Repay Holdings Corporation (RPAY) Third Quarter 2026 Earnings Call - REPAY HOLDINGS CORP

Good afternoon. I'd like to welcome everyone to Repay Holdings Corporation's third quarter 2026 earnings call. This call is being recorded November 9th, 2026. I would like to turn the session over to Charles Nabhan, Head of Investor Relations at Repay. Charles, you may begin. Thank you. Good afternoon and welcome to Repays third quarter 2026 earnings conference call. With us today are John Morris, co-founder and chief executive officer, and Robert Hauser, chief financial officer. During this call, we will be making forward-looking statements about our beliefs and estimates regarding future events and results. Those forward-thinking 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. Actual results may differ materially from any forward- looking statements that we make today. 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 reference certain non-GAAP financial measures. Reconciliations and other explanations of those non-GAP financial measure can be found in today's press release and in the earnings supplement, each of which is available on the company's IR site. With that, I will now turn the call over to John. Good afternoon, and thank you for joining us today. I'd like to begin by discussing who the new repay is following the Cougar acquisition. I'll then share highlights from the quarter and our strategic priorities, including how we're applying AI across the business, before turning the call over to Rob to walk through our financial results and outlook in detail. Since we announced the Coupa acquisition, we have frequently been asked, who is repay? What are you trying to achieve, and what problems are you solving for clients? Our answer is straightforward. With CUBRA, Repay now manages the entire lifecycle of a bill, from design and creation through presentment and communication to processing and settlement on our own payment engine. For clients, that means one partner for the whole billing relationship instead of several vendors stitched together. That end-to-end capability, which is fully integrated across our platform, sets us apart across our verticals and brings meaningful scale and diversification. Today, the combined company supports approximately $130 billion of annual payment volume, reaches more than 40% of U.S. and Canadian households, and counts eight of the ten largest U. S. gas and electric providers as clients. Our goal is to become the leading bill-presentment and payment company in North America, but getting there depends on operating as one integrated company, which is why we've invested in technology, product, and go-to-market. The third quarter reflected real progress against that strategy. Business payments and CUBRA both delivered exceptional results. The CUBBA integration is on track and already generating cross-sale interest, and we are raising our cost synergy target in core consumer payments results did not meet our expectations but we are taking deliberate actions to improve the business's competitive position under new leadership rob will cover the financials in detail including free cash flow and our investment in the bank reseller channel so i'll focus on what's happening across the businesses the integration of kubra remains our top priority it is progressing as planned our conversations with clients and progress on platform integration have increased our conviction that this is a highly complementary combination. We're capturing cost synergies ahead of schedule, helped in part by AI-enabled efficiencies. Just as importantly, we see early revenue opportunities. In business with several of our largest enterprise clients, we've heard strong interest from core repay clients on bill design, presentment, and print, while Cobra clients are asking about expanding their payment channels and options and core consumer payments results this quarter were below our expectations largely due to a weaker than expected pull through from 2026 new sales and prior year sales under the new leadership of matt morrow who joined us in the second quarter we have completed a comprehensive review of the segment's pipeline and client portfolio we have paired that review with operational and personnel changes designed to improve execution and are pleased to report that bookings exceeded quota for the quarter we have filled key leadership roles across the organization from sales and implementation to client and partner management on the new business front recent go lives include a captive auto leasing program for a global automaker and several new consumer lending and credit union clients furthermore we are seeing reduced implementation timelines as our teams leverage agentic ai on the product side we recently launched repay voice promoted cuba's print and communication capabilities introduced dynamic wallet which puts our clients bill directly on the phone's digital wallet so there's no app to download we're particularly excited about this solution as it removes a major source of friction and bill payment and keeps our clients brands in front of their customers on a recurring basis. We expect these actions to improve the segment's growth trajectory beginning in 2027 and look forward to sharing more detail at our investor day in December. Business payments was a standout this quarter. We capitalized on an exceptionally active campaign season and our political media business has already reached the high end of our original four-year forecast, which Rob will discuss as we raise our outlook for this portion of the business importantly growth was strong outside of political as well driven by our accounts payable business where we are monetizing more of the volume on our platform and bringing new clients live within that business we saw a particular strength in the embedded partner channel which has seen rapid growth from ramping of recently launched partners this quarter we invested 14 million in a bank reseller partnership with a large global fintech provider which expands our business into a new distribution channel the agreement provides us with certain contractual rights related to these relationships and the value depends on our execution in winning each relationship and migrating it onto our platform thus far we are ahead of plan on agreement sign which reinforces our view that this is a high return use of capital Before turning it over to Rob, I want to touch on AI, which we're deploying in two areas, the products our clients use, and how we run the business. On the product side, examples include RepayVoice, our natural language voice offering, Agentech AI within our repayment assistance plan, and AI-driven vendor enrollment matching that helps business payment clients move from paper checks to electronic payments. Internally, AI is shortening the time from contract signature to first processing, accelerating client and technology migrations, improving fraud and chargeback detection, and contributing to Cougar synergies. A few data points to illustrate the impact. Our agentic B2B payment workflows are processing a significant portion of vendor payments. And agentic AI now manages approximately 95% of security alerts and has reduced response times from roughly 300 minutes to about seven. This quarter, we also launched new AI agents supporting risk and underwriting reviews and ACH self-enrollment. Additionally, we have put clear governance and budget controls around AI spend, so these investments remain disciplined as they scale. To sum up, we are executing on our strategy, integrating CUBRA, growing business payments and repositioning consumer payments for higher quality growth with the goal of becoming the leading bill presentment and payment company in North America. I'm confident in our ability to deliver consistent profitable growth and we look forward to sharing more and introducing you to our team in person at our first investor day on Monday, December 7th in New York City. Before I turn the call over to Rob, I want to thank our employees across every part of Repay for their hard work and commitment. This has been a period of transformative change for our company. From the shifts in our consumer business to bringing Cooper into the Repay family, I know that navigating that much change while staying focused on our clients isn't easy. Your dedication to excellence is what makes this progress possible, and I'm genuinely grateful for it. With that, I'll turn the call over to Rob. Rob? Thank you, John, and good afternoon, everyone. Third quarter revenue was $153.4 million, up 97% year over year, including a full quarter contribution from CUBRA. Organic revenue growth was 13.6%, which includes approximately nine points of contribution from political media. Excluding political media, normalized organic revenue growth was approximately 5%, an improvement from approximately 4% in each of the first two quarters of the year. Consumer payments revenue increased 0.3% year-over-year on an organic basis due to softer revenue pull-through from 2026 new sales and prior year sales. We expect consumer payments organic growth in the low single digits in the fourth quarter As these actions work through our results are 2027 expectation is to get back to growth driven by improved pipeline quality book to bill execution and client expansion. We will provide more detail at our upcoming investor day on December 7. Uber reported within consumer payments contributed approximately $65 million in revenue during the quarter, up approximately 8% year-over-year on a pro forma basis, and an acceleration from 6% growth in the second quarter, driven by strength in professional services, payments, and communication services. We are also ahead of schedule on synergy realization and are raising our annualized target run rate, exiting 2026, from $8 million to $11 million. The business payment segment was a bright spot this quarter, generating 99% revenue growth or 40% excluding political media. It should come as no surprise to many of you that this has been an extremely active campaign season, and our business capitalized on this activity, generating $7.1 million of political media revenue in the quarter and $9.7 million year-to-date. That already puts us at the high end of our prior full-year forecast, which we ranged from $8 million to $10 million previously, and we are raising our forecast to $16 million to 18 million as a result. Political media activity in October exceeded the peak we saw during the 2024 presidential election cycle, and our share gains have enabled us to outperform the overall market. While political media revenue is cyclical, it carries high margins, so the vast majority falls to the bottom line and accelerates our progress towards our leverage target. Outside of political media, results were driven by our accounts payable business, which benefited from the monetization of volumes on our platform, as well as our new go-lives. Even excluding both political media and our newly entered bank reseller channel, business payments revenue grew at a double-digit rate. Business payments also included approximately $3 million in revenue and $1.3 million in adjusted EBITDA from the bank partners that we transitioned to the repay platform through a commercial agreement with a strategic partner. In connection with that agreement, we made a $14 million investment during the quarter, which is reflected in free cash flow. Because the investment related to the purchase of software, it is recorded within capital expenditures and we expect to make a final investment of approximately $5 million under the agreement in the fourth quarter. To date, we've had consent from 52 banks, which is 96% of the plan and ahead of schedule, and we believe our accounts payable offering represents a strong value proposition for financial institutions. Gross profit was $99.5 million, a 65% margin compared with a 74% margin a year ago. Because this change is likely to be misread, I want to be clear about what is driving it. The change is almost entirely a mix effect from Cobra, whose vertical product and payment mix, including print and mail, carries a lower gross margin than core repay. Over time, we expect the shift from print toward digital presentment to support Cobra's margin profile, as digital earns a higher gross margin than print. Third quarter adjusted EBITDA was $50.9 million, up 63% from $31.2 million in the prior year quarter, with an adjusted EBIDDA margin of approximately 33%. The same mixed dynamic applies here, as the reported margin reflects a full quarter of CUBRA. We are ahead of schedule on cost energies and now expect to exit 2026 at an annualized run rate of $11 million, compared with our prior target of $8 million. We continue to target over $20 million in operating and CapEx synergies, plus revenue opportunities exiting 2028. Third quarter adjusted net income was $22.5 million, or $0.25 per share. Free cash flow was a negative $21.1 million, reflecting the $14 million bank reseller channel partnership investment, $15 million in interest expense, and approximately $11 million of working capital timing. The working capital timing was primarily due to political media receivables that were elevated at quarter end ahead of the November election, and we expect this to normalize by year end. Now moving on to the balance sheet and liquidity, we ended the quarter with $64 million of operating cash on the balance sheets, plus an undrawn $100 million revolving credit facility that provides flexibility for total liquidity of approximately $164 million. Our capital structure consists of $288 million of 2029 convertible notes with a 2.875% coupon and a $500 million senior secure term loan due in 2033 priced at SOFR plus 550 basis points. At the end of Q3, pro forma synergized net leverage was approximately 3.8 times. De-leveraging is a clear priority, and we remain on track to be below three times by year-end 27 which will allow us to move to a more balanced capital allocation strategy the path is straightforward continue free cash flow generation including this year's high margin political media revenue and adjusted even a contribution from cubra and the synergies we just walked through turning to guidance we are reiterating the full year 2026 revenue outlook we provided when the CUBER acquisition closed on June 1st, which incorporated seven months of CUBER contribution. We continue to expect revenue of $490 million to $500 million, representing approximately 60 percent reported growth and 10 to 12 percent organic revenue growth. Within that outlook, the mix shifted. Higher political media revenue is making up for lower than previously expected growth in core consumer payments as a result we now expect normalized organic growth including political media of five to six percent compared with seven to nine percent we previously communicated we are also reiterating adjusted ebita of 168.5 million to 176 million representing a margin of approximately 35 based on stronger political media revenue and higher than expected synergy realization. The reduction in our free cash flow target from 30% to a range of 20 to 25% and from 35% to 25 to 30% on an adjusted basis reflects a $14 million bank channel investment made during the quarter and an expected $5 million payment in the fourth quarter. Despite this reduction, however, we remain on track to reach our leverage target by year-end 2027 and see this as a high return use of capital. Our 2026 outlook for Cobra remains unchanged, and we continue to expect a contribution of $150 million to $154 million in revenue and approximately $27.5 million to 30 million in adjusted EBITDA. To wrap up, the third quarter demonstrated the value of more diversified repay. Business payments and political media delivered meaningful upside, Kuber grew ahead of our expectations, and we are capturing synergies faster than planned. Together, those strengths allowed us to reiterate our full-year revenue and adjusted EBITDA outlook while we repositioned core consumer payments for higher quality, more durable growth. For the remainder of the year, our priorities are unchanged. Execute the Kuber integration while our segment leaders stay focused on their businesses, convert earnings into free cash flow, and reduce net leverage below three times. We look forward to sharing our longer-term financial framework at Investor Day on December 7th. With that, operator, please open the line for questions. Thank you. We will now be conducting a question-and-answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You might press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Our first question is from Joe Vaffey with Canaccord Genuity. Please proceed with your question. Good evening. This is Palafeni on for Joe. Thanks for taking the question. Can you help us understand a little more about the factors that led to the slowdown in the co-consumer payment segment and I will follow? Yes. Good evening, thank you for joining us today. So, as we indicated on the call, Our expected pull-through for some of our 2026 bookings were not as expected. And some of the things that kind of the puts and takes that go into how we look at that. Overall, we actually, some ofthe changes we were making into implementations, our actual, as we mentioned, implementations has actually improved. But as we look into how the size of the deals and how we size the deals inside of that, we saw that some ofour larger enterprise were taking longer. So we changed the polarization of how we look at some of that. But then also inside of that, there's the payment mix as when you expect certain pieces of that revenue to come live. Ultimately, the short answer to that is booking to live or booking to revenue was not hitting our expectations there. So we wanted to call that out in the fourth quarter, I mean, in the third quarter. Yeah, and this is Rob. Thanks for the question. So, you know, a meaningful portion of our pipeline that was in place at the start of the quarter, obviously, it didn't convert like we wanted it to in the timeframe we wanted to. We've made some pretty substantial, John talked about on the call just now, a change with bringing Matt Morrow on the team. And we've made them some changes in sales leadership. And they have some really strong horsepower where they come from. They understand the business really well. And they did a really deep dive on the pipeline over the past few months and really looked at the quality of the pipeline, looked at certain criteria, and looked at unrealistic closed timing versus closed timing and really rationalized that pipeline and gave us a really clean view going forward, a really clear, predictable, high-quality pipeline. And it's something that needed to be done, and we've put some really good – I guess, processes around that going forward. And, and, um, you know, it's, it didn't materialize as fast as we wanted it to, but this is a good business and we feel there's that, you know, this, the, the ramp is coming in a little slower than we expected and we'll pick up, uh, especially with some of the folks that are working on this now. Um, but it's going to take us a little longer than we thought. And um, but we're still really excited about the business and actually believe that it's going to return to growth over the next few quarters and really have that sustainable quality pipeline. And so, you know, a little bit of work we still have to do there, but there's no concern of any type of attrition or anything like that. It's really just building out that pipeline and putting those guardrails on. So a little more work we need to keep doing, but we feel really good about the business. Thank you. That's helpful. And maybe some color on the bank reseller channel partnership and the opportunity there. Anything else that you would like to add? Thank you? Yeah, I can start. So on the Bank channel, we're very excited about that. Obviously, this is something that we've just announced here, and our ability to really drive that as a new channel as we really drive an additional go-to-market. Think of it almost like a vertical, but it's a channel. And we're already seeing great results inside of that, inside of our first quarter of launching that. So something we were aware of, something we Were overall organically looking at to drive even more growth If we look out into the future, as you can imagine, inside of every each one of these 52 banks that we've already engaged with, that there's an opportunity for every one of their commercial customers to use our total pay solution and our ability to drive and monetize that inside of that. That it's almost resembles a little bit almost like our embedded partner channel, which is also driving growth exceptionally well in our B2B space. So we're really clicking on a lot of cylinders on the B2B side in a good way. But we are excited about that, what that's going to bring for us for the remainder of 26, as well as into 27, as we continue to expand out that bank partnership. And one point I want to call out is, you know, we have to go out and sign those banks. So this is a typical partnership agreement that we like to do, but we need to go out and actually bring those banks on. And as we mentioned on the call, we had 52 banks already consent, but we've got to go out and sell them and then move them on to our platform. And we're, as we said on the called, ahead of plan on that. So we're feeling really happy about where that's going and the growth opportunity for that space. Got it. Thank you for taking the questions. Sure. Our next question is from Pete Heckman with D.A. Davidson. Please proceed with your question. Hey, good morning. We're working through the numbers here, but the $3 million in the quarter in B2B, just to be clear, that that was a revenue contribution from the new reseller partnership? Correct. Yes, it was. Okay. Great, great. Okay. So, when we look at that 40% year-over-year, that includes the $3 million? It does. It does include the $ 3 million. And, you know, we're expecting for a full year somewhere in the range of around, you knows, $6 to $7 million for the full year on that channel. Okay. Okay, and then, sorry if I missed it, but did you quantify the range of expectations for political media spend you expect for the full year, what, including October and November? Yeah, we range the political media to be around $16 to $18 million for full year. So substantially higher than where we were during the presidential election. If you were to just take Q3 results on our political media and compare it to the presidential election Q3 two years ago, we roughly did 37% better than the presidential election. So we're starting to really see some expansion on that business and it's operating. And really from a full year guide compared to how we did in the presidential selection, it's roughly around the same percentage, around 38% improvement over the presidential elections. So really strong results. Okay. Okay, that's impressive. That's impressive, and then actually, I'll get back in the queue. I appreciate it. Yeah, no problem. Our next question is from Timothy Chiodo with UBS. Please proceed with your question. Great. Thanks a lot. Some of this was hit on a little bit on the first question, but I was hoping we can dig into a little Bitmore in terms of the drivers of the acceleration in the consumer business into next year. You mentioned actually proactively that churn is not one, meaning churn is kind of stable-ish. I'm assuming that means heading into next year as well. So when we get to some of the other factors, clearly it's either a same-store sales type of issue or something around the cohorts, either the last year cohort or next year's cohort. Of course, there's always one-off items in terms of implementation delays, which it sounds like, is one of the factors here. But I was hoping you could expand upon just the drivers and the confidence in the re-acceleration implied in the consumer business for next year. Thanks. Yeah, great call out, Tim. So I would start backwards. The cohort really is the 26th entry year cohort is not achieving our expectations. A few of those things can come into play, as you can imagine. And we've really invested to really drive with AI, drive our implementation cycle, but we can't completely control the client side of that. But ultimately, as we looked at the actual pull through on that and some things associated with the mix of that, really the timing of even the client-side go-live on some of these initiatives, Some of those were not matching our prior year cohorts on what we expected. And also our 25 cohorts, some of the latter parts of those deals were not matching what we had historically seen on some of our other what I call cohorts or even vintages. So we feel confident, though, on some OF the changes we made on how we're looking at it from a conservatism perspective. that we like because we can see some of the other metrics that really overall are driving that. Some of this as well as we are also moving up upstream, which we talked about, we're winning in some of our enterprise level, but those go a little bit slower than some of these we had historically expected. Regardless, we are putting the right pieces and measures in place and we are trying to do the right projecting out for some of those cohorts that will take a little bit longer. Yeah, if I just add a little to that, Tim, we're exiting the year at low single digits, as we said on the call. But to John's point, that pipeline and the quality of that pipeline, since we've really done a strong rationalization with some of the new sales leadership that's come on board, we have high confidence in going into 27. And we'll talk a lot more about that our December 7th investor day. But our confidence in the business is a great business. It's just, as John mentioned, it's taken a little bit longer on the ramp. And John also mentioned around AI, we've done a lot of work around AI around implementation. So we're ready as it starts to flow in to deploy. It's really getting that ramp going again and getting some of these bigger deals up and running. Excellent. Thank you for the answer. Yep. Once again, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question is from Mike Grondahl with Northland Securities. Please proceed with your question. Hey, guys. Thank You. Can you talk about what you're seeing in the auto and personal loan pieces of your business? Yeah, so, good evening, Mike. As we mentioned earlier, we went live with a larger OEM automaker in that particular part of the business. And specifically, that was one of those scenarios that took us longer than we expected on a few of those different portfolios. We're a very large enterprise. Sometimes it can be broken up into various different portfolios of servicing. In that particular case, we are alive there. We do see things sometimes where the average ticket in new auto is a little bit higher, if you're just looking for some metrics around some things there. that's a debit world for us so that's not always a negative necessarily and then what we see on the consumer finance side is we're seeing positive things there we don't see from a stability of consumer piece of that we don's see any that would be normal for us from what we have been seeing specifically in that world. There is a scenario where and we're not fully seeing this yet where used cars could be, you know, returning back just because new cars have become more expensive. We're not specifically seeing that one way or the other. It's just something we'll be on the lookout for. Got it. And then on the sales and marketing side, was there a lot of turnover there? It sounds like maybe there's some new salespeople, a new person running the group, but just overall sales and marketing, was there a lot of turnover, kind of summer, fall? Yeah, so this is specifically on core consumer, obviously not the Cougar side of the house. And specifically, we have made several changes there on the team. So the answer to that is yes, we Have made several Changes, and it did happen starting probably in the second quarter of this year. it can you highlight how many sales people kind of turned over how many are new or what percent of the group maybe yeah kind of a handful i would say but um as we look out on some of the investments we were making last year we look down we look at productivity and at some of changes we made so um around i'm just probably around a handful of those okay okay and And, hey, last question is just the $14 million investment in that bank channel, it just seems like a big number. What do you get for that? Yeah, so it's actually, I mean, it's $14 billion, which, you know, was the investment. Another five we're going to do in the fourth quarter. But actually, you know, as I mentioned, we're going to do just, and it's not even a full half year from when we entered into the agreement to the end of the year, around $7 million. So you can imagine, and its recurring revenue, its decent margin, the profitability on that's quite well. I mean, we've kind of laid that out. It's around 40% profit on that. So it's a recurring revenue channel. So for roughly $19 million, $14 in the third quarter and another $5 in the fourth quarter, we're going to have that recurring revenue that if you look at just – let me just frame this up. If you look At how we did what our political media estimates are for this year, you're roughly returning around that level of revenue on a recurring basis going forward. So it's actually – we're pretty excited about it. It's a great use of capital. And just like our existing core business in B2B, where we've been converting and monetizing a lot of the ACH volume we've run in, the opportunity to do that with this business is great. So we're pretty excited about the return that it's going to bring. Okay. Thank you. Sure. Let me give some more color there, Mike. So you obviously already see the $3 million in revenue from the $14 million investment. You'll see another $3 to $4 million, as Rob indicated, between now and the end in the fourth quarter, right? In addition to that, our ability to land and expand with those 52 banks, various different large enterprise customers. If we just pick the verticals we operate in, if you just think about, you know, healthcare, hospitality, the areas that we're automotive, that 52 various different banks and some very, very large, our ability, if we think about the leads part of that, but you also think about our ability to convert all of those onto our new total pay solution. We've seen that as we converted some in-house things over to our total pay solution, our ability to monetize and increase the ability to take that more digital, to take what, as you know, are more on the virtual card, more on The ACH Advanced. And then our ability drive that. There's billions in volume there. that's just another growth lever for that B2B side of the house that's just now as you can see our embedded partner channel is really is really accelerating of course the political media piece was 40% almost 40% growth over the prior political cycle we the investments we made in the last couple years they're really starting to pay off okay great thank you for that Thank you. I would like to turn the floor back over to John Morris for closing comments. Thank you, everyone. To sum up, we are executing on our strategy. As you know, we're integrating the overall Cougar platform and ahead of our schedule on our synergies. We're growing the business payments area, as we just talked about, repositioning overall consumer payments, which we talked about as well, to drive even more growth there with the goal of becoming the leading bill presentment and payment company in North America. I'm confident in our ability to deliver consistent and profitable growth. We look forward to sharing more about this as we introduce you to our overall individual team leaders in person at our first Investor Day on Monday, December 7th in New York City. Thank you for your time today. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.