Repay Holdings Snaps Up BillingTree For $503M

Payment solutions provider Repay Holdings Corp. (RPAY) has agreed to acquire integrated payments provider BillingTree for a consideration of about $503 million.

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Repay plans to fund the acquisition with $275 million of cash in hand, and the remaining $228 million via the issuance of REPAY common stock. The transaction is expected to close in the second quarter of 2021.

BillingTree provides payments solutions to a diverse set of industries, such as Healthcare, Credit Union, Accounts Receivable Management (ARM) and Energy. This acquisition helps Repay expand its footprint and position in these industries.

Repay CEO John Morris said, “BillingTree satisfies all of our acquisition investment criteria, including a large addressable market opportunity that is amid a shift away from legacy payment methods and towards the technology-first, industry-specific payment mediums in which BillingTree specializes.” (See Repay Holdings stock analysis on TipRanks)

Upon closing of the acquisition, Parthenon Capital, which is a majority owner in BillingTree, will own 10% of Repay’s outstanding shares. For 2021, BillingTree is estimated to reach card payment volume of $4.4 billion and a gross profit of $48 million.

Furthermore, cost reductions and expense streamlining are expected to generate $5 million in annual synergies for Repay. The total card payment volume of the company is expected to increase to $20 billion annually and increase its number of software partner integrations to more than 175.

Additionally, Repay declared Q1 results. Non-GAAP earnings per share of the company came in at $0.18, beating analysts’ estimates of $0.16. Aided by higher card payment volume, Repay’s revenue saw 20.4% year-on-year growth to $47.5 million, and was ahead of consensus by $2.65 million.

For Fiscal 2021, Repay sees card payment volume to be in the range of $19.9 billion to $20.4 billion. It estimates revenue to be between $210 million to $220 million. This guidance incorporates expected impact from the BillingTree acquisition.

Yesterday, Northland Securities analyst Michael Grondahl reiterated a Buy rating on the stock with a $28 price target (34.7% upside potential).

Noting Repay’s Q1 performance as “Solid,” Grondahl said it, “Highlights the value proposition of its business, which has become increasingly evident since the CV-19 pandemic began. “

He continued, “Organic growth was better than expected at 11% with some benefit from stimulus in late March.”

Based on 7 Buys and 1 Hold, consensus on the Street is that Repay is a Strong Buy. The average analyst price target of $27.88 implies 34.1% upside potential. Shares have gained about 15.9% over the past year.