On Friday, Citi adjusted its outlook on Repay Holdings (NASDAQ:RPAY) Corporation (NASDAQ:RPAY) stock, reducing the price target from $11.00 to $10.00 while keeping a Neutral rating. The move followed a review of the company's recent financial performance, which showed mixed results.
Repay reported gross profit growth that fell slightly short of Citi's estimates but aligned with the general market consensus. The company's adjusted EBITDA, however, was a bit higher than expected. Importantly, Repay has reiterated its full fiscal year 2024 outlook.
The quarter's results were influenced by the timing and delays in the implementation of new strategies, which are expected to accelerate growth in the second half of the year.
This expectation is supported by anticipated political ad spending and other go-live events. The company also observed consistent macroeconomic trends going into the third quarter, with consumer stability noted.
Repay's free cash flow (FCF) conversion has shown improvement. Additionally, the company’s financial strategy, which included a July convertible debt offering and paydown, along with an expanded revolving credit facility, has helped address liquidity and debt maturity concerns.
Citi acknowledged Repay's potential for growth through expansion into less penetrated markets. Still, the firm highlighted the importance of consistent performance and the execution of the company's strategies.
Delivering on the promised second-half acceleration is seen as critical for Repay to illustrate stability and meet its stated objectives. Citi emphasizes the need for steady execution and greater confidence in Repay's growth outlook moving forward.
In other recent news, Repay Holdings Corporation announced its intention to offer $260 million in convertible senior notes due in 2029. The funds from this offering will be used for various financial operations, including paying for capped call transactions, repurchasing a portion of the company's outstanding 2026 convertible senior notes, and acquiring shares of its Class A common stock. The remaining funds will be used for general corporate purposes.
On the earnings front, Repay reported a 10% increase in organic revenue and an 11% rise in organic gross profit for the first quarter of 2024. The company also saw a substantial 90% year-over-year increase in free cash flow growth, with adjusted EBITDA growing by approximately 15%.
In terms of future outlook, Repay anticipates a positive financial outlook for 2024, expecting revenue to be between $314 million and $320 million, and adjusted EBITDA between $139 million and $142 million.
The company is also eyeing growth opportunities in consumer and business payments, with new clients and expanded software partnerships. Lastly, Repay's executives have expressed interest in potential acquisitions, particularly in the AP vertical within Business Payments.
InvestingPro Insights
As Repay Holdings Corporation (NASDAQ:RPAY) continues to navigate its financial journey, the real-time data from InvestingPro provides a comprehensive picture of the company's current valuation and performance metrics. With a market capitalization of $882.87 million, Repay's growth trajectory is reflected in its revenue growth of 5.8% over the last twelve months as of Q1 2024. This is further bolstered by a quarterly revenue growth of 8.3%, indicating an upward trend in the company's earnings potential.
InvestingPro Tips highlight that while analysts have revised their earnings expectations downwards for the upcoming period, they also predict that Repay will become profitable this year. This is a key consideration for investors looking for signs of a turnaround, especially in light of the company's strategic initiatives aimed at accelerating growth. Moreover, Repay's liquid assets surpassing short-term obligations suggest a solid liquidity position, which is crucial for sustaining operations and funding growth strategies.
For those seeking further insights and analysis, InvestingPro offers additional tips on Repay Holdings Corporation, which can be accessed at https://www.investing.com/pro/RPAY. With these tools at their disposal, investors can make more informed decisions based on the latest market data and expert analysis.
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