Repay Holdings Corp (RPAY) Q4 2020 Earnings Call Transcript

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Repay Holdings Corp (NASDAQ: RPAY)
Q4 2020 Earnings Call
Mar 1, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and 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 future events and results. These forward-looking statements are subject to risks and uncertainties, including those set forth in its SEC filings related to today’s results and in our most recent Form 10-K filed with the SEC. Actual results might differ materially from any forward-looking statements that we may 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 these non-GAAP financial measures as well as a reconciliation of the 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.

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John MorrisCo-Founder, Chief Executive Officer and Director

Thank you, operator, and good afternoon, everyone. We hope everyone is doing well and staying healthy. On today’s call I wanted to first give an update on our business for the full year and fourth quarter, followed by a review of how we’re executing on our growth strategy. I’ll then turn it over to Tim to discuss our fourth quarter in more detail and provide guidance for 2021.

When we first previewed our thoughts for 2020 in March of last year, we would have never predicted that the world would be like today. And while there was so much uncertainty throughout the year, there were two things that became even more certain, the value proposition of our business and the strength of our organization. The value proposition of our business, which demonstrated through the growth we experienced this year, which included an increase in card payment volume of 42%; total revenue growth of 48%; gross profit growth of 44%; and adjusted EBITDA growth of 41%. As for the strength of our organization, I could not be more proud of how incredibly hard our team has worked this year despite all the challenges in everyday life.

In 2020, we were able to acquire and have been working to integrate three companies. Through those acquisitions, we further solidified our position in the B2B space and they also allowed us to add new verticals to our platform, including mortgage services within loan repayments, along with field services, hospitals and education, and B2B, just to name a few. We launched service transfer exchange to automate loan transfer payments between mortgage servicers, increasing speed, accuracy and transparency in mortgage service transfer for both servicers and borrowers. We also added 54 new software partners in 2020 across all verticals, further demonstrating that we are a key offering in many of these platforms.

In addition to expanding our product suite and partnership last year, we take pride in integrating new teams from our acquired companies into the REPAY family of employees, as we continue to rely on talent to grow. This employee first focus has been rewarded with certification as a great place to work for the past five years, thanks to a dedicated company culture in which over 90% of our employees have validated the positive work environment.

Now to move onto the fourth quarter, which was the strongest quarter we’ve ever had. For the three months, we reported card payment volume growth of 16%; total revenue growth of 23%; gross profit growth of 23%; and adjusted EBITDA growth of 29%. During the quarter we also completed one of the acquisitions I’ve just mentioned, CPS Payment Services, an accounts payable automation business, which further enhances our existing healthcare B2B business and helps to accelerate expansion into new verticals. Our loan repayment business was strong in the quarter, especially in the auto loan side, where we expect to continue to see rapid growth. The COVID-19 pandemic is reshaping the auto marketplace. According to EY’s 2020 Mobility Consumer Index published in November, nearly a third of the respondents who do not currently own a car say they plan to buy one in the next six months. As a reminder, we believe our TAM for auto is about $600 billion. It’s one of the fastest growing parts of our business.

Our mortgage servicing business also performed very well in the quarter due to increased home buying and refinancing activity, along with low interest rates. This increased demand and low mortgage rate have sparked a boom in originations and mortgage service transfers, positioning us well to benefit. We continue to guide development of our service transfer exchange solution through the STX Advisory Board, which is composed of mortgage industry experts, representing a variety of companies including, US Bank and loanDepot.

Our goal is to improve in standardized payment flow, eliminate errors, reduce delinquencies, and create a better experience for borrowers and servicers. On the personal loan side, many of our customers have recently seen a return to sequential quarterly loan portfolio growth in Q4. And we are hearing positive trends into Q1 as well. Our instant funding project continues to experience significant adoption. We’ve nearly tripled the number of users of this product since the beginning of 2020 and continued to add to this each month as consumers move away from cash and going into physical locations to access the loan disbursements.

The pandemic has proven that loan repayments are resilient. We’ve also seen significant shift to electronic payments during this time as many lenders have been focused on increasing digital engagement, which fits well with our enhanced payment technology offering. We believe the shift is permanent and we’ll increasingly grow over time.

Our B2B business was also stronger in the quarter, we were particularly pleased with the performance of CPS Payments and can already see the growing value of electronic payables with Enterprise customers, such as large healthcare networks and education systems. We now have approximately 45 total B2B software integrations and on the AP side, we’ve grown our supplier network to 60,000 plus.

We made progress against all our growth strategies in the fourth quarter. We’ve had some great client wins in the quarter, driven by our direct sales force. We have ended the year with 43 total credit union customers, which represents approximately 350,000 collective members. We expanded processes in services and integrated partnerships in the Canadian marketplace. REPAY was also recognized as an approved vendor and a fin-tech Innovator of the Year by the Canadian Lenders Association. Credit Unions at Canada will be a big focus area for growth in 2021.

We’re also now actively processing in the buy now pay later space, which is a natural move for us, given our long history in expertise in installment lending. All of these efforts were also aided by software integrations of which we added 30 new partners during the quarter, mostly by acquisitions. This brought our total ISV integrations to 124 at the end of December.

I want to spend a few minutes discussing several of these integrations. In December, we announced our partnership with the Strategic Regional Healthcare Organization, the National Association. This partnership expands our reach within the healthcare sector by providing health system members accounts payable with disbursement automation and revenue-generating rebates.

Also in December, we announced a technology integration with LiveVox, a next generation contact center platform. The partnership further enhances the LiveVox customer experience by providing additional digital payment options and processing capabilities in either self service or agent-assisted transactions, And more recently in January, we announced the technology integration with Billtrust, a B2B accounts receivable automation and integrated B2B payments clear. Through our participation in Billtrust’s Business Payments Network, or BPN as they call it, our corporate customers will instantly gain the ability to automate electronic payments to Billtrust’s fast network of suppliers, distributors, and vendors, with accelerating and simplifying the payment process and also further scaling adoption of virtual credit cards. In addition, last month we announced a technology integration with PN3 Solutions, a paperless B2B AP authorization and automation software provider. Through the partnership, PN3’s business customers will gain the ability to automate outbound payments through the use of virtual card or ACH to their vendors adding seamless, fully integrated payment capabilities to this procurement and AP workstreams. The partnership will also allow us to realize synergies with our B2B receivables offering as REPAY’s footprint now overlaps payables and receivables across key integrations, including Acumatica and Sage.

And just last week, we announced an integration with VBA, a leading-edge software design company revolutionizing the insurance industry through employee benefit and administration solutions. The two-way integration between the platforms will enable insurance companies to pay healthcare providers, including licensed healthcare facilities, programs, agencies, and doctors for services directly from the VBA system. On the International front, we are also implementing one of the largest non-bank lenders in Canada and we should be live in early March.

Moving on to M&A, which continues to be a key growth driver for our company. In January, we completed a concurrent common stock and convertible notes offering and in February, we closed a revolver providing us with ample liquidity to pursue deals. Our pipeline remains very active and we believe this capital raise positions us even better in the marketplace. Having completed five acquisitions since going public less than two years ago, we expect that there will continue to be a mid-market industry consolidation across the payments industry, on both the receivables and payables side. There are many players out there that are great acquisition candidates for us. Ideal targets are high-growth businesses and large verticals that are underserved from a payment perspective, are integrated with software, have attractive margins and have a need for our technology.

Lastly, to continue to position us well for the tailwinds we were seeing in digital payments and the growth we expect to continue to see for our business, we have recently opened a software development office in Ireland in partnership with a local firm called Protego. We are excited about this partnership and believe it to be a great asset as we expand.

To wrap up, I continue to be incredibly proud of our team for their hard work and dedication in growing this company and providing excellent service to our customers. I’m very encouraged by the trends we see in the verticals we serve and also impressed with the businesses we have been able to integrate to date. REPAY has proven resilient during these times and has positioned even better moving forward into 2021.

With that, I’ll turn it over to Tim to discuss the financials in greater detail. Tim?

Tim MurphyChief Financial Officer

Thank you, John. Now let’s move on to our Q4 financial results before I review our financial guidance for 2021. In the fourth quarter, REPAY delivered strong results across all of our key metrics. Card payment volume was $4 billion, an increase of 16% over the prior year’s fourth quarter. Total revenue was $41.4 million, an increase of 23% over the prior year fourth quarter. TriSource, APS, Ventanex, cPayPlus, and CPS contributed approximately $6.5 million of incremental revenue during the fourth quarter.

Moving on to expenses in the quarter. Other cost of services were $11.5 million compared to $9.3 million in the fourth quarter of 2019. The incremental other cost of services from TriSource, APS, Ventanex, cPayPlus, and CPS were $1.8 million for Q4. Gross profit was $30 million, an increase of 23% over the prior year’s fourth quarter. On an organic basis, we saw gross profit growth in the mid single-digits compared to the fourth quarter of 2019. Organic growth was solid in October and December, but November was down due to the lapping of a very strong November 2019 for personal loan repayments.

That said, our December organic gross profit growth was in the low teens and volume trends in early Q1 2021 were strong, which provides us continued confidence in our mid to high teens organic growth outlook. As John mentioned, we’ve seen many of our larger personal loan customers return to loan growth in recent months and we benefited from the second round of stimulus payments. We typically see an uptick in Q1 in our loan repayment vertical as a result of tax refunds in a lower sequential Q2.

SG&A was $21.5 million compared to $24.8 million in the fourth quarter of 2019. Fourth quarter pro forma net loss was $0.8 million compared to pro forma net loss of $7.5 million in the fourth quarter of 2019. Fourth quarter adjusted net income was $13.5 million or $0.17 per share compared to adjusted net income of $12.3 million or $0.20 per share in the fourth quarter of 2019. The decrease in adjusted net income per share was primarily driven by a pro forma tax adjustment in the current period, which we did not include in the prior-year period as well as a higher outstanding share count.

Lastly, fourth quarter adjusted EBITDA was $19 million, an increase of 29% over the prior year fourth quarter. Fourth quarter adjusted EBITDA as a percentage of total revenue was 46% compared to 44% in the prior-year fourth quarter. This increase in adjusted EBITDA and adjusted EBITDA margin is a result of organic growth and contributions from acquired businesses, as well as rigorous cost management, delays in hiring several positions, and residual payout plans for certain third-party sales partners.

On January 19, 2021, we completed a public offering for approximately 6.2 million shares of our Class A common stock at a public offering price of $24 per share. On the same date, we also completed the offering of $440 million of convertible notes with 0% coupon. We also announced the closing of a new undrawn $125 million senior secured revolving credit facility on February 3. Therefore, our cash and liquidity positions remain very strong. As of January 31, pro forma for the concurrent offerings and the payoff with the previous term loan facility, we had $394 million of cash on the balance sheet and access to $125 million undrawn revolver for a total liquidity amount of $519 million. Our pro forma net leverage is down only 0.6 times, which is the lowest we’ve been since becoming a public company.

As of January 31, pro forma for the common stock offering, we had approximately 86 million shares outstanding on an as-converted basis. Our fully diluted share count, including unvested shares, equaled approximately 88.4 million shares. Regarding the convertible notes, we are still considering treatment on this. We will likely elect net-share settlement, principal and cash in the money value in shares, which allows us to benefit from treasury stock method for accounting purposes. In this case, the convertible will only result in dilution once stock price increases above the conversion price of $33.60.

Finally, moving on to our outlook for 2021. We are still in a period of uncertainty around the economy and pandemic. Depending on the pace of recovery, we currently expect much stronger growth in the second half of 2021 versus the first half. Also, the second half of the year generally has easier comps. And to position us well for the significant shifts we are experiencing in electronic payments, we are planning to invest in sales, technology and product this year to further accelerate growth as we move into 2022. With all these factors in mind, we expect the following for 2021. Card payment volume to be between $17.5 billion and $18 billion.

Total revenue to be between $178 million and $188 million. We expect gross profit to be between $134 million and $140 million, which includes organic gross profit growth of 15% at the high end. We have a slide in our investor supplement on our IR site, which will provide a detailed explanation of our gross profit expectations for the year. And lastly, we expect adjusted EBITDA to be between $75 million and $80 million. Just to note that we expect approximately 55% of our P&L contribution to come in the back half of the year due to the reasons mentioned a moment ago.

As of prior quarters, this range assumes no further unforeseen COVID-related impacts, which could create substantial economic duress during the year. We are already experiencing strong momentum in early 2021 and look forward to an exciting year ahead.

I’ll now turn the call back over to the operator to take your questions. Operator?

Questions and Answers:

Operator

[Operator Instructions] And our first question is from Ramsey El Assal with Barclays. Please proceed with your

Ramsey El AssalBarclays — Analyst

Hi. Thanks for taking my question, guys. I wanted to ask about the impact of stimulus on the personal loan side of your business. And as I recall, last year, obviously the — your customers pulled back on originations at the same time the end consumer was sort of flush paying down sort of loan volumes. It seems like it’s a bit of a double-edge sword for you guys. Just wondering how you can — if you can characterize what’s been happening on that side of your business given this ground estimates we’ve just seen in that, which is likely coming up here in the not-too-distant future?

Tim MurphyChief Financial Officer

Hey, this is Tim. Thanks for the question. Yeah, so we — as we mentioned, we have seen a lot of our larger personal loan customers return to the loan growth in Q4 and early Q1 of this year. And so we think that’s very positive. Their originations have been increasing in recent months. And that’s just the trend we continue to hear. We did benefit from the recent stimulus, the $600 payments that went out in early January. We’ve received some of the volume from those. We haven’t heard that, that has led to any decreased originations since then.

What we do know and what’s different this time around versus last spring is that our customers, our personal loan customers, are not concerned with credit issues and delinquencies like they were then. I think they’re more aggressively lending now. They’re focused on loan growth versus protecting delinquencies and losses. And I think that’s just a different trend than we saw early on.

And so we think things are positive. We’re obviously monitoring additional stimulus and depending on the timing of that and the form that ultimately takes, we’ll just have to monitor what that means for originations. But like I said, because our customers are really focused on loan growth and that should be helpful this time around and not show a steep of a drop in originations if there is additional stimulus that includes direct payments.

Ramsey El AssalBarclays — Analyst

That’s super helpful. And your guidance does not include the potential incremental stimulus that we might see if the Senate in fact passes it?

Tim MurphyChief Financial Officer

Well, really the way we thought about it is if it happens, it’s likely going to happen at the end of the first quarter or early Q2. And we would think that, that may flow through to our volumes some time in Q2, if it does. And so that’s why we wanted to comment on the call that we expect stronger growth in the second half of the year after that kind of flushes through in the second quarter. And we would expect to also the overall economy to be recovering and consumer spending and demand to be greater, which causes more demand for personal loans. And so all those factors kind of led us to back-weight the year a bit, as I mentioned, and we’re just monitoring it. So again, it will ultimately depend on the timing and in the form it takes. But we do have some assumption in the guide for that.

Ramsey El AssalBarclays — Analyst

Okay, terrific. And one more quick one for me. Could you give us an update on the captive auto loan side of the business for the Mercedes contract and also just how the pipeline looks there and progress on implementation?

John MorrisCo-Founder, Chief Executive Officer and Director

Yeah, sure, this is John. Good afternoon, Ramsey.

Ramsey El AssalBarclays — Analyst

Hi.

John MorrisCo-Founder, Chief Executive Officer and Director

So our relationship there has progressed really well. Both parties have mutually benefited and we continued to think that there will be upside in that relationship for both parties. We don’t specifically pronounce exactly what that’s going to be. Our overall OEM pipeline is healthy and available if they — as we’ve said before, those contracts can be much longer in duration and it takes time for them to roll out sometimes slower decision-makers in that process. We like our position there, but we are not specifically — we don’t announce customers or specific large contracts there. We do like our value proposition of where we are for the industry. The features and functionalities in the financial technology we have, we see a need for that. So we would look to continue to promote our services into that sub-vertical of auto, and we think that there will eventually be some opportunity for us as we continue to move through this year.

Ramsey El AssalBarclays — Analyst

Okay, great. Great to hear you’re well positioned there. Thanks for taking my questions.

Operator

And our next question, it’s from Peter Heckmann with Davidson. Please proceed with your question.

Peter HeckmannD.A. Davidson — Analyst

Hi. Good afternoon, gentlemen. Thanks for taking the question. So I believe you said $6.5 million of acquired revenue in the quarter. Can you talk about what would be a good run rate for the first quarter? I think CPS was only included for a partial quarter in the fourth quarter.

Tim MurphyChief Financial Officer

Yeah, so, hey, Pete. This is Tim. So that’s the incremental revenue, not the total revenue. And so I think that as we continue to lap acquisitions, for example, Ventanex in Q1, that number could come down slightly just because it’s really just the incremental amount. You will have a full quarter of CPS, but it will also be some revenue from Ventanex in Q1 of 2020. So I’d say it’s maybe just a little bit lower than where that is and that’s why.

Peter HeckmannD.A. Davidson — Analyst

That’s great. And then could you just talk a little bit about some of the B2B run rates. I think last time we heard, so you’re looking at maybe was it $4 billion of payment volume attributable to the growing B2B business. But kind of how you think about that and where you can go in terms of the supplier network and how do we envision that business growing and kind of unifying what you’ve acquired so far?

Tim MurphyChief Financial Officer

Yeah, yeah. So we’ve put an updated slide in our earnings supplement to show some of the more recent stats and like we talked about in the call, we now have about 45 software integrations in B2B, over 60,000 suppliers. That supplier network is growing every month. One of the reasons we like cPayPlus from CPS was because they did a really good job of building and growing that network. And that network is largely enabled to accept electronic payments and specifically virtual cards, which we think is better margin for us. So we see that both the software providers and the supplier network continuing to grow nicely in 2021.

And then overall volume, we’re still probably around 25% of our total businesses B2B, but that’s growing faster than the other parts of our business. So we could see that moving to, call it, closer to 30% through this year. And we want to see that continue to become a bigger part of our business. Now, other parts of our business are growing really nicely too. For example, auto, so that will continue to become a bigger part of the mix as well. So there is that growth on that side of the business, but we do want to see B2B to be a bigger part and we have all the pieces in place we think now with the people that have come to us through acquisitions and the technology to continue to grow that.

Peter HeckmannD.A. Davidson — Analyst

Got it. Thank you.

Operator

And our next question is from Andrew Jeffrey with Truist Securities. Please proceed with your question.

Andrew JeffreyTruist Securities — Analyst

Hi. Good afternoon, gentlemen. Thank you for taking the question. I’m intrigued by the BNPL commentary. John, can you elaborate a little bit on sort of vertical markets where they overlap with your existing vertical markets. They probably look a little bit different and who the customers are? Are they some of the household names in that space? Are they some of the perhaps smaller providers in BNPL?

John MorrisCo-Founder, Chief Executive Officer and Director

Yes, true. Good afternoon. So obviously because we understand retail installment sales, we see that sometimes even in the auto space. It is not specifically exactly overlap as such. Some of them are just specifically there. Their retail financers of retail type transactions. We think that’s a great opportunity for us. As you are aware, civil retail transactions will be executed in this form as a ‘buy now pay later’ concept. It’s in our wheelhouse because of We understand how the process payments rate. Many situations we will be — they’ll need an actual third party processor to actually move the funds. And so we think we’re positioned well with that as well as technology as they grow out into the future, as well as some of those portfolios mature if some of them have longer horizons versus just a couple of months here there. And then as far as — we don’t name specific customers and we have seen growth with some of our existing customers grow really well in 2020 and so we would expect that to continue to happen this year, as well as we are reaching out and touching some of probably some more of the names that you would be familiar with. It’s a measured process for us and we do think there’ll be some opportunity for us to continue to grow there.

Andrew JeffreyTruist Securities — Analyst

Okay, it’s helpful. Thank you. And it sounds like you’ve made some good headway in mortgage repayments and in some of the B2B aspects of mortgage as well. I think, Tim, you called out pretty robust volume, which we’ve seen across the industry. Any thoughts or concerns about grow over in mortgage if rates back up and refis slowdown for example?

John MorrisCo-Founder, Chief Executive Officer and Director

No, I mean, we are processing a pretty specific type of transaction within mortgage, which is the kind of more complex service transfers or situations where it’s not just a typical recurring mortgage payment. And so we still — we think our technology, there is still a need for our technology there. Even if the refinancing activity would slow down somewhat, those types of complex transactions that require better payment technology and reconciliation tools will still be there. And we think just — we’re just really early in our Ellie Mae relationship and we’re starting to gain some traction there. So we have a lot of runway in mortgage and I think if the overall industry slows down a bit, obviously that’s not great in general. But we think within our business, we still have a lot of room to grow.

Andrew JeffreyTruist Securities — Analyst

Helpful. Thank you.

Operator

And our next question is from Bob Napoli with William Blair. Please proceed with your question.

Bob NapoliWilliam Blair — Analyst

Hello. Thank you. Good afternoon, Tim and John. Just the growth rate mid to high teens, your confident level in that, maybe just give a little color organically where you see the largest contributors to that over the next three to four years? Which portions of your business are going to be the largest contributors to that growth rate?

John MorrisCo-Founder, Chief Executive Officer and Director

Yeah. Hey, Bob. So we do feel comfortable with that. And again I’d point you to kind of the gross profit bridge that we’ve put in the earnings supplement show, look it there. And we think that that’s probably moving kind of toward the middle to the end of the year as the overall economy recovers and like we talked about, we think that’s probably a good pic for growth for us. And longer-term, I think auto is going to be [Technical Issues] of that. Auto was growing north of 25% for us. And then I think once we get beyond the first year of an acquired business, we think the B2B businesses will be really contributing to that growth in the outer years as well. So, we have a lot of different levers for growth now and a lot of different — very diverse verticals set, but I think ours are auto and B2B.

Bob NapoliWilliam Blair — Analyst

And then the credit union customers, now you’re moving into Canada, is that purely auto or are there opportunities for mortgage or other types of repayments for the credit union business?

John MorrisCo-Founder, Chief Executive Officer and Director

It’s largely auto today. That’s why we entered the space as because we were running into credit auto is that they’re doing a lot of direct lending. So that’s primarily what it is. That doesn’t mean we couldn’t process some of their other types of payment, but it’s still primarily auto. In Canada, it’s a mix. It’s actually a lot of personal loans in addition to auto in Canada.

Bob NapoliWilliam Blair — Analyst

Okay. And then, just curious on the Billtrust partnership, was that — how does that move the needle for your B2B business?

John MorrisCo-Founder, Chief Executive Officer and Director

So they are really strong in certain verticals that we are strong in. That’s how — our Head of B2B, Darin, who runs cPayPlus, he’d been talking to them about partnership for a long time. And there was some overlap in verticals and then we think that they are really good at helping fulfilled our adoption. So it gives us a deeper presence in the verticals that we’re already in and then it helps with virtual card adoption, which again is higher margin for us on the AP side. So that’s really how that moves the needle and there is some large customers within those verticals that we think we would have acquiring if we’re going through BPN.

Bob NapoliWilliam Blair — Analyst

Interesting. And then just last question quickly on healthcare, healthcare payments. I mean, it’s a massive market. I mean, is that an area, you haven’t talked a lot about that, but is there a strategy behind there to make that a much bigger part of the business? And if so, maybe a little color around that.

Tim MurphyChief Financial Officer

Yeah, I think, yes.

John MorrisCo-Founder, Chief Executive Officer and Director

Go ahead, Tim.

Tim MurphyChief Financial Officer

Yeah, sure. We — obviously we’ve foreshadowed that. We really like the space, specifically, there is, as you said, an enormous space. And again we want to deal with the payment piece of those things. We obviously think there is great pent-up demand there from a standpoint of elective procedures, things like that have really actually not returned back to pre-pandemic levels. So we think there is a great upside there. There is — in the B2B side of it, there’s great volumes there. There’s much larger institutions that have enormous amount of payment volume there. We think there’s a great opportunity for us to continue to build out our supplier network and build out our specific integrations. We have a healthy pipeline with our existing businesses that are marketing into those specific healthcare institutions. So we like that. We love to be able to supplement that with some inorganic opportunities, if that’s a possibility for us. And there could be some of that if we’re kind of looking out into the future.

Bob NapoliWilliam Blair — Analyst

Thank you. Just appreciate it.

Tim MurphyChief Financial Officer

We just announced of the VBA partnership, which is in — it’s our Ventanex business, which is B2B healthcare providers. And we can also do collections, that’s a two-way integration with VBA. And then SRHO is our integration through CPS. And if you recall, CPS serves more of a kind of an enterprise customer on the payables side and there — so they’re going after hospital networks and large healthcare providers. And so we’re kind of in a few different spots at healthcare. We’re in the third-party administrator world that facilitates payments between insurance companies and providers, and also benefits administration and then we’re also in the hospital and healthcare network side of the world where they’re paying a lot of different suppliers. It’s like John said, there is a lot of volume there and we’re in a couple of different [Technical Issues]

Bob NapoliWilliam Blair — Analyst

Great. Thank you.

Tim MurphyChief Financial Officer

Yeah.

Operator

And our next question is from Timothy Chiodo with Credit Suisse. Please proceed with your question.

Timothy ChiodoCredit Suisse — Analyst

Great. Thank you, guys. I want to touch base briefly on the credit union opportunity. So you have announced some very, very large partners in Jack Henry Symitar, CU Answers correlation. I think it gives you access to roughly 1,000 or so credit unions. So clearly that’s a big opportunity. I was hoping you could give us a little bit of an update on where you stand in terms of penetrating that opportunity and how that could progress throughout this year.

Tim MurphyChief Financial Officer

Yes, thanks, Tim. So we — so we’re currently, we have 43 credit union customers today. So obviously a lot of runway left to get to 1,000 across those different software partners. And a lot of those 43 were just signed in the last six months or so. So they’re ramping up. And if you know, the credit union space, it’s a longer sales cycle and it takes a little bit longer to implement, like maybe working with the bank. And so those have been rolling out throughout the end of 2020 and we think that they would really benefit us in 2021 as we get a full 12 months of them, their volume. And so we’re continuing to sell actively in this space through those partnerships. Sitting at 43 today out of approximately 1,000 is, like I said, a lot of room to grow. And then just the full-year effect of the credit unions we signed in 2021 — or 2020 will be very helpful for 2021.

Timothy ChiodoCredit Suisse — Analyst

All right. The annualization. Okay. Right on. Thank you, Tim. All right. Last one or a follow-up is a quick one. So the bridge slide that you pointed to for gross profit, that’s a really helpful slide, slide number 12, so — and you mentioned 15% organic gross profit growth is what the guide is essentially. And you also mentioned, we should expect that to be a little bit more second half-weighted. I know in the first half of this year, there is that the tax piece that you mentioned in terms of Q1 usually being a little bit bigger, but also there is the year-over-year comp issue where last year there were some payments that drifted into Q2 just on timing. So with that context, maybe you could just talk a little bit of how we should expect that gross profit growth to look in Q1-Q2 to the extent without maybe putting a finer point on it?

Tim MurphyChief Financial Officer

Yeah. So you’re right. So, Q1 is usually a strong quarter for us. Q1 of last year was also strong. And then Q2 of last year really strong because of the stimulus. So typically, we don’t see a strong ever Q2 as we had in 2020 because the stimulus payments happened. We benefited from that. And then, of course, that led to some origination issues going into Q3. So with those kind of comps in mind, I would say probably similar kind of single-digit organic growth in the first part of the year, maybe going up into 10% range, but then expecting higher accelerated growth in the back half of the year to get to the full year mid teens number.

Timothy ChiodoCredit Suisse — Analyst

Okay, all right. Great. But we should think about Q2 as maybe a little bit lower than Q1, just given the comp.

Tim MurphyChief Financial Officer

Yeah. Yes, that’s right. Yeah.

Timothy ChiodoCredit Suisse — Analyst

All right. And then we bounce back for the second half. All right, great. Thanks a lot, Tim.

Tim MurphyChief Financial Officer

Yep.

Operator

And our next question is from Sanjay Sakhrani with KBW. Please proceed with your question.

Sanjay SakhraniKBW — Analyst

Thank you. I want to go back to the first question Ramsey had about the stimulus. Tim, it sounds like you guys are thinking, despite stimulus, the second half you’ll see more sort of economic robustness and that will drive loan growth. Because doesn’t stimulus usually have sort of a temporary impact on loan growth and therefore your revenue?

Tim MurphyChief Financial Officer

It does. But the two points to make. One is that again we don’t think our customers are going to be as focused on pulling back originations, because of credit losses and delinquencies. We think they’re going to be more aggressively lending this time. So I don’t think that will — I think that will help versus last time, where there was just a lot of uncertainty around what the consumer would do. And then they pulled back on their own originations while there was less demand. So I think there’s a little bit of a different dynamic here in terms of our lenders and how they think about loan growth. And then I think just although there could be some — it’s a little bit of down or softness, I guess, related to the stimulus. But the economy overall is doing a lot better and the vaccine is widely distributed and generally things are better. I think that could help with demand as well. So I think that could offset some of it this time around.

Sanjay SakhraniKBW — Analyst

And are you guys seeing —

John MorrisCo-Founder, Chief Executive Officer and Director

Yeah, the biggest —

Sanjay SakhraniKBW — Analyst

Go ahead, John.

John MorrisCo-Founder, Chief Executive Officer and Director

Yeah. Just the biggest thing that we all are aware of is this, this year there is a vaccine, right. Last year that time of the year, people thought it would be 18 to 24 months before there’s a vaccine. So that’s a big difference maker, although obviously we are still in a pandemic and we have taken all those things into consideration in our outlook we’re looking at as well.

Sanjay SakhraniKBW — Analyst

And when you look across the different lending asset classes, it sounds like auto’s really doing well. And that’s where you seem to think there would still a lot more success to be had. Because I mean I think now with a personal loan sort of where it’s a little bit more suspected, the stimulus occurred. Is that a fair statement?

Tim MurphyChief Financial Officer

Yeah. Personal loans is impacted more by the stimulus I think than auto. Auto had performed really well. There was maybe a short blip right when the pandemic started, but it ended up performing really well throughout the year and really into this year. So yes, I think the personal loan space is where it could be more impacted, but we still see a lot of strong growth in auto.

Sanjay SakhraniKBW — Analyst

Okay. And then final question for John. You mentioned the inorganic growth opportunities helping to execute on some stuff. I mean, like maybe you could just speak to the pipeline contextually sort of where you’re looking at acquisitions and size and relative sizes? Thanks.

John MorrisCo-Founder, Chief Executive Officer and Director

Yeah, sure. So as I mentioned in the announcement, we have a healthy pipeline of things we’re looking at. We — some of the things we also said, when we were raising the funds in January as well. All those things we found it is still be true. I do personally think that 2021 will be a year of continued consolidation in the marketplace. We want it to be well positioned on our balance sheet to be ready for that. We see opportunities that are in our pipeline and that are coming available in the marketplace that from a size perspective are on the higher end of what we have traditionally done. With our pipeline is also healthy for kind of the traditional typical size deals we do. And we have many of those and process of evaluations as well. But then there is larger-sized transactions that would be in the higher end of what we have.

To be specific, I have not specifically done some of the largest deals in our history. So we think it’s going to be a great opportunity for us this year, assuming that it matches the criteria that we like to look for. And then we think we can continue to accelerate growth with any types of inorganic opportunities out there. So we see a great opportunity and we’re actually very excited. We’re excited. We’re well positioned to take advantage of that. And by being well-positioned, we’ve seen opportunities come our way at least for valuation purposes.

Sanjay SakhraniKBW — Analyst

And those to be additive to the vertical that you’re in right now or would it — could it be outside of them?

John MorrisCo-Founder, Chief Executive Officer and Director

Some, yes, absolutely could be for the verticals that we’re currently existing in. There could be a complement there or an expansion of some of the areas we already touch and then obviously there are some opportunities that would be on new verticals for us that we think have the great characteristics of our existing verticals.

Sanjay SakhraniKBW — Analyst

Okay, great. Thank you.

Operator

Our next question is from Joseph Vafi with Canaccord. Please proceed with your question.

Joseph VafiCanaccord — Analyst

Hey, guys. Good afternoon. Good end to the year. Just wondering here just with all the M&A activity in 2020, how far along are you at this point in cost synergies relative to those acquisitions? And kind of more specifically more maybe perhaps on the back-end on transaction efficiency and stuff, given the processing capability, and how to think about that over the next couple of years? And then just a quick follow-up after that.

John MorrisCo-Founder, Chief Executive Officer and Director

Sure. Hey, Joe. So we we have converted one of our acquisitions, APS, to our back-end. We did that on Q4 of 2020. And then we see some opportunity in the B2B AP businesses to potentially consolidate providers and find some synergy opportunity. That’s part of our plan for 2021 is to work on that and so that’s actively happens. And will continue to happen and like you said, having on back-end from a merchant acquiring standpoint, it’s been really helpful for that.

Joseph VafiCanaccord — Analyst

And is that — how should we think about how that may drive transaction margin or is it something that you can call out over time or is it just more incremental?

Tim MurphyChief Financial Officer

It’s probably more incremental. But we do, you see that our gross margins are a little bit up in 2021 versus last year. And so part of that is, we expect that it will to reduce some of our processing costs associated with these conversions.

Joseph VafiCanaccord — Analyst

Okay, great. And then just it would be helpful to perhaps think about the business run rate now, revenue comp — revenue contribution maybe from consumer loans or consumer auto, or we have consumed — personal payments, auto, and then B2B, if that’s something you can provide. Thanks a lot.

Tim MurphyChief Financial Officer

Yeah, so I think it’s still probably similar to what we talked about, which is 65% loan repayments, about 25% B2B and then 10% other, which is really trisource. But I think the mix within loan repayments is really — is shifting to auto away from personal loans and so that’s becoming a bigger part. And then credit union’s Canada and mortgage are also growing which will become a bigger part of that loan repayment mix. And then like I said earlier, the B2B side is growing, probably faster than other parts of our business. And so that’s why we want to see that continue to increase from 25% toward the 30% range.

Joseph VafiCanaccord — Analyst

Great. Thanks a lot guys. Much appreciate it.

Operator

Yeah. And our next question is from James Faucette with Morgan Stanley. Please proceed with your question.

James FaucetteMorgan Stanley — Analyst

Thank you very much. Wanted to follow up quickly on the comments and questions that you’ve already answered regarding acquisitions. First, in terms of your outlook for ’21, is there any contribution from acquisitions built into the guidance, but for deals that you haven’t yet announced or completed?

Tim MurphyChief Financial Officer

No.

James FaucetteMorgan Stanley — Analyst

Okay. That makes sense. And that’s what I thought. And then the second was just more color in terms of when — as you’re looking at deals, how are you feeling about things and what are you seeing in terms of valuations, time to payback potential synergies etc.? Are those moving around significantly from what you’ve seen in the past or just in general, the types of deals you’re looking at in the pipeline, how should we think about those baring in terms of financial contribution from what we’ve seen you do already?

Tim MurphyChief Financial Officer

Yeah, I mean, one of the reasons we went out and raised capital like we did was because there are some larger opportunities in the market, larger than we’ve done in the past. And so those would have more synergies. They would have a lot more volume that could potentially be moved to our back end or even at that scale potentially opex synergies. So we’re seeing more of those opportunities come to market. Those are typically in our process that they may have to work through, which could impact valuation, but there’s still some conversations we’re having directly with owners of businesses that could be favorable for us to move from a valuation standpoint. So it’s kind of a mix. But we do see larger deals out there across a number of different verticals, which is why we feel good about our current balance sheet. And so we’ll continue to be thoughtful about structuring and potentially putting in place earnout structures and then also on the larger ones, finding synergies that we think are actionable and able to be realized in a fairly short timeframe.

James FaucetteMorgan Stanley — Analyst

Yeah, that makes a lot of sense. And when you’re looking at those bigger deals with potentially more synergies, should we imply take from that, that valuations could be higher or not necessarily?

John MorrisCo-Founder, Chief Executive Officer and Director

Yeah, I mean, maybe a little bit higher just because it’s a bigger deal. And so they’re probably looking for something little bit higher than we’ve done in the past. But it kind of depends on the vertical. And again, it depends on the ownership structure and the dynamic we have with the sellers. There are a lot of different discussions happening. But in the past, we typically looked first synergies in terms of cost-saving — processing cost-savings, but in some of these situations we mapped and looked at more broadly at synergies and some of that has to do with valuation.

James FaucetteMorgan Stanley — Analyst

Makes sense. Sounds exciting. Thanks, guys.

John MorrisCo-Founder, Chief Executive Officer and Director

Yeah.

Operator

Our next question is from Mike Grondahl with Northland Securities. Please proceed with your question.

Mike GrondahlNorthland Securities — Analyst

Yeah, thanks, guys. You mentioned the ‘Buy Now, Pay Later’ space, how long have you been in there. And can you kind of let us know what you’re doing there specifically?

John MorrisCo-Founder, Chief Executive Officer and Director

Yeah, hey, Mike. We’ve been in this space for a while. It’s really an extension of it’s just — it’s another type of installment loan. And it happens at the point of sale in an e-commerce transaction. But we’ve had customers doing that type of lending for a few years now. And it’s really they like the fact that we are experts at processing recurring scheduled installment loan payments, which is really what that would have buy now pay later transaction looks like. And so we’ve been in this space for a few years and a lot of the customers that we’ve had have involved and increased their technology capabilities to better interact with their customers and payment technology as part of that. And so we see a lot of positive opportunity ahead.

Mike GrondahlNorthland Securities — Analyst

Great, thank you.

Operator

And our next question is from Tim Willi with Wells Fargo. Please proceed with your question.

Tim WilliWells Fargo — Analyst

Thank you and good afternoon. I just had one question. I don’t think it’s been assets Sorry I apologize if I missed it, but could you just — you mentioned investments in ’21 around I think technology, sales maybe there is another area called out. Could you maybe just talk a little bit more about any more specific themes or areas within those topics. And then also any way to think about like the cadence of some of the investment spending and how we should think about conceptually modeling that throughout the course of the year?

Tim MurphyChief Financial Officer

Yeah. So yeah, we mentioned sales technology and product as the three areas of focus. I’ll mention the Protego relationship that we talked about, where we have set up a development office in conjunction with Protego in Ireland. And that really the point of that is try to get more software development throughput. We have a lot of different initiatives. We have a lot of different verticals to attack and we felt like that was a great way to get additional resources in throughput within technology. So that’s part of the additional investment.

And then just hiring really good salespeople and partner relationship management, folks across all the different verticals we have is another big area of focus to continue to increase the software partnerships beyond that 124 that we have today. That we’ve started hiring some of those resources in 2021 already in both technology and sales. And then product is the other area. So our work with the technology team to kind of commercialize some of these efforts and work directly with the customers to bring them to them. So it’s going to be the — the pace of investment will start kind of — start to accelerate probably more toward the middle of the second half of the year as we get more comfort, which is the overall environment. We think that sets us up well to potentially even accelerate growth going into 2022.

Tim WilliWells Fargo — Analyst

Great. That’s all I had. Thanks very much.

Operator

And we have reached the end of the question-and-answer session. And I will now turn the call over to John Morris for closing remarks.

John MorrisCo-Founder, Chief Executive Officer and Director

Yeah, thank you everyone for your time today. We sincerely appreciate it. We’re looking forward to an exciting year ahead of us. We think we are well positioned to take advantage of the opportunities we see there both organically and inorganically. As I said on the call as well, we’ve got — I think the best team in the business and we think we’ve built some of the best technology out there. So we’re super excited what’s ahead of us, especially as we get to a more normalized post-pandemic basis. We really like all the different parts of our business and looking forward to the opportunity to continue to add value for our shareholders. Thank you for your time today.

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

John MorrisCo-Founder, Chief Executive Officer and Director

Tim MurphyChief Financial Officer

Ramsey El AssalBarclays — Analyst

Peter HeckmannD.A. Davidson — Analyst

Andrew JeffreyTruist Securities — Analyst

Bob NapoliWilliam Blair — Analyst

Timothy ChiodoCredit Suisse — Analyst

Sanjay SakhraniKBW — Analyst

Joseph VafiCanaccord — Analyst

James FaucetteMorgan Stanley — Analyst

Mike GrondahlNorthland Securities — Analyst

Tim WilliWells Fargo — Analyst

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