Repay (RPAY) Q1 2026 earnings review
Growth Reverses to Positive, but Transformational M&A Dominates the Story
After a grueling 2025 bogged down by client losses and political media headwinds, REPAY officially reversed its top-line contraction. Q1 2026 revenue grew 4% year-over-year, driven by an impressive 18% surge in the Business Payments segment. Management is confident enough in the organic trajectory to raise full-year Adjusted EBITDA guidance margins to ~42%. However, standalone organic results are heavily overshadowed by the pending acquisition of KUBRA—a business generating $239M in annual revenue that will nearly double REPAY's size. While organic growth is accelerating, a sluggish Q1 Free Cash Flow conversion of 16% and immense upcoming integration risks warrant a cautious stance.
🐂 Bull Case
The B2B segment is accelerating. Revenue jumped 18% YoY in Q1, and the AP Supplier network expanded by roughly 70% YoY to over 665,000. Enterprise adoption of the TotalPay solution is taking hold.
Despite Q1's modest revenue beat, management raised FY26 Adjusted EBITDA guidance by ~$4.5M at the midpoint, signaling improved operating leverage and realization of past cost-cutting initiatives.
🐻 Bear Case
The pending KUBRA acquisition ($239M revenue / $49M EBITDA) is transformational but highly risky. Integrating a target that almost doubles the standalone company's scale poses a severe threat to operational focus and near-term margin stability.
Free Cash Flow conversion came in at a dismal 16% in Q1. While this is an improvement from -24% in Q1 2025, management's maintained guidance of 45% for the full year requires near-flawless working capital management in the coming quarters.
⚖️ Verdict: ⚪
Neutral. The standalone business has successfully navigated past 2025's structural headwinds and is accelerating nicely. However, the impending KUBRA deal introduces a layer of integration and balance sheet risk that prevents a fully bullish outlook until post-merger execution is proven.
Key Themes
Business Payments Accelerating
The Business Payments segment was the primary growth engine this quarter, reversing the 9% reported contraction seen in FY25. Q1 2026 revenue grew 18% YoY to $13.0M, while gross profit increased 12% to $8.5M. The growth is fueled by aggressive expansion of the AP supplier network, which swelled to over 665,000—a massive 70% YoY increase that accelerates network effects and digital payment adoption.
Software Integrations Driving Embedded Strategy
REPAY added three new integrated software partners in Q1, bringing the total to 297. This strategy of embedding payment capabilities directly into client software (like auto lending systems and digital wallets) continues to serve as the primary funnel for organic client acquisition, insulating the company from direct pricing wars.
Profitability Outlook Upgraded
Management raised the full-year 2026 Adjusted EBITDA outlook from a midpoint of $139.0M to $143.5M, citing a 'strong start to the year and execution on our strategic initiatives.' This pushes expected Adjusted EBITDA margins to approximately 42%, demonstrating accelerating operating leverage as the company scales its enterprise volume.
Transformational KUBRA Deal Overhang
While KUBRA brings access to a $2.75 trillion addressable market in government and utility billers, it fundamentally changes REPAY's risk profile. With $239M in revenue and $49M in EBITDA, KUBRA's margin profile (~20%) is significantly lower than REPAY's standalone (~42%). Furthermore, the combined entity targets an aggressive $20M+ in run-rate synergies by 2028. Failure to achieve these platform migrations will drag down combined profitability.
Sluggish Q1 Free Cash Flow Conversion
REPAY generated $16.8M in operating cash flow and $5.4M in Free Cash Flow during Q1, yielding a conversion rate of just 16%. While Q1 is historically weak due to working capital timing (Q1 2025 was -24%), maintaining the annual guidance of 45% means the company must deliver heavy cash flow generation in the back half of the year, leaving little room for error.
GAAP Profitability Remains Elusive
Despite a healthy Adjusted EBITDA of $34.4M, GAAP Net Income came in at a loss of $10.0M (worse than the $8.2M loss in Q1 2025). This disconnect is driven by high structural expenses that are added back to adjusted figures: $25.5M in depreciation and amortization, $5.0M in stock-based compensation, and $3.8M in interest expense. Until debt is paid down and legacy acquisition intangibles roll off, the bottom line will remain suppressed.
Other KPIs
Accelerating slightly. Gross margin in the Consumer segment improved to 80% (from 79% in Q1 2025). Management noted this was positively impacted by immediate contributions from a strategic distribution partner and optimized network routing.
The company's standalone net leverage sits at 2.7x. They currently have $110M drawn on their revolver facility to handle previous maturities and TRA payments. Management has stated a target to keep net leverage under 3.0x within 18 months of the KUBRA closing, which will require aggressive debt paydown from future cash flows.
Guidance
Accelerating. Unchanged from prior updates, the $343M midpoint implies a robust ~11% YoY growth compared to the $309.3M generated in FY25. This excludes any contribution from the pending KUBRA acquisition.
Accelerating. Upgraded from the previous target of $136.5 - $141.5 million. The new $143.5M midpoint implies roughly 12% YoY growth compared to FY25 ($128.6M), mapping to an overall Adjusted EBITDA margin of approximately 42%.
Stable. The target remains unchanged. With Q1 conversion sitting at just 16%, investors should expect a sharp sequential acceleration in Q2 and Q3, mirroring the seasonal dynamic seen in 2025.
Key Questions
KUBRA Integration Roadmap
With KUBRA nearly doubling the size of your revenue base, what specific milestones should investors track over the first 12 months to ensure the $15M in estimated platform migration synergies are on track without disrupting core operations?
Business Payments Margin Compression
Business Payments revenue grew 18%, but gross margin compressed from 69% to 65% year-over-year due to changes in enhanced data programs with card networks. Is this 65% margin a new structural baseline, or can optimized routing push it back toward 70%?
Leverage and Capital Allocation Post-Close
Given the KUBRA acquisition and current revolver utilization, share repurchases seem highly unlikely in the near term. Can you explicitly rank your capital allocation priorities once the KUBRA deal closes?