Repay Holdings, the payment processing powerhouse, just announced another solid quarter, maintaining its steady trajectory of double-digit organic growth and accelerating free cash flow conversion. The market yawned. Analysts, focused on the usual suspects – macro trends, the convertible note, and tax refund seasonality – largely missed what could be a game-changing detail tucked away in the transcript: a potential surge in M&A activity.

Both CEO John Morris and CFO Tim Murphy were unusually effusive about their M&A pipeline, using phrases like "very healthy" and "building nicely". This is a stark departure from Repay's previous stance. Remember, it's been over two years since their last acquisition. Have valuations finally become attractive enough to entice this disciplined management team back into the market?

Here's where it gets really interesting. Repay is specifically eyeing the Business Payments Accounts Payable (AP) vertical, hinting at "attractive tuck-ins" that could significantly bolster their supplier network and open new vertical niches. This is the key: Repay's supplier network acts as a powerful flywheel, driving higher virtual card penetration and directly impacting their bottom line.

Consider this: in just a few months, Repay transformed Country Pure Foods from 100% paper-based payments to over 60% digital, with a 30% virtual card adoption rate. That's the power of Repay's TotalPay solution, coupled with a robust supplier network. Imagine the impact of strategically adding another AP company with a specialized supplier network, perhaps in a vertical where Repay currently has limited presence.

Hypothetical Impact of a Tuck-In Acquisition

Let's run some numbers. Repay's 2024 outlook anticipates approximately 60% free cash flow conversion on an adjusted EBITDA of $139-$142 million. That translates to free cash flow of $83.4-$85.2 million. Now, assume they acquire an AP company with a complementary supplier network generating, say, $10 million in annual gross profit. With Repay's operational leverage, a significant portion of that gross profit would likely flow straight to the bottom line, further fueling their already impressive cash flow growth.

But there's more. Beyond immediate financial gains, a strategic "tuck-in" acquisition could:

This isn't just speculation. Repay's management has proven adept at integrating acquisitions and squeezing out synergies. The reduction in CapEx spending for 2024, while partially attributed to completed projects, also suggests that they've streamlined their internal processes and built an infrastructure capable of efficiently absorbing new businesses.

Credit Union Client Growth

While analysts focus on the macro and the convertible note, a well-executed "tuck-in" acquisition could be the catalyst that sends Repay's cash flow – and its stock price – soaring. Keep your eyes on this space.

"Fun Fact: The term "tuck-in" acquisition refers to a smaller acquisition that is easily integrated into the acquirer's existing operations. It's like adding a missing puzzle piece that completes a picture."