Cash has long been falling out of favor as consumers shift more of their transactions to digital payments in many developed markets, but some industries have been holdouts. Specifically, lending, debt repayment, and business-to-business transactions are still heavily reliant on cash, checks, and legacy ACH (automated clearing house) to make payments. 

But the crisis brought on by COVID-19 is making traditional transaction methods redundant, and many banks, credit unions, debt servicers, and other businesses are updating their systems accordingly. That's what makes Repay Holdings (RPAY -0.20%) an intriguing stock, especially after its second-quarter report.

Someone pictured off screen holding a card and inputting the card info into a computer.

Image source: Getty Images.

Higher sales, higher profits

Thanks in part to a few acquisitions it made last year after going public via a special purpose acquisition company (SPAC) arrangement, as well as increases in digital payments activity, Repay notched 63% growth in card payment value to $3.6 billion during Q2. That pushed its revenue up by 68% to $36.5 million, lifted gross profit by 63% to $27.8 million (organic gross profit excluding acquisitions was up 21%), and increased its adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) by 55% to $16.2 million. Add in its strong first quarter, and 2020 has been A-OK for Repay so far.  


First Half 2020

First Half 2019



$76.0 million

$44.7 million


Gross profit

$56.5 million

$35.0 million


Adjusted EBITDA

$33.6 million

$21.8 million


Data source: Repay Holdings.  

Just as important, Repay issued new stock in May -- raising $76 million -- and redeemed warrants. One of the key areas I was worried about when it came to the company was the condition of its balance sheet, but by the end of the second quarter, Repay had $166 million in cash and equivalents on the books, compared to just $24.6 million at the start of 2020. Just like that, the digital payments technologist gave itself ample liquidity to pursue growth, and it wasted no time in doing so.  

A massive market opportunity

In late July, Repay announced it was acquiring small payment software and automation firm cPayPlus (CPP) for $8 million, with another $8 million payment due next summer if certain growth targets are met. Management says the tiny-but-fast-growing firm has thousands of customer integrations centered around accounts payable automation, which will dovetail with Repay's focus on accounts receivable and turn the combined company into a one-stop-shop for business-to-business digital transactions. Also of note, management said they remain actively on the lookout for more acquisition and merger opportunities to bolster the company's market share.

With the purchase of CPP as well as the addition of Daimler subsidiary Mercedes-Benz as a customer, annual card volumes in Repay's addressable market total some $3 trillion a year. With the vast majority of these payments still occurring via some form of cash, check, or ACH payment method, there's no shortage of opportunity for this company to expand its footprint in the fintech space.

Management also issued a full-year outlook, forecasting $145 million to $155 million in revenue and adjusted EBITDA of $62 million to $66 million. With a current market cap of $1.33 billion, shares trade for 8.8 times expected revenue and 21 times forward adjusted EBITDA at the midpoint of guidance. After the Q2 report, Repay looks even more attractive than before. If you think digital payments are the future, this small software technologist is well worth your consideration.