Repay Eyes Faster Growth, Debt Reduction as KUBRA Builds Consumer Billing Platform

Repay is broadening its consumer billing platform through the KUBRA acquisition, combining payment processing with bill presentment and communications for utilities, governments, consumer finance and other large billers.

Management expects organic growth to accelerate, targeting a 10%–12% exit rate this year, or 7%–9% excluding political media. KUBRA is expected to contribute $150 million–$154 million in revenue for the year, while identified synergies are projected to reach more than $20 million by 2028.

Repay plans to use free cash flow to reduce leverage, with net leverage declining from about 3.9x to 3.7x after the acquisition and a goal of falling below 3x within 18 months.

The company generated $27.4 million in second-quarter free cash flow but expects full-year conversion of roughly 30% due partly to higher interest expense.

Repay NASDAQ: RPAY executives said the company is positioning itself as a broader provider of consumer bill payment, bill presentment and communications services following its acquisition of KUBRA, while targeting an acceleration in organic growth and using cash flow to reduce leverage. Speaking at the 46th Annual Canaccord Growth Conference, Chief Executive Officer John Morris said the combined company serves large billers across consumer finance, utilities, municipalities and government. The company’s offerings span bill creation and presentment, customer communications and payment processing across digital, print, mobile, text and voice channels.

“The new Repay is, we think, one of the leading providers of consumer bill payment, bill presentment across the United States and Canada,” Morris said. He described the company’s strategy as delivering an end-to-end consumer experience that reduces friction for billers and their customers.

Chief Financial Officer Rob Houser said Repay delivered 6% organic growth in the second quarter. Political media activity contributed 2 percentage points of that growth, while the company’s consumer business grew approximately 4% organically during the period. Repay expects to exit the year with reported organic growth of 10% to 12%, Houser said. Excluding political media activity, that exit-rate outlook would be about 7% to 9%. Management expects growth to increase during the second half as new consumer business comes online and the company laps prior customer losses related to mergers and acquisitions involving those clients.

Houser said the B2B payments business grew 33% in the quarter, or 19% excluding political media. The company expects B2B growth excluding political media to remain in the mid-teens during the second half of the year.

The company generated $27.4 million in free cash flow during the second quarter, representing a 75% conversion rate, according to Houser. Repay expects free cash flow conversion of about 30% for the full year, with interest expense from the term loan used to acquire KUBRA affecting results in the second half. Political media is part of Repay’s B2B payables platform, Morris said. He said the company facilitates payments for political advertising, adding that the business has an every-other-year cycle but produces strong margins and cash flow. Houser said Repay has guided for $8 million to $10 million of political media revenue in the third and fourth quarters, tied in part to the midterm election cycle.

Management said KUBRA accounted for about one month of ownership in Repay’s second-quarter results. On a pro forma basis, KUBRA grew 6% in the second quarter and is expected to grow at a mid-single-d...