10-Q
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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, 2024

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

 

 

https://cdn.kscope.io/df2b5d7d8845fc80ef19b711b808d787-img48398744_0.jpg 

 

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 3, 2024, there are 95,786,041 shares of the registrant’s Class A Common Stock, par value $0.0001 per share, outstanding (which number includes 4,290,809 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 3, 2024, the holders of such outstanding shares of Class V common stock also hold 5,844,095 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, 2024

 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

Item 1.

Condensed Consolidated Financial Statements

1

 

 

 

Item 2.

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

19

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

 

 

 

Item 4.

Controls and Procedures

30

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

32

 

 

 

Item 1A.

Risk Factors

32

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

 

 

 

Item 3.

Defaults Upon Senior Securities

32

 

 

 

Item 4.

Mine Safety Disclosures

32

 

 

 

Item 5.

Other Information

32

 

 

 

Item 6.

Exhibits

33

 

 

 

 

Signatures

34

 

 

 

 


 

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, expected demand on our product offerings, including further implementation of electronic payment options and statements regarding our market and growth opportunities, 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, including bank failures or other adverse events affecting financial institutions, inflationary pressures, general economic slowdown or recession; 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 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 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, 2023. 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. Condensed Consolidated Financial Statements

 

REPAY HOLDINGS CORPORATION

Condensed Consolidated Balance Sheets

 

($ in thousands)

March 31, 2024 (Unaudited)

 

 

December 31, 2023

 

Assets

 

 

 

 

 

Cash and cash equivalents

$

128,318

 

 

$

118,096

 

Accounts receivable

 

39,984

 

 

 

36,017

 

Prepaid expenses and other

 

15,727

 

 

 

15,209

 

Total current assets

 

184,029

 

 

 

169,322

 

 

 

 

 

 

 

Property, plant and equipment, net

 

2,642

 

 

 

3,133

 

Restricted cash

 

26,512

 

 

 

26,049

 

Intangible assets, net

 

431,734

 

 

 

447,141

 

Goodwill

 

716,793

 

 

 

716,793

 

Operating lease right-of-use assets, net

 

5,939

 

 

 

8,023

 

Deferred tax assets

 

146,571

 

 

 

146,872

 

Other assets

 

2,500

 

 

 

2,500

 

Total noncurrent assets

 

1,332,691

 

 

 

1,350,511

 

Total assets

$

1,516,720

 

 

$

1,519,833

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Accounts payable

$

23,709

 

 

$

22,030

 

Accrued expenses

 

27,924

 

 

 

32,906

 

Current operating lease liabilities

 

1,241

 

 

 

1,629

 

Current tax receivable agreement

 

 

 

 

580

 

Other current liabilities

 

549

 

 

 

318

 

Total current liabilities

 

53,423

 

 

 

57,463

 

 

 

 

 

 

 

Long-term debt

 

434,877

 

 

 

434,166

 

Noncurrent operating lease liabilities

 

5,435

 

 

 

7,247

 

Tax receivable agreement, net of current portion

 

191,244

 

 

 

188,331

 

Other liabilities

 

2,443

 

 

 

1,838

 

Total noncurrent liabilities

 

633,999

 

 

 

631,582

 

Total liabilities

$

687,422

 

 

$

689,045

 

 

 

 

 

 

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

Class A common stock, $0.0001 par value; 2,000,000,000 shares authorized; 92,910,302 issued and 91,493,792 outstanding as of March 31, 2024; 92,220,494 issued and 90,803,984 outstanding as of December 31, 2023

 

9

 

 

 

9

 

Class V common stock, $0.0001 par value; 1,000 shares authorized and 100 shares issued and outstanding as of March 31, 2024 and December 31, 2023

 

 

 

 

 

Treasury stock, 1,416,510 shares as of March 31, 2024 and December 31, 2023

 

(12,528

)

 

 

(12,528

)

Additional paid-in capital

 

1,155,215

 

 

 

1,151,324

 

Accumulated deficit

 

(328,882

)

 

 

(323,670

)

Total Repay stockholders' equity

$

813,814

 

 

$

815,135

 

Non-controlling interests

 

15,484

 

 

 

15,653

 

Total equity

$

829,298

 

 

$

830,788

 

Total liabilities and equity

$

1,516,720

 

 

$

1,519,833

 

 

See accompanying notes to condensed consolidated financial statements.

1


 

REPAY HOLDINGS CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

Three Months Ended March 31,

 

($ in thousands, except per share data)

2024

 

 

2023

 

Revenue

$

80,720

 

 

$

74,537

 

Operating expenses

 

 

 

 

 

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

 

19,175

 

 

 

17,965

 

Selling, general and administrative

 

37,021

 

 

 

38,518

 

Depreciation and amortization

 

27,028

 

 

 

26,140

 

Loss on business disposition

 

 

 

 

9,878

 

Total operating expenses

 

83,224

 

 

 

92,501

 

Loss from operations

 

(2,504

)

 

 

(17,964

)

Other income (expense)

 

 

 

 

 

Interest income (expense), net

 

380

 

 

 

(923

)

Change in fair value of tax receivable liability

 

(2,913

)

 

 

(4,538

)

Other (loss) income, net

 

(26

)

 

 

(150

)

Total other income (expense)

 

(2,559

)

 

 

(5,611

)

Loss before income tax expense

 

(5,063

)

 

 

(23,575

)

Income tax expense

 

(302

)

 

 

(4,357

)

Net loss

$

(5,365

)

 

$

(27,932

)

Less: Net loss attributable to non-controlling interests

 

(153

)

 

 

(1,540

)

Net loss attributable to the Company

$

(5,212

)

 

$

(26,392

)

 

 

 

 

 

 

Loss per Class A share attributable to the Company:

 

 

 

 

 

Basic and diluted

$

(0.06

)

 

$

(0.30

)

Weighted-average shares outstanding:

 

 

 

 

 

Basic and diluted

 

91,218,208

 

 

 

88,615,760

 

 

See accompanying notes to condensed consolidated financial statements.

 

2


 

REPAY HOLDINGS CORPORATION

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

 

 

 

Repay Stockholders

 

 

 

 

 

 

 

 

Class A Common
Stock

 

 

Class V Common
Stock

 

 

Additional
Paid-In

 

 

Treasury

 

 

Accumulated

 

 

Non-controlling

 

 

Total

 

($ in thousands)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stock

 

 

Deficit

 

 

Interests

 

 

Equity

 

Balance at December 31, 2022

 

 

88,276,613

 

 

$

9

 

 

 

100

 

 

$

-

 

 

$

1,117,733

 

 

$

(10,000

)

 

$

(213,180

)

 

$

33,731

 

 

$

928,293

 

Exchange of Post-Merger Repay Units

 

 

14,460

 

 

 

-

 

 

 

 

 

 

-

 

 

 

61

 

 

 

-

 

 

 

-

 

 

 

(61

)

 

 

-

 

Release of share awards vested under Incentive Plan

 

 

528,843

 

 

 

-

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Tax withholding related to shares vesting under Incentive Plan

 

 

(147,727

)

 

 

-

 

 

 

 

 

 

-

 

 

 

(1,210

)

 

 

-

 

 

 

-

 

 

 

5

 

 

 

(1,205

)

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

4,134

 

 

 

-

 

 

 

-

 

 

 

(81

)

 

 

4,053

 

Tax distribution from Hawk Parent

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(54

)

 

 

(54

)

Net loss

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(26,392

)

 

 

(1,540

)

 

 

(27,932

)

Balance at March 31, 2023

 

 

88,672,189

 

 

$

9

 

 

 

100

 

 

$

-

 

 

$

1,120,718

 

 

$

(10,000

)

 

$

(239,572

)

 

$

32,000

 

 

$

903,155

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2023

 

 

90,803,984

 

 

$

9

 

 

 

100

 

 

$

-

 

 

$

1,151,324

 

 

$

(12,528

)

 

$

(323,670

)

 

$

15,653

 

 

$

830,788

 

Release of share awards vested under Incentive Plan

 

 

935,184

 

 

 

-

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Tax withholding related to shares vesting under Incentive Plan

 

 

(245,376

)

 

 

-

 

 

 

 

 

 

-

 

 

 

(2,412

)

 

 

-

 

 

 

-

 

 

 

5

 

 

 

(2,407

)

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

6,303

 

 

 

-

 

 

 

-

 

 

 

(21

)

 

 

6,282

 

Net loss

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,212

)

 

 

(153

)

 

 

(5,365

)

Balance at March 31, 2024

 

 

91,493,792

 

 

$

9

 

 

 

100

 

 

$

-

 

 

$

1,155,215

 

 

$

(12,528

)

 

$

(328,882

)

 

$

15,484

 

 

$

829,298

 

 

See accompanying notes to condensed consolidated financial statements.

3


 

REPAY HOLDINGS CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended March 31,

 

($ in thousands)

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(5,365

)

 

$

(27,932

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

27,028

 

 

 

26,140

 

Stock based compensation

 

 

6,282

 

 

 

4,054

 

Amortization of debt issuance costs

 

 

712

 

 

 

712

 

Loss on business disposition

 

 

 

 

 

9,878

 

Fair value change in tax receivable agreement liability

 

 

2,913

 

 

 

4,538

 

Deferred tax expense

 

 

302

 

 

 

4,357

 

Change in accounts receivable

 

 

(3,967

)

 

 

(2,541

)

Change in prepaid expenses and other

 

 

(520

)

 

 

3,921

 

Change in operating lease ROU assets

 

 

2,084

 

 

 

270

 

Change in accounts payable

 

 

1,679

 

 

 

(916

)

Change in related party payable

 

 

 

 

 

435

 

Change in accrued expenses and other

 

 

(4,982

)

 

 

(1,716

)

Change in operating lease liabilities

 

 

(2,201

)

 

 

(264

)

Change in other liabilities

 

 

836

 

 

 

(105

)

Net cash provided by operating activities

 

 

24,801

 

 

 

20,831

 

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(87

)

 

 

(528

)

Capitalized software development costs

 

 

(11,042

)

 

 

(13,201

)

Proceeds from sale of business, net of cash retained

 

 

 

 

 

40,423

 

Net cash (used in) provided by investing activities

 

 

(11,129

)

 

 

26,694

 

Cash flows from financing activities

 

 

 

 

 

 

Payments on long-term debt

 

 

 

 

 

(20,000

)

Payments for tax withholding related to shares vesting under Incentive Plan

 

 

(2,407

)

 

 

(1,205

)

Distributions to Members

 

 

 

 

 

(54

)

Payment of Tax Receivable Agreement (“TRA”)

 

 

(580

)

 

 

 

Payment of contingent consideration liability up to acquisition-date fair value

 

 

 

 

 

(1,000

)

Net cash used in financing activities

 

 

(2,987

)

 

 

(22,259

)

Increase in cash, cash equivalents and restricted cash

 

 

10,685

 

 

 

25,266

 

Cash, cash equivalents and restricted cash at beginning of period

 

$

144,145

 

 

$

93,563

 

Cash, cash equivalents and restricted cash at end of period

 

$

154,830

 

 

$

118,829

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

Interest

 

$

200

 

 

$

449

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

4


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Condensed 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 to Repay Holdings Corporation and its consolidated subsidiaries.

The Company is headquartered in Atlanta, Georgia.

2. Basis of Presentation and Summary of Significant Accounting Policies

Unaudited Interim Condensed Consolidated Financial Statements

These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited condensed consolidated financial statements and accompanying notes, which are included in the Annual Report on Form 10-K for the year ended December 31, 2023.

The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting 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 condensed 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 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.

The interim condensed 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.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Repay Holdings Corporation and its majority-owned subsidiary, Hawk Parent Holdings LLC, along with Hawk Parent Holdings LLC’s 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, Marlin Acquirer, LLC, 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, Custom Payment Systems, LLC, Electronic Payment Providers, 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.

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 Condensed Consolidated Statements of Operations during the reporting period. Actual results could differ materially from those estimates.

5


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements

 

Reclassifications

The Company changed its presentation for Interest expense to Interest income (expense), net within the Condensed Consolidated Statements of Operations. Prior period amounts have been revised to conform to the current presentation.

Segment Reporting

The Company reports operating results through two reportable segments: (1) Consumer Payments and (2) Business Payments, as further discussed in Note 13. Segments.

Recently Issued Accounting Pronouncements not yet Adopted

Segment Reporting

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”)”. ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, on an annual and interim basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently in the process of evaluating the effects of ASU No. 2023-07 on its Consolidated Financial Statements.

Income Taxes

In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”)”. ASU 2023-09 requires public business entities on an annual basis to (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently in the process of evaluating the effects of ASU No. 2023-09 on its Consolidated Financial Statements.

3. Revenue

Disaggregation of revenue

 

The Company’s revenue is from two types of relationships: (i) direct relationships and (ii) indirect relationships. The following table presents the Company’s revenue disaggregated by segment and by the type of relationship for the periods indicated.

 

 

Three Months Ended March 31, 2024

 

($ in thousands)

 

Consumer Payments

 

 

Business Payments

 

 

Elimination of intersegment revenues

 

 

Total

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Direct relationships

 

$

73,311

 

 

$

9,471

 

 

$

(5,093

)

 

$

77,689

 

Indirect relationships

 

 

2,825

 

 

 

206

 

 

 

 

 

 

3,031

 

Total Revenue

 

$

76,136

 

 

$

9,677

 

 

$

(5,093

)

 

$

80,720

 

 

6


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements

 

 

Three Months Ended March 31, 2023

 

($ in thousands)

 

Consumer Payments

 

 

Business Payments

 

 

Elimination of intersegment revenues

 

 

Total

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Direct relationships

 

$

66,473

 

 

$

8,434

 

 

$

(4,078

)

 

$

70,829

 

Indirect relationships

 

 

3,467

 

 

 

241

 

 

 

 

 

 

3,708

 

Total Revenue

 

$

69,940

 

 

$

8,675

 

 

$

(4,078

)

 

$

74,537

 

When the Company’s right to consideration for performance is contingent upon a future event or satisfaction of additional performance obligations, the amount of revenues the Company has recognized in excess of the amount the Company has billed to the client is recognized as a contract asset. The contract asset balance was $1.3 million and $1.4 million as of March 31, 2024 and December 31, 2023, respectively, and is included within Prepaid expenses and other in the Consolidated Balance Sheets.

4. Earnings Per Share

During the three months ended March 31, 2024 and 2023, 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 share-based awards, outstanding stock options and the Company’s Convertible Senior Notes due 2026 (“2026 Notes”) would have been anti-dilutive.

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

 

 

 

Three Months Ended March 31,

 

($ in thousands, except per share data)

 

2024

 

 

2023

 

Loss before income tax expense

 

$

(5,063

)

 

$

(23,575

)

Less: Net loss attributable to non-controlling interests

 

 

(153

)

 

 

(1,540

)

Income tax expense

 

 

(302

)

 

 

(4,357

)

Net loss attributable to the Company

 

$

(5,212

)

 

$

(26,392

)

 

 

 

 

 

 

 

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

 

 

91,218,208

 

 

 

88,615,760

 

 

 

 

 

 

 

 

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

 

$

(0.06

)

 

$

(0.30

)

For the three months ended March 31, 2024 and 2023, 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:

 

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Post-Merger Repay Units exchangeable for Class A common stock

 

 

5,844,095

 

 

 

7,861,271

 

Unvested share-based awards of Class A common stock

 

 

6,072,126

 

 

 

5,906,580

 

Outstanding stock options for Class A common stock

 

 

1,148,822

 

 

 

1,148,822

 

2026 Notes convertible into Class A common stock

 

 

13,095,238

 

 

 

13,095,238

 

Share equivalents excluded from loss per share

 

 

26,160,281

 

 

 

28,011,911

 

 

 

 

 

 

 

 

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. Each share of the Company’s Class V common stock gives the holder the right to vote the number of shares corresponding to the number of Post-Merger Repay Units held by that holder, but shares of Class V common stock have no economic rights.

7


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements

 

5. Business Disposition

On February 15, 2023, the Company sold Blue Cow Software, LLC and a related entity (“BCS”) within the Consumer Payments segment for cash proceeds of $41.9 million. During the three months ended March 31, 2023, the Company recognized a loss of $9.9 million associated with the sale, comprised of the difference between the consideration received and the net carrying amount of the assets and liabilities of the business within Loss on business disposition in the Company’s Condensed Consolidated Statement of Operations.

In connection with the disposition of BCS, the Company recognized a reduction in goodwill of $35.3 million within the Consumer Payments segment. See Note 8. Goodwill for further discussion. For the three months ended March 31, 2023, BCS contributed $1.2 million to the Consumer Payments segment revenue.

Transaction Expenses

The Company incurred transaction expenses of $3.4 million for the three months ended March 31, 2023 related to the disposition of BCS. Transaction expenses are included within Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

6. Fair Value

 

The following table summarizes, by level within the fair value hierarchy, 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 Condensed 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.

 

 

 

March 31, 2024

 

($ in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

128,318

 

 

$

 

 

$

 

 

$

128,318

 

Restricted cash

 

 

26,512

 

 

 

 

 

 

 

 

 

26,512

 

Other assets

 

 

 

 

 

2,500

 

 

 

 

 

 

2,500

 

Total assets

 

$

154,830

 

 

$

2,500

 

 

$

 

 

$

157,330

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings

 

$

 

 

$

407,550

 

 

$

 

 

$

407,550

 

Tax receivable agreement

 

 

 

 

 

 

 

 

191,244

 

 

 

191,244

 

Total liabilities

 

$

 

 

$

407,550

 

 

$

191,244

 

 

$

598,794

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

118,096

 

 

$

 

 

$

 

 

$

118,096

 

Restricted cash

 

 

26,049

 

 

 

 

 

 

 

 

 

26,049

 

Other assets

 

 

 

 

 

2,500

 

 

 

 

 

 

2,500

 

Total assets

 

$

144,145

 

 

$

2,500

 

 

$

 

 

$

146,645

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings

 

$

 

 

$

375,650

 

 

$

 

 

$

375,650

 

Tax receivable agreement

 

 

 

 

 

 

 

 

188,911

 

 

 

188,911

 

Total liabilities

 

$

 

 

$

375,650

 

 

$

188,911

 

 

$

564,561

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

Cash and cash equivalents contains cash on hand, demand deposit accounts, money market accounts and short term investments with original maturities of three months or less. They are classified within Level 1 of the fair value hierarchy, under Accounting Standard Codification (“ASC”) 820, Fair Value Measurements (“ASC 820”), as the price is obtained from quoted market prices in an active 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.

8


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements

 

Restricted Cash

Restricted cash is classified within Level 1 of the fair value hierarchy under 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.

Other 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 occur in an inactive market.

Borrowings

 

The revolving credit facility and 2026 Notes are measured at amortized cost, which the carrying value is unpaid principal net of unamortized debt discount and debt issuance costs. The estimated fair value of the revolving credit facility approximates the unpaid principal because its interest rate approximates market interest rates. The estimated fair value of the 2026 Notes is determined using the quoted prices from over-the-counter markets. The estimated fair value of the Company’s borrowings is classified within Level 2 of the fair value hierarchy, as the market interest rates and quoted prices are generally observable and do not contain a high level of subjectivity. As of March 31, 2024 and December 31, 2023, the Company had $0 drawn against the revolving credit facility.

 

The following table provides the carrying value and estimated fair value of borrowings. See Note 9. Borrowings for further discussion on borrowings.

 

 

 

March 31, 2024

 

 

December 31, 2023

 

($ in thousands)

 

Carrying value

 

 

Fair value

 

 

Carrying value

 

 

Fair value

 

2026 Notes

 

$

434,877

 

 

$

407,550

 

 

$

434,166

 

 

$

375,650

 

Tax Receivable Agreement

 

Upon the completion of the Business Combination, the Company entered into the TRA with holders of Post-Merger Repay Units. As a result of the TRA, the Company established a liability in its condensed 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, Business Combinations, which is recorded within Change in fair value of tax receivable liability in the Company’s Condensed Consolidated Statements of Operations.

 

The Company used a discount rate, also referred to as the 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 7.06% was applied to the forecasted TRA payments at March 31, 2024, 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. During the three months ended March 31, 2024, the TRA balance was adjusted by $2.3 million through a payment, accretion expense and a valuation adjustment, related to a decrease in the income tax rate used to measure the TRA as of the Early Termination Date and a decrease in the discount rate, which was 7.1% as of December 31, 2023.

 

The following table provides a rollforward of the TRA related to the acquisition and exchanges of Post-Merger Repay Units. See Note 12. Taxation for further discussion on the TRA.

 

9


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements

 

 

Three Months Ended March 31,

 

($ in thousands)

 

2024

 

 

2023

 

Balance at beginning of period

 

$

188,911

 

 

$

179,127

 

Purchases

 

 

 

 

 

31

 

Payments

 

 

(580

)

 

 

 

Accretion expense

 

 

3,324

 

 

 

 

Valuation adjustment

 

 

(411

)

 

 

4,538

 

Balance at end of period

 

$

191,244

 

 

$

183,696

 

 

7. Intangible Assets

The Company holds definite and indefinite-lived intangible assets. As of March 31, 2024 and December 31, 2023, the indefinite-lived intangible assets consist of one trade name, arising from the acquisition of Hawk Parent.

Intangible assets consisted of the following:

($ in thousands)

 

Gross Carrying Value

 

 

Accumulated Amortization

 

 

Net Carrying Value

 

 

Weighted Average Useful Life (Years)

 

Client relationships

 

$

523,850

 

 

$

203,770

 

 

$

320,080

 

 

 

6.07

 

Channel relationships

 

 

29,885

 

 

 

5,549

 

 

 

24,336

 

 

 

8.14

 

Software costs

 

 

257,938

 

 

 

190,770

 

 

 

67,168

 

 

 

0.78

 

Non-compete agreements

 

 

4,580

 

 

 

4,430

 

 

 

150

 

 

 

0.16

 

Trade name

 

 

20,000

 

 

 

 

 

 

20,000

 

 

 

 

Balance as of March 31, 2024

 

$

836,253

 

 

$

404,519

 

 

$

431,734

 

 

 

4.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Client relationships

 

$

523,850

 

 

$

190,591

 

 

$

333,259

 

 

 

6.32

 

Channel relationships

 

 

29,785

 

 

 

4,792

 

 

 

24,993

 

 

 

8.39

 

Software costs

 

 

246,996

 

 

 

178,323

 

 

 

68,673

 

 

 

0.83

 

Non-compete agreements

 

 

4,580

 

 

 

4,364

 

 

 

216

 

 

 

0.23

 

Trade name

 

 

20,000

 

 

 

 

 

 

20,000

 

 

 

 

Balance as of December 31, 2023

 

$

825,211

 

 

$

378,070

 

 

$

447,141

 

 

 

4.68

 

The Company’s amortization expense for intangible assets was $26.4 million and $25.4 million for the three months ended March 31, 2024 and 2023, respectively.

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

 

($ in thousands)

 

Estimated Future

 

Year Ending December 31,

 

Amortization Expense

 

2024

 

$

72,126

 

2025

 

 

74,071

 

2026

 

 

67,199

 

2027

 

 

55,024

 

2028

 

 

55,167

 

Thereafter

 

 

88,147

 

 

8. Goodwill

 

There were no changes in the carrying amount of goodwill for either the Consumer Payments or Business Payments segment during the three months ended March 31, 2024.

The Company concluded that goodwill was not impaired for either the Consumer Payments or Business Payments segment as of March 31, 2024. As of March 31, 2024 and December 31, 2023, accumulated impairment losses were $75.7 million for the Business Payments segment.

10


REPAY HOLDINGS CORPORATION

Notes to the Unaudited Condensed Consolidated Financial Statements

 

9. Borrowings

Amended Credit Agreement

On February 3, 2021, the Company announced the closing of a new undrawn $125.0 million senior secured revolving credit facility through Truist Bank (the “Amended Credit Agreement”).

On December 29, 2021, the Company increased its existing senior secured credit facility 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.

On February 9, 2023, the Company further amended the Amended Credit Agreement to replace London Inter-bank Offer Rate (“LIBOR”) with term Secured Overnight Financing Rate (“SOFR”) as the interest rate benchmark.