Welcome to today's earnings conference call being hosted by REPAY. With us today are John Morris, Co-Founder and Chief Executive Officer, and Tim Murphy, Chief Financial Officer. During this call, we will be making forward-looking statements about our beliefs and estimates regarding the future events and results. These forward-looking statements are subject to risks and uncertainties, including those set forth in the SEC filing related to today's results in our most recent Form 10-K filed with the SEC. Actual results may differ materially from any forward-looking statements that we make today. The forward-looking statements speak only as of today, and we do not assume any obligation or intent to update them except as required by law. In an effort to provide additional information to investors, today's discussion will also include references to certain non-GAAP financial measures.
An explanation of those non-GAAP financial measures as well as a reconciliation of these non-GAAP measures to the nearest GAAP financial measures can be found in our earnings release and earnings supplement, each of which are available on the company's IR Site. I would now like to turn the call over to Mr. Morris. Please go ahead, sir.
Thank you, Operator, and good afternoon, everyone. Thank you for joining us today to review our first quarter results. During the quarter, we reported card payment volume growth of 39%, total revenue growth of 42%, and gross profit growth of 46%. We also now have 225 total software integration partners. In addition, Q1 new client implementations across our business was a record, setting us up well for 2022 and beyond. Moving on to our first quarter business highlights. First, our business payments vertical, which is going after a massive $3.4 trillion TAM, continued to perform well during the quarter. On our Q4 call, we talked about our initiatives to focus on cross-selling our AR/AP unified capabilities in a more streamlined and formal way.
One recent example of this was with Hotel Investor Apps, HIA, which is a hospitality management ERP provider who currently uses REPAY for payment processing and learned of our payables capability during Q4 2021. We signed a partnership to begin adding our payable solution to HIA properties during the second quarter of this year. We now have 85+ B2B software integrations, representing approximately 15 vertical end markets and have over 3,700 clients. On the AP side, we've grown our supplier network to over 127,000. During the quarter, we signed Shepherd Center, an Atlanta-based private not-for-profit hospital who were using our AP automation and vendor payment solutions.
By automating their accounts payable processes, our technology will allow Shepherd Center to improve operational efficiencies, create a better experience for internal AP teams and hospital vendors, as well as allow Shepherd to benefit from its cash rebates. We've also been looking at new ways to expand our TAM for B2B AP. For instance, we recently found that local governments are a big opportunity for us. Capstone, a full-service marketing research organization, predicts that state and local government spending will grow $900 billion between 2022 and 2027. This translates into significant investment opportunities at all levels of government. In fact, we recently signed a large municipality in Metro Atlanta. B2B is a big part of our mix now and will continue to be a key growth driver as we expand our TotalPay solution and drive virtual card penetration.
We had another strong quarter in the consumer payment side of our business. We saw strength on the personal loan side in Q1 as volumes from tax refund season were strong. This strength in personal loan repayment volume continued into April and early May. In addition, many of our clients have recently experienced above seasonal pre-pandemic levels of originations. The data suggests that the recovery in personal loans is now accelerating and will continue to do so for the remainder of the year. Experian recently noted that the industry originated $222 billion of personal loans last year, up 31% versus 2020 and 22% over 2019. The growth in personal loans tracks a broader increase in spending and borrowing.
According to the Federal Reserve Bank of New York, non-mortgage consumer debt totaled $4.33 trillion at the end of last year, the highest level on record. Our auto loan business, which very much focused on used car payments, is growing rapidly as used car demand and prices remain elevated, driven by the lack of new vehicles. We continue to see extended durations and higher loan amounts. We're having success expanding into the credit union space. We recently announced a technology integration with FLEX, a leading provider of core system software for credit unions. The partnership further expands credit unions' abilities to offer digital payment options to members, enhancing the overall member experience and streamlining payment operations and reconciliation efforts for credit unions. This brings us to over 210 credit union clients. The Payix integration is going well.
We recently entered into an exclusive partnership between Payix and Nortridge Software, a leading software provider for lenders and loan servicing companies, to provide Nortridge clients online cash payment acceptance, known as eCash. eCash streamlines payment acceptance by enabling borrowers to make payments on their loans using cash at thousands of participating retail locations, including major convenience stores, dollar stores, and pharmacies. Cash payments are then settled electronically through the system of record to simplify reconciliation and end-to-end payment management, all from one place. Turning to our mortgage servicing payment business, much of our growth is coming from existing customers as some of our largest clients are servicing more mortgage volume. Our SDx offering is fully live and processing transactions, and the feedback has been very positive thus far. An emerging mortgage servicer recently joined our SDx Board of Advisors, bringing the total Advisory Board members to nine leading servicers.
We're continuing to add new members to the exchange and this offering can really take off as new participants go live. Our instant funding volume for Q1 2022 was roughly 70% above Q1 2021. We're excited to be part of the Visa Direct Partner program to help grow our instant funding solution. As a Visa Direct Partner, REPAY will have access to Visa's tools and resources aimed to help launch and sell real-time payment solutions. Lastly, REPAY Clearing and Settlement continues to perform nicely with a significant pipeline for future growth. We recently attended the Electronic Transactions Association ETA Conference and came away with the sentiment that both the market and the networks believe that we are well-positioned to continue winning new business via competitive takeaways as we provide superior technology and an enhanced onboarding experience.
This presents an opportunity for REPAY to take share with our proprietary platform, which offers ISOs and payment facilitators more autonomy and greater flexibility than traditional large acquirer programs. In fact, we're excited to join the Visa Acceptance Fast Track Program as a Visa-preferred partner, providing us with direct access to Visa's capabilities and its global network of partners. Through the Acceptance Fast Track Program, Visa will appoint pre-qualified fintechs and PayFacs to its preferred partners who are willing to provide key acquiring and processing services to develop a network of networks globally. We feel it was a solid first quarter that sets us a strong foundation for success in 2022. The secular trends towards frictionless digital payments will not go away no matter the macro environment and will continue to be a tailwind that will drive our business for years to come.
As a reminder, we laid out a few specific initiatives on our last call, which will be guiding our focus and investments for the year. As discussed, we continue to increase card penetration across all our verticals with top clients, and we expect the majority of our growth to be derived from our existing client base. We have been optimizing our processing infrastructure in order to reduce costs as we do volume. This will help us drive automation from first touch and every interaction. We have formally commercialized, marketed, and are cross-selling our AR/AP unified capabilities this year. As shown by the impressive growth this quarter, we continue to increase our AP supplier network as well as sign new B2B virtual card clients and expand virtual card adoption. We also will continue to focus on developing the best software and payment solutions for all verticals.
Lastly, we are focused on thoughtful capital allocation. Strategic M&A remains a powerful value creation lever for us, and we're continuing to see attractive opportunities in the pipeline. We believe that private valuations are beginning to moderate, and we remain confident that M&A will continue to enhance our performance relative to peers. Before turning the call over to Tim, I want to thank our entire REPAY team for their hard work so far this year. With that, I'll turn it over to Tim to discuss the financials and guidance in greater detail. Tim?
Thank you, John. Now let's move on to our Q1 financial results before I review our financial guidance for 2022. As John mentioned, in the first quarter, REPAY delivered strong results across all of our key metrics. Card payment volume was $6.4 billion, an increase of 39% over the prior year first quarter. Total revenue was $67.6 million, an increase of 42% over the prior year first quarter. This represents a take rate of approximately 106 basis points. We believe the primary reason for the sequential decline in take rates is that average individual tax refund dollar amounts were much higher in 2022 versus prior years. For certain pricing types, such as convenience fees, where the consumer pays the fee, the higher refunds would lead to lower take rates.
This happens because the payment volume is up, but the flat fee paid by the consumer stays the same. Please recall that approximately 15% of our business is priced on convenience fees, and these client types would correlate with those that would use tax refunds to repay loans, medical bills, or other outstanding debts. We do expect overall take rates to be higher in Q2 and future periods back closer to the 110 basis points we experienced in Q4 2021. BillingTree, Kontrol and Payix contributed approximately $17.2 million of incremental revenue during the quarter. Moving on to expenses in the quarter. Other costs of services were $16.6 million compared to $12.5 million in the first quarter of 2021. The incremental other cost of services from BillingTree, Kontrol and Payix were $3 million for Q1.
Gross profit was $51 million, an increase of 46% over the prior year first quarter. On an organic basis, we saw gross profit growth of 5% compared to the first quarter of 2021. Please recall that Q1 is a tough comp for us since there were two rounds of stimulus sent out Q1 2021 in addition to the normal tax refund season. We expect organic growth to be higher in Q2 and future periods. In fact, our current estimate for April is at least 10%. SG&A was $32.2 million compared to $23.4 million in the first quarter of 2021. First quarter adjusted net income was $18.4 million or $0.19 per share. Lastly, first quarter adjusted EBITDA was $29.3 million, an increase of 43% over the prior year first quarter.
First quarter adjusted EBITDA as a percentage of total revenue is 43%. We do still anticipate increased investment in sales, technology and product to continue putting in place the proper infrastructure for accelerated organic growth throughout 2022 and beyond. We remain confident in staying above the Rule of 40 for the foreseeable future. Combined pro forma net leverage is approximately 3.5 times.
We expect this to be below three time by the end of 2022, a very comfortable level which will allow us to continue to fund organic and inorganic opportunities. As of March 31, we had $65 million of cash on the balance sheet and access to $165 million of undrawn revolver capacity for a total liquidity amount of $230 million. As of March 31, we had approximately 100 million shares outstanding on a fully diluted basis. Finally, moving on to our thoughts for the remainder of the year. We are pleased with our results in Q1, so we are reiterating our guidance for 2022, which includes volume to be between $27 billion and $28 billion. Total revenue to be between $296 million and $306 million.
Gross profit to be between $224 million and $232 million. Adjusted EBITDA to be between $128 million and $134 million. We continue to expect approximately 45% of the P&L contribution to come in the first half of 2022. The strong growth in the second half of 2022 is anticipated to be driven by growth in our B2B business, which we expect to comprise a greater share of the overall mix by the end of 2022. This B2B growth includes exposure to the AP media vertical, which is expected to be positively impacted by the political cycle. Also fast-growing assets such as Payix, as well as the continued recovery in personal loans and healthcare. This 2022 outlook assumes organic gross profit growth of approximately 20%.
We expect organic growth to gradually increase throughout the year, with much stronger growth in the second half of the year. We are already off to a strong start in 2022 and look forward to continuing this momentum throughout the remainder of the year. I'll now turn the call back over to the Operator to take your questions. Operator?
Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Ramsey El-Assal with Barclays. Please proceed.
Thanks for taking my question this evening. I was wondering if you could provide some color on the macro assumptions baked into your guidance. How are you thinking about some of the notable drivers across the verticals, you know, with things, you know, indexing to things like rate hikes, supply chain, you know, everything that's going on in the environment?
Sure. Yeah. You know, as we just mentioned, we think there's a number of factors that are driving stronger organic growth and overall growth for the remainder of the year. Just a general recovery in personal loans and healthcare is kind of macro assumption we have. You know, we understand there are some challenges within the auto space, but we're more exposed to used cars within auto, and we still see, you know, very strong demand, longer durations, higher loan balances, which lead to greater repayment volume in auto. We see, you know, just growth in B2B, just given the underlying drivers of electronic payment adoption there. All of that leads to kind of our thinking on the remainder of the year.
Then as we talked about specific to our business, we do see B2B as the fastest growing part of the business and will become a bigger part of the mix in the second half of the year. We have some exposure to the AP media vertical and specifically the political media cycle, which will positively benefit us as well.
It doesn't sound like you're worried about, for example, loan originations in the personal loan area, you know, feeling a little bit of a headwind or, you know, other types of sort of macro headwinds. It sounds like for your business, you're kind of thinking macro is more of a tailwind in a sense, at this point than a potential headwind.
Yes. Yeah. As John mentioned, we have, there's been some interesting data on personal loan originations, which are really strong recently, and that will lead to greater repayment volume in future periods as well. As we've said, I mean, even in a situation where there may be credit normalization, you know, we think we benefit from that because our customers would be more likely to adopt our payment solutions when they're more focused on efficient collection tools. That could be a driver for us as well of potentially increased volumes.
Got it. Okay. Really quick follow-up, and I might have missed this and you might have mentioned it, but what was the organic growth in the quarter?
It was 5%. What we've said is we've seen our estimate for April so far is at least 10%.
Okay. Yeah.
Which again, is why we expect it to continue to increase.
I think I recall that you did mention that. Apologize, I missed that, first time around. Thanks so much. Thanks for your time this evening.
Absolutely.
Our next question is from Sanjay Sakhrani with KBW. Please proceed.
Thanks. Good evening. I guess first question just on the M&A backdrop. Obviously, there's lots of companies whose valuations have come in quite a bit. John, maybe you could just sort of update us on your thinking on, you know, what might be out there and what you're looking for.
Yeah, sure. Good afternoon, Sanjay. Obviously, we are very and have had great discussions with our board around thoughtful, you know, capital allocation of what's the highest and best use for our funds for both our shareholders. If we look at specifically around the M&A side of that, we still think it's a very powerful value creation lever for us, as I said on the call. We still see that we have a strong organic pipeline for ourselves that we have a team that looks at this. We do think that the private valuations are beginning to moderate, and we'll see that even more so as,
As we move throughout this year, we are positioned well. We have a history of being very successful there, and we'll continue to look at the opportunities in the marketplace that will overall help us enhance our long-term growth strategy, where it makes the most sense for us. We have lots of criteria we look at, in order to evaluate key strategic M&A. Strong pipeline. We see good opportunities. We will be very diligent in watching from a valuation perspective and making sure that, you know, we're disciplined in our approach there, and we expect some of that to moderate throughout this year. Our balance sheet will be set up strong for the opportunities we think will be heading in our way.
We also have had great conversations around just overall capital allocation as well.
Perfect. Maybe Tim, just following up on Ramsey's question. I guess, like, you know, obviously, your point is maybe, your customers might be seeking repayment options. The market is sort of assuming we are gonna go to a period of, you know, softness in the economy. Are you seeing some of the lenders actually seek you out and look for that? And then what else are you sort of paying attention to in terms of consumer repayment behavior so that, you know, you can make informed decisions about, you know, how you manage the business? I'm just curious because obviously it's a big focal point of the investment community. Thanks.
Yeah. We are hearing that from our customers. You know, we're hearing customers talking about going more digital and focusing on, you know, repayment strategies. That is something we're hearing and something that we've talked about and we think will continue. We think the consumer is very healthy right now. The employment market is strong. There's great demand for personal loans, we think those are all positive signs, and that's, you know, what we've talked about being baked into the rest of the year.
Thank you.
Our next question is from Peter Heckmann with D.A. Davidson. Please proceed.
Good afternoon. Thanks for taking the question. Can you talk a little bit more about, the B2B business and when you're winning there, for example, like the hospital, are those competitive takeaways or is there a mix of takeaways as well as, just customers that have not yet gone to a electronic payment solution for B2B?
It's typically just actually winning against other forms of payment, so typically just moving business to electronic, to your point, away from checks and specifically moving it to virtual cards. It's not often competitive takeaways. It's just, you know, completely greenfield and specifically within the verticals we serve within B2B, we see that as well.
Okay. Just in terms of, you know, just thinking about the seasonality of the business, you've generally the first quarter is strong, for the personal lending business due to tax refunds. Second quarter, would you expect it to be sequentially down or flattish with the first quarter?
Typically, it coming out of tax refund season, it's slightly down. We do have some parts of our business, like I said, B2B growing faster, which will support faster growth in the second half of the year. We expect organic growth to actually be higher in Q2. As I said, we're estimating at least 10% in April already. You know, that's kinda how we think about Q2 versus Q1. You know, the second half of the year, we expect a lot of strength. The personal loan recovery, we think is happening more rapidly than it was in prior periods, as John mentioned, and that'll support future growth in Q3 and Q4 as well.
Okay. All right. That's helpful. Thank you.
Our next question is from Andrew Schmidt with Citi. Please proceed.
Hey, John, Tim. Thanks for taking my questions here. First, I wanna ask on the B2B business. I think just a clarification. Is the go-to-market now fully TotalPay, or is the go-to-market still the individual branch? Just curious if the consolidation of the individual brands has happened yet or if there's, you know, kind of a multi-brand AP approach from a distribution perspective.
Yeah, sure. It's obviously REPAY is gonna be the single brand. We call that solution TotalPay because it really does describe the total solution, both sending funds as well as receiving funds from an overall perspective. On our AP side, it allows us to actually make all of their payables payments, not just the ones with virtual cards or not just the ones with ACH, but also for checks or how they would like to pay their payables. We find that to be the best descriptor for that. Overall, as a brand, it will only be REPAY as a brand. We'll drive that out to the market.
I will say as we roll that out as a total solution, you know, we will, AR and AP will have that integrated into the various different ERPs we're integrated into. That will take. As we move throughout this year and into next year, as we upgrade our integrations to include both the AR and AP for new versions, you know, we'll be adding the complete solution to that. As you are aware, we have integrations through our acquisitions with both sides of that. As we update to various versions on these accounting ERP systems, we will continue to add both the AR and AP to those.
Perfect. Thank you for that. Very helpful. Yeah, good to hear about the vertical expansion to government. I think, you know, it's obviously a very lucrative end market. But is there any investment that's required when we think about vertical expansion within B2B, whether it's Salesforce or, you know, are the existing integrations and go-to-market strategy enough to where maybe you modify some, you know, sales materials, but there's not much that's required from a, you know, heavy lift perspective. Just curious when we think about vertical expansion within B2B.
For the most part, it's not significant investment. Obviously, from a talent perspective, if we're adding specific Vertical Biz Dev talent, you know, but that's really incremental. From an integration perspective, we're touching a lot of ERP systems already. If there would be something that would be unique maybe on the AP side, it's a much lighter lift from an integration perspective, which is where we would touch. That's the piece we would touch mostly on the government side. That's a fairly easy integration for us or a lift for us on the technology side.
Perfect. Thank you for that. Then if I could just sneak one more in, just on the outlook, and this has been asked a couple different ways, but one quarter in, it sounds like there's more confidence in the outlook. Obviously, you know, first quarter probably doesn't make sense to increase it just yet. I just wanna confirm that, you know, what you're seeing out there, you're more optimistic about the full year outlook. Sounds that way with what you're seeing in the underlying business momentum, personal loan growth. Just curious if there are any offsets for the full year that we should consider. Thanks a lot.
No, no. Like we've said, we're confident in the rest of the year, which is why we reiterated the outlook. You know, there are a number of drivers there. You mentioned personal loans. There's also a recovery happening in healthcare, where we have exposure to a few different parts of healthcare. We have consumer healthcare payments, claims payables, as well as hospital payables. We think that just ongoing recovery on healthcare supports the outlook as well.
I would also add that, as I mentioned in my opening remarks, we had a record Q1, client implementations. Some of those are obviously layered into our forecast, the recurring nature of those. As they come live and actually begin processing, that gives us, you know, more confidence as well.
Got it. Thank you, John. Thank you, Tim. Appreciate the comments.
Our next question is from Andrew Jeffrey with Truist Securities. Please proceed.
Hi. Good afternoon, guys. Appreciate you taking the question. A couple things for me. One, encouraging to hear about Instant Funding and the 70% growth in that product. John, can you just remind us, When you look at that solution, does that drive yield, or is it really more of just a point of competitive differentiation such that you feel like you're, you know, you have stickier solutions and are offering more value to the customer? How should we think about that perhaps sort of driving the business over time? A little more nuance there would be helpful.
Sure. Yeah, it's if you look at the big picture, large piece of that, specifically say on the consumer payment side of it, those would be the outflows which historically were happening, you know, originally in cash and even check and even some form of ACH. As we influence that to a more digital card-based transaction, that will influence, as you look at the whole big picture of it, that'll influence the repayment mechanisms back. Typically, how something gets funded, it usually gets set up as the default stored card or filed payment method on file for repayment. We think that is really an influencer. We're seeing more and more activity, too, as we talk about the whole Secular Digital Shift, you know, that's a characteristic of that.
We're now starting to go out the door that way, which means it'll probably also come back that way. As we drive those different experiences and behaviors, that's part of that secular shift that we're seeing, and that's, we talk about it, but that's evidence of that. Now, that is more of a transactional based. There's great volume there, which also gives us visibility on what will eventually be paid back. It is more of a transactional piece of that, which is, you know, not necessarily a BPS per transaction you get on that. It's more of just a click type transaction fee on that. Really good indicator of what's to come.
Right. Drives that secular flywheel.
Yes.
Tim, can you just also elaborate a little bit on gross profit margin? You know, the organic revenue growth was a little light this quarter, and I understand it's gonna ramp. Margin looked really good. Can you just talk about puts and takes and how mix should affect margin throughout the year here?
Yeah. We a lot of that has to do with BillingTree. BillingTree has been actually better than expected from a gross profit margin north of 80%. They had you know they also have a strong Q1 as it relates to tax refund season. Their volume and revenue you know has much higher gross profit margins than the overall average, which brings the average up. That's one driver of that. You know, we're in the process, as we've discussed, of converting BillingTree's back-end to our RCS platform, which effectively will reduce processing costs, which should drive margin up as well. That will happen in Q2. We would actually think that gross profit margins could potentially be a little bit higher for the remainder of the year for those reasons.
Okay. You don't have to worry about seasonality necessarily in that number?
Because of the conversion in the back end, I think that will help support similar to slightly higher margins.
Got it. Okay. Appreciate it. Thank you.
Yep.
As a reminder, to star one on your telephone keypad if you would like to ask a question. Our next question is from James Faucette with Morgan Stanley. Please proceed.
Hey, this is actually Jeff Goldstein on for James. You mentioned that the reason for the take rate decline was due to the tax refund dynamics. Just wanted to ensure that longer term, you know, exiting the year and into 2023, you'd still expect either stable or growth in your ongoing take rate. Just any change to your long-term thinking around that?
We think it was unique to the tax refund dynamic, like I mentioned, with higher average individual refunds and our flat-fee convenience fee pricing model. We're already seeing that back up in April. We would expect it to increase back up closer to 110 basis points, as I mentioned, and then we wouldn't think there'd be any real material change going into next year or beyond. I think it really was related to this specific dynamic for the 2022 tax refund season.
Okay. Fair enough. And then you mentioned growing your supplier network to 127,000 suppliers, which was up, I think, from 110,000 last quarter. How should we think about your ability to keep growing out that network? What resources do you have dedicated there? Is there a way to think about maybe like a critical level that if you reached it could help accelerate adoption of your solutions? Is there some type of, like, network effect that you would imagine would occur? Just how should we think about that?
Well, you will see it continue to grow at a similar pace. Obviously, that has to do with really as we drill down into some of these niche verticals, you know, we're gonna add more of these suppliers to it. As we expand out into, you know, a couple of different areas, you'll see us be able to add more suppliers. Ultimately, the network effect is real, if you, it's a positive either way. You're adding to your network effect, if you were to have all your people on the network, then that would mean most of your customers could take virtual card. That's a good thing as well.
You will see it probably grow at a similar pace, but as we continue to grow organically new sales, it should continue to grow that as well. That network effect ultimately is getting as many people as we can on the network so that our virtual card adoption drives up there. We see it when we drill down into some specific unique areas where we have a unique niche in, we start to see many of those vendors over and over, and which is a positive effect for us.
Got it. Thanks for the color.
There are no more questions at this time. I would like to turn the conference back over to John for closing comments. Actually, we do have a question with Chris Kennedy with William Blair. Please proceed.
Hey, guys. Thanks for taking the question and squeezing me in. I apologize if I missed it, but did you happen to give kind of revenue growth by category, so B2B consumer loan repayments, what have you?
We've not done that on this call, but we have done that in the past. You know, consumer payments is probably in the high teens%. B2B is by far the fastest growing part of our business, it's 30+% . What we call other, which is really the RCS, the Back-End Platform, is probably growing in low teens%. Again, that's one of the reasons we have confidence in the outlook for the remainder of the year, just because B2B is becoming a bigger part of the mix and it's the fastest grower. We have, you know, those are, I think, healthier organic growth rates than the other areas as well.
Great. Thanks a lot.
Yep. Operator? No more questions? Great. I just wanna thank everybody for joining us this evening. We greatly appreciate your time. We're very encouraged by our strong start to the year, which has positioned us well to succeed in 2022 and beyond as we continue to take advantage of the secular trends towards frictionless digital payments. Look forward to seeing you, many of you as we see you at many of the different conferences. Thank you.
Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.