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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, 2022

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 May 4, 2022, there are 91,308,140 shares of the registrant’s Class A Common Stock, par value $0.0001 per share, outstanding (which number includes 2,419,752 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 4, 2022, the holders of such outstanding shares of Class V common stock also hold 7,883,048 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, 2022

 

TABLE OF CONTENTS

 

 


 


 

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 effects of the COVID-19 pandemic, expected demand on our product offering, 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; 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/or realize the benefits of our recent 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 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, 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, 2022 (Unaudited)

 

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

65,316,018

 

 

 

$

50,048,657

 

Accounts receivable

 

34,312,006

 

 

 

 

33,235,745

 

Prepaid expenses and other

 

12,789,275

 

 

 

 

12,427,032

 

Total current assets

 

112,417,299

 

 

 

 

95,711,434

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

3,846,999

 

 

 

 

3,801,199

 

Restricted cash

 

15,513,510

 

 

 

 

26,291,269

 

Intangible assets, net

 

556,625,295

 

 

 

 

577,693,902

 

Goodwill

 

824,094,441

 

 

 

 

824,081,632

 

Operating lease right-of-use assets, net

 

11,473,076

 

 

 

 

10,499,751

 

Deferred tax assets

 

141,404,532

 

 

 

 

145,259,883

 

Other assets

 

2,499,996

 

 

 

 

2,499,996

 

Total noncurrent assets

 

1,555,457,849

 

 

 

 

1,590,127,632

 

Total assets

$

1,667,875,148

 

 

 

$

1,685,839,066

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Accounts payable

$

21,738,214

 

 

 

$

20,082,651

 

Related party payable

 

14,324,177

 

 

 

 

17,394,125

 

Accrued expenses

 

19,552,828

 

 

 

 

26,819,083

 

Current operating lease liabilities

 

2,225,407

 

 

 

 

1,990,416

 

Current tax receivable agreement

 

24,454,088

 

 

 

 

24,495,556

 

Other current liabilities

 

1,048,662

 

 

 

 

1,565,931

 

Total current liabilities

 

83,343,376

 

 

 

 

92,347,762

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

449,187,265

 

 

 

 

448,484,696

 

Noncurrent operating lease liabilities

 

9,886,289

 

 

 

 

9,090,867

 

Tax receivable agreement, net of current portion

 

196,754,946

 

 

 

 

221,332,863

 

Other liabilities

 

1,385,704

 

 

 

 

1,547,087

 

Total noncurrent liabilities

 

657,214,204

 

 

 

 

680,455,513

 

Total liabilities

$

740,557,580

 

 

 

$

772,803,275

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

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

 

1,101,431,734

 

 

 

 

1,100,012,082

 

Accumulated other comprehensive loss

 

(2,205

)

 

 

 

(2,205

)

Accumulated deficit

 

(212,362,342

)

 

 

 

(226,015,886

)

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.

1


 

REPAY HOLDINGS CORPORATION

Consolidated Statements of Operations

(Unaudited)

 

 

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.

 


2


 

 

REPAY HOLDINGS CORPORATION

Consolidated Statements of Comprehensive Income

(Unaudited)

 

 

 

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.

 

 

 

3


 

 

REPAY HOLDINGS CORPORATION

Consolidated Statements of Changes in Equity

(Unaudited)

 

 

 

Repay Stockholders

 

 

 

 

 

 

 

 

 

 

 

Class A Common

Stock

 

 

Class V Common

Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated Other Comprehensive

 

 

Non-controlling

 

 

Total

 

 

 

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

)

 

$

46,868,350

 

 

$

556,182,071

 

Issuance of new shares

 

 

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

)

 

 

-

 

Release of share awards vested under Equity Plan

 

 

293,081

 

 

 

29

 

 

 

 

 

 

 

-

 

 

 

(29

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Shares repurchased under Equity Plan

 

 

(72,417

)

 

 

(7

)

 

 

 

 

 

 

-

 

 

 

(1,821,935

)

 

 

-

 

 

 

-

 

 

 

3,995

 

 

 

(1,817,947

)

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

5,171,544

 

 

 

-

 

 

 

-

 

 

 

(20,945

)

 

 

5,150,599

 

Valuation allowance on Ceiling Rule DTA

 

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

(5,064

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,064

)

Net loss

 

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

(15,793,901

)

 

 

-

 

 

 

(2,187,272

)

 

 

(17,981,173

)

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

)

 

$

-

 

 

$

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.


4


 

 

REPAY HOLDINGS CORPORATION

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from 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

 

 

28,589,145

 

 

 

17,792,994

 

Stock based compensation

 

 

3,093,835

 

 

 

5,150,599

 

Amortization of debt issuance costs

 

 

702,569

 

 

 

535,536

 

Loss on extinguishment of debt

 

 

 

 

 

5,940,600

 

Loss on sale of interest rate swaps

 

 

 

 

 

9,317,243

 

Fair value change in tax receivable agreement liability

 

 

(24,619,385

)

 

 

(1,042,733

)

Fair value change in other assets and liabilities

 

 

(2,900,000

)

 

 

2,648,786

 

Deferred tax expense

 

 

3,842,542

 

 

 

(5,941,773

)

Change in accounts receivable

 

 

(1,076,261

)

 

 

(2,586,374

)

Change in prepaid expenses and other

 

 

(362,243

)

 

 

846,681

 

Change in operating lease ROU assets

 

 

(973,325

)

 

 

424,043

 

Change in accounts payable

 

 

1,655,563

 

 

 

2,232,774

 

Change in related party payable

 

 

(169,948

)

 

 

(685,568

)

Change in accrued expenses and other

 

 

(7,266,255

)

 

 

(1,857,743

)

Change in operating lease liabilities

 

 

1,030,413

 

 

 

(330,651

)

Change in other liabilities

 

 

(678,652

)

 

 

(9,693,825

)

Net cash provided by operating activities

 

 

13,754,373

 

 

 

4,769,416

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(553,223

)

 

 

(640,467

)

Purchases of intangible assets

 

 

(7,013,115

)

 

 

(4,576,203

)

Acquisition of CPS, net of cash and restricted cash acquired

 

 

 

 

 

10,778

 

Net cash used in investing activities

 

 

(7,566,338

)

 

 

(5,205,892

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Issuance of long-term debt

 

 

 

 

 

440,000,000

 

Payments on long-term debt

 

 

 

 

 

(262,653,996

)

Public issuance of Class A Common Stock

 

 

 

 

 

142,098,361

 

Shares repurchased under Equity Plan

 

 

(1,698,433

)

 

 

(1,817,947

)

Payment of loan costs

 

 

 

 

 

(13,247,617

)

Net cash (used in) provided by financing activities

 

 

(1,698,433

)

 

 

304,378,801

 

Increase in cash, cash equivalents and restricted cash

 

 

4,489,602

 

 

 

303,942,325

 

Cash, cash equivalents and restricted cash at beginning of period

 

$

76,339,926

 

 

$

106,504,734

 

Cash, cash equivalents and restricted cash at end of period

 

$

80,829,528

 

 

$

410,447,059

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

 

Interest

 

$

286,020

 

 

$

647,821

 

 

 

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.

The Company is headquartered in Atlanta, Georgia.

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, which are included in the Annual Report on Form 10-K for the year ended December 31, 2021.

 

The accompanying unaudited 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 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.

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, 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 (“MPI”), Custom Payment Systems, 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 Issued Accounting Pronouncements not yet Adopted

Business Combinations

In August 2021, the FASB issued Accounting Standards Update No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU No. 2021-08”). ASU No. 2021-08 requires an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Revenue (Topic 606), and is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. Amendments within ASU No. 2021-08 are required to be applied prospectively to business combinations occurring on or after the effective date of the 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 Annual Report on Form 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,

 

 

 

2022

 

 

2021

 

Revenue