Repay Q2 Earnings Call Highlights

Key Points

• Repay’s Q2 revenue rose 33% to $100.7 million, helped by one month of contributions from the KUBRA acquisition, while organic growth was 6%. Adjusted EBITDA increased 14% to $36.3 million and free cash flow rose 21% to $27.4 million.
• Management reported more than $4.5 million in annualized KUBRA synergies and is targeting over $8 million exiting 2026, with longer-term operating and capital-expenditure synergies exceeding $20 million. Repay aims to reduce pro forma net leverage from approximately 3.7 times to below three times within 18 months.
• Repay reaffirmed its 2026 outlook, calling for $490 million to $500 million in revenue, adjusted EBITDA of $168.5 million to $176 million and organic revenue growth of 10% to 12%. Political-media revenue is expected to contribute $8 million to $10 million, primarily in the second half of the year.

Repay NASDAQ: RPAY reported second-quarter revenue growth of 33% as the payments company began consolidating results from its June acquisition of KUBRA, while management reiterated its full-year outlook and outlined integration, synergy and deleveraging targets.

Revenue totaled $100.7 million in the quarter, up 33% from a year earlier and including one month of KUBRA results. Organic revenue growth was 6%, including roughly two percentage points from political media activity, according to Chief Financial Officer Rob Houser.

Adjusted EBITDA was $36.3 million, up 14% year over year, with an adjusted EBITDA margin of about 36%. Adjusted net income was $17.9 million, or $0.20 per share. Free cash flow increased 21% to $27.4 million, representing 75% conversion, while adjusted free cash flow was approximately $29.3 million, or 81% conversion, excluding $1.9 million of technology, merger and integration costs.

KUBRA Integration and Synergies

Chief Executive Officer John Morris said the KUBRA acquisition, completed in June, substantially expanded Repay’s scale and capabilities in consumer bill payment and communication services. On a pro forma basis, he said the combination “essentially doubled” company revenue and brought annualized payment volume above $130 billion.

KUBRA contributed approximately $21 million in June revenue. Houser said KUBRA grew about 6% during the second quarter and about 5% on a pro forma basis for the first half, with management expecting mid-single-digit pro forma growth for the rest of 2026.

Management said the combined company can offer clients an end-to-end digital bill-payment platform that includes bill design and presentment, communications, payment processing, clearing and settlement. Morris said existing Repay clients have expressed interest in KUBRA’s bill presentment capabilities, while KUBRA clients are asking about expanded payment channels and modalities.

Repay said it had already realized more than $4.5 million in annualized run-rate synergies exiting the second quarter. The company is targeting more than $8 million in run-rate cost savings exiting 2026 and more than $20 million in operating and capital-expenditure synergies, plus revenue opportunities, exiting 2028.

The company plans to unify platforms over the next 18 to 24 months, with several large clients volunteering as early adopters of the upgraded KUBRA platform. Morris said clients will have input on the pace of upgrades and that sales and client-service teams have been insulated from integration work to avoid disrupting core growth.

Segment Performance

Consumer payments revenue rose approximately 33% year over year, supported by the KUBRA contribution. Organic growth in the segment was 4%, driven by enterprise-client ramps in automotive and personal-finance verticals. Houser said one larger client went live in July, while several other implementations are beginning to ramp, supporting management’s expectation for core consumer payments growth to exit 2026 in the double digits.

Business payments revenue increased 32% year over year. Normalized growth, excluding political media contributions, was about 19%. The segment benefited from new client onboarding through embedded software partners and from increased digital-payment monetization among existing TotalPay clients.

Houser said roughly 60% of business-payments growth during the quarter came from converting and monetizing ACH volume on the TotalPay platform, while about 40% came from newly onboarded clients. Repay’s accounts-payable supplier network expanded 65% year over year to more than 731,000 vendors.

Political media also contributed to business-payments growth, aided by primary-election spending and new political-media clients. Repay expects political-media revenue of $8 million to $10 million for the full year, with the majority of the contribution expected in the third and fourth quarters around the midterm elections.

Margins, Cash Flow and Leverage

Gross profit was $70.6 million, representing a 70% margin, compared with 76% a year earlier. Houser said the lower margin was “almost entirely a mixed effect from KUBRA,” whose product and payment mix includes print and mail and professional services that carry lower gross margins than Repay’s legacy business. He said the change was not related to pricing or competitive conditions.

KUBRA’s margins were approximately 20% at the outset, Houser said in response to an analyst question. Management expects margins to improve as it realizes cost savings, sunsets older technology and moves toward a unified platform architecture.

Repay ended the quarter with $84 million in operating cash and an undrawn $100 million revolving credit facility. Its debt structure included $288 million of 2029 convertible notes with a 2.875% coupon and a $500 million senior secured term loan priced at SOFR plus 5.5%.

Pro forma synergized net leverage was approximately 3.7 times at quarter-end. Houser said deleveraging is a priority, with the company targeting net leverage below three times within 18 months through free-cash-flow generation, KUBRA’s EBITDA contribution and planned synergies.

2026 Outlook Reaffirmed

Repay reiterated its 2026 forecast, which includes seven months of KUBRA contributions. The company expects:

• Revenue of $490 million to $500 million, representing about 60% reported growth.
• Organic revenue growth of 10% to 12%.
• Normalized revenue growth of 7% to 9%, excluding political media contributions and KUBRA.
• Adjusted EBITDA of $168.5 million to $176 million, with margins of about 35%.
• Free-cash-flow conversion of 30% and adjusted free-cash-flow conversion of approximately 35%.
• KUBRA revenue of $150 million to $154 million and adjusted EBITDA of approximately $27.5 million to $30 million.

Morris said Repay’s priorities for the second half include accelerating organic growth into double digits, advancing KUBRA integration, delivering on synergy goals and reducing leverage. The company plans to hold its first Investor Day in New York City on Dec. 7.

About Repay (NASDAQ:RPAY)

Repay Holdings Corp. Nasdaq: RPAY is a specialized financial technology company that delivers integrated payment solutions to businesses operating within key vertical markets. The company's platform enables merchants and service providers to accept a range of payment types, including credit and debit cards, automated clearing house (ACH) transfers and electronic checks. Repay's offerings are designed to seamlessly integrate with third-party software applications, such as enterprise resource planning, customer relationship management and point-of-sale systems, empowering industries such as utilities, telecommunications, automotive finance, healthcare, insurance, property management and education.

Tracing its roots to the formation of Pinnacle Payment Systems in 1997, Repay expanded its capabilities through strategic acquisitions, including Southeastern Integrated Solutions and Payliance, before completing a business combination with Thunder Bridge Acquisition II in 2019 to become a publicly traded company on the Nasdaq.

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