. Now let's move on to our Q1 financial results before I review our financial guidance for 2022. As John mentioned, in the first quarter, Repay delivered strong results across all of our key metrics. Card payment volume was $6.4 billion, an increase of 39% over the prior year first quarter.

Total revenue was $67.6 million, an increase of 42% over the prior year first quarter. This represents a take rate of approximately 106 basis points. We believe the primary reason for the sequential decline in take rates is that average individual tax refund dollar amounts were much higher in 2022 versus prior years.

For certain pricing types such as convenience fees where the consumer pays the fee, the higher refunds would lead to lower take rates. This happens because the payment volume is up, but the flat fee paid by the consumer stays the same.

Please recall that approximately 15% of our business is priced on convenience fees and these client types would correlate with those that would use tax refunds to repay loans, medical bills or other outstanding debts. We do expect overall take rates to be higher in Q2 and future periods, back closer to the 110 basis points we experienced in Q4 2021.

BillingTree, Kontrol and Payix contributed approximately $17.2 million of incremental revenue during the quarter. Moving on to expenses in the quarter. Other costs of services were $16.6 million compared to $12.5 million in the first quarter of 2021. The incremental other cost of services from BillingTree, Kontrol and Payix were $3 million for Q1.

Gross profit was $51 million, an increase of 46% over the prior year first quarter. On an organic basis, we saw gross profit growth of 5% compared to the first quarter of 2021. Please recall that Q1 is a tough comp for us. Since there were 2 rounds of signals sent out Q1 2021 in addition to the normal tax refund season.

We expect organic growth to be higher in Q2 and future periods. In fact, our current estimate for April is at least 10%. SG&A was $32.2 million compared to $23.4 million in the first quarter of 2021. First quarter adjusted net income was $18.4 million or $0.19 per share.

Lastly, first quarter adjusted EBITDA was $29.3 million, an increase of 43% over the prior year first quarter. First quarter adjusted EBITDA as a percentage of total revenue was 43%.

We do still anticipate increased investment in sales, technology and product to continue putting in place the proper infrastructure for accelerated organic growth throughout 2022 and beyond. We remain confident in staying above the Rule of 60 for the foreseeable future. Combined pro forma net leverage is approximately 3.5x.

We expect this to be below 3.3x by the end of 2022, a very comfortable level, which will allow us to continue to fund organic and inorganic opportunities. As of March 31, we had $65 million of cash on the balance sheet and access to $165 million of undrawn revolver capacity for a total liquidity amount of $230 million.

As of March 31, we had approximately 100 million shares outstanding on a fully diluted basis. Finally, moving on to our thoughts for the remainder of the year.

We are pleased with our results in Q1, we are reiterating our guidance for 2022, which includes volumes to between $27 billion and $28 billion, total revenue to 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.

We continue to expect approximately 45% of the P&L contribution to come in the first half of 2022. The strong growth in the second half of 2022 is anticipated to be driven by growth in our B2B business, which we expect to comprise a greater share of the overall mix by the end of 2022.

This B2G growth includes exposure to the AP Media vertical, which is expected to be positively impacted by the political cycle, also fast-growing assets such as Payix, as well as the continued recovery in personal loans in health care. This 2022 outlook assumes organic gross profit growth of approximately 20%.

We expect organic growth to gradually increase throughout the year with 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. I'll now turn the call back over to the operator to take your questions.

Operator?.

[Operator Instructions] Our first question is from Ramsey El-Assal with Barclays..

I was wondering if you could provide some color on the macro assumptions baked into your guidance.

How are you thinking about some of the notable drivers across the verticals with things addition to things like rate hikes, supply chain, everything that's going on in the environment?.

Sure. Yes. So as we just mentioned, we think there's a number of factors that are driving stronger organic growth and overall growth for the remainder of the year. Just the general recovery in personal loans in health care is of macro assumption we have.

We understand there are some challenges within the auto space, but we're more exposed to used cars within auto and we still see very strong demand, longer durations, higher loan balances, which lead to greater repayment volume in auto. And we see just growth in B2B just given the underlying drivers of electronic payment adoption there.

So all of that leads to kind of our thinking on the remainder of the year.

And then as we talked about specific to our business, we do see B2B is the fastest-growing part of the business and will help -- will become a bigger part of the mix in the second half of the year, and we have some exposure to the AP Media vertical and specifically the political media cycle, which will positively benefit us as well..

So it doesn't sound like you're worried about, for example, loan originations in the personal loan area, feeling a little bit of a headwind or other types of sort of macro headwinds? It sounds like for your business, you're kind of thinking macro is more of a tailwind in a sense at this point than a potential headwind..

Yes. Yes. As John mentioned, we have -- there's been some interesting data on personal loan originations, which are really strong recently, and that will lead to greater repayment volume in future periods as well.

And as we've said, I mean, even in a situation where there may be credit normalization, we think we benefit from that because our customers would be more likely to adopt our payment solutions to when they're more focused on efficient collection tools. And so that could be a driver for us as well as potentially increased volumes..

Got it. Okay.

And really quick follow-up, and I might have missed this and you might have mentioned it, but what was the organic growth in the quarter?.

It was 5%. And what we've said is we've seen -- we -- our estimate for April so far is at least 10%, which is why we expect to continue to increase..

I think I recall that, you did mention that I apologize. I missed that the first time around. Thanks for your time this evening..

Our next question is from Sanjay Sakhrani with KBW..

I guess first question on the M&A backdrop. Obviously, there's lots of companies with valuations has come in quite a bit.

John, maybe you could just sort of update us on your thinking on what might be out there and what you're looking for?.

Yes, sure. Good afternoon, Sanjay. Obviously, we are very -- have had great discussions with our Board around a thoughtful capital allocation of what's the highest and best use for our funds for both our shareholders.

And as we if we look at specifically around the M&A side of that, we still think it's a very powerful value creation lever for us, as I said on the call. We still see that there -- we have a strong organic pipeline for ourselves that we have a team that looks at this.

We do think that the private valuations are beginning to moderate, and we'll see that even more so as we move throughout this year. We are positioned well. We have a history of being very successful there.

And we'll continue to look at the opportunities in the marketplace, in the marketplace that will overall help us enhance our long-term growth strategy, where it makes the most sense for us. We have lots of criteria we look at in order to evaluate key strategic M&A. So strong pipeline. We see good opportunities.

We are -- we will be very diligent and watching from a valuation perspective and making sure that -- we're disciplined in our approach there, and we expect some of that to moderate throughout this year.

Our balance sheet will be set up strong for the opportunities we think we'll be heading in our way, but we are -- we also have had great conversations around just overall capital allocation as well..

Perfect. And maybe, Tim, just following up on Ramsey's question, I guess, like obviously, your point is maybe your customers might be seeking repayment options, the market is sort of assuming we are going to go to a period of softness in the economy.

Are you seeing some of the lenders actually seek you out and look for that? And then what else are you sort of paying attention to in terms of consumer repayment behavior so that you can make informed..

And so that is something that we were hearing and something that we've talked about and we think will continue. And we think the consumer is very healthy right now. The [payable] market is strong. There's great demand for personal loans.

And we -- so we think those are all positive signs and that's what we've talked about being baked into the rest of the year..

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

Can you talk a little bit more about the B2B business and when you're winning there, for example, like the hospital, are those competitive takeaways? Or is there a mix of takeaways as well as just customers that have not yet gone to an electronic payment solution for B2B..

It's typically just actually winning against other forms of payment. So typically just moving business to electronic, to your point, away from checks and specifically moving into virtual cards. So it's not often competitive takeaways. It's just completely greenfield and specifically within the verticals we serve within B2B, we see that as well..

Okay. And then just in terms of just thinking about the seasonality of the business, generally, the first quarter is strong for the personal lending business due to tax refunds.

Second quarter, would you expect it to be sequentially down or flattish with the first quarter?.

Typically, it's coming out of tax refund season, it's slightly down. We do have some parts of our business, like I said, B2B growing faster, which will support faster growth in the second half of the year. But we expect organic growth to actually be higher in Q2. As I said, we're estimating at least 10% in April already.

So that's kind of how we think about Q2 versus Q1, but the second half of the year, we expect a lot of strength. And the personal loan recovery, we think is happening more rapidly than it was in prior periods, as John mentioned, and that will support future growth in Q3 and Q4 as well..

Our next question is from Andrew Schmidt with Citi..

First, I want to ask on the B2B business. I think just a clarification. Is the -- is the go-to-market now fully TotalPay? Or is the go-to-market still the individual brand.

Just curious if the consolidation of the individual brands has happened yet or if there's kind of a multi-brand approach from a distribution perspective?.

Yes, sure. It's currently -- obviously, it's a -- Repay is going to be the single brand. We call that solution TotalPay because it really does describe the total solution, both sending funds as well as receiving funds from an overall perspective.

But on our AP side, it allows us to actually make all of their payables payments, not just the ones with virtual cards are not just the ones with ACH, but also for checks or how they would like to pay their payables. So we find that to be the best descriptor for that.

But overall, as a brand that will only be Repay as a brand, and we'll drive that out to the market. I will say as we roll that out as a total solution, we will -- AR and AP will have that integrated into the various different ERPs we're integrated into.

And that will take -- as we move throughout this year and into next year as we upgrade our integrations to include both the AR and AP for new versions, we'll be adding the complete solution to that. As you are aware, we have integrations through our acquisitions with both sides of that.

And so as we update to various versions on these accounting ERP systems, we will continue to add both AR and AP to those..

Okay. Very helpful. And good to hear about the vertical expansion to government. I think it's obviously a very lucrative end market.

But -- is there any investment that's required when we think about vertical expansion within B2B, whether it's Salesforce or the existing integrations and go-to-market strategy and not to where maybe you modify some sales materials, but there's not much is required from a heavy lift perspective.

Just curious when we think about vertical expansion within B2B?.

For the most part, it's not significant investment. Obviously, from a talent perspective, if we're adding specific vertical BizDev talent, but that's really incremental. And then from an integration perspective, we're touching a lot of ERP systems already.

If there would be something that would be unique maybe on the AP side, it's a much lighter lift from an integration perspective, which is where we would touch. That's the piece we would touch mostly on the government side. So that's a fairly easy integration for us or a lift for us on the technology side..

Perfect. And then if I could just sneak more -- sneak one more in just on the outlook, and this has been asked a couple of different ways, but 1 quarter in, it sounds like there's more confidence in the outlook. Obviously, in the first quarter, probably doesn't make sense to increase it just yet.

But I just want to confirm that what you're seeing out there, you're more optimistic about the full year outlook. It sounds that way with what you're seeing in the underlying business momentum, personal loan growth, but just curious if there are any offsets for the full year that we should consider..

No. No. Like we've said, we're confident in the rest of the year, which is why we reiterated the outlook. There are a number of drivers there. You mentioned personal loans. There's also a recovery happening in healthcare, where we have exposure to a few different parts of health care.

We have consumer health care payments, claims payables as well as hospital payables. And so we think that just ongoing recovery in health care supports the outlook as well..

And then I would also add that, as I mentioned in my opening remarks, we had a record Q1 client implementations. And so some of those are obviously layered into our forecast, the recurring nature of those. And as they come live and actually begin processing that gives us more confidence as well..

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

A couple of things for me. One, encouraging to hear about instant funding and the 70% growth in that product.

John, can you just remind us, when you look at that solution, does that drive yield? Or is it really more of just a point of competitive differentiation such that you feel like your - you have stickier solutions and are offering more value to the customer.

And how should we think about that perhaps sort of driving the business over time, but a little more nuanced, it would be helpful..

Sure. Yes. So it's -- if you look at the big picture, a large piece of that, I'd specifically say on the consumer payment side of it, those would be the outflows, which historically were happening originally in cash and even check and even some form of ACH.

So as we influence that to a more digital card-based transaction, that will influence, as you look at the whole big picture of it, that will influence the repayment mechanisms back. Typically, how something gets funded, it usually gets set as default stored card or file -- a payment method on file to -- for repayment.

So we think that is really an influencer. We're seeing more and more activity to -- as we talk about the whole secular digital shift. That's a characteristic of that. We're at now, it's starting to go out the door that way, which means it will probably also come back that way.

And so as we drive those different experiences and behaviors, that's part of that secular shift that we're seeing, and that's -- we talk about it, but that's an evidence of that. Now that is more of a transactional based. There's great volume there, which also gives us visibility on what it will eventually be paid back.

But it is more of a transactional piece of that, which is not necessarily bps per transaction you get on that. It's more of just a click type transaction fee on that. But really good indicator of what's to come..

Right. Right. drives that secular flywheel. And then Tim, can you just also elaborate a little bit on gross profit margin. The organic revenue growth was a little light this quarter, and I understand it's going to ramp. Margin looks really good.

Can you just talk about puts and takes and how mix should affect margin throughout the year here?.

Yes. So we -- a lot of that has to do with BillingTree. BillingTree has been actually better than expected from a gross profit margin north of 80%. And so -- and they had -- they also have a strong Q1 as it relates to tax refund season.

So their volume and revenue has much higher gross profit margins than the overall average, which brings the average up. And so that's one driver of that.

And then we're in the process, as we've discussed of converting BillingTree back in to our RCS platform which effectively will reduce processing costs, which should drive margin up as well, and that will happen in Q2.

And so we would actually think that gross profit margins could potentially be a little bit higher for the remainder of the year for those reasons..

Okay.

So you don't have to worry about seasonality necessarily in that number?.

No, because of the conversion of the back end, I think that will help support similar to slightly higher margins..

[Operator Instructions] Our next question is from James Faucette with Morgan Stanley..

This is actually Jeff Goldstein on for James. You mentioned that the reason for the take rate decline was due to the tax refund dynamics.

So I just wanted to ensure that longer term, exiting the year and into 2023, you'd still expect either stable or growth in your ongoing take rate? Just -- just any change to your long-term thinking around that?.

Yes. So it was. We think it was unique to the tax refund dynamic, like I mentioned with higher average individual refunds and our flat fee convenience repricing model. We're already seeing that back up in April so we would expect it to increase back up closer to 110 basis points, as I mentioned.

And then we wouldn't think there to be any real material change going into next year or beyond. So I think it really was related to this specific dynamic for the 2022 tax refund season..

Okay. Fair enough. And then you mentioned growing your supplier network to 127,000 suppliers which was up I think from 110,000 last quarter.

Just how should we think about your ability to keep growing out that network? What resources do you have dedicated there? And is there a way to think about maybe like a critical level that if you reach to, it could help accelerate adoption of your solutions? Just is there something like network effect that you would imagine would encourage? How should we think about that?.

Well you will see it continue to grow at a similar pace. Obviously that has to do with, really as we drill down into some of these niche verticals, we could get more -- we are going to add more of these suppliers to it. But as we expand out into a couple of different areas, you will see us be able to add more suppliers.

Ultimately, the network effect is real. So if you -- it’s a pise of either way you are adding to your network effect. But as if you were to have all your people on the network, that would mean most of your customers could take virtual card, that’s a good thing as well. So you will see it probably grow at a similar pace.

But as we continue to grow organically new sales, it should continue to grow that as well. That network effect ultimately is getting as many people as we can on the network so that our virtual card adoption drives out there.

We see it when we drill down it to some specific unique areas where we have a unique niche in, where we start to see many of those vendors over and over and which is a positive effect for us..

There are no more questions at this time. I would like to turn the conference back over to John for closing comments. Actually, we do have a question with Cris Kennedy with William Blair..

Thanks for taking the question and squeezing me in. And I apologize if I missed it.

But did you happen to give kind of revenue growth by category, so B2B consumer loan repayments, what have you?.

We've not done that on this call, but we have done that in the past. And so consumer payments is probably in the high teens. B2B is by far the fastest growing part of our business is 30-plus percent. And then what we call other, which is really the RCS, the back-end platform is probably growing in low teens.

And so again, that's one of the reasons we have confidence in the outlook for the remainder of the year just because B2B is becoming a bigger part of the mix, and it's the fastest grower. And then we have -- those are, I think, healthy organic growth rates in the other areas as well..

No more questions? Great. I just want to thank everybody for joining us this evening. We greatly appreciate your time. We're very encouraged by our strong start to the year, which has positioned us well to succeed in 2022 and beyond, as we continue to take advantage of the secular trends towards frictionless digital payments.

And I look forward to seeing many of you as we go and see you at many of their different conferences. Thank you..

Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation..