Repay (US:RPAY)2025-11-10 23:02Financial Data and Key Metrics Changes - In Q3 2025, the company achieved revenue of $77.7 million, reflecting a 5% normalized year-over-year growth, while gross profit was $57.8 million, with a 1% increase on a normalized basis [13][14] - Adjusted EBITDA was $31.2 million, representing approximately 40% adjusted EBITDA margins, and free cash flow was $20.8 million, resulting in a 67% free cash flow conversion [15][16] - The company reported a gross profit margin compression of approximately 3.4% year-over-year due to client losses and increased volume discounts [14][15] Business Line Data and Key Metrics Changes - In the consumer payments segment, gross profit increased by 1% year-over-year, with a single-digit increase when excluding the impact of client losses [14][15] - The business payments segment saw a normalized gross profit increase of 12% year-over-year, with over 20% growth when excluding the impact of client losses [10][15] - The supplier network in the business payments segment grew to over 540,000 suppliers, a 60% year-over-year increase [11] Market Data and Key Metrics Changes - The company added five new software partners in Q3, bringing the total partnership network to 291 across consumer and business payment segments [6][11] - The company is focusing on increasing TotalPay adoption and has seen double-digit growth in its accounts payable platform, particularly in healthcare and hospitality verticals [10][11] Company Strategy and Development Direction - The core growth strategy focuses on optimizing digital payment flows and embedding payment technology into software platforms [4][5] - The company is investing in AI tools and automation to enhance client onboarding and improve operational efficiency [5][6] - Capital allocation priorities include organic growth investments, managing CapEx, and maintaining a strong balance sheet while being open to M&A opportunities [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to sustainable growth as they exit 2025, with expectations of 6%-8% normalized gross profit growth in Q4 [17][18] - The company anticipates ongoing margin pressures due to a mix of larger clients with volume discounts and higher transaction values [18] - Management highlighted a stable consumer environment, with some softness noted in the automotive sector [36] Other Important Information - The company repurchased approximately 3% of its outstanding shares in August, totaling $38 million year-to-date, and reduced debt by retiring $73.5 million of convertible notes [12][16] - As of September 30, the company had approximately $96 million in cash and access to $250 million in undrawn revolver capacity, totaling $346 million in liquidity [16] Q&A Session Summary Question: Free cash flow outlook into 2026 - Management expects free cash flow conversion to be in the upper 50s for Q4 2025, with a strong 67% conversion in Q3 [22][23] Question: Political media spend headwind - The headwind from political media contributions in Q4 last year was $4.6 million in gross profit, with an annual impact of approximately $11.75 million [23] Question: Visa Commercial Enhanced Data Program - Management discussed the transition from level two to level three data requirements, which will impact interchange rates and associated fees [28][31] Question: Consumer payments softness - Management noted stable consumer conditions overall but identified softness in the automotive-to-used car segment [36] Question: M&A pipeline and targets - Management indicated a healthy pipeline for M&A opportunities in both consumer and B2B segments, while also focusing on capital allocation priorities [38]