SEC Filing - Repay Holdings Corporation

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rpay-10q_20210331.htm

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, 2021

☐	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:

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, there are 80,445,630 shares of the registrant’s Class A Common Stock, par value $0.0001 per share, outstanding (which number includes 2,338,605 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, the holders of such outstanding shares of Class V common stock also hold 7,959,160 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, 2021

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	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	37

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	39

Item 4.	Mine Safety Disclosures	39

Item 5.	Other Information	39

Item 6.	Exhibits	39

	Signatures	41

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 timing and benefits of the BillingTree acquisition, the impact of the restatement, the expected impact 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, 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; 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, including the regulatory environment applicable to our customers; 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. 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)
Assets
Cash and cash equivalents	$	390,921,782		$	91,129,888
Accounts receivable		23,897,098			21,310,724
Prepaid expenses and other		6,078,434			6,925,115
Total current assets		420,897,314			119,365,727

Property, plant and equipment, net		1,980,100			1,628,439
Restricted cash		19,525,277			15,374,846
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
Goodwill		458,959,477			458,970,255
Operating lease right-of-use assets, net of amortization		9,650,463			10,074,506
Deferred tax assets		141,799,307			135,337,229
Total noncurrent assets		988,213,777			990,612,413
Total assets	$	1,409,111,091		$	1,109,978,140

Liabilities
Accounts payable	$	14,112,412		$	11,879,638
Related party payable		17,774,815			15,811,597
Accrued expenses		17,358,515			19,216,258
Current maturities of long-term debt		—			6,760,650
Current operating lease liabilities		1,562,964			1,527,224
Current tax receivable agreement		10,146,135			10,240,310
Total current liabilities		60,954,841			65,435,677

Long-term debt, net of current maturities		427,287,919			249,952,746
Noncurrent operating lease liabilities		8,470,264			8,836,655
Tax receivable agreement, net of current portion		220,237,348			218,987,795
Other liabilities		889,371			10,583,196
Total noncurrent liabilities		656,884,902			488,360,392
Total liabilities	$	717,839,743		$	553,796,069

Commitment 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		—			—
Additional paid-in capital		839,589,351			691,675,072
Accumulated other comprehensive (loss) income		—			(6,436,763	)
Accumulated deficit		(191,725,614	)		(175,931,713	)
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

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

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	)

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
	Shares		Amount		Shares		Amount		Capital			Deficit			(Loss) Income			Equity			Interests
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

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
Issuance of new shares		6,244,500		624				-		142,411,389			-			-			142,412,013			(313,652	)
Exchange of Post-Merger Repay Units		375,000		38				-		2,158,374			-			-			2,158,412			(2,158,412	)
Release of share awards vested under Equity Plan		220,664		22				-		(22	)		-			-			-			-
Treasury shares repurchased		-		-						(1,821,942	)		-			-			(1,821,942	)		3,995
Stock-based compensation		-		-				-		5,171,544			-			-			5,171,544			(20,945	)
Valuation allowance on Ceiling Rule DTA		-		-				-		(5,064	)		-			-			(5,064	)		-
Net loss		-		-				-		-			(15,793,901	)		-			(15,793,901	)		(2,187,272	)
Accumulated other comprehensive income		-		-				-		-			-			6,436,763			6,436,763			1,207,738
Balance at March 31, 2021		78,084,846	$	7,809		100	$	-	$	839,589,351		$	(191,725,614	)	$	-		$	647,871,546		$	43,399,802

See accompanying notes to consolidated financial statements.

REPAY HOLDINGS CORPORATION

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
	2021			2020 (As Restated)
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:
Depreciation and amortization		17,792,994			13,904,384
Stock based compensation		5,150,599			3,522,731
Amortization of debt issuance costs		535,536			332,990
Loss on extinguishment of debt		5,940,600			—
Loss on sale of interest rate swaps		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
Fair value change in other assets and liabilities		2,648,786			(4,531	)
Deferred tax expense		(5,941,773	)		(1,116,093	)
Change in accounts receivable		(2,586,374	)		242,818
Change in related party receivable		—			563,084
Change in prepaid expenses and other		846,681			(10,964	)
Change in operating lease ROU assets		424,043			—
Change in accounts payable		2,232,774			1,149,433
Change in related party payable		(685,568	)		(160,321	)
Change in accrued expenses and other		(1,857,743	)		(4,109,906	)
Change in operating lease liabilities		(330,651	)		—
Change in other liabilities		(9,693,825	)		—
Net cash provided by operating activities		4,769,416			8,571,145
Cash flows from investing activities
Purchases of property and equipment		(640,467	)		(366,694	)
Purchases of software		(4,576,203	)		(2,409,074	)
Acquisition of Ventanex, net of cash and restricted cash acquired		—			(35,521,024	)
Acquisition of CPS, net of cash and restricted cash acquired		10,778			—
Net cash used in investing activities		(5,205,892	)		(38,296,792	)
Cash flows from financing activities
Change in line of credit		—			(10,000,000	)
Issuance of long-term debt		440,000,000			46,000,000
Payments on long-term debt		(262,653,996	)		(1,562,500	)
Public issuance of Class A Common Stock		142,098,361			—
Repurchase of treasury shares		(1,817,947	)		—
Exercise of warrants		—			3,534,188
Payment of loan costs		(13,247,617	)		(1,755,835	)
Net cash provided by financing activities		304,378,801			36,215,853
Increase in cash, cash equivalents and restricted cash		303,942,325			6,490,206
Cash, cash equivalents and restricted cash at beginning of period	$	106,504,734		$	37,901,117
Cash, cash equivalents and restricted cash at end of period	$	410,447,059		$	44,391,323

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest	$	647,821		$	3,184,795
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Valuation adjustment to contingent consideration for APS acquisition	$	—		$