We continue our discussion on FinTech companies transitioning to private ownership, following our recent article on Paysafe. REPAY Holding (Nasdaq: RPAY) released its fourth-quarter 2024 earnings on March 3 and announced it is considering strategic alternatives. REPAY offers expedited and lower-risk payment formats such as ACH or wire transfers for a fee, converting from original forms such as credit card and check for loan repayment. Given that most loan repayment terms only accept ACH or wire transfers, REPAY enhances payer flexibility by increasing available payment formats—a mutually beneficial scenario. The company’s $300 million annual revenue is predominantly consumer-oriented. Additionally, REPAY provides B2B accounts receivable and accounts payable automation solutions to streamline payment workflows, reduce costs, and minimize errors from manual data entry.
Despite hiring external advisors, REPAY has not established a deadline nor a definitive pathway. Investors highlight customer attrition and weak financial performance as significant challenges. Over the past five years, RPAY shares have declined by 78% from their peak of $27 to $6. The company has engaged with private equity firms, aiming to restructure and innovate, without the pressures of public markets.
Fourth-quarter 2024 divisional performance was mixed, with a 7% year-over-year organic revenue decline in the essential consumer payments segment, and a positive 7% increase in the smaller business payments segment, resulting in a reduced adjusted EBITDA margin. Notably, the company did not provide 2025 guidance, which negatively impacted the stock. Furthermore, REPAY benefited from non-recurring business revenue and recorded stagnant organic topline growth last year. With client attrition, challenging conditions in auto, ARM, and credit union services, sluggish consumer spending, and migration to a new AP IT platform, comparisons in the first half of 2025 will be difficult, while the second half of the year is expected to improve.
Moving forward, REPAY is managing its capital position to pay down $220 million in convertible bonds early next year and has access to $440 million in liquidity. A second tranche of convertible bonds totaling $285 million is due in 2029.
REPAY is navigating complex dynamics in both the consumer and business segments. Negative news, such as the acquisition and loss of a large customer, and another customer bringing their services in-house, are prominent concerns for many investors, overshadowing the positive developments of the company: securing several significant contracts, currently in the early stages of ramp-up. Additionally, the relatively low penetration of multiple service use per customer presents a long runway for growth.
All in all, it’s a negative short term outlook with long term potential upside. This makes REPAY, like Paysafe, a likely target for a ‘take private’ deal to unlock shareholder value that’s been lost in the public market: a theme for publicly traded legacy payment providers we identified heading into the year.
