What They Do
Repay Holdings provides payment processing and software solutions for two main markets: businesses (B2B payments, accounts payable automation) and consumers (card processing, personal loans). They make money by taking a small percentage of each transaction processed through their platform, plus software subscription fees. Think of them as the digital plumbing that helps companies pay suppliers and process customer payments more efficiently.
Investment Thesis
**Sticky B2B Growth Engine**: Business Payments segment showing strong 12% normalized gross profit growth, with supplier network expanding 60% YoY to 524,000 suppliers**Capital Allocation Discipline**: Management repurchased 8% of shares YTD and retired $73.5M of debt at a discount, demonstrating smart capital deployment**Profitable Growth Model**: Maintaining 40% adjusted EBITDA margins while generating 67% free cash flow conversion, proving the business can grow profitablyKey Risks
**Margin Compression**: Gross margins compressed 3.4% YoY due to client mix shifting toward larger enterprise customers who demand volume discounts**Client Concentration**: Recent client losses in both segments show vulnerability to customer churn in a competitive payments landscapeGrowth Story
Revenue growth has been modest at 5% normalized growth, but the company expects sequential improvement in Q4 with 6-8% normalized gross profit growth. The real opportunity lies in their expanding B2B payments platform and growing software partner network (291 partnerships), positioning them to capture more of the digital AP transformation market.
Profitability Profile
RPAY operates a healthy profit-generating business with 42% gross margins and 40% adjusted EBITDA margins. Free cash flow conversion of 67% demonstrates strong cash generation, though margins face near-term pressure from enterprise client mix shift. The company has achieved profitable normalized growth while maintaining strong cash flow metrics.
Competitive Position
RPAY competes in the fragmented B2B payments space against players like Bill.com and AvidXchange, differentiating through their integrated software partnerships and supplier network scale. Their 524,000 supplier network and 291 software partnerships create network effects, though they face margin pressure when competing for large enterprise deals.
Recent Momentum
Q3 results showed mixed performance with revenue missing by 4.4% but maintaining profitability metrics. The market appears focused on the sequential improvement story, with management guiding toward better Q4 performance (6-8% growth) after lapping difficult political media comparisons. Analyst engagement was notably light with only 4 questions from 4 analysts.
What Wall Street Thinks
Wall Street sentiment appears cautious given the limited analyst participation and mixed recent earnings performance. The focus is on whether management can deliver on their sequential improvement promises and address the margin compression from enterprise client mix. Analysts are waiting for 2026 guidance to better assess the growth trajectory.
The Bottom Line
RPAY is a profitable payments company at an inflection point—they're successfully managing the transition to larger enterprise clients despite near-term margin pressure, with improving growth momentum expected in Q4 and a strong B2B payments platform positioned for the digital transformation wave.
