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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 September 30, 2020

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: (404504-7472

 

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 November 5, 2020, there are 73,438,353 shares of the registrant’s Class A Common Stock, par value $0.0001 per share, outstanding (which number includes 2,270,105 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 November 5, 2020, the holders of such outstanding shares of Class V common stock also hold 8,361,477 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 September 30, 2020

 

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

32

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

46

 

 

 

Item 4.

Controls and Procedures

47

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

47

 

 

 

Item 1A.

Risk Factors

47

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

49

 

 

 

Item 3.

Defaults Upon Senior Securities

49

 

 

 

Item 4.

Mine Safety Disclosures

49

 

 

 

Item 5.

Other Information

49

 

 

 

Item 6.

Exhibits

49

 

 

 

 

Signatures

51

 

 


 


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, the expected impact of the COVID-19 pandemic, the expected benefits of our recent acquisitions, our financial performance, 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 and consumer and commercial spending; the impacts of the ongoing COVID-19 coronavirus pandemic and the actions taken to control or mitigate its spread (which impacts are highly uncertain and cannot be reasonably estimated or predicted at this time); a delay or failure to integrate and realize the benefits of our recent acquisitions and any difficulties associated with operating in the markets in which we have limited experience; 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; 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 and Part II, Item 1A “Risk Factors" of this Form 10-Q. 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

 

 

 

 

 

 

 

 

 

 

September 30, 2020 (Unaudited)

 

 

 

December 31, 2019

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

182,290,497

 

 

 

$

24,617,996

 

Accounts receivable

 

15,789,747

 

 

 

 

14,068,477

 

Related party receivable

 

-

 

 

 

 

563,084

 

Prepaid expenses and other

 

5,350,733

 

 

 

 

4,632,965

 

Total current assets

 

203,430,977

 

 

 

 

43,882,522

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

1,708,731

 

 

 

 

1,610,652

 

Restricted cash

 

10,388,388

 

 

 

 

13,283,121

 

Customer relationships, net of amortization

 

249,611,097

 

 

 

 

247,589,240

 

Software, net of amortization

 

62,067,336

 

 

 

 

61,219,143

 

Other intangible assets, net of amortization

 

23,676,584

 

 

 

 

24,241,505

 

Goodwill

 

415,510,625

 

 

 

 

389,660,519

 

Deferred tax assets

 

128,294,164

 

 

 

 

-

 

Other assets

 

-

 

 

 

 

555,449

 

Total noncurrent assets

 

891,256,925

 

 

 

 

738,159,629

 

Total assets

$

1,094,687,902

 

 

 

$

782,042,151

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Accounts payable

$

11,892,529

 

 

 

$

9,586,001

 

Related party payable

 

14,896,246

 

 

 

 

14,571,266

 

Accrued expenses

 

12,677,908

 

 

 

 

15,965,683

 

Current maturities of long-term debt

 

6,760,650

 

 

 

 

5,500,000

 

Current tax receivable agreement

 

10,105,356

 

 

 

 

6,336,487

 

Total current liabilities

 

56,332,689

 

 

 

 

51,959,437

 

 

 

 

 

 

 

 

 

 

Long-term debt, net of current maturities

 

251,307,205

 

 

 

 

197,942,705

 

Line of credit

 

-

 

 

 

 

10,000,000

 

Tax receivable agreement, net of current portion

 

212,794,971

 

 

 

 

60,839,739

 

Deferred tax liability

 

-

 

 

 

 

768,335

 

Other liabilities

 

10,635,013

 

 

 

 

16,864

 

Total noncurrent liabilities

 

474,737,189

 

 

 

 

269,567,643

 

Total liabilities

$

531,069,878

 

 

 

$

321,527,080

 

 

 

 

 

 

 

 

 

 

Commitment and contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Class A common stock, $0.0001 par value; 2,000,000,000 shares authorized and 71,087,989 issued and outstanding as of September 30, 2020

 

7,109

 

 

 

 

3,753

 

Class V common stock, $0.0001 par value; 1,000 shares authorized and 100 shares issued and outstanding as of September 30, 2020

 

-

 

 

 

 

-

 

Additional paid-in capital

 

609,914,694

 

 

 

 

307,914,346

 

Accumulated other comprehensive (loss) income

 

(9,265,548

)

 

 

 

313,397

 

Accumulated deficit

 

(79,441,366

)

 

 

 

(53,878,460

)

Total stockholders' equity

$

521,214,889

 

 

 

$

254,353,036

 

 

 

 

 

 

 

 

 

 

Equity attributable to non-controlling interests

 

42,403,135

 

 

 

 

206,162,035

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity and members' equity

$

1,094,687,902

 

 

 

$

782,042,151

 

 

See accompanying notes to consolidated financial statements.

2


 

REPAY HOLDINGS CORPORATION

Consolidated Statements of Operations

(Unaudited)

 

 

Three Months Ended September 30, 2020

 

 

Nine Months Ended

September 30, 2020

 

 

From July 11, 2019 to September 30, 2019

 

 

 

From

July 1, 2019

to July 10, 2019

 

 

From

January 1, 2019

to July 10, 2019

 

 

(Successor)

 

 

 

(Predecessor)

 

Revenue

$

37,634,537

 

 

$

113,597,599

 

 

$

23,926,474

 

 

 

 

2,333,837

 

 

 

47,042,917

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other costs of services

 

10,492,011

 

 

 

29,989,935

 

 

 

6,367,624

 

 

 

 

467,874

 

 

 

10,216,079

 

Selling, general and administrative

 

28,580,764

 

 

 

65,765,167

 

 

 

21,002,624

 

 

 

 

34,069,143

 

 

 

51,201,322

 

Depreciation and amortization

 

15,421,129

 

 

 

44,031,111

 

 

 

10,702,840

 

 

 

 

333,290

 

 

 

6,222,917

 

Change in fair value of contingent consideration

 

(3,750,000

)

 

 

(3,010,000

)

 

 

-

 

 

 

 

-

 

 

 

-

 

Total operating expenses

 

50,743,904

 

 

 

136,776,213

 

 

 

38,073,088

 

 

 

 

34,870,307

 

 

 

67,640,318

 

(Loss) Income from operations

 

(13,109,367

)

 

 

(23,178,614

)

 

 

(14,146,614

)

 

 

 

(32,536,470

)

 

 

(20,597,401

)

Other (expense) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(3,624,499

)

 

 

(10,846,639

)

 

 

(2,685,998

)

 

 

 

(226,539

)

 

 

(3,145,167

)

Change in fair value of tax receivable liability

 

(1,475,376

)

 

 

(12,055,797

)

 

 

(450,922

)

 

 

 

-

 

 

 

-

 

Other income

 

25,379

 

 

 

69,826

 

 

 

(1,315,932

)

 

 

 

-

 

 

 

38

 

Total other (expense) income

 

(5,074,496

)

 

 

(22,832,610

)

 

 

(4,452,852

)

 

 

 

(226,539

)

 

 

(3,145,129

)

(Loss) income before income tax expense

 

(18,183,863

)

 

 

(46,011,224

)

 

 

(18,599,466

)

 

 

 

(32,763,009

)

 

 

(23,742,530

)

Income tax benefit

 

3,382,859

 

 

 

8,395,077

 

 

 

2,719,402

 

 

 

 

 

 

 

 

 

 

Net (loss) income

$

(14,801,004

)

 

$

(37,616,147

)

 

$

(15,880,064

)

 

 

$

(32,763,009

)

 

$

(23,742,530

)

Less: Net (loss) income attributable to

   non-controlling interests

 

(5,297,782

)

 

 

(12,053,241

)

 

 

(7,399,303

)

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to the Company

$

(9,503,222

)

 

$

(25,562,906

)

 

$

(8,480,761

)

 

 

$

(32,763,009

)

 

$

(23,742,530

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per Class A share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

$

(0.16

)

 

$

(0.56

)

 

$

(0.25

)

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

57,913,089

 

 

 

45,806,225

 

 

 

34,326,127

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 


3


 

REPAY HOLDINGS CORPORATION

Consolidated Statements of Comprehensive Income

(Unaudited)

 

 

 

Three Months Ended September 30, 2020

 

 

Nine Months Ended

September 30, 2020

 

 

From July 11, 2019 to September 30, 2019

 

 

 

From

July 1, 2019

to July 10, 2019

 

 

From

January 1, 2019

to July 10, 2019

 

 

 

(Successor)

 

 

 

(Predecessor)

 

Net (loss) income

 

$

(14,801,004

)

 

$

(37,616,147

)

 

$

(15,880,064

)

 

 

$

(32,763,009

)

 

$

(23,742,530

)

Other comprehensive income (loss), before tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of designated cash flow hedges

 

 

560,800

 

 

 

(10,687,184

)

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss), before tax

 

 

560,800

 

 

 

(10,687,184

)

 

 

 

 

 

 

 

 

 

 

Income tax related to items of other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

47,122

 

 

 

1,598,492

 

 

 

 

 

 

 

 

 

 

 

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

 

 

47,122

 

 

 

1,598,492

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss), net of tax

 

 

607,922

 

 

 

(9,088,692

)

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss

 

$

(14,193,082

)

 

$

(46,704,839

)

 

$

(15,880,064

)

 

 

$

(32,763,009

)

 

$

(23,742,530

)

Less: Comprehensive loss attributable to non-controlling interests

 

 

(4,534,744

)

 

 

(15,879,944

)

 

 

 

 

 

 

 

 

 

 

Comprehensive loss attributable to the Company

 

$

(9,658,338

)

 

$

(30,824,895

)

 

$

(15,880,064

)

 

 

$

(32,763,009

)

 

$

(23,742,530

)

 

 

See accompanying notes to consolidated financial statements.

 

 

 

4


 

REPAY HOLDINGS CORPORATION

Consolidated Statements of Changes in Equity

(Unaudited)

 

 

 

Total Equity

 

 

 

(Predecessor)

 

Balance at December 31, 2018

 

$

109,078,357

 

Net income

 

 

9,020,479

 

Contributions by members

 

 

-

 

Stock based compensation

 

 

250,783

 

Distribution to members

 

 

(6,904,991

)

Balance at June 30, 2019

 

$

111,444,628

 

Net loss

 

 

(32,763,009

)

Contributions by members

 

 

-

 

Stock based compensation

 

 

658,195

 

Distribution to members

 

 

-

 

Balance at July 10, 2019

 

$

79,339,814

 

 

See accompanying notes to consolidated financial statements.

5


 

 

 

 

Class A Common

Stock

 

 

Class V Common

Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated Other Comprehensive

 

 

Total

Stockholders'

 

 

Non-controlling

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Loss) Income

 

 

Equity

 

 

Interests

 

Balance at July 11, 2019

 

 

33,430,259

 

 

$

3,343

 

 

 

100

 

 

$

-

 

 

$

290,592,210

 

 

$

(37,657,028

)

 

$

-

 

 

$

252,938,525

 

 

$

221,443,561

 

Release of Founder Shares

 

 

1,482,500

 

 

 

148

 

 

 

 

 

 

 

-

 

 

 

(148

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Release of share awards vested under 2019 Plan

 

 

575,301

 

 

 

58

 

 

 

 

 

 

 

-

 

 

 

(58

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation

 

 

 

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

9,750,822

 

 

 

-

 

 

 

-

 

 

 

9,750,822

 

 

 

-

 

Tax distribution from Hawk Parent

 

 

 

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(185,957

)

Net loss

 

 

 

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

(8,480,761

)

 

 

-

 

 

 

(8,480,761

)

 

 

(7,399,303

)

Balance at September 30, 2019 (Successor)

 

 

35,488,060

 

 

$

3,549

 

 

 

100

 

 

$

-

 

 

$

300,342,826

 

 

$

(46,137,789

)

 

$

-

 

 

$

254,208,586

 

 

$

213,858,301

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A Common

Stock

 

 

Class V Common

Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated Other Comprehensive

 

 

Total

Stockholders'

 

 

Non-controlling

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Loss) Income

 

 

Equity

 

 

Interests

 

Balance at December 31, 2019 (Successor)

 

 

37,530,568

 

 

$

3,753

 

 

 

100

 

 

$

-

 

 

$

307,914,346

 

 

$

(53,878,460

)

 

$

313,397

 

 

$

254,353,036

 

 

$

206,162,035

 

Issuance of new shares

 

 

9,200,000

 

 

 

920

 

 

 

 

 

 

 

-

 

 

 

173,991,388

 

 

 

-

 

 

 

-

 

 

 

173,992,308

 

 

 

-

 

Redemption of Post-Merger Repay Units

 

 

 

 

 

 

-

 

 

 

 

 

 

 

-