8-K: Repay Holdings Corporation Announces Q4 and Full Year 2024 Financial Results; Initiates Strategic Review

Repay Holdings Corporation reports a 2% gross profit increase for Q4 2024 and announces a strategic review process, including potential strategic alternatives.

Summary

• Repay Holdings Corporation (RPAY) reported its financial results for the fourth quarter and full year ended December 31, 2024.
• The company's Q4 2024 revenue increased by 3% year-over-year to $78.3 million.
• Gross profit grew by 2% in Q4 to $59.7 million and 6% for the full year to $241.4 million.
• Adjusted EBITDA increased by 9% in Q4 to $36.5 million and 11% for the full year to $140.8 million.
• Net loss for Q4 was $4.0 million, compared to a net loss of $77.7 million in Q4 2023, which was impacted by a $75.7 million goodwill impairment loss.
• Free Cash Flow increased by 8% in Q4 to $23.5 million and significantly for the full year, with Free Cash Flow Conversion improving from 42% in 2023 to 75% in 2024.
• The company has commenced a strategic review process to assess a full range of alternatives aimed at capturing shareholder value, which may include M&A, a sale or take private of the Company, and other structural changes.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. While there are some challenges in the Consumer Payments segment, the overall financial performance is solid, with strong growth in Adjusted EBITDA and Free Cash Flow Conversion. The strategic review adds an element of uncertainty but also potential for value creation.

Positives

• Strong Adjusted EBITDA growth and accelerated Free Cash Flow Conversion during 2024.
• Business Payments segment showed strong gross profit growth of approximately 60% year-over-year in Q4 2024.
• The AP supplier network grew significantly, increasing by approximately 38% year-over-year.
• Instant funding volumes increased by approximately 34% year-over-year.
• The company added four new integrated software partners in Q4 2024, bringing the total to 280.
• The company ended Q4 2024 with 329 credit union clients.
• The company has a strong sales pipeline within healthcare, property management, and municipality verticals via direct sales and new / refreshed integrations.

Negatives

• Consumer Payments gross profit declined approximately 5% year-over-year in Q4 2024.
• Client losses impacted Consumer Payments gross profit by approximately 5% in Q4 and approximately 2% for the full year 2024.
• TotalPay volume migration impacted Business Payments gross profit by approximately 6% in Q4 and approximately 2% for the full year 2024.
• The company reported a net loss of $4.0 million for Q4 2024.

Risks

• The strategic review process may not result in any particular outcome, transaction, or other strategic alternative.
• Exposure to economic conditions and political risk affecting the consumer loan market, the receivables management industry, and consumer and commercial spending.
• Changes in the payment processing market and the vertical markets that REPAY targets.
• The ability to retain, develop, and hire key personnel.
• Risks relating to REPAYs relationships within the payment ecosystem and data security.
• The risk that REPAY may not be able to execute its growth strategies, including identifying and executing acquisitions.
• Changes in accounting policies applicable to REPAY and the risk that REPAY may not be able to maintain effective internal controls.

Future Outlook

The company remains dedicated to delivering the best payment experience for its clients and creating value by facilitating the ongoing secular shift to more digital payment flows. REPAY has commenced a comprehensive strategic review, with the assistance of outside advisors, to assess a full range of alternatives aimed at capturing shareholder value.

Management Comments

• Q4 closed out the year with another quarter of profitable growth at REPAY, said John Morris, CEO of REPAY.
• Our full year results showcased our resilient business model with strong double digit Adjusted EBITDA growth and accelerating Free Cash Flow Conversion from 42% in 2023 to 75% in 2024.
• As we reflect on the accomplishments we achieved in 2024 and turn to 2025, we remain dedicated to delivering the best payment experience for our clients and creating value by facilitating the ongoing secular shift to more digital payment flows.
• With the Boards support, we have commenced a comprehensive strategic review, with the assistance of outside advisors, to assess a full range of alternatives aimed at capturing shareholder value.

Industry Context

The announcement highlights the ongoing shift towards digital payments and REPAY's position in facilitating this trend within specific verticals. The strategic review suggests the company is exploring options to capitalize on its market position, potentially through consolidation or other strategic moves.

Comparison to Industry Standards

• Comparing REPAY to similar payment processing companies like Global Payments, Fiserv, and Block (formerly Square), REPAY's growth rates in Adjusted EBITDA and Free Cash Flow Conversion indicate a strong performance.
• Global Payments reported adjusted net revenue growth of 7.8% in 2023, while REPAY reported revenue growth of 6% for the full year 2024.
• Fiserv's adjusted earnings per share increased by 12% in 2023, while REPAY's Adjusted EBITDA increased by 11% for the full year 2024.
• Block's gross profit increased by 25% in 2023, while REPAY's gross profit increased by 6% for the full year 2024.
• REPAY's Free Cash Flow Conversion of 75% in 2024 is a strong indicator of efficient cash management compared to industry averages.

Stakeholder Impact

• Shareholders may experience changes in value depending on the outcome of the strategic review.
• Employees may be affected by any potential restructuring or M&A activity.
• Customers should expect continued focus on improving payment solutions.
• Suppliers and creditors may be impacted by any changes in the company's financial strategy.

Next Steps

• REPAY will host a conference call on March 3, 2025, to discuss the fourth quarter and full year 2024 financial results.
• The company will continue to execute its strategic review process.
• The company will focus on driving durable and sustained growth across REPAY's diversified business model.

Key Dates