10-Q: Repay Holdings Reports Q3 Loss Amid Revenue Dip and Goodwill Impairment

Repay Holdings Corporation announced a net loss for the third quarter and first nine months of 2025, driven by a significant goodwill impairment and slight revenue decline, despite growth from new and existing clients.

Summary

• Total revenue decreased by 1.8% to $77.7 million for the three months ended September 30, 2025, compared to $79.1 million in the prior year period.
• Total revenue decreased by 1.7% to $230.7 million for the nine months ended September 30, 2025, compared to $234.8 million in the prior year period.
• A net loss attributable to the Company of $(6.4) million was reported for the three months ended September 30, 2025, a significant decline from a net income of $3.2 million in the same period last year.
• A net loss attributable to the Company of $(116.6) million was reported for the nine months ended September 30, 2025, compared to a net loss of $(6.0) million in the prior year period.
• A non-cash goodwill impairment loss of $103.8 million was recognized during the nine months ended September 30, 2025, primarily impacting the Consumer Payments segment ($103.2 million).
• Adjusted EBITDA decreased by 11.1% to $31.2 million for the three months ended September 30, 2025, and by 7.8% to $96.2 million for the nine months ended September 30, 2025.
• Adjusted Net Income decreased by 14.1% to $18.2 million for the three months ended September 30, 2025, and by 11.9% to $57.6 million for the nine months ended September 30, 2025.
• The Consumer Payments segment's revenue increased by 3.6% to $71.7 million in Q3 2025, driven by new and existing clients.
• The Business Payments segment's revenue decreased by 21.6% to $12.0 million in Q3 2025, primarily due to previously announced client losses and reduced political media spending.
• Repurchased $73.5 million in aggregate principal amount of 2026 Notes for $72.0 million cash, resulting in a $1.4 million gain on extinguishment of debt in Q3 2025.
• The authorized Share Repurchase Program was increased to $75 million, with $23.0 million remaining capacity as of September 30, 2025, after repurchasing approximately 3.1 million shares for $15.6 million in Q3 2025.

Sentiment

Score: 3

Explanation: The company reported a substantial net loss for the nine-month period, primarily due to a large goodwill impairment. Revenue declined, and key profitability metrics like Adjusted EBITDA and Adjusted Net Income also decreased. While there's growth from new clients, it's insufficient to offset client losses and macroeconomic headwinds. The significant cash outflow from financing activities and the warning about TRA payment financing add to the negative sentiment.

Positives

• Growth from newly signed and existing clients in both Consumer Payments and Business Payments segments, partially offsetting overall revenue declines.
• Consumer Payments segment revenue increased by 3.6% year-over-year to $71.7 million for the three months ended September 30, 2025.
• A gain on extinguishment of debt of $1.4 million was realized in Q3 2025 due to the repurchase of 2026 Notes principal.
• Selling, General and Administrative expenses decreased by $1.5 million (4.1%) in Q3 2025, primarily due to lower equity compensation and compensation expenses.
• The authorized Share Repurchase Program was increased to $75 million, indicating management's confidence or belief in the company's valuation.
• Maintained a $250.0 million senior secured revolving credit facility with $0 drawn as of September 30, 2025, providing significant liquidity.

Negatives

• Total revenue decreased by 1.8% in Q3 2025 and 1.7% in 9M 2025, primarily due to client losses and reduced political media spending.
• A net loss attributable to the Company of $(6.4) million was reported in Q3 2025, a reversal from a $3.2 million net income in Q3 2024.
• A substantial net loss attributable to the Company of $(116.6) million was reported for 9M 2025, significantly worse than the $(6.0) million loss in 9M 2024.
• A non-cash goodwill impairment loss of $103.8 million was recognized in 9M 2025, primarily affecting the Consumer Payments segment.
• Adjusted EBITDA decreased by 11.1% in Q3 2025 and 7.8% in 9M 2025.
• Adjusted Net Income decreased by 14.1% in Q3 2025 and 11.9% in 9M 2025.
• Business Payments segment revenue decreased by 21.6% in Q3 2025 and 4.5% in 9M 2025, impacted by client losses and political media spending fluctuations.
• Costs of services increased by 13.6% in Q3 2025 and 7.3% in 9M 2025.
• Interest income decreased due to lower average interest rates earned on cash and cash equivalents.
• Interest expense increased due to a higher outstanding principal balance under convertible senior notes.
• Cash and cash equivalents decreased from $189.5 million at December 31, 2024, to $95.7 million at September 30, 2025.
• Net cash used in financing activities was $(130.2) million for 9M 2025, a significant increase from $(10.7) million in 9M 2024.

Risks

• Exposure to economic conditions and political risk affecting the consumer loan market, receivables management industry, and consumer and commercial spending, including bank failures, inflationary pressures, evolving U.S. trade policies, U.S. government shutdown, general economic slowdown or recession.
• Changes in the payment processing market, including its competitive landscape, technology evolution, or regulatory changes.
• Changes in the vertical markets targeted, including the regulatory environment applicable to clients.
• Ability to retain, develop, and hire key personnel.
• Risks relating to relationships within the payment ecosystem.
• Risk of not being able to execute growth strategies, including identifying and executing acquisitions.
• Risks relating to data security.
• Changes in accounting policies applicable to the company.
• Risk of not being able to maintain effective internal controls.
• Payments required under the Tax Receivable Agreement (TRA) could be substantial and potentially exceed actual tax benefits, with no assurance that the company will be able to finance its obligations under the TRA.
• Seasonal fluctuations in revenues due to consumer spending patterns (e.g., tax refunds in Q1) and political media spending (e.g., Q3/Q4 of election years).

Future Outlook

The company expects its cash flow from operations, current cash and cash equivalents, and available borrowing capacity to be sufficient to fund operations, planned capital expenditures, and debt obligations for the next twelve months and the following five years. It continues to evaluate the impact of the One Big Beautiful Bill Act (OBBBA) but does not currently expect it to materially impact the estimated annual effective tax rate in 2025. The company also expects to remain in compliance with restrictive covenants under its convertible notes and credit agreement.

Management Comments

• We intend to continue to strategically target verticals where we believe our ability to tailor payment solutions to our client needs, our deep knowledge of our vertical markets and the embedded nature of our integrated payment solutions will drive strong growth by attracting new clients and fostering long-term client relationships.
• The effect of these events on our financial condition, results of operations and cash flows is uncertain and cannot be predicted at this time (referring to macroeconomic conditions).
• The impact of all of these various events on our results in the first nine months of 2025 may not be necessarily indicative of their impact on our results for the remainder of 2025 (referring to macroeconomic conditions).
• In our opinion, the liabilities, if any, which may ultimately result from the outcome of such matters (legal proceedings), individually or in the aggregate, are not expected to have a material adverse effect on our financial position, liquidity, results of operations or cash flows.
• We expect that our cash flow from operations, current cash and cash equivalents and available borrowing capacity will be sufficient to fund our operations and planned capital expenditures and to service our debt obligations for the next twelve months and the following five years.
• We expect to fund the payment of the amounts due under the TRA out of the cash savings that we actually realize in respect of the attributes to which TRA relates. However, the payments required to be made could be in excess of the actual tax benefits that we realize and there can be no assurance that we will be able to finance our obligations under the TRA.

Industry Context

The company operates in the payment processing market, serving industry-oriented vertical markets such as personal loans, automotive loans, receivables management, credit unions, education, and healthcare. It acknowledges monitoring the current macroeconomic environment, including heightened inflation, evolving U.S. trade policies, supply chain issues, and slower growth, which could adversely affect payment volumes. The company also notes the competitive landscape, technology evolution, and regulatory changes within the payment processing market. Revenues are subject to seasonality influenced by consumer spending (e.g., tax refunds) and political media spending during election cycles.

Management Changes

Corporate Governance

Legal Proceedings

• The company is a party to various claims and lawsuits incidental to its business.
• Management believes that the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, are not expected to have a material adverse effect on its financial position, liquidity, results of operations, or cash flows.

Related Party Transactions

• Held Tax Receivable Agreement (TRA) payables for related parties of $22.3 million as of September 30, 2025, and $27.5 million as of December 31, 2024. These amounts are owed to holders of Post-Merger Repay Units.
• The TRA itself is a related party transaction, providing for payments to holders of Post-Merger Repay Units based on tax benefits realized from increases in tax basis.

Stakeholder Impact

• Shareholders: Negative impact due to significant net loss, goodwill impairment, declining revenue, and decreased Adjusted Net Income per share. Share repurchases offer some support but are overshadowed by overall poor performance.
• Employees: Potential impact from 'restructuring and other strategic initiative costs' and 'reorganization of operations' mentioned in non-GAAP adjustments, though specific employee impacts are not detailed. Share-based compensation remains a component of overall compensation.
• Customers: Continued growth from new and existing clients in Consumer Payments suggests ongoing service delivery, but client losses in Business Payments indicate some customer churn.
• Creditors: Debt levels are managed, and the company expects to remain in compliance with covenants, but the overall financial performance and potential TRA obligations warrant monitoring.
• Regulatory Authorities: The company is evaluating new accounting pronouncements and tax legislation, indicating ongoing compliance efforts.

Next Steps

• Continue to monitor macroeconomic conditions and their potential impact on payment volumes.
• Focus on attracting new clients and fostering long-term client relationships in strategic vertical markets.
• Successfully integrate recent acquisitions and execute future acquisitions to drive growth.
• Offer new and competitive payment technology solutions to clients.
• Manage debt obligations, including the maturity of the 2026 Notes in February 2026.
• Continue share repurchases under the increased $75 million program, with $23.0 million remaining capacity.
• Evaluate the effects of recently issued accounting pronouncements (ASU 2023-09, 2024-03, 2024-04, 2025-05, 2025-06) on financial statements.
• Evaluate the impact of the One Big Beautiful Bill Act (OBBBA) on the estimated annual effective tax rate in 2025.

Key Dates

Recommendation

The company reported a substantial net loss for the nine months ended September 30, 2025, primarily due to a $103.8 million goodwill impairment. Revenue declined year-over-year, and key profitability metrics like Adjusted EBITDA and Adjusted Net Income also saw significant decreases. While the Consumer Payments segment showed some growth, it was more than offset by declines in Business Payments and overall operational challenges. The decrease in cash and the cautionary note regarding the financing of Tax Receivable Agreement obligations further highlight financial pressures. These factors suggest a deteriorating financial position and a challenging outlook, warranting a 'Sell' recommendation for a seasoned investor.

Keywords

Payment processing, Fintech, Consumer payments, Business payments, Goodwill impairment, Convertible notes, Share repurchase, Electronic payments, Accounts payable automation, Financial results, SEC filing, 10-Q