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

Explicit Guidance:

• FY 2026 Revenue: Reiterated range of $490 million to $500 million, representing ~60% reported growth and 10–12% organic growth.
• FY 2026 Organic Growth (Normalized): Raised to 5–6% (previously 7–9%) due to mix shift toward political media and lower core consumer payments growth.
• FY 2026 Adjusted EBITDA: Reiterated range of $168.5 million to $176 million, representing ~35% margin.
• FY 2026 Free Cash Flow Margin: Reduced to 20–25% (down from 30%) on a reported basis and 25–30% on an adjusted basis, reflecting $14M investment in Q3 and expected $5M in Q4.
• FY 2026 CUBRA Contribution: Maintained outlook of $150 million to $154 million revenue and $27.5 million to $30 million adjusted EBITDA.
• FY 2026 Political Media Revenue: Raised full-year forecast to $16 million to $18 million (previously $8 million to $10 million).
• FY 2026 Synergies: Annualized run rate raised to $11 million (up from $8 million) for exit 2026.
• Long-Term Synergies: Targeting over $20 million in combined operating and CapEx synergies plus revenue opportunities exiting 2028.
• De-leveraging Timeline: Targeting net leverage below 3.0x by year-end 2027.

Business-Segment Outlook:

• Consumer Payments: Expects organic growth in the "low single digits" for Q4 2026. Full-year 2027 expectation is a return to growth driven by improved pipeline quality, booking-to-bill execution, and client expansion.
• Consumer Payments Pipeline: Recent rationalization of the pipeline under new leadership (Matt Morrow) has resulted in bookings exceeding quota for the quarter.
• Consumer Payments Implementation: Implementation timelines have been reduced via agentic AI; expected to improve segment growth trajectory beginning 2027.
• Business Payments: Expects continued strong growth outside of political media, driven by accounts payable monetization and new go-lives.
• Business Payments Bank Channel: Projected to generate $6 million to $7 million in revenue for the full year from the new bank reseller partnership (channel includes $3M contribution in Q3 and $3–4M in Q4).
• Product Launches: "Repay Voice" (natural language voice), "Dynamic Wallet" (digital wallet integration without app download), and AI-driven vendor enrollment matching are currently live and expected to reduce friction and drive retention.

Market and Competitive Outlook:

• Political Media Market: October activity exceeded the 2024 presidential election cycle peak; share gains allowed outperformance of the overall market. Business is expected to operate with high margins as activity is cyclical.
• Embedded Partners: The embedded partner channel is seeing rapid growth with the ramping of recently launched partners.
• Bank Reseller Channel: 52 banks have provided consent (96% of plan, ahead of schedule); opportunity exists to monetize commercial customers across all 52 banks.
• CUBRA Integration: Integration is on track with cost synergies captured ahead of schedule; cross-sale opportunities identified between Core Repay clients (bill design, print) and CUBRA clients (expanded payment channels).

Macro / Industry Outlook:

• Election Impact: Political media revenue saw elevated receivables at quarter-end ahead of the November 2026 election, expected to normalize by year-end.
• Consumer Finance Trends: Noting potential shift to used cars due to high new car prices (currently monitoring).
• Interest Rates: No specific guidance on FX or rates; focus remains on deleveraging via cash flow generation.
• Regulatory/Tax: No specific mention of new regulatory changes or tax rate impacts in guidance.

Strategic Initiatives:

• Bank Reseller Partnership: Executed $14 million investment in Q3 for a partnership with a global fintech; additional $5 million investment planned for Q4. Investment recorded as CapEx.
• Capital Allocation: De-leveraging to <3.0x by 2027 remains a priority; next capital allocation strategy to be balanced thereafter.
• AI Deployment: Agentic AI managing ~95% of security alerts (response time reduced from 300 to 7 minutes); deployed for vendor enrollment, fraud detection, and implementation acceleration.
• Organizational Changes: Filled key leadership roles in sales, implementation, and client management within Consumer Payments to improve execution.
• Investor Relations: First Investor Day scheduled for December 7, 2026, in New York City, to detail longer-term financial framework.

Risks and Headwinds to Outlook:

• Consumer Payment Conversion: 2026 bookings experienced slower pull-through than expected; some large enterprise deals are taking longer to go-live.
• Political Revenue Cyclicality: Political media revenue is cyclical; results depend on continued campaign activity.
• Integration Execution: CUBRA integration and bank channel migration success depend on execution in winning relationships and migrating them to the platform.
• Capital Intensity: Free cash flow margin reduction is due to the $19 million total bank channel investment ($14M Q3 + $5M Q4).
• Gross Margin Mix: Gross margin compression (65% vs 74% YoY) driven by CUBRA's lower-margin print/mail mix; expected to improve as digital presentment shifts.

Management Tone on the Future:

• Confidence: Management expresses high confidence in the ability to deliver "consistent profitable growth" and return to organic growth in Consumer Payments in 2027.
• Strategic Conviction: Views the CUBRA acquisition and bank channel investment as "high return use of capital" and complementary combinations driving scale.
• Operational Discipline: Emphasizes disciplined AI spend and the success of pipeline rationalization; notes that while the Consumer Payments ramp was slower, the quality of the pipeline is now "clean, predictable, and high-quality."
• Forward-Looking Language: "We are particularly excited," "We feel really good," "Ahead of plan," and "High conviction."

Miscellaneous:

• Liquidity: Ended Q3 2026 with $64 million operating cash and a $100 million undrawn revolver ($164M total liquidity).
• Capital Structure: $288M in 2029 convertible notes (2.875% coupon) and $500M senior secure term loan (SOFR + 550 bps).
• Pro Forma Leverage: 3.8x as of Q3 2026.
• Investment Details: Bank channel investment includes purchase of software; $3M of revenue and $1.3M of adjusted EBITDA generated from this channel in Q3.