UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
(Exact name of Registrant as specified in its Charter)
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(Former address of principal executive offices) |
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Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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:
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Emerging growth company |
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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
As of November 6, 2024, there are
REPAY HOLDINGS CORPORATION
Quarterly Report on Form 10‑Q
For the quarter ended September 30, 2024
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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44 |
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) |
September 30, 2024 (Unaudited) |
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December 31, 2023 |
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Assets |
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Cash and cash equivalents |
$ |
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$ |
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Accounts receivable |
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Prepaid expenses and other |
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Total current assets |
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Property, plant and equipment, net |
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Restricted cash |
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Intangible assets, net |
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Goodwill |
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Operating lease right-of-use assets, net |
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Deferred tax assets |
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Other assets |
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Total noncurrent assets |
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Total assets |
$ |
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$ |
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Liabilities |
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Accounts payable |
$ |
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$ |
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Accrued expenses |
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Current operating lease liabilities |
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Current tax receivable agreement |
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— |
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Other current liabilities |
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Total current liabilities |
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Long-term debt |
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Noncurrent operating lease liabilities |
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Tax receivable agreement, net of current portion |
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Other liabilities |
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Total noncurrent liabilities |
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Total liabilities |
$ |
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$ |
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Stockholders' equity |
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Class A common stock, $ |
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Class V common stock, $ |
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— |
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Treasury stock, |
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Additional paid-in capital |
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Accumulated deficit |
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Total Repay stockholders' equity |
$ |
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$ |
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Non-controlling interests |
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Total equity |
$ |
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$ |
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Total liabilities and equity |
$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
1
REPAY HOLDINGS CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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($ in thousands, except per share data) |
2024 |
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2023 |
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2024 |
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2023 |
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Revenue |
$ |
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$ |
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$ |
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$ |
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Operating expenses |
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Costs of services (exclusive of depreciation and amortization shown separately below) |
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Selling, general and administrative |
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Depreciation and amortization |
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Loss on business disposition |
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— |
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— |
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— |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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( |
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Other income (expense) |
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Interest (expense) income, net |
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( |
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( |
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( |
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Gain on extinguishment of debt |
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— |
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— |
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Change in fair value of tax receivable liability |
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( |
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( |
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( |
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( |
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Other income (loss), net |
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( |
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( |
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Total other income (expense) |
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( |
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( |
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Income (loss) before income tax (expense) benefit |
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( |
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( |
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( |
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Income tax benefit (expense) |
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( |
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( |
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Net income (loss) |
$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Less: Net loss attributable to non-controlling interests |
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( |
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( |
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( |
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( |
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Net income (loss) attributable to the Company |
$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Income (loss) per Class A share attributable to the Company: |
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Basic |
$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Diluted |
$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted-average shares outstanding: |
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Basic |
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Diluted |
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See accompanying notes to condensed consolidated financial statements.
2
REPAY HOLDINGS CORPORATION
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
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Repay Stockholders |
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Class A Common |
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Class V Common |
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Additional |
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Treasury |
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Accumulated |
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Non-controlling |
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Total |
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($ in thousands) |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Stock |
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Deficit |
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Interests |
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Equity |
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Balance at June 30, 2023 |
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$ |
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$ |
- |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
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Exchange of Post-Merger Repay Units |
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- |
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- |
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- |
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- |
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( |
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- |
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Release of share awards vested under Incentive Plan |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Tax withholding related to shares vesting under Incentive Plan |
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( |
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- |
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- |
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( |
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- |
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- |
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( |
) |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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- |
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Tax distribution from Hawk Parent |
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- |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
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Net loss |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
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( |
) |
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Balance at September 30, 2023 |
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$ |
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$ |
- |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
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Balance at June 30, 2024 |
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$ |
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$ |
- |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
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Exchange of Post-Merger Repay Units |
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- |
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- |
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- |
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- |
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( |
) |
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- |
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Release of share awards vested under Incentive Plan |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Tax withholding related to shares vesting under Incentive Plan |
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( |
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- |
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- |
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( |
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- |
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- |
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- |
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( |
) |
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Treasury shares repurchased |
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( |
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- |
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- |
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( |
) |
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( |
) |
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- |
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( |
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Stock options exercised |
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- |
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- |
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- |
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- |
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( |
) |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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- |
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- |
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Purchase of capped calls related to issuance of the 2029 Notes |
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- |
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- |
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- |
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( |
) |
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- |
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- |
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- |
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( |
) |
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Net income (loss) |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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Balance at September 30, 2024 |
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$ |
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$ |
- |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
|
See accompanying notes to condensed consolidated financial statements.
3
REPAY HOLDINGS CORPORATION
Condensed Consolidated Statements of Changes in Equity
(Unaudited) (Continued)
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Repay Stockholders |
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Class A Common |
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Class V Common |
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Additional |
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Treasury |
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Accumulated |
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Non-controlling |
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Total |
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($ in thousands) |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Stock |
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Deficit |
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Interests |
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Equity |
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Balance at December 31, 2022 |
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$ |
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$ |
- |
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|
$ |
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$ |
( |
) |
|
$ |
( |
) |
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$ |
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$ |
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||||||
Exchange of Post-Merger Repay Units |
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- |
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- |
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- |
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- |
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( |
) |
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- |
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Release of share awards vested under Incentive Plan and ESPP |
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- |
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- |
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- |
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- |
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( |
) |
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- |
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Tax withholding related to shares vesting under Incentive Plan and ESPP |
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( |
) |
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- |
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- |
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( |
) |
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- |
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- |
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( |
) |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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|||
Tax distribution from Hawk Parent |
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- |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
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Net loss |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
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( |
) |
|
Balance at September 30, 2023 |
|
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$ |
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$ |
- |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Balance at December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
- |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
Exchange of Post-Merger Repay Units |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|||
Release of share awards vested under Incentive Plan and ESPP |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|||
Tax withholding related to shares vesting under Incentive Plan and ESPP |
|
|
( |
) |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
( |
) |
||
Treasury shares repurchased |
|
|
( |
) |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
|
|
|
( |
) |
||
Stock options exercised |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
|
||||
Stock-based compensation |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
|
|||
Purchase of capped calls related to issuance of the 2029 Notes |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance at September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
- |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
See accompanying notes to condensed consolidated financial statements.
4
REPAY HOLDINGS CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
Nine Months Ended September 30, |
|
|||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Stock based compensation |
|
|
|
|
|
|
||
Amortization of debt issuance costs |
|
|
|
|
|
|
||
Loss on business disposition |
|
|
— |
|
|
|
|
|
Gain on extinguishment of debt |
|
|
( |
) |
|
|
— |
|
Other loss |
|
|
— |
|
|
|
|
|
Fair value change in tax receivable agreement liability |
|
|
|
|
|
|
||
Deferred tax expense |
|
|
( |
) |
|
|
|
|
Change in accounts receivable |
|
|
( |
) |
|
|
( |
) |
Change in prepaid expenses and other |
|
|
|
|
|
|
||
Change in operating lease ROU assets |
|
|
( |
) |
|
|
|
|
Change in accounts payable |
|
|
|
|
|
( |
) |
|
Change in accrued expenses and other |
|
|
|
|
|
( |
) |
|
Change in operating lease liabilities |
|
|
|
|
|
( |
) |
|
Change in other liabilities |
|
|
|
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
||
Cash flows from investing activities |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Capitalized software development costs |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of business, net of cash retained |
|
|
— |
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
( |
) |
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
||
Issuance of long-term debt |
|
|
|
|
|
— |
|
|
Payments on long-term debt |
|
|
( |
) |
|
|
( |
) |
Payments of debt issuance costs |
|
|
( |
) |
|
|
— |
|
Payments for tax withholding related to shares vesting under Incentive Plan and ESPP |
|
|
( |
) |
|
|
( |
) |
Treasury shares repurchased |
|
|
( |
) |
|
|
— |
|
Stock options exercised |
|
|
|
|
|
— |
|
|
Distributions to Members |
|
|
— |
|
|
|
( |
) |
Purchase of capped calls related to issuance of the 2029 Notes |
|
|
( |
) |
|
|
— |
|
Payment of Tax Receivable Agreement (“TRA”) |
|
|
( |
) |
|
|
— |
|
Payment of contingent consideration liability up to acquisition-date fair value |
|
|
— |
|
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Increase in cash, cash equivalents and restricted cash |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at beginning of period |
|
$ |
|
|
$ |
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
|
||
Cash paid during the year for: |
|
|
|
|
|
|
||
Interest |
|
$ |
|
|
$ |
|
||
Income taxes |
|
$ |
|
|
$ |
|
See accompanying notes to condensed consolidated financial statements.
5
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.
6
REPAY HOLDINGS CORPORATION
Notes to the Unaudited Condensed Consolidated Financial Statements