UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 20212022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM                                                           TO

Commission File Number 001-38531

 

 

 

Repay Holdings Corporation

(Exact name of Registrant as specified in its Charter)

 

 

 

Delaware

98-1496050

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3 West Paces Ferry Road,

Suite 200

Atlanta, GA

30305

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (404) 504-7472

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

 

RPAY

 

The NASDAQ Stock Market LLC

 

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  No 

 

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).  Yes  No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No 

As of May 5, 2021,4, 2022, there are 80,445,63091,308,140 shares of the registrant’s Class A Common Stock, par value $0.0001 per share, outstanding (which number includes 2,338,6052,419,752 shares of unvested restricted stock that have voting rights) and 100 shares of the registrant’s Class V Common Stock, par value of $0.0001 per share, outstanding. As of May 5, 2021,4, 2022, the holders of such outstanding shares of Class V common stock also hold 7,959,1607,883,048 units in a subsidiary of the registrant and such units are exchangeable into shares of the registrant’s Class A common stock on a one-for-one basis. 

 

 

 


 

REPAY HOLDINGS CORPORATION

Quarterly Report on Form 10‑Q

For the quarter ended March 31, 20212022

 

TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

Item 1.

Consolidated Financial Statements

1

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

2624

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

3635

 

 

 

Item 4.

Controls and Procedures

3736

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

3837

 

 

 

Item 1A.

Risk Factors

3837

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

3837

 

 

 

Item 3.

Defaults Upon Senior Securities

3937

 

 

 

Item 4.

Mine Safety Disclosures

3937

 

 

 

Item 5.

Other Information

3937

 

 

 

Item 6.

Exhibits

3938

 

 

 

 

Signatures

4139

 

 


 


 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, anticipated benefits from our recent acquisitions, the expected timing and benefits of the BillingTree acquisition, the impact of the restatement, the expected impacteffects of the COVID-19 pandemic,the expected demand on our product offering, including further implementation of electronic payment options and statements regarding our market and growth opportunities,, the expected benefits of our other recent acquisitions, our financial performance, and our business strategy and the plans and objectives of management for future operations. You generally can identify these statements by the use of words such as “outlook,” “potential,” “continue,” “may,” “seek,” “approximately,” “predict,” “believe,” “expect,” “plan,” “intend,” “estimate” or “anticipate” and similar expressions or the negative versions of these words or comparable words, as well as future or conditional verbs such as “will,” “should,” “would,” “likely” and “could.” These statements may be found under Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere, and are subject to certain risks and uncertainties that could cause actual results to differ materially from those included in the forward-looking statements. These risks and uncertainties include, but are not limited to: exposure to economic conditions and political risk affecting the consumer loan market, the receivables management industry and consumer and commercial spending; the impacts of the ongoing COVID-19 coronavirus pandemic and the actions taken to control or mitigate its spread; a delay or failure to integrate andand/or realize the benefits of our recent acquisitions and any difficulties associated with operating in the markets in which we have limited experience;acquisitions; changes in the payment processing market in which we compete, including with respect to its competitive landscape, technology evolution or regulatory changes; changes in the vertical markets that we target, including the regulatory environment applicable to our customers;clients; the ability to retain, develop and hire key personnel; risks relating to our relationships within the payment ecosystem; risk that we may not be able to execute our growth strategies, including identifying and executing acquisitions; risks relating to data security; changes in accounting policies applicable to us; the risk that we may not be able to develop and maintain effective internal controls; and those risks described under Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020, as amended.2021. The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we disclaim any obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In light of these risks and uncertainties, there is no assurance that the events or results suggested by the forward-looking statements will in fact occur, and you should not place undue reliance on these forward-looking statements.

 

 


 

 

PART I

FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements

 

REPAY HOLDINGS CORPORATION

Consolidated Balance Sheets

 

March 31, 2021 (Unaudited)

 

 

 

December 31, 2020

(As Restated)

 

March 31, 2022 (Unaudited)

 

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

390,921,782

 

 

$

91,129,888

 

$

65,316,018

 

 

$

50,048,657

 

Accounts receivable

 

23,897,098

 

 

 

21,310,724

 

 

34,312,006

 

 

 

33,235,745

 

Prepaid expenses and other

 

6,078,434

 

 

 

6,925,115

 

 

12,789,275

 

 

 

12,427,032

 

Total current assets

 

420,897,314

 

 

 

 

119,365,727

 

 

112,417,299

 

 

 

 

95,711,434

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

1,980,100

 

 

 

 

1,628,439

 

 

3,846,999

 

 

 

 

3,801,199

 

Restricted cash

 

19,525,277

 

 

 

15,374,846

 

 

15,513,510

 

 

 

26,291,269

 

Customer relationships, net of amortization

 

272,923,320

 

 

 

280,887,486

 

Software, net of amortization

 

59,987,041

 

 

 

64,434,985

 

Other intangible assets, net of amortization

 

23,388,792

 

 

 

23,904,667

 

Intangible assets, net

 

556,625,295

 

 

 

577,693,902

 

Goodwill

 

458,959,477

 

 

 

458,970,255

 

 

824,094,441

 

 

 

824,081,632

 

Operating lease right-of-use assets, net of amortization

 

9,650,463

 

 

 

10,074,506

 

Operating lease right-of-use assets, net

 

11,473,076

 

 

 

10,499,751

 

Deferred tax assets

 

141,799,307

 

 

 

135,337,229

 

 

141,404,532

 

 

 

145,259,883

 

Other assets

 

2,499,996

 

 

 

2,499,996

 

Total noncurrent assets

 

988,213,777

 

 

 

990,612,413

 

 

1,555,457,849

 

 

 

1,590,127,632

 

Total assets

$

1,409,111,091

 

 

$

1,109,978,140

 

$

1,667,875,148

 

 

$

1,685,839,066

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

$

14,112,412

 

 

$

11,879,638

 

$

21,738,214

 

 

$

20,082,651

 

Related party payable

 

17,774,815

 

 

 

15,811,597

 

 

14,324,177

 

 

 

17,394,125

 

Accrued expenses

 

17,358,515

 

 

 

19,216,258

 

 

19,552,828

 

 

 

26,819,083

 

Current maturities of long-term debt

 

 

 

 

6,760,650

 

Current operating lease liabilities

 

1,562,964

 

 

 

1,527,224

 

 

2,225,407

 

 

 

1,990,416

 

Current tax receivable agreement

 

10,146,135

 

 

 

10,240,310

 

 

24,454,088

 

 

 

24,495,556

 

Other current liabilities

 

1,048,662

 

 

 

1,565,931

 

Total current liabilities

 

60,954,841

 

 

 

65,435,677

 

 

83,343,376

 

 

 

92,347,762

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, net of current maturities

 

427,287,919

 

 

 

249,952,746

 

Long-term debt

 

449,187,265

 

 

 

448,484,696

 

Noncurrent operating lease liabilities

 

8,470,264

 

 

 

8,836,655

 

 

9,886,289

 

 

 

9,090,867

 

Tax receivable agreement, net of current portion

 

220,237,348

 

 

 

218,987,795

 

 

196,754,946

 

 

 

221,332,863

 

Other liabilities

 

889,371

 

 

 

10,583,196

 

 

1,385,704

 

 

 

1,547,087

 

Total noncurrent liabilities

 

656,884,902

 

 

 

488,360,392

 

 

657,214,204

 

 

 

680,455,513

 

Total liabilities

$

717,839,743

 

 

$

553,796,069

 

$

740,557,580

 

 

$

772,803,275

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitment and contingencies (Note 12)

 

 

 

 

 

 

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A common stock, $0.0001 par value; 2,000,000,000 shares authorized and 78,084,846 issued and outstanding as of March 31, 2021; 2,000,000,000 shares authorized and 71,244,682 issued and outstanding as of December 31, 2020

 

7,809

 

 

 

7,125

 

Class V common stock, $0.0001 par value; 1,000 shares authorized and 100 shares issued and outstanding as of March 31, 2021 and December 31, 2020

 

 

 

 

 

Class A common stock, $0.0001 par value; 2,000,000,000 shares authorized, and 88,817,111 and 88,502,621 issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

 

8,881

 

 

 

8,850

 

Class V common stock, $0.0001 par value; 1,000 shares authorized and 100 shares issued and outstanding as of March 31, 2022 and December 31, 2021

 

 

 

 

 

Additional paid-in capital

 

839,589,351

 

 

 

691,675,072

 

 

1,101,431,734

 

 

 

1,100,012,082

 

Accumulated other comprehensive (loss) income

 

 

 

 

(6,436,763

)

Accumulated other comprehensive loss

 

(2,205

)

 

 

(2,205

)

Accumulated deficit

 

(191,725,614

)

 

 

(175,931,713

)

 

(212,362,342

)

 

 

(226,015,886

)

Total stockholders' equity

$

647,871,546

 

 

 

$

509,313,721

 

 

 

 

 

 

 

 

 

Equity attributable to non-controlling interests

 

43,399,802

 

 

 

 

46,868,350

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity and members' equity

$

1,409,111,091

 

 

 

$

1,109,978,140

 

Total Repay stockholders' equity

$

889,076,068

 

 

 

$

874,002,841

 

Non-controlling interests

 

38,241,500

 

 

 

 

39,032,950

 

Total equity

$

927,317,568

 

 

 

$

913,035,791

 

Total liabilities and equity

$

1,667,875,148

 

 

 

$

1,685,839,066

 

 

See accompanying notes to consolidated financial statements.


REPAY HOLDINGS CORPORATION

Consolidated Statements of Operations

(Unaudited)

 

 

Three Months Ended March 31,

 

 

2021

 

 

2020 (As Restated)

 

Revenue

$

47,520,496

 

 

$

39,462,537

 

Operating Expenses

 

 

 

 

 

 

 

Other costs of services

 

12,474,808

 

 

 

10,771,297

 

Selling, general and administrative

 

23,393,367

 

 

 

18,166,191

 

Depreciation and amortization

 

17,792,994

 

 

 

13,904,384

 

Change in fair value of contingent consideration

 

2,648,786

 

 

 

 

Total operating expenses

 

56,309,955

 

 

 

42,841,872

 

(Loss) Income from operations

 

(8,789,459

)

 

 

(3,379,335

)

Other (expense) income

 

 

 

 

 

 

 

Interest expense

 

(1,183,357

)

 

 

(3,517,785

)

Loss on extinguishment of debt

 

(5,940,600

)

 

 

 

Change in fair value of warrant liabilities

 

 

 

 

(6,898,095

)

Change in fair value of tax receivable liability

 

1,042,733

 

 

 

(541,963

)

Other income

 

28,147

 

 

 

39,048

 

Other loss

 

(9,080,410

)

 

 

 

Total other (expense) income

 

(15,133,487

)

 

 

(10,918,795

)

(Loss) income before income tax expense

 

(23,922,946

)

 

 

(14,298,130

)

Income tax benefit

 

5,941,773

 

 

 

1,115,592

 

Net (loss) income

$

(17,981,173

)

 

$

(13,182,538

)

Less: Net (loss) income attributable to

   non-controlling interests

 

(2,187,272

)

 

 

(2,852,399

)

Net (loss) income attributable to the Company

$

(15,793,901

)

 

$

(10,330,139

)

 

 

 

 

 

 

 

 

Loss per Class A share:

 

 

 

 

 

 

 

Basic and diluted

$

(0.21

)

 

$

(0.27

)

Weighted-average shares outstanding:

 

 

 

 

 

 

 

Basic and diluted

 

76,602,759

 

 

 

37,624,829

 

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

Revenue

$

67,564,055

 

 

$

47,520,496

 

Operating expenses

 

 

 

 

 

 

 

Costs of services (exclusive of depreciation and amortization shown separately below)

 

16,564,956

 

 

 

12,474,808

 

Selling, general and administrative

 

32,217,893

 

 

 

23,393,367

 

Depreciation and amortization

 

28,589,145

 

 

 

17,792,994

 

Change in fair value of contingent consideration

 

(2,900,000

)

 

 

2,648,786

 

Total operating expenses

 

74,471,994

 

 

 

56,309,955

 

Loss from operations

 

(6,907,939

)

 

 

(8,789,459

)

Other income (expense)

 

 

 

 

 

 

 

Interest expense

 

(988,589

)

 

 

(1,183,357

)

Loss on extinguishment of debt

 

 

 

 

(5,940,600

)

Change in fair value of tax receivable liability

 

24,619,385

 

 

 

1,042,733

 

Other income

 

6,060

 

 

 

28,147

 

Other loss

 

 

 

 

(9,080,410

)

Total other income (expense)

 

23,636,856

 

 

 

(15,133,487

)

Income (loss) before income tax (expense) benefit

 

16,728,917

 

 

 

(23,922,946

)

Income tax (expense) benefit

 

(3,842,542

)

 

 

5,941,773

 

Net income (loss)

$

12,886,375

 

 

$

(17,981,173

)

Less: Net loss attributable to

   non-controlling interests

 

(767,169

)

 

 

(2,187,272

)

Net income (loss) attributable to the Company

$

13,653,544

 

 

$

(15,793,901

)

 

 

 

 

 

 

 

 

Income (loss) per Class A share attributable to the Company:

 

 

 

 

 

 

 

Basic

$

0.15

 

 

$

(0.21

)

Diluted

$

0.12

 

 

$

(0.21

)

Weighted-average shares outstanding:

 

 

 

 

 

 

 

Basic

 

88,607,655

 

 

 

76,602,759

 

Diluted

 

113,015,159

 

 

 

76,602,759

 

 

See accompanying notes to consolidated financial statements.

 



 

REPAY HOLDINGS CORPORATION

Consolidated Statements of Comprehensive Income

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020 (As Restated)

 

Net loss

 

$

(17,981,173

)

 

$

(13,182,538

)

Other comprehensive loss, before tax

 

 

 

 

 

 

 

 

Change in fair value of designated cash flow hedges

 

 

 

 

 

(9,854,764

)

Total other comprehensive loss, before tax

 

 

 

 

 

(9,854,764

)

Income tax related to items of other comprehensive income:

 

 

 

 

 

 

 

 

Tax benefit on change in fair value of designated cash flow hedges

 

 

 

 

 

1,314,843

 

Total income tax benefit on related to items of other comprehensive income

 

 

 

 

 

1,314,843

 

Total other comprehensive loss, net of tax

 

 

 

 

 

(8,539,921

)

Total comprehensive loss

 

$

(17,981,173

)

 

$

(21,722,459

)

Less: Comprehensive loss attributable to non-controlling interests

 

 

(2,187,272

)

 

 

(7,064,061

)

Comprehensive loss attributable to the Company

 

$

(15,793,901

)

 

$

(14,658,398

)

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Net income (loss)

 

$

12,886,375

 

 

$

(17,981,173

)

Other comprehensive income, before tax

 

 

 

 

 

 

 

 

Reclassification of net unrealized loss on cash flow hedges to other loss

 

 

 

 

 

9,317,244

 

Total other comprehensive income, before tax

 

 

 

 

 

9,317,244

 

Income tax related to items of other comprehensive income:

 

 

 

 

 

 

 

 

Tax expense on reclassification of net unrealized loss on cash flow hedges to other loss

 

 

 

 

 

(1,672,743

)

Total income tax expense on related to items of other comprehensive income

 

 

 

 

 

(1,672,743

)

Total other comprehensive income, net of tax

 

 

 

 

 

7,644,501

 

Total comprehensive income (loss)

 

$

12,886,375

 

 

$

(10,336,672

)

Less: Comprehensive loss attributable to non-controlling interests

 

 

(767,169

)

 

 

(979,534

)

Comprehensive income (loss) attributable to the Company

 

$

13,653,544

 

 

$

(9,357,138

)

 

 

See accompanying notes to consolidated financial statements.

 

 

 


 

REPAY HOLDINGS CORPORATION

Consolidated Statements of Changes in Equity

(Unaudited)

 

 

Class A Common

Stock

 

 

Class V Common

Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated Other Comprehensive

 

 

Total

Stockholders'

 

 

Non-controlling

 

 

Repay Stockholders

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Loss) Income

 

 

Equity

 

 

Interests

 

 

Class A Common

Stock

 

 

Class V Common

Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated Other Comprehensive

 

 

Non-controlling

 

 

Total

 

Balance at December 31, 2019

 

 

37,530,568

 

 

$

3,753

 

 

 

100

 

 

$

-

 

 

$

307,914,346

 

 

$

(70,335,151

)

 

$

313,397

 

 

$

237,896,345

 

 

$

206,162,035

 

Stock-based compensation

 

 

 

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

3,522,731

 

 

 

-

 

 

 

-

 

 

 

3,522,731

 

 

 

-

 

Warrant exercise

 

 

308,051

 

 

 

31

 

 

 

 

 

 

 

-

 

 

 

3,534,157

 

 

 

-

 

 

 

-

 

 

 

3,534,188

 

 

 

-

 

Reclassification to warrant liabilities

 

 

 

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

(22,188,932

)

 

 

 

 

 

 

-

 

 

 

(22,188,932

)

 

 

-

 

Net loss

 

 

 

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

(10,330,139

)

 

 

-

 

 

 

(10,330,139

)

 

 

(2,852,399

)

Accumulated other comprehensive (loss) income

 

 

 

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,643,102

)

 

 

(5,643,102

)

 

 

(4,211,662

)

Balance at March 31, 2020

 

 

37,838,619

 

 

$

3,784

 

 

 

100

 

 

$

-

 

 

$

292,782,302

 

 

$

(80,665,290

)

 

$

(5,329,705

)

 

$

206,791,091

 

 

$

199,097,974

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Loss) Income

 

 

Interests

 

 

Equity

 

Balance at December 31, 2020

 

 

71,244,682

 

 

$

7,125

 

 

 

100

 

 

$

-

 

 

$

691,675,072

 

 

$

(175,931,713

)

 

$

(6,436,763

)

 

$

509,313,721

 

 

$

46,868,350

 

 

 

71,244,682

 

 

$

7,125

 

 

 

100

 

 

$

-

 

 

$

691,675,072

 

 

$

(175,931,713

)

 

$

(6,436,763

)

 

$

46,868,350

 

 

$

556,182,071

 

Issuance of new shares

 

 

6,244,500

 

 

 

624

 

 

 

 

 

 

 

-

 

 

 

142,411,389

 

 

 

-

 

 

 

-

 

 

 

142,412,013

 

 

 

(313,652

)

 

 

6,244,500

 

 

 

624

 

 

 

 

 

 

 

-

 

 

 

142,411,389

 

 

 

-

 

 

 

-

 

 

 

(313,652

)

 

 

142,098,361

 

Exchange of Post-Merger Repay Units

 

 

375,000

 

 

 

38

 

 

 

 

 

 

 

-

 

 

 

2,158,374

 

 

 

-

 

 

 

-

 

 

 

2,158,412

 

 

 

(2,158,412

)

 

 

375,000

 

 

 

38

 

 

 

 

 

 

 

-

 

 

 

2,158,374

 

 

 

-

 

 

 

-

 

 

 

(2,158,412

)

 

 

-

 

Release of share awards vested under Equity Plan

 

 

220,664

 

 

 

22

 

 

 

 

 

 

 

-

 

 

 

(22

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

293,081

 

 

 

29

 

 

 

 

 

 

 

-

 

 

 

(29

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Treasury shares repurchased

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

(1,821,942

)

 

 

-

 

 

 

-

 

 

 

(1,821,942

)

 

 

3,995

 

Shares repurchased under Equity Plan

 

 

(72,417

)

 

 

(7

)

 

 

 

 

 

 

-

 

 

 

(1,821,935

)

 

 

-

 

 

 

-

 

 

 

3,995

 

 

 

(1,817,947

)

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

5,171,544

 

 

 

-

 

 

 

-

 

 

 

5,171,544

 

 

 

(20,945

)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

5,171,544

 

 

 

-

 

 

 

-

 

 

 

(20,945

)

 

 

5,150,599

 

Valuation allowance on Ceiling Rule DTA

 

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

(5,064

)

 

 

-

 

 

 

-

 

 

 

(5,064

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

(5,064

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,064

)

Net loss

 

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

(15,793,901

)

 

 

-

 

 

 

(15,793,901

)

 

 

(2,187,272

)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

(15,793,901

)

 

 

-

 

 

 

(2,187,272

)

 

 

(17,981,173

)

Accumulated other comprehensive income

 

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,436,763

 

 

 

6,436,763

 

 

 

1,207,738

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,436,763

 

 

 

1,207,738

 

 

 

7,644,501

 

Balance at March 31, 2021

 

 

78,084,846

 

 

$

7,809

 

 

 

100

 

 

$

-

 

 

$

839,589,351

 

 

$

(191,725,614

)

 

$

-

 

 

$

647,871,546

 

 

$

43,399,802

 

 

 

78,084,846

 

 

$

7,809

 

 

 

100

 

 

$

-

 

 

$

839,589,351

 

 

$

(191,725,614

)

 

$

-

 

 

$

43,399,802

 

 

$

691,271,348

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2021

 

 

88,502,621

 

 

$

8,850

 

 

 

100

 

 

$

-

 

 

$

1,100,012,082

 

 

$

(226,015,886

)

 

$

(2,205

)

 

$

39,032,950

 

 

$

913,035,791

 

Release of share awards vested under Equity Plan

 

 

427,755

 

 

 

43

 

 

 

 

 

 

 

-

 

 

 

(43

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Shares repurchased under Equity Plan

 

 

(113,265

)

 

 

(12

)

 

 

 

 

 

 

-

 

 

 

(1,702,805

)

 

 

-

 

 

 

-

 

 

 

4,384

 

 

 

(1,698,433

)

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

3,122,500

 

 

 

-

 

 

 

-

 

 

 

(28,665

)

 

 

3,093,835

 

Net income (loss)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

13,653,544

 

 

 

-

 

 

 

(767,169

)

 

 

12,886,375

 

Balance at March 31, 2022

 

 

88,817,111

 

 

$

8,881

 

 

 

100

 

 

$

-

 

 

$

1,101,431,734

 

 

$

(212,362,342

)

 

$

(2,205

)

 

$

38,241,500

 

 

$

927,317,568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.



REPAY HOLDINGS CORPORATION

Consolidated Statements of Cash Flows

(Unaudited)

 

 

Three Months Ended March 31,

 

 

Three Months Ended March 31,

 

 

2021

 

 

2020 (As Restated)

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(17,981,173

)

 

$

(13,182,538

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

12,886,375

 

 

$

(17,981,173

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

17,792,994

 

 

 

13,904,384

 

 

 

28,589,145

 

 

 

17,792,994

 

Stock based compensation

 

 

5,150,599

 

 

 

3,522,731

 

 

 

3,093,835

 

 

 

5,150,599

 

Amortization of debt issuance costs

 

 

535,536

 

 

 

332,990

 

 

 

702,569

 

 

 

535,536

 

Loss on extinguishment of debt

 

 

5,940,600

 

 

 

 

 

 

 

 

 

5,940,600

 

Loss on sale of interest rate swaps

 

 

9,317,243

 

 

 

 

 

 

 

 

 

9,317,243

 

Fair value change in warrant liabilities

 

 

 

 

 

6,898,095

 

Fair value change in tax receivable agreement liability

 

 

(1,042,733

)

 

 

541,963

 

 

 

(24,619,385

)

 

 

(1,042,733

)

Fair value change in other assets and liabilities

 

 

2,648,786

 

 

 

(4,531

)

 

 

(2,900,000

)

 

 

2,648,786

 

Deferred tax expense

 

 

(5,941,773

)

 

 

(1,116,093

)

 

 

3,842,542

 

 

 

(5,941,773

)

Change in accounts receivable

 

 

(2,586,374

)

 

 

242,818

 

 

 

(1,076,261

)

 

 

(2,586,374

)

Change in related party receivable

 

 

 

 

 

563,084

 

Change in prepaid expenses and other

 

 

846,681

 

 

 

(10,964

)

 

 

(362,243

)

 

 

846,681

 

Change in operating lease ROU assets

 

 

424,043

 

 

 

 

 

 

(973,325

)

 

 

424,043

 

Change in accounts payable

 

 

2,232,774

 

 

 

1,149,433

 

 

 

1,655,563

 

 

 

2,232,774

 

Change in related party payable

 

 

(685,568

)

 

 

(160,321

)

 

 

(169,948

)

 

 

(685,568

)

Change in accrued expenses and other

 

 

(1,857,743

)

 

 

(4,109,906

)

 

 

(7,266,255

)

 

 

(1,857,743

)

Change in operating lease liabilities

 

 

(330,651

)

 

 

 

 

 

1,030,413

 

 

 

(330,651

)

Change in other liabilities

 

 

(9,693,825

)

 

 

 

 

 

(678,652

)

 

 

(9,693,825

)

Net cash provided by operating activities

 

 

4,769,416

 

 

 

8,571,145

 

 

 

13,754,373

 

 

 

4,769,416

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(640,467

)

 

 

(366,694

)

 

 

(553,223

)

 

 

(640,467

)

Purchases of software

 

 

(4,576,203

)

 

 

(2,409,074

)

Acquisition of Ventanex, net of cash and restricted cash acquired

 

 

 

 

 

(35,521,024

)

Purchases of intangible assets

 

 

(7,013,115

)

 

 

(4,576,203

)

Acquisition of CPS, net of cash and restricted cash acquired

 

 

10,778

 

 

 

 

 

 

 

 

 

10,778

 

Net cash used in investing activities

 

 

(5,205,892

)

 

 

(38,296,792

)

 

 

(7,566,338

)

 

 

(5,205,892

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in line of credit

 

 

 

 

 

(10,000,000

)

Issuance of long-term debt

 

 

440,000,000

 

 

 

46,000,000

 

 

 

 

 

 

440,000,000

 

Payments on long-term debt

 

 

(262,653,996

)

 

 

(1,562,500

)

 

 

 

 

 

(262,653,996

)

Public issuance of Class A Common Stock

 

 

142,098,361

 

 

 

 

 

 

 

 

 

142,098,361

 

Repurchase of treasury shares

 

 

(1,817,947

)

 

 

 

Exercise of warrants

 

 

 

 

 

3,534,188

 

Shares repurchased under Equity Plan

 

 

(1,698,433

)

 

 

(1,817,947

)

Payment of loan costs

 

 

(13,247,617

)

 

 

(1,755,835

)

 

 

 

 

 

(13,247,617

)

Net cash provided by financing activities

 

 

304,378,801

 

 

 

36,215,853

 

Net cash (used in) provided by financing activities

 

 

(1,698,433

)

 

 

304,378,801

 

Increase in cash, cash equivalents and restricted cash

 

 

303,942,325

 

 

 

6,490,206

 

 

 

4,489,602

 

 

 

303,942,325

 

Cash, cash equivalents and restricted cash at beginning of period

 

$

106,504,734

 

 

$

37,901,117

 

 

$

76,339,926

 

 

$

106,504,734

 

Cash, cash equivalents and restricted cash at end of period

 

$

410,447,059

 

 

$

44,391,323

 

 

$

80,829,528

 

 

$

410,447,059

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest

 

$

647,821

 

 

$

3,184,795

 

 

$

286,020

 

 

$

647,821

 

SUPPLEMENTAL SCHEDULE OF NONCASH

 

 

 

 

 

 

 

 

INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Valuation adjustment to contingent consideration for APS acquisition

 

$

 

 

$

6,580,549

 

Acquisition of Ventanex in exchange for contingent consideration

 

$

 

 

$

10,800,000

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

5


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

 

 

1. Organizational Structure and Corporate Information

Repay Holdings Corporation was incorporated as a Delaware corporation on July 11, 2019 in connection with the closing of a transaction (the “Business Combination”) pursuant to which Thunder Bridge Acquisition Ltd., a special purpose acquisition company organized under the laws of the Cayman Islands (“Thunder Bridge”), (a) domesticated into a Delaware corporation and changed its name to “Repay Holdings Corporation” and (b) consummated the merger of a wholly owned subsidiary of Thunder Bridge with and into Hawk Parent Holdings, LLC, a Delaware limited liability company (“Hawk Parent”).

Throughout this section, unless otherwise noted or unless the context otherwise requires, the terms “we”, “us”, “Repay” and the “Company” and similar references refer (1) before the Business Combination, to Hawk Parent and its consolidated subsidiaries and (2) from and after the Business Combination, to Repay Holdings Corporation and its consolidated subsidiaries. Throughout this section, unless otherwise noted or unless the context otherwise requires, “Thunder Bridge” refers to Thunder Bridge Acquisition. Ltd. prior to the consummation of the Business Combination. Thunder Bridge issued public warrants and private placement warrants (collectively, the “Warrants”), which were outstanding and recorded on the Company’s consolidated financial statements at the time of the Business Combination. On July 27, 2020, the Company completed the redemption of all outstanding Warrants.

The Company is headquartered in Atlanta, Georgia. The Company’s legacy business was founded as M & A Ventures, LLC, a Georgia limited liability company doing business as REPAY: Realtime Electronic Payments (“REPAY LLC”), in 2006 by current executives John Morris and Shaler Alias. Hawk Parent was formed in 2016 in connection with the acquisition of a majority interest in the successor entity of REPAY LLC and its subsidiaries by certain investment funds sponsored by, or affiliated with, Corsair Capital LLC (“Corsair”).

On January 19, 2021, the Company completed the previously announced underwritten public offering (the “Equity Offering”) of 6,244,500 shares of its Class A common stock at a public offering price of $24.00 per share. 814,500 shares of such Class A common stock were sold in the Equity Offering in connection with the full exercise of the underwriters’ option to purchase additional shares of Class A common stock pursuant to the underwriting agreement.

Restatement of previously issued financial statements

On April 12, 2021, the Securities and Exchange Commission (the “SEC”) issued a statement (the “Statement”) on the accounting and reporting considerations for warrants issued by special purpose acquisition companies (“SPACs”). The Statement referenced the guidance included in generally accepted accounting principles in the United States of America (“GAAP”) that entities must consider in determining whether to classify contracts that may be settled in its own stock, such as warrants, as equity or as an asset or liability. After considering the Statement, the Company re-evaluated its historical accounting for the Warrants and concluded it must amend the accounting treatment of the Warrants, which were recorded to the Company’s consolidated financial statements at the time of the Business Combination. At that time, the Warrants were presented within equity and did not impact any reporting periods prior to the Business Combination. The Company’s management concluded that the Warrants include provisions that, based on the Statement, preclude the Warrants from being classified as components of equity. Management, after consultation with the audit committee and our independent registered accounting firm, concluded that our previously issued audited financial statements as of December 31, 2019, for the period from July 11, 2019 through December 31, 2019 and as of and for the year ended December 31, 2020 and the Company’s unaudited condensed consolidated financial statements for the quarterly periods within those periods (the “Relevant Periods”) should no longer be relied upon. The Company has filed an amendment to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”) restating the financial statements for the Relevant Periods (including the quarter ended March 31, 2020), as set forth in the Statement. The notes included herein should be read in conjunction with the restated financial reports included in the 2020 Form 10-K. This Quarterly Report on Form 10-Q reflects the restated financials for the quarter ended March 31, 2020.  The Warrants were no longer outstanding as of the end of 2020, and therefore, the change in accounting policy triggered by the restatement has no impact on the financial statements for the quarter ended March 31, 2021 included in this Quarterly Report on Form 10-Q.

6


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

The Company has reflected in this Quarterly Report on Form 10-Q restated financials as of December 31, 2020 and March 31, 2020 and for the quarter ended March 31, 2020 to restate the following non-cash items:

 

 

As of December 31, 2020

 

 

As of March 31, 2020 (Unaudited)

 

 

 

As Reported

 

 

Adjustments

 

 

As Restated

 

 

As Reported

 

 

Adjustments

 

 

As Restated

 

Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liabilities

 

$

 

 

$

 

 

$

 

 

$

 

 

$

45,543,718

 

 

$

45,543,718

 

Total noncurrent liabilities

 

 

488,360,392

 

 

 

 

 

 

488,360,392

 

 

 

311,648,710

 

 

 

45,543,718

 

 

 

357,192,428

 

Total liabilities

 

 

553,796,069

 

 

 

 

 

 

553,796,069

 

 

 

378,395,096

 

 

 

45,543,718

 

 

 

423,938,814

 

Additional paid-in capital

 

 

604,391,167

 

 

 

87,283,905

 

 

 

691,675,072

 

 

 

314,971,234

 

 

 

(22,188,932

)

 

 

292,782,302

 

Accumulated deficit

 

 

(88,647,808

)

 

 

(87,283,905

)

 

 

(175,931,713

)

 

 

(57,310,504

)

 

 

(23,354,786

)

 

 

(80,665,290

)

Total stockholders' equity

 

 

509,313,721

 

 

 

 

 

 

509,313,721

 

 

 

252,334,809

 

 

 

(45,543,718

)

 

 

206,791,091

 

 

 

For the three months ended March 31, 2020

 

 

 

As Reported

 

 

Adjustments

 

 

As Restated

 

Unaudited Consolidated Statements of Operations

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of warrant liabilities

 

$

 

 

$

(6,898,095

)

 

$

(6,898,095

)

Total other (expense) income

 

 

(4,020,700

)

 

 

(6,898,095

)

 

 

(10,918,795

)

(Loss) income before income tax expense

 

 

(7,400,035

)

 

 

(6,898,095

)

 

 

(14,298,130

)

Net (loss) income

 

 

(6,284,443

)

 

 

(6,898,095

)

 

 

(13,182,538

)

Net (loss) income attributable to the Company

 

 

(3,432,044

)

 

 

(6,898,095

)

 

 

(10,330,139

)

Loss per Class A share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.09

)

 

 

 

 

 

$

(0.27

)

 

 

For the three months ended March 31, 2020

 

 

 

As Reported

 

 

Adjustments

 

 

As Restated

 

Unaudited Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(6,284,443

)

 

$

(6,898,095

)

 

$

(13,182,538

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities

 

 

14,855,588

 

 

 

6,898,095

 

 

 

21,753,683

 

Net cash provided by operating activities

 

 

8,571,145

 

 

 

 

 

 

8,571,145

 

Net cash used in investing activities

 

 

(38,296,792

)

 

 

 

 

 

(38,296,792

)

Net cash provided by financing activities

 

 

36,215,853

 

 

 

 

 

 

36,215,853

 

The restatement had no impact on the Company’s liquidity or cash position.

2. Basis of Presentation and Summary of Significant Accounting Policies

 

Unaudited Interim Consolidated Financial Statements

 

These unaudited consolidated interim financial statements should be read in conjunction with the Company's audited consolidated financial statements and accompanying notes, for the periods ended December 31, 2020 and 2019, which are included in the 2020Annual Report on Form 10-K.10-K for the year ended December 31, 2021.

 

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with GAAPaccounting principles generally accepted in the United States (“GAAP”) and with instructions to Form 10-Q and Rule 10-01 of SEC Regulation S-X as they apply to interim financial information. Accordingly, the interim consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements, although the Company believes that the disclosures made are adequate to make the information not misleading.

 

The interim consolidated financial statements are unaudited, but in the Company’s opinion include all adjustments of a normal recurring nature or a description of the nature and amount of any adjustments other than normal recurring adjustments, operations and cash flows as of and for the periods presented. The interim financial results are not necessarily indicative of results that may be expected for any other interim period or the fiscal year.

7


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

Principles of Consolidation

 

The consolidated financial statements include the accounts of Repay Holdings Corporation, the majority-owned Hawk Parent Holdings LLC and its wholly owned subsidiaries: Hawk Intermediate Holdings, LLC, Hawk Buyer Holdings, LLC, Repay Holdings, LLC, M&A Ventures, LLC, Repay Management Holdco Inc., Repay Management Services LLC, Sigma Acquisition, LLC, Wildcat Acquisition, LLC, (“PaidSuite”), Marlin Acquirer, LLC, (“Paymaxx”), REPAY International LLC, REPAY Canada Solutions ULC, TriSource Solutions, LLC (“TriSource”), Mesa Acquirer, LLC, CDT Technologies LTD (“Ventanex”), Viking GP Holdings, LLC, cPayPlus, LLC (“cPayPlus”), CPS Payment Services, LLC, Media Payments, LLC and(“MPI”), Custom Payment Systems, LLC.LLC, BT Intermediate, LLC, Electronic Payment Providers, LLC, Blue Cow Software, LLC, Hoot Payment Solutions, LLC, Internet Payment Exchange, LLC, Stratus Payment Solutions, LLC, Clear Payment Solutions, LLC, Harbor Acquisition LLC, Payix Holdings Incorporated and Payix Incorporated. All significant intercompany accounts and transactions have been eliminated in consolidation.

6


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

 

Basis of Financial Statement Presentation

 

The accompanying interim consolidated financial statements of the Company were prepared in accordance with GAAP. The Company uses the accrual basis of accounting whereby revenues are recognized when earned, usually upon the date services are rendered, and expenses are recognized at the date services are rendered or goods are received.

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported Consolidated Statements of Operations during the reporting period. Actual results could differ materially from those estimates.

Correction of Immaterial Error in Previously Issued Financial Statements

During the preparation of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, the Company identified an error in the presentation of the reclassification of net unrealized loss on cash flow hedges to other loss and its related tax expenses within the Consolidated Statements of Comprehensive Income in previous reporting periods beginning the three months ended March 31, 2021, which resulted in a decrease of Comprehensive loss attributable to the Company from ($15.8) million to ($9.4) million for the three months ended March 31, 2021. Net income (loss) for the three months ended March 31, 2021 and Total equity as of March 31, 2021 were not impacted. The Company assessed the materiality of the misstatement both quantitatively and qualitatively in accordance with Accounting Standards Codification (“ASC”) 250, Accounting Changes and Error Corrections, as well as SEC Staff Accounting Bulletins No. 99, Materiality, and No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, and concluded that the misstatement was not material to the Company’s previously issued unaudited interim consolidated financial statements for the prior periods and that amendments of previously filed reports were not required.

Recently AdoptedIssued Accounting Pronouncementsnot yet Adopted

Accounting for Income TaxesBusiness Combinations

In December 2019,August 2021, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”) 2019-12, "No. 2021-08, “Income TaxesBusiness Combinations (Topic 740)805): Simplifying the Accounting for Income TaxesContract Assets and Contract Liabilities from Contracts with Customers (“ASU No. 2021-08”). ASU 2019-12 simplifies the accounting for income taxes, eliminates certain exceptions withinNo. 2021-08 requires an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Income TaxesRevenue (Topic 740)606), and clarifies certain aspects of the current guidance to promote consistency among reporting entities, and is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020,2022, with early adoption permitted. Most amendmentsAmendments within ASU 2019-12No. 2021-08 are required to be applied prospectively to business combinations occurring on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

The Company adopted ASU 2019-12 as of January 1, 2021, using a modified retrospective transition approach. The adoption of this ASU does not have a material impact on the Company’s consolidated financial statements or related disclosures.

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity, which made targeted improvements to an issuer’s accounting for convertible instruments under Accounting Standards Codification (“ASC”) Topic No. 470 Debt, and the derivative scope exception for contracts in an entity’s own equity under ASC Topic No. 815 Derivatives and Hedging. Specifically, ASU 2020-06 reduces the number of accounting models that exist under GAAP as well as the number of settlement conditions which will likely result in more convertible instruments being accounted for as a single unit of account, a reduction in the amount of interest expense recognized for convertible debt, and more embedded derivatives meeting the derivative scope exception. In addition, ASU 2020-06 amends ASC Topic No. 260 Earnings Per Share, which will result in more dilutive earnings per share results.

ASU 2020-06 is effective for public companies beginning January 1, 2022, including interim periods within the fiscal years after the adoption date. Early adoption is also permitted beginning January 1, 2021, including interim periods within those fiscal years.

8


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

The Company early adopted ASU 2020-06 as of January 1, 2021. The Company issued the 0.00% Convertible Senior Notes due 2026 (“2026 Notes”) in January 2021, which resulted in recognition of $440.0 million in noncurrent long-term debt of and $11.4 million in debt issuance cost. In determining the impacteffective date of the 2026 Notes on the Company’s diluted earnings per share calculations, the Company will apply the if-converted method. For additional information and required disclosures related to 2026 Notes, see Note 10. Borrowings.amendments.

 

3. Revenue

For the Company’s accounting policies for recognizing revenue and contract costs, see Note 2. Basis of Presentation and Summary of Significant Accounting Policies and Note 3. Revenue to the Company’s Notes to Consolidated Financial Statements in Part II, Item 8 of the 2020Annual Report on Form 10-K.10-K for the year ended December 31, 2021.

7


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

 

Disaggregation of revenue

 

The table below presents a disaggregation of revenue by direct and indirect relationships for the periods indicated:

 

 

Three Months Ended March 31,

 

 

Three Months Ended March 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct relationships

 

$

46,971,894

 

 

$

38,715,624

 

 

$

63,637,758

 

 

$

46,971,894

 

Indirect relationships

 

 

548,602

 

 

 

746,913

 

 

 

3,926,297

 

 

 

548,602

 

Total Revenue

 

$

47,520,496

 

 

$

39,462,537

 

 

$

67,564,055

 

 

$

47,520,496

 

 

4. Earnings Per Share

During the three months ended March 31, 2021, and 2020, basic and diluted net loss per common share are the same since the inclusion of the assumed exchange of all limited liability company interests of Hawk Parent (“Post-Merger Repay Units”), unvested restricted share awards and convertible debt conversionthe Company’s Convertible Senior Notes due 2026 (“2026 Notes”) would have been anti-dilutive.

The following table summarizes net lossincome (loss) attributable to the Company and the weighted average basic and basic and diluted shares outstanding:

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020 (As Restated)

 

Loss before income tax expense

 

$

(23,922,946

)

 

$

(14,298,130

)

Less: Net loss attributable to non-controlling interests

 

 

(2,187,272

)

 

 

(2,852,399

)

Income tax benefit

 

 

5,941,773

 

 

 

1,115,592

 

Net loss attributable to the Company

 

$

(15,793,901

)

 

$

(10,330,139

)

 

 

 

 

 

 

 

 

 

Weighted average shares of Class A common stock outstanding - basic and diluted

 

 

76,602,759

 

 

 

37,624,829

 

 

 

 

 

 

 

 

 

 

Loss per share of Class A common stock outstanding - basic and diluted

 

$

(0.21

)

 

$

(0.27

)

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Income (loss) before income tax expense

 

$

16,728,917

 

 

$

(23,922,946

)

Less: Net loss attributable to non-controlling interests

 

 

(767,169

)

 

 

(2,187,272

)

Income tax (expense) benefit

 

 

(3,842,542

)

 

 

5,941,773

 

Net income (loss) attributable to the Company

 

$

13,653,544

 

 

$

(15,793,901

)

 

 

 

 

 

 

 

 

 

Weighted average shares of Class A common stock outstanding - basic

 

 

88,607,655

 

 

 

76,602,759

 

Add dilutive common stock equivalent shares:

 

 

 

 

 

 

 

 

Post-Merger Repay Units exchangeable for Class A common stock

 

 

7,926,576

 

 

 

 

 

Unvested restricted share awards of Class A common stock

 

 

3,385,690

 

 

 

 

 

2026 Notes convertible into Class A common stock

 

 

13,095,238

 

 

 

 

 

Weighted average shares of Class A common stock outstanding - diluted

 

 

113,015,159

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) per share of Class A common stock outstanding - basic

 

$

0.15

 

 

$

(0.21

)

Income (loss) per share of Class A common stock outstanding - diluted

 

$

0.12

 

 

$

(0.21

)

 

 

 

 

 

 

 

 

 

9


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

 

For the three months ended March 31, 2021, and 2020, the following common stock equivalent shares were excluded from the computation of the diluted loss per share, since their inclusion would have been anti-dilutive:

 

Post-Merger Repay Units exchangeable for Class A common stock

 

 

7,959,160

 

 

 

29,505,623

 

Earnout Post-Merger Repay Units exchangeable for Class A common stock

 

 

 

 

 

 

Dilutive warrants exercisable for Class A common stock

 

 

 

 

 

1,925,108

 

Unvested restricted share awards of Class A common stock

 

 

2,939,545

 

 

 

2,905,053

 

2026 Notes convertible for Class A common stock

 

 

13,095,238

 

 

 

 

Share equivalents excluded from earnings (loss) per share

 

 

23,993,943

 

 

 

34,335,784

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

2021

Post-Merger Repay Units exchangeable for Class A common stock

7,959,160

Unvested restricted share awards of Class A common stock

2,939,545

2026 Notes convertible into Class A common stock

13,095,238

Share equivalents excluded from earnings (loss) per share

23,993,943

8


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

 

Shares of the Company’s Class V common stock do not participate in the earnings or losses of the Company and, therefore, are not participating securities. As such, separate presentation of basic and diluted earnings per share of Class V common stock under the two-class method has not been presented.

5. Business Combinations

VentanexBillingTree

On February 10, 2020,June 15, 2021, the Company acquired all of the ownership interests of CDT Technologies, LTD d/b/a Ventanex (“Ventanex”BT Intermediate, LLC (together with its subsidiaries, “BillingTree”).Under the terms of the securities purchase agreement and plan of merger between Repay Holdings,BT Intermediate, LLC, the Company, two newly formed subsidiaries of the Company and the direct and indirect ownersowner of CDT Technologies, LTDBT Intermediate, LLC (“Ventanex PurchaseBillingTree Merger Agreement”), the aggregate consideration paid at closing by the Company was approximately $36$505.8 million, consisting of approximately $277.5 million in cash. In addition to the closing consideration, the Ventanex Purchase Agreement contains a performance-based earnout (the “Ventanex Earnout Payment”), which was based on future resultscash and approximately 10 million shares of the acquired business and could result in an additional payment to the former owners of Ventanex of up to $14 million.Class A common stock. The Ventanex acquisition was financed with a combination of cash on hand and committed borrowing capacity under the Company’s existing credit facility. The Ventanex PurchaseBillingTree Merger Agreement contains customary representations, warranties and covenants by Repay and the former ownersowner of Ventanex,BillingTree, as well as a customary post-closing adjustment provision relating to working capital and similar items.

The following summarizes the preliminary purchase consideration paid to the selling membersseller of Ventanex:BillingTree:

 

Cash consideration

 

$

35,939,129

 

 

$

277,521,139

 

Contingent consideration (1)

 

 

4,800,000

 

Class A common stock issued

 

 

228,250,000

 

Total purchase price

 

$

40,739,129

 

 

$

505,771,139

 

 

(1)

Reflects the fair value of the Ventanex Earnout Payment, the contingent consideration to be paid to the selling members of Ventanex, pursuant to the Ventanex Purchase Agreement as of February 10, 2020. The selling partners of Ventanex will have the contingent earn-out right to receive a payment of up to $14.0 million dependent upon the Gross Profit, as defined in the Ventanex Purchase Agreement, for the years ended December 31, 2020 and 2021. In February 2021, the Company paid the sellers of Ventanex $0.9 million, pursuant to the terms of the Ventanex Purchase Agreement. As of March 31, 2021, the Ventanex earnout was $4.6 million,which resulted in a $0.7 million adjustment included in the change in fair value of contingent consideration in the Consolidated Statements of Operations for the three months ended March 31, 2021.

10


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

The Company recorded ana preliminary allocation of the purchase price to Ventanex’sBillingTree’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the February 10, 2020June 15, 2021 closing date. The preliminary purchase price allocation is as follows:

 

Cash and cash equivalents

 

$

50,663

 

 

$

8,243,570

 

Accounts receivable

 

 

1,376,539

 

 

 

3,623,894

 

Prepaid expenses and other current assets

 

 

180,514

 

 

 

1,601,854

 

Total current assets

 

 

1,607,716

 

 

 

13,469,318

 

Property, plant and equipment, net

 

 

137,833

 

 

 

541,244

 

Restricted cash

 

 

428,313

 

 

 

274,954

 

Other assets

 

 

1,782,489

 

Identifiable intangible assets

 

 

26,890,000

 

 

 

236,810,000

 

Total identifiable assets acquired

 

 

29,063,862

 

 

 

252,878,005

 

Accounts payable

 

 

(152,035

)

 

 

(2,552,251

)

Accrued expenses

 

 

(373,159

)

 

 

(6,982,919

)

Deferred tax liability

 

 

(31,384,399

)

Net identifiable assets acquired

 

 

28,538,668

 

 

 

211,958,436

 

Goodwill

 

 

12,200,461

 

 

 

293,812,704

 

Total purchase price

 

$

40,739,129

 

 

$

505,771,140

 

 

The preliminary values allocated to identifiable intangible assets and their estimated useful lives are as follows:

 

 

Fair Value

 

 

Useful life

 

Fair Value

 

 

Useful life

Identifiable intangible assets

 

(in millions)

 

 

(in years)

 

(in millions)

 

 

(in years)

Non-compete agreements

 

$

0.1

 

 

5

 

$

0.3

 

 

2

Trade names

 

 

0.4

 

 

Indefinite

 

 

7.8

 

 

Indefinite

Developed technology

 

 

4.1

 

 

3

 

 

26.2

 

 

3

Merchant relationships

 

 

22.3

 

 

10

 

 

202.5

 

 

10

 

$

26.9

 

 

 

 

$

236.8

 

 

 

9


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

 

Goodwill of $12.2$293.8 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired.acquired, of which $47.7 million is expected to be deductible for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of Ventanex.BillingTree.

cPayPlusKontrol

On July 23, 2020,June 22, 2021, the Company acquired substantially all of the ownership interestsassets of cPayPlus.Kontrol LLC (“Kontrol”). Under the terms of the securitiesasset purchase agreement between a newly formed subsidiary of Repay Holdings, LLC and the directowner of Kontrol (“Kontrol Purchase Agreement”), the aggregate consideration paid at closing by the Company was up to $10.5 million in cash, of which $7.4 million was paid at closing. The Kontrol Purchase Agreement contains customary representations, warranties and indirect ownerscovenants by Repay and the former owner of cPayPlus.Kontrol, as well as a customary post-closing adjustment provision relating to working capital and similar items.

The following summarizes the preliminary purchase consideration paid to the owner of Kontrol:

Cash consideration

 

$

7,439,373

 

Contingent consideration (1)

 

 

500,000

 

Total purchase price

 

$

7,939,373

 

(1)

Reflects the fair value of the Kontrol earnout payment, the contingent consideration to be paid to the selling members of Kontrol, pursuant to the Kontrol Purchase Agreement as of June 22, 2021. The selling partners of Kontrol will have the contingent earnout right to receive a payment of up to $3.0 million, dependent upon the Gross Profit, as defined in the Kontrol Purchase Agreement. As of March 31, 2022, the fair value of the Kontrol earnout was $0.3 million, which resulted in a ($0.6) million adjustment included in the change in fair value of contingent consideration in the Consolidated Statements of Operations for the three months ended March 31, 2022.

The Company recorded a preliminary allocation of the purchase price to Kontrol’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the June 22, 2021 closing date. The preliminary purchase price allocation is as follows:

Accounts receivable

 

$

67,510

 

Prepaid expenses and other current assets

 

 

5,572

 

Total current assets

 

 

73,082

 

Identifiable intangible assets

 

 

6,940,000

 

Total identifiable assets acquired

 

 

7,013,082

 

Accounts payable

 

 

(664,932

)

Net identifiable assets acquired

 

 

6,348,150

 

Goodwill

 

 

1,591,223

 

Total purchase price

 

$

7,939,373

 

The preliminary values allocated to identifiable intangible assets and their estimated useful lives are as follows:

 

 

Fair Value

 

 

Useful life

Identifiable intangible assets

 

(in millions)

 

 

(in years)

Trade names

 

$

0.0

 

 

Indefinite

Merchant relationships

 

 

6.9

 

 

8

 

 

$

6.9

 

 

 

Goodwill of $1.6 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired, of which $1.1 million on a gross basis is expected to be deductible for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain

10


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of Kontrol.

Payix

On December 29, 2021, the Company acquired Payix Holdings Incorporated (together with its subsidiary, “Payix”). Under the terms of the merger agreement with Payix (“cPayPlusPayix Purchase Agreement”), the aggregate consideration paid at closing by the Company was approximately $8.0$95.6 million in cash. In addition to the closing consideration, the cPayPlusPayix Purchase Agreement contains a performance-based earnout (the “cPayPlus“Payix Earnout Payment”), which was based on future results of the acquired business and could result in an additional payment to the former owners of cPayPlusPayix of up to $8.0 million in the third quarter of 2021.$20.0 million. The cPayPlusPayix acquisition was financed with cash on hand. hand and available revolver capacity.The cPayPlusPayix Purchase Agreement contains customary representations, warranties and covenants by Repay and the former owners of cPayPlus,Payix, as well as a customary post-closing adjustment provision relating to working capital and similar items.

The following summarizes the preliminary purchase consideration paid to the selling memberssellers of cPayPlus:Payix:

 

Cash consideration

 

$

7,956,963

 

 

$

95,627,972

 

Contingent consideration (1)

 

 

6,500,000

 

 

 

2,850,000

 

Total purchase price

 

$

14,456,963

 

 

$

98,477,972

 

11


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

 

(1)

Reflects the fair value of the cPayPlus Earnout Payment,Payix earnout payment, the contingent consideration to be paid to the selling membersformer owners of cPayPlus,Payix, pursuant to the cPayPlusPayix Purchase Agreement as of July 23, 2020.December 31, 2021. The selling partnersformer owners of cPayPlusPayix will have the contingent earn-outearnout right to receive a payment of up to $8.0$20.0 million, dependent upon the Gross Profit, as defined in the cPayPlusPayix Purchase Agreement, in the third quarter of 2021.Agreement. As of March 31, 2021,2022, the cPayPlusfair value of the Payix earnout was $7.8$0.5 million, which resulted in a $1.3($2.4) million adjustment included in the change in fair value of contingent consideration in the Consolidated Statements of Operations for the three months ended March 31, 2021.2022.

The Company recorded a preliminary allocation of the purchase price to cPayPlus’sPayix’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the July 23, 2020December 29, 2021 closing date. The preliminary purchase price allocation is as follows:

 

Cash and cash equivalents

 

$

262,331

 

 

$

702,575

 

Accounts receivable

 

 

164,789

 

 

 

1,715,292

 

Prepaid expenses and other current assets

 

 

37,660

 

 

 

93,891

 

Total current assets

 

 

464,780

 

 

 

2,511,758

 

Property, plant and equipment, net

 

 

20,976

 

 

 

83,449

 

Restricted cash

 

 

27,177

 

Other assets

 

 

655,588

 

Identifiable intangible assets

 

 

7,720,000

 

 

 

33,150,000

 

Total identifiable assets acquired

 

 

8,205,756

 

 

 

36,427,972

 

Accounts payable

 

 

(99,046

)

 

 

(214,195

)

Accrued expenses

 

 

(363,393

)

Accrued expenses and other liabilities

 

 

(2,022,846

)

Deferred tax liability

 

 

(6,943,998

)

Net identifiable assets acquired

 

 

7,743,317

 

 

 

27,246,933

 

Goodwill

 

 

6,713,646

 

 

 

71,231,039

 

Total purchase price

 

$

14,456,963

 

 

$

98,477,972

 

11


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

 

The preliminary values allocated to identifiable intangible assets and their estimated useful lives are as follows:

 

 

Fair Value

 

 

Useful life

 

Fair Value

 

 

Useful life

Identifiable intangible assets

 

(in millions)

 

 

(in years)

 

(in millions)

 

 

(in years)

Non-compete agreements

 

$

0.1

 

 

5

Trade names

 

 

0.1

 

 

Indefinite

 

$

0.3

 

 

Indefinite

Developed technology

 

 

6.7

 

 

3

 

 

12.4

 

 

3

Merchant relationships

 

 

0.8

 

 

10

 

 

20.5

 

 

10

 

$

7.7

 

 

 

 

$

33.2

 

 

 

12


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

Goodwill recognized of $6.7$71.2 million represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired.acquired, 0ne of which is expected to be deductible for tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforce of cPayPlus.Payix.

CPSMeasurement Period

On November 2, 2020, the Company acquired all of the ownership interests of CPS Payment Services, LLC, Media Payments, LLC (“MPI”), and Custom Payment Systems, LLC (collectively, “CPS”). Under the terms of the securities purchase agreement between Repay Holdings, LLC and the direct and indirect owners of CPS. (“CPS Purchase Agreement”), the aggregate consideration paid at closing by the Company was approximately $78.0 million in cash. In addition to the closing consideration, the CPS Purchase Agreement contains a performance-based earnout (the “CPS Earnout Payment”), which was based on future results of the acquired business and could result in an additional payment to the former owners of CPS of up to $15.0 million in 2 separate earnouts. The CPS acquisition was financed with cash on hand. The CPS Purchase Agreement contains customary representations, warranties and covenants by Repay and the former owners of CPS, as well as a customary post-closing adjustment provision relating to working capital and similar items.

The following summarizes the preliminary purchase consideration paid to the selling members of CPS:

Cash consideration

 

$

83,886,556

 

Contingent consideration (1)

 

 

4,500,000

 

Total purchase price

 

$

88,386,556

 

(1)

Reflects the fair value of the CPS Earnout Payment, the contingent consideration to be paid to the selling members of CPS, pursuant to the CPS Purchase Agreement as of November 2, 2020. The selling partners of CPS will have the contingent earnout right to receive a payment of up to $15.0 million in 2 separate earnouts, dependent upon the Gross Profit, as defined in the CPS Purchase Agreement. As of March 31, 2021, the CPS earnout was $5.1 million, which resulted in a $0.6 million adjustment included in the change in fair value of contingent consideration in the Consolidated Statements of Operations for the three months ended March 31, 2021.

The Company recorded a preliminary allocation of the purchase price to CPS’ and MPI’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the November 2, 2020 closing date. The preliminary purchase price allocation is as follows:

 

 

CPS

 

 

MPI

 

Cash and cash equivalents

 

$

1,667,066

 

 

$

2,097,921

 

Accounts receivable

 

 

2,810,158

 

 

 

5,556,958

 

Prepaid expenses and other current assets

 

 

2,615,615

 

 

 

934,751

 

Total current assets

 

 

7,092,839

 

 

 

8,589,630

 

Property, plant and equipment, net

 

 

19,391

 

 

 

2,995

 

Restricted cash

 

 

407

 

 

 

35,318

 

Identifiable intangible assets

 

 

30,830,000

 

 

 

7,110,000

 

Total identifiable assets acquired

 

 

37,942,637

 

 

 

15,737,943

 

Accounts payable

 

 

(2,004,371

)

 

 

(4,495,599

)

Accrued expenses

 

 

(2,143,680

)

 

 

 

Net identifiable assets acquired

 

 

33,794,586

 

 

 

11,242,344

 

Goodwill

 

 

40,747,939

 

 

 

2,601,687

 

Total purchase price

 

$

74,542,525

 

 

$

13,844,031

 

13


REPAY HOLDINGS CORPORATION

Notesallocations for the acquisitions of BillingTree, Kontrol, and Payix are based on initial estimates and provisional amounts. For the acquisitions completed during the year ended December 31, 2021, the Company continues to refine its inputs and estimates inherent in the Unaudited Consolidated Financial Statements

The preliminary values allocated to identifiablevaluation of intangible assets, and their estimated useful lives are as follows:

 

 

Fair Value

 

 

 

 

 

(in millions)

 

 

Useful life

Identifiable intangible assets

 

CPS

 

 

MPI

 

 

(in years)

Non-compete agreements

 

$

0.1

 

 

$

0.1

 

 

4

Trade names

 

 

0.5

 

 

 

0.1

 

 

Indefinite

Developed technology

 

 

7.2

 

 

 

0.7

 

 

3

Merchant relationships

 

 

23.0

 

 

 

6.3

 

 

10

 

 

$

30.8

 

 

$

7.2

 

 

 

Goodwilldeferred income taxes, realization of $43.3 million, represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of the strong market position and the assembled workforceaccuracy and completeness of CPS.liabilities within the measurement period.

Transaction Expenses

The Company incurred transaction expenses of $1.6$2.8 million for the three months ended March 31, 2021, respectively,2022, related to the Ventanex, cPayPlusBillingTree, Kontrol, and CPSPayix acquisitions. The Company incurred transaction expenses of $1.0$1.6 million for the three months ended March 31, 2020,2021, related to the acquisitions of Ventanex, acquisition. cPayPlus and CPS Payment Services, LLC (together with its affiliated companies, “CPS”).

Pro Forma Financial Information (Unaudited)

The supplemental condensed consolidated results of the Company on an unaudited pro forma basis give effect to the Ventanex, cPayPlusBillingTree, Kontrol, and CPSPayix acquisitions as if the transactions had occurred on January 1, 2020.2021. The unaudited pro forma information reflects adjustments for the issuance of the Company’s common stock, debt incurred in connection with the transactions, the impact of the fair value of intangible assets acquired and related amortization and other adjustments the Company believes are reasonable for the pro forma presentation. In addition, the pro forma earnings exclude acquisition-related costs.

 

 

Three Months Ended March 31, 2021

 

 

Pro Forma Three Months Ended March 31, 2020

 

Revenue

 

$

47,520,496

 

 

$

43,785,775

 

Net loss

 

 

(17,981,173

)

 

 

(13,116,365

)

Net loss attributable to non-controlling interests

 

 

(2,187,272

)

 

 

(2,824,118

)

Net loss attributable to the Company

 

 

(15,793,901

)

 

 

(10,292,246

)

 

 

 

 

 

 

 

 

 

Loss per Class A share - basic and diluted

 

$

(0.21

)

 

$

(0.27

)

 

 

Pro Forma Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Revenue

 

$

67,564,055

 

 

$

63,679,085

 

Net income (loss)

 

 

12,886,375

 

 

 

(15,610,922

)

Net loss attributable to non-controlling interests

 

 

(767,169

)

 

 

(1,970,560

)

Net income (loss) attributable to the Company

 

 

13,653,544

 

 

 

(13,640,362

)

 

 

 

 

 

 

 

 

 

Income (loss) per Class A share - basic

 

$

0.15

 

 

$

(0.18

)

Income (loss) per Class A share - diluted

 

$

0.12

 

 

$

(0.18

)

1412


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

 

 

 

6. Fair Value

 

The following table summarizes, by level within the fair value hierarchy, the carrying amounts and estimated fair values of the Company’s assets and liabilities measured at fair value on a recurring or nonrecurring basis or disclosed, but not carried, at fair value in the Consolidated Balance Sheets as of the dates presented. There were no transfers into, out of, or between levels within the fair value hierarchy during any of the periods presented. Refer to Note 5, Note 10 and Note 11 for additional information on these liabilities.

 

 

March 31, 2021

 

 

March 31, 2022

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

390,921,782

 

 

$

 

 

$

 

 

$

390,921,782

 

Restricted cash

 

 

19,525,277

 

 

 

 

 

 

 

 

 

19,525,277

 

Other assets

 

$

 

 

$

2,499,996

 

 

$

 

 

$

2,499,996

 

Total assets

 

$

410,447,059

 

 

$

 

 

$

 

 

$

410,447,059

 

 

$

 

 

$

2,499,996

 

 

$

 

 

$

2,499,996

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

 

 

$

 

 

$

17,500,000

 

 

$

17,500,000

 

 

$

 

 

$

 

 

$

14,146,840

 

 

$

14,146,840

 

Borrowings

 

 

 

 

 

427,287,919

 

 

 

 

 

 

427,287,919

 

 

 

 

 

 

449,187,265

 

 

 

 

 

 

449,187,265

 

Tax receivable agreement

 

 

 

 

 

 

 

 

230,383,483

 

 

 

230,383,483

 

 

 

 

 

 

 

 

 

221,209,034

 

 

 

221,209,034

 

Total liabilities

 

$

 

 

$

427,287,919

 

 

$

247,883,483

 

 

$

675,171,402

 

 

$

 

 

$

449,187,265

 

 

$

235,355,874

 

 

$

684,543,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020 (As Restated)

 

 

December 31, 2021

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

91,129,888

 

 

$

 

 

$

 

 

$

91,129,888

 

Restricted cash

 

 

15,374,846

 

 

 

 

 

 

 

 

 

15,374,846

 

Other assets

 

$

 

 

$

2,499,996

 

 

$

 

 

$

2,499,996

 

Total assets

 

$

106,504,734

 

 

$

 

 

$

 

 

$

106,504,734

 

 

$

 

 

$

2,499,996

 

 

$

 

 

$

2,499,996

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

 

 

$

 

 

$

15,800,000

 

 

$

15,800,000

 

 

$

 

 

$

��

 

$

17,046,840

 

 

$

17,046,840

 

Borrowings

 

 

 

 

 

256,713,396

 

 

 

 

 

 

256,713,396

 

 

 

 

 

 

448,484,696

 

 

 

 

 

 

448,484,696

 

Tax receivable agreement

 

 

 

 

 

 

 

 

229,228,105

 

 

 

229,228,105

 

 

 

 

 

 

 

 

 

245,828,419

 

 

 

245,828,419

 

Interest rate swap

 

 

 

 

 

9,312,332

 

 

 

 

 

 

9,312,332

 

Total liabilities

 

$

 

 

$

266,025,728

 

 

$

245,028,105

 

 

$

511,053,833

 

 

$

 

 

$

448,484,696

 

 

$

262,875,259

 

 

$

711,359,955

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CashOther assets

Other assets contain a minority equity investment in a privately-held company. The Company elected a measurement alternative for measuring this investment, in which the carrying amount is adjusted based on any observable price changes in orderly transactions. The investment is classified as Level 2 as observable adjustments to value are infrequent and cash equivalents

Cash and cash equivalents are classified within Level 1 of the fair value hierarchy, under ASC 820, Fair Value Measurements (“ASC 820”), as the primary component of the price is obtained from quoted market pricesoccur in an activeinactive market. The carrying amounts of the Company’s cash and cash equivalents approximate their fair values due to the short maturities and highly liquid nature of these accounts.

Restricted Cash

Restricted cash is classified within Level 1 of the fair value hierarchy, under ASC 820, Fair Value Measurements (“ASC 820”), as the primary component is cash that is used as collateral for debts. The carrying amounts of the Company’s restricted cash approximate their fair values due to the highly liquid nature.

15


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

Contingent Considerationconsideration

 

Contingent consideration relates to potential payments that the Company may be required to make associated with acquisitions. The contingent consideration is recorded at fair value based on estimates of discounted future cash flows associated with the acquired businesses.businesses within Related party payable in the Consolidated Balance Sheets. To the extent that the valuation of these liabilities is based on inputs that are less observable or not observable in the market, the determination of fair value requires more judgment. Accordingly, the fair value of contingent consideration is classified within Level 3 of the fair value hierarchy, under ASC 820.820, Fair Value Measurement (“ASC 820”). The change in fair value is re-measured at each reporting period with the change in fair value being recognized in accordance with ASC 805, Business Combinations (“ASC 805”).

 

The Company used a discount rate to determine the present value, based on a risk-free rate adjusted for a credit spread, of the contingent consideration in the simulation approach. A range of 4.6%4.4% to 4.7%4.5% and weighted average of 4.6%4.46% was applied to the simulated contingent consideration payments, in order to determine the fair value. A significant increase or decrease in the discount rate could have resulted in a lower or higher balance, respectively, as of the measurement date.

13


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

The following table provides a rollforward of the contingent consideration related to previous business acquisitions. Refer to Note 5 for more details.

 

Three Months Ended March 31,

 

 

Three Months Ended March 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Balance at beginning of period

 

$

15,800,000

 

 

$

14,250,000

 

 

$

17,046,840

 

 

$

15,800,000

 

Measurement period adjustment

 

 

 

 

 

6,580,549

 

Purchases

 

 

 

 

 

10,800,000

 

Payments

 

 

(948,786

)

 

 

 

 

 

 

 

 

(948,786

)

Accretion expense

 

 

 

 

 

Valuation adjustment

 

 

2,648,786

 

 

 

 

 

 

(2,900,000

)

 

 

2,648,786

 

Balance at end of period

 

$

17,500,000

 

 

$

31,630,549

 

 

$

14,146,840

 

 

$

17,500,000

 

 

Borrowings

 

The carrying value of the Company’s 2026 Notes, revolving credit facility and term loan is net of unamortized debt discount and debt issuance costs. The fair valuecarrying amount of the Company’s borrowings was determined using a discounted cash flow model basedapproximates fair value because interest rates on observablethese instruments approximate market factors, such as changes in credit spreads for comparable benchmark companies and credit factors specific to us.interest rates. The fair value of the Company’s borrowings is classified within Level 2 of the fair value hierarchy, as the inputs to the discounted cash flow modelmarket interest rates are generally observable and do not contain a high level of subjectivity. See Note 10 for further discussion on borrowings.

Tax Receivable Agreement

 

Upon the completion of the Business Combination, the Company entered into the Tax Receivable Agreement (the “TRA”) with holders of Post-Merger Repay Units. As a result of the TRA, the Company established a liability in its consolidated financial statements. The TRA is recorded at fair value based on estimates of discounted future cash flows associated with the estimated payments to the Post-Merger Repay Unit holders. These inputs are not observable in the market; thus, the TRA is classified within Level 3 of the fair value hierarchy, under ASC 820. The change in fair value is re-measured at each reporting period with the change in fair value being recognized in accordance with ASC 805.

 

The Company used a discount rate, also referred to as the early termination rate,Early Termination Rate, as defined in the TRA, to determine the present value, based on a risk-free rate plus a spread, pursuant to the TRA. A rate of 1.28%3.1% was applied to the forecasted TRA payments at March 31, 2021,2022, in order to determine the fair value. A significant increase or decrease in the discount rate could have resulted in a lower or higher balance, respectively, as of the measurement date. The TRA balance increased as a result of exchanges of Post-Merger Repay Units for Class A common stock pursuant to the Exchange Agreemententered into upon completion of the Business Combination (the “Exchange Agreement”). In addition, the TRA balance was adjusted by $1$24.6 million through accretion expense and a valuation adjustment, related to a decreasean increase in the discount rate, which was 1.34%1.58% as of December 31, 2020.2021. 

16


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

 

The following table provides a rollforward of the TRA related to the Business Combination and subsequent acquisition and exchanges of Post-Merger Repay Units. See Note 15 for further discussion on the TRA.

 

 

Three Months Ended March 31,

 

 

Three Months Ended March 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Balance at beginning of period

 

$

229,228,105

 

 

$

67,176,226

 

 

$

245,828,419

 

 

$

229,228,105

 

Purchases

 

 

2,198,111

 

 

 

 

 

 

 

 

 

2,198,111

 

Payments

 

 

 

 

Accretion expense

 

 

806,375

 

 

 

541,963

 

 

 

960,866

 

 

 

806,375

 

Valuation adjustment

 

 

(1,849,108

)

 

 

 

 

(25,580,251

)

 

 

(1,849,108

)

Balance at end of period

 

$

230,383,483

 

 

$

67,718,189

 

 

$

221,209,034

 

 

$

230,383,483

 

 

Interest rate swap14


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

 

In October 2019, the Company entered into a $140.0 million notional, fifty-seven month interest rate swap agreement, and in February 2020, the Company entered into a $30.0 million notional, sixty month interest rate swap agreement, then a revised notional amount of $65.0 million beginning on September 30, 2020. These interest rate swap agreements are to hedge changes in its cash flows attributable to interest rate risk on a combined $205.0 million of Company’s variable-rate term loan to a fixed-rate basis, thus reducing the impact of interest rate changes on future interest expense.

These swaps involve the receipt of variable-rate amounts in exchange for fixed interest rate payments over the lives of the agreements without an exchange of the underlying notional amounts and were designated for accounting purposes as cash flow hedges. The interest rate swaps are carried at fair value on a recurring basis in the Consolidated Balance Sheets and are classified within Level 2 of the fair value hierarchy, as the inputs to the derivative pricing model are generally observable and do not contain a high level of subjectivity. The fair value was determined based on the present value of the estimated future net cash flows using implied rates in the applicable yield curve as of the valuation date.

As of March 31, 2021, both interest rate swaps were settled.

7. Property and Equipment

Property and equipment consisted of the following:

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Furniture, fixtures, and office equipment

 

$

1,506,085

 

 

$

1,112,702

 

 

$

2,923,703

 

 

$

2,763,380

 

Computers

 

 

1,980,757

 

 

 

1,733,672

 

 

 

3,774,768

 

 

 

3,408,336

 

Leasehold improvements

 

 

340,333

 

 

 

340,333

 

 

 

516,982

 

 

 

430,894

 

Total

 

 

3,827,175

 

 

 

3,186,707

 

 

 

7,215,453

 

 

 

6,602,610

 

Less: Accumulated depreciation and amortization

 

 

1,847,075

 

 

 

1,558,268

 

 

 

3,368,454

 

 

 

2,801,411

 

 

$

1,980,100

 

 

$

1,628,439

 

 

$

3,846,999

 

 

$

3,801,199

 

 

 

 

 

 

 

 

 

 

Depreciation expense for property and equipment was $0.3$0.5 million and $0.2$0.3 million for the three months ended March 31, 2022 and 2021, and 2020, respectively.

17


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

 

8. Intangible Assets

The Company holds definite and indefinite-lived intangible assets. As of March 31, 2022 and December 31, 2021, the indefinite-lived intangible assets consist of trade names of $22.2 million, and this balance consists of 65 trade names, arising from the acquisitions of Hawk Parent, TriSource, APS Payments (“APS”), Ventanex, cPayPlusMPI, BillingTree, Kontrol and CPS.Payix. 

Definite-lived intangibleIntangible assets consisted of the following:

 

Gross Carrying Value

 

 

Accumulated Amortization

 

 

Net Carrying Value

 

 

Weighted Average Useful Life (Years)

 

 

Gross Carrying Value

 

 

Accumulated Amortization

 

 

Net Carrying Value

 

 

Weighted Average Useful Life (Years)

 

Customer relationships

 

$

308,450,000

 

 

$

47,320,995

 

 

$

261,129,005

 

 

 

8.39

 

Client relationships

 

$

539,850,000

 

 

$

96,664,304

 

 

$

443,185,696

 

 

 

8.15

 

Channel relationships

 

 

12,550,000

 

 

 

755,685

 

 

 

11,794,315

 

 

 

9.40

 

 

 

13,490,000

 

 

 

1,401,352

 

 

 

12,088,648

 

 

 

8.50

 

Software costs

 

 

109,198,942

 

 

 

49,211,901

 

 

 

59,987,041

 

 

 

1.53

 

 

 

170,030,678

 

 

 

97,160,222

 

 

 

72,870,456

 

 

 

1.29

 

Non-compete agreements

 

 

4,270,000

 

 

 

3,111,208

 

 

 

1,158,792

 

 

 

1.27

 

 

 

4,580,000

 

 

 

4,239,505

 

 

 

340,495

 

 

 

0.79

 

Balance as of March 31, 2021

 

$

434,468,942

 

 

$

100,399,789

 

 

$

334,069,153

 

 

 

6.62

 

Trade name

 

 

28,140,000

 

 

 

 

 

 

28,140,000

 

 

 

 

Balance as of March 31, 2022

 

$

756,090,678

 

 

$

199,465,383

 

 

$

556,625,295

 

 

 

6.51

 

 

 

 

 

 

 

Customer relationships

 

$

308,450,000

 

 

$

39,920,578

 

 

$

268,529,422

 

 

 

8.64

 

 

$

539,850,000

 

 

$

83,014,231

 

 

$

456,835,769

 

 

 

8.40

 

Channel relationships

 

 

12,550,000

 

 

 

191,936

 

 

 

12,358,064

 

 

 

9.65

 

 

 

12,550,000

 

 

 

1,146,935

 

 

 

11,403,065

 

 

 

8.65

 

Software costs

 

 

104,715,101

 

 

 

40,280,116

 

 

 

64,434,985

 

 

 

1.85

 

 

 

163,957,560

 

 

 

83,162,612

 

 

 

80,794,948

 

 

 

1.48

 

Non-compete agreements

 

 

4,270,000

 

 

 

2,595,333

 

 

 

1,674,667

 

 

 

1.52

 

 

 

4,580,000

 

 

 

4,059,880

 

 

 

520,120

 

 

 

0.88

 

Balance as of December 31, 2020

 

$

429,985,101

 

 

$

82,987,963

 

 

$

346,997,138

 

 

 

6.95

 

Trade name

 

 

28,140,000

 

 

 

 

 

 

28,140,000

 

 

 

 

Balance as of December 31, 2021

 

$

749,077,560

 

 

$

171,383,658

 

 

$

577,693,902

 

 

 

6.79

 

 

 

 

 

The Company’s amortization expense for intangible assets was $17.5$28.1 million and $13.7$17.5 million for the three months ended March 31, 2022 and 2021, and 2020, respectively.

15


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

The estimated amortization expense for the next five years and thereafter in the aggregate is as follows:

 

Year Ending December 31,

 

Estimated

Future

Amortization

Expense

 

 

Estimated

Future

Amortization

Expense

 

2021

 

$

45,556,445

 

2022

 

 

58,105,482

 

 

$

73,678,172

 

2023

 

 

39,879,266

 

 

 

83,652,958

 

2024

 

 

32,577,868

 

 

 

69,630,251

 

2025

 

 

32,254,856

 

 

 

55,580,308

 

2026

 

 

32,242,778

 

 

 

55,665,944

 

Thereafter

 

 

93,452,457

 

 

 

190,277,660

 

 

9. Goodwill

 

The following table presents changes to goodwill for the three months ended March 31, 2021 and 2020.2022.

 

 

Total

 

 

Total

 

Balance at December 31, 2020

 

$

458,970,255

 

Balance at December 31, 2021

 

$

824,081,632

 

Acquisitions

 

 

 

 

0

 

Dispositions

 

0

 

 

0

 

Impairment Loss

 

0

 

 

0

 

Measurement period adjustment

 

 

(10,778

)

 

 

12,809

 

Balance at March 31, 2021

 

$

458,959,477

 

Balance at March 31, 2022

 

$

824,094,441

 

 

 

 

 

18


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

The Company has only 1 operating segment and, based on the criteria outlined in ASC 350, Intangibles – Goodwill and Other (“ASC 350”), only 1 reporting unit that needs to be tested for goodwill impairment. Accordingly, goodwill was reviewed for impairment at the consolidated entity level. Based on the qualitative factors described in ASC 350, theThe Company concluded that goodwill was 0t impaired as of March 31, 2021.2022. As of March 31, 2022 and December 31, 2021, there were 0 accumulated impairment losses on the Company’s goodwill.

 

10. Borrowings

Successor Credit Agreement

 

The Company entered into a Revolving Credit and Term Loan Agreement (as the “Successor Credit Agreement”) on July 11, 2019, with Truist Bank (formerly SunTrust Bank) and the other lenders party thereto, which provided a revolving credit facility (the “Revolving Credit Facility”), a term loan A (the “Term Loan”), and a delayed draw term loan at a variable interest rate(the (the “Delayed Draw Term Loan”). The Successor Credit Agreement provided for an aggregate revolving commitment of $20.0 million at a variable interest rate.

On February 10, 2020, as part of the financing for the acquisition of Ventanex, the Company entered into an agreement with Truist Bank and other members of its existing bank group to amend and upsize its previous credit agreementthe Successor Credit Agreement from $230.0 million to $346.0 million. The Successor Credit Agreement is collateralized by substantially all of the Company’s assets, and includes restrictive qualitative and quantitative covenants, as defined in the Successor Credit Agreement.

  On January 20, 2021, the Company used a portion of the proceeds from the 2026 Notes to prepay in full the entire amount of the outstanding Term Loans under the Successor Credit Agreement. The Company also terminated in full all outstanding Delayed Draw Term Loan commitments under such credit facilities.

16


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

Amended Credit Agreement

On February 3, 2021, the Company announced the closing of a new undrawn $125$125.0 million senior secured revolving credit facility through Truist Bank. The Amended Credit Agreement replaces the Company’s Successor Credit Agreement, which included an undrawn $30$30.0 million Revolving Credit Facility.

On December 29, 2021, the Company increased its existing senior secured credit facilities by $60.0 million to provide for a $185.0 million revolving credit facility in favor of Hawk Parent pursuant to an amendment to the Amended Credit Agreement. The revolving credit facility is guaranteed by Repay Holdings Corporation and certain of its subsidiaries. The Company was in compliance with its restrictive covenants under the Amended Credit Agreement at March 31, 2021.2022.

The Amended Credit Agreement provides for a Revolving Credit Facility of $125.0 million. As of March 31, 2021,2022, the Company had $0.0$20.0 million drawn against the Revolving Credit Facility.revolving credit facility at a variable interest rate of 2.25% plus 1-month LIBOR due 2026. The Company paid $97,222$0.2 million and $42,361$0.1 million in fees related to unused commitments for the three months ended March 31, 20212022 and 2020,2021, respectively. The Company’s interest expense on the line ofrevolving credit facility totaled $0$0.1 million and $62,008$0 for the three months ended March 31, 20212022 and 2020,2021, respectively.

Convertible Senior Debt

On January 19, 2021, the Company issued $440.0 million in aggregate principal amount of 0.00% Convertible Senior Notes due 2026 in a private placement. The conversion rate of any 2026 Notes will initially bewas 29.7619 shares of Class A common stock per $1,000 principal amount of 2026 Notes (equivalent to an initial conversion price of approximately $33.60 per share of Class A common stock). Upon conversion of the 2026 Notes, the Company may choose to pay or deliver cash, shares of the Company’s Class A common stock, or a combination of cash and shares of the Company’s Class A common stock. The 2026 Notes will mature on February 1, 2026, unless earlier converted, repurchased or redeemed. Subject to Nasdaq requirements, the Company controls the conversion rights prior to November 3, 2025, unless a fundamental change or an event of default occurs.

During the three months ended March 31, 2021,2022, the conversion contingencies of the 2026 Notes were not met, and the conversion terms of the 2026 Notes were not significantly changed. The shares issuable upon conversion of the 2026 Notes were excluded from the computation of the diluted loss per share, since their inclusion would have been anti-dilutive.

At March 31, 2021 and December 31, 2020,The following table summarized the total borrowings under the Successor Credit Agreement, Amended Credit Agreement and 2026 Notes consisted of the following, respectively:

19


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

Notes:

 

 

 

March 31, 2020

 

 

December 31, 2020

 

Non-current indebtedness:

 

 

 

 

 

 

 

 

Term Loan

 

$

 

 

$

262,653,996

 

Revolving Credit Facility

 

 

 

 

 

 

Convertible Senior Debt

 

 

440,000,000

 

 

 

 

Total borrowings under credit facility and convertible senior debt (1)

 

 

440,000,000

 

 

 

262,653,996

 

Less: Current maturities of long-term debt (2)

 

 

 

 

 

6,760,650

 

Less: Long-term loan debt issuance cost (3)

 

 

12,712,081

 

 

 

5,940,600

 

Total non-current borrowings

 

$

427,287,919

 

 

$

249,952,746

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2022

 

 

December 31, 2021

 

Non-current indebtedness:

 

 

 

 

 

 

 

 

Revolving Credit Facility (1)

 

$

20,000,000

 

 

$

20,000,000

 

Convertible Senior Debt

 

 

440,000,000

 

 

 

440,000,000

 

Total borrowings under credit facility and convertible senior debt

 

 

460,000,000

 

 

 

460,000,000

 

Less: Long-term loan debt issuance cost (2)

 

 

10,812,735

 

 

 

11,515,304

 

Total non-current borrowings

 

$

449,187,265

 

 

$

448,484,696

 

 

 

 

 

 

 

 

 

 

(1)

The Term Loan, Delayed Draw Term Loan and Revolving Credit Facility bearrevolving credit facility bears interest at variable rates, which were 3.65% at2.71% and 2.35% as of March 31, 2022 and December 31, 2020.2021, respectively.

(2)(

Pursuant to the terms of the Amended Credit Agreement, the Company is required to make quarterly principal payments equal to 0.625% of the initial principal amount of the Term Loan and Delayed Draw Term Loan (collectively the “Term Loans”).

(3)2)

The Company incurred $0.5$0.7 million of interest expense for the amortization of deferred debt issuance costs for the three months ended March 31, 2021.2022. The Company incurred $1.4$2.5 million of interest expense for the amortization of deferred debt issuance costs for the year ended December 31, 2020.2021.

Following17


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

The following is a summary of principal maturities of long‑term debt for each of the next five years ending December 31 and in the aggregate:

 

2021

 

$

 

2022

 

 

 

 

$

 

2023

 

 

 

 

 

 

2024

 

 

 

 

 

 

2025

 

 

 

 

 

 

2026

 

 

440,000,000

 

 

 

460,000,000

 

 

$

440,000,000

 

 

$

460,000,000

 

 

The Company incurred interest expense on the Term Loans of $3.2 million for the three months ended March 31, 2020.

11. Derivative Instruments

The Company does not hold or use derivative instruments for trading purposes.

Derivative Instruments Designated as Hedges

Interest rate fluctuations expose the Company’s variable-rate term loan to changes in interest expense and cash flows. As part of its risk management strategy, the Company may use interest rate derivatives, such as interest rate swaps, to manage its exposure to interest rate movements.

In October 2019, the Company entered into a $140.0 million notional, five-year interest rate swap agreement, with Regions Bank, to hedge changes in cash flows attributable to interest rate risk on $140.0 million of its variable-rate term loan. This agreement involves the receipt of variable-rate amounts in exchange for fixed interest rate payments over the life of the agreement without an exchange of the underlying notional amount. This interest rate swap was designated for accounting purposes as a cash flow hedge. As such, changes in the interest rate swap’s fair value are deferred in accumulated other comprehensive income (loss) in the Consolidated Balance Sheets and are subsequently reclassified into interest expense in each period that a hedged interest payment is made on the Company’s variable-rate term loan. Pre-tax gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense was$0.1 million for the three months ended March 31, 2020.

20


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

On February 21, 2020, the Company entered into a swap transaction with Regions Bank. On a quarterly basis, commencing on March 31, 2020 up to and including the termination date of February 10, 2025, the Company will makemade fixed payments on a beginning notional amount of $30.0 million, then a revised notional amount of $65.0 million beginning on September 30, 2020. On a quarterly basis, commencing on February 21, 2020 up to and including the termination date of February 10, 2025, the counterparty will makemade floating rate payments based on the 3-month LIBOR on the beginning notional amount of $30.0 million, then a revised notional amount of $65.0 million beginning on September 30, 2020.

Both interest rate swaps were settled as of March 31,in January 2021, with a realized loss of $9.3$6.4 million, recorded innet of taxes of $1.7 million reclassified from Accumulated other comprehensive loss into Other loss in the Consolidated Statements of Operations duringfor the three monthsyear ended MarchDecember 31, 2021.

12. Commitments and Contingencies

Legal Matters

The Company is a party to various claims and lawsuits incidental to its business. In the Company’s opinion, 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.

Leases

The Company has commitments under operating leases for real estate leased from third parties under non-cancelable operating leases. A right-of-use (“ROU”) asset and lease liability is recorded on the Consolidated Balance Sheet for all leases except those with an original lease term of twelve months or less. The Company’s leases typically have lease terms between three years and ten years, with the longest lease term having an expiration date in 2029. Most of these leases include one or more renewal options for six years or less, and certain leases also include lessee termination options. At lease commencement, the Company assesses whether it is reasonably certain to exercise a renewal option, or reasonably certain not to exercise a termination option, by considering various economic factors. Options that are reasonably certain of being exercised are factored into the

18


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

determination of the lease term, and related payments are included in the calculation of the ROUright-of-use (“ROU”) asset and lease liability.

The components of lease cost are presented in the following table:

 

 

Three Months Ended March 31,

 

 

Three Months Ended March 31, 2021

 

 

2022

 

 

2021

 

Components of total lease costs:

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease cost

 

$

540,639

 

 

$

689,806

 

 

$

540,639

 

Short-term lease cost

 

 

12,450

 

 

 

12,007

 

 

 

12,450

 

Variable lease cost

 

 

 

 

 

 

 

 

 

Total lease cost

 

$

553,089

 

 

$

701,813

 

 

$

553,089

 

Amounts reported in the Consolidated Balance Sheets were as follows:

 

 

March 31, 2021

 

 

December 31, 2020

 

 

March 31, 2022

 

 

December 31, 2021

 

Operating leases:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ROU assets

 

$

9,650,463

 

 

$

10,074,506

 

 

$

11,473,076

 

 

$

10,499,751

 

Lease liability, current

 

 

1,562,964

 

 

 

1,527,224

 

 

 

2,225,407

 

 

 

1,990,416

 

Lease liability, long-term

 

 

8,470,264

 

 

 

8,836,655

 

 

 

9,886,289

 

 

 

9,090,867

 

Total lease liabilities

 

$

10,033,228

 

 

$

10,363,879

 

 

$

12,111,696

 

 

$

11,081,283

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average remaining lease term (in years)

 

 

6.0

 

 

6.2

 

 

 

4.5

 

 

5.2

 

Weighted-average discount rate (annual)

 

 

4.6

%

 

 

4.6

%

Weighted-average discount rate (annualized)

 

 

2.1

%

 

 

4.3

%

Other information related to leases are as follows:

 

Three Months Ended March 31,

 

 

Three Months Ended March 31, 2021

 

 

2022

 

 

2021

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

459,698

 

 

$

644,726

 

 

$

459,698

 

Right-of-use assets obtained in exchange for lease liabilities:

 

 

 

 

ROU assets obtained in exchange for lease liabilities:

 

 

 

 

 

 

 

 

Operating leases

 

 

 

 

 

1,531,689

 

 

 

 

21


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

The following table presents a maturity analysis of the Company’s operating leases liabilities as of March 31, 2021:2022:

 

2021

 

$

1,522,813

 

2022

 

 

1,903,329

 

 

$

2,004,007

 

2023

 

 

1,948,666

 

 

 

2,714,419

 

2024

 

 

1,847,041

 

 

 

2,536,885

 

2025

 

 

1,531,435

 

 

 

2,370,722

 

2026

 

 

2,083,022

 

Thereafter

 

 

2,793,934

 

 

 

1,805,172

 

Total undiscounted lease payments

 

 

11,547,220

 

 

 

13,514,227

 

Less: Imputed interest

 

 

1,513,991

 

 

 

1,402,531

 

Total lease liabilities

 

$

10,033,228

 

 

$

12,111,696

 

19


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

 

13. Related Party Transactions

Related party payables consisted of the following:

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Ventanex accrued earnout liability

 

$

4,600,000

 

 

$

4,800,000

 

 

$

12,746,840

 

 

$

12,746,840

 

cPayPlus accrued earnout liability

 

 

7,800,000

 

 

 

6,500,000

 

CPS accrued earnout liability

 

 

5,100,000

 

 

 

4,500,000

 

 

 

650,000

 

 

 

600,000

 

Kontrol accrued earnout liability

 

 

250,000

 

 

 

850,000

 

Payix accrued earnout liability

 

 

500,000

 

 

 

2,850,000

 

Other payables to related parties

 

 

274,815

 

 

 

11,597

 

 

 

177,337

 

 

 

347,285

 

 

$

17,774,815

 

 

$

15,811,597

 

 

$

14,324,177

 

 

$

17,394,125

 

 

The Company incurred transaction costs on behalf of related parties of $1.3$3.2 million and$0.5 $1.3 million for the three months ended March 31, 20212022 and 2020,2021, respectively. These costs consist of retention bonuses and other compensation to employees, associated with the costs resulting from the integration of new businesses.

22


REPAY HOLDINGS CORPORATIONThe Company held receivables from related parties of $0.3 million as of both March 31, 2022 and December 31, 2021. These amounts were due from employees, related to tax withholding on vesting of equity compensation. See Note 14. Share based compensation for more detail on these restricted share awards.

NotesThe Company owed $14.3 million and $17.4 million to related parties, in the form of contingent consideration payable to the Unaudited Consolidated Financial Statements

sellers of Ventanex, CPS, BillingTree, Kontrol and Payix, who were employees of REPAY, as of March 31, 2022 and December 31, 2021, respectively. Further, the Company owed employees $0.0 million for amounts paid on behalf of the Company as of both March 31, 2022 and December 31, 2021.

14. Share Based Compensation

Omnibus Incentive Plan

At the 2019 Annual Shareholders Meeting of Thunder Bridge, the shareholders considered and approved the 2019 Omnibus Incentive Plan (the “Incentive Plan”) which resulted in the reservation of 7,326,728 shares of Class A common stock for issuance thereunder. The Incentive Plan became effective immediately upon the closing of the Business Combination.

Under this plan, the Company currently has twothree types of share-based compensation awards outstanding: performance stock units (“PSUs”), restricted stock awards (“RSAs”) and restricted stock units (“RSUs”).

The following table summarized share-based compensation expense and the related income tax benefit recognized for the Company’s share-based compensation awards:

 

 

Three Months Ended March 31,

 

($ in millions)

 

2022

 

 

2021

 

Share-based compensation expense

 

$

3.1

 

 

$

5.2

 

Income tax benefit

 

 

1.2

 

 

 

1.6

 

20


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

Activities for RSAs for the three months ended March 31, 2021 and 20202022 are as follows:

 

 

Class A

Common

Stock

 

 

Weighted

Average

Grant

Date Fair

Value

 

 

Class A Common Stock

 

 

Weighted Average Grant Date Fair Value

 

Unvested at December 31, 2020

 

 

2,523,431

 

 

$

15.71

 

Unvested at December 31, 2021

 

 

1,971,245

 

 

$

17.80

 

Granted

 

 

713,785

 

 

 

22.84

 

 

 

916,137

 

 

 

16.51

 

Forfeited (1)(2)

 

 

77,007

 

 

 

16.16

 

 

 

129,927

 

 

 

18.13

 

Vested

 

 

220,664

 

 

 

15.58

 

 

 

314,490

 

 

 

16.71

 

Unvested at March 31, 2021

 

 

2,939,545

 

 

$

18.09

 

Unvested at March 31, 2022

 

 

2,442,965

 

 

$

17.44

 

Activities for RSUs for the three months ended March 31, 2022 are as follows:

 

 

Class A Common Stock

 

 

Weighted Average Grant Date Fair Value

 

Unvested at December 31, 2021

 

 

46,026

 

 

$

22.16

 

Granted

 

 

9,304

 

 

 

18.27

 

Forfeited

 

 

 

 

 

 

Vested

 

 

 

 

 

 

Unvested at March 31, 2022

 

 

55,330

 

 

$

21.51

 

Activities for PSUs for the three months ended March 31, 2022 are as follows:

 

 

Class A Common Stock

 

 

Weighted Average Grant Date Fair Value

 

Unvested at December 31, 2021

 

 

498,363

 

 

$

20.16

 

Granted (3)

 

 

389,032

 

 

 

16.73

 

Forfeited

 

 

 

 

 

 

Vested

 

 

 

 

 

 

Unvested at March 31, 2022

 

 

887,395

 

 

$

18.66

 

 

(1)

The forfeited shares include employee terminations during the three months ended March 31, 2021;2022; further, these forfeited shares are added back to the amount of shares available for grant under the Incentive Plan.

(2)

Upon vesting, award-holders elected to sell shares to the Company in order to satisfy the associated tax obligations. The awards are not deemed outstanding; further, these forfeited shares are added back to the amount of shares available for grant under the Incentive Plan.

(3)

Represent shares to be paid out at target level.

 

Unrecognized compensation expense related to unvested PSUs, RSAs and RSUs was $38.1 million at March 31, 2022, which is expected to be recognized as expense over the weighted-average period of 2.28 years. Unrecognized compensation expense related to unvested PSUs, RSAs and RSUs was $34.8 million at March 31, 2021, which is expected to be recognized as expense over the weighted-average period of 2.91 years. Unrecognized compensation expense related to unvested RSAs and RSUs was $32.8 million at March 31, 2020, which is expected to be recognized as expense over the weighted-average period of 2.64 years. The Company incurred $5.2 millionand $3.5 million of share-based compensation expense for the three months ended March 31, 2021 and 2020, respectively.

15. Taxation

Repay Holdings Corporation is taxed as a corporation and is subject to paying corporate federal, state and local taxes on the income allocated to it from Hawk Parent, based upon Repay Holding Corporation’s economic interest held in Hawk Parent, as well as any stand-alone income or loss it generates. Hawk Parent is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Hawk Parent is not subject to U.S. federal and certain state and local income taxes. Hawk Parent’s members, including Repay Holdings Corporation, are liable for federal, state and local income taxes based on their allocable share of Hawk Parent’s pass-through taxable income.

 

21


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

The Company’s effective tax rate was 24.8% and 7.8%, as restated,23.0% for the three months ended March 31, 2021 and 2020, respectively.2022. The Company recorded an income tax benefitexpense of $5.9 million,and $1.1$3.8 million for the three months ended March 31, 2021 and 2020, respectively.2022. The effective tax rate for the three months ended March 31, 20212022 includes a stock-based compensation adjustments excess tax benefitshortfall related to restricted stock awards vesting, which is required to be recorded discretely in the interim period in which it occurs.

The Company’s effective tax rate was 24.8%, for the three months ended March 31, 2021. The Company recognizedrecorded an income tax benefit of $5.9 million and $1.1 million for the three months ended March 31, 2021. The effective tax rate is dependent on many factors, including the estimated amount of income subject to income tax. As such, the effective tax rate can vary from period to period.

The Company recognized ($3.8) million for the three months ended March 31, 2022, of deferred tax assets related to the income tax expense derived from the net operating income generated over the same period. The Company recognized $5.9 million for the three months ended March 31, 2021, and 2020, respectively, of deferred tax assets related to the income tax benefit derived from the net operating loss over the same

23


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

periods. period. The Company did 0t0t recognize any changes to the valuation allowance as of March 31, 2021,2022, and the facts and circumstances remain unchanged.

 

Deferred tax assets, net of $141.8$141.4 million for the three months endedas of March 31, 2021,2022, relates primarily to the basis difference in the Company’s investment in Hawk Parent. The basis difference arose primarily as a result of athe subsequent purchase of Post-Merger Repay Units by the Company pursuant to the Unit Purchase Agreements entered into in 2020 with CC Payment Holdings, LLC, an entity controlled by Corsair, and the subsequent exchanges of Post-Merger Repay Units for shares of the Company’s Class A common stock in accordance with the Exchange Agreement.

As In addition, as a result of the Post-Merger Repay Unit exchange duringmerger with BillingTree on June 15, 2021, an estimated opening deferred tax liability net of $31.4 million, as adjusted, was recorded. The merger was recognized as a Qualified Stock Purchase within the three months ended March 31, 2021,meaning of Internal Revenue Code (the “Code”) Section 338(d)(3). As such, no step up in the tax asset basis was permitted creating an estimated net deferred tax liability related to the tax asset basis difference in the investment in Hawk Parent on the opening balance sheet date.

The Company recognized an additionaldid not recognize any adjustment to the deferred tax asset (“DTA”) and offsetting deferred tax liability (“DTL”) inrecorded as a result of the amount of $5,064ceiling rule limitation arising under Code Sec. 704(c) for the three months ended March 31, 2022, to account for the portion of the Company’s outside basis in the partnership interest that it will not recover through tax deductions, a ceiling rule limitation arising under Internal Revenue Code (the “Code”) sec. 704(c).deductions. As the ceiling rule causes taxable income allocations to be in excess of 704(b) book allocations the DTL will unwind, leaving only the DTA, which may only be recovered through the sale of the partnership interest in Hawk Parent. The Company has concluded, based on the weight of all positive and negative evidence, that all of the DTA associated with the ceiling rule limitation is not likely to be realized. As such, a 100% valuation allowance was recognized.

 

NaN uncertain tax positions existed as of March 31, 2021.2022.

 

Tax Receivable Agreement Liability

 

Pursuant to the Company’s election under Section 754 of the Code, the Company expects to obtain an increase in its share of the tax basis in the net assets of Hawk Parent when Post-Merger Repay Units are redeemed or exchanged for Class A common stock of Repay Holdings Corporation. The Company intends to treat any redemptions and exchanges of Post-Merger Repay Units as direct purchases for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that the Company would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

On July 11, 2019, the Company entered into a TRA that provides for the payment by the Company of 100% of the amount of any tax benefits realized, or in some cases are deemed to realize, as a result of (i) increases in its share of the tax basis in the net assets of Hawk Parent resulting from any redemptions or exchanges of Post-Merger Repay Units and from its acquisition of the equity of the selling Hawk Parent members, (ii) tax basis increases attributable to payments made under the TRA, and (iii) deductions attributable to imputed interest pursuant to the TRA (the “TRA Payments”). The TRA Payments are not conditioned upon any continued ownership interest in Hawk Parent or the Company. The rights of each party under the TRA other than the Company are assignable. The timing and amount of

22


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

aggregate payments due under the TRA may vary based on a number of factors, including the timing and amount of taxable income generated by the Company each year, as well as the tax rate then applicable, among other factors.

 

As of March 31, 2021,2022, the Company had a liability of $230.4$221.2 million related to its projected obligations under the TRA, which is captioned as tax receivable agreement liability in the Company’s Unaudited Consolidated Balance Sheet. The increasedecrease of $24.6 million in the TRA liability for the three months ended March 31, 2021,2022, was primarily a result of a selling member of Hawk Parent exchanging 375,000Post-Merger Repay Units for shares of the Company’s Class A common stockchange in the three months ended March 31, 2021 in accordance with the Exchange Agreement. This resulted in an increase to the Company’s share of the tax basis in the net assets of Hawk Parent.Early Termination Rate.

24


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Consolidated Financial Statements

16. Subsequent events

Management has evaluated subsequent events and their potential effects on these unaudited consolidated financial statements through May 10, 2021, which isstatements. Based upon the datereview, management did not identify any subsequent events that would have required adjustment or disclosure in the unaudited consolidated financial statements were available to be issued.

On May 10, 2021, the Company announced the acquisition of BillingTree for approximately $503.0 million, consisting of $275.0 million in cash and $228.0 million in shares of newly issued Class A common stock. The cash consideration for the transaction will be financed with cash on hand and is expected to close by the end of the second quarter, subject to certain customary closing conditions.statements.

 

 

 


2523


 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For purposes of this section, "Repay", the “Company", "we", or "our" refer to Repay Holdings Corporation and its subsidiaries, unless the context otherwise requires. Certain figures have been rounded for ease of presentation and may not sum due to rounding.

 

Cautionary Note Regarding Forward-Looking Statements

Statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including those set forth under Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K as amended.for the year ended December 31, 2021.

Overview

We are a leading payments technology company. We provide integrated payment processing solutions to industry-oriented vertical markets in which businessesclients have specific and bespoke transaction processing needs. We refer to these markets as “vertical markets” or “verticals.”

Our proprietary, integrated payment technology platform reduces the complexity of the electronic payments process for businesses, while enhancing their consumers’ overall experience. We are a payments innovator, differentiated by our proprietary, integrated payment technology platform and our ability to reduce the complexity of the electronic payments for businesses. We intend to continue to strategically target verticals where we believe our ability to tailor payment solutions to our customers’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 customersclients and fostering long-term customerclient relationships.

Since a significant portion of our revenue is derived from volume-based payment processing fees, card payment volume is a key operating metric that we use to evaluate our business. We processed approximately $4.6$6.4 billion of total card payment volume infor the three months ended March 31, 2021,2022, and our card payment volume growth over the same period in 20202021 was approximately 20%39%.

The ultimate impacts of the COVID-19 pandemic and related economic conditions on the Company’sour results remain uncertain. The scope, duration and magnitude of the direct and indirect effects of the COVID-19 pandemic continue to evolve and in ways that are difficult to fully anticipate. At this time, we cannot reasonably estimate the full impact of the pandemic on the Company, given the uncertainty over the duration and severity of the economic crisis. In addition, the impact of COVID-19 on the Company’sour results in 2020 and in the first quarter of 20212022 may not be necessarily indicative of its impact on the Company’sour results infor the remainder of 2021.

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, as amended, we restated our previously issued consolidated financial statements for periods following the Business Combination through December 31, 2020 to make accounting corrections related to warrant accounting. This Quarterly Report on Form 10-Q reflects the restated consolidated financial statements as of December 31, 2020 and for the quarter ended March 31, 2020.2022.

Business Combination

The Company was formed upon closing of the merger (the “Business Combination”) of Hawk Parent Holdings LLC (together with Repay Holdings, LLC and its other subsidiaries, “Hawk Parent”) with a subsidiary of Thunder Bridge Acquisition, Ltd, (“Thunder Bridge”), a special purpose acquisition company, on July 11, 2019 (the “Closing Date”).2019. On the Closing Date,closing of the Business Combination, Thunder Bridge changed its name to “Repay Holdings Corporation.”

Key Factors Affecting Our Business

Key factors that we believe impact our business, results of operations and financial condition include, but are not limited to, the following:


the dollar amount volume and the number of transactions that are processed by the customersclients that we currently serve;

our ability to attract new merchantsclients and onboard them as active processing customers;clients;

our ability to (i) successfully integrate recent acquisitions and (ii) complete future acquisitions;


our ability to offer new and competitive payment technology solutions to our customers;clients; and

general economic conditions and consumer finance trends.

Key Components of Our Revenues and Expenses

Revenues

Revenue. As our customersclients process increased volumes of payments, our revenues increase as a result of the fees we charge for processing these payments. Most of our revenues are derived from volume-based payment processing fees (“discount fees”) and other related fixed per transaction fees. Discount fees represent a percentage of the dollar amount of each credit or debit transaction processed and include fees relating to processing and services that we provide. The transaction price for such processing services areis determined, based on the judgment of management, considering factors such as margin objectives, pricing practices and controls, customerclient segment pricing strategies, the product life cycle and the observable price of the service charged to similarly situated customers.clients. During the three months ended March 31, 20212022 and 2020, we believe2021, our chargeback rate was less than 1% of our card payment volume.

Expenses

Other costsCosts of services. Other costsCosts of services primarily include commissions to our software integration partners and other third-party processing costs, such as front and back-end processing costs and sponsor bank fees.

Selling, general and administrative. Selling, general and administrative expenses include salaries, share-based compensation and other employment costs, professional service fees, rent and utilities, and other operating costs.

Depreciation and amortization. Depreciation expense consists of depreciation on our investments in property, equipment and computer hardware. Depreciation expense is recognized on a straight-line basis over the estimated useful life of the asset. Amortization expense for software development costs and purchased software is recognized on the straight-line method over a three-year estimated useful life, over a ten-yearbetween eight to ten years estimated useful life for customerclient relationships and channel relationships, and over a five-yearbetween two to five years estimated useful life for non-compete agreements.

Interest expense. Interest expense consists of interest in respect of our indebtedness under the Successor Credit Agreement, which was entered into in connection with the Business Combination and amended in February 2020, and the Amended Credit Agreement, which replaced the Successor Credit Agreement in February 2021.

Change in fair value of warrant liabilities. This amount represents the change in fair value of the warrant liabilities. The warrant liabilities are carried at fair value; so, any change to the valuation of this liability is recognized through this line in other expense. The change in fair value results from the change of underlying publicly listed trading price of our Class A common stock at each measurement date.

Change in fair value of tax receivable liability. This amount represents the change in fair value of the tax receivable agreement liability. The TRA liability is carried at fair value; so, any change to the valuation of this liability is recognized through this line in other expense. The change in fair value can result from the redemption or exchange of Post-Merger Repay Units for Class A common stock of Repay Holdings Corporation, or through accretion of the discounted fair value of the expected future cash payments.


Results of Operations (Unaudited)

 

 

Three Months ended March 31

 

 

Three Months ended March 31,

 

(in $ thousands)

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Revenue

 

$

47,520

 

 

$

39,463

 

 

$

67,564

 

 

$

47,520

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other costs of services

 

$

12,475

 

 

$

10,771

 

Costs of services (exclusive of depreciation and amortization shown separately below)

 

$

16,565

 

 

$

12,475

 

Selling, general and administrative

 

 

23,393

 

 

 

18,166

 

 

 

32,218

 

 

 

23,393

 

Depreciation and amortization

 

 

17,793

 

 

 

13,904

 

 

 

28,589

 

 

 

17,793

 

Change in fair value of contingent consideration

 

 

2,649

 

 

 

 

 

 

(2,900

)

 

 

2,649

 

Total operating expenses

 

$

56,310

 

 

$

42,841

 

 

$

74,472

 

 

$

56,310

 

Income (loss) from operations

 

$

(8,790

)

 

$

(3,379

)

Interest expenses

 

 

(1,183

)

 

 

(3,518

)

Loss from operations

 

$

(6,908

)

 

$

(8,790

)

Interest expense

 

 

(989

)

 

 

(1,183

)

Loss on extinguishment of debt

 

 

(5,941

)

 

 

 

 

 

 

 

 

(5,941

)

Change in fair value of warrant liabilities

 

 

 

 

 

(6,898

)

Change in fair value of tax receivable liability

 

 

1,043

 

 

 

(542

)

 

 

24,619

 

 

 

1,043

 

Other income

 

 

28

 

 

 

39

 

 

 

6

 

 

 

28

 

Other loss

 

 

(9,080

)

 

 

 

 

 

 

 

 

(9,080

)

Total other (expenses) income

 

 

(15,133

)

 

 

(10,919

)

Income (loss) before income tax expense

 

 

(23,923

)

 

 

(14,298

)

Income tax benefit

 

 

5,942

 

 

 

1,116

 

Total other income (expense)

 

 

23,636

 

 

 

(15,133

)

Income (loss) before income tax (expense) benefit

 

 

16,728

 

 

 

(23,923

)

Income tax (expense) benefit

 

 

(3,843

)

 

 

5,942

 

Net income (loss)

 

$

(17,981

)

 

$

(13,182

)

 

$

12,885

 

 

$

(17,981

)

Net income (loss) attributable to non-controlling interest

 

 

(2,187

)

 

 

(2,852

)

Net loss attributable to non-controlling interest

 

 

(767

)

 

 

(2,187

)

Net income (loss) attributable to the Company

 

$

(15,794

)

 

$

(10,330

)

 

$

13,652

 

 

$

(15,794

)

Weighted-average shares of Class A common stock outstanding - basic and diluted

 

 

76,602,759

 

 

 

37,624,829

 

Loss per Class A share - basic and diluted

 

$

(0.21

)

 

$

(0.27

)

 

 

 

 

 

 

 

 

Weighted-average shares of Class A common stock outstanding - basic

 

 

88,607,655

 

 

 

76,602,759

 

Weighted-average shares of Class A common stock outstanding - diluted

 

 

113,015,159

 

 

 

76,602,759

 

 

 

 

 

 

 

 

 

Income (loss) per Class A share - basic

 

$

0.15

 

 

$

(0.21

)

Income (loss) per Class A share - diluted

 

$

0.12

 

 

$

(0.21

)

 

Three Months Ended March 31, 20212022 Compared to Three Months Ended March 31, 20202021

Revenue

Total revenue was $67.6 million for the three months ended March 31, 2022 and $47.5 million for the three months ended March 31, 2021, and $39.5 million for the three months ended March 31, 2020, an increase of $8.1$20.1 million or 20.4%42.2%. This increase was the result of newly signed customers,clients, the growth of our existing customers,clients, as well as the acquisitions of Ventanex, cPayPlusBillingTree, Kontrol, and CPS.Payix. For the three months ended March 31, 2021,2022, incremental revenues of approximately $4.9$17.2 million are attributable to Ventanex, cPayPlusBillingTree, Kontrol and CPS.Payix.

Other Costs of Services

Other costsCosts of services were $16.6 million for the three months ended March 31, 2022 and $12.5 million for the three months ended March 31, 2021, and $10.8 million for the three months ended March 31, 2020, an increase of $1.7$4.1 million or 15.8%32.8%. This increase was the result of the acquisitions of BillingTree, Kontrol, and Payix. For the three months ended March 31, 2021,2022, incremental costs of services of approximately $1.7$3.0 million are attributable to Ventanex, cPayPlusBillingTree, Kontrol and CPS.Payix.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $23.3$32.2 million for the three months ended March 31, 2022 and $23.4 million for the three months ended March 31, 2021, and $18.2 million for the three months ended March 31, 2020, an increase of $5.1$8.8 million or 28.0%. This increase was37.7%, primarily due to a $6.2 million increase in compensation expenses with general business growth and increasesa $1.6 million increase in expenses relating to software and technological services.

Depreciation and Amortization Expenses

Depreciation and amortization expenses were $28.6 million for the three months ended March 31, 2022 and $17.8 million for the three months ended March 31, 2021, and $13.9 million for the three months ended March 31, 2020, an increase of $3.9$10.8 million or 28.8%. The increase was60.7%, primarily due to fair value adjustments to intangibles resulting from the Business Combination, as well as additionala $9.4 million increase in depreciation and amortization of fixed assets and intangibles from the acquisitions of Ventanex, cPayPlusBillingTree, Kontrol and CPS.Payix.


Change in the Fair Value of Contingent Consideration

Change in the fair value of contingent consideration was $2.6$2.9 million for the three months ended March 31, 2021,2022, which consisted of fair value adjustments related to the contingent consideration for the acquisitions of Ventanex, cPayPlusCPS, Kontrol and CPS.Payix.

Interest Expense

Interest expense was $1.0 million for the three months ended March 31, 2022 and $1.2 million for the three months ended March 31, 2021, and $3.5 million for the three months ended March 31, 2020, a decrease of $2.3$0.2 million or 66.4%16.4%. This decrease was due to a lower average outstanding principal balance under our Amended Credit Agreement as compared to the average outstanding principal balance under the Successor Credit Agreement.

Loss on Extinguishment of Debt

We incurred a loss of $5.9 million on extinguishment of debt for the three months ended March 31, 2021, due to the termination in full of all outstanding Delayed Draw Term Loan commitments under the Successor Credit Agreement.

Change in Fair Value of Warrant Liabilities

We incurred a change in the fair value of warrant liabilities of $6.9 million for the three months ended March 31, 2020, which was due to the mark-to-market valuation adjustments related to the increase in the publicly listed trading price of our stock. In July 2020, we completed the redemption of all of our outstanding warrants.

Change in Fair Value of Tax Receivable Liability

We incurred a loss,gain, related to accretion expense and fair value adjustment of the tax receivable liability of $1.0$24.6 million for the three months ended March 31, 20212022 compared to $0.5a $1.0 million gain for the three months ended March 31, 2020,2021, an increase of $1.5$23.6 million. This increase was due to higherlower fair value adjustments related to the tax receivable liability, primarily as a result of changes to the discount rate used to determine the fair value of the liability.

Other Loss

We incurred a loss of $9.1 million on the settlement of interest rate swaps for the three months ended March 31, 2021.

Income Tax (Expense) Benefit

The income tax expense was $3.8 million for the three months ended March 31, 2022, reflecting the expected income tax expense on the income generated over the same period. This was a result of the operating income incurred by the Company, primarily driven by the change in fair value of the tax receivable liability and contingent consideration, offset by stock-based compensation deductions and the amortization of assets acquired in the Business Combination and prior acquisitions. The income tax benefit was $5.9 million for the three months ended March 31, 2021, and the income tax benefit was $1.1 million for the three months ended March 31, 2020, which reflected the expected income tax benefit to be received on the net earnings related to the Company’s economic interest in Hawk Parent. This was a result of the operating loss incurred by the Company, primarily driven by stock-based compensation deductions, the amortization of assets acquired in the Business Combination and prior acquisitions, the write-off of deferred debt issuance costs and the loss recognized as part of the settlement of interest rate swaps.



 

Non-GAAP Financial Measures

This report includes certain non-GAAP financial measures that management uses to evaluate our operating business, measure our performance and make strategic decisions.

Adjusted EBITDA is a non-GAAP financial measure that represents net income prior to interest expense, tax expense, depreciation and amortization, as adjusted to add back certain charges deemed to not be part of normal operating expenses, non-cash andcharges and/or non-recurring charges, such as loss on extinguishment of debt, loss on termination of interest rate hedge, non-cash change in fair value of warrant liabilities, non-cash change in fair value of contingent consideration, non-cash change in fair value of assets and liabilities, share-based compensation charges, transaction expenses, employee recruiting costs, other taxes, restructuring and other strategic initiative costs and other non-recurring charges.

Adjusted Net Income is a non-GAAP financial measure that represents net income prior to amortization of acquisition-related intangibles, as adjusted to add back certain charges deemed to not be part of normal operating expenses, non-cash andcharges and/or non-recurring charges, such as loss on extinguishment of debt, loss on termination of interest rate hedge, non-cash change in fair value of warrant liabilities, non-cash change in fair value of contingent consideration, non-cash change in fair value of assets and liabilities, share-based compensation expense, transaction expenses, employee recruiting costs, restructuring and other strategic initiative costs, other non-recurring charges, non-cash interest expense and net of tax effect associated with these adjustments. Adjusted Net Income is adjusted to exclude amortization of all acquisition-related intangibles as such amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Management believes that the adjustment of acquisition-related intangible amortization supplements GAAP financial measures because it allows for greater comparability of operating performance. Although we exclude amortization from acquisition-related intangibles from our non-GAAP expenses, management believes that it is important for investors to understand that such intangibles were recorded as part of purchase accounting and contribute to revenue generation.

Adjusted Net Income per share is a non-GAAP financial measure that represents Adjusted Net Income divided by the weighted average number of shares of Class A common stock outstanding (on an as-converted basis)basis assuming conversion of the outstanding Post-Merger Repay Units) for the three andmonths ended March 31, 20212022 and 20202021 (excluding shares subject to forfeiture).

 

We believe that Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share provide useful information to investors and others in understanding and evaluating its operating results in the same manner as management. However, Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share are not financial measures calculated in accordance with GAAP and should not be considered as a substitute for net income, operating profit or any other operating performance measure calculated in accordance with GAAP. Using these non-GAAP financial measures to analyze our business has material limitations because the calculations are based on the subjective determination of management regarding the nature and classification of events and circumstances that investors may find significant. In addition, although other companies in our industry may report measures titled Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per share or similar measures, such non-GAAP financial measures may be calculated differently from how we calculate our non-GAAP financial measures, which reduces their overall usefulness as comparative measures. Because of these limitations, you should consider Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per share alongside other financial performance measures, including net income and our other financial results presented in accordance with GAAP.

The following tables set forth a reconciliation of our results of operations for the three months ended March 31, 20212022 and 2020.2021.



 

REPAY HOLDINGS CORPORATION

Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA

For the three months ended March 31, 20212022 and 20202021

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months ended March 31, 2021

 

(in $ thousands)

2021

 

 

2020(m)

 

Revenue

$

47,520

 

 

$

39,463

 

Operating expenses

 

 

 

 

 

 

 

Other costs of services

$

12,475

 

 

$

10,771

 

Selling, general and administrative

 

23,393

 

 

 

18,166

 

Depreciation and amortization

 

17,793

 

 

 

13,904

 

Change in fair value of contingent consideration

 

2,649

 

 

 

 

Total operating expenses

$

56,310

 

 

$

42,841

 

Income (loss) from operations

$

(8,790

)

 

$

(3,379

)

Interest expenses

 

(1,183

)

 

 

(3,518

)

Loss on extinguishment of debt

 

(5,941

)

 

 

 

Change in fair value of warrant liabilities

 

 

 

 

(6,898

)

Change in fair value of tax receivable liability

 

1,043

 

 

 

(542

)

Other income

 

28

 

 

 

39

 

Other loss

 

(9,080

)

 

 

 

Total other (expenses) income

 

(15,133

)

 

 

(10,919

)

Income (loss) before income tax expense

 

(23,923

)

 

 

(14,298

)

Income tax benefit

 

5,942

 

 

 

1,116

 

Net income (loss)

$

(17,981

)

 

$

(13,182

)

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

 

Interest expense

 

1,183

 

 

 

3,518

 

Depreciation and amortization(a)

 

17,793

 

 

 

13,904

 

Income tax (benefit)

 

(5,942

)

 

 

(1,116

)

EBITDA

$

(4,947

)

 

$

3,124

 

 

 

 

 

 

 

 

 

Loss on extinguishment of debt(b)

 

5,941

 

 

 

 

Loss on termination of interest rate hedge(c)

 

9,080

 

 

 

 

Non-cash change in fair value of warrant liabilities(d)

 

 

 

 

6,898

 

Non-cash change in fair value of contingent consideration(e)

 

2,649

 

 

 

 

Non-cash change in fair value of assets and liabilities(f)

 

(1,043

)

 

 

542

 

Share-based compensation expense(g)

 

5,151

 

 

 

3,523

 

Transaction expenses(h)

 

2,340

 

 

 

2,869

 

Employee recruiting costs(i)

 

136

 

 

 

 

Other taxes(j)

 

139

 

 

 

186

 

Restructuring and other strategic initiative costs(k)

 

628

 

 

 

78

 

Other non-recurring charges(l)

 

386

 

 

 

130

 

Adjusted EBITDA

$

20,460

 

 

$

17,350

 


 

Three Months ended March 31,

 

 

(in $ thousands)

2022

 

 

2021

 

 

Revenue

$

67,564

 

 

$

47,520

 

 

Operating expenses

 

 

 

 

 

 

 

 

Costs of services (exclusive of depreciation and amortization shown separately below)

$

16,565

 

 

$

12,475

 

 

Selling, general and administrative

 

32,218

 

 

 

23,393

 

 

Depreciation and amortization

 

28,589

 

 

 

17,793

 

 

Change in fair value of contingent consideration

 

(2,900

)

 

 

2,649

 

 

Total operating expenses

$

74,472

 

 

$

56,310

 

 

Loss from operations

$

(6,908

)

 

$

(8,790

)

 

Interest expense

 

(989

)

 

 

(1,183

)

 

Loss on extinguishment of debt

 

 

 

 

(5,941

)

 

Change in fair value of tax receivable liability

 

24,619

 

 

 

1,043

 

 

Other income

 

6

 

 

 

28

 

 

Other loss

 

 

 

 

(9,080

)

 

Total other income (expense)

 

23,636

 

 

 

(15,133

)

 

Income (loss) before income tax (expense) benefit

 

16,728

 

 

 

(23,923

)

 

Income tax (expense) benefit

 

(3,843

)

 

 

5,942

 

 

Net income (loss)

$

12,885

 

 

$

(17,981

)

 

 

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

 

 

Interest expense

 

989

 

 

 

1,183

 

 

Depreciation and amortization (a)

 

28,589

 

 

 

17,793

 

 

Income tax expense (benefit)

 

3,843

 

 

 

(5,942

)

 

EBITDA

$

46,306

 

 

$

(4,947

)

 

 

 

 

 

 

 

 

 

 

Loss on extinguishment of debt (b)

 

 

 

 

5,941

 

 

Loss on termination of interest rate hedge (c)

 

 

 

 

9,080

 

 

Non-cash change in fair value of contingent consideration (d)

 

(2,900

)

 

 

2,649

 

 

Non-cash change in fair value of assets and liabilities (e)

 

(24,619

)

 

 

(1,043

)

 

Share-based compensation expense (f)

 

3,357

 

 

 

5,151

 

 

Transaction expenses (g)

 

4,930

 

 

 

2,340

 

 

Employee recruiting costs (h)

 

200

 

 

 

136

 

 

Other taxes (i)

 

149

 

 

 

139

 

 

Restructuring and other strategic initiative costs (j)

 

1,246

 

 

 

628

 

 

Other non-recurring charges (k)

 

658

 

 

 

386

 

 

Adjusted EBITDA

$

29,327

 

 

$

20,460

 

 

 

 

 

 

 

 

 

 

 

 



 

REPAY HOLDINGS CORPORATION

Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income

For the three months ended March 31, 20212022 and 20202021

(Unaudited)

 

 

Three Months ended March 31, 2021

 

 

(in $ thousands)

2021

 

 

2020(m)

 

 

Revenue

$

47,520

 

 

$

39,463

 

 

Operating expenses

 

 

 

 

 

 

 

 

Other costs of services

$

12,475

 

 

$

10,771

 

 

Selling, general and administrative

 

23,393

 

 

 

18,166

 

 

Depreciation and amortization

 

17,793

 

 

 

13,904

 

 

Change in fair value of contingent consideration

 

2,649

 

 

 

 

 

Total operating expenses

$

56,310

 

 

$

42,842

 

 

Income (loss) from operations

$

(8,790

)

 

$

(3,379

)

 

Interest expenses

 

(1,183

)

 

 

(3,518

)

 

Loss on extinguishment of debt

 

(5,941

)

 

 

 

 

Change in fair value of warrant liabilities

 

 

 

 

(6,898

)

 

Change in fair value of tax receivable liability

 

1,043

 

 

 

(542

)

 

Other income

 

28

 

 

 

39

 

 

Other loss

 

(9,080

)

 

 

 

 

Total other (expenses) income

 

(15,133

)

 

 

(10,919

)

 

Income (loss) before income tax expense

 

(23,923

)

 

 

(14,298

)

 

Income tax benefit

 

5,942

 

 

 

1,116

 

 

Net income (loss)

$

(17,981

)

 

$

(13,182

)

 

 

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

 

 

Amortization of Acquisition-Related Intangibles(n)

 

16,039

 

 

 

13,203

 

 

Loss on extinguishment of debt(b)

 

5,941

 

 

 

 

 

Loss on termination of interest rate hedge(c)

 

9,080

 

 

 

 

 

Non-cash change in fair value of warrant liabilities(d)

 

 

 

 

6,898

 

 

Non-cash change in fair value of contingent consideration(e)

 

2,649

 

 

 

 

 

Non-cash change in fair value of assets and liabilities(f)

 

(1,043

)

 

 

542

 

 

Share-based compensation expense(g)

 

5,151

 

 

 

3,523

 

 

Transaction expenses(h)

 

2,340

 

 

 

2,869

 

 

Employee recruiting costs(i)

 

136

 

 

 

 

 

Restructuring and other strategic initiative costs(k)

 

628

 

 

 

78

 

 

Other non-recurring charges(l)

 

386

 

 

 

130

 

 

Non-cash interest expense(o)

 

536

 

 

 

 

 

Pro forma taxes at effective rate(p)

 

(8,722

)

 

 

(1,697

)

 

Adjusted Net Income

$

15,140

 

 

$

12,364

 

 

 

 

 

 

 

 

 

 

 

Shares of Class A common stock outstanding (on an as-converted basis)(q)

 

84,578,585

 

 

 

67,130,452

 

 

Adjusted Net income per share

$

0.18

 

 

$

0.18

 

 

 

Three Months ended March 31,

 

 

(in $ thousands)

2022

 

 

2021

 

 

Revenue

$

67,564

 

 

$

47,520

 

 

Operating expenses

 

 

 

 

 

 

 

 

Costs of services (exclusive of depreciation and amortization shown separately below)

$

16,565

 

 

$

12,475

 

 

Selling, general and administrative

 

32,218

 

 

 

23,393

 

 

Depreciation and amortization

 

28,589

 

 

 

17,793

 

 

Change in fair value of contingent consideration

 

(2,900

)

 

 

2,649

 

 

Total operating expenses

 

74,472

 

 

$

56,310

 

 

Loss from operations

$

(6,908

)

 

$

(8,790

)

 

Interest expense

 

(989

)

 

 

(1,183

)

 

Loss on extinguishment of debt

 

 

 

 

(5,941

)

 

Change in fair value of tax receivable liability

 

24,619

 

 

 

1,043

 

 

Other income

 

6

 

 

 

28

 

 

Other loss

 

 

 

 

(9,080

)

 

Total other income (expense)

 

23,636

 

 

 

(15,133

)

 

Income (loss) before income tax (expense) benefit

 

16,728

 

 

 

(23,923

)

 

Income tax (expense) benefit

 

(3,843

)

 

 

5,942

 

 

Net income (loss)

$

12,885

 

 

$

(17,981

)

 

 

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

 

 

Amortization of Acquisition-Related Intangibles(l)

 

23,136

 

 

 

16,039

 

 

Loss on extinguishment of debt (b)

 

 

 

 

5,941

 

 

Loss on termination of interest rate hedge (c)

 

 

 

 

9,080

 

 

Non-cash change in fair value of contingent consideration (d)

 

(2,900

)

 

 

2,649

 

 

Non-cash change in fair value of assets and liabilities (e)

 

(24,619

)

 

 

(1,043

)

 

Share-based compensation expense (f)

 

3,357

 

 

 

5,151

 

 

Transaction expenses (g)

 

4,930

 

 

 

2,340

 

 

Employee recruiting costs (h)

 

200

 

 

 

136

 

 

Restructuring and other strategic initiative costs (j)

 

1,246

 

 

 

628

 

 

Other non-recurring charges (k)

 

658

 

 

 

386

 

 

Non-cash interest expense (m)

 

703

 

 

 

536

 

 

Pro forma taxes at effective rate (n)

 

(1,194

)

 

 

(8,722

)

 

Adjusted Net Income

$

18,402

 

 

$

15,140

 

 

 

 

 

 

 

 

 

 

 

Shares of Class A common stock outstanding (on an as-converted basis) (o)

 

96,534,231

 

 

 

84,578,585

 

 

Adjusted Net income per share

$

0.19

 

 

$

0.18

 

 

 

 

(a)

See footnote (n)(l) for details on our amortization and depreciation expenses.

 

(b)

Reflects write-offs of debt issuance costs relating to Hawk Parent’s term loans.

 

(c)

Reflects realized loss of our interest rate hedging arrangement which terminated in conjunction with the repayment of Term Loans.

 

(d)

Reflects the mark-to-market fair value adjustments of the warrant liabilities.

(e)

Reflects the changes in management’s estimates of future cash consideration to be paid in connection with prior acquisitions from the amount estimated as of the most recent balance sheet date.

 

(f)(e)

Reflects the changes in management’s estimates of the fair value of the liability relating to the Tax Receivable Agreement.TRA.

 

(g)(f)

Represents compensation expense associated with equity compensation plans, totaling $5,150,598$3.4 million and $3,522,731 in$5.2 million for the three months ended March 31, 20212022 and 2020,2021, respectively.

 

(h)(g)

Primarily consists of (i) during the three months ended March 31, 2021,2022, professional service fees and other costs incurred in connection with the acquisitionacquisitions of Ventanex, cPayPlusBillingTree, Kontrol and CPS, as well as professional service expenses related to the January 2021 equity and convertible notes offerings,Payix, and (ii) during the three months ended March 31, 2020,2021, professional service fees and other costs incurred in connection with the


 

acquisition of Ventanex, cPayPlus, and additional transactionCPS, as well as professional service expenses incurred in connection withrelated to the Business CombinationJanuary 2021 equity and the acquisitions of TriSource and APS.convertible notes offerings.

 

(i)(h)

Represents payments made to third-party recruiters in connection with a significant expansion of our personnel, which we expect will become more moderate in subsequent periods.

 

(j)(i)

Reflects franchise taxes and other non-income based taxes.

 

(k)(j)

Reflects consulting fees related to our processing services and other operational improvements, including restructuring and integration activities related to our acquired businesses, that were not in the ordinary course during the three months ended March 31, 2022 and 2021.

(k)

For the three months ended March 31, 2022 and 2021, reflects extraordinary refunds to clients and 2020.other payments related to COVID-19 and non-cash rent expense.

 

(l)

For the three months ended March 31, 2021 and 2020 reflects extraordinary refunds to customers and other payments related to COVID-19. Additionally, in the three months ended March 31, 2021 reflects non-cash rent expense, and in the three months ended March 31, 2021, reflects expenses incurred related to one-time accounting system and compensation plan implementation related to becoming a public company.

(m)

Does not include adjustment for incremental depreciation and amortization recorded due to fair-value adjustments under ASC 805.

(n)

For the three months ended March 31, 2021,2022, reflects amortization of customerclient relationships, non-compete agreement, software, and channel relationship intangibles acquired through the Business Combination, and customerclient relationships, non-compete agreement, and software intangibles acquired through Repay Holdings, LLC’sour acquisitions of TriSource, APS, Ventanex, cPayPlus, CPS, BillingTree, Kontrol and CPS.Payix. For the three months ended March 31, 20202021 reflects amortization of customerclient relationships, non-compete agreement, software, and channel relationship intangibles acquired through the Business Combination, and customerclient relationships, non-compete agreement, and software intangibles acquired through our acquisitions of TriSource, APS, Ventanex, cPayPlus and Ventanex.CPS. This adjustment excludes the amortization of other intangible assets which were acquired in the regular course of business, such as capitalized internally developed software and purchased software. See additional information below for an analysis of our amortization expenses:

 

Three months ended March 31,

 

 

Three Months ended March 31,

 

(in $ thousands)

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Acquisition-related intangibles

 

$

16,039

 

 

$

13,203

 

 

$

23,136

 

 

$

16,039

 

Software

 

 

1,465

 

 

 

462

 

 

 

4,946

 

 

 

1,465

 

Amortization

 

$

17,504

 

 

$

13,665

 

 

$

28,082

 

 

$

17,504

 

Depreciation

 

 

289

 

 

 

239

 

 

 

507

 

 

 

289

 

Total Depreciation and amortization1

 

$

17,793

 

 

$

13,904

 

 

$

28,589

 

 

$

17,793

 

 

 

1)

Adjusted Net Income is adjusted to exclude amortization of all acquisition-related intangibles as such amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions (see corresponding adjustments in the reconciliation of net income to Adjusted Net Income presented above). Management believes that the adjustment of acquisition-related intangible amortization supplements GAAP financial measures because it allows for greater comparability of operating performance. Although we exclude amortization from acquisition-related intangibles from our non-GAAP expenses, management believes that it is important for investors to understand that such intangibles were recorded as part of purchase accounting and contribute to revenue generation. Amortization of intangibles that relate to past acquisitions will recur in future periods until such intangibles have been fully amortized. Any future acquisitions may result in the amortization of additional intangibles.

 

(o)(m)

Represents non-cash interest expense (deferreddeferred debt issuance costs).costs.

(p)(n)

Represents pro forma income tax adjustment effect associated with items adjusted above.

(q)(o)

Represents the weighted average number of shares of Class A common stock outstanding (on an as-converted basis)basis assuming conversion of outstanding Post-Merger Repay Units) for the three months ended March 31, 2021,2022 and 2021. These numbers do not include any shares issuable upon conversion of our 2026 Notes. See the three months ended March 31, 2020.reconciliation of basic weighted average shares outstanding to the non-GAAP Class A common stock outstanding on an as-converted basis for each respective period below:


 

 

Three Months ended March 31,

 

 

 

2022

 

 

2021

 

Weighted average shares of Class A common stock outstanding - basic

 

 

88,607,655

 

 

 

76,602,759

 

Add: Non-controlling interests

         Weighted average Post-Merger Repay Units exchangeable for Class A common stock

 

 

7,926,576

 

 

 

7,975,826

 

Shares of Class A common stock outstanding (on an as-converted basis)

 

 

96,534,231

 

 

 

84,578,585

 

Adjusted EBITDA for the three months ended March 31, 2022 and 2021 and 2020 was $20.5$29.3 million and $17.4$20.5 million, respectively, representing a 17.9%43.3% year-over-year increase. Adjusted Net Income for the three months ended March 31, 2022 and 2021 and 2020 was $15.1$18.4 million and $12.4$15.1 million, respectively, representing an 22.4%a 21.6% year-over-year decrease.increase. Our net lossincome (loss) attributable to the Company for the three months ended March 31, 2022 and 2021 and 2020 was $15.8$13.7 million and $10.3($15.8) million, respectively, representing a 52.9%186.4% year-over-year increase.


These increases in Adjusted EBITDA, Adjusted Net Income, and net income (loss) attributable to the Company for the three months ended March 31, 20212022 are primarily due to the loss on extinguishmentorganic growth of debt and loss on termination of interest rate hedge.our business, along with contributions from acquisitions.

Seasonality

We have experienced in the past, and may continue to experience, seasonal fluctuations in our volumes and revenues as a result of consumer spending patterns. Volumes and revenues, per each customerclient store, during the first quarter of the calendar year tend to increase in comparison to the remaining three quarters of the calendar year. This increase is due to consumers’ receipt of tax refunds and the increases in repayment activity levels that follow. Operating expenses show less seasonal fluctuation, with the result that net income is subject to the similar seasonal factors as our volumes and revenues.

Liquidity and Capital Resources

We have historically financed our operations and working capital through net cash from operating activities. As of March 31, 2021,2022, we had $390.9$65.3 million of cash and cash equivalents and available borrowing capacity of $125.0$165.0 million under the Amended Credit Agreement. This balance does not include restricted cash, which reflects cash accounts holding reserves for potential losses and customerclient settlement funds of $19.5$15.5 million at March 31, 2021.2022. Our primary cash needs are to fund working capital requirements, invest in technology development, fund acquisitions and related contingent consideration, make scheduled principal payments and interest payments on our outstanding indebtedness and pay tax distributions to members of Hawk Parent. We expect that our cash flow from operations, current cash and cash equivalents and available borrowing capacity under the Amended Credit Agreement will be sufficient to fund our operations and planned capital expenditures and to service our debt obligations for the next twelve months.

We are a holding company with no operations and depend on our subsidiaries for cash to fund all of our consolidated operations, including future dividend payments, if any. We depend on the payment of distributions by our current subsidiaries, including Hawk Parent, which distributions may be restricted by law or contractual agreements, including agreements governing their indebtedness. For a discussion of those considerations and restrictions, refer to Part I, Item 1A "Risk“Risk Factors - Risks Related to Our Class A Common Stock"Stock” in our Annual Report on Form 10-K as amended.for the year ended December 31, 2021.


Cash Flows

The following table presentpresents a summary of cash flows from operating, investing and financing activities for the periods indicated:

 

 

Three Months ended March 31,

 

 

 

Three Months ended March 31,

 

 

(in $ thousands)

 

2021

 

 

2020

 

 

 

2022

 

 

2021

 

 

Net cash provided by operating activities

 

$

4,769

 

 

$

8,571

 

 

 

$

13,754

 

 

$

4,769

 

 

Net cash used in investing activities

 

 

(5,206

)

 

 

(38,297

)

 

 

 

(7,566

)

 

 

(5,206

)

 

Net cash provided by (used in) financing activities

 

 

304,379

 

 

 

36,216

 

 

Net cash (used in) provided by financing activities

 

 

(1,698

)

 

 

304,379

 

 

 

Cash Flow from Operating Activities

Net cash provided by operating activities was $13.8 million and $4.8 million for the three months ended March 31, 2021.

Net cash provided by operating activities was $8.6 million in the three months ended March 31, 2020.

Cash provided by operating activities for the three months ended March 31,2022 and 2021, and 2020,respectively, reflects net income as adjusted for non-cash operating items including depreciation and amortization, share-based compensation, and changes in working capital accounts.


Cash Flow from Investing Activities

Net cash used in investing activities was $7.6 million and $5.2 million for the three months ended March 31, 2022 and 2021, respectively, due to the capitalization of software development activities.

Net cash used in investing activities was $38.3 million in the three months ended March 31, 2020, due to the acquisition of Ventanex, and capitalization of software development activities.

Cash Flow from Financing Activities

Net cash used in financing activities was $1.7 million for the three months ended March 31, 2022, due to the shares repurchased under Equity Plan.

Net cash provided by financing activities was $304.4 million for the three months ended March 31, 2021, due to proceeds from the issuance of new shares in the Equity Offerings,January 2021 equity offering and proceeds from the 2026 Notes, offset by repayment of the outstanding revolver balance related to the Successor Credit Agreement in connection with its amendment and the acquisition of Ventanex, and repayments of the term loan principal balance under the Successor Credit Agreement.

Net cash provided by financing activities was $36.2 million in the three months ended March 31, 2020, due to new borrowings related to the acquisition of Ventanex under the Successor Credit Agreement, as well as funds received related to the exercise of warrants, offset by repayment of the outstanding revolver balance related to the Successor Credit Agreement in connection with its amendment and the acquisition of Ventanex, and repayments of the Term Loan principal balance under the Successor Credit Agreement.

Indebtedness

Successor Credit Agreement

In connection with the Business Combination, on July 11, 2019, TB Acquisition Merger Sub LLC, Hawk Parent and certain subsidiaries of Hawk Parent, as guarantors, entered into a Revolving Credit and Term Loan Agreement (as amended, the “Successor Credit Agreement”) with certain financial institutions, as lenders, and Truist Bank (formerly SunTrust Bank), as the administrative agent.

On February 10, 2020, we announced the acquisition of Ventanex. The closing of the acquisition was financed partially from new borrowings under our existing credit facility. As part of the financing for the transaction, we entered into an agreement with Truist Bank and other members of its existing bank group to amend and upsize the Successor Credit Agreement.

On January 20, 2021, we used a portion of the proceeds from the 2026 Notes to prepay in full the entire amount of the outstanding term loans under the Successor Credit Agreement. We also terminated in full all outstanding delayed draw term loan commitments under such credit facilities.

Amended Credit Agreement

On February 3, 2021, the Company announced the closing of a new undrawn $125$125.0 million senior secured revolving credit facility through Truist Bank. The Amended Credit Agreement replaced the Successor Credit Agreement, which included an undrawn $30$30.0 million revolving credit facility. We currently expect that


On December 29, 2021, we will remain in compliance with the restrictive financial covenants ofincreased our existing senior secured credit facilities by $60.0 million to provide for a $185.0 million revolving credit facility pursuant to an amendment to the Amended Credit Agreement, prospectively.Agreement.

As of March 31, 2021,2022, the Amended Credit Agreement provides for a revolving credit facility of $125.0$185.0 million. As of March 31, 2021,2022, we had $0.0$20.0 million drawn against the revolving credit facility.facility at a variable interest rate of 2.25% plus 1-month LIBOR due 2026. We paid $97,222$0.2 million and $42,361$0.1 million in fees related to unused commitments for the three months ended March 31, 20212022 and 2020,2021, respectively.

Convertible Senior Debt

On January 19, 2021, we issued $440.0 million in aggregate principal amount of 0.00% Convertible Senior Notes due 2026 in a private placement (the “Notes Offering”) to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. $40.0 million in aggregate principal amount of such 2026 Notes were sold in the Notes Offering in connection with the full exercise of the initial purchasers’ option to purchase such additional 2026 Notes pursuant to the purchase agreement. Upon conversion, the Company may choose to pay or deliver cash,


shares of the Company’s Class A Common Stock, or a combination of cash and shares of the Company’s Class A Common Stock. The 2026 Notes will mature on February 1, 2026, unless earlier converted, repurchased or redeemed.

As of March 31, 2021,2022, we had convertible senior debt outstanding of $427.3$431.5 million, net of deferred issuance costs, under the 2026 Notes, and werevolving credit facility debt outstanding of $17.7 million, net of deferred issuance costs, under the Amended Credit Agreement. We were in compliance with the related restrictive financial covenants. Additionally, we currently expect that we will remain in compliance with the restrictive financial covenants ofunder the 2026 Notes and the Amended Credit Agreement, prospectively.

Tax Receivable Agreement

Upon the completion of the Business Combination, we entered into the Tax Receivable Agreement (the “TRA”) with holders of limited liability company interests of Hawk Parent (the “Post-Merger Repay Units”). As a result of the TRA, we established a liability in our consolidated financial statements. Such liability, which will increase upon the redemptions or exchanges of Post-Merger Repay Units for the Class A common stock of the Company, generally represents 100% of the estimated future tax benefit, if any, relating to the increase in tax basis that will result from redemptions or exchanges of the Post-Merger Repay Units for shares of Class A common stock pursuant to the Exchange Agreement and certain other tax attributes of the Company and tax benefits of entering into the TRA, including tax benefits attributable to payments under the TRA.

Under the terms of the TRA, we may elect to terminate the TRA early but will be required to make an immediate payment equal to the present value of the anticipated future cash tax savings. As a result, the associated liability reported on our consolidated financial statements may be increased. We expect that the payment obligations of the Company required under the TRA will be substantial. The actual increase in tax basis, as well as the amount and timing of any payments under the TRA, will vary depending upon a number of factors, including the timing of redemptions or exchanges by the holders of Post-Merger Repay Units, the price of the Class A common stock of the Company at the time of the redemption or exchange, whether such redemptions or exchanges are taxable, the amount and timing of the taxable income we generate in the future, the tax rate then applicable and the portion of our payments under the TRA constituting imputed interest. 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.

Critical Accounting Policies and Recently Issued Accounting Pronouncements

There have been no significant changes to our critical accounting policies for the three months ended March 31, 2022. See Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as amended,2021, for a complete discussion of critical accounting policies.

For information related to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 2. Basis of Presentation and Summary of Significant Accounting Policies, to our Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

Off-Balance Sheet Arrangements

We did not have any material off-balance sheet arrangements as of March 31, 2021 or December 31, 2020.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Effects of Inflation

While inflation may impact our revenues and cost of services, we believe the effects of inflation, if any, on our results of operations and financial condition have not been significant. However, there can be no assurance that our results of operations and financial condition will not be materially impacted by inflation in the future.

Interest Rate Risk

Interest rates are highly sensitive to many factors, including U.S. fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond our control. Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. We


are exposed to market risk from changes in interest rates on debt, which bears interest at variable rates. Our debt has floating interest rates. We are exposed to changes in the level of interest rates and to changes in the relationship or spread between interest rates for its floating rate debt. Our floating rate debt requires payments based on variable interest rates such as the federal funds rate, prime rate, eurocurrency rate, and LIBOR. Therefore, increases in interest rates may reduce our net income or loss by increasing the cost of debt. As of March 31, 2022, we had convertible senior debt of $431.5 million, net of deferred issuance costs, and revolving credit facility borrowings of $17.7 million, net of deferred issuance costs, outstanding under the respective debt agreements. As of December 31, 2021, we had convertible senior debt of $427.3$429.3 million, net of deferred issuance costs, and revolverrevolving credit facility borrowings of $0.0$19.2 million, outstandingnet of deferred issuance costs, outstanding. The borrowings under the respective credit agreements. As of December 31, 2020, we had term loan borrowings of $256.7 million, and revolver borrowings of $0.0 million outstanding under the respective credit agreements. The borrowingsAmended Credit Agreement accrue interest at either base rate, described above under “Liquidity and Capital Resources — Indebtedness,” plus a margin of 1.50% to 2.50% or at an adjusted LIBOR rate plus a margin of 2.50% to 3.50% under the Amended Credit Agreement, in each case depending on the total net leverage ratio, as defined in the respective agreements governing the Amended Credit Agreement.

In October 2019, we entered into a $140.0 million notional interest rate swap agreement, and in February 2020, we entered into a $30.0 million notional interest rate swap agreement, then a revised notional amount of $65.0 million beginning on September 30, 2020. These interest rate swaps effectively converted $205.0 million of the outstanding term loan into to fixed rate payments for 57 months and 60 months, respectively. A 1.0% increase or decrease in the interest rate applicable to borrowings under the Successor Credit Agreement during the year ended December 31, 2020 would have increased or decreased cash interest expense on our indebtedness by approximately $1.0 million per annum and $1.0 million per annum, respectively. As of March 31, 2021, bothBoth interest rate swaps were settled.settled in January 2021.

We may incur additional borrowings from time to time for general corporate purposes, including working capital and capital expenditures.

In July 2017, the U.K. Financial Conduct Authority announced its intention to phase out LIBOR rates by the end of 2021. The deadline has been mostly extended and most U.S. dollar-denominated LIBOR maturity tenors will continue to be published until June 30, 2023. It is not possible to predict the effect of any changes in the methods by which the LIBOR is determined, or any other reforms to LIBOR that may be enacted in the United Kingdom or elsewhere. Such developments may cause LIBOR to perform differently than in the past, including sudden or prolonged increases or decreases in LIBOR, or cease to exist, resulting in the application of a successor base rate under the Amended Credit Agreement, which in turn could have unpredictable effects on our interest payment obligations under the Amended Credit Agreement.

Foreign Currency Exchange Rate Risk

Invoices for our services are denominated in U.S. dollars and Canadian dollars. We do not expect our future operating results to be significantly affected by foreign currency transaction risk.


 

ITEM 4. CONTROLS AND PROCEDURES

 

Controls and Procedures

 

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this Quarterly Report on Form 10-Q, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2021,2022, our disclosure controls and procedures were not effective due solely to ensure that the material weaknessinformation required to be disclosed by us in our internal control over financial reporting related toreports that we file or submit under the restatement described below. Notwithstanding this material weakness, management has concluded that our financial statements includedExchange Act is recorded, processed, summarized and reported within the time periods specified in this Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with GAAP for each of the periods presented therein.SEC’s rules and forms.


 

Changes in Internal Control over Financial Reporting

Our internal control over financial reporting, specifically the review controls over the evaluation of complex, non-routine transactions, were insufficient to detect the proper accounting and reporting for the public warrants and private placement warrants previously issued by Thunder Bridge (collectively, the “Warrants”), which were outstanding and recorded on our consolidated financial statements at the time of the Business Combination. Management identified this error when the Securities and Exchange Commission issued a statement (the “Statement”) on the accounting and reporting considerations for warrants issued by special purpose acquisition companies on April 12, 2021. The Statement addresses certain accounting and reporting considerations related to warrants of a kind similar to the Warrants. This control deficiency resulted in the Company having to restate certain of our audited consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2020 and the quarterly periods included therein, and if not remediated, could result in a material misstatement to future annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, management has determined that this control deficiency constitutes a material weakness. Since the restatement, management has implemented remediation steps to address that material weakness and to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals. We can offer no assurance that these initiatives will ultimately have the intended effects.

Other than the remediation efforts relating to the material weakness described above. There have been no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the quarter ended March 31, 20212022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 



PART II – OTHER INFORMATION

 

 

From time to time we are named as a defendant in legal actions arising from our normal business activities. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, we do not believe any currently pending legal proceeding to which we are a party will have a material adverse effect on our business, prospects, financial condition, cash flows or results of operations.

 

ITEM 1A. RISK FACTORS

 

There have been no material changes with respect to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, as amended.2021.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

In connection with the vesting of restricted stock awards, shares of Class A common stock are delivered to the Company by employees to satisfy tax withholding obligations. The following table summarizes such purchases of Class A common stock for the three months ended March 31, 2021:2022:

 


 

 

Total Number of Shares Purchased (1)

 

 

Average Price Paid per Share

 

 

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

 

 

Approximate Dollar Value of Shares that May yet be Purchased Under the Plans or Programs

 

January 1-31, 2021

 

 

5,269

 

 

$

11.98

 

 

 

-

 

 

$

-

 

February 1-28, 2021

 

 

4,978

 

 

 

11.98

 

 

 

-

 

 

 

-

 

March 1-31, 2021

 

 

62,170

 

 

 

16.77

 

 

 

-

 

 

 

-

 

Total

 

 

72,417

 

 

$

16.09

 

 

 

-

 

 

$

-

 

 

 

Total Number of Shares Purchased (1)

 

 

Average Price Paid per Share

 

 

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

 

 

Approximate Dollar Value of Shares that May yet be Purchased Under the Plans or Programs

 

January 1-31, 2022

 

 

3,625

 

 

$

18.15

 

 

 

-

 

 

$

-

 

February 1-28, 2022

 

 

36,372

 

 

 

17.51

 

 

 

-

 

 

 

-

 

March 1-31, 2022

 

 

73,268

 

 

 

13.61

 

 

 

-

 

 

 

-

 

Total

 

 

113,265

 

 

$

15.01

 

 

 

-

 

 

$

-

 

 

 

(1)

During the quarterthree months ended March 31, 2021,2022, pursuant to the Incentive Plan, we withheld 72,417withheld 113,265 shares at an average price per share of $16.09$15.01 in order to satisfy employees' tax withholding and payment obligations in connection with the vesting of awards of restricted stock, which we withheld at fair market value on the vesting date.

 

ITEM 3. DEFAULT UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.



ITEM 6. EXHIBITS

 

The exhibits listed in the following exhibit index are furnished as part of this report.

 

EXHIBIT INDEX

 

 

 

Exhibit

 

 

Number

    

Exhibit Description

 

 

 

 

 

 

2.1

Agreement and Plan of Merger, dated as of May 7, 2021, by and among BT Intermediate, LLC, Repay Holdings Corporation, Beckham Acquisition LLC, Beckham Merger Sub LLC and BillingTree Parent, L.P. (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on May 10, 2021).

3.1

 

Certificate of Corporate Domestication of Repay Holdings Corporation (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on July 17, 2019.2019).

 

 

 

3.2

 

Certificate of Incorporation of Repay Holdings Corporation (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed on July 17, 2019).

 

 

 

3.3

 

By-Laws of Repay Holdings Corporation (incorporated by reference to Exhibit 3.3 to the Company’s Form 8-K filed on July 17, 2019).

 

 

 

4.110.1

 

Indenture,Second Amendment to Employment Agreement, dated as of January 19, 2021March 1, 2022, between Repay Holdings CorporationManagement Services LLC (as assignee of M & A Ventures, LLC) and U.S. Bank National AssociationJohn Morris (incorporated by reference to Exhibit 4.1 of10.1 to the Company’s Form 8-K (File No. 001-38531), filed with the SEC on January 19, 2021)March 1, 2022).

 

 

 

10.1†10.2*

 

Amended and Restated Revolving CreditEmployment Agreement, dated February 3,April 1, 2020, between Repay Management Services LLC and Jacob H. Moore.

10.3*

First Amendment to Employment Agreement, dated March 1, 2021, bybetween Repay Management Services LLC and among Repay Holdings Corporation, Hawk Parent Holdings LLC, Truist Bank, as Administrative Agent, and the other parties thereto (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K (File No. 001-38531), filed with the SEC on February 5, 2021).Jacob H. Moore.

 

 

 

31.1*

 

Certification of Principal Executive Officer of Repay Holdings Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


 

 

 

31.2*

 

Certification of Principal Financial Officer of Repay Holdings Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1*

 

Certification of Principal Executive Officer of Repay Holdings Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.2*

 

Certification of Principal Financial Officer of Repay Holdings Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

101

 

The following financial statements from the Company’s Form 10‑Q for the quarter ended March 31, 2021,2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Changes In Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to the Unaudited Consolidated Financial Statements.

 

104

 

 

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

*Filed herewith.

Schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Registration S-K. The registrant hereby agrees to furnish a copy of any omitted schedules to the Commission upon request.



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 

 

 

 

 

REPAY HOLDINGS CORPORATION

 

 

(Registrant)

 

 

 

 

 

 

Date: May 10, 20212022

By:

/s/ John Morris

 

 

John Morris

 

 

Chief Executive Officer
(Principal Executive Officer)

 

 

 

Date: May 10, 20212022

By:

/s/ Timothy J. Murphy

 

 

Timothy J. Murphy

 

 

Chief Financial Officer

 

 

(Principal Financial Officer)

 

 

 

4139