RPAY

Good afternoon. I'd like to welcome everybody to REPAY's 1st quarter 2026 earnings conference call. This call is being recorded today, May 4, 2026. I would like to turn the session over to Stewart Grisante, Head of Investor Relations for REPAY. Stuart, you may begin.

Thank you. Good afternoon. Welcome to REPAY's first quarter 2026 earnings conference call. With us today are John Morris, Co-founder and Chief Executive Officer, and Robert Houser, 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-looking statements are subject to risks and uncertainties, including those set forth in the SEC filings related to today's results and 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. 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-GAAP financial measures can be found in today's press release and in the earnings supplement, each of which are available on the company's IR site. In connection with our 2026 annual meeting of stockholders, we intend to file a definitive proxy statement and related materials with the SEC. Our directors and certain of our executive officers and employees will be participants in the solicitation of proxies in connection with the annual meeting. Stockholders are encouraged to read the proxy statement and related materials when they become available, as they will contain important information, including the identity of the participants and their direct or indirect interest by security holdings or otherwise.

As you may know, Veradace Partners submitted a request for the board to waive the timeliness requirement of our bylaws for stockholders to provide notice of intent to submit director nominations for candidates to stand for election to the board at the annual meeting. The board determined to deny the request, and on Friday, May first, we filed our preliminary proxy statement with the SEC. Veradace failed to comply with the requirements set forth in our bylaws and is not entitled to make lawful director nominations at this year's annual meeting. Additionally, the board previously confirmed receipt of an unsolicited, non-binding proposal from Forager Capital to acquire the outstanding shares of the company.

Earlier today, we sent a letter to Forager Capital and issued a press release providing that the board has unanimously rejected the unsolicited, non-binding proposal because it significantly undervalues the company and is therefore not in shareholders' best interest. At this time, we will be making no further comments or take any questions on Veradace, Forager Capital, or any matters related to them. With that, I will now turn the call over to John.

Thanks, Stuart. Good afternoon, everyone, thank you for joining us today. Repay had a solid start to the year after exiting 2025 with continued momentum. Since reporting full year 2025 earnings in March, we announced a strategically significant acquisition to create a scaled bill payment provider with the technology and market position to lead the digital journey across the payment ecosystem. I will talk more about the KUBRA acquisition in a little bit, let's first go over the highlights of our Q1 results and progress we have made. During Q1, Repay remained focused on our core growth and operational execution. We achieved 4% revenue growth and approximately 43% Adjusted EBITDA margins and continued to generate positive Free Cash Flow. We exited the quarter with over 297 software partners across our consumer and business payment verticals.

In consumer payments, Q1 revenue increased approximately 4% year-over-year as we implemented new enterprise clients who are adopting more payment channels and modalities. We have seen strong interest in our Digital Wallet capabilities and began our phased rollout of Repay Voice AI to select enterprise clients. Throughout last year, Repay has been investing in our sales and customer support teams while also enhancing many of our software integrations to help further penetrate existing partnerships and create overall better user experiences. The teams are working through the onboarding and implementation and ramping of clients in our sales pipeline, which we are confident will drive accelerating growth as we move through the year. During the quarter, we continued to automate workflows and deployed AI capabilities to improve processes such as performance and risk monitoring for our ever-growing volumes on our gateway.

We have also been optimizing network routing, leading to tangible payment efficiencies. In addition, we completed a strategic partner investment leading to an immediate EBITDA uplift from existing volumes during the quarter. Finally, we have strengthened our Consumer Payments leadership. We're excited for Matt Morrow to join Repay in the coming weeks as the new Executive Leader of Consumer Payments. Matt brings over a decade of payments and business service experience managing growth through disciplined strategic planning. He has extensive experience and history with embedded payment partners and will oversee the Consumer Payments growth, sales, operational initiatives going forward. Moving over to our Business Payments segment. Business Payments had another quarter of strong performance with Q1 revenue increasing approximately 18% year-over-year. The business added 2 new software partners in the quarter, leading to many new clients across our verticals.

The sales pipeline continues to build in our automotive, property management, government, and education verticals. New client wins include regional multi-location auto groups and multiple government and school districts within certain regions. The political media vertical started to see an uptick in processing ahead of the back half weighted political media cycle heading into the 2026 midterm elections. We ended Q1 with over 665,000 vendors in our supplier network, an increase of over 70% year-over-year. Vendor enablement is a great example of where we are deploying automation to improve vendor matching for clients. During the quarter, we were able to automatically match more than 15,000 new vendors, which will allow us to improve our digital monetization for both new and existing volumes over time. The last topic I'd like to discuss is our recently announced acquisition of KUBRA.

In evaluating capital allocation alternatives, including share repurchases and M&A, we believe the KUBRA acquisition offers the most compelling long-term value creation opportunity given its scale, non-discretionary, reoccurring revenue profile, and synergy potential. We have received feedback from certain shareholders on KUBRA and wanted to address those points directly. Before doing so, I should reiterate our board's continued support of the acquisition and management's belief in the long-term benefits. The acquisition is supported by fully committed financing. As such, the teams are moving forward expeditiously, and we expect to close the transaction during Q2 2026. We also have been asked about our plans for integrating the companies. Our teams have been actively planning for the integration to hit the ground running on day one and to provide the identified value creation opportunities in the near term.

This incorporates integrating technology, employees, and most importantly, client relationships, and the support for a seamless transition. I look forward to engaging with KUBRA's clients in the coming months once the deal is closed. Given the acquisition is yet to close, there are limits to the level of detail we can provide at this time. However, we will provide additional detail following closing. The board and management remain confident in the strategic and financial rationale of the KUBRA acquisition. As with any integration of this scale, execution will be critical, and we are focused on the disciplined integration planning to mitigate operational and client transition risks. Together, we offer a comprehensive end-to-end digital platform. This means spanning across bill presentment, communication services, and payment processing with our own clearing and settlement engine.

The acquisition will result in compelling strategic combination in the market leading to management and the board's confidence in creating long-term value for all stakeholders. The board remains focused on the fiduciary duty to maximize long-term shareholder value and regularly evaluates strategic alternatives, such as the KUBRA acquisition. We believe the KUBRA acquisition provides that significant scale. Based on 2025 KUBRA results, we will approximately double our revenue, interact with over 40% of U.S. and Canadian households every month, and process over $130 billion in annual payment volumes as we serve non-discretionary categories with reoccurring billing cycles. Importantly, the transaction is expected to enhance our free cash flow profile over time and provide identifiable cost and revenue synergy opportunities.

We're targeting a return to below 3 times net leverage within approximately 18 months of closing, supported by the combined company's cash flow generation, synergy realization, disciplined capital allocation, and, as appropriate, ongoing evaluation of opportunities to further enhance balance sheet flexibility. We expect to generate strong free cash flow over this period and look forward to providing additional updates following closing on our progress throughout 2026. With that, I'll turn the call over to Rob to go over Repay's Q1 financials. Rob?

Thank you, John, and good afternoon, everyone. In the first quarter, Repay delivered results that were in line with our internal expectations across key metrics. Revenue was $80.8 million, representing 4% growth year-over-year. Consumer payments revenue increased 4% year-over-year. Business payments reported revenue increase 18% year-over-year, and normalized revenue increased approximately 16%, which excludes the positive political media contributions during the quarter. We expect this positive momentum and sustained contributions from existing clients as well as incremental contributions from new clients will increase growth momentum as we move throughout 2026. We also started to see early contributions from the political media spending cycle that occurs every 2 years, which we typically see a majority of political contributions in Q3 and Q4 around the November elections.

Q1 Adjusted EBITDA was $34.4 million, representing approximately 43% Adjusted EBITDA margins. During the quarter, we began to benefit from cost improvement initiatives such as optimizing volume routing and the immediate accretion from a strategic distribution partner investment we made during the quarter. As we updated in our flash Q1 performance last week, we raised our Adjusted EBITDA outlook, which represents an improvement in our margin expectations to approximately 42% for full year 2026. This improvement includes the volume mix impacts that we recently seen and the ongoing growth investments towards our sales, customer support, and technology. First quarter Adjusted Net Income was $19.4 million or $0.22 per share. Free Cash Flow was $5.4 million during the quarter, resulting in 16% Free Cash Flow Conversion.

During Q1, we made approximately $15 million in Tax Receivable Agreement payments related to the 2024 tax reporting year. In addition, we paid approximately $22.5 million for a strategic distribution partner purchase. We immediately benefited from this investment as the volumes were already on Repay's platform. The investment resulted in immediate EBITDA uplift during Q1 and for full year 2026. In January, we used approximately $37 million in cash and drew $110 million on our revolving credit facility to refinance our maturing 2026 Convertible Notes. Total debt outstanding at quarter end was comprised of $288 million of Convertible Notes due in 2029 with a 2.875% coupon and a $110 million draw on our revolver facility.

As of March 31, we've had approximately $44 million in cash on the balance sheet and net leverage of approximately 2.7 times. With a strong and resilient Q1 behind us, we are confident in achieving our 2026 outlook for double-digit revenue growth. As previously mentioned, we recently increased our full-year Adjusted EBITDA outlook to represent approximately 42% margins for 2026. For the full year 2026, Repay expects revenue to be between $340 million and $346 million, representing 10%-12% reported revenue growth, and when excluding political media, approximately 7%-9% normalized revenue growth. Adjusted EBITDA is now expected to be between $141 million and $146 million, and we are confident in achieving our Free Cash Flow Conversion target of 45%.

Please keep in mind that net interest expense is included in our free cash flow, which includes the interest payments associated with our 2029 Convertible Notes and the recent $110 million draw on our revolving credit facility. We are also expecting to benefit from a strong midterm election cycle, with the majority of political media contributions occurring in Q3 and Q4. We continue to expect political media contributions to positively impact revenue by $8 million-$10 million, representing approximately 3 percentage points of reported growth year-over-year. Our current 2026 outlook does not incorporate contributions or expenditures related to recently announced KUBRA acquisition. We remain confident closing during the second quarter of 2026 upon receiving regulatory approvals.

As I outlined on our previous earnings call, Repay's capital allocation priorities are focused on creating long-term value while maintaining strong cash generation for future opportunities. In light of the KUBRA acquisition, our overall capital allocation framework remains unchanged, and we are working toward closing the transaction and then de-leveraging. In 2026, we have and will continue to deploy capital towards key strategic priorities of organic growth and M&A catalysts to achieve long-term growth. Our first priority is to remain focused on organic operations and growth opportunities. We continue to make targeted investments to strengthen our position and accelerate our growth opportunities. We have announced strategic M&A and partnerships. The KUBRA acquisition is expected to generate compelling value creation opportunities, including the identified cost synergies by streamlining operations, integrating tech platforms, and better aligning Repay's overall corporate structure.

Following the closing of the KUBRA acquisition, we will continue our commitment to prudently manage balance sheet flexibility and leverage. With the strong free cash flow accretion of the combined companies, we are targeting a return to below 3 times net leverage, supported by strong free cash flow generation, synergy realization, and disciplined capital allocation within 18 months of closing. We believe maintaining a prudent level of CapEx towards product and technology initiatives to deliver the best experience for our clients and their consumers is mission-critical. As we move through 2026, we are focused on accelerating our growth and achieving our 2026 outlook and are committed to implementing our capital allocation strategy. I'll now turn the call over to the operator to take your questions. Operator?

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two 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 while we poll for questions. Our first question is from Joseph Vafi with Canaccord Genuity. Please proceed.

Hey, guys. Good afternoon. Nice to see the revenue outlook guidance and the accelerating growth here. I thought maybe just start, I know you don't provide quarterly guidance here, but as we look at the year and we look at the ramp on the top line, excluding political media, how should we kind of think about how the quarters progress here on the top line? I'll have a quick follow-up.

Hey, Joe. Thanks for the question. It's Rob. You know, strong first quarter, came out at 4% growth. As I said, excluding political media, we expect to ramp, full year will be at the 7%-9% growth as we guided. Really coming out of that, as I talked about last quarter, we had some new client wins that pushed into the second half of this year. We in Q1 of this year, we are lapping some small attrition that happened on the back half of last year. We're at 4% growth this quarter, and we expect to ramp as we get into Q2 and really into Q3.

Some of those new client wins will come on, and we feel really confident about that. That's really what the ramp-up is, excluding political media. When you include the reported numbers, you know, the 10%-12% double-digit growth for the year, we have a strong political media. It's a midterm election season that really ramps in Q3 and Q4, and that's what really gets us to the reported double-digit growth for the year.

Okay. Thanks for that, Rob. Could you remind us on the dynamic, I think in Q1 you said that, you know, consumer was a little bit down year-over-year. I know you're expanding offerings there with some customers, and there's a dynamic there that kind of leads, I think, to maybe a short-term headwind and then a longer-term tailwind. Just if you could refresh us on that. Thanks very much.

On the consumer side, like I said, we did 4% growth for Q1.

Okay. Got it.

And-

I got that.

Yeah.

I got it a little confused there, John. Maybe just one other on, you know, is there a macro assumption built into the guide this year or just, you know, where we are at this point on a macro run rate built into the guide for 2026? Thanks.

Yeah, sure. This is John. Hello, Joseph Vafi. Specifically, we do continue to see a stable consumer and the trends we see, at least currently, and that same outlook, we consider that in our full-year outlook.

Very good. Thanks a lot.

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

Hey, good afternoon. Thanks for taking the question. Just in terms of the KUBRA deal and evaluating it versus, let's say, buyback or other smaller deals. I guess, what do you feel are maybe one or two of the most compelling aspects of KUBRA? What does it bring to Repay? Then in terms of thinking about the, you know, the combined company, I guess, what are the attributes that you would see two years out that really make you feel like either your growth rate-

Sure

... margins or both will really, you know, drive additional shareholder value?

Yeah. We are very excited about it. Obviously, it gives us a comprehensive end-to-end digital platform. We take the best of both of us. We really allows us to really expand across our bill presentment capabilities, our communication services, and our overall payment processing with our own clearing and settlement engine. We take the strengths of both as we are able to deliver those new solutions together on behalf of both our clients. And we think that's a really great long-term value creation. I would also point you to slide 8 in our earnings supplement. We think we've become one of the leading providers of these resilient verticals. It does expand our TAM, really increases our scale. Obviously, there's some compelling synergies that we've talked about in this transaction.

On a post-combined basis, as we look out into the next 18, 24 months, gives us what we consider to be very attractive financial strength as well.

Yeah. I would just add to that. You know, the Free Cash Flow generation of the combined company is what really excites us as well. Pretty decent Free Cash Flow Conversion as we go in the out years. As John mentioned, we've committed to hitting those synergies and we're, you know, we're really confident in those synergies out of the gate. We've got plans in place and are very confident on day one of close to start executing on those.

Let me touch another couple points that I mentioned earlier on the call. It approximately doubles our revenue. We'll then be able to interact with over 40% of all U.S. and Canadian households every month. Processes over $130 billion in annual payment volume. These are very highly non-recurring categories. I'm sorry, very non-discretionary categories with very highly recurring billing cycles. Think about it. We've become a very large consumer bill pay processor on a combined basis. We think that it obviously you know, recession-resistant as well.

Okay. That's helpful. Then the small, relatively small deal in the first quarter, does that contribute any revenue or is it, or does it eliminate like a rev share or residual, so it really just has an impact on the EBITDA line?

Yeah. No additional revenue contribution there. Fully integrated strategic partner there, so no additional revenue there, but fantastic opportunity for us as a, yeah, highly strategic distribution partner.

On the EBITDA side, it contributed little less than $1 million on EBITDA in Q1, and it was part of our full-year re-guide for EBITDA, about a $4.5 million increase. Remember, it's not a full year because we brought it in towards the end of the quarter. Listen, we hit our full-year guide, our quarter guide, we still feel strong about the guide we gave in fourth quarter. Really, the uptake was due to this strategic distribution partner.

All right. Thank you.

Sure.

Our next question is from Mike Randall with Northland Securities. Please proceed.

Hey, guys. John, you know, in the consumer side, auto, personal loans, how would you kind of describe the headwinds you're facing there, the tailwinds you're seeing? If you could handicap those two businesses for us, that would be helpful.

Yes. Mike, good afternoon. It's been actually fairly consistent for the last few quarters that we talked about, and we're not seeing any major differences there. We still see resiliency. We still, you know, one example of that would be, we had a strong February, March, on the consumer side from a tax refund season perspective. We see positive trends there in our volumes. Currently, that's what we're seeing, which we think is very stable trends across our verticals.

Got it. You know, over the course of 2026, any important larger customer renewals to kind of call out?

Specifically for core REPAY, nothing that I would call out specific that would not be normal for us. We as most of you aware in the payment processing world, all of us would have some type of automatic evergreens regardless in our contracts, but nothing unusual there, Mike.

Got it. maybe just lastly, you guys noted your Digital Wallet capabilities in the press release. Could you just highlight those again?

Sure. My Digital Wallet perspective, think about you dropping your, in your case, maybe your card statement automatically in your native wallet, in your Apple or Google wallet on your phone. We're gonna be able to deliver that solution and are currently rolling some of that out with our clients. We're gonna be able to take those consumer invoices or consumer bill presentments and present that directly into their native Apple device. We see a significant interest from our clients on that, we set be some kind of biller.

We see significant interest there as well as you may also heard earlier on the call today, we talked about using AI to help us with our product development, and specifically even, we use that to create and recreate what we consider to be an IVR and turn that into a Repay Voice, which is an interactive AI solution, when you on behalf of our billers, when someone calls in and wants to make a phone payment, et cetera, we're able to use AI to help them, you know, drive that. Then again, early stages of testing and rolling some of those things out with our clients. We see significant interest in our product development and some of the things we're doing.

Got it. Thank you.

Our next question is from Timothy Chiodo with UBS. Please proceed.

Great. Thank you. A topic that we brought up on a prior call, we hit on this a little bit, but I see actually a comment in slide 4, it seems as though it's risen to maybe a greater level of materiality. You have a comment that says that gross profit margins experience near term impact changes of Enhanced Data Programs with the card networks. I was hoping you could expand upon the comment in slide 4 of the investor presentation. Thanks.

Hi, Tim. Yes. We have seen what we considered we expected where we saw the impact coming through from the Level 2, Level 3 on the CEDP in the business payment side of it, predominantly on the AR side, as you would expect. We've seen that impact come through, as expected on our side. We obviously consume that's embedded in our annual outlook that we gave as well. We do see opportunities as well from our growth in our B2B space on our overall total payment volume, opportunities to continue to drive monetization in addition to that.

Okay. Thank you.

Okay.

It wasn't. I apologize. No, please go ahead. You first.

No, I was just gonna reaffirm that, you know, we had always forecasted that and then our original guide, we had baked that, the L2 impact into our numbers. You're just seeing that impact it fall through as we expected.

Beautiful. Okay. Thank you. I really appreciate that. Thank you both.

Thanks.

As a reminder to star one on your telephone keypad if you would like to ask a question. Our next question is a follow-up from Joseph Vafi with Canaccord Genuity. Please proceed.

Yes, thank you. Just one quick follow-up. I know you mentioned a few new customer ramps that you've got good visibility to. Just, you know, any other organic go get requirements, do you think, other than, you know, maybe small normal core stuff to get to your guidance this year? Or is the visibility pretty good on some of these new client wins? Thank you.

Yes. Thanks for the question. No. From a go get for 2026, we feel really good about those bookings were already booked, and it's really about just executing on deploying those clients and ramping them on the second half, which we have a lot of confidence around. A lot of the work that our sales team is doing now is really starting to focus towards 2027. Our confidence level on those bookings, they're booked. It's just a matter of deploying on the second half. We have a high confidence level on that.

Got it. Great. Thanks, Rob.

Sure.

We have a follow-up question from Michael Rindell with Northland Securities. Please proceed.

Hey, guys. Just one more question. As I was looking through your May, your new May 2026 deck, page 22 lists a handful of acquisitions that you guys have done. John, what was the best acquisition there that you did and why? Which one was maybe the toughest and why?

Sure, sure. Specifically on an acquisition side, obviously, acquiring TriSource with our backend clearing and settlement has fundamentally, you know, understanding payments and understanding the whole technology stack and the infrastructure there, and our ability to use that to maximize our overall margins and throughput and overall client experiences has to rank up at the top. Not 1 single thing. Our B2B acquisitions have been, you know, very positive for us as well. On the challenging side, I think was your other question there. Ultimately would say sometimes actually the smallest ones could be a little bit challenging because the ability to move certain technology pieces around, despite the ROI on it, can be some challenge sometimes.

I would ultimately say on that piece, on the challenging side, it would ultimately be your ability to just, you know, combine things together. We haven't done an acquisition in the last 3 years, so we are very confident in what we've done and how we've kind of merged all of our tech stack together and how we've really enhanced our overall product offerings. We think we're in a really good spot from an overall product competitive perspective. We've really monetized many things that we are trying to do on both sides of the business. You add on the fact of what we're doing with AI and really how we're leaning hard into AI on a lot of different things.

We've talked to you for the last few quarters about some of the investments we're making on integrations and implementations. We haven't fully turned our flywheel there how we want to, so we're gonna continue to use that to really help us enhance that experience, how we can use that also to really do some additional things from the front office and the back office of our business, in addition to enhancing some of our integrations and speeding up implementations. We think some fantastic opportunities ahead of us as well. If you combine that with what we've learned over the fast, you know, the several acquisitions we have done, it gives us a great deal of confidence in the KUBRA transaction, and how we're leaning into our core abilities of executing there.

It's very exciting for us as we look out and what we think we can do together. I think, as we execute and we understand, as we said on the call, execution is critical. We know that, but we think we're set up well to be able to execute there.

Got it. Hey, thanks for that color.

There are no further questions at this time. I would like to turn the floor back over to John for closing remarks.

Thank you everyone for joining us today. Repay had a strong start to the year, and we remain focused on executing against our priorities, including closing the KUBRA transaction. We're also focused on accelerating towards double-digit reported growth with strong profitability in our 2026 outlook. We believe the KUBRA acquisition will put us in a better position to scale and benefit from the opportunities ahead. Thank you so much for joining us.

This concludes today's conference. You may disconnect at this time, and thank you for your participation.