Making payments for goods and services with a credit or debit card or digital wallet has become entirely commonplace for customers in the retail world. But behind the scenes in the realm of business-to-business (B2B) and loan repayment transactions? Not so much.

Enter digital payments software provider Repay Holdings (NASDAQ:RPAY), which wants to change that. Stitched together via multiple acquisitions, the company grew at a fast pace once again in the third quarter, and it announced another takeover of a smaller peer as it continues to make headway in the large money movement markets where it operates.

A woman holding a smartphone and credit card.

Image source: Getty Images.

The summer months in review

Before it went public in July 2019, Repay divulged that it processed some $7 billion in card transactions in 2018. It did more than half that volume in Q3 2020 alone, with card volume increasing 44% year over year to $3.77 billion. Its revenue and gross profits were $37.6 million and $27.1 million, respectively, for year-over-year increases of 43% and 40%. Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) was up only 31% to $15.6 million due to acquisition costs.

For 2020 so far, Repay has made solid progress on its strategic goals in the areas of mortgage and auto loan payments, personal loan payments, and B2B transactions.


9 Months Ending
Sept. 30, 2020

9 Months Ending
Sept. 30, 2019



$113.6 million

$70.97 million


Gross profit

$83.61 million

$54.39 million


Net income

($37.62 million)

($39.62 million)


Adjusted EBITDA

$49.17 million

$33.69 million


EBITDA = earnings before interest, tax, depreciation, and amortization. Data source: Repay Holdings.  

Organic revenue growth (which excludes the addition of acquisitions APS, Ventanex, and cPayPlus during the last year) was in the high single-digit percentages in Q3. Over the long term, management forecasts that organic growth will average a mid- to high-teens percentage rate. And as it digests its acquisitions and takes advantage of the synergies between the various software tools it has brought together, the company has lots of potential to further expand its profits.  

Updating legacy methods of payment

Speaking of acquisitions, Repay announced another one concurrent with its Q3 report: CPS Payment Services. The purchase will cost up to $93 million (about nine times CPS' expected 2020 sales) but will give Repay access to new customers in the healthcare, education and government, media, and hospitality sectors. And it complements other B2B payments software providers like cPayPlus that Repay purchased earlier this year. Repay CEO and co-founder John Morris said mergers and acquisitions activity will continue to be a strategic growth driver for his company.  

Given the myriad of small software players in the loan repayment and B2B transaction universe -- not to mention a low rate of penetration for real-time digital payments and automation on this front -- this acquisition-heavy strategy makes sense. In the midst of the pandemic, credit unions, mortgage loan servicers, and accounting departments for businesses have all had to figure out new ways to make and receive payments, and demand is rising for software that enables these tasks to be automated and handled in a low-touch way. Being at the forefront with viable solutions should pay off for Repay in the years ahead. 

At the end of September, the company had cash and equivalents of $182 million on the books (a figure that doesn't factor in the purchase of CPS) and debt of $251 million. Repay's shares declined by more than 10% immediately following the release of its quarterly report -- but it's worth noting that the stock had been up by more than 80% year to date at one point. A general tech-sector sell-off driven by coronavirus vaccine news is also weighing on its shares. Perhaps some traders are concerned that an end to the COVID-19 pandemic will bring an end to the growth of demand for payment digitization and automation. I don't think it will. Nevertheless, this small fintech stock looks like a good long-term bet at 11 times 2020's expected revenues and 26 times expected adjusted EBITDA.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.